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Energy-saving Products: VAT

Volume 607: debated on Thursday 24 March 2016

3. What assessment she has made of the implications for her Department’s policies on energy efficiency of EU proposals to increase the level of VAT applicable to energy-saving products. (904292)

The UK has applied a reduced rate on 11 different types of energy-saving materials since 2001. That remains in place and unchanged—and that is where we want it to stay.

For 13 years, Gordon Brown laboured to reduce VAT on energy-saving materials in the face of EU opposition, even getting President Sarkozy onside in 2007, but to no avail. With VAT on installations set to increase to 20% after the European Court of Justice judgment, does the Minister agree that the most likely route to allow the British Government to incentivise energy saving in the interests of British consumers and the planet is to vote leave on 23 June?

Let me take issue with my hon. Friend’s first point, which was that there will be no changes. If he checks the Finance Bill, which is published today, he will see that VAT is not rising as had been foretold. One reason why is the Prime Minister’s VAT action plan: he was able to go to Brussels and negotiate a better relationship so that countries can have their own VAT rates stayed. It seems to me that that is a very good example of the EU working for this country.

I would like to follow up on that. It is just two days since the Government accepted the amendment that I and my hon. Friends the Members for Wigan (Lisa Nandy) and for Salford and Eccles (Rebecca Long Bailey) tabled to the Budget resolution. The Chancellor was the first in history who had to accept an Opposition amendment to his own Budget, and that was within a week of its delivery. Now we discover that the Finance Bill makes no provision whatsoever regarding VAT on energy-saving products. In fact, it is worse than that, because my hon. Friend the Member for Salford and Eccles has just received a written answer from the Financial Secretary stating that the Government are “still considering” their policy, and that the lower rate of VAT will continue only “in the meantime”. Will the Secretary of State tell us whether there is a now a U-turn on the U-turn?

Thank you for that advice, Mr Speaker.

Let me point out to the hon. Gentleman that while it might be only two days since the amendment was moved, Government Members have been aware of the problem and have been engaging with Brussels, as was declared previously at the Select Committee, so we are clear that this approach is in the interest of the industry. I welcome the hon. Gentleman’s rather belated support for it.