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Should we pay less VAT on energy-saving goods?

Energy saving lightbulb

DIY giant B&Q is calling for tax to be slashed on energy-saving items. Will it encourage us to cut our carbon footprint – or is it better to put penalties on energy-guzzling goods?

B&Q is asking customers to sign a petition calling for a cut in VAT on ‘essential green goods’ via giant green piggy banks placed in stores, which it plans to present to the Treasury.

It’s also currently selling energy monitors – the tabletop gadgets you can use to keep an eye on your energy consumption – with 5% VAT, absorbing the remaining 12.5%.

Meanwhile, a separate study from sustainability consultancy AEA suggests just over half of people have an appetite for green penalties as well as sweeteners. 51% were in favour of a ‘carbon tax’ on products that particularly harm the environment.

So which is it – carrots, sticks, or a bit of both – that will make us think more about environmental impact?

Energy-saving and VAT

The 5% VAT already applies if you have certain energy-saving measures professionally installed. This includes home heating controls and various types of home insulation, plus small-scale microgeneration systems like solar panels, wind turbines and heat pumps. VAT exemptions also exist for households taking advantage of government grants.

But the reduced rate doesn’t apply when you opt to buy and fit one of these items yourself – and it doesn’t include smaller products like energy-saving light bulbs or energy monitors.

You also pay full VAT (rising to 20% in January) on items such as energy-efficient gas boilers (unless through a grant scheme), double glazing and A-rated white goods.

Tax relief for energy-savers?

I’m no tax expert, but B&Q has a point. Surely the rules should be consistent for a product however it’s installed (though I’m not sure many of us would attempt to install solar panels or cavity wall insulation).

I’m less convinced when it comes to smaller items. Can we comfortably class something like an energy monitor as an ‘essential’ energy-saving product? Particularly when you don’t automatically save energy by using one – as we recently discussed, the novelty of seeing how much energy your kettle uses can soon wear off.

An energy-efficient condensing boiler, on the other hand, applies to a mass market and has immediate energy-saving potential.

With VAT rises looming, which energy-saving items do you think we should pay less tax on, if any? Or is it the way forward to put higher taxes on environmentally-unfriendly goods?

Comments
Member

I think is a great idea, I hope this make more people buy energy saving thus saving the planet. I prefer paying less VAT on energy saving goods rather raising it on energy guzzling ones.

Member

Very good idea

I’m all for it

Member

Sounds like a superb idea to me too: to date my energy saving efforts have cost me far more than they have saved financially and like many people, the recession, various cuts, reduced job security, the impending budgetary measures to be announced on the 20th of this month and the VAT rise next January mean that I can’t any longer afford to take further energy saving steps if they cost more than they save. This would be a very welcome step in the right direction.
I oppose totally the penalty approach: rather like pre-payment fuel meters it would be the poverty-stricken households who would be penalised which is grossly unfair when they can’t afford the energy saving devices.
Well done B&Q …. lets see if the government will put it’s money where it’s mouth is and back this plan.

Member

Hi Dave, just to apologise abut your comment not going through straight away. We’re having a few glitches with the system not approving comments automatically. I know it’s frustrating, but we’re working on it. So please keep commenting, but try not to resubmit the same comment. They’re coming through and we’ll approve them ASAP. Thanks.

Member

Thanks Patrick – I thought it seemed odd … bit like when I reply to e-mails from which local and my replies don’t seem to get though either. I was starting to wonder if it was because I am Mac based!!!!

Member

We have love for Mac too. Back on topic – this sounds like a great idea, though the bulbs I bought from Asda were very cheap – 3 for £1 I believe.

Member

Why can’t it be both? ‘reward’ for energy saving – Extra tax on energy guzzling devices

That would act as a double incentive

Member

It would be a double incentive and I agree in principle, but having worked for just over 5 years in the postcode area with the highest level of deprivation outside of Inner london, I realise now (and I admit I did not before my current job) that for many people buying anything that is not utterly essential now, this minute, is out of the question. The problem is exacerbated by schemes such as pre-payment meters which penalise the poverty-sricken by charging them more for essentials than the rest of use who use credit tariffs, for example. As such, whilst buying 3 energy saving bulbs for £1 at ASDA is probably affordable, buying more efficient (supposedly) appliances, which are usually priced a little (or indeed a lot) more than less efficient models may well be simply out of the question.
It seems immoral to me to that people in such a position should be penalised.
A better solution, but one which I doubt the government or the energy companies would go for, would be for the energy companies to offer vouchers or some other *real* discount which can be redeemed against only high efficiency appliances (gas and electric) and which would bring the price down to a similar level as the cheaper, less efficient, models.
Cynical people might suppose that the energy companies won’t want to do this because they *want* people to use more energy, especially if they are on higher tariffs, as this makes profit for them.
The other measure which I would like to see, and which I again suspect would never be accepted by the government nor industry, would be a penalty or surcharge of some kind on the purchase and installation of awful appliances like outdoor heaters for patios and outside pubs, and wasteful commercial lighting such as that left on overnight in shops and offices. These are completely non-essential energy guzzlers and my feeling is that people who insist on having them should be made to pay a higher rate of something-or-other than the rest of us.
Hope this makes some sense.