Brown to press EU for lower VAT on energy efficient goods

Chancellor Gordon Brown has promised to urge EU member states to allow lower VAT rates for energy-efficient products.

The day before the government unveiled its draft Climate Change Bill (see pp 5-6 ), Mr Brown addressed environmentalists at a Green Alliance meeting.

Mr Brown told the audience he would write to EU finance ministers to urge them "to speed up the setting of new energy efficiency standards for consumer electronic goods and to permit lower rates of VAT on energy efficient goods".

Over the past ten years the government has reduced the rates of VAT on energy efficient products that are professionally installed. But EU law currently prohibits reduced rates for such goods bought by individual consumers.

Mr Brown added that while EU leaders agreed last week to ask the European Commission to propose tougher energy efficiency standards for incandescent light bulbs by 2009, "after talks over recent weeks with leading manufacturers and retailers, the UK will be the first European country to phase out high energy light bulbs from almost all domestic use" (see p 8 ).

The phase-out will be completed by 2011 - "saving a further 1.2 million tonnes of carbon and around £30 off an average energy bill". The Chancellor promised to examine how to give special help to pensioners to achieve the goal.

He also vowed to speed up the setting of new energy efficiency standards for consumer electronics. "Again, by working with retailers we will do this first in Britain, designing out the use of wasteful standby facilities and raising energy efficiency."

Mr Brown also promised to increase the number of existing homes to receive insulation under the Energy Efficiency Commitment and Warm Front programmes from two million by next year to ten million "over the next ten years", saving 2 million tonnes of carbon.

In general, he said, it is the government’s job "to help make it easier for people to make more sustainable choices, providing… incentives in preference to penalties".

But Tory leader David Cameron, in a speech the same day, seized on one of the few "green taxation" measures recently announced by the Chancellor, the recent increase in air passenger duty. Describing it as a "stealth tax", he said the Chancellor "is giving green taxes a bad name" - something environmental groups would probably agree with.

Mr Cameron proposed three ideas for tackling aviation’s climate emissions: charging fuel duty or VAT on domestic flights; replacing air passenger duty with a per-flight tax based more closely on actual carbon emissions; and introducing a "green air miles allowance" that taxed frequent flyers at a higher rate.