Share this post:
If the government is really considering cutting VAT on energy bills, most of us should be asking: “So what?”
According to the BBC,
asked if the government would consider scrapping the 5% rate, [Energy Secretary Ed Miliband] told the BBC the country was facing a “cost-of-living crisis that we need to address as a government” and “we’re looking at all of these issues”.
The government is under pressure to reduce household energy costs and before the election Labour pledged to lower average bills by £300 a year by 2030.
According to Nesta (the National Endowment for Science, Technology and the Arts), cited by the BBC, scrapping VAT entirely would save the average household £86 per year, but cost the Treasury around £2.5 billion per year.
Note to readers
Vox Political is evolving!
I’m opening a new home for my reporting — The Whip Line on Substack — where independent journalism will be supported directly by readers.
From now on, you’ll still get at least one free article here every day, but most of my work will appear on The Whip Line, available to subscribers who make this reporting possible.
Join The Whip Line today and help keep independent journalism alive:
https://thewhipline.substack.com
That £86 figure assumes a “typical” household bill of around £1,755 per year, so the claim does add up: five per cent of £1,755 is £87.75 (approximately £86 once rounded and averaged).
A VAT cut would not transform household finances, then — it’s the difference between paying £160 and £146.25 per month for energy; a saving of £13.75.
Useful, yes — but not enough to change anyone’s overall cost-of-living situation.
The fiscal cost to the UK government (£2.5 billion) is not trivial, especially when Rachel Reeves is publicly stressing that Labour faces “difficult fiscal circumstances”.
That cost would need to be offset somehow — either by raising other taxes or cutting spending elsewhere.
More importantly: because VAT is a flat-rate tax, this change benefits richer households more in cash terms (as they use more energy), although poorer households gain more proportionally.
That makes it a blunt instrument for tackling fuel poverty — politically popular, but not well targeted. In fact, it would be exactly the kind of “sticking-plaster” politics that now-prime minister Keir Starmer railed against in opposition.
Labour might do it anyway; VAT on energy was often cited by Leave campaigners during Brexit debates — “we’ll be able to cut VAT on fuel” was one of the promises made in 2016.
Doing it now would let Labour say they’re delivering on something that has long been discussed but never done.
It is also simple, easy to explain, and a quick fill for people’s pockets.
And it would give the government a headline cost-of-living measure that provides time for Reeves to work on more complex or long-term reforms (like removing policy levies or restructuring energy pricing). Whether she actually bothers to do that work is a different question entirely.
Such changes are certainly needed. Energy analysts – and This Site – agree that structural reforms matter far more than tinkering with VAT. These include:
-
Reforming the energy market so that electricity prices aren’t tied to gas (as Pippa Heylings noted)
-
Investing in insulation and efficiency, which cuts bills permanently
-
Funding green infrastructure through general taxation rather than on-bill levies, so costs don’t fall disproportionately on consumers
Vox Political has discussed these elsewhere.
If they are handled properly, the long-term savings could be hundreds of pounds per household, not tens.
Until (or unless) they are, we are left to conclude that Miliband – and Reeves – simply don’t understand or don’t care about what they are doing.
Never miss a Vox Political post!
Social media algorithms often hide what you want to read. If you’d like to get every article directly, here are your options:
RSS Feed – instant updates, no filters:
https://voxpoliticalonline.com/get-every-vox-political-post-no-algorithms-no-blocks/
Mailing List – updates delivered to your inbox:
https://voxpoliticalonline.com/join-the-vox-political-mailing-list/
Video Mailing List – updates go straight to your inbox:
https://dashboard.mailerlite.com/forms/1503041/155584006128141972/share
Discord Server – direct updates, discussion and campaigns
https://discord.gg/SMCRE39XGm
Telegram Channel – every post, direct to your phone:
https://t.co/be9EMGHXFV
Support Vox Political!
With social media algorithms acting as gatekeepers – allowing users to read only what their owners want them to, sites like Vox Political need the support of our readers like never before.
You can help by making a donation:
https://Ko-fi.com/voxpolitical
Share this post:
Like this:
Like Loading...
What’s the point of cutting VAT on energy bills?
Share this post:
According to the BBC,
According to Nesta (the National Endowment for Science, Technology and the Arts), cited by the BBC, scrapping VAT entirely would save the average household £86 per year, but cost the Treasury around £2.5 billion per year.
Note to readers
Vox Political is evolving!
I’m opening a new home for my reporting — The Whip Line on Substack — where independent journalism will be supported directly by readers.
From now on, you’ll still get at least one free article here every day, but most of my work will appear on The Whip Line, available to subscribers who make this reporting possible.
Join The Whip Line today and help keep independent journalism alive:
https://thewhipline.substack.com
That £86 figure assumes a “typical” household bill of around £1,755 per year, so the claim does add up: five per cent of £1,755 is £87.75 (approximately £86 once rounded and averaged).
A VAT cut would not transform household finances, then — it’s the difference between paying £160 and £146.25 per month for energy; a saving of £13.75.
Useful, yes — but not enough to change anyone’s overall cost-of-living situation.
The fiscal cost to the UK government (£2.5 billion) is not trivial, especially when Rachel Reeves is publicly stressing that Labour faces “difficult fiscal circumstances”.
That cost would need to be offset somehow — either by raising other taxes or cutting spending elsewhere.
More importantly: because VAT is a flat-rate tax, this change benefits richer households more in cash terms (as they use more energy), although poorer households gain more proportionally.
That makes it a blunt instrument for tackling fuel poverty — politically popular, but not well targeted. In fact, it would be exactly the kind of “sticking-plaster” politics that now-prime minister Keir Starmer railed against in opposition.
Labour might do it anyway; VAT on energy was often cited by Leave campaigners during Brexit debates — “we’ll be able to cut VAT on fuel” was one of the promises made in 2016.
Doing it now would let Labour say they’re delivering on something that has long been discussed but never done.
It is also simple, easy to explain, and a quick fill for people’s pockets.
And it would give the government a headline cost-of-living measure that provides time for Reeves to work on more complex or long-term reforms (like removing policy levies or restructuring energy pricing). Whether she actually bothers to do that work is a different question entirely.
Such changes are certainly needed. Energy analysts – and This Site – agree that structural reforms matter far more than tinkering with VAT. These include:
Reforming the energy market so that electricity prices aren’t tied to gas (as Pippa Heylings noted)
Investing in insulation and efficiency, which cuts bills permanently
Funding green infrastructure through general taxation rather than on-bill levies, so costs don’t fall disproportionately on consumers
Vox Political has discussed these elsewhere.
If they are handled properly, the long-term savings could be hundreds of pounds per household, not tens.
Until (or unless) they are, we are left to conclude that Miliband – and Reeves – simply don’t understand or don’t care about what they are doing.
Support Vox Political!
With social media algorithms acting as gatekeepers – allowing users to read only what their owners want them to, sites like Vox Political need the support of our readers like never before.
You can help by making a donation:
https://Ko-fi.com/voxpolitical
Share this post:
Like this:
you might also like
How much can YOU pay? A&E charges would speed NHS privatisation
Like this:
Osborne wants a ‘year of hard truths’. Here’s one: He’s HIDING the truth
Like this:
Was Stephanie Bottrill a victim of corporate manslaughter?
Like this:
Like this: