An increase in the rate of VAT will be a charter for cowboy builders, the Federation of Master Builders has warned.
Tomorrow’s Emergency Budget, the new government’s first, is widely tipped to include a rise in the rate of VAT to 20% from 17.5%.
However, implementing such an increase on housing repairing, maintainance and improvement materials and work would simply boost the informal, cash-based sector, argues the FMB director general Richard Diment.
“More and more cash strapped householders would resort to ‘cash in hand’ as a way to avoid paying a possible 20% on maintaining their home. The end result will be not to raise more money as the Chancellor intends but simply a means to drive more money into the informal economy,” Diment says.
The FMB has long campaigned for a reduction in the rate of VAT on housing RMI work, latterly as part of the get Britain Building campaign.
Diment continues: “The Chancellor needs to consider carefully VAT rates because a low taxation economy is one that stimulates growth. Independent research has shown that actually reducing the rate of VAT to five percent on the labour element of housing repair, maintenance and improvement work would have a multiplier effect of more than £1 billion as well as creating more than 55,000 extra new jobs this year alone. This can only be good news for the economy as it faces the threat of a double dip recession.
“The danger of inadvertently boosting the informal economy is that more people will be put at risk by unscrupulous rogue traders who will exploit cash strapped customers. We know that two years ago more than £170 million was paid to rogue traders by members of the public and given the current economic crisis this figure will have probably increased as householders tighten their belts.”