Energy VAT: Scrap It for Homes, Add It to Flights

Rachel Reeves has a simple, powerful opportunity to ease the pressure on hard-pressed families by tackling VAT on energy bills.

I commissioned one of the biggest polls of its kind, the Giga Poll, where we asked 45,335 people about their lives. The results were stark. The cost-of-living crisis rolls on, grinding down working families month after month.

Almost one-in-ten said they feel financially desperate. Another quarter said they’re worried about their financial futures. That’s 20 million people lying awake at night worrying about how to pay the bills.

So, here’s one idea how to help those people who are really struggling.

Energy bills are of course an essential, everyone pays. We have an energy price cap to protect people from energy bills being any higher than they absolutely need to be – but then we add VAT on top.

That’s around £80–£100 added to bills.

That’s a regressive form of tax.

But while millions face the choice of heating or eating in the winter, flying is completely VAT free and there is no fuel duty charged either. So why not take the 5% VAT off energy bills and put it on flights instead. We’ve crunched the numbers; there’s a number of ways this could be done from a small net loss to the Treasury to a much bigger gain, or somewhere in between.

But the fact remains, half of Britons don’t fly in a given year. The richest 10% take 50% of all flights. Meanwhile, the airline industry enjoys about £20billion a year in hidden subsidies through tax exemptions on fuel and VAT.

Redirecting just a fraction of that to help people heat their homes isn’t radical – it makes sense.