Energy Price Guarantee

(asked on 8th December 2022) - View Source

Question to the HM Treasury:

To ask His Majesty's Government whether they examined the case for (1) reducing VAT on domestic fuel, and (2) raising the personal allowance for taxpayers, as an alternative to the Energy Price Guarantee before they announced the Autumn Statement on 17 November; and if not, why not.


Answered by
Baroness Penn Portrait
Baroness Penn
This question was answered on 15th December 2022

The Government made the difficult but necessary decision to maintain income tax thresholds until April 2028 to ensure the tax system supports strong public finances.

Maintaining these thresholds is universal, progressive and fair. The highest earners will contribute more of the revenue. Even with the decision to maintain thresholds the Personal Allowance (PA) has increased by over 40 per cent in real terms since 2010, ensuring some of the lowest earners do not pay income tax. Thanks to the PA, in 2021-22 around 30% of earners didn’t pay tax.

The UK’s PA is high by international standards – it is one of the most generous personal tax allowances in the OECD and highest in the G7.

The Government also 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 rate of VAT 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.

As with all aspects of the tax system, the Government will continue to keep income tax thresholds and VAT under review and any decisions on future changes will be taken by the Chancellor in the context of the wider public finances.

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