Members of the ‘Vote Leave’ campaign including London mayor Boris Johnson have claimed that if the UK votes to leave the EU in the referendum on June 23rd, then VAT could eventually be lifted on energy bills, cutting costs for households across the country.
Writing in The Sun, Boris Johnson, Michael Gove and Gisela Stuart of the Vote Leave campaign said:
“In 1993, VAT on household energy bills was imposed. This makes gas and electricity bills much more expensive. EU rules mean we cannot take VAT off those bills.”
They went on to claim: “When we Vote Leave, we will be able to scrap this unfair and damaging tax”.
VAT on energy bills is currently charged at 5%, having been reduced by the Labour government in 1997. 5% is technically the lowest level of VAT that can be charged on a product under EU laws which prohibit the addition of zero rate products.
This particular rule gained a lot of exposure when campaigners rallied to end the 5% VAT charged on women’s sanitary products, known as the ‘tampon tax’. Following pressure, the government did manage to persuade the European Commission into allowing the UK to add sanitary products to the list of zero rate products.
Gove, Johnson and Stuart said that if we do vote to leave the EU, power to remove VAT on energy bills would be in the hands of the Prime Minister, rather than in the hands of “unelected bureaucrats in Brussels”.
Members of the Remain campaign hit back against Vote Leave’s claims, with Chancellor George Osborne dismissing their ideas as “fantasy economics”.
“Leaving the EU” Osborne said in a Tweet, “would lead to [a] smaller economy, a hole in public finances [and] higher taxes – like VAT”.
Energy secretary Amber Rudd has separately argued that leaving the EU would add a staggering £500 million to household energy bills. She made her comments back in March, arguing that rather than keeping bills high, our EU membership as “helped keep our energy bills down”.
This, she argued, comes from being part of the European Internal Market, membership of which, according to a report from National Grid, could keep bills from rising by around £20 per household.
Rudd also said that remaining part of the EU prevents the UK from being bullied by “countries such as Putin’s Russia [who] use their gas supplies as a tool of foreign policy”.
Leave campaigners argue that we are unlikely to be bullied by Russia if we do leave, since we are more reliant on countries like Norway for our gas supply.
