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Create 100,000 New Jobs by Cutting VAT, says Federation of Master Builders



Reducing VAT to 5% for all domestic Repair, Maintenance and Improvement (RM&I) works would create more than 100,000 extra jobs in the UK by 2020, according to a latest report from the Federation of Master Builders (FMB), the largest trade association in the UK construction industry.


According to the research, produced by economic analysts at Experian, ‘TheOpportunities and Costs of Cutting VAT: The effects of selected reductions inthe rate of VAT on the labour element of housing repair, maintenance andimprovement’, reveals thatmore than 26,600 jobs would be created in the construction industry alone, with a further 34,400 new jobs in the wider economy, over the next year as a result of the VAT cut.


Brian Berry, FMB Director of External affairs, said:

“At a time when unemployment, especially among young people, is rising cutting VAT on RMI works would help create more than 60,000 jobs over the next 12 months. Last year the construction industry took on over 26,500 apprentices, but a VAT cut for home improvements would increase demand in the sector and help create even more apprenticeship opportunities for young people. The cut would also benefit millions of UK homeowners by reducing bills for those who cannot afford vital repairs to their homes; help bring empty properties back into use thereby assisting with the alleviation of the housing supply crisis; remove the perverse incentive to demolish existing buildings to avoid the VAT bill; encourage the use of existing structures rather than continuing the urban sprawl and building on greenbelt land; and help protect consumers by cutting the competitive advantage of the informal economy over legitimate traders.”


Berry continued:

“A VAT cut would also have considerable social and financial benefits for the public sector by reducing the VAT bills of housing associations and local authorities, enabling more of the current expenditure to be used for improving the UK’s 4.9 million units of social housing stock. Based on the 2010 expenditure for improving the UK’s social housing stock which was £7.9billion, a further £374 million each year could be added to the budget.”


Berry added:

“While the research demonstrates that the immediate effect of a reduction in the rate of VAT would be a net revenue loss to the Government in 2012 of between £161million and £864 million, it also shows that such a move would provide a total economic stimulus in the region of £1.7 billion in 2012 alone, rising to more than £20 billion by 2020.”


Berry concluded:

“One of the biggest benefits of cutting VAT from 20% to 5% from the Government’s point of view is the boost it could give to its flagship programme the Green Deal as a VAT cut would act as an incentive to homeowners considering energy efficiency home improvements to their home. This has been the Government of cuts and we urge the Chancellor to make this selected cut as will help create much needed jobs, give homeowners the opportunity to have a more energy efficient home and critically will provide the stimulus that is needed to boost economic growth.”


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