David Lammy, Labour shadow foreign secretary, urged Mr Johnson to scrap the tax on utilities bill in the fight against potential crisis. But Stewart Jackson, a former Tory MP and Brexiteer, responded to the news on Twitter: “That’s the VAT we can now vary having left the EU. That one.”
This prompted back-and-forth from other users.
One, Brian Parker, wrote: “I know anyone with the word Brexit in the name never likes to stick to the facts but the UK could reduce at any time.
“Spain reduced…in the summer and Spain remains in the EU?
“But don’t let facts spoil a fatuous point.”
Another, Mr J, replied: “He said scrap VAT ie reduce to zero, which cannot be done under EU rules, but don’t let facts spoil a fatuous point.”
READ MORE: Brexit betrayal: not enough being done on deregulation
However, suppliers reportedly fear that cap could be breached next winter unless the Government mitigates for the cost of wholesale gas prices.
EU law requires that the standard VAT rate must be at least 15 percent and the reduced rate at least 5 percent.
Actual rates applied vary between EU member states and between certain types of products.
However, since the UK left the EU, it is able to set its own tax rates without the bloc’s oversight.
That means the Government now has the power to abolish VAT for certain products, such as energy.
The call from Mr Lammy follows claims from economists that the Government could have been “bolder” when it came to deregulating the economy since Brexit.
Julian Jessop, an independent economist and former Chief Economist for the Institute of Economic Affairs, recently told Express.co.uk the Government was showing “a bit of caution about seizing the opportunities of Brexit.
Mr Jessop said: “There are lots of things the Government could do in areas like agriculture and financial services, where the industry has been held back by what the EU rules had been.
“So the Government could be a lot bolder there – and that would be, I think, a good example of how the benefits of Brexit can be realised.”
Meanwhile, Patrick Minford, chair of Applied Economics at Cardiff University, said the Government “hasn’t done anything on regulation yet, which was supposed to be one of the big things.
He said: “They haven’t raised much energy at all, as far as I can make out. If anything, they’ve gone to sleep on the regulation front; but they are planning to do more, I know that much.
“But, of course, it’s all kind of being pushed into the future, without any real program. And that’s quite frustrating.”
He added the Government should be lowering taxes to stimulate the economy.