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Calls for UK Government to reduce VAT on green home improvements

Covid-19 can't compromise the net zero goal

The UK Government is being urged to reduce VAT on home efficiency projects and products, which could help with its stated goal of a green revolution. 

The Environmental Audit Select Committee, which includes MPs from across the political spectrum, is calling on the UK Government to develop a tax system that will encourage greener living. It wants the UK Government to both make energy efficiency improvements cheaper, as well as bring the cost of electric vehicles down to help those who are unable to afford the current cost premium associated with EVs. 

Philip Dunne, the Conservative MP and Chairman of the committee, called for the UK Government to adopt a tax system that will help deliver its goal of cutting greenhouse gases to net zero by 2050. 

What does the Environmental Audit Select Committee want? 

The Environmental Audit Select Committee wants the UK Government to wake up to the threat that climate change poses to the economy and the health of everyone on this planet. It says that the Government can do this by delivering upon its promised ‘green revolution’. 

To deliver a green revolution, the committee had several recommendations, including: 

  • Reduction in VAT on repair services and products that utilise upcycled or recycled materials, encouraging a low-waste society
  • VAT cuts or other tax incentives for areas such as polyester clothing with a high proportion of recycled PET plastic, recycled paper board packaging, refurbished IT equipment or products being leased rather than sold
  • Reduction in VAT for renovation projects when the home is being upgraded with green technologies, such as insulation or low carbon heating systems, bringing them in-line with zero-rated new builds
  • New tax incentives to boost the number of people buying electric vehicles
  • Air passenger duty reform to encourage investment in technologies that have a lower impact on the environment 
  • An economy-wide carbon tax, which will help businesses and consumers shift away from polluting the environment
  • A new planning mechanism that will take into account the carbon impact of projects, such as new road building and airport expansion
  • An overhaul of the Green Homes Grant scheme, which has largely bombed and was gutted of millions in funding recently

The Environmental Audit Select Committee wants many of its changes to be implemented in the next Budget, which will be announced by Chancellor Rishi Sunak in March. This will be the first full Budget since Covid-19 decimated the UK economy, and one that will test the Government’s commitment to a green revolution. 

Some MPs have already criticised the Government for its commitment to a green revolution. A new coal mine in Cumbria could undermine the net zero plans, while the expansion of roads and airports within the UK could also damage our progress. 

Dunne, commented, “The COVID-19 crisis must be treated as a wake-up call. It is a symptom of a growing ecological emergency.

“The economic recovery will shape our national economy for decades to come and it is crucial that tackling climate change and restoring nature is at its core.

“A tax system fit for net-zero Britain is key. It will encourage innovation, give confidence to the sector and support companies to make the low-carbon transition.

“There are endless initiatives that can lead to a greener future and the Chancellor should use his upcoming Budget statement to start this process.”

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