The British Government is going to have to implement a European Court of Justice (ECJ) ruling that will put VAT on the installation and supply of energy saving materials for houses up to 20% from its currently reduced rate of 5%.

BSRIA, the member-based association providing specialist services in construction and building, says it is "hugely disappointed".

Affecting the installation of energy saving measures including insulation, central heating and hot water system controls, heat pumps, solar photovoltaic cells and solar thermal panels, and wind and water turbines, the ruling means that such measures will no longer benefit from the reduced rate of 5% VAT.

Julia Evans, BSRIA Chief Executive, said: “Government should have the courage of their convictions. Yet again the energy efficiency industry is to suffer at the hands of this decision. Installation of energy-saving materials is the only category within the 5% reduced rate VAT that will be increased to the standard rate.

"All other categories – such as children’s car seats, mobility aids for the elderly, nicotine patches, residential conversions and renovating a dwelling that has been empty for at least two years, domestic fuel and the installation of energy-saving materials in non-residential properties – will remain at the reduced rate.

"This decision, therefore, flies in the face of the industry trying to achieve its climate change targets and build on energy-saving measures.

"If government could have exercised continued discretion for longer this would have helped. Sticking at the reduced rate would have served as an incentive for the industry. The judgement also presents a direct challenge to the UK government commitments made in the Queen’s Speech."

The decision by government to pass on the ECJ’s judgment now is a further example of the EU curtailing the UK’s legislative freedom. Depending on the government’s response, it could also lead to higher costs for affected groups seeking to improve the energy-efficiency of their homes.

Julie Evans says BSRIA is getting the impression that energy and carbon reduction issues are being viewed as a burden to government which is inhibiting not only the industry but the economy at large. "The recent government announcement of the end of the UK’s zero carbon buildings policy is a further example of this. As a minimum, government is sending mixed messages on carbon reduction policies, which are of great concern.

"The undoubted impact of these measures will be a significant rise in costs for consumers and others installing energy-saving materials – for example, in residential homes and home owner-occupiers. Only social housing tenants will be provided with the supply and installation of energy-saving materials at a reduced rate. Government may also need to find a more efficient way of promoting energy efficient materials while remaining in line with EU VAT law, possibly through the use of direct subsidies.”

There is no opportunity for government to appeal against the decision of the ECJ.

The changes will not take place until the Budget in 2016.