Stimulating the Green Energy Sector
In March 2024, the government announced a targeted fiscal intervention to accelerate the transition to renewable energy. This policy temporarily reduced the Value Added Tax (VAT) rate on residential microgeneration systems—such as solar photovoltaic (PV) panels, air-source heat pumps, and home battery storage—from the standard rate of 17.5% to a discounted rate of 4.5%. The intervention aimed to boost consumer demand, lower costs for installation businesses, and support jobs in the green technology sector.
The cost of installing a residential solar PV system is £5,600 before VAT. Use Extract E to calculate the decrease in the amount of VAT that would have to be paid on this installation as a result of the temporary tax cut.
245 exam-style questions on AQA A Level Economics 2.5 Fiscal policy and supply-side policies, covering 2.5.1 Fiscal policy and 2.5.2 Supply-side policies. Each one has a worked solution and a mark scheme showing where the marks go.