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Create 100,000 New Jobs By Slashing VAT

OVER 100,000 new jobs could be created in the UK this year if VAT is reduced from 20% to 5% for all domestic repair, maintenance and improvement works, according to new research commissioned by the Federation of Master Builders.

The report by Experien for the FMB states that 26,600 construction jobs would be generated over the next 12 months, alongside a further 34,400 positions in the wider economy simply by slashing the rate of VAT.
The move would also boost the economy by £1.7bn in 2012, rising to over £20bn by 2020.

Brian Berry, FMB director of external affairs, says a VAT cut for home improvements would help create many more apprenticeship opportunities for young people in the construction industry, alleviating the growing levels of youth unemployment.

‘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’.

The move would also ‘remove the perverse incentive to demolish existing buildings to avoid the VAT bill; it would encourage the use of existing structures rather than continuing the urban sprawl and building on

greenbelt land’.

Another major advantage would be helping to protect consumers against rogue traders and cowboy builders by cutting the competitive advantage of the ‘informal economy’ over legitimate traders.

Mr Berry also believes that a VAT cut would 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 4.9m units of social housing stock.

Based on the 2010 expenditure for improving the UK’s social housing stock which was £7.9bn, a further £374m each year could be added to the budget.

He concedes that while the immediate effect of a reduction in the rate of VAT could be a net revenue loss to the Government in 2012 of between £161m and £864m, it also shows that such a move would provide a total economic stimulus of some £1.7bn in 2012 alone, rising to more than £20bn by 2020.

‘One of the biggest benefits of cutting VAT,’ says Mr Berry, ‘is to give homeowners an incentive for energy efficiency home improvements to their homes, boosting the flagship Green Deal programme ’.

This article has been reproduced from the Contract Flooring Journal website. You can find them at