Treasury urged to scrap tax on energy retrofits to reduce energy costs and reach climate goals

Industry body the Association for Decentralised Energy (ADE) has this week launched a new campaign urging the Treasury to scrap VAT on energy retrofits for the UK's building stock, in a bid to combat spiralling energy costs.

Treasury urged to scrap tax on energy retrofits to reduce energy costs and reach climate goals

The letter also argues that the removal of this VAT would also create 42

The campaign, consisting of an open letter with 23 signatories including 16 ADE members, calls on the Treasury to remove VAT on energy efficiency retrofits to be reduced to 0%.

The campaigners argue this would help combat rising energy prices while also building towards the UK’s net-zero target for 2050.

Currently, all retrofit works for existing buildings, such as the installation of triple glazing or insulation, have a 20% VAT rate applied. VAT exemptions are no longer limited in the UK following Brexit, and the ADE is calling on the Treasury to exercise these new freedoms to kickstart a retrofit programme.

The ADE’s chief executive Lily Frencham said: “Retrofitting the UK’s inefficient homes will require public and private investment. Zero rating VAT is a simple incentive to increase private investment that works with the market for home renovation.

“It would simplify a complex system and result in a net gain for the UK economy, as well as improving the UK’s housing stock and enabling more families to enjoy warm and healthy homes – ultimately, by failing to act on this, the government is missing a significant opportunity to deliver on net-zero compliant buildings.”    

Groups including the ADE and the MCS Charitable Foundation have joined dozens of other organisations in arguing that the major missing piece of the puzzle is now a national strategy for swiftly improving the energy efficiency of the UK’s existing building stock.

ADE previously delivered an open letter to Chancellor Rishi Sunak, stating that a temporary cut to VAT for retrofitting would help the UK with its net-zero agenda and with selling the ‘benefits of Brexit’, as well as with the energy price crisis.

The letter also argues that the removal of this VAT would also create 42,000 extra full-time equivalent construction jobs and an additional 53,000 jobs in the wider economy over five years.

History of calls

The UK Government has long been urged by its advisors at the Climate Change Committee (CCC) to address the fact that the nation’s housing stock is, compared to other developed economies, performing poorly on energy efficiency.

Currently, around 46% of the UK’s housing stock is meeting Energy Performance Certificate (EPC) band C or above, according to official Government figures. This is a considerable improvement since 2008, but still leaves the UK behind nations such as France and Germany.

An energy inefficient building stock causes issues not only in terms of energy bills and fuel poverty, but for the delivery of the UK’s net-zero target.

This time last year, MPs were told that retrofitting the UK’s building stock with low-carbon solutions could reduce national energy costs by £7.5bn a year, create more than 150,000 jobs over a 10-year period and cut carbon emissions by 20%.

That message came from Bankers for Net-Zero, which called for call for a strategy that would deliver at least a 50% reduction in energy usage and carbon footprints, with a potential to deliver a 100% reduction.

Matt Mace

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