THE European Parliament has adopted proposals today that would renew the facility which allows governments more flexibility to set VAT rates on locally provided and labour-intensive services.

The directive allows governments to reduce the rate of VAT to five percent on services that are local and are unlikely to be provided remotely or across borders such as building renovations, cleaning, hairdressing, restaurants and gardening.

Being labour-intensive, they can help mitigate the current serious unemployment trends.

Conservative MEP for the West Midlands, Philip Bradbourn, says that EU member states should take advantage of this flexibility to set their taxation rates in these areas.

Mr Bradbourn, who is local government spokesman for the Conservatives in the European Parliament, said: "In the current parlous state of the British, European and world economies, this proposal gives us an opportunity to work to target major reductions in VAT, down to five per cent, on labour-intensive and local services such as renovation of homes, places of worship and of cultural importance.

"This will be much more effective than the across-the-board reduction of two-and-a-half per cent introduced by our current Government.

"The Council of Ministers should now speedily approve these plans so that governments have greater flexibility in applying VAT rates."