Would Brexit lead to lower UK energy prices?

lightbulbIf the UK were to leave the EU, would  British households face higher or lower energy bills? Nobody knows for sure, writes Stephen Tindale, Director of the Alvin Weinberg Foundation: it would depend on decisions taken and agreements concluded by a post-Brexit government. But claims from Brexiteers that leaving the UK would lead to lower energy prices are misleading. The reverse is more likely, according to Tindale.

Leading Leave campaigners Michael Gove, Boris Johnson and Gisela Stuart argue that outside the EU British bills would be lower: “In 1993, VAT on household energy bills was imposed. This makes gas and electricity much more expensive. EU rules mean we cannot take VAT off those bills..”

VAT on domestic energy was not ‘imposed’ by Brussels: it was introduced by the Conservative government. EU rules state that, once introduced, VAT can be reduced to 5 per cent (as Labour did in 1997) but not to zero. Outside the EU, a British government could remove it. But this would cost around £1.6 billion a year. A future Conservative prime minister would be at least as committed to cutting the deficit as Cameron is.  Removal of VAT from domestic energy therefore appears unlikely. Continue reading

Brexit is not an escape from EU regulation

bureaucracyPiet Eeckhout, Professor of EU Law at UCL, explains how the argument for a UK exit of the EU on the basis that it would reduce ‘red tape’ for businesses is a false one. He notes that to benefit fully from the EU market, which is arguably one of the UK’s most important markets, the UK would still need to implement EU regulation but in the case of Brexit, would no longer be able to influence what that regulation is.

One of the recurring themes of the Brexit debate is that the EU is said to impose an excessive regulatory burden on UK companies and on the UK economy. Remarkably, a substantial number of business people also adopt such a position. As a mere academic I am of course not in a position to disprove assessments within companies that EU membership has led to more ‘red tape’. But I do feel that some basic facts are missing from the conversation. They concern the reasons for EU regulation, and the question whether Brexit equals escape from it. Continue reading