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“Budget incentive without regret”: firms intensify calls to abandon VAT on energy efficiency

Ahead of the Chancellor’s spring statement, trade groups and energy companies are again urging the Treasury to use the tax system to speed up the market for the modernization of clean homes

The Treasury is facing new calls to reduce VAT on energy efficiency of homes to encourage households to pursue environmentally modernized homes that can fight fuel poverty and protect citizens from volatile energy prices.

The Decentralized Energy Association (ADE), Solar Energy UK and the Federation of Craftsmen, as well as the energy company E.ON and the engineering consultancy Sweco are among the organizations intensifying their calls this week to revise green tax rates. home renovation products.

This comes amid a sharp rise in electricity bills for home and business caused by the global jump in fossil gas prices, with costs rising again to around £ 2,000 a year for the average home from April, sparking growing calls for a nationwide energy efficiency program for decarbonisation. The infamous UK housing stock.

In a letter to the Chancellor on Thursday, ADE argues that the abolition of VAT on modernization measures is a “quick turnaround, without sparing the fiscal stimulus” that could stimulate a massive home modernization program that will allow Britain to achieve its climate goals while reducing costs on fuel for consumers and creating 95,000 jobs in construction and in the economy as a whole.

The letter, which was also signed by the directors of Saving Energy UK, the Federation of Craftsmen, the National Insulation Authority, the Energy Saving Trust, Instagroup, E.ON, Sweco and Leeds City Council, notes that the current tax system is currently encouraging carbon-replacing existing ones. buildings for green upgrades because new construction projects benefit from a zero VAT rate.

“Regardless of what policies and other incentives exist for the modernization market, with 20 percent VAT on all modernization work on existing homes, there is a strong deterrence for in-depth modernization work,” the letter said. “This is a particularly important issue given the ongoing energy price crisis – although energy efficiency decisions alone cannot solve the problem of rising electricity bills, they are an effective way for the UK to work to keep its citizens warm, healthy and comfortable. the future. ».

Meanwhile, another separate report, commissioned by the MCS Charitable Foundation and handed over to Treasury officials yesterday, similarly calls for a zero-per cent 20 percent tax on home energy efficiency and renewable energy.

Researchapproved by Solar Energy UK, the Federation of Craftsmen and the National Energy Fund, warns that the current tax regime is a “major obstacle” to the much-needed refurbishment of 29 million homes in the UK.

David Quadry, MCS’s director of external relations, said Britain’s climate goals were at stake. “The current government policy does not meet the emission targets for 2050, but the adoption of VAT measures will make the introduction of energy efficiency measures more affordable,” he said. “It also sends a clear signal of business support, as the low-carbon heating sector will create tens of thousands of skilled green jobs. Energy efficiency must be a priority.”

A report by independent tax expert Tate Walker warns that 70 per cent of UK-owned homes are not eligible for energy saving grants, a situation markedly different from other European countries where incentives have led to increased use of heat pumps and others. energy efficiency measures.

It argues that “broad positive tax incentives”, such as targeted VAT cuts, could provide “vital” support that could isolate millions of homes across the UK while lowering fuel bills.

“After Brexit, the government has autonomy over VAT, but they do not enjoy that power,” Quilt said. “Financial losses for the Treasury would be minimal, but the painful effect of such positive actions would be far-reaching. Now is the time to purposefully reduce VAT on energy efficiency measures and domestic renewable energy. ”

A Finance Ministry spokesman said the government would consider views expressed by various organizations advocating for tax reform that could encourage home modernization.

The spokesman noted that some energy-saving materials have already taken advantage of the reduced tax rate. ‘The government is already supporting a reduced VAT rate of 5 per cent for the installation of many energy-saving materials such as solar panels, and is investing £ 3 billion in this parliament to help more than half a million low-income homes become more energy efficient, saving families.’ an average of £ 290, ”they said.

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https://www.businessgreen.com/news/4045196/regrets-fiscal-stimulus-firms-intensify-calls-ditch-vat-energy-efficiency-upgrades “Budget incentive without regret”: firms intensify calls to abandon VAT on energy efficiency

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