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Construction industry calls for VAT cut in budget

The construction industry has united in its call to the chancellor of the exchequer to cut VAT to 5% for property refurbishment in the budget this month.
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.

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.

'The chancellor has an opportunity in his budget to take advantage of the EU decision of March 10, 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,' said Michael Ankers, chief executive of the CPA.

'This will provide a far more effective fiscal stimulus than many of the other measures 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,' he added.

'Making it cheaper to repair and maintain homes will help bring empty properties back into use and encourage people to take advantage of energy saving measures such as insulation,' said Louis Armstrong, chief executive of the RICS.

'Reusing empty homes improves communities, minimises waste sent to landfill and reduces carbon emissions from the transport of construction materials. Cutting VAT would help bring empty homes back into use and increase supply while housebuilding is at a record low level,' he said.

'Recycling our heritage by putting buildings back into beneficial use is an essential part of improving our quality of life,' said Richard Diment, director general of the FMB.

Research carried out by University of Oxford calculates the potential market for the refurbishment of existing homes to improve their energy efficiency is worth between £3.5B and £6.5B which would be a significant boost to the construction sector providing thousands of new jobs.

'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,' said Sunand Prasad, president of the RIBA.

He added: 'In France the scheme resulted in a €500M net increase in tax yields, disproving the argument that the scheme would burden public finances.'
20 April 2009

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