Boris Johnson U-turns over VAT on energy bills

Boris Johnson will consider slashing VAT on energy bills to help struggling families despite appearing to rule it out just three weeks ago.

The measure is one of a number of possible options to tackle the cost of living crisis that the Prime Minister and Chancellor plan to discuss this week.

Earlier this month, Mr Johnson warned that scrapping the disliked tax on domestic fuel could prove a ‘blunt instrument’ that would benefit better-off families more than the needy.

But sources said last night that the option was firmly on the table – although no decisions have yet been made.

Energy firms, Labour and some Tory MPs have piled pressure on ministers to axe the 5 per cent VAT rate on domestic fuel this winter. 

Slashing the levy would cost the Treasury £1.7billion and knock around £60 off an average household fuel bill.

The Prime Minister and Rishi Sunak are hoping to meet to discuss the options this week and intend to make an announcement before February 7 when the energy price cap level is set. It is feared bills could rise by 50 per cent from April. 

A government source last night said the proposed VAT cut has ‘never not been one of several options’ under consideration despite Mr Johnson’s comments, but stressed that no decisions have been made.

Ministers are understood to be increasingly keen for a ‘broad brush’ measure which will help middle-income families as well as those on lower wages.

Gallery: The cost of healthcare systems around the world (Espresso)

During the 2016 Brexit referendum campaign, Mr Johnson and Michael Gove pledged to scrap VAT on energy bills if the UK left the EU.

Last night Labour reiterated its call to slash the tax as it warned that a million more disabled people are now ‘trapped in hardship’ and poverty than in 2010.

An analysis of Department for Work and Pensions figures by the Party found the number of disabled people living in poverty is currently 3.8 million – increasing from 2.6 million in 2010 when the Conservative Party came to power.

Anneliese Dodds, Labour’s women and equalities spokesman, warned that the cost of living crisis ‘has seen poverty explode’ and called on the Government to adopt Labour calls to cut VAT on energy bills.

Miss Dodds said: ‘Instead of taking action to help [disabled people], the Tories slashed Universal Credit, cut £70million in disability benefits and voted against Labour’s measure to reduce energy bills.

‘Labour’s contract with the British people will ensure disabled people are treated with respect and our fully-costed energy plan would see those most in need getting up to £600 off their energy bills.’

Labour has claimed that the cost of living crisis has disproportionately affected disabled people, adding that the ‘overall rate of disability poverty’ now stands at 27 per cent – growing by a fifth since 2010. It came as health unions called for an ‘inflation-busting’ pay rise to tackle the ‘exodus’ of exhausted NHS staff.

In evidence to the independent NHS pay review body, 14 unions representing 1.2 million workers warned that without a decent wage increase this year, the health service will continue to lose staff at ‘alarming’ rates.

The Government clashed with unions last year over NHS pay amid the huge strain on the service due to the coronavirus crisis, eventually awarding a 3 per cent rise in England. But the recent submission has called on ministers to make sure this year’s pay rise cushions health workers from increased living costs and helps the NHS to retain and attract staff.

Union officials said the huge number of Omicron-related work absences among health workers in recent weeks, coupled with 93,000 vacancies in England, has shown that the NHS is ‘fragile’. And they warned that large numbers of staff have ‘had enough’, with many actively seeking work elsewhere.

Unison’s head of health Sara Gorton urged the Government to ‘pull its finger out’ to hold on to ‘experienced health workers [and] protect the NHS’. She added: ‘An above-inflation increase alone isn’t a magic solution to the NHS’s many problems but a decent wage boost could be just the trick to persuade many burnt-out staff to stay.’

Joanne Galbraith-Marten, of the Royal College of Nursing, said that ministers have ‘repeatedly inflicted real-terms pay cuts on NHS staff’. She added: ‘Exhausted and demoralised staff need to know the Government is on their side – not to hear that it is stalling again on NHS pay. To prevent an exodus… ministers must quickly rise to the challenge.’