Household Energy Bills: VAT

Sammy Wilson Excerpts

Tuesday 11th January 2022 Commons Chamber

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is incredible, given the current cost-of-living crisis, that the UK Government seem to be incapable of doing anything different. The Chief Secretary reeled off a list of measures that the Government were already taking, but there was nothing new in his speech. There was nothing about what the Government are doing to tackle the current crisis, and they need to think again.

We have already seen the broken promises about lower energy bills post Brexit. Now all the Tory Back Benchers who campaigned for lower VAT on energy bills are queuing up to back the Government not to introduce a VAT holiday, and that makes no sense either. The fact is that without Government action, a real crisis looms. It is not credible for the energy cap to rise to approximately £2,000 a year in April. National Energy Action estimates that there are already 4.5 million fuel-poor households in the UK, which is a disgrace, and if the cap rises, as is predicted, the number will rise to 6 million. The Government really need to think about that, and take action to prevent it.

It is also worth looking at how the cap operates at present. It does provide protection for the vulnerable, but not enough protection. A constituent of mine who is on the standard variable tariff is struggling to pay her bills. Because the cap is based on average energy units, she is already paying £200 more per annum than the predicted cap. I urge the Government and Ofgem to look at how the cap works in reality.

As has been said, raising the cap to the extent that the average user will pay £600 more per annum would be so damaging that it cannot happen. I therefore support the calls for Government loans to be used to help energy companies to smooth over the transitional costs over, say, 10 years. I certainly support further direct intervention to mitigate any fuel rises. On that basis, I am happy to support the VAT holiday proposed in the Labour motion, although the predicted £89 annual saving will be wiped out if the Government do not take action to mitigate the cap.

[Sammy Wilson (East Antrim) (DUP)]

I am glad that the hon. Member appreciates one of the benefits of Brexit, namely that we now have the option of reducing VAT—and I do not understand why the Government will not do that—but does he recognise that as a result of the flawed deal in Northern Ireland and the fact that the Northern Ireland protocol leaves Northern Ireland under the EU VAT regime, any reduction in VAT could not apply to consumers in Northern Ireland, because EU VAT rules still apply there?

[Alan Brown]

I was not aware of that, but it appears from recent figures relating to the impact of Brexit that the protocol is protecting Northern Ireland, and it is not taking the same hit to its economy as the likes of Scotland. It is swings and roundabouts. The Northern Ireland economy is doing much better than it would have as part of Brexit Britain.

I have said that I certainly support the VAT holiday, but I am not sure that some of the rest of Labour’s £6.6 billion package and rhetoric has been completely thought through. The real windfall tax should be levied on the Treasury. As our energy bills have increased, so have VAT returns to the Treasury; as fuel prices have increased, the Treasury has raked in more money in fuel duty and VAT; and as for the North sea, it was confirmed in the Red Book for the November Budget that this financial year the Treasury will receive an extra £1.1 billion in oil and gas revenues compared with the March 2021 prediction, and the Treasury will receive an extra £2 billion from oil and gas revenues in this coming year and £6 billion in total over the Parliament. The Treasury should release the additional windfall revenue it has received.

Although to impose a windfall tax directly on oil and gas companies is an easy political soundbite, it has potential implications, so what discussions has Labour had with the industry? What assessment has Labour made of the levels of investment—which could be part of the decarbonisation agenda—that might be clawed back because of such a tax? The harsh reality is that every previous windfall tax on the oil and gas industry has led to a drop in capital investment.

In our transition to net zero, we do need to get off our dependence on oil and gas, but the reality is that carbon capture and storage is part of the pathway to net zero. What assessment has Labour made of the potential impact on such projects, and particularly on the Scottish carbon capture cluster, which has already been sacrificed to reserve status by the Tory Government?

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[Alan Brown]

I am not responsible for the administration of the £500 million fund, but the hon. Gentleman should just be grateful that it is there. It is for a 10-year investment period, so clearly it is for long-term planning.

[Sammy Wilson]

I am confused about where the hon. Member stands on energy policy for Scotland now. He wants to have an independent country that is a member of the EU and subject to EU VAT rules, which unfortunately will still apply in Northern Ireland. I also understand that the Scottish National party does not actually want to exploit the oil and gas that lie around our shores, so how does it hope to reduce the cost of energy for consumers in Scotland and ensure the supply to them?

[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.

--- Later in debate ---

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

rose—

[Sammy Wilson]

rose—

[Chris Skidmore]

I will gave way to the right hon. Gentleman and that is it.

[Sammy Wilson]

While the right hon. Gentleman is eulogising about the target of net zero, does he not recognise that the large size of the bills that he says consumers have difficulty paying is a result of the green levies, which are stealthily placed on the consumer and which have reached 26% of what people pay every time they have an energy bill?

[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%.