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The Government's failure to address the real issue of VAT on domestic repair, maintenance and improvement work plus its unwillingness to radically review the Construction Industry Scheme means that despite initiatives such as the Quality Mark, its policies continue to encourage rather than curb the activities of the cowboy builder. That is the message from the Federation of Master Builders, the building industry's largest employers' association with over 13,000 members, to the Labour Party as it gathers next week for its annual conference in Brighton.
The Federation has welcomed the recent changes to VAT, notably the extension of a 5% rate of VAT on the conversion of non-residential property into dwellings and the conversion of dwellings into multiple occupation, but this is far short of the universal rate of 5% on all RMI work for which the Federation has campagined. The Federation believes that the current punitive rate of 17.5% supports the rogue operative to the detriment of the professional builder. It encourages the employment of cash-in-hand, no-questions-asked rogue traders. The customer gets a second rate job with no opportunity for redress and the Treasury loses some £43 billion in tax evasion.
The benefits of lowering the rate of VAT has been demonstrated in countries throughout Europe reports Gordon Marjoram, newly re-elected National President of FMB: "Reducing VAT would encourage customers to use bona fide firms rather than taking the cheapest option. These customers then have the temerity to complain about the rogue traders that they have themselves have encouraged and employed. It would also actually improve the Treasury's tax take by bringing more work into the legitimate economy. This view is borne out by experience in other EU countries and indeed closer to home in the Isle of Man. The European Commission supports our aims on VAT. At the moment seven European countries have reduced the rate for RMI, the sooner that the Treasury makes it eight the better."
Another problem is the Government's unwillingness to properly review the Construction Industry Scheme which according to Mr Marjoram is "unscientific, inequitable in operation, cumbersome, vexatious and intolerably complex bearing the imprint of sectional discrimination whilst leaving the rogues untouched." He goes on to say, "Like all extreme statutes, it defeats the purpose for which it was introduced, in this case by forcing even more people in the black economy than before."
In addition to reducing VAT and reviewing the tax deduction scheme the Federation would like to see the Government introduce a statutory requirement for builders to provide an insurance-backed warranty on work carried out. Cowboy builders would not be able to offer such a guarantee. Such a statutory requirement would give real power to Trading Standards Officers.
The problem of cowboy clients also needs addressing. A growing number of clients try to avoid paying for work done. This can prove disastrous for the small building firm. The FMB proposes that those legal requirements and penalties relating to late payment of commercial debt be extended to the domestic market to ensure that home-owners pay for work promptly.
Mr Marjoram say:
"We will be making our case at the forthcoming Labour Party conference by explaining to delegates what needs to done if the Government is to really work with and not against the building industry. The Government needs to address not only our concerns but also its own and those of our customers."
First posted: 1 October 2001. Last modified: 1 October 2001.
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