VAT report "is an important step"

Published:  21 April, 2010

The Get Britain Building (GBB) campaign has thrown its weight behind a new report.

The Get Britain Building (GBB) campaign has thrown its weight behind a new report – produced by the Cut the VAT Coalition – on the effect of cutting VAT for housing repair, maintenance and improvement (RMI) as an important first step in convincing the Treasury.

The report – The Opportunities and Costs of Cutting VAT: The effects of selected reductions in the rate of VAT on the labour element of housing repair, maintenance and improvement – identifies opportunities for government:

• To create 55,000 new jobs in the first year of a VAT cut

• Free up £450 million each year for renovations on social housing

• Bring 19,000 social houses back into use per year

• See sustainability improvements to 174,000 private domestic properties

• Reduce housing carbon emissions by up to 337,000 tonnes.

The report estimates that the cost could be as little as £102 million per year – equivalent to a quarter of the Car Scrappage Scheme; twice the boiler scrappage programme, and just 0.01% of the resource so far committed to bailing out the banks. 

It is arguable that the £400 million Car Scrappage Scheme did not create a single UK job, with most of the monies going to companies with no British manufacturing base at all.

GBB has been campaigning for a cut in VAT to 5% on domestic works that include an element of ‘consequential improvements’ which deliver sustainability benefits. This would generate activity in domestic RMI, improve the UK’s property asset base and help the government meet its carbon reduction commitments.

Mike Leonard, GBB spokesperson and director of the Modern Masonry Alliance, said: “This report represents the first costed proposal to Treasury that incontrovertibly demonstrates the economic, social and environmental benefits from supporting the building industry.

“The report only addresses the benefits of VAT reduction on the labour elements of works. It is our belief that should the programme be widened to encompass all elements of RMI – provided sustainable ‘consequential improvements’ are included – the cost would be lower still; possibly cost-neutral and even revenue generating.”

The report reveals that a cut in VAT to 5% would contribute over £1.4 billion to the UK economy in 2010, rising to £17 billion by 2019. It said an extra 81,500 UK jobs could be created by the end of the decade. 

Speaking at the launch of the research in the House of Commons, Lorely Burt, MP for Solihull, said: “We need to act quickly to get people back into work. A cut in VAT would provide many jobs immediately and would continue to provide a sustained flow of jobs over the next decade.”

Leonard continued: “For years, the Treasury has been deaf to the message, claiming they did not have numbers to support it. Now they do, and there can be no excuse for them to carry on prevaricating. 

“For too long, government has determinedly ignored the opportunity provided by the building industry to help rebuild the economy, while improving investment in infrastructure and UK housing stock. This report goes some way to demonstrating that they can’t afford to ignore that anymore.”

Get Britain Building is spearheaded by British Precast, the Builders Merchants Federation, the Federation of Master Builders and the Modern Masonry Alliance.