Conservative leadership hopeful Rishi Sunak has said that if the wins the race to be next leader he will scrap VAT on energy bills.
Mr Sunak, who polls suggest is trailing rival Liz Truss among Tory members, described it as a "targeted, temporary and timely tax cut". But critics immediately accused him of making a screeching U-turn after he repeatedly opposed tax cuts. Labour had pushed for a cut in VAT on energy bills months ago but speaking at the time then Chancellor Sunak told the Commons that the "policy would
But what would scrapping VAT on energy bills mean for hard pressed families? Just his week a report by the Bevan Foundation found that between January and July 57% of people cut back on heating, electricity, and/or water, 51% cut back on clothing for adults, 45% cut back on transport costs, and 39% cut back on food for adults. It also found that Nearly four in 10 Welsh households do not have enough money to buy anything beyond everyday items.
Read more: 40% of Welsh households can afford nothing beyond everyday essentia
Removing the 5% VAT on energy bills would obviously affect families different depending on their energy use. But if we take the average bill which is predicted to hit £3,244 from October, then removing the 5% VAT would save £154 a year. This potential saving looks dwarfed by the fact that bills this winter are set to be around £2,000 higher on average than last year— and around £500 more than was predicted when the Government set out its support package in May.
Richard Neudegg, director of regulation at Uswitch.com, said: “Households have been waiting two weeks to hear the candidates’ plans to solve the energy bills crisis, and it’s a positive step that ideas are starting to be discussed. Temporarily cutting VAT from energy bills is a reasonable idea to put on the table, and could be part of the solution. But it won’t be enough by itself in the face of the price rises that are to be revealed in less than a month.
"What really matters is what specific financial support will be provided to people on their bills, particularly the vulnerable, rather than the delivery mechanism. It is time for both Conservative leadership candidates to show they can get the job done for anxious households. We call on both Rishi Sunak and Liz Truss to work together as a matter of urgency so that clear, concrete support is laid out at the point that the new price cap level is announced on August 26. Above all else, households need clarity as soon as possible to help them plan for the most expensive winter in living memory.”
Elsewhere, the Welsh Government has announced it is extending its fuel support scheme meaning 400,000 households in Wales are set to get £200 towards keeping their homes warm this autumn and winter. The idea is to provide people with support over the winter as the cost of living crisis escalates.
Previously around 166,000 households on universal credit, legacy means-tested benefit, and working tax credits benefited from the £200. However this has now been expanded so more groups are eligible. Those claiming the following payments will now be eligible for the scheme:
Child tax credits
Pension credits
Disability benefits
Carers allowance
Contributory benefits such as jobseeker's allowance and employment and support allowance (ESA)
Those receiving help from the council tax reduction scheme
You can see how you can apply for the scheme here.
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