Archived press release

Government slammed over vat on energy saving goods

20 October 1997

Friends of the Earth is calling on the Government to cut VAT on energy saving materials to encourage more people to become energy efficient and help tackle global climate change. The call follows reports that the Treasury will oppose plans to reduce VAT on products such as low energy light bulbs and insulation materials [1], despite Labour's support for such a move when in opposition [2]. Later today Environment Secretary Michael Meacher launches national Energy Efficiency Week [3].

Last year Dawn Primarolo MP - now a Government Treasury Minister in charge of VAT -urged the House of Commons to vote to reduce VAT on energy efficiency materials to 8 per cent “in the name of justice, jobs, democracy and energy efficiency” [4]. In response to a Labour three line whip almost the entire current Cabinet went into the Division lobby to support this call. Since Labour has been in power the tax disparity between VAT on energy use and energy efficiency has grown. The Budget in July led to VAT on domestic fuel being reduced to 5 per cent but, despite pre-Budget speculation, VAT on energy-saving materials was left at 17.5 per cent - three and a half times greater.

Charles Secrett, Director of Friends of the Earth, said:

“We are extremely disturbed by reports that the Treasury will try and block plans to cut VAT on energy saving materials. If the Government is serious about encouraging people to become more energy efficient and tackling global climate change it should use green taxes to help persuade householders to make energy conservation investments. We are pleased that Mr Meacher is backing Energy Efficiency Week, and hope that the message will also get through to Gordon Brown and his Department. If the Government fails to cut VAT its pre-election pledge of putting the environment at the heart of Government will be empty rhetoric. ”.

Later this week the final round of intergovernmental talks take place in Bonn before the UN Climate Change Summit in Kyoto, Japan [5].
ENDS

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NOTES TO EDITORS:

[1] Independent 7 October 1997 - “Move to cut VAT on 'green products' blocked.

[2] Labour supported an amendment to the Finance Bill on 27 March 1996 which would have achieved a VAT reduction on energy saving materials. The amendment was lost by a single vote after a number of Conservatives abstained. A year later, on 11 March 1997,Labour tabled an amendment to the Finance Bill which required a review on the effects of this reduction. The Labour Spokeswoman at the time, Dawn Primarolo MP (now Treasury Minister in charge of VAT) promised Parliament that this review “pursues the position that we supported last year” and that she was “trying to come up with a workable proposal”.

[3] National Energy Efficiency Week (20-26 October) has been organised by the Energy Saving Trust. Friends of the Earth supports this and similar initiatives.

[4] Hansard, 27 March 1997.

[5] The UN climate Summit, Kyoto, Japan. 1-10 December 1997

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Published by Friends of the Earth Trust