The cost of energy efficiency measures is set to increase after a European Court ruling found that the UK’s reduced rate of VAT imposed on energy saving products ?failed to comply’ with EU rules.
Currently, certain measures such as insulation receive a reduced VAT rate of 5% rather than the standard rate of 20%. However, the new ruling – made on June 4 – claims that the UK is in breach of the VAT directive as a reduction can only be applied to work carried out as a result of ?social policy’. This would allow the 5% reduction to be applied to work carried out on social housing only, and therefore not all residential properties.
This means that UK households could face paying more for energy-saving measures following a decision that has been branded as hypocritical and perverse by some industry figures.
Dave Sowden from the Sustainable Energy Association (SEA), said: “This is an action by the EU Commission of the most astonishing hypocrisy. In one breath, the Commission and the EU Institutions implore member states to take efficiency and sustainable energy more seriously – yet in the next, they use legal means to try to abolish the very policies the UK has in place to achieve this.
“It is contrary to almost every principle and policy created to reduce consumers’ energy consumption, cut emissions and help boost economic recovery across the EU.”
John Sinfield, Knauf Insulation’s managing director for Northern Europe, has responded by pointing out that the ruling means the consumption of energy – which will remain at 5% VAT – has a lower rate than the installation of measures designed to reduce energy dependence. He added that this “perverse contradiction whereby consumption of a valuable resource is rewarded and efficiency penalised” is also against many of the decisions coming out of the European Union.
He explained: “Ironically, much of what had come out of the EU to date on energy efficiency pushed in the right direction. The recent Energy Efficiency Directive placed a requirement on member states to produce a long-term plan to address the wasted energy in their building stock. It also requires them to propose a programme that would deliver against that long-term plan.”
The EU ruling is likely to see pressure build on the Government to respond, particularly in light of the heightened attention being paid to the UK’s membership of Europe under the shadow of the upcoming referendum.
Mr. Sowden of the SEA added: “We are urging the UK Government to act now. We believe there are strong legal reasons to retain the reduced VAT rate, enabling hard-pressed consumers to cut fuel bills without paying more to do it. We need to stand up to Brussels on this and find legal means of preserving most of our reduced VAT rates. The new government should make this an essential part of an ambitious strategy to drastically improve the efficiency of our buildings – and ultimately help consumers to permanently reduce their bills.”
Mr. Sinfield continued: “The new Secretary of State [Amber Rudd] has a great opportunity to create a strong market for people looking to improve their homes. But this ECJ [European Court of Justice] ruling has just made it that much more difficult a task.
“So, as we enter a period where the UK must make a decision on a Brexit, I would like to see both the ?separatist’ and the ?better together’ camps set out how they will embed two core raison d’etre into decision making.
For the separatists wishing to bring powers back to these shores, they must set out their mechanism f