Question to the HM Treasury:
To ask the Chancellor of the Exchequer, pursuant to the Answer of 7 March 2022 to Question 129256, what assessment his Department has made of whether VAT revenues will increase or decrease as a result of rises in energy prices.
As set out in the answers to PQ UIN 125532 and PQ UIN 129256, high energy prices reduce VAT revenues.
In recognition that families should not have to bear all the VAT costs they incur to meet their energy needs, domestic fuels such as heating oil, gas and electricity are subject to the reduced rate of 5 per cent of VAT. If people spend more on domestic fuels where VAT is 5 per cent, they spend less on goods and services that on average have a much higher VAT rate, thereby reducing VAT revenue overall.