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Tax plans would help high streets recover

The Chancellor has been urged to drop VAT on energy efficient domestic appliances in a scheme that would mirror the car scrappage programme.

The call has come from the British Retail Consortium (BRC) which claimed that the move would not only encourage consumers to switch to more environment friendly goods but would also boost high street business.

Research carried out by the BRC found that dropping VAT on the more energy efficient items would result in a 1.3 million tonne reduction in CO2 emissions by 2020.

That, the BRC said, would be the equivalent of almost 1 per cent of domestic emissions.

Introducing the tax change would involve a loss of £507 million per year in revenue, a figure, however, that represents just two weeks of the across-the-board VAT cut implemented last December.

The BRC wants the Chancellor to include the measure in his pre-Budget Report, arguing in its submission to Mr Darling that it would give consumers a clear signal of the benefits of a switch to the most energy efficient products and could be kick started through time-limited scrappage schemes for those buying ‘Energy Saving Recommended’ products.

Stephen Robertson, the BRC’s director general, said: “The government’s working against its own objectives when it sets targets for reducing carbon emissions while charging full VAT on the efficient products that will move us towards those targets.

“Retailers are already doing their bit to cut carbon but homes are responsible for 27 per cent of the nation’s emissions. Helping householders improve their performance has to be the next step.”

Mr Robertson added: “Removing VAT and exploring the possibility of a scrappage scheme would do a lot to get old energy and water-squandering appliances out of people's homes.”

Also in its submission, the BRC put the case for dropping the 0.5 per cent increase in employers’ and employees’ National Insurance contributions planned for 2011, saying it would save jobs.

Next year’s national minimum wage should go up by no more than 1 per cent, business rates need to be kept at an affordable level and Business Rate Supplements must not exceed the likely value of the benefit that businesses will receive, the BRC said.

The government should likewise provide early confirmation that the 40 per cent capital allowance for firms investing over £50,000 in qualifying plant and machinery will be extended beyond the current first year and apply to a wider range of investment.