Green Deal VAT row heats up

A broad coalition of charities, NGOs, green businesses and consumer groups has written to cabinet office minister Oliver Letwin regarding the current dispute over VAT levied on energy saving materials.

The EU challenged the government earlier this year by stating that a cut-price VAT rate of five per cent on insulation materials contravenes the EU VAT directive. It has begun infringement proceedings against the UK government insisting that the VAT rate be brought in line with the current full level of 20 percent.

So far the government has refused to budge with any VAT change likely to jeapardise plans for Green Deal by pushing the cost of energy saving measures beyond the Golden Rule threshold.

The letter to Oliver Letwin calls on the government to hold firm on the issue despite legal threats that the case could go before the European Court. 

It reads: “We are writing to you as a coalition of charities, NGOs, businesses and consumer groups to express our grave concern at the European Commission’s recent Reasoned Opinion on the UK’s reduced rate of VAT on the supply and installation of energy saving materials.

“We believe that the Commission is wrong in its view that the UK’s 5 percent rate of VAT on energy saving materials goes “beyond the scope” of the 2006 VAT Directive.  We believe that the UK can – and should – mount a robust defence of its existing position on the basis that a policy aimed at fuel poverty-proofing homes, reducing households’ exposure to high fuel prices and mitigating harmful carbon emissions can most certainly be argued to constitute a “social policy”.  We also believe that the Commission’s position runs counter to the grain of broader EU policy, for example the recent Energy Efficiency Directive.  Moreover, quadrupling the current rate of VAT would dampen demand for the Government’s flagship Green Deal scheme by making it more difficult for energy saving measures to meet the Golden Rule.  This in turn would have a highly damaging effect on the already depressed state of the energy efficiency industry, and do little to help boost jobs in the construction sector.”

Signatories include: Sylvia Brown (Association for the Conservation of Energy), Blane Judd (Building & Engineering Services Association), Ian Fletcher (British Property Federation), Mike O’Connor CBE (Consumer Focus), Danielle Troop (Country Land & Business Association), Karen Lawrence (Energy Saving Trust), Craig Bennett (Friends of the Earth), Brian Berry (Federation of Master Builders), John Sinfield (Knauf Insulation UK and Northern Europe), Dave Sowden (The Micropower Council), Syed Ahmed (Mineral Wool Insulation Manufacturers Association), Richard Lambert (National Landlords Association), Alan Ward (Residential Landlords Association), Anna Scott-Marshall (Royal Institute of British Architects), Ruth Watkinson (Church of England), John Alker (UK Green Building Council), Nick Molho (WWF-UK)