Green Building Press: Government makes money as citizens freeze

The Cut the VAT campaign to cut VAT on building repair and maintenance work, whose backers include the Federation of Master Builders (FMB), National Energy Action (NEA) and The TaxPayers’ Alliance (TPA), can reveal that with fuel prices expected to rise by as much as 25 per cent this autumn, the Treasury could stand to make an additional £0.3 billion from the VAT levied on fuel bills.

This would mean that the Treasury would rake in a staggering £1.6 billion from householders who pay 5 per cent VAT on their fuel bills.

Total expenditure on gas and electricity has increased by £8.2 billion between 2003 and 2006. Fuel cost increases only accounted for a little over half of this figure - £4.5 billion. When additional costs for gas and electricity were added together the main increases for the two fuels were VAT – nearly £0.4 Billion. With the average fuel bill now at £1,058 the government currently makes an astounding £1.3 billion annually in VAT payments from people’s fuel bills.

Reports that fuel bills could be rising by as much as 25 per cent will come as a hammer blow to the 4.5 million UK households already living in fuel poverty. It will also make grim reading for the 1 million extra people who will be forced into fuel poverty when this rise kicks in. The government by comparison is set to profit handsomely by the prospect of yet another VAT windfall to the Treasury.

As more and more people are dragged into fuel poverty, traditional methods of government support are increasingly unavailable to those most in need.

Maria Wardrobe from National Energy Action said, “NEA urges the government to use this additional revenue to restore the budget for the Warm Front programme and to extend the Winter Fuel Payment to other vulnerable groups including families with young children and those with disabilities. These short term fixes will go someway to helping those hardest hit, but in the long-term we would like to see a top-level Fuel Poverty Summit to get the UK Fuel Poverty Strategy back on track.”

Brian Berry, Director of External Affairs at the Federation of Master Builders continued, “The truth is that current high rate of VAT on building repair work prevents people, particularly those on low-incomes, from maintaining their homes. In many instances, this results in people living in misery because they cannot afford to have basic repairs or central heating installed. What makes this worse is that these tend to be the most vulnerable people in our society, with the elderly particularly at risk.”

Matthew Elliot, Chief Executive of the TaxPayers’ Alliance concluded, “VAT is a cruel tax that hits some of the most vulnerable in society. The higher prices rise, the bigger the VAT bill grows – making things worse when it’s already difficult to make ends meet. At a time when people are facing rocky economic prospects and families struggle with a higher cost of living, VAT rubs salt into the wound. If you want to make your home energy efficient then you have to pay VAT, but if you can’t afford to do so you have to stump up VAT on fuel instead. It’s heads I win, tails you lose. Increasingly people are being pushed over the edge financially as a result of this immoral tax grab.”

The Cut the VAT coalition was formed by the Federation of Master Builders (FMB) in January and features a range of organisations including the Royal Institution of Chartered Surveyors (RICS), Empty Homes Agency and the National Home Improvement Council as well as the FMB and the TaxPayers’ Alliance. The Coalition is supported by National Energy Action.