The construction industry has welcomed the promise of shadow chancellor Ed Balls to cut VAT to 5% on domestic building repair works.

The reduction is a major plank in the Get Britain Building campaign and Mr Balls is the first major politican to heed its call.

Five per cent VAT on domestic repair maintenance and improvement (RMI) works for one year was one element of the five-point plan for economic growth he presented to the Labour Party conference today.

Richard Lambert, outgoing chief executive of the British Woodworking Federation, said RMI work had dipped below newbuild for the first time in many years.

“The sector needs stimulation. A tax cut is technically very complex, but this is the shadow chancellor saying this, not a politician that then has to take their words to the Treasury.

“I would be interested to know quite what the strings attached are. I doubt that it’s going to be a straight cut, but in principle the construction sector needs a boost and this could help.”

Richard Diment, director-general of the Federation of Master Builders, said a targeted cut in VAT for home improvement works made good economic sense as the total stimulus effects of such a cut would be more than double any net loss to the Treasury as well as helpg to create tens of thousands of new jobs.

“This policy makes sense on every level. It supports economic policy; it supports environmental objectives by taking pressure off green belt land to provide new housing; and it tackles rogue traders and tax dodgers by reducing their competitive advantage over legitimate businesses,”said Mr Diment.