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UK energy VAT cut faces funding dispute, rattling gilts

The VAT cut for energy bills is estimated to cost about £850 million, with lawmakers challenging whether the cancelled digital ID scheme was truly unfunded.

Reported · Written up by our desk · Economy

A UK government plan to cut VAT on energy bills has run into an immediate funding dispute, with lawmakers challenging how the policy would be paid for and raising fresh fiscal concerns, according to Forexlive.

The policy cost for the VAT cut is estimated at around £850 million, with earlier reporting saying it would be funded through a cancelled digital ID scheme estimated to cost about £1.8 billion over coming years. However, UK lawmaker Darren Jones disputed that framing, saying the digital ID scheme was unfunded in the first place, setting off an internal dispute over budget responsibility.

Forexlive noted that this infighting is happening just one day after the policy announcement, as attention turns to how the government will finance lower energy bills while also aiming to help keep inflation lower.

The outlet said the UK gilts market was reacting calmly for now, but that fiscal worries are returning to the forefront.

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