The European Court of Justice has banned Britain's five percent rate of VAT on energy saving materials — forcing the government to raise VAT to the standard 20 percent rate.
However, reducing Brussels muscle power over Britain and a 'red card' system, allowing national parliaments to work together and veto unwanted European legislation, is part of David Cameron's seven point plan for renegotiating Britain's membership of the EU ahead of a promised In-Out referendum in 2017.
UK’s #Green VAT illegal say EU judges. #energyefficiency #RenovateEurope #brexit #EUGreenWeek http://t.co/t012gkqDwc pic.twitter.com/iglTDvBDAu
— EurActiv (@EurActiv) June 5, 2015
According to former Foreign Secretary, William Hague, a red card would be "to give national parliaments the right to block legislation that need not be agreed at European level."
Cameron is also calling for less interference from European institutions — like the Court of Justice of the European Union (CJEU) and the European Court of Human Rights.
Meanwhile, the CJEU has recently ruled in favor of the European Commission which brought infringement proceedings against the UK before the Court of Justice on its reduced rate of VAT on energy saving materials for every household in Britain — not just social housing.
The CJEU ruled that the Conservative's policy to lower the VAT rate on energy saving materials wasn't "adopted for reasons of exclusively social interest or even for reasons of principally social interest."
According to information provided by the CJEU:
"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 ruling leaves David Cameron rather red-faced over a policy intended to cut taxes on 'green' goods.
