Rachel Reeves is facing a backlash over plans to impose VAT on taxi fares, with critics warning the charge will hit rural residents and make it more expensive for disabled people to attend medical appointments.
Campaigners have warned the chancellor that taxing cab journeys will push up the cost of trips outside of London, hitting those living in the countryside hardest.
And they have highlighted figures showing that the NHS spends £460m a year on private hire vehicles and taxi journeys to non-urgent medical appointments, arguing that VAT on cab fares would pile pressure on the already strained health service’s budget.
Taxi companies outside London do not currently have to charge VAT on journeys, with drivers considered self-employed contractors. And individual cabbies do not meet the threshold of £90,000 a year in earnings at which they would be liable to pay VAT.
But the government has launched a consultation on whether to standardise the system by charging the full rate of VAT on all taxi journeys.
Ahead of the autumn Budget, in which Ms Reeves needs to find tens of billions of pounds in tax hikes to balance the books, the taxi industry fears it will be hit by the VAT charge.
Treasury minister Dan Tomlinson said this month that the government “takes this complex issue very seriously and recognises businesses’ need for certainty”.
“The government is carefully considering the wide range of views shared through last year’s consultation on the VAT treatment of private hire vehicles and will publish a detailed response soon,” he said.
A decision is expected when Ms Reeves sets out her tax plans on 26 November.
Speaking to The Telegraph, Michael Solomon Williams, from the Campaign for Better Transport, said: “Taxis and private hire vehicles are an important part of an integrated transport mix, especially for people who live in rural areas, can’t drive or need accessible door-to-door travel.
“The focus should be on making public transport more affordable and accessible – not taxing the services that fill its gaps, hiking prices and undermining connectivity.”
Meanwhile, the Stop the Taxi Tax campaign warned the move would be a breach of Labour’s manifesto promise not to increase VAT.
“Not only that, it will hit those living in rural communities especially hard, who lack reliable and accessible public transport,” a spokesperson said.
A Treasury spokesperson added: “We take this issue very seriously and recognise its complexity. We are reviewing feedback from our recent consultation and will publish our detailed response shortly.”
