The cut-off date for member states to reduce their VAT on refurbishment was the end of last month. So why did our chancellor miss the chance in his Budget speech?

we all know that many European governments blame the European commission for a whole host of national ills. But it is rare to hear about the opportunities offered by the Brussels bureaucracy that these same governments choose not to exploit. Like VAT, for example.

The European Union has been experimenting with lower VAT rates on several different types of labour-intensive services, including the renovation and repair of homes, since 2000. Eight countries are committed to taking part, although the UK government's commitment did not stretch beyond the Isle of Man. As the experimental period drew to a close at the end of last year, there was pressure from two sources to continue it. On the one hand there was a push from the central and eastern European countries that had missed out on the scheme, was started before they were EU members. These countries argued that that were most in need of financial help to improve the quality of their housing stock.

On the source of pressure was from the construction industry, particularly in those countries such as France that had benefited from the years of reduced VAT and saw disaster ahead for the economy if the rates were to rise.

And so it came to pass that the EU agreed to a reduced rate of VAT on repair and renovation work for domestic buildings - for those countries whose government asked for it by 31 March 2006.

HM Treasury chose not to ask for it. The chancellor's Budget speech, delivered just a week ahead of the deadline, failed to deliver the revised VAT regime that would have, among other things, improved the state of our homes, cut down on the number of houses lying empty and helped to eliminate cowboy builders.

The EU agreed to allow a reduced rate of VAT on repair and renovation works for domestic buildings for those countries whose governments asked asked for it by 31 March 2006. HM Treasury chose not to ask for it

The anomaly of a 0% rate levied on new-build and a full 17.5% rate on repairs and conversions is therefore set to continue. There is no sign here of the joined-up policy-making that recognises that the additional cost of VAT is a disincentive to making better use of our existing buildings, which in turn is essential to urban regeneration and can play an important part in cutting waste and conserving scarce resources such as land, building materials and energy.

The energy issue is a particular irony. Indeed in the same week that the chancellor missed his chance on VAT, the prime minister was successfully lobbying his colleagues at the spring summit of EU leaders in Brussels to back a deal on a common energy policy.

As well as agreeing to set up a strategic energy review and roadmap on renewables they committed themselves to delivering an energy-efficiency action plan. What better way could there be to deliver progress on energy efficiency than to give financial incentives for household improvements?

So an opportunity missed. And with the new EU scheme in place until 2010, the UK will have a while to wait before it gets another like it.