Scottish ministers call for VAT cut on energy bills as price hike looms

Urgent action is needed to reduce energy bills including a cut in VAT, the Scottish Government has said.

Scottish ministers have called upon their UK counterparts to act on rising energy bills as a major price hike looms this April. PIC: Matt Cardy/Getty.

Ministers in Edinburgh have written to the UK Government, saying there should be targeted support for those on low incomes.

Energy Secretary Michael Matheson and Social Justice Secretary Shona Robison have written a joint letter to UK Energy Minister Kwasi Kwarteng.

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They have called for four-nation discussions ahead of an expected increase in the energy price cap in April.

The Government's price cap, which limits the amounts that suppliers can charge, is currently at an already record-beating £1,277. But analysts at Investec think this could go up to £1,995 on April 1.

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The letter says the Scottish Government is already taking a number of measures to reduce the burden on consumers, but most powers around energy markets are reserved.

It says: "The UK Government must urgently take further tangible actions in addition to what suppliers (have) already been asked to do to support those in need.

"Since the start of the Covid-19 pandemic, we have been pressing the UK Government to provide more help to vulnerable households through the Warm Home Discount scheme.

"We have set out how this could be delivered by the Scottish Government as part of a single, more flexible fuel poverty scheme in Scotland.

"However time is running out for a replacement scheme of any kind to be put in place for next winter, how these levy-funded schemes will operate from April remains in your hands and a clear, prompt decision is now needed."

The letter continues: "We believe you should urgently consider a reduction to VAT as one of the most simple means of mitigating the impact on consumers in the short term.

The letter also calls for additional payments for those eligible for Cold Weather Payments as a means of targeting support for those on the lowest incomes including older people on pension credit.

Age UK has warned the predicted rise in energy bills could trigger national emergency for millions of older people, with the charity urging ministers to take immediate action to "mitigate the potentially devastating impact of the escalating crisis".

The letter from Scottish ministers sets out a demand for a meeting with UK counterparts “as early as possible”.

"Since meaningful collaboration between the UK Government and the devolved nations will be a vital component of any effective response to this situation, we would welcome an assurance that this is already part of your thinking and would like to meet as early as possible, to discuss these matters further," the letter says.

A UK Government spokesman said domestic fuel bills were already subject to the reduced rate of 5% VAT, while the Warm Home Discount provided a £140 rebate to more than two million low-income households.

The spokesman said: "We recognise families are facing pressure, which is why we are taking £4.2bn of decisive action to help households across the UK, and the Energy Price Cap remains in place to shield millions from high global gas prices.

"We are also supporting vulnerable and low-income households through initiatives such as the new £500 million Household Support Fund, Warm Home Discount, Winter Fuel Payments and Cold Weather Payments.

The prices are due to soaring wholesale costs given an increased demand for electricity from around the world.

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