The Government has been urged to reduce VAT to 5 per cent for energy saving measures under the Green Deal to boost installations.
A warning has been issued by 27 organisations in the construction, property and business industries as well as environmental groups which are worried that ,unless VAT is reduced, consumers are unlikely to take up the Green Deal when it is launched next year.

The group says that the scheme, which covers the upfront costs for the installation of a range of energy efficiency measures such as insulation, energy efficient boilers and small-scale renewables, needs a reduction in the rate of VAT so that the retrofit programme will be a success.

As MPs prepare to debate the final stages of the Energy Bill, major industry players have joined together to back the statement.

The Cut the VAT campaign supporters have signed a joint statement urging MPs to ask the Government to reduce the rate of VAT to 5 per cent from 20 per cent for all Green Deal-approved measures in order to ensure take-up of the programme to reduce carbon emissions from buildings and cut fuel bills.

Brian Berry, director of external affairs at the Federation of Master Builders (FMB), said: 'At a time when energy prices are soaring the need to make our homes more energy efficient has never been so urgent. It is critical that the Green Deal is a success but it needs to be attractive to consumers who may be reluctant to have a 'charge' attached to their property. Other incentives are needed to support the Green Deal which is why a cut in VAT for Green Deal energy efficient work makes sense.

'Our homes contribute 27 per cent of the UK's total carbon emissions and 85 per cent of our existing homes will still be standing in 2050 so it is imperative that homeowners are encouraged to make their homes more energy efficient if the UK is to achieve its legal target to cut carbon emissions by 80 per cent by 2050.

'Businesses also need to be reassured that there is demand for Green Deal work if they are to invest in new energy efficient work because in the in the current economic climate many firms can't afford to start training their workforce until they know there is a growing demand for energy efficient home improvements.

'With little more than a year to go before the Green Deal, the energy saving market has to expand fast and wide. A targeted VAT cut would be a great start to stimulate demand and raise awareness of the Green Deal.'

Ian Fletcher, director of policy at the British Property Federation, added: 'The Government must prepare for the Green Deal by stimulating further demand in the energy saving market. A package of incentives will help to draw consumer attention to the Green Deal, bring more works within eligibility, and help support a successful launch. Therefore, we urge MPs from all parties to ask the Government to levy VAT at a rate of 5 per cent for all Green Deal approved measures.'

John Walker, national chairman at Federation of Small Businesses (FSB) said: 'Confidence among small business owners fell dramatically in the second quarter of the year with businesses in the construction sector not overly confident about their prospects for the third quarter. The FSB is calling for a cut in VAT for Green Deal improvements to help to restore growth in the construction sector and to help the Government achieve its carbon reduction targets. With just over a year until the Green Deal kicks in and as business and household budgets remain squeezed it is vital that the Government begins to incentivise energy efficiency improvements to ensure that the Green Deal is a success.'

Darren Shirley, sustainable homes campaign manager at WWF-UK, said: 'The Green Deal will be the only game in town from the end of 2012 and its success is critical to insulating consumers from rising household energy bills and to meeting the UK's carbon budgets. With current energy efficiency programmes under-delivering and with the Green Deal not yet looking to be an attractive offer for households the Government must introduce measures that will help drive the market to ensure the Green Deal is taken up. Cutting VAT on energy efficiency improvements as part of a package of incentives is one such measure that will be needed.'

Click here to view the joint statement.