The European Court of Justice – the highest court in the EU – ruled that VAT discounts on energy-saving measures must be scrapped, despite having been introduced by the UK Government in order to help meet Brussels’ own punitive emissions quotas.
The barmy ruling comes at a time when the EU is threatening to dish out multi-million pound fines to countries who do not cut their greenhouse gas emissions by at least a fifth.
It means the Government will be forced to charge the full VAT rate of 20 per cent on all of the most popular energy-saving measures, which could lead to a huge drop in the number of people insulating their homes.
Critics said the ruling means that Britain has effectively lost control of its taxation system to unelected EU bureaucrats.
It defies common sense
Tory MEP Ashley Fox
“Not content with banning tungsten lightbulbs previously, the EU wants to make it more expensive for ordinary people to save energy and money in their own homes.
“The upcoming EU referendum will allow the UK to put its own house in order and the EU in its place.”
Leading accountant George Bull, who is a senior partner at respected London firm Baker Tilly, added: “This judgement is a further example of the EU’s willingness to curtail the UK’s legislative freedom.”
The ruling was requested by the European Commission, which said the tax relief should only be available for social housing tenants.
It means that many people face being stung for an extra £2,500 to insulate a large home, with the total cost leaping to a prohibitive £20,500.
Eurocrats at the Commission decided to take Britain to court despite knowing the country’s housing stock is among the least energy efficient in the 28-nation bloc, with the VAT discount had been brought in to address that very problem.
He said: “When you consider the importance these days of promoting energy saving this judgement is unfortunate and thoroughly unwelcome.
“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 judgements like this.”
The ruling was also slammed by solar energy companies, who said it would now take homeowners an extra two years to recoup the cost of installing green technology just at a time when it was finally starting to become affordable.
Garry Felgate, from umbrella group the Association for the Conservation of Energy, said: “This is a backward step which goes against efforts to help people stay warm in their homes in winter.”
A spokesman for Number 10 said the Prime Minister may decide to appeal the judgement.
He said: “The Government is disappointed the court didn’t agree that the UK had correctly implemented his relief and is studying the decision before considering next steps.”