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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?


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.

Very good idea

I’m all for it

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.

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.

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!!!!

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.

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

That would act as a double incentive

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.

Graham Forecast says:
15 October 2010

I think a VAT reduction to 5% on energy saving devices is a great idea, and if marketed properly should actually increase government revenue as more people are pursuaded to buy the (more expensive) ‘green’ alternatives. I don’t agree with the stick approach for the same reasons given by previous correspondents, but I think patio heaters are so wasteful they should actually be banned!

Absolutely agree! Patio heaters should never have been permitted to start with and should be made illegal at the earliest legislative opportunity.

Yes, this kind of change would be more effective than lots of government-sponsored advertising, particularly in promoting energy conservation in areas of the market outside B&Q (eg local tradesmen in southwest Scotland) who haven’t otherwise caught up with the idea that people want this stuff.

Green Machine says:
16 October 2010

This sounds like a good idea, but it comes at the wrong time for the current economic climate. When and if the government get out of the financial crisis we are in, then this sort of measure will be a good thing, but during todays climate this will only really help the more affulent in society, as they are in a position to take a benefit from this, where as people who are really being squeezed by todays money crisis will not benefit, as it is hard enough to pay the current utilitiy bills. Yes having a more efficient boiler or electricical appliance is a good thing, many of us cannot afford the luxury of spending a few hundred pounds extra now, to save a few hundred pounds some way down the line.

ABSOLUTELY! Really well put. And your last sentence really and truly hits at the truth of the matter: saving down the line. I’ve argued ’til I am blue in the face that all these crackpot schemes to get us to throw away perfectly good appliances and buy new “green” ones is, to mis-quote a different Which? topic, “greenwash”. People cannot afford to waste perfectly good appliances just to save a few ergs here and there (erg, for anyone who doesn’t know, being just about the smallest unit in which energy can be measured).

Taking a slightly off topic slant on this though, not only can people not afford to do this, but we should not be doing it even if we can afford: the energy which is wasted in making new goods that we don’t actually need, and the environmental damage that is done in disposing of old goods outweighs the energy and environmental saving of using a newer item millions of times over.

I still support B&Q in their aim: but it has come at a bad time and encouraging people only to replace when they have to rather from the sake of it would be an even better idea.

Simon says:
16 October 2010

The Government should be doing all it can to encourage people to buy more efficient products (where they need to buy a prouct at all) and cutting the VAT on the most efficent lightbuld and on insulation makes perfect sense.

(where they need to buy a prouct at all)

EXACTLY – as per my comment further up – buy efficient appliances but don’t buy any at all unless you NEED to – “need” is not the same as “Want” nor is it the same as “latest fashion”!!!

And also, as per many of my comments on other WHich? and other boards, be VERY very cautious: the so called efficient new appliances are often NOT as efficient as older models: there are seemingly endless loopholes in the various schemes used to rate the efficiency of electrical and gas appliances and I have, to my shock and shame, fallen foul of at least 2 of these and my neighbours, who are also pretty savvy and do lots of research, have also fallen foul of at least one. Remember “statistics can prove anything”!

IRMH says:
16 October 2010

I suggest that many people have missed the point about energy and the environment. There is no shortage of energy with around 100PW reaching the earth from the sun; that’s about 20000 times more than we use. The environmental problem is CO2 emissions and we need to change the way we generate energy so that it’s not linked to CO2 emissions. That might be renewables, might be carbon capture, and might be nuclear. If we move to a society with electricity generated without CO2 production, electric or hydrogen powered cars, industry using carbon capture or burning hydrogen for heat, then there’s no environmental reason to save energy. If you want to buy it and waste it that isn’t a social problem.

We need to focus our resources on this switch to a non CO2 society. I would accept that as a transient using less energy will help reduce CO2, but we should not rely on low energy usage as a reasonable way forward. We need to move to low CO2

Well said!

Of course, the governments of the world know this, but it isn’t a vote winner because it involves capital expenditure by governments and industry, which in turn means higher public spending and heavy investment at the expense of shareholder profits, which in turn lead to lost votes for any government or opposition party proposing these moves.

QUOTE: ” The 5% VAT already applies if you have certain energy-saving measures professionally installed. “.

Does anyone reading this remember the “Laptops for teachers” scheme from about 8 years ago?

That sounded great when you first heard about it: every teacher in the country could get a laptop computer and the government will pay towards it.

Then you read the small print: teachers had to buy a laptop from a very small range of suppliers (many of whom have long since gone bust) who were infamous amongst all computers users for charging extortionate prices for shoddy, low specification, outdated computers and providing the most notoriously awful customer service. Finally the small print pointed out that when you had chosen your laptop and supplier, you could only get back form the government about £300. THis was at a time when the average laptop cost about £650 and the ones that came form the eligible suppliers were marketing at around £975 and upwards, so in fact teachers buying a laptop through the scheme saved precisely nothing or, in many cases, paid more from their own pocket than they would have if they’d been and bought a decent model from a good supplier as a private purchase.

The 5% VAT on professionally installed eco-goods is rather similar as far as I can see. It’s very much like the Boiler Scrappage Scheme. In both of these cases (and I have looked into this extensively over almost 2 years now) the cost of buying from the approved suppliers and choosing from the limited range of goods included in the schemes is massively greater than buying outright from a reputable and highly rated trader and choosing the model that you want for yourself. The 5% VAT doesn’t bring the price down to anywhere near the full price that you’d pay without using the scheme. In short these schemes are designed to make extra revenue at the expense of the unsuspecting consumer.
Radio 4’s “you and yours” and “Money box” have investigated these schemes extensively and forced leading spokespeople for them to admit on air that the schemes are flawed. For example in Autumn 2009 leading experts on GAs boilers put a government spokesperson on the spot on air by proving that if you bought a boiler under the boiler scrappage scheme, the possible savings of having a new SEDBUK A boiler instead of an old G rated model would take around 22 years (at the then current gas prices) to pay for the cost of the boiler, including all discounts possible under the scheme. However, try as they might, they could not find a boiler manufacturer who thought that their boilers would last beyond 8 years in service, so it was clear that financially the boiler scrappage scheme was just a way to get money out of the public. By contrast they found a good number of installers who could supply and install a model that would make the same saving sin use, but where the payback would come in under 12 years, if it was done as a “normal” purchase, not involving the BSS.
The bottom line, though, was “your boiler has to be WORKING to be eligible for the scheme, if your boiler is working then under no circumstances change it in the hope of saving money as you will be unable to do so. If you want to change it for the same of being able to say “I’m going green, fine, but it will be at your cost”.

Sorry – this is very long winded: What I am saying is that the 5% VAT idea is brilliant but the caveat that professional installers from an approved list have to be used is something that I do not truyst one inch and won’t even think of taking up.

Finally, my solar water heating cost just under £2,500 to supply and install, including a new cylinder twice the size of the old one, quite lengthy pipework and all the solar equipment. It was a completely “private” transaction between me and the company I chose and involved no schemes, grants or anything like that and as far as I can see it cost me a good £3,000 less than any solar water heating system that is covered by any of the government backed schemes. I would not have been eligible anyway because all the schemes that I read about said that before I could even apply for a grant or discount I had to have UPVC double glazing throughout and cavity wall insulation. My windows are in a conservation area and UPVC is prohibited so I was on to a loser from the outset.

Mark Williams says:
23 December 2010

Personally I am not happy with any kind of ‘scrappage’ scheme. We should be keeping appliances working as long as possible, rather than replacing them when they are still working. I would be in favour of reducing VAT on energy saving products, but I don’t think this would be of great benefit, especially to the poorest. The best thing we could do is to reduce or remove VAT on spare parts. At the moment manufacturers can often charge more than the original cost of the product for one spare part. This must be stopped and I think we need change of legislation to achieve this.

Although I am in total agreement about the immorality of patio heaters, I feel the same about air conditioners. Why have we let so many office blocks be designed so that they MUST have air conditioning? I have rarely been in an office block where it worked satisfactorily anyway. They all seem to slow to respond to changes in the weather and it’s either too cold or too hot. I bet if someone calculated the drain on the national grid by air conditioning plant, it would probably account for all the nuclear reactors we have on line.

What’s wrong with windows? Add if the argument is that you cannot have windows in high buildings, don’t build them.


Diana Price says:
28 April 2011

Green products should be cheaper, so should green detergents and household products too, the def certified ones such as Ecover and Method, and the not so green taxed more heavily, it has to make sense, of course!!

Terrible idea. Have you any idea how much it costs to administer such a hair-brained scheme?

And Ecover and most green cleaning products are rubbish. You cannot keep a kitchen properly clean with low levels of germs by using non-chlorine/bleach based products.

In our house we have seriously cut down on the amount of bleach we use, but its elimination is what has been responsible for the national increase in food poisoning.

As we live in a very hard-water area, we had a water softener installed 25 years ago. We use barely a third of the quantity of soap or detergent than recommended. We therefore conclude that over the years we have been far greener than anyone using Ecover or similar products because our usage has been far lower.

Diana Price says:
30 April 2011

I hate to differ from the previous comment , Ecover do produce great products and they work, for us , that is most of us, and I also live in a very hard water area, do not have water softeners.
Also as someone who works in care, and does health and safety as my extra duty, the need for bleach etc, is not reccommended, a dishwasher yes, and washing up liquid and basic good hygiene, is required, plus great training, that is what knowing what to do, this is a legal certificate.
So how come you can’t keep a kitchen clean without bleach and petro chemical **** I really don’t know?

There is absolutely no way that you can keep work surfaces, dish cloths, sinks, drains and similar surfaces clear of germs as effectively as using bleach. Used sensibly, bleach is safe. All the stories about kids drinking it or mixing it with household acids is scare-scaremongering. Note the words: used sensibly.

But this is now off topic. Partly my fault.

The topic is encouraging energy saving not green goods in general. The point I was making is that so many green ideas are just poorly thought out and a total waste of money.

Dishcloths can be disinfected with boiling water, so that there is an alternative to bleach. There is no need to use bleach on work surfaces (unless perhaps they are used for changing babies). Some have argued that exposure to bacteria and other microorganisms can help humans develop immunity to infection and be less susceptible to allergies.

Diana Price says:
30 April 2011

That is a maybe , Ecover do produce a bleach, a less toxic one, and I use it, its in a powder form, and can be used, when diluted in the same way as conventional bleach.

But why would I pay up to £2 for 400g of Ecover bleach when I can buy 2 litres of Tesco bleach (that lasts us over a year) for 29 pence?

That’s five to six times the cost for an inferior product with doubtful benefits the environment.

martin says:
24 July 2019

I take on board others views on vat reduction on some energy saving products mainly the large capital items but even this has been inconsistent down the years 5% vat on new build installs 20%vat retro by non trade Pv solar 5% initially and if you can afford have battery storage at same time 5%vat also have the battery storage later you will be hit by a 20% Vat now the eu has waded in with a law challenge telling the UK to apply 20% Vat to all products this will dent the up take pv solar in this country and yet these eu countries signed up to climate change efforts recently yet this all is going in the wrong direction and yet coal is still 5% vat unchanged …Housing stock in this country pre 2000 is woeful in energy consumption/insulation standards the changes needed are major and yet Govs consistently start off with good intentions ie remember the ill fated green loan for householders you remember take big loan out to to pay for all these improvements and yes sell the house and pass the loan on to the new owners ..yes we know that failed miserably..The problem has always been who should pay for it ? Latest thinking by those in various think tanks is a a very small charge applied to all transactions on the stock exchange in the order of 0.005% to 0.002% it would hardly be noticeable this would raise large sums over number of years which would be applied to green energy/insulation upgrades taking pressure off consumer and tax payer and help maintain and create new jobs In these relevant green industries and help to stick to agreed carbon emission targets.. Inconsistency seems to be the various gov thinking down the years on house supply and failure to take up new tech on construction still building the same way as the 60’s despite tweeking a building regs still using bricks etc …..energy saving products vat issues just a continuation of muddled thinking/implementation…