Rising energy prices will bring £ 3.1 billion to Treasury, say Labor | Taxes and Expenses
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Rising energy prices will bring Rishi Sunak a ‘windfall’ of £ 3.1bn since the October budget, according to a Labor analysis, which the party urged the Chancellor to spend to cut household bills. households.
Labor said the proceeds would cover the expected £ 2.4bn cost of removing VAT from gas and electricity bills during the winter months.
The figures come from the House of Commons Library research, commissioned by Labor, which projects an additional £ 3.1bn in VAT revenue in 2021-2022, for a total of £ 135bn.
The labor figures were obtained using projections from the Office for Budget Responsibility (OBR) that 42.2% of VAT revenue will come from November to March. This suggests that with £ 78bn raised through October 2021, just under £ 57bn can be expected over the remainder of the year. This would bring total VAT revenue to around £ 135 billion. In the October budget, the OBR forecasted £ 131.9 billion for 2021-2022.
However, the Treasury said those increases would not be close to predictions before the pandemic. A government spokesperson said: “There was no VAT windfall. VAT revenue this year is expected to be lower than pre-Covid level, with the OBR forecasting that nearly £ 2 billion less will be received this year compared to just before the pandemic. “
But fictitious Chancellor Rachel Reeves said the extra money over the pre-budget forecast meant the Chancellor could ease energy bills.
“Right now, people are affected by a cost of living crisis that has seen energy bills skyrocket, food costs rise and the weekly budget stretch. This is why Labor is calling on the government to immediately remove VAT from household heating bills during the winter months.
Reeves said more measures were needed to protect households from escalating bills after the next review of the energy price cap, which some experts say could rise to 40% when Ofgem sets it at new in february. The energy regulator is also expected to adopt a series of changes after the collapse of so many small suppliers.
The ceiling for the average household is £ 1,277 per year, but the Tony Blair Institute for Global Change has estimated it could reach almost £ 1,800.
“We need a sustainable and ambitious approach to energy, which is why Labor would also increase its ambitions with our plan to renovate 19 million homes, making our energy supply chain more secure without harming household savings, ”Reeves said.
“On top of the biggest tax burden in 70 years, Conservative complacency is worsening the cost of living crisis and accumulating long-term problems, workers are paying the price.”
A spokesperson for the Treasury said it concluded that high energy prices will reduce VAT revenue due to the 5% VAT rate on the supply of household fuel and electricity. Higher prices on the whole meant that if people spent more on energy, where VAT was lower, they would spend less on goods and services that had on average a much higher VAT rate, thus reducing costs. global VAT receipts.
“We are supporting vulnerable households with the cost of energy through initiatives such as the Hot House Rebate, which is raised to £ 150 and extended to cover an additional 750,000 households, winter fuel payments and cold weather payments, ”the spokesperson said.
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