Cost of Living: Government Assistance

Treasury written question – answered on 5 July 2022.

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Photo of Lord Rose of Monewden Lord Rose of Monewden Conservative

To ask Her Majesty's Government what plans they have to assist families further in relation to the rise in the cost of living; and whether any such plans include (1) introducing a lower rate of VAT for fuel, and (2) reducing the general rate of VAT.

Photo of Baroness Penn Baroness Penn Baroness in Waiting (HM Household) (Whip)

To support households with the rising cost of living, the Government is providing over £15 billion of additional support, targeted particularly on those with the greatest need. This package builds on the over £22 billion announced previously, with Government support for the cost of living now totaling over £37 billion this year.

The Government intends VAT to remain a broad-based tax on consumption where the standard rate of 20 per cent applies to most goods and services, including road fuel. While there are exceptions to the standard rate, these have always been strictly limited by both legal and fiscal considerations.

Reducing VAT would impose additional pressure on the public finances, to which VAT makes a significant contribution. VAT raised around £130 billion in 2019-20 and, according to OBR forecasts, will have raised approximately £135 billion in 2021-22, helping to fund key spending priorities. Any reduction in tax paid is a reduction in the money available to support important public services, including the NHS and policing.

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