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Oi. EU. No!

Will no one rid me of this meddlesome priest

Lovers of irony will appreciate the juxtaposition of some of the news stories on the website this week.

On the one hand we have the Institution of Mechanical Engineers calling for a Government initiative making insulating our building fabric mandatory. Yay and hurrah for the IME. They get it. They get exactly what we need to improve energy efficiency, reduce energy bills and cut carbon emissions and out reliance on fossil fuels.

On the other hand, we have the European Court of Justice which has ruled against the UK Government, deciding that the 5% rate of VAT currently levied on insulation and other energy saving materials is against EU law. The ECJ, clearly, doesn’t get it.

A bigger irony, of course, is that the EU has given the UK targets to reach in terms of reducing carbon emissions. And one of the best ways of doing that is to ensure that the buildings are as energy efficient as possible.

The BMF has been highlighting that this has been on the cards, of course, for a couple of years, ever since the EU threatened to take the UK Government to the European Court if it didn’t increase VAT from 5% to the full whack of 20%. The Government didn’t, so it did and now the Government has to cough up.

Or, rather, it has to make us cough up. And there’s another ironic thing. The ECJ decision means that the Prime Minister might well find himself in the slightly embarrassing situation of having to welch on a pre-election promise NOT to raise taxes or VAT. Hell, the silly man even went so far as to say he would pass a law prohibiting him from so doing. David, David, don’t go making promises you’re not sure you can keep. Did five years of working with Nick Clegg teach you nothing?

What makes it more complicated is that the EU laws apparently would allow a member state to set its own rate of VAT on such materials if it was for social housing.

So the Tories now have the dilemma of whether they go back on a promise, and put the VAT rate up, blaming the EU – which won’t do Cameron’s hopes of getting a pro-Europe result in the referendum much good. UKIP MEPs must be cackling into their claret. Or, they could come up with some sort of fudged figures which will show that most of us do, actually, Mr Europe, live in social housing.

Or, just ignore it and hope that none of us notice.

It’s such a bloody farce and has probably killed the 5% RMI work VAT campaign aims. A few years ago I remember the then CPA President Bill Bolsover telling the CPA lunch audience that he believed it to be “astounding that one can pay 5% VAT on materials to make ones home more energy efficient, yet 20% on installing those materials.”

Turns out the EU agreed. They just agreed the wrong way.

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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