In the face of fears of a cost of living crisis in the coming months, the Treasury is looking at ways to help families. The cost of wholesale gas has skyrocketed in recent weeks, pushing up energy prices for millions across the country.
A number of suppliers have gone bust due to the hike in cost, forcing households onto higher tariffs with other providers.
The Chancellor is now thought to be considering a cut to the five percent rate of VAT on energy to help combat the increased cost of bills.
Brexiteers, including Prime Minister Boris Johnson, pledged during the 2016 EU referendum that voting to leave the bloc would mean “fuel bills will be lower for everyone”.
Brussels rules dictated that member states could not cut VAT on domestic energy and gas below five percent.
A statement by the Vote Leave campaign said: “When we Vote Leave, we will be able to scrap this unfair and damaging tax.
“It isn’t right that unelected bureaucrats in Brussels impose taxes on the poorest and elected British politicians can do nothing.”
According to the Financial Times, Mr Sunak is looking at a VAT reduction as part of his Budget due to take place later this month.
“It would tick two boxes – it reminds people of the benefits of Brexit and shows you’re listening to people,” one Treasury official told the publication.
On October 27 the Chancellor is set to announce his tax and spending plans to the House of Commons.
He is grappling with how to help families through what is expected to be a tough winter without racking up yet more debt.
The UK’s debt level hit a record high during the pandemic.
The Chancellor’s bid to keep the economy afloat during lockdowns led to eye-watering levels of borrowing.
Net debt stood at £2.2trillion at the end of August, approximately 97.6 percent of GDP, the highest ratio since March 1963.
The Government has already launched a new £500million hardship fund for councils to help those Britons struggling with living costs.
It will help those who are vulnerable through schemes including the warm home discount and winter fuel payments.
However, critics have said more action is needed and the new fund is not enough.
Labour’s shadow welfare secretary, Jonathan Reynolds, said: “Temporary and inadequate sticking plasters are no substitute for a proper social security system that offers security to families in hard times.”
As well as looking at a VAT reduction for energy bills, another newspaper report said Mr Sunak is also looking at slashing taxes on alcohol.
Under plans being considered, levies could be reduced on wine and beer.
Campaigners have long argued for the beer tax to be cut, warning Britons pay the second-highest tax rate on beer in the whole of Europe.
The Treasury said it would not comment on tax speculation ahead of the Budget.Internet Explorer Channel Network