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The European Commission's suggestion that the Treasury must reinstate the full rate of VAT on energy saving products has been branded as "crazy".
Currently, the Treasury only charges five per cent on exempted products such as insulation, solar panels and heat pumps - a level of tax which is crucial for the success of its forthcoming Green Deal energy-efficiency scheme.
"The European Commission's move could be disastrous," the Builders Merchants Federation said.
"The building trade faces the prospect of the chancellor removing a lower rate … just before the introduction of a flagship policy to improve the thermal performance of our homes and workplaces. How crazy is that?"
However, despite its stance, a spokesman for the European Commission recently suggested to BusinessGreen that the UK could use a "social policy" argument to get around the VAT directive.
The spokesperson's candour suggests that the whole issue might just be a box-ticking exercise.
Author: Editor Gavin Pearson (gpearson@acenet.co.uk or 0207 202 0255)
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