Cameron Avoids Rebellion by Accepting Solar Amendment on Budget

  • Amendment will stop ministers raising sales tax from 5%
  • Issue seized upon by Tory lawmakers seeking U.K. exit from EU

The U.K. government plans to support an amendment to its own budget that will prevent ministers from raising value-added tax on solar panels and insulation, averting a backbench rebellion by Euro-skeptic Tories that threatened to add to Prime Minister David Cameron’s woes.

“It is an existing government position to have a reduced rate of VAT on solar panels,” Cameron’s spokeswoman, Helen Bower, told reporters in London on Monday. “We’ve been engaging hard with the European Commission ahead of their proposals that we expect shortly. We will continue working hard to make sure that we can set the VAT rates on these types of products at a level that we think is appropriate for Britain.”

Cameron was facing a revolt in the House of Commons on Tuesday after at least 16 Conservative lawmakers said they would back the opposition Labour Party amendment, which will spare solar panels and insulation from an increase in sales tax to 20 percent from 5 percent. The European Court of Justice ruled in June that Britain’s reduced rate of VAT on energy-saving products was in breach of European Union laws.

The rebellion threatened a new fracture in the ruling party after Work and Pensions Secretary Iain Duncan Smith resigned on Friday, citing planned cuts to welfare benefits foisted on his department by Chancellor of the Exchequer George Osborne.

The VAT increase was touted by proponents of a British vote to leave the EU as an example of overreach by the 28-nation bloc. The rebels included Euro-skeptics Graham Brady, Bernard Jenkin, Edward Leigh, Jacob Rees-Mogg and John Redwood. Cameron averted one backbench rebellion last week by securing backing from other EU leaders to exempt tampons from VAT.

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