Clarke under pressure on VAT

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Indy Politics
The Chancellor, Kenneth Clarke, will today attempt to head off a rebellion among Tory MPs which could see the Government defeated in the Commons tomorrow.

There is strong cross-party support for a move to cut VAT on insulation and other energy-saving goods from 17.5 to 8 per cent, bringing it in line with the lower VAT rate charged on electricity and gas.

Among the 11 Tory rebels who have signed amendments to the Finance Bill are prominent Euro-sceptics such as Sir Teddy Taylor and Theresa Gorman. They see the issue as a chance to challenge the European Commission's restrictions on VAT changes in member states. The 11 also include Sir John Hanham, a member of the executive of the powerful 1922 Committee of backbench Tory MPs. He and Tim Yeo, the former environment minister, are to meet Mr Clarke today.

Supporters of the campaign say common sense and justice demand that products such as triple glazing, cavity-wall insulation and thermostatic radiator valves should have the same VAT rate as fuel. The differential encourages households to use energy wastefully, harming the environment and economy.

But the Government hasbeen strongly opposed. Apart from possible problems with the Commission, it does not want to lose the pounds 8m a year revenue which 17.5 per cent VAT on energy saving goods brings in.

Alan Simpson, the left-wing Labour MP for Nottingham South, is leading the campaign. Last year his Early Day Motion calling for the VAT cut was signed by over half of all MPs, and nearly 200 backed his amendments to the Finance Bill last week. An amendment to allow a refund system in which people who pay 17.5 per cent VAT could reclaim half, is most likely to come to a vote.

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