A package of incentives to include a reduced rate of VAT on home energy efficiency improvements and reduced Stamp Duty needs to be at the heart of the forthcoming Budget if the government is serious about making homes more energy efficient, says the Federation of Master Builders.

A package of incentives to include a reduced rate of VAT on home energy efficiency improvements and reduced Stamp Duty needs to be at the heart of the forthcoming Budget if the government is serious about making homes more energy efficient, says the Federation of Master Builders (FMB).

Brian Berry, director of external affairs at the FMB, said: “In the current economic climate householders will need more than just loans as currently proposed by the government in its Green Deal finance package to make existing homes more energy efficient. What is needed is a range of targeted incentives to encourage householders to take the steps that are necessary to install energy-efficient improvements.”

Berry believes a reduced rate VAT to 5% for improvement projects would provide a boost and create much-needed jobs in the building industry.

"The current VAT exemptions for energy saving materials are too complex and are not serving the purpose for which they were intended," Berry added. "These need to be simplified and better promoted to householders and builders alike.”  

Independent research commissioned by the FMB shows that the rise in VAT to 20% in January will cause a decline in the housing repair, maintenance and improvement market, resulting in 7,500 construction job losses this year, rising to over 11,000 by 2019.

The federation claims small and medium sized building companies are continuing to report falling workloads and a third expect to have to cut staff this year.

Berry added: "The stimulus effect of a targeted VAT cut would far outweigh the cost to the Treasury and would help to deliver the government's low carbon policy objectives.

"The government has promised thousands upon thousands of new construction jobs as a result of the Green Deal, but unless homeowners are given the best possible deal on their improvements, this flagship policy risks falling at the first hurdle."