MSE News: Government 'wants big six energy firms to hold prices'

JezR

thor wrote: »

I'm curious. When Ken clarke increased VAT on energy from 0% to 5% in the 90s was he pushed by Europe or did he give them the idea to foist it on everyone else? I remember him doing it but genuinely have no idea behind the motive as I don't class gas and electricity as luxuries anymore.

It was Lamont rather than Clarke that initiated this policy.

He did point out that the UK was unique in not charging VAT on domestic gas and electricity, but there was no requirement to do so.

The reasons cited at the time were:
- a need to reduce the budget deficit.
- remove an 'anomaly' that energy saving products were subject to VAT whilst energy consumption was not.
- part of the action 'in order to meet the commitment that we entered into at Rio', ie carbon reduction.

Benefits and pensions were uprated to offset this, not something I am aware was explicitly done to other levies on fuels not given the 'VAT' label. Indeed it was probably the experience of failing to introduce VAT at the full rate in the mid 1990s to call levies on Fuel something else.