"The Snowman Warmeth" by Les Gibbard © BBC

Cheaper Fuel Bills Announced

The Chancellor has fulfilled an election pledge by announcing plans to cut VAT on domestic fuel.

In his Budget speech, Gordon Brown said the Government would reduce VAT on domestic fuel from 8% to 5% from 1st September, the lowest level permitted by the European Union.

To help pay for the cut in VAT on fuel, the Chancellor said he would, as had been expected, withdraw tax relief for private medical insurance for the over-60s.

He said this had cost £140 million a year and had failed to achieve its original purpose of increasing the take up of such insurance.

To cut fuel bills he would be reducing the gas levy to zero from next April, benefiting 18.5 million domestic cutomers whose bills should fall by about 2% on average.

As a result of these changes and other price cuts, Mr Brown said he expected gas prices to fall in real terms by 5.5% this year and 11% next year. This would mean a fall of £90 in next year's fuel bills compared with last year's.

The Chancellor also announced that the national home insulation programme would be expanded. Contractors and voluntary organisations would be encouraged to take on young people to insulate the homes of pensioners.