If 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