UK Should Reduce VAT on Fuel to Help Families, Balls Says - Bloomberg

U.K. Chancellor of the Exchequer George Osborne should reverse an increase in value-added tax on fuel to lessen the impact of oil-price rises on drivers, according to Ed Balls, who speaks on the economy for the country's main opposition Labour Party.

VAT, a sales tax which was increased to 20 percent from 17.5 percent on Jan. 4, could be reduced on fuel before the March 23 budget, Balls said in an interview with BBC TV today.

"He should say now to families who are having a tough time across the country 'actually the VAT rise on fuel was a mistake'," Balls said. "When we were in government we often didn't put the duty rise through if the oil price was high. That's a budget decision, but he could reverse the VAT thing now and give relief to families and hauliers."

The previous government looked into introducing a fuel- price stabilizer like one being considered by the Treasury, which would cut duty when prices were high and increase it when they were low, and found it unworkable, Balls also said.

"It is completely flawed," Balls, who was an adviser to former Prime Minister Gordon Brown when he was Chancellor of the Exchequer, told the Sunday Times. "It leads to instability and some perverse outcomes."

To contact the reporter on this story: Thomas Penny in London at tpenny@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net