VAT rate cut agreed by EU

European finance ministers have agreed that that member states may set their own rates of VAT on a range of sectors. The move could see the rate in the UK reduced to 5% for home maintenance and repairs.

Reducing VAT on building repairs and maintenance is one of the demands of the Get Britain Building Campaign, launched last month.

The campaign is backed by some of the industry’s leading organisations including the Builders Merchants Federation, Modern Masonry Alliance, British Precast and Federation of Master Builders, all of whom have welcomed the news.

Chris Pateman, managing director of the BMF said that the Government really has no option but to reduce the VAT on building repair and maintenance work.

“The UK building industry is on its knees with nearly 300,000 job losses in the last 12 months. A cut in VAT would throw the sector a lifeline and could stimulate the market almost overnight. If job losses on this scale were happening at one plant, on one site, then there would be public outcry – but because we’re talking about the cumulative total across thousands of small and medium-sized businesses it’s going almost unnoticed.

“Voters are quietly losing their jobs, homes and businesses – out of the media spotlight – up and down the country, in cities, the suburbs and small towns. Yet the plight of the car industry grabs the headlines and politicians start to act.

“In the past the Government’s reason for not cutting VAT was due to Europe failing to agree. With this obstacle removed, there is no reason why the British Government cannot introduce a lower VAT rate in the Budget on 22 April. Europe’s politicians have given Gordon Brown and Alistair Darling the freedom to act.”

“The Brown Darling Government is no stranger to the idea of lowering VAT rates – we saw this when the Chancellor cut the standard VAT rate from 17.5% to 15% last November. At the time of that Pre-Budget Report, it was reported to be the first time any government had cut VAT rates. Yesterday’s very welcome Euro-decision allows our Westminster Government to do it again and help to Get Britain Building.”

Federation of Master Builders director of external affairs Brian Berry said that the rate had already been cut in other parts of Europe and that it had been successful. “A cut will increase Treasury revenue as well as creating a greener, more energy efficient housing stock and tackling the growing issue of fuel poverty.”

A reduction in VAT on domestic repair and maintenance to 5% would also remove the competitive advantage of the black economy builders and help to raise standards.

Among the other sectors where VAT could be cut are meals out and hairdressing.

Editor’s blog on the subject, click here