Fianna Fáil plan to cut builder Vat would cost €240m – Cowen

TD defends proposal that would reduce costs and allow construction of more homes

‘I think it’s a small price to pay in relation to the situation we have presently,’ Barry Cowen said. Photograph: Aidan Crawley

‘I think it’s a small price to pay in relation to the situation we have presently,’ Barry Cowen said. Photograph: Aidan Crawley

 

Fianna Fáil’s proposal to reduce construction industry Vat rates would cost the exchequer €240 million, housing spokesman Barry Cowen has said.

Mr Cowen on Monday defended the plan which aims to reduce cost of construction to put builders in a “position to construct more homes”, Mr Cowen said.

The proposal would see construction Vat reduced to 9 per cent from 13.5 per cent.

Speaking to RTÉ’s Morning Ireland, he said the measure should not be taken “in isolation” but the Government could “play a role in adjusting the cost of construction”.

Mr Cowen said Nama and similar agencies can also had a role to play in “driving development by local authorities” despite not being the case to date.

“There’s much unspent monies in relation to Government policy and the delivery of units because units are simply not being delivered,” he said.

Sinn Féin spokesman on finance Pearse Doherty described the proposal as “breathtakingly stupid, in which we’re giving a quarter of a billion Euro in tax cuts to Fianna Fáil’s developer buddies”.

In response, Mr Cowen said: “We’ve seen an all-party committee in relation to housing make recommendations over a year ago, many of which have not been taken on board. . . and I won’t take lectures from Sinn Féin or anybody else in my efforts to simulate the construction sector.”

Mr Cowen said the cost of the Vat cut - at €240 million - was “a small price to pay in relation to the situation we have presently. We’ve seen three people unfortunately die and we haven’t entered winter yet”.

Architect Mel Reynolds told Newstalk Breakfast that “the danger with Vat reduction is when that gets applied to larger sites, it’s just added onto the bottom line - so site prices increase”.

Mr Reynolds said a Vat cut would make the situation worse as the “single biggest element in housing cost at the moment isn’t actual construction cost at all, it’s the site value”.

Tom Parlon, director general of the Construction Industry Federation, said he welcomes the “pretty positive proposal.”

“The main issue is that it’s not viable to build,” he said, adding that a Vat cut is one of the “host of items” that would counter that situation.

Mr Reynolds said it was important to first look at existing buildings and the conversion of “particularly vacant” units.

“I think introducing a Vat cut or planning levy cut on new build houses, which is a tiny percentage of the market, would just add to land hoarding practices that we’re already seeing,” he said.