Calls for cut in VAT to aid construction industry

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by a Newsnet reporter

SNP MSP Kevin Stewart has called on the UK government to reduce VAT on home improvements and extensions to provide a boost to the construction industry and the Scottish economy.

His call comes the week after the Office for National Statistics released figures showing that the UK economy grew by only 0.2% in the second quarter of the year and only 0.7% over the last 12 months.

The MSP for Aberdeen Central had previously lodged a motion in the Scottish Parliament calling for VAT to be cut for home improvements and extensions.

Mr Stewart’s motion stated: “That the Parliament recognises that many small construction firms are suffering because of the economic downturn; notes that new house building is VAT exempt, but that housing extensions and improvements are not, and calls on the UK Government to consider cutting or abolishing VAT on housing improvements and extensions to allow for the security and survival of Scotland’s small construction companies.”

The motion received cross-party support in Parliament.  

The SNP is also supporting the Cut the VAT Coalition which is campaigning for VAT to be cut from 20% to 5% for all building repair and maintenance work.  The campaign was started by a group of voluntary organisations and trade organisations representing the building and housing sector, and has received backing from politicians across the political spectrum.

The construction industry has been particularly badly affected by the economic downturn.  Many other jobs in service, transport and support industries depend upon the economic activity generated by the construction industry.  Giving a kick-start to this key sector is seen as vital in order to increase growth throughout the economy and to encourage the faltering economic recovery.

Commenting, Kevin Stewart MSP said:

“During this period of recovery we are seeing small construction firms suffer due to the increase in VAT by the UK Government and the UK’s cuts to capital investment.

“A cut to 5% for the construction and industry would provide the sector with a boost and encourage homeowners to make investments, that is why I am proud that the SNP is supporting the FSB and the ‘Cut the VAT coalition’ in their calls.

“The latest economic figures underline the need for action on VAT to be taken in targeted areas that will promote economic recovery.

“Normally at this stage after a recession we would witness a robust economic recovery but the Tory mismanagement of the economy is preventing that.

“I am delighted that my motion has received cross party support and hope that the UK Government will take note.

“The Scottish Parliament and Government need the financial powers to properly support our economy and create jobs.”

Commenting Grahame Barn, Director of the Federation of Master Builders Scotland, one of the 19 organisations making up the “Cut the VAT coalition” said:

“A cut in VAT on home repair, maintenance and improvement work to 5% would be a big boost to the Scottish economy. Research commissioned last year by the Cut the VAT coalition shows the cut could result in over 3,000 new construction jobs in Scotland.

“Instead, the contraction in construction is hurting businesses and undermining overall growth, which is why the Federation of Master Builders Scotland has welcomed Kevin Stewart’s motion to introduce this targeted VAT cut.”