Cutting VAT can unleash green housing revolution

A VAT cut on home improvements could generate £15bn in new taxes, create 95,000 jobs and unlock £1bn green revolution.

In December 2019, a coalition of business groups, including the Electrical Contractors’ Association (ECA) and organisations from across the property and construction sectors joined forces to urge the new UK government to cut VAT on maintenance and improvement works to people’s homes.

Reducing VAT from 20% to 5% on home improvement works would unleash investment in housing, stimulate the economy and enable the UK’s transition to net-zero carbon, said groups including the Federation of Master Builders and the British Property Federation.

On December 2, the coalition wrote to each of the leaders of Westminster’s four largest parties, asking them to speak for the ‘Cut the VAT’ campaign during the general election and to meet with the coalition early in the next Parliament.

This is vital, the coalition of built environment groups said, in order to green the nation’s homes, with domestic buildings responsible for around 20% of the UK’s carbon emissions.

In addition to improving the standards of older homes, and those in rural areas, this measure would also help unleash investment in new housing. Build-to-rent (BTR) is a relatively new asset class in the UK that provides high quality, purpose-built and professionally managed homes.

The BTR sector has grown from fewer than 30,000 homes to 148,000 homes in the past five years – and in 2018 delivered a quarter of London’s housing output. By reducing the irrecoverable VAT associated with maintenance and management of BTR, the sector can deliver even more, the letter said.

Melanie Leech, Chief Executive of the British Property Federation, said: “Reducing the rate of VAT on all repairs, maintenance and management of residential property would support the greening and improvement of our housing stock, and help the build-to-rent sector deliver more homes. We therefore urge the government to support the Cut the VAT campaign.”

Brian Berry, Chief Executive of the Federation of Master Builders, said: “An amazing 20 million floors, eight million lofts and five million cavity walls [are] all in need of insulation across the UK, according to the government’s own figures. The four main parties must go further in their policy pledges to promote and incentivise energy-efficiency works. Given that homeowners tend to complete these tasks as a consequence of larger home improvement works, the rate of VAT on repair and maintenance work needs to be reduced from the current 20% to 5%.”

Anna Scothern, Chief Executive of the National Home Improvements Council, said: “The NHIC are proud to support this campaign and have long since championed initiatives which support householders to make safe, informed decisions around home improvements. Providing a reduction in VAT comparable to that in new build would go a long way toward putting a stop to the grey economy as well as ensuring householders are protected when using reputable tradespeople.”

Patrice Cairns, Northern Ireland Policy Manager, Royal Institute of Chartered Surveyors, said: “To fully decarbonise the built environment, both the operational carbon and embodied carbon in buildings must be tackled; retrofitting provides an opportunity to achieve significant embodied carbon savings through re-use rather than re-build”.

The suggestion of reducing the rate of VAT on repairs and maintenance of homes has been widely advocated for some time. Most notably, the Cut the VAT campaign, which was formed by a coalition of over 60 business and trade bodies, lobbied exclusively on this issue several years ago. Cut the VAT commissioned some research by Experian in 2015 to quantify the impact of reducing the rate of VAT on residential repairs and maintenance from 20% to 5% (over the five-year period from 2015 to 2020).

The Cut the VAT campaign research by Experian is available HERE: https://www.fmb.org.uk/about-the-fmb/policy-and-public-affairs/domestic-refurbishment-and-energy-efficiency/

[edit] Organisations which signed the letter to Westminster party leaders are:

• Bathroom Manufacturers Association
• British Blind and Shutter Association
• British Property Federation
• British Woodworking Federation
• Builders Merchants Federation
• CPRE The Countryside Charity
• Civil Engineering Contractors Association
• Chartered Institute of Building
• Country Land and Business Association
• Countryside Alliance
• Electrical Contractors’ Association
• Federation of Master Builders
• The Heritage Alliance
• HomeOwners Alliance
• Insulation Manufacturers Association
• National Federation of Builders
• National Home Improvement Council
• National Landlords Association
• Roof Tile Association
• Royal Institute of Chartered Surveyors
• Scottish Building Federation
• UK Green Building Council
• The VAT Consultancy

[edit] About this article

This article was written by the Electrical Contractors' Association (ECA) and previously appeared on its website in December 2019. It was originally titled 'Cut the VAT to unleash green housing revolution, party leaders urged' and can be accessed HERE.

Other articles by the ECA on Designing Buildings Wiki can be accessed HERE.

[edit] Related articles on Designing Buildings Wiki

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--ECA