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General News

16 June 2010

VAT, Campaign, Building Costs

Re: Emergency Budget - 22nd June 2010
 
The "Cut the VAT" Coalition has been campaigning for a reduction in the rate of VAT, applied to the labour element of repairs, maintenance and improvement work, to 5 per cent.
 
Independent research examined the effects of selected VAT reductions on the labour element of housing repair, maintenance and improvement. This  revealed that a reduction in VAT to 5 per cent on the labour element would create a net loss to the Government of between £102 million and £508 million, once other benefits are taken into account.  However, the total stimulus effect of this £102-508 million to the UK economy would be in the region of £1.4 billion in 2010 alone once the £373 million in additional construction outputs and its £1.06 billion multiplier effect are combined.  Cutting the rate of VAT to 5 per cent would also have positive economic benefits in terms of job creation.

The cut would create up to 24,200 extra full-time construction jobs in this year alone rising to 34,500 by the end of 2019. The knock on effect could create an additional 31,000 jobs in 2010 in the wider economy. By the end of 2019 the report predicts a total of 81,500 extra jobs could be created.    
 
A selected cut in VAT would stimulate housing supply through renovation. Our existing housing stock contributes 27 per cent of the UK's total carbon emissions. Urgent action is needed now to make existing homes more energy efficient if we are to fulfil the UK's legal obligation to cut carbon emissions by 80 per cent by 2050.  This suggests that the Government should focus its attention on retrofitting the existing housing stock and why the impact of VAT is critical.

The current VAT treatment of energy efficiency and micro generation is inconsistent with £4.5 billion of energy efficiency works attracting the full rate of VAT whilst some less efficient measures attract the reduced rate of 5 per cent. A flat rate of 5 per cent on all energy efficiency measures would produce a more readily implementable treatment of energy retrofitting. 

To read the Cut the VAT letter please click here.

To take part in the petition please click here.

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