Chancellor urged to cut rate to 5% in refurbishment market

The construction industry has united in its call to the Chancellor of the Exchequer to cut VAT to 5% for property refurbishment in his Budget on Wednesday.

A coalition of interests including the Construction Products Association (CPA), the Federation of Master Builders (FMB), the Royal Institute of British Architects (RIBA) and the Royal Institution of Chartered Surveyors (RICS) has united for the first time to write to the Chancellor arguing that a cut in VAT would help kick start the British economy.

Michael Ankers, chief executive of the CPA said: “The Chancellor has a unique opportunity in his Budget to take advantage of the EU decision of 10 March 2009, which allows Member States to reduce VAT on services, and cut the current rate of VAT from 15 to 5% for all private housing repair and maintenance work.

“This will provide a far more effective fiscal stimulus than many of the other measures the government has introduced or is considering, by helping to sustain employment in many thousands of SMEs and using construction products, of which a high proportion are manufactured in the UK.”

Job losses are predicted to hit 300 000 in the construction industry but experiments elsewhere in Europe indicate a VAT cut could create thousands of much needed jobs.

Richard Diment, director general of the FMB said: “Research carried out by University of Oxford calculates that the potential market for the refurbishment of existing homes to improve their energy efficiency is worth between £3.5 and £6.5 billion, which would be a significant boost to the construction sector providing thousands of new jobs at a time when they are needed more than ever.”

Sunand Prasad, president of the RIBA said: “The European Construction Industry Federation (FIEC) has shown that the experiment of reduced VAT rates for activities relating to the restoration and maintenance of dwellings in Belgium, Spain, Italy and Portugal created almost 170 000 permanent additional jobs. In France the scheme resulted in a €500 million net increase in tax yields, disproving the argument that the scheme would burden public finances.”