Commenting on the European Commission's decision to refer the UK to the European Court of Justice for its reduced VAT rate on the supply and installation of energy-saving materials, Jonathan Main, PwC Partner and head of the UK firm's environmental taxes practice said:

"If we assume that the UK Government continues to defend the reduced rate, then we are unlikely to see a change in VAT rates within the next 18-24 months, which is the time it will take for the European Court to reach a decision, so we need to see this announcement in its proper context.

"However, if the European Court were to force an increase VAT rate from 5% to 20% on a range of energy saving materials, this would be bad news for consumers, who would have to pay more to make their houses more energy efficient. It would also be bad news for the drive to make the UK's fuel hungry housing stock more energy efficient.

"It is also worth noting that this won't affect the 'golden rule', which determines the level of funding available under the Green Deal, as Green Deal Plans are financed on the basis of the energy savings that can be made

.

However, this could make funding more expensive and may mean that energy saving improvements would not be fully funded through a Green Deal plan.

"The UK Government wants to encourage householders to make energy efficient improvements to their homes, whether through the reduced rate or the Green Deal. To continue with its energy efficiency policy the Government will need to take a strong stance in defending the reduced rate or find other ways of cutting the cost to consumers."