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The Federation of Master Builders (FMB) today took the lead in the campaign to reduce the rate of VAT on domestic construction repair, maintenance and improvement (RMI) work to 5% and called on Chancellor Gordon Brown to consider such a cut in the forthcoming Budget. In its submission to the Chancellor, the FMB sets out a clear case for the benefits to the country as a whole of a reduced VAT rate.
Speaking today, Ian Davis, FMB director general said:
"It is time for the Chancellor to recognise not only the damage that 'cowboy' builders do to the industry but also the positive effects that the cut in VAT will have in reducing the informal economy and in supporting other Government policies."
Mr. Davis added:
"A cut in VAT would represent an investment in better homes, greater energy efficiency and improved health and safety in the industry. The Federation urges the Chancellor to reduce VAT on domestic RMI to 5% and believe it could act as the catalyst for bringing about the improvements that the construction industry so desperately needs."
Illegal Competition
FMB Members and other legitimate builders are confronted every day by illegal competition from rogue traders who evade tax by carrying out domestic RMI work for cash.
These 'cowboys' are destroying the fabric of the construction industry by cutting corners, doing cheap and often substandard work and ignoring best practice in health and safety and training. Reputable builders who refuse to compromise on quality and safety are going out of business as a result.
Cash Culture
The "cash builder" culture is so deeply ingrained in Britain that extra enforcement action by Customs and Excise will not work. Recent surveys suggest that up to 50% of consumers are likely to ask their builder for a "VAT off for cash" deal. The only way forwards is to reduce the rate of VAT itself. Reducing the rate of VAT to 5% on domestic RMI work will significantly reduce the commercial advantage that the rogue trader enjoys. It will put builders on a much more level playing field and allow customers to choose on the basis of quality and service. This experiment has already been tried in France, and resulted in a reduction in rogue trading activity. It is time for British consumers and builders to enjoy the same benefits.
Support for Other Policies
Reducing the rate of VAT on domestic RMI work to 5% will also support many other Government policies:
- It will support an improvement in the housing stock, around 8% of which is unfit for human habitation;
- It will encourage energy efficiency as home improvements are made using more up-to-date and energy efficient products and materials;
- It will support efforts to reduce the unacceptable level of complaints about bad building work. After all, why should builders take the time, trouble and resources to work towards badges of excellence, when the consumer is only looking for a cheap cash deal in so many cases?
This is an important issue which touches upon the life of every man, woman and child in the country. If VAT on domestic RMI work can be reduced to 5%, it will be a key step in the elimination of rogue builders and the misery that they cause.
The FMB is urging all of its 13,000 members to write to the Chancellor and their local MP in support of the "Cut the VAT" campaign.
First posted: 18 February 2003. Last modified: 18 February 2003.
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