Household Energy Bills: VAT

David Linden Excerpts

Tuesday 11th January 2022 Commons Chamber

[Rachel Reeves]

In fact the poorest households spend a higher proportion of their income on gas and electricity bills, with pensioners spending the highest proportion, so the beneficiaries of this measure would be the people we know need that support more than anyone.

We have had a decade of dither and delay from the Conservatives on energy policy. There is indeed a global price spike for gas, but this Government have left Britain uniquely exposed. They have failed to insulate homes properly and they have failed to invest in the new nuclear or renewables that we need. They have failed on gas storage, leaving us reliant on Russia and Qatar for our gas supply. They have failed to regulate the market, with 27 companies now having gone bankrupt, which has left rising prices hitting millions.

[David Linden (Glasgow East) (SNP)]

Does the shadow Chancellor share my incredulity at the suggestion by the hon. Member for West Worcestershire (Harriett Baldwin) that, somehow, giving assistance to people in big houses is the wrong thing to do when the Conservatives are giving them £300,000 of levelling-up money to do up their driveways?

[Rachel Reeves]

That is levelling up in action, filling in the potholes at the Lord’s manor.

On this side of the House we want to keep bills low, which is why Labour is bringing forward this vote to reduce VAT on home energy bills to 0% for a year. It is why we would spread out the price increase that is about to hit bill payers because of the collapsing energy firms, and it is why we would help the squeezed middle, those on lower incomes and pensioners by increasing and expanding the warm homes discount to 9 million people. Our plan would save households £200 from their bills, and up to £600 in total for those who need it most. We would pay for this with a windfall tax on North sea oil and gas profits. These companies have profited massively because of exploding prices, so much so that some in the industry have referred to soaring energy prices as a “cash machine” for producers and their shareholders.

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[Alan Brown]

The right hon. Gentleman seems easily confused, but of course he is a climate change sceptic. If Scotland was in charge of its own energy policy, there would be more investment in renewables and greater hydrogen development, and we would not be paying for nuclear power. I have already said that the nuclear power stations will put up to £63 billion on to our bills; that is the estimate. We would have a much better energy policy that we could implement as an independent country and we would not have the highest grid charges in the whole of Europe.

[David Linden]

I am looking on with a degree of bemusement—the hon. Member for South Thanet (Craig Mackinlay) is engaging in a debate about Scottish independence. Does my hon. Friend welcome the fact that the Government are finally engaging in the debate about Scottish independence? Perhaps the hon. Member for South Thanet will come up and campaign in the coming referendum.

[Alan Brown]

I welcome that intervention. It is good that people recognise that Scottish independence through a referendum is going to happen, and we look forward to a continued debate about the nuances of what will happen in an independent Scotland that has control of its own policies and can choose to go back into Europe.

As I said, we need to understand that the warm home discount is actually paid for by other bill payers. I am uncomfortable with the fact—the Chief Secretary did this earlier—that the Tories brag about the warm home discount as if it is a Government-funded measure. The reality is that, as a stand-alone tax measure, the warm home discount is actually regressive, because the people who can least afford it pay the same levy as those that can afford to pay more. So while the warm home discount does help people that require help, it is actually a regressive tax measure. If Labour’s proposals were implemented in the way the scheme operates just now, that would add £200 per annum to the bills of those who are left paying for it. It is inferred that Labour’s proposals would be funded from £3.5 billion of additional Treasury receipts, but that needs to be made clear. We also need to make sure that the Tories are not allowed to do a fudge when they raise the warm home discount, but by making other bill payers pay for it, giving them a free pass to pretend they are doing something. Similarly, there has been a call for policy levies to be removed from our electricity bills. I have argued this for a while because state levies on bills are also regressive, so we need to come to a fairer taxation measure to pay for our transition to net zero.

I have another concern about current Labour rhetoric about tax rises. It is as if all tax rises are bad. That plays to the Tories’ narrative and encourages them to make tax cuts ahead of the next election. So yes, the national insurance rise is an unfair tax on workers, and it is correct to highlight that, but we need to debate fair taxation. The Chancellor shied away from setting capital gains tax at the same rate as income tax. Had he done that, it would negate the need for a national insurance rise.

In Scotland the Scottish Government have shown that this can be done differently with a low starting rate of income tax and incremental increases across the bandings so that those can afford to pay a bit more do so. This is a model that Labour should be espousing. It should be demanding that the UK Government match our £20 per week child payment and reinstate the £20 per week universal credit cut.

It has been highlighted that tax burdens are the highest in peacetime since world war two. If this were to create a fairer society as part of a genuine levelling-up agenda, it could be managed. But we have right now in the UK the worst levels of poverty and inequality in north-west Europe and the highest levels of in-work poverty this century. The UK has one of the worst pensions in the world, made worse by the Government’s cap on the triple lock, so the Chancellor is balancing the books on already hard-hit pensioners struggling to heat their homes. How is it credible to reduce pensioners’ income by over £500 a year on what it otherwise would have been this year? The UK has one of the lowest sick pay rates in the OECD with the current rate of £96 per week. That is wholly inadequate, especially if people still need support in self-isolating.

Small independent countries continue to demonstrate that they can create a fairer, more equitable society. It is time Scotland had these powers rather than having to continually tinker around the edges and have decisions imposed on us. The debate has started today. I look forward to continuing the debate in that form.

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[David Linden (Glasgow East) (SNP)]

This is the second day in a row that the Chancellor of the Exchequer appears to have been posted missing. At the beginning of the pandemic, he was absolutely everywhere: we could see all his branding on Instagram and he was clearly trying to pump himself up in advance of a Tory leadership bid. This Government often talk about their plan for jobs, but it is becoming increasingly clear that the Chancellor has a plan for only one job: his next job, which the Prime Minister seems to be doing his best to expedite today.

Yesterday, I met Age UK and Age Scotland, which told me that 96% of respondents to their snap survey last week were worried about their energy bills. People are already making really tough choices between heating and eating: for example, some people are making the decision just to live in the one room in their house that they can heat.

The Government need to reflect that, when people fall into destitution, the state bears the cost anyway, so there is a preventive argument as well. What we need from the Government is not just a plan for jobs, but a plan for their cost-of-living crisis and a plan to tackle pensioner poverty. We need a one-off payment to low-income households, which could be identified by way of the council tax reduction mechanism. We need to increase and extend the warm home discount, delivered through customers’ bills and funded by the Government. We need the April benefits uprating to better reflect inflation rates and certainly to reinstate the £20 that was cut from universal credit, which was so callous on the Government’s part.

We need to reinstate the pensions triple lock, on which the Government broke their own manifesto commitment only a couple of months ago, because pensioner poverty is on the rise and the UK already has one of the poorest pensions in the OECD. We were told that an 8% rise in pensions would be disproport- ionate, but reasonable economic forecasts now expect inflation to run at 7% in April. We need bold action on pension credit. Over 3,000 constituents in Glasgow East are eligible for pension credit but do not take it up, so we need more action from the Government to promote it.

The Department for Work and Pensions needs to look again at the £500 million household support fund. Initially, we had £41 million of that Barnettised to the Scottish Government. Rather than winding the fund down, the UK Government should increase it. We need to reintroduce and mandate the social energy tariff, reinstate the free TV licence for over-75s, who largely spend more time at home, and reduce or remove VAT and environmental levies on energy bills.

Those are just some of the things that could be in the Chancellor’s plan for the cost-of-living crisis but, as we all know, his only plan for jobs is for his next one. This place is clearly not going to deliver anything for Scotland, so the only way to do it properly is with Scottish independence.