Prime minister David Cameron has acknowledged the industry’s position over the 5 per cent VAT rate and said his government will address the issue.
“We have got to get the Green Deal to work,” was the message from Mr Cameron to the Builders Merchants’ Federation (BMF).
The Prime Minister was answering a point made by BMF policy manager Brett Amphlett who represented the Federation at the Spring Conference in central London.
The BMF wants David Cameron to stand firm and defend 5 per cent VAT now the European Commission has referred the United Kingdom to the European Court of Justice.
The issue is whether or not Whitehall has applied a reduced VAT rate for energy-saving purposes correctly under EU law.
The prime minister listened to the BMF argue that elevating VAT on the supply and installation of certain energy-saving materials to the 20 per cent standard rate will scupper the Green Deal.
Insulation, heating and hot water system controls, heat pumps, solar pv and solar thermal products are at risk if the UK loses the case. Any increase in the cost of materials will affect the Golden Rule calculation, the BMF said.
Tax relief brought in for environmental reasons is not permitted under EU law. Mr Cameron’s ministers will have to demonstrate that the current reduced rate is for social objectives – and that the Green Deal and new Energy Company Obligation are social policies intended to combat fuel poverty.