Flame Heating Group founder John Savage has written to the leaders of the three main political parties urging them to scrap the 5% VAT rate on domestic energy as soon as the country departs from the European Union.
The Managing Director of the North East’s fastest growing heating and plumbing merchant claims that abolishing the tax - agreed at EU level – would reduce greenhouse gas emissions by encouraging a wider adoption of energy efficient technologies.
He also argues that such a tax cut would reduce the energy bills of low and middle-income earners in relative terms, stimulating the economy and greatly reducing the number of households in England classed as living in fuel poverty (currently 2.5m).
Savage, whose business is based in Boldon, South Tyneside, has written letters to Conservative Prime Minister Boris Johnson, Labour Party leader Jeremy Corbyn and Liberal Democrat leader Jo Swinson, seeking their support to scrap the VAT charge once the United Kingdom has left the EU.
In the letter, he says: “I believe government must seize the opportunity to abolish this charge once this country is free to administer its own tax affairs.”
A VAT rate was applied to household energy in 1993 by the UK government. Under more recent EU rules, it cannot now be scrapped unilaterally by a member state, so that the UK has to collect a minimum rate of 5%.
He adds: “I’m urging our political leaders to take decisive action by giving their full support to abolishing this ineffective VAT charge on household energy as soon as we exit the European Union.”
Boris Johnson has already spoken in support of the change during the referendum campaign.
The Resolution Foundation, an independent think thank, explores the issue in After Brexit the UK could cut VAT on energy – but should it?