· VAT on labour-intensive activities can make repairing broken items too expensive, frustrating consumers who want to avoid waste
· Once the UK is no longer subject to EU VAT rules, it will have the power to zero-rate VAT on repairs
· As well as preventing waste, this would satisfy public demand, stimulate the economy and help to create 34,000 new jobs in the repair sector and 346,000 new jobs in remanufacturing
The UK VAT system drives perverse environmental and social outcomes and is hampering the UK’s ability to cut carbon fast enough to tackle the climate emergency, says a new report from charity and think tank Green Alliance. [1]
The report says that VAT on repair services should be zero-rated to stimulate the repair industry and make repairs more affordable. This would be popular with the public as two thirds of people in the UK think products are currently too difficult to repair.[2]
High impact, frequently wasted items like electronics, which are a particular problem in the UK, should be prioritised. The UK creates more e-waste per capita than any other country in the world, apart from Norway. In 2019, the UK generated 23.9 tonnes per person, against an EU average of 16.2 tonnes and a global average of just 7.3 tonnes per year. [3]
As part of a wider move towards a circular economy, zero-rating VAT would also help to tap into the employment potential of the repair industry. Combined with other policies, there is potential to create 34,000 new jobs across the country as they would be needed in every locality. And a robust remanufacturing sector could support 312,000 additional jobs, which will be much needed to help the UK cope with the impact Covid-19 has had on jobs. [4]
Libby Peake, head of resource policy at Green Alliance, said:
“This Brexit boost for the repair industry should be a no brainer for the government at this point. It has repeatedly said that leaving the EU will give the UK freedom to map its own path. Reforming VAT is an opportunity to show what that means in practice, and zero-rating repairs will have the added bonus of cutting waste and creating new, reliable jobs.”
Notes
[1] Added value: improving the environmental and social impact of UK VAT (Green Alliance, September 2020)
In addition to the change to repair, the report outlines two other VAT perversities, with adverse social and environmental impacts, and how to they could be easily corrected:
- Building renovation: VAT for repair and renovation of buildings should be zero-rated, in line with new build, which will end what the government’s Building Beautiful, Building Better Commission called “the unnecessary and ecologically unacceptable destruction of adaptable and durable buildings, and their replacement by short-lived glossy boxes”. [3]
- Ending the subsidy on household gas: The current 5% rate on gas and other fuels is costing the Treasury more than £2 billion a year, with the benefit accruing to the better off, who use more energy. To help with both net zero goals and the levelling up agenda, the full rate should be applied and the revenue used for redistribution and improvements to low income households.
[2] Green Alliance and the Centre for Industrial Energy, Materials and Products (CIEMAP), 2018, By popular demand: what people want from a resource efficient economy
[3] UN, June 2020, Global e-waste monitor
[4] Green Alliance and WRAP, 2015, Employment and the circular economy: job creation in a more resource efficient Britain.
