By charging 20% VAT on all home repair, maintenance and improvement work the Government is exacerbating a number of serious social, economic and environmental problems.
Instead introducing a reduced rate of VAT for all home repair and improvement work is a simple single plan to relieve the country of many of these problems.
Economic growth
The UK economy is facing a weak recovery from the recent recession. Output in the construction industry shrunk faster than the economy as a whole during the recession and recent forecasts suggest there will be no significant sign of recovery in the industry until 2014. Successful trials in a number of EU countries strongly suggest a cut in VAT on home repair and improvement work would reap economic benefits for the UK.
Increased employment
249,000 workforce jobs have been lost in the construction sector since 2007 according to the Office for National Statistics. This is terrible news for the Government’s finances as well as for those affected. Moreover, unless the industry can recruit and train sufficient people now there will be a serious skills shortage in future years. We know from independent research that a cut in VAT on home repair and improvement work could create thousands of new jobs in the construction sector and the wider economy.
More homes
We are building fewer than half the number of new homes needed to match the rate of household growth in the UK. Therefore, it is shocking that there were over 700,000 empty homes in 2010 in England alone. Many require considerable repair work before they can be lived in and the high rate of VAT makes this a very costly activity for private landlords or local authorities who could otherwise renovate more existing properties to help ease the pressure on housing supply. By making home repair and improvement work more affordable, it would encourage the use of existing structures rather than continuing the urban sprawl and building on greenbelt land.
Greener homes and warmer homes
Existing homes contribute around 27% of the UK’s total CO2 emissions. There is a vast amount of work to be done if the UK is to meet the legally binding targets for reducing emissions. A simple, single cut in VAT on home repair and maintenance work would help millions of households to upgrade their homes to make them more energy efficient. Without help to reduce energy use, the number of households living in fuel poverty will continue to grow as they struggle to protect themselves against rising fuel prices.
Fewer cowboy builders
According to Trading Standards a staggering £170 million is stolen by rogue traders from unsuspecting homeowners across Britain each year, and they also cause significant damage to law-abiding businesses. Rogues traders flourish by evading VAT in order to offer a cheap deal. However, all too often, the deal comes without a proper written contract or any kind of paperwork meaning the enforcement of consumer rights is almost impossible if something goes wrong. Again, this simple, single action to cut VAT on home repair and improvement work to 5% would protect consumers and legitimate businesses by significantly reducing the competitive advantage of rogues traders.
Visit our research page for more information.
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