A report launched today by Experian for the ‘Cut the VAT’ coalition, an alliance of 21 organisations including the Federation of Master Builders, the Modern Masonry Alliance, the Clay Roof Tile Council and the Royal Institution of Chartered Surveyors, has unveiled that as many as 55,000 new jobs in the building sector and construction industry could be created if VAT on labour for building work and home improvements was cut to 5%.

Creating Building Jobs

The Cut the VAT coalition believes that by cutting the percentage of VAT paid on labour for renovation and property maintenance work from the current 12.5% to 5% would help the current economic situation of high numbers of unemployed people, and would also have a number of social and economic benefits for the UK as a whole, including helping the Government reach its carbon emission reduction targets.

The report anticipates an additional 24,000 construction jobs could be created in 2010 alone, with this rising to nearly 35,000 building sector jobs by 2019. In addition, the report explains that the additional demand for tradespeople to carry out work in domestic properties will have a knock on effect for companies who supply materials to the trades as people decide to upgrade central heating systems, repair roofs, build extensions and rewire homes. As a result of making building work and renovation of properties more affordable for homeowners, this will in turn help people make their homes more energy efficient, reducing energy consumption and saving them money.

Create Greener Homes

The Director General of the Federation of Master Builders, Richard Diment, commented that as the number of new homes being constructed in the UK at present is at its lowest level since 1946, carrying out home improvements would be a much more practical solution than focusing on building new zero carbon homes. He advised that instead, eco retrofitting is a better option:

“Building zero carbon homes will have a limited impact on the UK’s carbon emissions, especially considering the existing UK housing stock is responsible for 27 percent of total UK carbon emissions. A more effective way to reduce carbon emissions would be to ‘green’ the existing housing stock. Cutting VAT would mean that many more homeowners could afford to have their homes retrofitted.”

Currently, the VAT amount for microgeneration equipment and renewable energy components is inconsistent, therefore having a flat 5% VAT rate would make this more fair, avoid customer confusion and increase demand. In addition, demand for double and tertiary glazing, replacement boilers and fitting insulation would increase with the potential to save up to 337 thousand tonnes of CO2 over the next decade.

As well as helping make UK homes greener and creating a significant number of building jobs, there are a number of other benefits that the Cut the VAT coalition believe taking action would help achieve.

Stopping Cowboy Builders

By reducing the labour costs for home improvement and maintenance work, the coalition advises that the increased affordability of carrying out renovation or retrofitting work would mean less people are likely to be ripped off by cowboy builders and rogue traders offering ‘too good to be true’ cheap building quotes. More than 10,000 people are affected by rogue traders each year, accounting for £170 million of money taken for work that is either sub standard or never completed according to Trading Standards. Because cowboy builders usually make their money by avoiding paying their VAT in the first place, the reduction to 5% would significantly reduce the profitability of their practices.

Renovating Empty Properties

Homes that currently stand empty, structurally unsafe and derelict would be less likely to be left to crumble because owners can’t afford to carry out building work and restoration of the properties. By restoring old buildings and empty properties, the demand for development of countryside and open space would be reduced as regeneration of existing properties would be a more attractive, cost effective and efficient option.

The proposal to reduce the VAT paid on building labour is supported by a number of MPs from a range of different political parties as well as being backed by the 21 organisations making up the Cut the VAT coalition, and is supported in the EU by many MEPs.

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1. Building a Greener Home
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3. Ecobuild Exhibition Taking Place in March to Promote Green Building
4. FMB on the Hunt for Britain’s Best Builder
5. Federation of Master Builders Publishes Election Manifesto