With diesel at £1.90 a litre the Treasury is raking in 32 p a litre VAT on top of the 53p of duty, a total of 85p. This is considerably more than forecast for this year before the oil price went up. The Treasury should cut VAT to at most 15% on motor fuel from 20% to cut the pump price by 8 p a litre , so the cost of living is not pushed higher by aggressive extra tax on fuel.
This tax cut should apply in Northern Ireland as part of the U.K. The Treasury seems to think it cannot alter VAT in NI thanks to the Protocol. That is a strange reading of that document as it does not grant the EU any powers over our tax system. We used to differentiate VAT from Republic of Ireland choices of goods and rates even when were both in the EU. Outside we must be free to set our own taxes.
The promised legislation to clarify the Protocol and to uphold our internal market and lawmaking competence can address this issue. It appears it will need take a strong statement of U.K. law to persuade the pro EU or craven Treasury into accepting it can control U.K. VAT. The PM needs to tell the Chancellor the U.K. expects tax cuts that could help cut inflation and ease the squeeze.