One in every two Scottish homeowners would spend more on building works if VAT were cut to 5% said the Scottish Building Federation last week.

The news was revealed after a new survey of Scottish homeowners, which suggests that 50% of those surveyed would invest in building works to repair or improve their home if VAT on this category of spending were cut.

Conducted in conjunction with Progressive Scottish Opinion and involving a sample of more than 1000 Scottish consumers, the new results follow an earlier consumer survey conducted by PriceWaterhouseCoopers, which found that 88% of consumers said that the 2.5% cut in the standard rate of VAT had had no impact whatsoever on their spending.

Announcing the survey results, the Federation repeated its call for a targeted cut in VAT on home building works to support the construction industry at a time when building firms continue to shed jobs and capacity as a result of the recession.

The Chancellor of the Exchequer will present this year’s pre-Budget report to Parliament in late November or early December, when it is expected he will confirm that the current reduction in the standard rate of VAT will not be extended beyond its planned expiry date of the 1st January 2010.


Federation Chief Executive Michael Levack used the announcement of the new survey results to press the Chancellor to act on industry calls for VAT on home building works to be slashed as an effective means of supporting the construction sector, rooting out cowboy builders and greening the UK’s 25 million homes.

Mr. Levack argued that the survey findings showed the huge positive impact such a move would have, in stark contrast to the limited effect on consumer spending of the 2.5% cut on the standard rate of VAT demonstrated by the earlier PwC survey:

"All the evidence suggests that the 2.5% cut in the standard rate of VAT has failed because it wasn't suitably targeted.

"Our new survey shows that a more substantial but narrowly focused cut in VAT on home building works would succeed where the blanket 2.5% cut has failed. In short, one in every two Scottish homeowners would spend more as a result," he said.

"Encouraging homeowners to spend more money on building works to improve their home would make a huge contribution towards sustaining the jobs of thousands of apprentices and tens of thousands of other construction workers in Scotland. Cutting VAT on the services provided by legitimate building firms would eliminate the competitive advantage of cash-in-hand cowboy builders, helping to drive them out of the industry for good."

He concluded: "Sadly, when it comes to government support, the building sector is treated too often as the poor cousin to other so-called 'strategic' industries.

"For instance, during the current recession, the UK car industry has so far benefited from a publicly funded consumer incentive package worth £400 million in the shape of the car scrappage scheme.

"The construction industry’s huge contribution to skills and employment in this country deserves proper recognition and support.

"As the recession continues to bite hard, construction’s recovery literally needs to start at home – and cutting VAT on home building works to 5% would be the ideal place to start."

(BMcC/KMcA)