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The VAT has been reduced to 5 percent already in some areas.

The Government, in fact, has been gradually reducing the rate from 1998 onwards until it reached 5 per cent for installation by professional installers of some energy-saving materials.

Insulation installation also benefitted from this break. This VAT rate reduction reveals an appreciation of the incentivizing powers of this option. Homeowners, however, remain excluded from the benefits enjoyed by professional installers, should they opt to do the installation work on their own.

The environmental benefits of the UK government reducing VAT on all insullation work to five percent would also benefit excluded classes, including homeowners. One group left out is the householder. Yet, under the credit crunch and falling market price of houses era we face, householders are likely to go the do it yourself route. Not surprising the Construction Products Association has seen the light and said it supports the extension of the reduced rate to those who decide to do renovations this way.

It has been noted that the market for thermal insulation has grown due to favourable regulation and rising energy prices. A reduced rate would enhance the appeal for this measure. A test mimicking the VAT exemption increased sales by 120 percent to reveal the potential of what is possible if this is done. This would lead to reduction in CO2 emissions.

The Construction Products Association has stated that many householders are capable of installing insulation themselves and yet they are paying the full rate of VAT on a product the Government must want to encourage them to buy.

It is known that buildings are the largest single energy-using sector, accounting for 40 percent of energy consumption in Europe.

Insulation is a highly cost-effective end-useful measure in reducing the emissions of green house gas emissions. A study commissioned by EU has found that a reduced VAT rate on insulation products might not be passed through fully by installers to the consumers. Despite the rate cut for commercial installation, this is one reason it has been surmised why the uptake in the UK market has been low. This is because since the installer purchases the product on behalf of the residential customer, the reduced rate may not be clearly apparent to the end consumer. Of course, when the residential owner is the installer, this is not the case.

The results of the Isle of Man pilot study for EU on the impact of a reduced VAT rate led to improvements to the existing housing stock and reduced pressure on green field site developments.

The tax intake increased and the Isle of Man Government concluded the experiment had been a fiscal success. This experiment led the Council of European Finance Ministers to decide that it would allow EU Member States to permanently reduce VAT to 5 percent from the 10th of March 2009. Yet, UU has only extended this reduction in a limited fashion.

There is room for reduction of VAT to 5 percent on all insulation work. Even that done by homeowners and any other segment left out so far. Consumers would receive a clear Indication from the Government the tax system supports their part in helping the environment. This step would be an important act towards achieving and encouraging sustainable consumption patterns. This reduced VAT rate should be allowed on goods where the nature of the product is key to its beneficial environmental impact.

Insulation leads to a beneficial environmental impact by the reduction of resource use.
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