The Telegraph, March 25, Sir Iain Duncan Smith MP
As Putin’s war in Ukraine rages, shocking the world economy and forcing up energy and food prices, Rishi Sunak had to use his Spring Statement to focus on the cost of living.
However, beyond the concerns about whether he has done enough, among his measures, one proposal highlighted a different and very serious issue. It is the artificial division now in the United Kingdom created by the Northern Ireland Protocol. This became starkly clear when the Chancellor had to admit that his proposed cut in VAT on energy-saving products could not apply to Northern Ireland as it would across the rest of the UK because of the Protocol.
Prior to Brexit, VAT was an EU regulated tax. The charging of VAT on insulation, solar panels and energy efficient light bulbs was therefore subject to the EU’s VAT Directive and, despite a long running battle by Gordon Brown and other Chancellors over many years culminating in a ruling from the ECJ against the UK in 2015, it remained the case that the UK could not cut this tax.
The freedom to set our own VAT rules was thus one of the key benefits of Brexit. This allowed the Chancellor to dutifully set out that, in order “to help households improve energy efficiency and keep heating bills down, the government will… ensure that households having energy-saving materials installed pay 0 per cent VAT.”
Great news, but then came the small print. “The Northern Ireland Executive will receive a Barnett share of the value of this relief until it can be introduced UK-wide.”
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