EU to UK: You’re Not Allowed to Cut Taxes on Energy Usage… Even Though We Tell You To

The European Court of Justice has today handed down a bizarre ruling to the British government, demanding that despite Europe’s constant hectoring over carbon emissions, the UK may not seek to reduce Value Added Tax (VAT) on energy-saving materials to increase its uptake amongst consumers.

The ruling, which has already been criticised by Conservative Party MEPs, states that Britain would breach the EU’s VAT Directive by applying a reduction in the rate of VAT applied to energy-saving materials for housing.

The EU has decided that the policy, introduced by the coalition government last year, can only apply to social, or government housing.

Today’s ruling says:

“…the Court states that, while it is true, as asserted by the UK, that a policy of housing improvement may produce social effects, the extension of the scope of the reduced rate of VAT to all residential property cannot be described as essentially social. By providing for the application of a reduced rate of VAT to supplies of energy-saving materials and installation of such materials, irrespective of the housing concerned and with no differentiation among people living in that housing, the UK measures cannot be regarded as having been adopted for reasons of exclusively social interest or even for reasons of principally social interest.”

The policy of a 5 percent reduction in VAT applied to households’ heating controls, water turbines, wind turbines, insulation, heat pumps, and boilers.

The new ruling flies in the face of the government’s other, both self-imposed and EU-imposed obligations to attempt to reduce overall carbon emissions.

The 5 percent VAT reduction formed part of the last government’s “Green Deal” initiative. Today’s ruling will increase the cost of the materials and installation, with experts claiming that it threatens “to make the Green Deal unviable in many cases.”

Conservative MEP Ashley Fox said: “When you consider the importance these days of promoting energy-saving, this judgment is most unfortunate and thoroughly unwelcome. It defies common sense.

“People will be aghast when they see the EU on the one hand hectoring member states about carbon reduction while on the other handing down judgments like this.”