"Proposals being considered by Rachel Reeves to cut tax on electricity bills will backfire, experts have warned, resulting in a giveaway to richer homeowners and undermining the UK's climate commitments. The chancellor is understood to be looking at plans to eliminate the 5% VAT charge on electricity bills as a fast and simple way to reduce bills for consumers and ease the cost of living pressures which have aided the rise of Reform UK."
"Tim Leunig, a former government adviser and visiting professor at the London School of Economics, said: This is a terrible idea. Most of the benefit would go to people in larger houses with larger than average electricity bills. He added: If they take VAT off energy bills, you have to give up on Labour as a sensible economic party."
"Reeves faces a career-defining budget on 26 November when she will have to explain how she will fill an expected black hole of around 30bn while also trying not to push up living costs for millions of ordinary voters. As part of that package, the chancellor is considering a range of measures to bring down energy bills, having made a pre-election promise to reduce them by 300."
A proposal under consideration would remove the 5% VAT charge on domestic electricity bills as a quick way to lower consumer costs. The measure is estimated to cost the exchequer 2.5bn a year while saving the average household about 86 a year. Most of the financial benefit would accrue to households with larger homes and higher electricity use, skewing the relief toward wealthier homeowners. The change would likely increase carbon emissions and could be poorly targeted for cash-strapped voters. The chancellor must present a budget on 26 November to address an anticipated 30bn shortfall and meet a promise to cut bills by 300.
Read at www.theguardian.com
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