VAT call for energy-saving measures

The Government should reduce VAT to 5% for all energy saving measures installed in homes and businesses under its flagship "green deal" scheme, it was urged today.

More than two dozen organisations have called for an across-the-board 5% VAT rate for the green deal, instead of 20%, which they say is needed to ensure take-up of the programme to reduce carbon emissions from buildings and cut fuel bills.

The demand from 26 groups, including the British Property Federation, the UK Green Building Council, environmental charity WWF and the Royal Institution of Chartered Surveyors, comes as MPs finalise the legislation that will bring in the green deal.

The scheme will cover the upfront costs of a range of energy efficiency measures in homes, such as insulation, energy efficient boilers and small-scale renewables, with homeowners paying back the money through savings on their bills.

But the groups warn the Government must do more to make energy saving packages attractive to householders, making the green deal more affordable in order for it to be a success.

A lower rate of VAT would also make it easier to meet the so-called "golden rule" in which repayments must be lower than the savings consumers make on their bills as a result of the new measures, they say.

Currently the professional installation of certain measures, such as small-scale renewables, is charged at 5% VAT.

But while energy is charged at 5% VAT, most measures to save energy such as more efficient boilers do not get the reduced rate.

The coalition of organisations has issued a statement calling for a "consistent approach" to taxing materials and labour used in UK buildings.

Ian Fletcher, director of policy at the British Property Federation, said: "The Government must prepare for the green deal by stimulating further demand in the energy-saving market.

"A package of incentives will help to draw consumer attention to the green deal, bring more works within eligibility, and help support a successful launch.

"Therefore, we urge MPs from all parties to ask the Government to levy VAT at a rate of 5% for all green deal-approved measures."

PA