Calls to cut tax on green improvements
By Sarah Wood | 17th February 2021
An influential committee of MPs is calling on the government to cut VAT on repairs for electrical goods and green home improvements.
The savings would help people to reduce greenhouse gas emissions in their everyday lives, according to the environmental audit committee, as reported by The Guardian.
The committee said funding for green home grants to install insulation and low-carbon heating should also be brought back to start a green recovery from the pandemic.
After the government supported the economy with emergency measures last year, the committee is calling on it to align the next phase of recovery with the objective of net zero emissions.
Committee chair Philip Dunne said the chancellor must set out clear plans in next month's budget to generate low-carbon growth in the run-up to the UN climate talks, Cop26, in Glasgow this November.
The report Growing back better: putting nature and net zero at the heart of the economic recovery, published today (17th February), said: "We recommend that the chancellor of the exchequer bring forward proposals to reduce the rate of VAT on repair services and products containing reused or recycled materials to increase the circularity and resilience of the UK economy. The government should also reduce VAT on green home upgrades to incentivise more people to install low-carbon technologies and improve the energy efficiency of new homes."
Cuts to VAT on green goods were limited under EU rules. But now the UK has left the EU, it can set all of its own VAT rates. So far, the government has made little indication it intends to use this new freedom to meet its net zero emissions target.
In October 2019, the government increased the VAT rate from five per cent to 20 per cent on installations of some low-carbon goods, including many solar panel installations.
The committee's recommendation is designed to put right the disparity between the zero-VAT rate on new construction and the full VAT rate charged on retro-fitting a property.
However, some green campaigners would like to see the government go further and cut VAT completely on all green products, from bikes to solar panels, as an effective way to make green improvements more affordable.
The government said it is committed to building back greener from the pandemic, and has plans to invest £9bn in improving the energy efficiency of buildings, as part of its commitment to climate change by 2050.
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