Material matters: How’s VAT? - Cut in building materials tax

Materials World magazine
7 Jan 2013

Last November, Chancellor George Osborne gave a speech to the Royal Society in London to promote UK scientific research in general, and eight areas of development in particular, where the UK already has an edge but given the right funding and framework could be world-leading. Many of these emerging technologies have close links to recent advances in materials science, including regenerative medicine, energy storage, robotics and space commercialisation.

So it was encouraging to hear the Chancellor single out advanced materials and nanotechnology as one of the eight areas for development. The Chancellor also correctly observed that, ‘It is not Government who creates the scientific innovation, or translates into growth... But we can back those who do’.  

He backed up his words in December’s Autumn Statement, announcing a £600 million injection into the UK’s Research Council infrastructure to add to the £300 million already committed to the UK Research Partnership Infrastructure Fund that was launched in the 2012 Budget. The fund is intended as a catalyst for private capital to develop the facilities for world-class university research and build strategic partnerships between universities and the private sector.  

There is absolutely no doubt that many of the problems facing the world will be solved by advances in science and, as readers of this publication will appreciate, materials science in particular. Indeed, many of the IOM3 technical boards and committees are already leading the charge. But I can’t help feeling the Chancellor missed an opportunity to boost a more immediate use of less advanced materials and in doing so solve the key problem facing the UK today, namely our sluggish, almost flat-lining economy. Politicians of all shades are agreed that one of the best ways to do this is through building and construction of new housing and infrastructure. This is why materials and labour for newbuild housing is zero-rated for VAT. But why are such incentives not extended to renovations, repairs and extensions? In these times of austerity and credit squeeze, many people are deterred from buying new homes and look to renovating or extending their existing property instead. At this juncture I should point out a personal interest in the matter, having just had to cough up 20% Value Added Tax to re-roof my house (a euphemism if ever there was one, surely any tax adds cost, not value?).  

Now I am not advocating a cut in VAT to encourage a general increase in retail spending, much of which goes on cheap imported goods with limited benefit to UK plc. But home improvements do have a direct benefit to the economy, in two very specific ways – firstly, providing employment to skilled and semi-skilled trades and secondly by increasing demand for the materials required – slates and roofing materials, brick and stonework, cements and aggregates, copper piping, uPVC guttering, flashing and window frames – and the glass that fits them. Since many of these materials are produced and manufactured in the UK, such an increase in spending not only improves our GDP but has no adverse effect on our balance of trade. To paraphrase the Chancellor, it is not Government that creates the ideas for home renovation, or translates this into building warrants... But it can back those who do.  

So come on George, how about backing the supply side of the Institute’s member profile with a cut in VAT on building materials and renovations? I’ll be needing to get after the plumbing and electrics next.