VAT on domestic repair, maintenance and improvement work ought to be reduced to 5%, according to a report commissioned by the Construction Products Association.
The report, by consultant Capital Economics, said cutting VAT on repair work from 17.5% to 5% would reduce the attractiveness of using cowboy builders, which can undercut reputable firms that pay the tax.

The report said: "With a smaller price differential between formal and informal economy prices, households may decide that the saving made by using an informal economy firm is too small to be worth sacrificing the guarantee of quality from a formal economy firm."

The possibility of trading off the reduction on repair work against a 5% levy on new-build is ruled out. CPA chief executive Michael Ankers said: "Such a move would be economically disadvantageous and politically unattractive – tending to reduce the amount of new housebuilding and increases the price of houses."

The CPA has met construction minister Nigel Griffiths to discuss the findings. It will also lobby chancellor Gordon Brown before the pre-Budget statement using the findings in the report as ammunition.