Anthony Browne is a former director of Policy Exchange and a former Europe correspondent of the Times.
The high cost of domestic gas and electricity, and the consequences in terms of fuel poverty, is the Frank Sinatra of political issues – it keeps making a comeback.
For many people who struggle to make ends meet, particularly the elderly, it can be a source of real anguish, and forces them to live in the cold in winter. The current Government has responded by introducing an energy price cap. But after Brexit it could just scrap the tax it is required to impose on all our bills by the EU.
Ahead of the 1997 Labour landslide, the then Chancellor Ken Clarke hiked up VAT on domestic energy, and Tony Blair and Gordon Brown scored huge political points pledging to scrap it. But unfortunately they couldn’t. Despite the fact that domestic energy taxation has no impact on cross border trade, under EU single market VAT harmonisation regulations, Tony Blair could only reduce it to five per cent, and stuck that on his famous 1997 election-winning pledge card: “cut VAT on heating to five per cent”. And there it has stayed since.
But a post-Brexit government could scrap tax on heating altogether. With average household energy bills around £1000 a year, it would be a cut of about £50 per year per family. It may not be a fortune, but it would be an instant Brexit bonus for every household, putting pounds directly in the pockets of the “just about managing”.
And it would mean that people wanting to scrap Brexit would have to justify why they want to put up everyone’s heating bills, most poignantly for the elderly feeling the cold. If you are worried about the impact on greenhouse gas emissions, the government could just scrap VAT on renewable energy, having differential pricing depending on how green the energy is. Either way, this is a politically sensitive issue that Brexit brings back into play.