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Slashing VAT on RMI works would generate 100,000 jobs, government told

More than 100,000 extra jobs could be created in the UK by 2012 if VAT is reduced to five per cent for all domestic repair, maintenance and improvement works, latest research commissioned by the Federation of Master Builders has found.

As many as 26,600 construction jobs would be generated over the next year, alongside a further 34,400 positions in the wider economy simply by slashing the rate of VAT from 20 per cent to five per cent, the Experian report found.

The move would provide a total economic stimulus in the region of £1.7 billion in 2012 alone, rising to more than £20 billion by 2020, the FMB said, although it pointed out that the immediate effect of a cut would be a net revenue loss to the Government of between £161 million £864 million.

Increased apprenticeship opportunities for young people, reduced bills for homeowners and bringing empty properties back into use were among the advantages cited.

Brian Berry, FMB director of external affairs said a VAT cut would also remove the ‘perverse incentive’ to demolish existing buildings to avoid the VAT bill and encourage the use of existing structures rather than building on greenbelt land.

“A VAT cut would also have considerable social and financial benefits for the public sector by reducing the VAT bills of Housing associations and local authorities, enabling more of the current expenditure to be used for improving the UK’s 4.9 million units of social housing stock,” Berry added. 

“Based on 2010 expenditure for improving the UK’s social housing stock which was £7.9 billion, a further £374 million each year could be added to the budget.”

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