But why does Rachel Reeves want to increase the $7 trillion subsidy to fossil fuels by cutting VAT on domestic energy?
This puzzles:
Proposals being considered by Rachel Reeves to cut tax on electricity bills will backfire, experts have warned, resulting in a giveaway to richer homeowners and undermining the UK’s climate commitments.
The chancellor is understood to be looking at plans to eliminate the 5% VAT charge on electricity bills as a fast and simple way to reduce bills for consumers and ease the cost of living pressures that have aided the rise of Reform UK.
Does everyone recall that insistence that the IMF said there was a $7 trillion subsidy to fossil fuels? This report. As we’ve pointed out before that subsidy is partly - and only very partly - direct subsidies in a handful of countries to the use of fossil fuels. In the UK’s case it’s a few billions - real money, yes, but at the level of the economy trivia. The vast majority of that $7 trillion is the IMF stating that not paying a proper carbon tax and, also, not paying the general level of consumption taxation is a subsidy. So, the current 5% VAT rate on domestic energy supplies is a subsidy by that IMF calculation.
Turning that 5% rate into a 0% rate is therefore two things. Firstly, it’s one of those things that is only possible now Brexit has happened and, secondly, it’s an increase in that $7 trillion to fossil fuels. Tsk, eh?
At one level of course this is just a giggle. Imagine MiliEd’s face when he grasps this! But at another it’s a really very important revelation.
We’ve this insistence that beating climate change is our sole and most important task - the very continued existence of civilisation, of the species itself, apparently rests upon our determination to do so. Yet all of that is to be put aside in order to nick a few votes off Reform, is it?
Which is that basic problem with using politics to run everything. Everything does get run by politics. A few votes here or there by the next election is more important than that long term planning for the future. For the time horizon of politics is that next election and nothing more.
No, think on it. By the standards of the more shriekier greens and climate insisters the Chancellor is going to broil Flipper in the fumes of the last ice floe in order to save the seats of a few Labour MPs. This is not a system we should be using to run the world now, is it?
Tim Worstall