ED Balls yesterday called on the government to limit the impact of surging fuel prices by abolishing the recent rise in VAT on petrol.
The shadow chancellor said the move would save 3p a litre, helping squeezed middle-income families to avoid a “cost of living crisis”.
He said: “In Britain [petrol prices] have gone up more [than in other countries] because George Osborne has raised VAT on fuel prices, on petrol prices.
“I think he should say now to families who are having a tough time across the country ‘actually the VAT rise on fuel was a mistake’.”
The Treasury would lose around £700m a year by reducing VAT on fuel from 20 per cent to 17.5 per cent, but Balls claims this could be offset with the extra £800m the government will net after it raised this year’s banking levy.
However, the Conservatives said Ed Balls had spent the extra proceeds from the banking levy “ten times over”, citing a long list of unfunded spending commitments and tax cuts.
Deputy Tory chairman Michael Fallon said: “Ed Balls is promising unfunded tax cuts with bank levy money he’s already spent. No wonder Labour couldn’t live within their means.”
Meanwhile, the Treasury yesterday confirmed it is examining a fuel duty stabiliser, which would lower taxes on fuel when oil prices rise and increase them when prices fall.