Brussels are taking the UK to court as a result of the lower rate of 5% VAT for all energy saving products, it was announced today.
The European Commission said that the UK’s defence for the reduced rate was “not satisfactory” and have referred the matter to the EU Court of Justice.
EU rules state that discounts can only be given for social policy reasons, not environmental ones.
In a statement, the Commission said: “Member States themselves unanimously decided on the list of goods and services that could benefit from a reduced VAT rate, and they also insisted that this list be strictly applied, with no room for manoeuvre or interpretation. This is important to prevent competitive distortions in the Single Market and to ensure a fair and level playing field between all Member States.”
The Commission also said that reduced VAT rates are not the best way to achieve policy objectives and that direct subsidies could be a more efficient way.
If the Commission are successful, it will increase spending on the Green Deal, will make it harder to meet the “Golden Rule” that costs do not exceed the savings made from decreasing energy bills.