Responding to the Chancellor Rishi Sunak’s failure to answer how many people are being pushed into fuel poverty on the BBC’s Sunday Morning show, Liberal Democrat Treasury Spokesperson Christine Jardine said:
Rishi Sunak doesn’t even care enough to find out how many people he is condemning to fuel poverty. It shows he is completely out of touch with families worried sick about how to cope with soaring energy bills.
People are desperate for help but the Conservatives’ response is to clobber them with an unfair tax rise.
The Chancellor should use this week’s Spring Statement to put money back into people’s pockets, by finally scrapping this hated tax hike and slashing VAT.
The Liberal Democrats are calling on the Chancellor to introduce an emergency cut to the standard rate of VAT, reducing it from 20% to 17.5% for one year. This would save households an average of around £600 each over the next year.
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9 Comments
If a 2.5% cut in VAT will save an average of £600 in a year, that is only possible if the average household spends £24,000 on goods and services that are not subject to VAT. The majority of households spend much less than £2,000 per month on non VATed items but the ‘average’ figure reflects that wealthy household spend far more or VATed goods and services and therefore get greater benefit from such a measure. Sorry, but I believe that the priority should be to target help at households that are struggling to make ends meet, and not to make luxury goods, expensive cars etc cheaper for the wealthiest in our society. If this is Ed Davy trying to attract Tories voters, I don’t like it.
It isn’t as if there might be a feel good experience — the opportunity to treat yourself — from a 2.5% VAT cut when inflation is heading towards 10% by the end of the year. Everything which we buy which contains a significant transport cost will not be affected in a positive way.
People on low incomes or with high basic living costs need changes which will put money in their pockets for essentials. That means raising the thresholds for income tax and NI.
>The Chancellor should use this week’s Spring Statement to put money back into people’s pockets
Agree, he should increase the rate of vehicle due electric vehicles attract from zero. He should also impose the same duties and tax on electricity used to charge electric vehicles (easily done as cars have a unique id that is used in dedicated vehicle charging stations).
Given the premium these vehicles carry, it won’t be those in need who will be hit.
The monies gained could be directed to assisting the less well off. Interestingly, this action would tend to align the needs of those who would have purchased eCars with the less well off, so helping further to subsidize public transport by increasing potential passenger numbers…
Remember there will be fewer eCars on the road in future than there are ICE cars today, time to start preparing…
After I retired as a Lib Dem Councillor in 2012, I became a Trustee (and later Chair) of a Food Bank….. so I’ve witnessed a bit about food poverty.
I agree with Brad Barrows that reducing VAT would not have the biggest impact on food poverty and I’m afraid I have to say that in my personal experience (going back to 2012 again) Rishi Sunak isn’t the only politician – or member of the only political party – to be ‘out of touch’ on the issue of food poverty……… but if Ms Jardine is in the process of a ‘damascene conversion’ on this issue that is to be welcomed.
There was plenty of information about poverty and inequality in the UK in the UN Alston Report published in 2019. It’s not too late for the Liberal Democrat Party to read and digest it.
2.5pc off VAT is too diffuse to really help. Targeted intervention for the poorest and lowest paid would mean above inflation rises for benefits (not including state pensions) coupled with another hike in both the entry level of NI contributions and basic income tax.
Meanwhile..
https://www.theguardian.com/money/2022/mar/21/fuel-retailers-defend-high-costs-at-uk-pumps-after-drop-in-oil-prices
“AA accused retailers of dragging feet on passing on reduction to drivers, as petrol and diesel hit record highs”
Between 2005 and 2008 the cost of crude rose from $60 to a high of $140 per barrel (almost a threefold increase; far higher than today’s $112) and yet pump petrol only rose from 80p to £1,,,
Over the last few years crude has remained reasonably stable (apart from a historical low of under$20 in 2020) ..This year there has been a steep rise in crude but nowhere near the high of 2008..
I appreciate that tax has risen but, as we are constantly informed that “little profit is made at the pumps”, why are we paying almost £1.70 per litre..
Who, apart from the tax, is making the profit?
Given that the chancellor has nailed his colours to the mast on the increased rate of NI, an obvious offset would be to raise the NI threshold.
We are in an environment of stagflation (high inflation and slowing growth or recession). We have been here before in the 1970s. The most probable outcome is lower living standards as real wages are squeezed for many years to come. Tinkering with tax rates will have little broad impact. The focus has to be on the social security safety net and maintaining full employment.
The target for support should be those on fixed incomes i.e. welfare recipients and pensioners. The policy tools are a minimum income guarantee and restoration of the triple lock. To maintain full employment the focus should be on a shift of the burden of taxation from labour to economic rents including land rents. An increase in the NI threshold to that of the income tax personal allowance (£12,570) and revision of council tax to a proportional property tax would be good starting point.