Calls for VAT reduction on business energy bills as inflation hits 40-year high

By James McAllister

- Last updated on GMT

Calls for VAT reduction on business energy bills as inflation hits 40-year high
Sacha Lord, Greater Manchester's night time economy adviser, has called on the Government to implement a temporary reduction in VAT on business energy bills in the face of rocketing inflation.

Yesterday (18 May), the latest data from the Office for National Statistics (ONS) revealed that the Consumer Prices Index (CPI) rose by 9% in the 12 months to April 2022 – the highest level seen for 40 years.

The rise, up from 7% in March, has been driven by the increase in gas and electricity prices since the energy price cap was increased at the beginning of last month, resulting in an estimated £700 rise in the cost of utilities for the average household.

Grant Fitzner, the ONS’s chief economist, was quoted as saying: “Around three quarters of the increase in the annual rate [of inflation] this month came from utility bills.”

Lord says the inflation figures may be unprecedented but they aren't unexpected.

“The economic impacts of the past 24 months, from Brexit, the Covid pandemic and the terrible atrocities in Ukraine, have not only exacerbated weaknesses, but have put the true instability of our economy on stark display,” he says.

“Businesses across the board are struggling and I know many who are making tough decisions on how and whether to survive.

“Some in hospitality are seeing energy bills rise to six, seven and eight thousand pounds per month, and this level of payout for businesses recovering post-pandemic, is simply unsustainable.”

Lord wants to see the Government to implement a temporary reduction in VAT on business energy bills from 20% to 5%, saying it will help save small businesses and the livelihoods of the hundreds of thousands across the UK that they employ.

“Ideas and financial solutions to the cost of living crisis have been mooted by the Chancellor and across the government over the past months, but they are simply not coming to fruition fast enough.

“If Westminster is serious about levelling up and saving the high street across the UK, they must provide practical financial help now, not just make promises for the future.”

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