Household Energy Bills: VAT

Debate between Lord Cryer and Chris Skidmore

Tuesday 11th January 2022 Commons Chamber

[Chris Skidmore (Kingswood) (Con)]

I rise to make a plea to Members from all parties that, regardless of the emotions that are raised in this debate, we maintain our united commitment to decarbonisation and energy transition, because, ultimately, net zero was part of all of our manifestos. I worry about having debates such as this, because they tend to become the start of a slippery slope. The shadow Front-Bench spokesperson, the hon. Member for Leeds West (Rachel Reeves), mentioned that this was going to be a temporary VAT cut. Rarely are tax rises or tax cuts temporary. We need a responsible debate about the form that taxation takes, particularly in a post-covid era where Government spending has, regrettably, been at record levels. The fact is that the VAT tax base raises about £134 billion a year—6% of GDP. If we get into the situation of whataboutery where we suddenly say that we will take VAT off here versus VAT off there, it is very difficult to argue a case for maintaining a tax that is actually one of the most sustainable forms of taxation in terms of raising revenue—revenue that is spent on the NHS, on welfare and on the vulnerable constituents mentioned by the hon. Member for Tooting (Dr Allin-Khan) in her powerful speech just now.

I want to make the case that the best long-term form of ensuring that we reduce energy bills is investment in renewable forms of energy and in insulation. We need to take a long-term view to achieve a long-term gain, as opposed to this short-term perspective of taking a one-year windfall tax as a revenue-raising exercise. It is not a sustainable mechanism by which to deliver a systems-based approach to net zero. We need everyone, not just in this Chamber, but in the country, pulling together to be able to deliver on net zero. Making certain organisations pariahs will not turn the dial back.

[John Cryer (Leyton and Wanstead) (Lab)]

rose—

--- Later in debate ---

[Chris Skidmore]

That is what I mean by the slippery slope. It is the slippery slope of suddenly saying, “Well, what about reducing VAT? Let’s turn to the green levies—they are actually making up 12% of total cost —which are one of the best ways in which we can enact levelling up and regeneration in former coalfield communities and post-industrial landscapes by ensuring that we have future green investment, such as in Net Zero Teesside or on the Humber where we have seen a revolution in offshore wind. If we want to debate how we deliver on energy prices, it must be by looking at the energy sources for the future, and not at the energy sources of the past. The reason we have an energy cost crisis at the moment is that wholesale gas prices have risen by 400%.

[John Cryer]

The hon. Gentleman talks a lot about sustainability. He is quite right. That has been the big question about energy for as long as I can remember. On that basis, was it a wise decision to close the biggest gas storage facility in the country, which this Government did?

[Chris Skidmore]

No, it was not the correct decision to close that gas storage facility. We have the lowest gas storage in the whole of Europe—I think it is about 4% or a couple of days’ worth of gas storage. That historic decision demonstrates why we need to take a long-term perspective, rather than short-term political wins.

We need to act like a Government, which the Opposition are clearly not prepared to do at the moment, and that is to think that difficult decisions need to be taken and need to be taken now, in order for us to think how we not only decarbonise, but reduce our emissions by 70% by 2030, as part of our nationally determined contribution. It beggars belief, to quote the hon. Member for Kilmarnock and Loudoun (Alan Brown), that countries attending COP26 in Glasgow will turn to us, thinking, “Actually, an Opposition party was calling for a reduction in taxation on gas and fossil fuels as a result of reducing VAT.” I do not think that that is a responsible position for the Opposition to take.

Instead, when looking at raising taxation, we need to think about how we responsibly introduce a carbon tax, in the same way as we introduced a carbon tax on coal back in 2012—£18 a tonne on CO₂ ended up quite quickly reducing carbon emissions from coal from 140 million tonnes a year to 80 million tonnes a year, and they have dropped ever since. We could do the same with other forms of fossil fuels if we worked responsibly and together, just as we did when we introduced the Climate Change Act 2008 or net zero. We can work together to come up with a consensus that will outlive any one Government or any one party, because that is what we need to do if we are going to be able to deliver net zero by 2050.