Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment he has made of the potential merits of reducing the VAT on domestic energy to 2.5 per cent.

The Energy Price Guarantee is a scheme that caps the unit price households pay for electricity and gas, which means that a typical household will have to pay bills equivalent to no more than £2500 a year on their energy bills this winter. This is expected to save consumers who use both gas and electricity around £900 this winter. The scheme as currently designed will last until 31 March 2023. As announced during the 2022 Autumn Statement, the EPG will increase to £3000 from April 2023 until April 2024. This new approach is expected to save around £14 billion to April 2024, ensuring fiscal sustainability, whilst targeting support to those most in need.

The Government recognises that families should not have to bear all of the VAT costs they incur to meet their needs, with domestic fuels such as gas, electricity and heating oil already subject to the reduced VAT rate (at 5 per cent of VAT). The Government's package of support to help households with their energy bills is more generous than an additional VAT cut on domestic fuel and power, and there would be no guarantee that suppliers would pass on the discounts from this relief to all customers.