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Colleges call for VAT concession among measures to rescue projects

Colleges have urged the Government to scrap VAT for further education construction projects to revive the stricken sector.

An Association of Colleges taskforce investigating ways forward for stalled college jobs has written to the Department for Business, Innovation and Skills calling for the concession.

The taskforce is also likely to recommend that colleges lower their sights on sustainability measures, and that the Government supports private borrowing.

Scores of Building Colleges for the Future projects are on hold after delivery body the Learning and Skills Council ran out of cash earlier this year. Colleges are now seeking ways of making their projects less reliant on LSC funding.

Taskforce chairman and Oakland College principal Mark Dawe told Construction News: “We have written to the department saying it is unfair that colleges can not reclaim VAT, while schools and local authorities can.

“We would like them to change the VAT status of colleges or set up an equilisation charge so colleges can claim back VAT on capital projects. That would be a good gesture and help enormously.”

Mr Dawe said that LSC work to find alternative sources of finance for colleges would only be worthwhile if the Government helped them repay debts.

“There does not appear to be a lack of willingness to lend but the issue is, if there is no support from Government, what level of projects is affordable?

“If there is a desire to support colleges then the Government should look at supportive borrowing, where colleges access private finance and the Government pays back a percentage of the debt. It would be not dissimilar to PFI credits.”

The taskforce will produce a final report in mid-September, which will be sent to all interested parties.

As well as calling for Government support, it is likely to promote the use of less elaborate designs to cut costs – and sustainability may be pushed down the agenda.

“Clearly there are ways colleges can reduce the costs of their projects. These are often small things like using more standardised design and looking carefully at BREEAM costs against benefits. Some colleges have gone a little bit overboard on this, there is room for efficiency,” said Mr Dawe.

But he agreed that something of a stand-off had developed between contractors and colleges over who should pay for redesigning stalled schemes.

“I think there is a reluctance from colleges to pay for redesigns unless there is a copper-bottom guarantee of funding,” he said. “At Oakland’s we spent millions of pounds on designs and the last thing I am going to do is spend more unless I have solid guarantees that the project will happen.”

The UK Contractors Group welcomed the taskforce’s work but questioned how much would come of it.

UKCG director Stephen Ratcliffe said: “We will look at the report. Anything that can kickstart the programme is welcome, but we are not holding our breath.

“The fact that [the VAT scheme] would encourage colleges to stay in the frame would have to be a good thing, but I am not sure how realistic it is.”

Mr Ratcliffe said many colleges were aiming at the gold BREEAM rating, and could save money by aiming a little lower, although perhaps not a significant amount.

“There could be economies of scale if five or six colleges grouped together and came up with a standard design they could all use,” he added.

The LSC ran out of cash earlier this year having funded just eight of 79 projects given approval in principle. It was then given £300 million emergency funding to rescue some of the stalled jobs this year - but has only shortlisted 13 colleges.

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