‘Extraordinary’: Nick Ferrari asks Treasury Minister four times how much scrapping VAT on energy bills will cost - but he still can’t answer
The Government has temporarily removed the 5 per cent VAT from electricity bills until March 31 next year to cut around £45 a year
The Paymaster General was unable to say how much today's VAT cut on electricity bills would cost the Treasury when asked four times, but reassured the public it is "fully funded".
Listen to this article
In an effort to help households with the cost of living, the Government has temporarily removed the 5 per cent VAT from electricity bills until March 31 next year to cut around £45 a year. Households will still pay 5 per cent VAT for gas.
It comes as a 4 per cent hike to Ofgem’s energy price cap takes effect amid warnings household bills could soar by almost another £300 from January.
James Murray, Financial Secretary to the Treasury and Labour MP for Ealing North, was grilled by LBC's Nick Ferrari on how much the VAT cut is going to cost the Treasury.
He conceded that it is "fully funded" by the Treasury but was unable to give any figures.
He told Nick: "What the Prime Minister announced was to remove VAT off electricity bills for 6 months from October to March next year... that depends exactly on usage over those 6 months...
"I haven't got that figure in front of me, but... the exact amount will depend. I haven't got the figure in front of me right now.... Sorry, I haven't got that right in front of me."
Campaigners have urged the Government to make plans now to support all households with energy costs this winter because of the severity of forecast bill hikes.
The stark warning comes as the latest 4 per cent increase to the price cap coincided with experts at Cornwall Insight predicting it will rise by a further 16 per cent to £1,999 a year on January 1, up by £276 on the level between October and December and the biggest rise since January 2023.
On Thursday, the bill for the average household in England, Scotland and Wales paying by direct debit for gas and electricity reached £1,723, up £5 a month or £60 a year if this level was sustained over 12 months.
More than four million homes that remain on a standard energy tariff are affected by the increase.
Mr Murray added: "As of today, VAT has been taken off energy bills over the winter to give people some breathing space in the months ahead, because we know that there's unprecedented instability around the world in the Middle East, Strait of Hormuz, and Iran and elsewhere.
"All of that is putting pressure on energy bills here in Britain.
"But we're not powerless as a government, and so where we can act, we will.
"By taking VAT off electricity bills, it gives families across the country some breathing space through the winter."
The End Fuel Poverty Coalition urged ministers to prepare an “emergency heat tariff” to cap the cost of heating this winter, with gas prices already rising 27 per cent year on year.
Prime Minister Andy Burnham said: “For many families, the energy bill is the one they dread the most. I don’t accept that it has to be this way, and I am determined to bring down costs for good.
“But I know people can’t wait. Families need breathing space now.
“That’s why, from today, VAT is gone from your electricity bill. And we’re going further, capping bus fares at £2 from January and cutting business rates for pubs, social clubs and live music venues.”