HC Deb 11 July 1984 vol 63 cc1270-95

Item No. 1. The granting, by a person substantially reconstructing a protected building, of a major interest in, or in any part of, the building or its site. 2. The supply, in the course of an approved alteration of a protected building, of any services other than the services of an architect, surveyor or any person acting as consultant or in a supervisory capacity. 3. The supply, by a person supplying services within item 2 and in connection with those services, of—

  1. (a) materials or of builder's hardware, sanitary ware or other articles of a kind ordinarily installed by builders as fixtures; or
  2. (b) in respect of such goods, services described in paragraph 1(1) of Schedule 2 to this Act.

Notes (1) 'Protected building' means a building which is—

  1. (a) a listed building, within the meaning of—
    1. (i) the Town and Country Planning Act 1971; or
    2. (ii) the Town and Country Planning (Scotland) Act 1972; or
    3. (iii) the Planning (Northern Ireland) Order 1972; or
  2. (b) a scheduled monument, within the meaning of—
    1. (i) the Ancient Monuments and Archaeological Areas Act 1979; or
    2. (ii) the Historic Monuments Act (Northern Ireland) 1971.
(2) For the purposes of item 1, a protected building shall not be regarded as substantially reconstructed unless the reconstruction is such that at least one of the following conditions is fulfilled when the reconstruction is completed—
  1. (a) that, of the works carried out to effect the reconstruction, at least three-quarters, measured by reference to cost, are of such a nature that the supply of services (other than excluded services), materials and other items to carry out the works, would, if supplied by a taxable person, be within either item 2 or 3 of this Group; and
  2. (b) that the reconstructed building incorporates no more of the original building (that is to say, the building as it was before the reconstruction began) than the external walls, together with other external features of architectural or historic interest.
and in paragraph (a) above 'excluded services' means the services of an architect, surveyor or other person acting as consultant or in a supervisory capacity.
(3) 'Approved alteration' means,—
  1. (a) in the case of a protected building which is an ecclesiastical building which is for the time being used for ecclesiastical purposes or would be so used but for the works in question, any works of alteration; and
  2. (b) in the case of a protected building which is a scheduled monument within the meaning of the Historic Monuments Act (Northern Ireland) 1971 and in respect of which a protection order, within the meaning of that Act, is in force, works of alteration for which consent has been given under section 10 of that Act; and
  3. (c) in any other case, works of alteration for which, except in the case of a Crown interest or Duchy interest, consent has been obtained under any provision of—
    1. (i) Part IV of the Town and Country Planning Act 1971,
    2. (ii) Part IV of the Town and Country Planning (Scotland) Act 1972,
    3. (iii) Part V of the Planning (Northern Ireland) Order 1972, or
    4. (iv) Part I of the Ancient Monuments and Archaeological Areas Act 1979,
and in paragraph (c) above 'Crown interest' and 'Duchy interest' have the same meaning as in section 30 of the said Act of 1979.
(4) For the purposes of paragraph (a) of Note (3), a building used or available for use by a minister of religion wholly or mainly as a residence from which to perform the duties of his office shall be treated as not being an ecclesiastical building. (5) Where the benefit of the consideration for the grant of a major interest as described in item 1 accrues to the person substantially reconstructing the protected building but that person is not the grantor, he shall be treated for the purposes of that item as the person making the grant. (6) In item 2 'alteration' does not include repair or maintenance; and where any work consists partly of an approved alteration and partly of other work, an apportionment shall be made to determine the supply which falls within item 2. (7) Note (2) to Group 8 applies in relation to item 2 of this Group as it applies in relation to item 2 of that Group.".'.

Amendments to the proposed amendment: (a), leave out item 3.

(b), in note (2), leave out 'three-quarters' and insert `one half'.

(c), in note (2)(a), leave out 'or 3 of this Group' and insert `of this Group or item 3 of Group 8 above, as it applies to a supply by a person supplying services within item 2 of this Group.'

Mr. Hayhoe

In the debate on schedule 6 on 30 April I said that I would consider a concession to provide some relief for structural alterations to listed buildings. I announced details of this relief on 18 May and the three amendments concerned are Nos. 1, 5 and 6.

Amendment No. 1 paves the way to a new part III to schedule 6. Amendment No. 5 is the way in which the draftsman has chosen to apply to the new listed buildings relief the zero rating of certain materials supplied in connection with an approved alteration. The existing zero rating under group 8 of the zero rate schedule is applied also to the new group 8A which is contained in amendment No. 6.

The broad effect is to zero rate any alteration of a listed building which both requires and has received building consent from the appropriate planning authority. Any alteration to a listed church is zero rated. Repairs or maintenance work remain standard rated.

There is a parallel relief for builders or developers who substantially reconstruct a listed building which they own, with a view to selling it or granting a long lease of it. The sale or grant of the lease is to be zero rated, so that the builder or developer can reclaim the VAT which he incurs on the goods and services he uses.

I appreciate that some hon. Members would prefer a wider relief, and I will, of course, listen to what is said in support of the amendments linked with Government amendment No. 1.

8.45 am
Mr. A. J. Beith (Berwick-upon-Tweed)

We are all anxious to make progress as quickly as possible, and some of us would have liked to reach this point much earlier, so that we could have devoted more time to it.

From the beginning, I have welcomed this concession on behalf of my party. It is a significant and valuable improvement to the Bill. However, I question the extent of the concession. Other hon. Members may wish to mention other difficulties, but the difficulty that worries me is that it seems to have been acknowledged by the Customs and Excise that zero rating will generally be confined to major alterations to the structure of a listed building and will not include minor improvements and alterations. If that is so, the effect of the concession will be to persuade the owner or developer of a listed building to alter that building more than he might otherwise have done and more than might be in the interests of preserving the qualities for which it was originally listed.

The object of our listed building legislation must be to conserve our listed buildings. Alteration may sometimes be necessary to fit them for modern purposes—they are still to be usable buildings—but if we induce developers to change the buildings more than they need to do, we shall directly frustrate the purposes of the listing system.

That is my fundamental objection to the wording of the Government's concession and to the way in which they have sought to limit it. The concession contains a dangerous limitation which will result in its effect being quite other than that which the Government say that they intend.

The fact that the concession is not wider will present serious problems in the future. Whereas I hope that the Government will be able to respond reasonably quickly to my first point, I could not expect them to respond very fully today to the points that I am about to make, which are nevertheless important. Many buildings in conversation areas, whose maintenance is essential to the maintenance of the character of those areas, will not benefit in any way from the concession. They will suffer directly from the imposition of VAT on building alterations, and our heritage will as a result be seriously damaged.

The concept of the conservation area was developed because it was recognised that a single listed building, or two or three listed buildings, in the high street of a town did not by themselves make that high street such a priceless heritage. If other buildings which are not of enormous merit but which are valuable contributors to the total scene are not to benefit from the concession, we shall find listed buildings standing in a desert of modern alternatives, erected because it is cheaper to rebuild than to pay the extra VAT on an existing building.

Our amendment to the Government amendment mentions some other buildings where the lack of this concession will be a serious problem. There are buildings run by voluntary organisations — such as schools —village and community halls, church halls, and unlisted churches.

The listing system has not caught up with the growing appreciation of churches of periods other than those which have found favour in the past. That is especially true of churches which are beyond the pale of the Church of England. Many nonconformist churches have been shown to be of great historical interest and individuality, but they are still only beginning to be listed. They will not get the benefit of the VAT concession and it will be tempting to pull them down and rebuild them.

In many towns and villages we have already seen churches disappear because people are faced with the choice of either trying to maintain a valuable part of our heritage or pulling the building down to replace it with one that is cheaper to maintain. We increase that temptation by raising VAT and failing to extend the concession. The result will be real hardship to many churches and church organisations and another blow to our heritage and valuable historic buildings

Mr. John Hannam (Exeter)

I welcome the concession on listed buildings but wish to deal principally with amendments Nos. 4 and 7 on alterations that affect disabled people. I fully support the general objective that my right hon. Friend the Chancellor laid down in the Budget, as it represents the burden of taxation moving away from earnings to spending. The Government's stated aim is to increase freedom of choice but, in shifting the burden of taxation, we must not forget that some people do not have much freedom of choice. In regard to building alterations, disabled people do not have the same freedom of choice as the rest of us. The Budget has delivered a severe blow to them and the charities that serve them.

The National Children's Home will have to raise an additional £200,000 in the coming year, purely to pay VAT on proposed building alterations. The Jewish Blind Society will have to find an additional £100,000, the Spastics Society an additional £120,000 and Help the Aged an additional £150,000. Those are just a few examples of how charities will be hit. Those figures do not take into account the small concessions that my right hon. Friend announced after the Budget but it has been quite difficult for the charities to assess how much the concessions will reduce their financial burden. The Spastics Society has estimated that its VAT bill could be reduced by between 15 per cent. and 40 per cent. That would reduce the extra £120,000 to between £70,000 and £90,000—still a massive sum.

On their own, the figures are merely bald statistics, but nobody can deny that they represent a hefty bill. We must examine the additional finance that is required and the adverse effects that that will have on the services that charities provide. They provide essential services that would otherwise have to be provided by the state at far greater cost. Building alterations are a major part of a charity's work. They depend on the endowment or purchase of older buildings, as they tend to take over older buildings rather than build them. Older buildings need a great deal of work and renovation.

In Chertsey, for example, there is an assessment, education and treatment unit for children who suffer from cerebral palsy which has developed through parental pressure in response to local needs. It is funded almost entirely by voluntary effort. Last year it spent £45,000 on improving and extending the building to match the increasing demand for its services. This year, it plans to spend between £30,000 and £35,000 on adapting a decrepit bungalow to provide a respite service for the parents of children with cerebral palsy. The people involved are providing the very services that the Government wish to encourage and develop through their policy of care in the community.

The imposition of VAT on building alterations, however, cuts straight across that policy and the unit now faces three choices. First, it can cut other vital services to pay the VAT man. Secondly, it can curtail its building activities, but by doing that it would not be responsding to the needs of the community. Finally, it can ask its volunteers to put extra time and energy not into improving existing services but into fund-raising for Customs and Excise. They have the freedom to choose but whichever they choose, inevitably, the services to the disabled and their families will suffer.

Let us take the example of a short-stay residential home in Norfolk for severely disabled people. Various extensions, alterations, adaptations and repairs are needed to make that house habitable. Before the Budget, the VAT bill to do that work was £30,000. It is now three times that amount, and this is allowing for the exemptions announced in the Chancellor's concessions. The charities' VAT reform group campaigned vigorously for a concession on VAT in general from this year's Budget, and the all-party disablement group has always given its full support to that campaign, and will continue to do so. For the purposes of this Bill, we have introduced an amendment that will exempt from VAT all building alterations carried out for the benefit of disabled people. It includes such work as that by registered charities, by an individual to improve access for a disabled person within the home, and work carried out to improve access to a building to which members of the public are admitted.

Amendments Nos. 4 and 7 deal with those particular points. With the exception of work carried out for the benefit of disabled people by a registered charity, the principle of giving these works exemption from VAT has already been accepted by the Government. The wording of these amendments comes from the Building (Prescribed Fees) (Amendments) Regulations 1983, which exempt such works from building control fees. Therefore, the principle that adaptations for disabled people are a special category has already been accepted by the Chancellor in that change of last year, and by the concessions that he announced after the Budget this year.

However, the concessions and exemptions not only do not go far enough, but they fail to recognise that for a disabled person no one improvement is any more important than another. For instance, if one is confined to a wheelchair, it is just as important to have one's front door rehung so that it is easier to open as it is to have a ramp installed to get the wheelchair up to the front door. While we welcome the Chancellor's exemptions as far as they go—that is they exempt VAT for the ramp—there is real concern that the refusal to grant VAT exemption for the widening of the door represents an anomaly, which will arise again and again.

I can cite a specific example of a 45-year-old man who has recently become confined to a wheelchair because of a spinal injury. He is having a number of alterations made to his house so that it can accommodate him and his disability. This involves the installation of a ramp leading up to his doorway. To get to the rest of his house, he has to pass through the kitchen, and to do this, the kitchen units have to be moved, and rehung, to leave enough room for the wheelchair.

All these alterations are essential to that person's mobility, but under the exemptions that my right hon. Friend the Chancellor has awarded, only the ramp will be zero-rated. The rehanging of the door and the repositioning of the kitchen units will not. We have expressed grave concern over these exemptions, pointing out the confusions and hard feelings that will arise between the builder and the disabled person over which work is VAT-able, and which is not. Our fear is that in the end, the builders will say that they must apply VAT on the whole lot, because they will not be able to sort out the confusions that will arise.

I tabled a parliamentary question on 4 June, to try to get this matter cleared up. The reply said: Where a single inclusive price includes zero-rated and standard-rated items, the supplier"— that is the builder— will have to split the price between the items in order to calculate how much tax is due (if he cannot do this, the entire supply is liable at the standard rate)." — [Official Report, 4 June 1984; Vol. 61, c. 84.] It does not need a great deal of imagination to see that the small builder, faced with such complexities and trying to work out what is VAT-able, and what is not, will put all the work down as being VAT-able. This is a serious anomaly about which I feel strongly, I am sure that hon. Members will agree that this should be dealt with through amendment.

The third aim of the amendment is to exempt from VAT the building alterations carried out for the benefit of disabled people, in buildings to which members of the public are admitted. We have spent a lot of time recently securing improvements in accessibiliy to public buildings. Many of these will not be affected by the Budget, because they are carried out by local authorities, which can reclaim VAT. However, there are other public buildings such as cinemas, theatres, post offices, banks and shops which need to be altered to accommodate the disabled. There is a real fear that the imposition of VAT will hinder the making of adaptations to benefit the disabled.

9 am

On costings, we all know the Treasury's answer to the claims put to it. Hon. Members have done a great deal of work and tabled questions and we now know that it is not possible for the Treasury or anyone else to estimate the cost of exempting the work covered in the amendments. However, we believe that the cost to the Treasury will be minimal while the benefit to charities and the disabled will be considerable. We have studied the general level of costs across the board, and believe that the loss of revenue involved would be not more than £1 million or £2 million. Such a move would remove the anomalies and confusion and alleviate the distress of the disabled who, after long years of campaigning to obtain relief from VAT, are now faced with VAT on building works.

The Chancellor, in his exemptions, has already reduced the potential loss of revenue to the Treasury that the amendments would create. I believe that the financial cost would be minimal and there would be a great social and financial benefit to the disabled. They do not have a choice about building alterations — they are an absolute necessity to a disabled person wishing to live an independent and satisfying life. I commend the amendments to the House and hope that my hon. Friend the Minister will accept that the disabled, who are already facing the problems of unemployment and economic distress, should not find themselves faced with further barriers to their integration in normal life

Mr. Dafydd Wigley (Caernarfon)

I support amendments Nos. 4 and 7 and warmly welcome what the hon. Member for Exeter (Mr. Hannam) said. The amendments are supported by hon. Members of all parties. They refer to a matter that has a broad consensus of support—that there should be more progress to facilitate access for the disabled into and out of buildings, and that we should be especially sensitive at this difficult time to the needs of the disabled who need to adapt their dwellings.

Amendment No. 7 refers to the three categories — first, a building to which members of the public may have access; secondly, changes undertaken by registered charities; and, thirdly, dwellings where disabled people live or are likely to live. Those three categories cover the areas that need special attention now.

The question of members of the public gaining access to buildings has been the subject of vexed and staccato progress during the past 10 to 15 years. Since the introduction of the Chronically Sick and Disabled Persons Act 1970, there has been a definite attempt to improve access to buildings for the disabled, but the intentions of the Act have not been fully carried out because of the non-enforceability of sections 4 to 8. Because of that, I introduced the Disabled Persons Act 1981. It is three years since that Act reached the statute book, but we have not made the full progress that we hoped to make on section 6 relating to building regulations to ensure that the disabled have access to new buildings.

As we have not yet even buttoned up the area covered by new buildings, that puts even greater pressure on ensuring that adaptations are made to existing buildings. We hope that fairly soon the Government will have made progress on building regulations for shops and offices. That will be a great step forward. When the provisions move forward even further to take in auditoria and places where people meet, we shall have made provision for new buildings. But that still leaves the vast majority of buildings untouched, and the likelihood of us being able to bring in regulations to enforce changes in existing buildings is somewhat remote.

Therefore, we must depend on the good will of those who own and manage existing buildings to make the necessary adaptations to enable disabled people to get in and out. Ramps are a small part of the total facilities that need to be provided. Disabled people should also be able to move freely within buildings. Corners should not be too sharp for wheelchairs to go round and doors should not be too narrow. Toilets for the disabled should be provided. In fact, most of the provisions defined by British Standard 5810 are the basis on which to act if we want to define the areas of provision for disabled people. Substantial costs are involvwed in such adaptations, and they will be even higher if VAT is added.

The Government have from time to time been criticised for their lack of speed in making progress over access to buildings for disabled people. If VAT is charged for adaptations to buildings, disabled people will feel that the Government are not making progress in the right direction rapidly enough, and are even moving backwards. There will be an additional disincentive for the owners of buildings to make these changes.

I appeal strongly to the Minister to accept these amendments in their entirety. He should not simply do so in favour of registered charities. The hon. Member for Exeter has described the position of registered charities. We are dealing with only one aspect of VAT in respect of registered charities, but that aspect can most easily be accommodated within the provisions of the Bill. We should also amend the Bill to allow incentives for adaptations to access into buildings and dwellings for disabled people.

The provision for changes in local authority-owned dwellings can be taken care of, as the hon. Member for Exeter has mentioned. It is part of Government policy, which is supported by all parties in the House, to have maximum integration of disabled people into the community, and to ensure that barriers are not put against them. Being integrated into the community means living in ordinary houses in ordinary neighbourhoods. That should be facilitated by every possible means.

Adaptations can be made to a person's home to enable him or her to remain there rather than to go into institutional care or into specially designated houses built by local authorities. It is advantageous to enable families to remain in their normal environment in their homes and area. That objective is shared by all hon. Members. Therefore, the addition of VAT to the cost of work that is undertaken to make that possible for such families is a step backwards and should be avoided.

Note (4)(ii)(c) of amendment No. 7 would allow the exemption of VAT on costs incurred in the adaptations of dwellings to meet the needs of disabled people. The three categories taken together are a worthwhile change to the Finance Bill. I hope that the Minister will reply in a positive manner. Such a response would be welcomed outside the House

Mr. Cormack

I endorse what has been said by my hon. Friend the Member for Exeter (Mr. Hannam) and by the hon. Member for Caernarfon (Mr. Wigley). They both spoke from deep knowledge and with a quiet passion. For me, their case was utterly convincing. I hope that my hon. Friend will feel as I did.

I rise to speak to amendments Nos. 8 and 9 in my name. I revert to the ca se that was made briefly but very forcefully by the hon. Member for Berwick-upon-Tweed (Mr. Beith). I infinitely regret that we need to have this debate at all. It is tragically ironic that we are having it in the very week that York minster has been so devastated by fire.

I can claim credentials of consistency in this matter.. in that, before VAT was even introduced, I waited upon the then Minister and sought to persuade him not to impose it on repairs to historic buildings. It seemed to me that that case had real merit, but in spite of the fact that I and colleagues in both Houses of Parliament have repeated the case time after time, successive Chancellors have been impervious to our pleas and have done nothing.

That is nonsense. I speak not only as someone with a great personal interest in these matters but as one who until recently was a member of Historic Buildings Council and who has for many years been a trustee of the Historic Churches Preservation Trust. I have always felt extremely angry when we have been making grants, either from public money in the case of the Historic Buildings Council, or from private money in the case of the trust, to know that the Chancellor was taking first 10 per cent., then 8 per cent. and then 15 per cent. That is utterly indefensible. Indeed, it becomes absurd when we are dealing with public money and taking away with one hand what we are giving with the other.

I wish to deal in some detail with these amendments, but before doing so I wish to refer again to York. I should like a categorical assurance from the Minister that there will be no question at all of the work at York minster being VAT-ed. That would be monstrous—

Mr. Wrigglesworth

These are repairs

Mr. Cormack

The hon. Gentleman interjects, "Repairs", and I fear the answer that I shall receive. However, I seek art unequivocal answer from the Dispatch Box. If it is 15 per cent. on top of whatever has to be raised, that is monstrous.

The figure of £1 million which has been bandied about is, I believe, hopelessly optimistic, given that the repair of the ceiling in another place cost three times that amount. It would be sanguine in the extreme to expect the repair at York minster to leave any change from £5 million, and I would not be a bit surprised if it went above that figure.

I revert to the amendment. A bad and indefensible situation was made totally intolerable by this year's Budget. Of all the things which the Chancellor did, many of which I applauded and some of which I criticised, this was the worst. Two aspects of the damaging effects have already been touched on — the effect on historic buildings and the effect on the disabled. Because of the eloquent pleas made by my hon. Friend the Member for Rutland and Melton (Mr. Latham) in Committee, the Minister—I pay tribute to him for it—promised to think about the matter and to try to come up with a concession. The House owes a debt both to my hon. Friend the Member for Rutland and Melton — I am sorry that indisposition prevented my being there to support him—and to the Minister for his response.

Although I do not for a moment doubt the Government's good intentions in seeking to meet the points that were made, the blunt fact is that they have made the situation only marginally better than it was when the Chancellor sat down after delivering his Budget speech.

I do not ask the Minister merely to take my word for that, although I hope that he will, as he is a fully subscribed member of the all-party heritage group, which I have the honour to chair, and is an attender at our functions. I therefore hope that he will take my word for it. But I pray in aid the Association of District Councils and, much more importantly — I know that it will forgive me for saying so, even though I am one of its vicepresidents—the new Historic Buildings and Monuments Commission. That body was set up by the Government to take over the work of the Ancient Monuments Board and the Historic Buildings Council, and was given new autonomy and a wider role. It has several commissioners of great expertise. I think of people of the experience and breadth of knowledge of Mr. Jeremy Benson, who is known to many hon. Members for his indefatigable beavering away at producing briefs for amendments in Committee. I hazard a guess that he is not a million miles away from where I stand.

9.15 am

Those commissioners, led by Lord Montagu and with the Duke of Gloucester as deputy chairman, amount to a pretty high-powered and impressive group of people. They have shown their autonomy and have flexed their muscles by telling my hon. Friend the Minister that he has made a terrible mistake which he has not yet put right. Hon. Members in all parts of the House will understand my sadness and my reason for wanting to say, "Away with VAT on all repairs and alterations to historic buildings —and if not all, at least those owned by charities". That is what I have campaigned for over the years. However, that is not possible within the terms of the amendments before us. Nevertheless, within those terms, we can put right the great wrong that my right hon. Friend the Chancellor of the Exchequer did when he delivered his Budget Speech. I sincerely hope that my hon. Friend the Minister will heed my words.

I should like to quote briefly from some notes and a letter sent out this week by the Association of District Councils. I dare say that I am not the only hon. Member to be in possession of a copy of the letter that was sent to the Minister. Doubtless he has read it with interest. The ADC, which is the body with real practical responsibility in this area, makes several extremely telling points. For example, it says that, although the Government's amendment will do something, it will leave a very real problem in conservation areas. That matter has already been touched on by the hon. Member for Berwick-upon-Tweed. It will, of course, leave a very real problem, in particular, for those buildings that are not listed. The whole concept of conservation areas will be torpedoed if we do not extend proper protection to all the buildings within such areas.

As the proposals of my right hon. Friend the Chancellor stand, there is no such protection for any building in a conservation area that is not listed. As the ADC says: The imposition of VAT on alterations and improvements to make them suitable for continued use will undermine long-established policies designed to maintain and enhance the character in Britain's conservation areas. Those of us who are privileged to have conservation areas in our constituencies can testify to the accuracy of that observation.

The ADC also says: The Government's amendment will also mean that VAT will be payable on alterations and improvements to listed buildings which do not require listed building consent. Particularly significant in this category are internal alterations and improvements to grade II buildings—it is precisely this type of alteration which is essential if uses are to be found for these buildings. That point has already been touched on, and it cannot be emphasised too strongly or underlined too many times.

The ADC concludes: The overall result of the Government's proposal is that rehabilitation projects generally will be less attractive and consequently demolition/new build will be relatively more attractive. Or, more likely, the potential investor will abandon such projects and go elsewhere—giving a further twist to the spiral of decay in Britain's architectural heritage. Some of us have had letters from Sir Lawrie Barratt who says that some projects that we all applaud could not have gone ahead if this measure had been in force a few months ago and that some projects will have to be abandoned.

We all know of constituency cases that will be affected. I am president of the Staffordshire historic buildings trust and I have sent the Chancellor details of projects that would be at risk.

I implore my hon. Friend the Minister of State to do something to put right the inadvertent wrong that the Government have done. I accept that it was inadvertent, but, even with the Government's welcome concession in the amendment, we are left with what could amount to a charter for the bulldozer and the demolition man—the sort of thing about which the late John Betjeman would have written a lament. How much we owe him for opening the eyes of the nation and how sad it is that the Government appear to have their eyes closed. This is an all-party issue and the Government's record has been commendable in many respects. Their action on Calke abbey has already been mentioned. I implore my hon. Friend the Minister of State to heed the words of the ADC and to listen to the HBMC commissioners who have been appointed to give the sort of advice that I am expressing. It is nonsense to appoint men and women of experience and expertise and to ignore them when they say, "You will do great damage." If our amendments are accepted, at least we shall revert to the status quo and we can recommence the battle to have this VAT nonsense done away with. I urge my hon. Friend to give a positive reply.

Mr. Robert Litherland (Manchester, Central)

I wish to register the anxieties of Manchester and all the major cities in the country. This part of the Bill requires scrutiny and amendment.

Manchester city council is worried that the imposition of VAT will impede all plans for refurbishment, not only of listed buildings, but of all buildings in the inner city. Poor cities such as Manchester have embarked on massive programmes of alterations, modernisation and refurbishment. The proposed imposition of VAT raises fears about the progress of such redevelopment plans.

A problem has arisen over an urban development grant scheme of conversion by a housing association of Granby house in Manchester, a grade II listed building. That former warehouse is being converted into 62 flats for sale. The project has been approved by the city council and accepted by the Secretary of State for the Environment. It was assumed that VAT would be waived.

The Chancellor wrote to my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Moms): The sale or long lease of a listed building by the builder or developer will be zero-rated if … more than 75 per cent. of the cost of the substantial reconstruction incurred is attributable to alteration work for which listed building consent has been given. That sounds fine, but Granby house has been inspected by the local VAT office which has identified works totalling about £407,000 that will be liable to VAT amounting to £61,185. The works include repairs to the roof, external repointing, replacement of internal plumbing and electrical services and repainting.

It is nonsense, in that if it had been newly painted, VAT would not have been charged. Because an old surface was painted over, VAT was chargeable. Those elements amount to just over 25 per cent. of the contract and therefore VAT is payable.

Any additional financial burden must be imposed on what is already a finely balanced project. The cost can only be met from a public sector grant and so part of it will fall on the local authority. The terms of the Chancellor's concession are narrower when applied to an actual scheme than when they are on paper. Next week the various committees of the town hall of Manchester will consider that matter. It is likely that further representations will be authorised.

It appears that the distinction being made by the local VAT inspectorate between repairs and refurbishment within major refurbishment projects for listed buildings, many of which are empty and run down, is imprecise and open to varying interpretations, especially in a city, such as Manchester, where there is an important heritage.

Many listed buildings require refurbishment. That will create an atmosphere of considerable uncertainty. If such schemes are given priority, all the necessary works for the schemes should be exempted from VAT. The imposition of such charges and charges for future refurbishment works will upset the fine financial balance of these schemes. They are developed and processed over a long period by all the parties involved, including the Department of the Environment.

The city council believes that it must add its voice to other representations which have been made against the proposal. I urge the Government to consider refurbishment schemes of buildings, such as are found in the inner-city area of Manchester and elsewhere, and to exempt them from this proposed charge. Failure to do that will produce an effect which is diametrically opposed to the Government's policies on the inner city. It will appear to be an abrogation of their responsibility

Mr. Neil Hamilton

I welcome the Government's concession on VAT for listed buildings, but I agree with my hon. Friends that it does not go far enough to reach its object. I cannot meet the baroque rotundity of my hon. Friend the Member for Staffordshire, South (Mr. Cormack), but he put the case well. I shall make two or three technical points to explain how I believe the new legislation can be improved and made to work through my amendments to amendment No. 6.

A test for qualifying for relief is that of substantial reconstruction, which is defined in the clause. The test can be met in one of two ways. One can meet the three quarters test—that three quarters of the cost of the scheme must be approved alteration work, for which listed building consent has been obtained.

The evidence given to me by those who practise in this area shows that that is too high a proportion for most of the works we hope to exempt from VAT.

It is vital that the 75 per cent. proportion is reduced, or developers will inevitably be driven to the damaging alternative test to ensure that their schemes are zero-rated. The alternative test is to gut the building completely sc that only the exterior walls and features remain. I cannot image a more destructive alternative nor a more destructive incentive to developers to go the whole hog and rob an historic building of its real character.

9.30 am

I beg my hon. Friend to accept the logic of my remarks on this matter and, at the very least, to say, in response to the debate, that if he cannot take these amendments on board today, he will keep an eye on this matter from the start of the new legislation. If evidence becomes available, as I am convinced it soon will, that there is an incentive to over-restore and to destroy the character of buildings, I trust that he will immediately introduce changes to reduce the damaging effect of the legislation.

The Historic Buildings and Monuments Commission has been in touch with my hon. Friend and provided figures from Derbyshire Historic Buildings Trust to back what I have said this morning. It is not just airy flannel about expectations. Concrete information is available. The Derbyshire trust says that recent schemes that it has carried out, which met the previous non-statutory test of substantial reconstruction, failed by a large margin to meet the new three quarters test. The only scheme that came anywhere near meeting the new test involved the reconstruction of a roofless ruin without floors. That is also borne out by evidence of a major scheme for the conversion of a derelict historic mansion to provide flats. All those schemes, whether to provide housing or offices, should qualify as reconstruction and be zero-rated, because they are producing new accommodation by the creative restoration and adoptation of disused and abandoned historic buildings.

I urge my hon. Friend the Minister to consider, as an alternative, retaining the existing non-statutory test, which is the import of the amendment in the name of my hon. Friend the Member for Uxbridge (Mr. Shersby). If he is not minded to accept my amendment, perhaps he will consider that one.

Another problem arises with a VAT leaflet, which was admittedly produced in a hurry because this business has come upon us at the last minute. I agree with my hon. Friend the Member for Staffordshire, South that that is to be regretted. The VAT leaflet, which gives advice to builders on how to qualify for exemption, is wrong in many places and requires thorough revision. It contains a serious error that could torpedo the scheme, in so far as it could be said to work at all. I am sorry to weary the House with the detail, but it is vital to inform the House of this. In page 2, paragraph 2, the Customs and Excise seems to be making a distinction between the need for and the granting of listed building consent, as though one could grant listed building consent without a need for it. The import of the paragraph is that the Customs and Excise will set itself up as the arbiter of what qualifies for listed building consent, not the local authorities upon which that duty is devolved.

I urge my hon. Friend to clarify the matter this morning and to say that there will be no attempt by the Customs and Excise to undermine the existing listed building consent system in the way that this leaflet does.

There are many other technical points which I have previously discussed with my hon. Friend, but I shall not detain the House longer at this hour. I hope that I shall be given assurances on the points that I have raised

Mr. Jim Craigen (Glasgow, Maryhill)

I wish to be associated with the concerns that have been expressed by hon. Members about the impact of VAT on historic buildings and measures to adapt premises for the disabled. I am particularly worried about the imposition of VAT for the first time on home improvements, particularly in view of the work that has been done to regenerate inner-city areas by the rehabilitation of houses.

The changes which the Government propose mean that it will be easier to bring in the bulldozer again to the inner-city areas because there is no VAT on new building or on demolition work, though VAT will be attached to the restoration of many inner-city dwellings. We must not forget that the heritage takes different forms. Commendable though it is to restore the heritage and improve our stately homes, there are thousands of ordinary homes throughout the country where the occupiers would like to make them more stately as premises in which to live.

Although the Chancellor is proposing a most significant change, what the Government will receive by way of revenue seems to represent a false economy. Figures have been advanced to suggest that for every additional £1 million spent by the Government on construction, we would create another 65 jobs in construction plus anything between 70 and 300 indirect jobs for architects, building suppliers and so on. We could also have another 45 rehabilitated homes.

I was disappointed that amendment No. 191 was not selected because it would have dealt with the problems facing housing associations, particularly in the west of Scotland. In recent correspondence from the Minister responsible for housing at the Scottish Office, he agreed with the figure put forward by the housing associations as to the loss to the rehabilitation programme in Scotland arising from the Government's proposals. The Minister said that, at £4 million, the figure was about right. It represents a sizeable underhand cut in the allocation of funds for many inner city projects. I hope therefore that the Government will think again about the impact of VAT on home improvements

Mr. Michael Latham (Rutland and Melton)

I begin by declaring my interest as a builder. The amendments standing in my name would alter the proposals of my hon. Friend the Member for Staffordshire, South (Mr. Cormack). I wish to express my sincere thanks to the Minister of State for the positive way in which he responded to my original amendments in Committee of the whole House on 30 April and the detailed proposals which he put forward in his written answer to me on 18 May.

It is essential that there should be safeguards to protect the heritage. It has enough enemies already, without giving them a financial incentive to knock down Britain's street scene at the same time. I accept, reluctantly, that the concession must be tightly drawn to minimise loss of revenue. I also agree with the Government, for example, that His Grace the Duke of Omnium should not have zero rating for central heating or double glazing for Omnium castle if Joe Bloggs or Dave Spart down the road must pay for it for 35 Acacia road. That is why I support amendment No. 9.

The VAT leaflet is wrong about the listed building consent, which applies not only to structural works but to anything which affects the character of the building. Planning officers cannot be expected to implement VAT laws or vice-versa. The obvious way to deal with the problem is to accept amendment No. 9, to let the exemption from VAT be triggered by producing a listed buidling consent and then to let the Minister make orders under the VAT legislation simultaneously with Royal Assent of this measure, which would exclude double glazing, fitted kitchens, central heating and other luxuries which would benefit the standard of amenity of his grace the Duke of Omnium castle but would mean that the structural work, which would be important to the building rather than to his grace personally, would be zero rated and the heritage preserved.

Four of my amendments to amendments—(a) and (c) in each case — are purely technical and have been overtaken by the tabling of amendment No. 5 by my right hon. Friend the Chancellor of the Exchequer. If my right hon. Friend were to accept the substantive amendments he would need to accept my sub-amendments as well.

Amendment (b) to amendment No. 8 is more substantial. My hon. Friend the Member for Staffordshire, South wishes to reduce the Government's three quarters test to one of two thirds. He wants also to eliminate what is called the gutter's charter. That is the purpose of amendment No. 8. Over the weekend it became increasingly clear to the Historic Buildings and Monuments Commission — I pay tribute to the outstanding work that has been done on the Bill by Jeremy Benson and Peter Rumble — that a reduction to two thirds would not be enough. My sub-amendment would reduce the test to one half. The figures that I shall present to the House substantiate beyond question the need to make this further concession.

The House will recall that, even after my amendment, the test would require that 50 per cent. of the work—possibly including civil engineering site work such as drives and drains — would have to be on alterations needing and having obtained listed building consent. I shall give the House a couple of figures which have been referred to briefly by my hon. Friend the Member for Tatton (Mr. Hamilton). The figures come from the Derbyshire historic buildings trust. Under the old 50 per cent. test the railway cottages at Derby would have passed at 55 per cent. Under the Government's new 75 per cent. test they would fail at 36.5 per cent.

Another example is No. 1, The Dale, Wirksworth. Under the old 50 per cent. test, the work would have come to £11,500 and the property would have passed at 34 per cent. The theoretical test result under the new 75 per cent. test would have been a failure because the building would have obtained only 53 per cent. Another example in Newcastle-under-Lyme would have passed at 55.2 per cent. under the old 50 per cent. test but would fail substantially under the new test because it would obtain only 26 per cent.

I suggest to my hon. Friend the Minister that these are serious figures that show the need for a further concession. We do not want developers or restorers to opt for the gutting alternative unless the building is already a derelict shell. We certainly do not want any financial incentive for them to do so.

My hon. Friend the Minister of State, who received Mr. Benson, my hon. Friend the Member for Tatton and myself most courteously on Monday at the Treasury, wants genuinely to help the heritage. He knows that the VAT leaflet will have to be redrafted anyway as it is incorrect and he knows also that there has been some misunderstanding between Customs and Excise and the Heritage Commission. If he makes this small further concession today, honour will be satisfied all round and he will have demonstrated fully his determination to keep the spirit as well as the letter of the concession that he promised to my major amendment, which was supported on both sides of the House two and half months ago

Mr. Stephen Ross

I shall be brief in supporting what the hon. Member for Rutland and Melton (Mr. Latham) has said and in urging the Minister to accept the amendments, which I consider to be essential. I am slightly strengthened in my feeling that he will be prepared to do so because when he moved the Government amendments and opened the debate he said that he was prepared to listen to the debate. I hope that he will do so.

Two or three years ago I formed a building preservation trust on the Isle of Wight, which we based on the Derbyshire trust. The trust has proceeded slowly and has raised about £70,000. It is engaged in its second alteration, having purchased a house of historic interest in Ryde which is to he converted into six flats. I do not believe that we shall be able to proceed with that project if the 75 per cent. rule remains. We shall be providing accommodation where it is badly needed at reasonable prices. If the amendment remains and we do not have a 50 per cent. rule, we shall probably be priced out. We have heard the example put by the hon. Member for Staffordshire, South (Mr. Cormack). Surely we must encourage what Sir Lawrie Barratt has been doing in making good use of some of our stately homes throughout the United Kingdom. I press upon hon. Members the great need for the amendment to be taken on board.

9.45 am
Mr. Michael Shersby (Uxbridge)

I rise to speak to my amendment (c) to amendment No. 6. As my hon. Friend the Member for Staffordshire, South (Mr. Cormack) said, schedule 6 is an "inadvertent wrong", and that is a good description. For some weeks, I have corresponded with my hon. Friend the Minister of State and other colleagues in an attempt to convey the deep feeling about the way in which the legislation will affect important buildings in my constituency. I am sure that his Department is taking an active interest in those buildings.

Under the existing rule, the cost of reconstruction work would be at least 50 per cent. of the cost of rebuilding the building in its present form. The rule was designed to allow zero rating for the sale or long lease of an existing building when it was being substantially reconstructed—in short, the builder or developer was doing work on such a scale as to amount to something not very different from new construction.

In the case of listed buildings, with the inherent restrictions imposed upon them, that was often difficult for the builder to achieve. The new 75 per cent. rule, which is theoretically intended to be broadly equivalent in effect to the existing 50 per cent. rule, penalises the restorer further. It would offer a greater disincentive to the restoration of architecturally or historically important buildings, since, by definition, the constraints on alteration or reconstruction work on such a building are considerable. They often prohibit the extent of work necessary to qualify for zero rating, and therefore ensure that VAT is irrecoverable, in most cases thereby substantially reducing the cost of the restoration project.

I hope that my hon. Friend the Minister will listen carefully to my points, because the problem is exemplified by Swakeleys house, a 17th century, grade 1 listed Jacobean mansion in my constituency, which is being saved from dereliction and decay and is being reconstructed to the highest standards under the careful scrutiny of the listing authority. The Swakeleys house project is the culmination of five years of hard slog by a group of my constituents .who have taken this amazing project on board. The project has been supported by people throughout this land from the very highest to the very lowest. It has the support of local government and has received encouragement from my right hon. Friend the Secretary of State for the Environment. I wish that I had similar encouragement in the replies that I received from my hon. Friend the Minister of State in trying to deal with this difficult matter.

Although it has been confirmed by the local Customs and Excise office that the restoration works fell comfortably within the old 50 per cent. test, it is apparent that under the new legislation the works which many laymen would regard as most substantial reconstruction would appear to fail the new 75 per cent. criterion. The project qualifies, therefore, under the new formula, even though, theoretically, the proposed new group A of the zero rating schedule is intended to be roughly equivalent in its effect to the 50 per cent. test for reconstructed buildings. Restorers of major listed buildings will be unable to reclaim the tax on the supply and disposal, and will be in a much worse position as a result, even if they had qualified under the old rule. That must surely be contrary to the spirit in which my hon. Friend the Minister introduced his amendment.

The owners of such a building are correctly forbidden to gut it. That point was made well by my hon. Friend the Member for Staffordshire, South. They are therefore unable to meet the criterion. I repeat, they are unable to do so. In fact, ironically, the more important the building is architecturally, and the more protected it is, the less likely it is that planning permission will be obtained for work that involves 75 per cent. alterations.

I cannot help wondering how the Treasury, when it framed the amendment, thought that planning permission could be obtained for 75 per cent. alterations. It seems that there is a lack of understanding among the officials and Ministers concerned about what the work involves. They are setting a test that it is impossible to meet. As my hon. Friend and others have said, such alterations virtually amount to gutting. The developer or restorer is therefore in a Catch 22 situation.

The listing authorities will not permit the level of reconstruction required to qualify for zero rating and as a result a 15 per cent. tax penalty will be incurred, which cannot be reclaimed. I am sure that that cannot have been intended by my hon. Friend the Minister when he framed the amendment. Much of the work that is essential in the restoration of listed buildings, such as Swakeleys house, would not contribute towards meeting the 75 per cent. tax, although the restoration standard required by the listing authorities and the potential user of the building demands that it be done to first-class standards.

For example, extensive and expensive renovation of external leadwork, decorative external rendering and mural painting would weigh against the restorer in this situation. While the inability to reclaim VAT is a severe problem for the developer, the percentage of total revenue obtained from restoration of such listed buildings for the nation will in fact be minuscule in the context of the revenue earned from the total catchment area at which it is directed. When he replies, perhaps my hon. Friend the Minister will be kind enough to tell the House what the difference in revenue will be, taking into account the effect on buildings, such as Swakeleys house and the many other wonderful historic buildings to which hon. Members on both sides of the House have referred during the debate.

This relatively minute amount in the context of the nation's tax revenue will be dramatically detrimental to securing the future of the nation's decaying architectural heritage of listed buildings since, for the individual restorer, it is material and significant. The penalty on the restorer of now being unable to reclaim his VAT under the proposed new legislation, even if he originally met the 50 per cent. rule, could, and in many cases will, discourage such restorers from contemplating or undertaking the type of work that is being carried out in my constituency and elsewhere throughout the country because the added tax penalty incurred can amount to several hundred thousand pounds on one project alone. I put that case to my hon. Friend, referring particularly to Swakeleys. There might be an additional tax penalty of several hundred thousand pounds. Such a penalty is just what is needed to torpedo a project that will save a building that is quite unique. Such a penalty will not be warmly welcomed by my constituents, who have worked so hard and for so long for a fine objective.

This further discouragement will inevitably lead restorers to seek extensive reconstruction, or even full or partial demolition, to qualify and will provide a greater financial argument against the listing authorities, the objectives of which are, of course, to encourage repair maintenance without substantial alteration or reconstruction.

If it is not possible totally to zero rate the supply of any listed building, the test for whether a listed building has been substantially reconstructed should be no more onerous than in the past. I ask my hon. Friend to take that point on board.

Attempts to put into statutory form the tests that the Customs and Excise previously applied in relation to whether any building had been substantially reconstructed are contained in my amendment (c). I hope that the Minister will be able to promise some relief. I should make it clear to him that the strength of feeling, not just on both sides of the House but in our constituencies, is such that, if he cannot give a helpful reply, it may be necessary to test opinion in the House so that those of us who have worked so long for our heritage will know which hon. Members feel strongly about this matter and are prepared to vote accordingly

Mr. Tam Dalyell (Linlithgow)

Having been a member of 11 Finance Bill Committees, I know how irritating it is when hon. Members who were not on the Committee breeze in at the last moment and take up time in debates on the Floor of the House. Therefore, I shall be brief.

As the House knows, I have connections with both the Historic Buildings Council in Scotland through my wife's membership, and the Scottish National Trust. Heritage interests in Scotland are extremely concerned about the 75 per cent. test. I have also given notice, as no doubt have other hon. Members, that I intend to refer to the Benson memorandum.

The 75 per cent. test is complex and may prove inequitable in operation or impossible for developers to achieve. Are the Government sure that it is workable at all? Regardless of whether it is desirable, are the Government sure that it is workable? Above all, we need a simple test. The non-statutory 50 per cent. rule that used to be applied in deciding whether a refurbishment scheme could be treated in effect as a new development may have caused difficulties, but the underlying principle was much fairer. The answer must surely be not to legislate on the lines of the Government's two tests but to retain the non-statutory interpretation of what is to be treated as a substantially reconstructed building. We believe that that is far more realistic. A sensible basis for such a test would be that the total cost of refurbishment and restoration—that is, repairs and alterations, new work and fittings—should be at least half the cost of providing a similar amount of new accommodation.

Hon. Members who are suspicious of the power of the heritage lobby should reflect that funds provided by the State in this way, which may be substantial—I shall not repeat the comments made by the hon. Member for Rutland and Melton (Mr. Latham) to whom I listened carefully—create labour-intensive employment, as my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) pointed out. It is a crying shame that skilled craftsmen, who could contribute greatly to the heritage, are out of work. Therefore, if there is any feeling that the formidably organised heritage lobby is pushing at doors when others less effectively organised have an equally good case, it should be remembered that in terms of the employment of skilled people the amendment is absolutely legitimate and desirable.

To their credit, Conservative Members have spoken out on this. I hope that if the Minister cannot promise a speedy review within the next fortnight or so, or better still a decision on the 50 per cent. test here and now, Conservative Members will press the matter and join us in the Lobby.

Sir Hugh Rossi (Hornsey and Wood Green)

I shall not detain the House for more than a few moments as I know that hon. Members are anxious to get to bed after a very long night, but I must add my voice to those of my hon. Friends who have urged my hon. Friend the Minister to make a concession in favour of the disabled and the charities working for them. My hon. Friend the Minister will recall that I raised this with him in Committee on 30 April. Since then, as the thick file in my hand betokens, I have engaged in correspondence with him on these matters. I have written to him on behalf of the Cheshire Homes, the Jewish Blind Society, the Methodist Homes for the Aged, the Muswell Hill Society of Friends and the Abbeyfield North London Society, all of which will lose many thousands of pounds if VAT is imposed upon the adaptation of buildings for the disabled and the aged.

10 am

My hon. Friend's response has been very unsatisfactory. He does not seem to be concerned about the merits or the needs of those bodies or of the disabled. He seems to be concerned primarily to maintain the neat symmetry of this tax and to ensure that no exemptions are made that might spoil the way in which the tax would operate.

My hon. Friend seems to overlook the fact that this fiscal imposition upon charities will hinder their work. The more money they have to pay to the Exchequer, the less they will be able to devote to the needs of the most disadvantaged sections of our community. The Government's policy is very short-sighted. Unless the voluntary organisations are given every assistance in carrying out their work, and are not impeded in doing it by fiscal impositions, the people whom they help will have to turn to society as a whole. They will have to look to the state—to the DHSS and to the local authorities. Even greater public expenditure will then be required because we all know from experience of these matters over many years that the voluntary organisations frequently perform these tasks much more efficiently—and always much more economically—than any organ of the state. I urge my hon. Friend to think again. Although I am reluctant to do so on such a matter, I will, if need be, join my hon. Friend the Member for Exeter (Mr. Hannam) and vote for his amendment

Mr. Robin Maxwell-Hyslop (Tiverton)

What this debate shows is how little the Treasury knows about reality. The phrase "the price of everything and value of nothing" comes to mind once again. Until we hear my hon. Friend's reply, we shall not know whether Treasury Ministers realise what they will be doing if they turn down the amendment of my hon. Friend the Member for Exeter (Mr. Hannam). Do they realise that, although a ramp can be zero-rated, the facility to open the door cannot; that a downstairs lavatory can be altered to let a wheelchair in, but a lavatory upstairs cannot?

I should like to believe that my right hon. and hon. Friends were not aware of this nonsense, but, after this debate, they will not be able to say that the regulations were drafted by officials who concealed from them their true effect. The purpose of debates such as this is to bring home to Ministers what the fine print means in terms of real life.

Because of constrictions of time, the whole meaning of the regulations has not been brought home to Ministers. A disabled person in a two-storey house may need a lift, but the installation of the lift will not be covered by the VAT concession. Did my hon. Friend's officials not tell him that, or has he been knowingly resisting pressure of the kind embodied in the amendment — knowing that VAT will be charged on the installation of a lift and on the alteration to the entrance of an upstairs lavatory to let a wheelchair in? Did my hon. Friend know about that when the regulations were drafted., or did he not? I should like a clear answer to that question. I prefer to believe that he did not know, but that certainly cannot be said at the conclusion of this debate

Mr. Tim Yeo (Suffolk, South)

I wish to speak briefly in support of amendment No. 7.

My anxiety arises from the problem of VAT in relation to charities. As chairman of the charities VAT reform group, which is supported by more than 300 of the country's leading charities covering all forms of charitable activity, I have long pleaded with the Treasury to grant complete relief. I deplore the fact that the framing of the Budget resolutions this year have prevented our debating an amendment that would bring about such relief.

Amendment No. 7 goes part of the way to removing the burden of VAT on charities. The details have already been set out succintly by my hon. Friend the Member for Exeter (Mr. Hannam) and by the hon. Member for Caernarfon (Mr. Wigley). I shall not go into the figures, but I wish to stress that this year's Budget has greatly increased the burden of VAT on charities because the fiscal philosophy of the Government is to shift the burden of taxation from direct to indirect tax. I entirely support that philosophy, but it has a damaging effect on one group of organisations which are already exempt from income tax. When indirect taxes are raised, they get no compensating benefits as they pay no direct tax. Some charities will soon find it advantageous, from a tax point of view, to deregister because their VAT payments exceed the amount of tax that they can recover on convenants and investments. That would be absurd for a Government who believe in the voluntary sector being supported.

Buildings are a major item of expenditure for charities, and acceptance of amendment No. 7 would at least partly restore what appertained before the Budget, bad though that was. However, it would be a step in the right direction. I urge my hon. Friend to accept the amendment

Mr. Rooker

I rise merely to lend the support of the Opposition to any and all of these amendments.

We are extremely grateful to the Minister for coming back, following his original commitment in Committee on the Floor of the House. If ever there was an example of the force of the argument being targeted in by the brevity of speeches, it is the one to which we have just listened. The Minister has been made aware by hon. Members on both sides of the House of the arguments in regard to the disabled. I refer particularly to those advanced by the hon. Member for Berwick-upon-Tweed (Mr. Beith) and others.

There comes a time in the life of every Minister when he is at the Dispatch Box when he has a chance to grab the issue and act immediately. I do not think that hon. Members should have to wait for the Finance (No. 3) Bill, which will undoubtedly come later in the year, to deal with this matter.

Mr. Hayhoe

This has been an extremely useful and constructive debate. Points have been made succinctly. I shall try to reply to as many of them as I can, but I am sure that hon. Members realise that so many have been raised that I shall miss some, so I shall write to the hon. Members concerned about them.

The amendments and the speeches fall naturally into three groups. The first arises from the main point of the hon. Member for Berwick-upon-Tweed (Mr. Beith), which is covered by amendment (a) to Government amendment No. 6. It extends the concession considerably beyond listed buildings to include any building in a conservation area, any school, any village, community or church hall and any church that is not a listed building

Mr. James Couchman (Gillingham)

I had intended to speak briefly in the debate but did not do so. On the latter point, I draw to my hon. Friend's attention the letter that he wrote to me last week resisting my blandishments on behalf of a church in my constituency. An appeal has raised about £50,000 out of the £70,000 needed for the brave modernisation programme, but is now faced with a bill for £10,500-worth of VAT to be raised by voluntary subscription. I ask my hon. Friend for a concession in this direction

Mr. Hayhoe

I know that others of my hon. Friends have also pleaded the case for an extension of the concession to conservation areas, but there are considerable difficulties, of which the first is cost. To make an extension of the listed building concession into the sectors suggested by the hon. Member for Berwick-upon-Tweed would cost tens of millions of pounds because of the numbers of buildings that would be covered. Secondly, a line has to be drawn somewhere, and I imagine there will always be arguments no matter where that line is drawn. The conservation areas are designated by local authorities according to fairly loose criteria. It seems undesirable to give relief from national taxation on the basis of what would be essentially local decisions, and decisions that could be taken purely with a view to the taxation implications

Mr. Cormack

Can my hon. Friend accept that what was annoying and inconvenient at 8 per cent. becomes penal and destructive at 15 per cent.? Can he also accept that in refurbishing the housing stock—I hate to use the phrase—we are doing a great service to the nation?

Mr. Hayhoe

I hope that, in his turn, my hon. Friend will appreciate that the concession that he is seeking would probably cost tens of millions of pounds. There is obviously only a vague idea as to how much advantage would be taken of it, and while we shall consider the points that have been made, I cannot hold out any hope of a change at this stage in the Budget which would lead to such a major cost.

There have been a series of speeches about the concessions on listed buildings that I have announced. There have been arguments about the criteria of the four walls, which have been described as a gutters' charter, although I should not accept such an emotive phrase. It has been said that this is a dangerous and bad thing, and a bad test to have within the concession. However, I believe that, for a variety of reasons, cases will occur where, although a building is listed, it has no internal features that are appropriate for preservation. Interiors can be destroyed by fire, and I shall return to the tragedy at York minster later. There may have been damage by previous occupants or the interior may be unsuitable for the new purpose, for example, when warehouses are turned into flats.

Therefore, it seems to make sound sense to have a simple factual test, which would save businesses and the Customs and Excise detailed calculations and arguments about costing. The test is simple and practical, and has been welcomed by the British Property Federation. It has no sinister purpose and, in the Government's view, it can happily run in harness with the other cost-based tests, to which I shall return. That test contains the flexibility necessary to cater for buildings where the external features are retained.

If the overwhelming view of those concerned in these matters is, on reflection, that the four-wall test should be defeated, I shall take account of that. However, I hope that this debate will be considered and people will reflect on the points that have been made. I shall be open to observations on those counts.

The amendment tabled by my hon. Friend the Member for Uxbridge (Mr. Shersby) deals with reversion to the 50 per cent. test. When I announced the terms of the listed building relief, I said that the new 75 per cent. test, applied to the more restricted category of listed buildings, was intended to be roughly equivalent in its effect to the old 50 per cent. test. Comparisons are necessarily difficult. The 75 per cent. figure will be considered in the light of what has been said and the evidence that has been supplied.

10.15 am

The issue at this stage is not the percentage but the basis of the test. The Government's conclusion is that the 50 per cent. test was faulty both in its conception and in its operation. It relied upon a comparison of the actual cost of reconstruction, excluding repair and maintenance, with the developer's estimate of the notional cost of erecting the building from scratch in its new form. It is always difficult for the Customs and Excise to verify such estimates, especially for historic buildings, as the estimates often fail to take into account the true cost of replacing old features with modern materials and using modern methods and skills. As a result, they are often unrealistically low.

My hon. Friend referred to the imaginative project in his constituency where the preliminary judgment is that it would have passed the 50 per cent. test but will fail the 75 per cent. test. In a letter I wrote last month, the company was invited to let the Customs and Excise examine the detailed figures. The details have just been received, and are being reviewed.

I want to refer to the relationship between the new 75 per cent. test and the old 50 per cent. test. In announcing the listed building concessions, I said that it was intended that the effect of the new test should be roughly equivalent to that of the old test. I outlined the unsatisfactory nature of the old test. Some six or seven cases, including the one mentioned by my hon. Friend the Member for Uxbridge and those referred to by my hon. Friend the Member for Rutland and Melton (Mr. Latham), have been put to me during the past week. It is said that all of them would have passed the 50 per cent. test but would fail the 75 per cent. test. They are being carefully examined to determine whether projects that are properly works of reconstruction, as opposed to refurbishment for rehabilitation, would have passed the 50 per cent. test but would fail the 75 per cent. test.

I give the House the clear assurance that if I am persuaded that some lower figure than 75 per cent. is required to provide that broad equivalent that I promised to the House when I announced the detailed concessions, I shall return to the House by means of a Treasury order, subject to the negative procedure, to change the 75 per cent. figure. I stand by what I said—that the new 75 per cent. test should be broadly equivalent to the old test. If it is not, a change will be made. I hope that the House agrees that that is a reasonable and proper response to the points that have been put to me

Mr. Dalyell

I should like to ask the Minister about the time scale of that assurance. I am told by Jeremy Benson and many others that decisions are being taken here and now to demolish, in two or three weeks, rather than five or six months. What is the time scale of the Minister's decision-making?

Mr. Hayhoe

The time scale will be in relation to our examination of the examples that have been put to us, and some others. I hope that the response will be fairly speedy on the matter, and that what I have said today will be relayed to those who may have been acting precipitately in the light of a misunderstanding. I hope that they will recognise that I and the Government stand by what I said in the earlier announcement of the concession, and that the change will be made, if that is required. As the hon. Gentleman knows, it does not have to wait until after Parliament returns from the Recess. The procedure can be followed and be effective while the House is in recess. It will he subject to negative procedure when the House returns. There is no problem over the Recess

Mr. Cormack

I am most grateful to the Minister. What he says is helpful and important. Can he guarantee absolutely that there will be a maintenance of the status quo, so to speak, which is really the test, and that the matter will be resolved by the end of August at the latest?

Mr. Hayhoe

I shall stand on the words that I used, rather than those of someone else. I always think that that is better, so that misunderstandings do not arise. I used my words carefully in my announcement in the Parliamentary answer. I shall stand by that, and my reaction to the comments made during this debate.

Amendments (f) and (g) deal with the question whether alterations require and have obtained building consent. That is an important point. As my hon. Friend the Member for Tatton (Mr. Hamilton) said, it has given rise to genuine misunderstandings. Reference was made to the letters that have come to me from the Association of District Councils on this point. The letter said: I hope you will feel able to say in the debate on report in line with your parliamentary answer on 18 May that zero rating will apply to any alteration that requires and has received listed building consent from the appropriate planning authority. I gladly feel able to say that and to reaffirm what the association has asked. The association went on to ask—this is in relation to the point raised by several hon. Members—whether the Customs and Excise was setting itself up as an arbiter of listed building consent. The association asked whether listed building consent, if that is given by a local planning authority, would be regarded as evidence that consent was required. Generally, I accept that that would be so. It would only be in the most exceptional case that one might be led to believe that it would not. Generally, if consent has been given, that would be regarded as evidence that that consent was required and that the requirements of the amendment would then have been met

Mr. Neil Hamilton

I am a little worried that my hon. Friend considers that there might be exceptions to the rule that the grant of the certificate on listed building consent might not always be enough to satisfy the Customs and Excise that listed building consent was needed. My hon. Friend is not exactly giving me 100 per cent. of what I was hoping for

Mr. Hayhoe

One should always retain reservations for exceptional circumstances. On reflection, my hon. Friend may find that I have gone a long way to meet the requests that have been made.

My hon. Friends the Members for Exeter (Mr. Hannam) and for Hornsey and Wood Green (Sir H. Rossi) and the hon. Member for Caernarfon (Mr. Wigley) and others are in tune with the representations which have been made by the all-party disablement group and which have been conveyed to my right hon. Friend the Chancellor. My hon. Friend the Member for Exeter said that acceptance of the amendments would result in a small cost. I think that he estimated a cost of about £2 million to £3 million. Although it is not possible to say precisely how much the amendments would cost, I am advised that it is likely to be considerable as the reliefs are couched in wide terms. The best estimate that I can obtain is that the cost would run into tens of millions of pounds.

The Chancellor has put forward arguments to the all-party group about problems of definition and so on, but it is only fair to say that the Government's real objection, and the reason that the Chancellor has come to the decision that he has, albeit reluctantly because he accepts the wide and broad support within the House for the changes, has nothing to do with problems of administration or definition—those could be overcome; it is simply one of the revenue cost, which I have explained

Mr. Maxwell-Hyslop

My hon. Friend does not have to satisfy the House as to the quantum of the cost, but why the newly created cost should fall on the disabled rather than on the Treasury

Mr. Hayhoe

At this stage in the Finance Bill, as with all other amendments, it is necessary to look at the costs. My hon. Friend made a number of points that were clearly exercising his mind. He must have misunderstood the position. My hon. Friend the Member for Exeter gave the example of the widening of a doorway and the rehanging of the door as part of a necessary alteration to enable a disabled person to enter and he said that there would be difficulties over the zero rating. I must tell him that there would not. The installation of a stairlift for a disabled person, which we know from our constituencies are such a boon, will be zero rated. The widening of a door to an upstairs lavatory for a disabled person will be zero rated. Although the details of the concessions are as announced earlier this year, the Customs and Excise, with my authority, is always willing to consider cases on their merits where facilities are required other than on the ground floor—for example, where a disabled person sleeps upstairs and the existing facilities are on the ground floor. The matter is not being interpreted pedantically but in a fairly relaxed way.

I must reiterate that the overall concession that has been asked for, and which I am sure will be asked for again in interventions which will now come, is one which the Chancellor has given careful consideration to and he has decided, regrettably, that he cannot agree with it on cost grounds.

Sir Hugh Rossi

As cost is the only factor which has determined the Chancellor's refusal to give this exemption to charities seeking to support the disabled, has the Chancellor taken into account the inevitable additional expense which will now fall upon public bodies to give the support that the voluntary organisations will no longer be able to give, and has he considered that many of the voluntary organisations will inevitably seek an increase in their section 64 grants from the Department of Health and Social Security in order to maintain financial viability? That is the other side of the public expenditure equation. Can my hon. Friend satisfy me that that has been taken into account, as cost is the only criteria?

10.30 am
Mr. Hayhoe

My hon. Friend seems to assume that amendments Nos. 4 and 7 are concerned only with charities. They go much wider than that. I ask him to reflect upon the breadth of the amendments, but I assure him and other hon. Members that all the points which have been raised will be taken very carefully into consideration. I have already shown, by a concession that was granted in advance of the request for it, that this matter concerns the Government. I am sure that there will be a continuing dialogue

Mr. Wigley


Mr. Hayhoe

I must return to something that I began to say about York minster. Building repairs, as will be realized—

Mr. Wigley


Mr. Hayhoe

May I finish the point that I am making? The building repairs are, of course, in law liable to VAT at the standard rate, but the Government recognise the unique character of York minster and will wish to give full consideration to the VAT position as the full cost and other relevant factors—for example, the extent of insurance cover—becomes clear. I do not think that I can go beyond that, except to say that very careful consideration will be given.

There have been criticisms of the Customs and Excise leaflet. I accept the criticisms of the leaflet, which was produced in a hurry. It will be necessary for it to be looked at again. I hope that it will be done after full consultations have taken place with the heritage movement and with the local authority associations.

On the basis of what I have said, I am sorry that I must recommend my hon. Friends not to accept any amendments other than Government amendments Nos. 1, 5 and 6.

Amendment agreed to.

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