Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what recent estimate he has made of the potential additional value to the Exchequer of VAT on fuel arising from the expected increase in energy prices from April 2022.
High energy prices reduce VAT revenues. In recognition that families should not have to bear all of the VAT costs they incur to meet their needs, domestic fuels such as gas and electricity are already subject to the reduced rate of 5 per cent of VAT. If people spend more on energy where VAT is 5 per cent, they spend less on goods and services that have on average a much higher VAT rate, thereby reducing VAT revenue overall.
The Government is providing significant financial support – up to £350 – to the majority of households, which will cover more than half of the forecast £700 rise in energy bills for the average household. This support is worth £9.1 billion in 2022-23.