Labour calls again for 5% VAT cut on energy bills

Labour has again called for the 5% VAT rate on energy bills to be scrapped, demanding "serious solutions" for the rising cost of living.

Speaking at Prime Minister's Questions, the party's deputy leader Angela Rayner said working families were "picking up the tab" for Boris Johnson's "incompetence" over the issue.

But the PM insisted the government was providing a number of schemes to help.

A spike in wholesale gas prices has led to soaring energy bills in the UK.

A total of 27 energy companies have also gone bust as the energy price cap - limiting how much consumers can be charged - saw some businesses forced to sell energy for less than they bought it for.

But there are fears an expected rise in the cap, due in April, could see households hit with even higher bills.

Labour has been calling for the government to slash the 5% VAT rate on energy bills to zero since October, with shadow chancellor Rachel Reeves calling it a "simple" and "immediate" measure to help people deal with costs over the winter.

A group of 20 Conservative MPs and peers - including five ex-ministers - joined the call last week, writing to Mr Johnson to urge him to cut VAT, as well as going further by suspending environmental levies which fund renewable energy schemes.

Backers of the plan said VAT receipts had come in more than £3bn higher than forecast because of rising prices, giving the government extra funds to cover the cost.

But a Treasury source has told the BBC that rising bills overall mean consumers are spending less elsewhere on products with higher VAT, so the overall income to the government has remained flat.

Standing in for Labour leader Sir Keir Starmer - who has tested positive for Covid - Ms Rayner said "working people across the country are facing rising bills and ballooning prices", due to a mixture of inflation, rising energy costs and an incoming tax rise to pay for the NHS and social care.

She added: "The prime minister pretends it is not his fault. He blames the global forces, he blames the market.

"But the prime minister has made political choices that have led us into this place."

The deputy leader claimed the government had "failed to invest in long term energy security" and "let the energy market run out of control", adding: "Can't the prime minister see what is happening?

"Yet again working families are picking up tab for his incompetence."

But Mr Johnson said a number of government initiatives - including the warm homes discount, winter fuel payments and cold weather payments - were supporting people, especially those on low incomes.

He also accused Labour of "bare-faced cheek" for calling for the VAT cut, as the party campaigned to stay in the EU - when it would not have been an option.

"Everybody knows full well it would be absolutely impossible if they were to do what Labour would do and go back into the EU [and] remain aligned with the EU single market," said the PM.

"That is the objective of the Labour Party. They can't be trusted on Brexit and they can't be trusted with the economy."