SLASH THE VAT ON OUR ENERGY AND BUSINESS TAX CHANCELLOR IS TOLD
LABOUR has urged the Government to use its Brexit freedoms to completely remove-vat from domestic energy bills.
The plea comes amid growing concerns of a cost-of-living crisis, as food prices soar by as much as 20 per cent and energy bills keep climbing.
The demand by shadow chancellor Rachel Reeves would be worth £1.6billion, according to HMRC figures.
Last night, hospitality and retail chiefs warned that thousands of businesses will be lost if Chancellor Rishi Sunak increases business rates and VAT to pre-pandemic levels in the Budget.
Sources have suggested that Mr Sunak, who was part of the campaign to exit the EU before the referendum, may end VAT on energy bills in Wednesday’s Budget.
If so, he will have support from the official Opposition, who say the problem of rising inflation has to be tackled.
Ms Reeves said: “We want our everyday economy to thrive and for people to be secure and prosperous.
“But right now, people are being hit by a cost-of-living crisis which has seen energy bills soar, food costs increase and the weekly budget stretched.
‘There would be a wave of closures’
“That’s why Labour is calling on the Government to immediately remove VAT on domestic energy bills for six months.
“We need a sustainable and ambitious approach to energy, which is why Labour would also ramp up ambition with our plan to retrofit 19 million homes and make our energy supply chain more secure.
“Conservative complacency is making the cost-of-living crisis worse and storing up long-term problems, with working people paying the price.”
She added: “The Chancellor has a choice to make.
“He can choose to let online giants dodge tax and ignore the cost-of-living crisis, or he can give working people a helping hand by providing an immediate cut to their energy bills.”
Labour has argued that a VAT cut on domestic energy bills – which would change the charge from five per cent to zero – could come into place from November 1.
It should last for six months, seeing people through the winter months, with VAT being automatically deducted from their bills.
A source close to Ms Reeves pointed out that Boris Johnson, Mr Sunak and other senior members of the Government all promised the public that the freedom to cut VAT was one of the benefits to leaving the EU during the Vote Leave campaign before Brexit. Ms Reeves believes that the tax cut would be funded for by the higher-thanexpected VAT receipts accrued since the start of the financial year.
To further tackle higher energy bills and the climate emergency, Labour recently announced that they would ramp up the ambition on retrofitting homes for sustainable, long-term reductions in energy bills – a major policy announced in Labour leader Keir Starmer’s party conference speech.
They have argued for building a more secure energy supply chain, including new nuclear and improved gas storage, all aiming to help achieve net zero.
Further pressure was heaped on the Chancellor last night, as hospitality and retail chiefs warned that many more livelihoods will be lost if business rates and VAT are raised to pre-pandemic levels in the Budget.
They say there would be a wave of closures due to increasing wages, rising heating costs and price inflation if shops, pubs and restaurants are fully taxed by the Government during the next financial year.
Without current support measures being maintained, they fear permanent damage to high streets.
Kate Nicholls, chief executive of UK Hospitality, said businesses in her sector have struggled since July with labour shortages, staff self-isolating because of the “pingdemic” and now ongoing supply chain difficulties.
She said: “The utilities price rises are really impacting on the sector and there is a big bubble building which will burst at some point, resulting in higher prices for consumers.
“What the industry needs is to make sure that this is not made worse by tax increases.
“We are really looking for the Budget to have extension of business rates relief, to make sure we don’t have a higher tax rate cutting off the recovery in March.
“Ideally, we would like to see an extension of the lower rate of VAT, to retain that rate of 12.5 per cent to make sure we are competitive internationally and businesses can navigate the challenges they are facing.”
Ms Nicholls added: “The industry remains incredibly fragile. Some of the businesses are borderline viable at the moment.
“We lost 12,000 during the pandemic and there is a danger that we lose that many again over the next 18 months as the cost pressures become unsustainable and prices go through the roof.
“If we don’t get support measures we are going to see a permanently smaller
hospitality sector and job losses across the sector.”
Andrew Goodacre, chief executive of the British Independent Retailers Association, agreed with Ms Nicholls.
He said: “If business rates were to come back at the full level from March, I don’t think businesses can survive, with everything else going on in terms of inflation from energy costs and the relatively flat retail sales.”
He added he is “nervously waiting” for the announcement on tax levels for next year. He is also hoping there will be easier access for all retailers to funds to improve their digital offerings, as businesses currently need to have five or more members of staff.
He said: “On the skills side, the apprenticeship schemes are not very helpful for retail. We would like to see something that addresses the skills gap and attracts more people with stronger IT skills, which the sector needs.”
Professor Chris Turner, chief executive of British Business Investment Districts, has written to Mr Sunak asking him to consider five measures to help the thousands of retail, hospitality and leisure businesses in the 324 districts nationwide.
The first of these would be keeping the 66 per cent business rates discount in place until March 2023, or until the “outdated” tax is reformed.
The second is keeping VAT at its current 12.5 per cent rate for an extra year, to offset wage inflation and supply shortages.
The third involves waiving bounceback loans for the smallest independent businesses suffering from the lower footfall and spending on high streets.
The fourth is to make it simpler and quicker to access government grants, including the community renewal fund or levelling-up fund.
And finally, he is calling for investment in vocational subjects, to end the over-reliance on university degrees.
In his letter to the Chancellor, Prof Turner said: “We hope you can take the above measures into account as you finalise your Budget.
“And we hope your announcements will help us ‘Build Back Better’ from the pandemic.”
‘Hospitality remains incredibly fragile’