Laing chairman Sir Martin Laing last week wrote to Brown to ask for the cut, which industry leaders believe is essential to the success of government attempts to outlaw cowboy builders.
Writing in his capacity as president of the Construction Industry Employers Council, Sir Martin was also representing the industry’s consultants, clients, materials producers and specialists in his letter.
The plea has been made because reputable firms believe that they are constantly undercut by cowboy firms that do not charge VAT.
These fears have been heightened by the government’s plans to introduce a quality mark as part of its anti-cowboy initiative.
Small contractors are apprehensive that the cost of qualifying for the quality mark – currently expected to be about £500 – will exacerbate the existing price differential caused by VAT. The prospect of an increase in cowboys’ competitive edge could lead to legitimate firms refusing to apply for quality mark status, thereby preventing the initiative from gaining the critical mass of reputable firms that it needs to take off.
Industry leaders believe that as well as having the success of the anti-cowboy initiative in mind, Brown may cut VAT on repair and maintenance because the European Commission is also softening its opposition to member states setting different rates of VAT for different services.
Until recently, the commission has insisted that countries charge a uniform rate of VAT, but the directive that underpins it is now under review and any relaxation could lead to some governments being allowed to make changes to their rates of indirect taxation.
Countries are expected to be allowed to make changes in the VAT regime for industries deemed to create high levels of employment, opening the door for Brown to cut the rate on construction.
It is understood that the DETR supports industry efforts to cut the rate of VAT on repair and maintenance, and that deputy prime minister John Prescott is already lobbying for the change within Whitehall.
Industry leaders declined to comment on the letter, but it is understood that it has been sent with the aim of persuading Brown to announce a change in his autumn pre-budget statement. This would allow the cut to be introduced in the spring 2001 budget.
Meanwhile, work is going ahead on the introduction of the anti-cowboy initiative. The first trial is scheduled to begin in early November, when a team at Birmingham City Council aims to pilot a quality mark system among builders and clients in the area.
