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Ministers urged to help kickstart a ‘green recovery’

MINISTERS should cut VAT on repairs for electrical goods and green home improvements, to help people reduce greenhouse gas emissions in their everyday lives, an influential committee of MPs has urged.

Funding for green home grants to install insulation and low-carbon heating, should also be restored to kickstart a ‘green recovery’ in the UK, said the environmental audit committee in a report on how to “grow back better” from the coronavirus crisis.

Philip Dunne, chairman of the committee, said:  “Last spring was about keeping the UK economy in aspic, with emergency measures and funding. Now, there is more time to put together measures for the next phase. We need to see that aligned with the objectives of net zero emissions, and that remains to be seen.”

He called for the Chancellor to lay out clear plans in next month’s budget to spur low-carbon growth in the run-up to the vital UN climate talks, called Cop26, in Glasgow this November.

“The eyes of the world will be on us for Cop26,” he said. “Rather than just preaching to other countries, we need to be seen to be taking action.”

In its report “Growing back better: putting nature and net zero at the heart of the economic recovery”, published on Wednesday, the committee 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 have long been advocated by green campaigners, but VAT exemptions were limited under EU rules. Since Brexit, the UK can set all of its own VAT rates, but the government has made little indication it intends to use this to meet its net zero emissions target.

In October 2019, the Government increased the VAT rate from 5% to 20% on installations of a range of low-carbon goods including many solar panel installations, especially those with batteries, as well as domestic wind turbine systems, heat pumps and insulation materials.

The higher rate is charged where the cost of materials exceeds 60% of the installation cost, with exemptions for some cases of social need, such as care homes.

The committee’s recommendation is meant to correct the disparity between the zero-VAT rate on new construction and the full rate charged on retrofitting a property. However, the committee stopped short of recommending an end to VAT on all green goods, from solar panels to bicycles, called for by some campaigners.

 

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