Rishi Sunak could slash VAT on household energy bills in Budget to ease cost of living crisis as he ‘pushes ahead’ with plans for online sales tax

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  • Speculation intensifies ahead of Rishi Sunak presenting his budget on October 27
  • It is believed that the Chancellor is considering deducting VAT on domestic electricity bills.
  • The move may help ease the pressure on households amid rising prices of basic items

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Rishi Sunak may slash VAT on household energy bills in the Budget to reduce cost of living crisis, it was claimed today.

The chancellor is believed to be considering reducing the rate to 5 percent on October 27 despite little room for maneuver in the financial package.

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As well as easing some of the pressure on struggling families, the move could give Boris Johnson the benefits of Brexit, as VAT rates are set centrally within the EU.

With speculation in the budget preparation, Mr. Sunak is also said to be keen to push online sales tax after plans to change business rates are put on hold.

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Energy bills are rising after natural gas wholesale prices have risen, forcing many smaller suppliers to collapse.

The government’s cap on prices for homes has already been raised and is set for another eye-catching hike in April.

Chancellor Rishi Sunak is believed to be considering reducing the rate to 5 per cent on October 27 despite little room for maneuver in the financial package.

This Ofgem chart shows how daily natural gas prices have been rising in recent months

This Ofgem chart shows how daily natural gas prices have been rising in recent months

Interest rate hike to tackle inflation ‘would be a disaster’

A former Bank of England adviser warned today that raising interest rates now to control inflation would be a ‘disaster’.

David Blanchflower said that the rates being raised for ‘mood music’ were ‘foolish’ as ​​the price hike through the system is now almost certainly ‘extremely temporary’.

The economist, who is currently a professor at Dartmouth College in the US, warned that the US was already headed for a recession – and the UK was in danger of following.

In an interview with BBC Radio 4’s Today programme, the remarks came after Bank of England Governor Andrew Bailey expressed greater concern about inflation, saying it was earlier due to rising gas bills and rising wages. will last longer than expected.

He clarified that the Monetary Policy Committee (MPC) has to “act and do so if we see risks, especially to medium-term inflation”.

Interest rates are currently at a historic low of 0.1 per cent, having dropped from 0.25 per cent in March last year to help fight the effects of the pandemic.

But there is speculation that they may start rising again early next month, with headline CPI now above 4 per cent and upward pressure on salaries.

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Tory MPs are urging Mr Sunak to act on the burden that comes with many other inflationary tensions, with warnings that many will be faced with choices between ‘eating and heating up’ this winter .

Vote Leave pledged that ‘fuel bills will be lower for all’ during the Brexit referendum campaign in 2016, pointing out that EU rules mean VAT on domestic energy must be at least 5 percent.

Government officials briefed on budget preparations told the Financial Times that lowering the level is being considered but no final decision has been taken.

“It will tick two boxes – it reminds people of the benefits of Brexit and shows you are listening to people,” a Treasury official said.

Mr Sunak, however, insists that the government should rein in spending and the move would cost the exchequer around £1.5 billion a year.

It will also be politically difficult ahead of the COP26 summit, where Mr Johnson is begging world leaders to accelerate the move towards net zero.

Paul Johnson, director of the prestigious Institute for Fiscal Studies think-tank, said lowering VAT would “increase the effective subsidies we provide for burning gas”.

“It will cost more than £1.5 billion annually, most of which will go to high-income families,” he said.

Meanwhile, the Telegraph said Treasury officials are speeding up work on a new online sales tax designed to help level the playing field between firms like Amazon and high street retailers.

Mr Sunak is not expected to go ahead with the long-awaited overhaul of trade rates in the Budget, dashing the hopes of many retailers who are battling the pandemic.

The policy response to the rising cost of living crisis will be watched closely as experts dispute which direction the economy is headed.

A former Bank of England adviser warned today that raising interest rates now to control inflation would be a ‘disaster’.

David Blanchflower said that the rates being raised for ‘mood music’ were ‘foolish’ as ​​the price hike through the system is now almost certainly ‘extremely temporary’.

The economist, who is currently a professor at Dartmouth College in the US, warned that the US was already headed for a recession – and the UK was in danger of following.

In an interview with BBC Radio 4’s Today programme, the remarks came after Bank of England Governor Andrew Bailey expressed greater concern about inflation, saying it was earlier due to rising gas bills and rising wages. will last longer than expected.

He clarified that the Monetary Policy Committee (MPC) has to “act and do so if we see risks, especially to medium-term inflation”.

Interest rates are currently at a historic low of 0.1 per cent, having dropped from 0.25 per cent in March last year to help fight the effects of the pandemic.

But there is speculation that they may start rising again early next month, with headline CPI now above 4 per cent and upward pressure on salaries.

The headline CPI rate of inflation touched 3.2 per cent in August and is expected to rise further when the latest figures are announced this week.

The headline CPI rate of inflation touched 3.2 per cent in August and is expected to rise further when the latest figures are announced this week.

The latest UK monthly GDP figures from the Office for National Statistics suggest the pandemic's recovery has been all-but stalled

The latest UK monthly GDP figures from the Office for National Statistics suggest the pandemic’s recovery has been all-but stalled

As well as relieving some of the pressure on struggling families, the move could allow Boris Johnson (running this morning) Brexit benefits, as VAT rates are set centrally within the EU.

As well as relieving some of the pressure on struggling families, the move could allow Boris Johnson (running this morning) Brexit benefits, as VAT rates are set centrally within the EU.

The cost of public sector pensions eclipses the national debt: Gold-plated retirement fund bills total £2.4 trillion, study shows

The total cost of meeting gold-plated public sector pension promises now eclipses Britain’s entire national debt, a startling analysis has revealed.

Generous guaranteed retirement packages for state workers have left the country with a £2.4 trillion bill, a study shows.

The national debit is £2.2trillion.

Public sector workers, including MPs, judges, civil servants and NHS doctors, will still have to meet the spiraling costs by future taxpayers in order to honor substantial pension deals.

Almost all private sector companies abandoned salary-linked pension deals when they became too expensive.

But they are still offered by all public sector employers.

The UK national debt is £2.2 trillion, and a study finds that a generous retirement package for state employees costs £2.4 trillion

The UK national debt is £2.2 trillion, and a study finds that a generous retirement package for state employees costs £2.4 trillion

The most recent data suggests that occupational contributions were the reason why more people were receiving pensions and putting more money into them.

The most recent data suggests that occupational contributions were the reason why more people were receiving pensions and putting more money into them.

This latest bar chart shows how pension pots compare to personal wealth and savings.

This latest bar chart shows how pension pots compare to personal wealth and savings.

The deals are handled by the taxpayer and guaranteed to pay out retirement income based on the last or career average salary that rises with inflation each year.

The analysis shows that the actual annual cost of providing a pension to the taxpayer has doubled over the past five years to £95 billion.

This is more than double the £45 billion spent on the Royal Navy, the Army and the Royal Air Force – and nearly £96 billion as education budgets.

John Ralph, a pension advisor who analyzed pension plan accounts for the Granthshala, said: ‘Why isn’t there public outcry at the rising cost of public sector pensions?

The silence is not because voters are satisfied, but because successive governments have simply “discredited” official pension costs to keep them in the dark.

‘The Treasury must clarify to taxpayers the real economic cost of public sector pensions. Then we could have a fair debate about whether the cost was justified.’

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