Vat on Fuel Compensation Package

Ways and Means – in the House of Commons at 3:31 pm on 29th November 1994.

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I am able to improve the package of help that I announced last year to cushion the effects of VAT on fuel on all pensioners and on vulnerable groups—enormous though that package was when I announced it last year. Last year I doubled public spending on the very effective home energy efficiency scheme so that, for the first time, everyone over the age of 60 became eligible for a grant. This has been a huge success. Soon over a million people will have received grants to improve the insulation of their homes, reducing their excessive heating bills and improving their comfort. That is still not enough. Therefore, on top of last year's doubling, which will of course be carried forward each year, I am now adding another £10 million a year to the resources to fund grants. Soon British homes will at last be a match for the British weather in every part of the United Kingdom, especially for the elderly.
Cold weather payments were set at £6 each week only two years ago. I now intend to increase them to £8.50 each week in order to reassure people that they will get help with their bills when spells of freezing weather occur.
Furthermore, next year, 1995–96, there will be an additional £52 for single pensioners and £73 for couples built into all retirement pensions as compensation for VAT on fuel.
From April 1996 there will be £68 extra on the single pensioner rate and £96 extra for pensioner couples. That is more than the whole of the VAT on fuel bills for a significant number of them.
In addition, electricity prices have been falling for many people. Gas prices are to be raised for the first time since 1991, but this will be coupled with discounts for prompt payment which will reduce many peoples' bills.
The House should appreciate that, so far, including the first stage of VAT—the 8 per cent. already in payment—both gas and electricity bills have fallen by 1 per cent. in real terms over the last two years. That real-terms fall is for everybody, before taking into account the package of help for pensioners so far in payment.
The full burden of the tax is, of course, only borne by people of working age who are not receiving means-tested benefits. I have made it quite clear that people of working age cannot expect tax cuts or a reverse of previously announced tax increases this year.