VAT Reduction on Domestic Fuel: Effect on Benefits

HL Deb 14 October 1997 vol 582 c121WA

Lord Tebbit

asked Her Majesty's Government:

To what extent they will recoup the loss of revenue consequent upon the reduction in VAT on domestic fuels by its effect on the RPI and thereby upon index-linked benefits.

Lord McIntosh of Haringey

The reduction of VAT on fuel and power for domestic users from 8 per cent. to 5 per cent., will cost around £500 million per annum in lost revenue. The lower RPI that results means that in cash terms total benefit spending will rise roughly £100 million less in 1998–99 than it would have done. But benefits are uprated to reflect the changes in prices paid for goods and services, so the real value of benefits is not affected.