A bitter disappointment and a major opportunity lost

Published:  24 June, 2010

LONDON: The Builders Merchants Federation (BMF) is dismayed at George Osborne’s failure to lower VAT to 5% for home improvement work. His decision to raise the standard rate to 20% dashed hopes of recovery for housebuilding and home improvement businesses.



Lowering VAT would have saved hundreds of thousands of jobs and allowed the trade to ‘Get Britain Building’.

Commenting on this failure, Chris Pateman, BMF managing director, said: “The Chancellor failed to do the one thing which could have made a real difference to consumer confidence, to construction output, and to the long-term condition of our housing. He could have listened to BMF members - not to mention the Scottish Parliament and the Welsh Assembly - and selectively cut the rate of VAT to 5% on home improvements. It is a bitter disappointment and a major opportunity lost. The Tory-Lib Dem Coalition has let us down.”

“Mr Osborne could have created a climate in which home improvement is more affordable to encourage homeowners to invest in their property. His failure is disastrous for construction which is already on its knees with hundreds of thousands job losses suffered over the last two years. Legitimate builders could have competed better with the ‘cash-in-hand’ cowboys who evade VAT and their responsibilities.”

The BMF wants to see this new 20% rate held for at least four years. The HMRC should also allow any exceptional back-office costs of the changeover to be written down over that period.

The BMF welcomes other aspects of the Emergency Budget Statement:


  • reductions in Corporation Tax by 1p in the pound in each of the next 4 years
  • concerns expressed about Capital Gains Tax have been listened to - and changes made are not as bad as had been feared.

On Employer’s National Insurance Contributions, the BMF notes Messrs Osborne and Alexander took the sting out of next year’s planned 1% rise by raising the threshold at which bosses start paying it. But it would have been better to completely withdraw the whole of this ‘tax on jobs’.

The Chancellor’s silence on other issues was noted:


  • no money was found to continue or extend the Boiler Scrappage Scheme.
  • the trade credit insurance top-up scheme is not being re-introduced.

Overall, the message is that this budget is a business-friendly one, and the BMF welcomes it.

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