2 days ago
Rachel Reeves eyeing VAT hikes on energy bills, SNP claim
Darren Jones, Chief Secretary to the Treasury, has committed to not increasing the 'headline rate' of Value Added Tax (VAT).
But under questioning on BBC Radio 4's Today programme on Monday, the top Labour minister failed to rule out expanding the tax's scope – meaning it could be applied to more products.
Jones's comments have sparked fears Labour could be moving to ending exemptions, given that planned cuts to plug a shortfall in the public finances must be filled by cuts elsewhere or tax hikes to meet the party's self-imposed fiscal rules.
VAT is applied to things like fast food and many snacks but not to fruit and vegetables; likewise, adults' clothes are taxed where children's clothes and babywear are not.
Household energy bills incur a 5% VAT charge and there are concerns this could be hiked as this is not the headline rate of VAT, which is 20%.
The SNP have written to Chancellor Rachel Reeves to demand she does not hike taxes on 'everyday essentials'.
(Image: House of Commons)
Dave Doogan (above), the party's economy spokesperson, said: 'As the UK economy continues to falter on your watch, there are growing concerns about the austerity cuts and tax rises the Labour government will impose on families to fill the black hole in your government's finances.
'The Labour Party has already broken your election pledge not to increase National Insurance taxes – and as a result the UK economy is now in an even worse state as businesses shed jobs and investment and UK unemployment hits a 4-year high.
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'Now there are concerns that the Labour government intends to increase the cost of food, energy bills, baby clothes and other everyday essentials by increasing VAT charges on items that are currently VAT exempt or charged at a lower rate than the headline 20%.'
He added that Jones's (below) Today programme interview had 'left the door open to such a move', adding: 'Families must not be forced to pay the price for Labour Party failure on the economy with regressive tax hikes that will hit send the cost of living even higher.
'People are already paying through the nose for everyday essentials under the Labour government - with the cost of food, energy and household bills even higher than they were under the Tories. They cannot afford yet another Labour Party-imposed hike in living costs. Such a tax hike would also squeeze economic growth even further.
'Labour Party policies are actively damaging the UK economy and public finances - with both in a worse state than when you came to office.'
A Treasury spokesperson said: 'The Government stands by its promise not to raise the basic, higher or additional rates of Income Tax, employee National Insurance or VAT.'
The Office for Budget Responsibility (OBR) warned earlier this month that Labour's efforts to cut Government borrowing had mostly failed, saying there had been a 'a substantial erosion of the UK's capacity to respond to future shocks and growing pressures on the public finances'.
Reeves has also been hamstrung by a shrinking economy after promising growth, with gross domestic product falling for the second month running in May.
