Oral Answers to Questions

Debate between Andrea Leadsom and Angela Rayner

Thursday 11th February 2016 Commons Chamber

[Angela Rayner (Ashton-under-Lyne) (Lab)]

17. Whether the Secretary of State has had discussions with the Chancellor of the Exchequer on proposals to increase VAT on solar panels.

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

A recent European Court of Justice ruling found that the reduced rate of VAT on certain “energy saving materials” was in breach of EU law. As a result, Her Majesty’s Revenue and Customs recently consulted on changes to the rate of VAT and is considering the responses. If the rate of VAT does change, we will consider the options for how to maintain a suitable rate of return for investors under the feed-in tariff.

[Angela Rayner]

May I, along with the Minister, wish my hon. Friend the Member for Bolsover (Mr Skinner) a happy birthday? I am so pleased that he is still winning. He is fantastic.

Following on from the question from the hon. Member for Cheltenham (Alex Chalk), the proposed hike in VAT would raise the typical cost of a 4 kW residential solar PV system by nearly £1,000, even though industry experts advise us to retain the lower tax rate for solar under the recent ECJ judgment. The Government are keeping the lower rate for heat pumps, biomass boilers and combined heat and power units. The same should surely apply to solar PV thermal; otherwise we will have the perverse situation in which electricity generated from fossil fuels is taxed at 5% VAT, while homeowners have to pay 20% VAT for their own renewable energy. Can the Minister not persuade the Chancellor to reverse this tax hike and, if she cannot, will she make commensurate increases?

[Andrea Leadsom]

I want to be clear with the hon. Lady that this is not the Chancellor’s choice. As I have made very clear, this is an EU Court ruling; it is not our choice. In the event that we have to impose an increase in VAT, we will look at the returns to investors under the feed-in tariff.