Construction Confederation chief Jennie Price slams Brown’s decision not to cut VAT to tackle cowboys.
The Construction Confederation has said it was “bitterly disappointed” that chancellor Gordon Brown ignored its pleas for tax measures to combat rogue builders in Tuesday’s budget.

The confederation has been pushing for a reduction in the VAT rate on domestic repair and maintenance work to 5% to stop cowboy builders undercutting tax-paying firms.

But the budget did not refer to the issue. Confederation chief executive Jennie Price said: “Many small builders will see this as a kick in the teeth. We have supported the government’s proposals for a quality mark scheme, but we repeatedly said it would not work without a level playing field between the bona fide trader and the rogue builder.

“A VAT cut would have delivered that. Instead, we are being asked to increase our costs further by joining the scheme while the rogues are left unscathed. This budget is a rogue’s bonanza.”

Industry also expressed concern that Brown made no reference to the government’s stance on the private finance initiative.

Other budget proposals received a mixed response from industry.

Brown said the government would consult on how stamp duty relief for brownfield development could be introduced. Proposals on this are expected in the urban white paper, due to be published later this year.

Michael Ankers, chief executive of the Construction Products Association, said: “We are hoping they are saving up some goodies for later.”

Small builders will see this as a kick in the teeth. This budget is a rogue’s bonanza

Jennie Price, Construction Confederation

Ankers also expressed concern at the £1.60/tonne aggregates tax that will be introduced in April 2002 for virgin sand, crushed rock and gravel. “This is supposed to raise £380m but the irony is that the government is the main client for the roads that these materials will be used in and, as such, will end up meeting much of the cost.”

However, materials producers welcomed the reduction in VAT on energy-saving materials for homes from 17.5% to 5%. The decision to freeze tax on fuel was also welcomed.

Brown also announced £280m of transport spending, £250m of which has been ringfenced for a number of road and public transport improvement schemes set to be announced today by deputy prime minister John Prescott.

However, Ankers said: “This is a very small amount of money compared with the scale of the problem.”

He added that the industry would be lobbying government to ensure that some of the extra £4.9bn for the NHS and £1bn for education goes on building new schools and hospitals or improving existing ones.

Berkeley Group chairman Roger Lewis said: “We will be looking at what Tony Blair says about how the extra money to the NHS is to be spent. We expect that the bulk of it will go on reducing the bed queues and improving staff levels.”

And housebuilders expressed relief that the threat of the introduction of VAT on new housing had been left out. However, the chancellor did announce a rise in stamp duty to 3% for sales of more than £250 000 and 4% for sales of more than £500 000. Many saw the measure as an attempt to take some heat out of the South-east housing market.

What the industry and City think

Roger Lewis, chairman, Berkeley Group We’re relieved that nothing has been done to introduce VAT on new housing. If Gordon Brown ever was to do that, he’d have to phase it in over three years. Overall, I think Berkeley and the industry welcome this budget. It was relatively neutral and will not cause inflationary pressure, so it is unlikely that there will be an increase in interest rates, and house buyers’ confidence will not be affected. Courtney Collins, partner, Gleeds The increases in NHS and education spending will have some property spin-off. However, most large projects are now funded by the private finance initiative. I would think most of the money will go on staff, although there may be some major refurbishment and extension work. John Messenger, building analyst, Deutsche Bank The main point for the City is relief that there was no introduction of VAT on new housing. There was a lot of relief and you can see that in Wednesday morning’s stock prices. The rises in stamp duty will not have a big impact. Barratt said it would affect only 2% of its sales in that price bracket. However, the aggregates tax is disappointing and raises questions about passing these costs down the line. But it is a long way off because it will be introduced in 2002.