MEP presses EU Commission for lower VAT rate to help address fuel poverty

South West MEP Molly Scott Cato is pressing the European Commission to allow a reduced VAT rate for energy saving materials. The call comes in the wake of a ruling by the European Court of Justice (CJEU) earlier this year that the 5% lower VAT rate offered for energy-saving materials in housing violates the EU’s VAT Directive.

Dr Scott Cato believes a lower VAT rate for installing energy-saving measures is key to tackling fuel poverty and greenhouse gas emissions. Four and a half million households in the UK are in fuel poverty, with the private rented sector worst affected. Many areas of the South West have above average levels of fuel poverty with parts of Cornwall and North Devon being particularly badly affected. The ruling by the CJEU concluded that the provision, construction, renovation and alteration of housing cannot be considered part of social policy. Molly Scott Cato said:

“I think people will struggle to understand how promoting the use of energy-saving materials in housing stock does not constitute a social policy as it is clear that tackling fuel poverty means improving people’s health and wellbeing. This ruling means households and landlords will face significantly higher costs for doing what is socially and environmentally desirable. I fear that many will now be deterred from fitting energy saving measures in their homes, consigning many to the misery of fuel poverty.”

Molly Scott Cato is pushing the Commission to ensure that a reduced VAT rate on energy saving materials is a key aim of the forthcoming review of the VAT Directive. [1]

[1] Full Written Question to the EU Commission: Ruling on VAT reduction on Energy Saving Materials in the UK