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Construction Job Losses Could Be Tackled with VAT Changes
21st November 2009
New academic research conducted for the Repairing Britain Campaign supports the campaign's belief that the benefits of a cut in VAT to five per cent on property repairs would more than compensate for the loss in government revenue.
The detailed report, prepared by Teesside University Business School, presents a breakdown of the net losses to HM Revenue and Customs of reducing VAT and compares these with the estimated costs arising should the predicted 300,000 construction workers who will have lost their jobs during the recession, remain unemployed.
The study concludes that the VAT reduction can be justified for the construction jobs it would save and the improvement it would bring in the quality and energy efficiency of the UK housing stock.
Also calculated is the effect of equalising the rate of VAT charged on new build projects and refurbishments because at present, new buildings do not attract any VAT whereas the tax is levied at the full prevailing rate on repairs and renovations. However such a move is seen as likely to be popular and might slow down recovery.
As commissioner of the report, property repair and maintenance specialist Rok has sent a copy to the Chancellor, Rt. Hon Alistair Darling MP, in advance of the pre-budget report expected next month.
His attention is drawn to the key findings which are:
- The cost to the Government of reducing VAT on repairs to five percent would be £2.6bn, but demand for such services could increase by ten percent
- The cost to the Exchequer of 300,000 construction workers remaining unemployed throughout 2010 is £3.5bn
- Based on experience of the shorter and shallower recession of the 1990s, the sector's job losses will result in a future skills shortage and consequent inflationary wage rises as the recovery takes hold
- VAT reduction on repairs will reduce the black economy and allow a better use of the existing stock of buildings to revitalise communities
Based on experiences from previous recessions, The Repairing Britain Campaign believes that many thousands of industry jobs are under threat. According to the report, tens of thousands of jobs in the construction sector could be saved as a result of a proposed VAT reduction.
The Repairing Britain Campaign was created to boost the UK economy by stimulating the construction industry and encouraging the public and local authorities to take an interest in the maintenance of their homes and community buildings. It is spearheaded by Rok and supported by a range of industry-related businesses and organisations.
Garvis Snook, Chief Executive of Rok plc and Spokesperson for the Repairing Britain campaign said, "We welcome the findings of this report which give validity to our arguments that a change in tax on property repairs could be cash neutral. The report supports our belief that a tax cut could keep more people in work at a time of rising unemployment and help the country return to financial stability and growth."
