Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what estimate his Department has made of the cost to the Exchequer of removing VAT from the price of covid-19 test services in each quarter in 2021-22.

VAT is a broad-based tax on consumption and the standard rate of 20 per cent normally applies to most goods and services, including PCR tests. VAT makes a significant contribution towards the public finances, raising about £130 billion in 2019/20. This helped to fund the Government's priorities in key areas such as health, schools, and defence. Any loss in tax revenue would have to be balanced by a reduction in public spending, increased borrowing or increased taxation elsewhere.

Medical testing, where it is administered by registered health professionals, is exempt from VAT. The Government also continues to offer free COVID-19 testing for those with COVID-19 symptoms.

Competition among private providers in the market for COVID-19 tests has already worked to reduce the cost of PCR tests significantly, without Government intervention, and the Government expects these prices to continue to decrease over time. In order to reflect the recent reduction in the price of PCR tests that are available privately, NHS Test and Trace has already decreased the cost of the tests that they provide for international arrivals.