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The Low Incomes Tax Reform Group (LITRG) has responded to an EU Commission Consultation on the legislation relating to reduced rates of VAT. Another way to put this might be that LITRG is trying to make sure that people don't have to pay a further 14% on their fuel bills in the next few years...

It would perhaps be fair to say (but then perhaps not too loudly) that the UK is fairly generous when it comes to its use of exemptions and the reduced rates of 0% and 5% VAT. Many mainland European Community countries do not apply the reduced rate in as many circumstances as does the UK; nor the "legacy" 0% rate.

The Commission is, amongst other things, concerned to ensure that reduced rates do not distort the Internal Market, and also contemplates "the abolition of reduced rates on goods and services whose consumption is discouraged by other EU policies." Such as energy / fossil fuels.

Domestic heat and power are of course charged at the reduced rate of 5% in the UK.

It is therefore not surprising that LITRG has taken up the case for UK residents, including in its response Reduced VAT Rates are an Important Way of Helping People on Low Incomes:

"For whatever reason, so-called fuel poverty is more prevalent in the UK than elsewhere. Applying the standard rate of VAT to products such as domestic fuel, energy saving equipment and heating equipment is likely to exacerbate the problem."

and

"Except where the existence of reduced rates results in significant cross-border distortion [of the Internal Market of the EC], we consider that Member States should retain most if not all of the discretion they have to apply the reduced rates of VAT (including zero-rates and exemptions)."

Imagine, if you will, what would be the mood of the UK electorate if people were to find that their home gas and electricity bills were to rise by more than 14%, thanks to the EC. An electorate that may be able to vote on remaining "fully" in the European Community, in the not too distant future.