Figures produced by the Association of British Insurers (ABI) have put the total repair bill for the June and July 2007 floods at £3 billion.

With VAT charged at the full rate of 17.5% on almost all building repair work, £525m could be generated in VAT for the Treasury - almost as much as that spent this year on flood defences.

According to the ABI the average homeowner paid £30,000 to have their home repaired following the June floods and £40,000 following the floods in July. This would have meant them paying a VAT bill of £5,250 in June and a VAT bill of £7,000 in July.

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Brian Berry, Director of External Affairs, at the Federation of Master Builders (FMB) said: "What message does this send to those people affected by last summer's floods? It is clearly very wrong that the Government should be making such large amounts of money out of other people's misery and misfortune. The insurance industry has clearly identified that its exposure will be £3 billion with VAT charged at the full rate of 17.5 per cent on almost all building repair work, it is easy to see that the Chancellor is going to be receiving a huge windfall. What is particularly galling is the fact that the Government to date has only made available £86 million to assist the affected regions of the UK.

"It is clear that many of the people affected by the recent floods are some of the most vulnerable in society, many of these people were not fortunate to have insurance and with average repair bills of £30,000 or £40,000 it is clearly wrong that these people on top of everything else should be faced with a VAT bill from the Treasury for £5,250 or £7,000."

(CD/JM)