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Cowboy builders will continue to prosper thanks to the Chancellor's decision not to reduce VAT from 17.5% to 5% on domestic repair and maintenance work the Federation of Master Builders has said. By leaving the financial incentive for homeowners to deal in cash and so evade paying VAT, he is encouraging the black market and rogue cash-in-hand operators.
The Federation believes that the budget is a golden opportunity lost to smash the black economy.
Derrick Ovington, President of the Federation of Master Builders, said:
"With a record budget surplus of over £12 billion and forecast billion pound budget surpluses for the foreseeable future, the Chancellor missed a golden opportunity to smash the black economy and drive cowboy builders out of town by reducing VAT on domestic repair, maintenance and improvement (RMI) building work."
The Federation, along with many other organisations, lobbied for action on the punitive rate of VAT that deters and discriminates against those who repair and maintain their own home and bring derelict or old homes in disrepair back into use.
It is estimated that there are 770,000 empty homes in England, a third of them privately owned and are empty for more than a year. Most require repair or refurbishment. A further 800,000 homes could be provided by refurbishment of flats above shops and business premises. Bringing these properties back into use would significantly add to the UK housing stock and reduce the need to build on greenfield sites.
Research carried out by FMB has proved that are many advantages in reducing VAT on RMI work. The recent temporary cut of VAT in France underlines the research findings. Since the cut to 5% over 30,000 extra jobs have been created and net receipts of one billion French Francs received.
The Federation welcomed the decision not to impose VAT on new housing and the plan to reduce stamp duty for brownfield development. However increasing stamp duty on sales will mean that people moving house will cut corners on repair and improvement work.
Ian Davis, FMB's Director General, said:
"Unfortunately, the Government's plan to deter greenfield development needs action to encourage more refurbishment and improvement of the existing stock. On the Government's own figures there is a £114 billion backlog of disrepair in private sector housing and all that builders got out of this budget were few crumbs from the table."
First posted: 22 March 2000. Last modified: 03 April 2000.
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