Imposing a “taxi tax” on minicabs and private hire cars would strip disabled, elderly and vulnerable people of their independence and amount to a manifesto breach, the Chancellor has been warned.
Rachel Reeves is said to be looking at imposing 20 per cent VAT on minicab and private hire car journeys in her upcoming Budget.
Taxi firms outside of London do not have to charge VAT currently but the government is understood to be considering imposing a flat rate to bring more money into the Treasury.
Critics argue this would unfairly penalise disabled people, and carers, who rely on specific private hire vehicles to get around.
Karl Turner, Labour MP for Kingston Upon Hull East, has written to the Chancellor asking her to drop the proposal ahead of the Budget, it is understood.
He told The i Paper the proposed tax was “possibly more barmy than the barmy pasty tax the Tories dreamed up in the Tory-Lib Dem coalition”.
The pasty tax was a controversial proposal that would have seen VAT slapped on all hot takeaway food. Tory Chancellor George Osborne was forced to scrap the policy after considerable backlash.
Charities urge Reeves to think again
Charities including Disability Rights UK and Carers Trust have also urged the Chancellor not to go ahead.
Stephen Brookes, of Disability Rights UK, said the move would amount to “raising money on the backs of the most vulnerable”.
“For many disabled people, private hire vehicles are not a luxury, they are essential. They provide a vital means of transport where public options are inaccessible or unreliable,” he said.
The additional charge could also strain health budgets.
Figures from a 2021 NHS England report show Non-Emergency Patient Transport Services (NEPTS) – which offers transport for outpatients receiving hospital care, such as dialysis – provide more than 11 million journeys each year.
This costs around £460m annually – with trusts often using private hire vehicles (PHV) and taxis.
‘Clear breach’ of Labour Party manifesto
In his letter to Reeves, Turner warned the levy would be a “clear breach of our party’s manifesto commitment not to raise VAT” as well as posing a threat to jobs.
“The last thing [taxi drivers] need is a tax hike that will force up fares, drive down demand and threaten their livelihoods,” Turner told The i Paper.
“And the higher fares will hit vulnerable people particularly hard; elderly, disabled people, parents with kids who have complex needs, and women trying to get home safely at night, will all be hurt by this.”
The policy was “the daftest idea I think I’ve ever heard because it’s more damaging to the most vulnerable,” he added, accusing “Treasury boffins” of coming up with the policies and selling them to ministers as “brilliant thinking when they are not”.
In the letter, he added that almost 300,000 people work as private hire vehicle drivers who already struggle “making ends meet” and warned the prospect of a VAT increase has sparked fear that “it will cost thousands their livelihood”.
“The taxi tax would amount to a new tax on working people, which is precisely what our manifesto pledged to avoid,” he added.
His warning comes as the polling of 2000 people, commissioned by the Stop the Taxi Tax campaign, revealed two-thirds (67 per cent) of carers and people with mobility issues used a minicab for a medical appointment in the past year.
Nearly three-quarters of voters (74 per cent), and 85 per cent of carers, are concerned that fare increases would make it harder to attend vital appointments.
A Treasury spokesperson said: “We take this issue very seriously and recognise its complexity.”
The government is “reviewing feedback” from a consultation on the issue and “will publish our detailed response shortly,” the spokesperson added.
