Value Added Tax

HC Deb 22 February 1995 vol 255 cc375-402 4.41 pm

The Paymaster General (Mr. David Heathcoat-Amory)

I beg to move, That the Value Added Tax (Construction of Buildings) Order 1995 (S.1., 1995, No. 280), dated 8th February 1995, a copy of which was laid before this House on 8th February, be approved.

Madam Deputy Speaker (Dame Janet Fookes)

I understand that with this it will be convenient to discuss the following motions: That the Value Added Tax (Protected Buildings) Order 1995 (S.I., 1995, No. 283), dated 8th February 1995, a copy of which was laid before this House on 8th February, be approved. That the Value Added Tax (Input Tax) (Amendment) Order 1995 (S.I., 1995, No. 281), dated 8th February 1995, a copy of which was laid before this House on 8th February, be approved. That the Value Added Tax (Buildings and Land) Order 1995 (S.I., 1995, No. 279), dated 8th February 1995, a copy of which was laid before this House on 8th February, be approved. That the Value Added Tax (Payments on Account) (Amendment) Order 1995 (S.I., 1995, No. 291), dated 8th February 1995, a copy of which was laid before this House on 9th February, be approved.

Mr. Heathcoat-Amory

There are five value added tax orders before the House. I shall first introduce three of them and then speak to the remaining two separately. The first three are closely related and deal with VAT on the construction industry. It is a difficult and contentious area of VAT liability, but these measures together would deregulate, simplify and give greater certainty to the law. They also address many points of criticism made by VAT tribunals in recent years.

The majority of the changes were the subject of an announcement by my right hon. and learned Friend the Chancellor of the Exchequer on 21 July last year. Draft legislation was then exposed for comment and an extra-statutory concession was announced at that time which granted some of the main changes immediately.

The initial reaction to the changes from the building industry was very positive, in that many issues that had been the subject of innumerable, costly and time-consuming disputes were about to be resolved. Indeed, the president of the construction industry joint taxation committee wrote to my right hon. and learned Friend in the following terms: I and the whole of my committee were delighted with the news on the 21st July about these VAT changes to be introduced in your next Budget. It is particularly pleasing that the reforms have been given immediate effect by way of extra-statutory concession. Following the consultation exercise, the Government noted a number of good suggestions and also some legitimate concerns expressed by the industry. We have therefore made some suitable changes to the construction order which is now before the House.

The present law allows for the zero-rating of most goods and services in the course of the construction of a new house or flat and certain other limited categories of building. That and other provisions mean that the sale of all new houses is effectively VAT-free. Conversely, any work to an existing building, with the notable exception of listed buildings, is taxable. That means that a person who enlarges his house pays 17.5 per cent. on the cost of the work, as does the entrepreneur who converts a derelict factory into flats or the couple who convert a disused barn into a house. That has been the position.

The major change in the new construction order is to extend zero-rating to the conversion of non-residential buildings into houses and flats. That is a significant and welcome boost to the hard-pressed construction industry. It would also help the regeneration of inner-city areas by the creation of new, affordable housing.

Mr. William O'Brien (Normanton)

Will the Minister take into consideration the position of some charitable organisations which acquire buildings that need to be adapted into day centres? Is the Minister saying that, under the changed orders for VAT on building, any charitable organisation that acquires a building which requires alteration so that it may be used as a day centre to accommodate disabled people, elderly people and so on will not pay VAT on those conversions?

Mr. Heathcoat-Amory

The new concession covers the conversion of a non-residential building into a dwelling or collection of dwellings or residential accommodation. Therefore, it does not extend to the creation of a day centre. It is a major concession, but, if the hon. Gentleman believes that it does not go far enough, Madam Deputy Speaker, he may catch your eye and explain how far he would like it to go, and I shall endeavour, at the end of the debate, to tell the hon. Gentleman of the further reasoning that caused us to stop at dwellings and residential accommodation.

Usually, the benefit of zero-rating will be obtained when the property in question is sold for the first time, but we have made special provision for housing associations, which are often subject to restrictions on selling their housing stock. In those cases, the order will allow the builder to zero-rate his services. Likewise, someone who himself converts a building, such as a barn, into a dwelling will be able to recover the VAT that he has paid under an amended DIY housebuilders scheme.

I have mentioned that we aim for all houses to be effectively free of VAT, but that cannot necessarily apply to the contents of those houses. It would be grossly unfair to the general public and retailers, and very expensive in revenue terms, if a new house could be sold with tax-free items such as carpets, curtains or white goods such as refrigerators and freezers. Since 1973, we have therefore blocked the VAT relief on certain items incorporated into a house.

The order relaxes that list of blocked goods and now reflects the requirements of the building regulations. Whereas previously all electrical items were blocked, developers can now obtain tax-free installation in a new building of all ventilation equipment, and safety equipment such as burglar alarms, lifts, hoists and waste disposal units. Those changes have been warmly welcomed.

The order changes the tax treatment of new charity annexes to an existing building. Currently, when a new annexe is built for non-business charity purposes which is detached from any other building and can function independently of that building, the construction is zero-rated for VAT purposes. Alternatively, if the annexe is built adjacent to the original building and connected by doors or corridors, the construction is deemed to be work to an existing building and is taxed. Effectively, the change of law will ignore the connecting door or corridor and apply the same tax treatment to both types of annexes. It is not, however, intended to give tax-free treatment to enlargements or extensions to charity buildings.

The order also addresses a particular difficulty that tribunals have experienced in deciding whether an existing building remained following dereliction or part demolition. If there was a building, the work to it was taxable, but if the tribunal decided that no building remained, the new building could be zero rated.

There is no definition in law and tribunals have tried to rely on the facts of each case and their perception of the final building. The order gives a legal definition of when a building ceases to be an existing building. The original draft, published last July, required a clear site to be left following demolition. Following representations received from the industry, the order now allows one facade, or, on a corner site, two facades, to be retained if they are required by local planning permission.

Because of the new rules on conversions, the bulk of the problem has been resolved. The effect of the change is, therefore, limited to work to existing dwellings. In the past VAT tribunals have been persuaded that zero rating is proper for the creation of a new house by, for example, incorporating a small house into a much larger one. That will no longer be possible and, generally, any work of whatever degree to an existing dwelling will be taxable.

The second order deals with protected or, to use a more common term, listed buildings. A new order is necessary as this group has always reflected the main conditions contained in the construction group that I have just discussed. In addition, two changes have been made. Religious bodies that wish to alter a listed building are exempt from planning permission provided that they set up internal procedures that satisfy the Department of National Heritage. Other denominations must seek normal listed building approval from the local planning authorities. The order incorporates recent changes in this ecclesiastical exemption.

The order clarifies the definition of approved alterations to a listed building. It has always been the case that repairs are taxable but that alterations are zero-rated. Some hon. Members will recall that when Chancellor Lawson abolished zero rating for alterations to most buildings in 1984, the House was persuaded that listed buildings should retain such zero rating. The borderline has always been difficult. Tax advisers increasingly claim that all work that changes the fabric of a building to any minute degree is an alteration, provided that it has been approved by the local authority.

Some confusion now reigns because some VAT tribunal chairman have agreed with that argument while others have not. I can give the House a few examples of the difficulties caused. When a thatched roof is replaced with one of a different reed, it has been claimed that the new type of reed alters the roof rather than repairs it. In another case, the replacement of a leaky flat roof covered by a single lead sheet with a sectional roof using modern methods was claimed to be an alteration rather than a repair. An even more bizarre example is where the chemical impregnation of a wall for damp-proofing purposes, which changed the molecular structure of the bricks, was claimed to be an alteration not a repair and was therefore eligible for different VAT treatment.

I have mentioned the tax-free new house and the need to tax some of the contents such as fridges, carpets and so on. The input tax order closes a tax loophole whereby a procedure has been devised by tax advisers to allow commercial nursing homes in the private sector to acquire all their fixtures and fittings tax-free. I am sure that removing that avoidance device will excite little controversy in the House.

The first three orders form a package of measures that have been widely welcomed by the industry. In addition to significant new concessions, a general tidying-up exercise has resulted in considerable simplification and greater clarity of the law, which will be most helpful to the industry and administrators and will reduce costs on both sides. Contentious and costly litigation to tribunals and the courts will certainly be reduced.

The Value Added Tax (Buildings and Land) Order results from a consultation undertaken by Customs with businesses and professional advisers to see how the VAT treatment of commercial property transactions could be simplified. The order makes significant changes, which will be welcomed by businesses large and small. It is deregulatory and will cause pages of complex legislation to disappear.

I shall set out what the order seeks to achieve. In a sentence, the order makes simpler and more flexible the election to waive exemption, which is sometimes called the option to tax, and abolishes the self-supply of commercial property. The option to tax is a relieving measure. By allowing landlords to choose to tax supplies of their property, it permits recovery of input tax that could not otherwise be reclaimed.

First, existing provisions do not allow the cancellation of an option. The order assists those who opt to tax in haste and those who, in the fullness of time, wish to change their minds. It will allow withdrawal of an option to tax within three months, if it has not been put into practical effect, and cancellation in any case after 20 years subject to Customs' permission.

Secondly, the order offers businesses more discretion in determining the scope of their option. Currently, an option automatically covers most groups of buildings and entire estates. From 1 March 1995, businesses will be able to tax more selectively so that, for example, each building at a business park and discrete areas of agricultural land can be separately taxed.

I have decided to discontinue the complicated special rules for determining how much tax is due when an option to tax is first made. The normal rules will now apply. I also propose that an option can no longer be used to tax the pitch rent for a residential caravan, or the mooring fee for a residential houseboat, and to put those charges on the same footing as the ground rent for an ordinary dwelling.

Turning to the self-supply provisions briefly, the existing provisions require businesses making exempt supplies of, for instance, finance, insurance, health or education, to pay VAT to customs on the full cost of any building that they construct themselves. Usually that tax can be recovered only in part. The vast majority of responses to the Customs consultation asked for the abolition of those provisions and I have decided to abolish them altogether for any developments starting on or after 1 March 1995. Transitional provisions for existing buildings and those still under construction will continue until 1 March 1997. Those will protect in particular people who pointed out that they had secured funding for developments currently in progress on the basis of the existing rules.

The order greatly simplifies a difficult area of the tax within a framework that gives businesses the greatest possible choice. It abolishes a complicated and generally unpopular measure. The result is less regulation and greater flexibility for businesses, and I commend the order to the House.

Finally, I turn to the Value Added Tax (Payments on Account) (Amendment) Order. The existing payments on account scheme requires the largest VAT payers to make payments by monthly instalments of their VAT liability. The scheme was originally introduced to prevent an increase in the public sector borrowing requirement as a result of changes necessitated by the United Kingdom's entry into the single market. To maintain the PSBR position, it is necessary for the scheme to continue.

The order updates the 1993 payments on account order so that entry to the scheme and the amounts payable for 1995–96 are determined by the tax liability in the year 1993–94 rather than 1992–93. It also provides that, in future, the scheme will roll forward automatically on an annual basis, thus removing the need to lay fresh statutory instruments before the House each year to update the scheme.

In July last year, the Chancellor announced that the scheme would be aligned with the fiscal year so that businesses could start making payments on account for VAT periods beginning in April, May and June of each year rather than October, November and December. To effect that change, the current scheme was allowed to run for a further six months—to March this year-rather than being updated as previously. The Chancellor also announced that, when the scheme was next updated, the order would be amended to provide that future updates of the scheme would happen automatically each year. That would remove the need to lay fresh statutory instruments before the House.

The Value Added Tax (Payments on Account) (Amendment) Order 1995 gives effect to the two changes, and I commend the order to the House.

5.2 pm

Ms Dawn Primarolo (Bristol, South)

As the House will have realised from the Paymaster General's speech, the series of five VAT orders is highly complex. Understanding the orders—particularly their impact on the building industry and housing market—is akin to trying to wade through treacle, but there are specific issues that we wish to raise involving the Value Added Tax (Construction of Buildings) Order 1995. As the Paymaster General said, the orders result from tribunal cases, appeals and legal action, which can be fraught.

I specifically wish to refer to the impact of the orders on public sector housing. The homeless or destitute are not frequently seen at VAT tribunals appealing against the impact of the legislation on their rent levels—they are not seen at such tribunals at all. I want to explain why we believe that the construction of buildings order is detrimental to housing associations and why the Government, in trying to resolve one set of anomalies, have created another. I know that Customs and Excise officials have worked hard on the orders and have done their best to take on a range of issues, but we are not satisfied on several points and we shall oppose the order for those reasons.

To demonstrate the impact on public sector housing it is important to stress a number of points. Public sector housing is made of two sorts of housing: local authority housing stock and housing association housing stock. Their relationship is important and it is being drawn more tightly by the Government's housing policy, which enforces the transfer from local authorities to housing associations of the management of that stock.

Local authority housing stock is declining because it is being sold off through the right-to-buy scheme. Almost no new building is taking place in that sector. Housing associations account for 25 per cent. of all new dwellings in the UK and are developed partly through public funds, through the Housing Corporation, and partly through private finance. There are two sorts of housing association and the order affects them in different ways. There are those that are registered with the Housing Corporation under charitable rules and those that are registered under Housing Corporation rules as industrial and provident societies.

Housing associations are competitive, but their ethos is to help other housing associations, which are known as embryonic housing associations—social housing that cannot initially secure the finance needed to develop premises. The embryonic housing association piggy-backs on the larger housing association in order to secure the private finance that it needs. It is that relationship which is in danger of being undermined and damaged by the order if it is passed today.

Housing associations' core income is exempt from value added tax, which means that they cannot claim VAT on input costs. Housing associations suffer VAT on repairs, maintenance, major refurbishment and professional fees for developing new dwellings. That is a consequence of the VAT orders, and the same is not true for local authorities, which are excluded. That consequence has a detrimental affect on housing rent.

In future, housing associations are expected to take on local authority stock as local authorities are expected to divest themselves of that stock. There will be an increasing role for housing associations. The movement has two distinct ways of trying to deal with the VAT environment and how it places its contracts.

Housing associations are expected to cope with a VAT environment in which they are considered to be in the mainstream of VAT law. There are certain unique legislative concessions to their status. Because they are in the main stream, they are considered as businesses—the activity of collecting rental income from their tenants is their business. Their core income is exempt. Housing associations thus suffer from VAT. The ones that are VAT registered because of activities ancillary to their core income may claim credit or recover the tax only on costs associated directly or indirectly with generating that taxed income.

I do not want to go into too much detail about the specific provisions of the order. I want to show its impact and give some examples of how it could undermine new developments in housing associations.

Because of various factors, housing associations find that speculatively built housing is unsuitable for their tenants. Invariably, they are not converting a country barn into a country residence or worrying about different sorts of roofing but considering specific designs to meet the constraints of sites—which frequently involve difficulties—or to meet the specific needs of, for example, disabled people or people with special needs. Although housing associations develop some green-field sites, most developments are in urban areas, and carry difficulties. Professional fees and on costs can amount to 10 per cent. of the development cost.

The housing associations' traditional approach has been to opt for two sorts of building contracts. The first is the traditional contract, whereby one set of providers supplies professional services and a second set of providers undertakes the building work. That building work is zero-rated, but value added tax is imposed on professional services. The second type of contract is the design and build contract. Housing associations opt for a specific company which can provide all the professional and building services, and in that way the VAT can be absorbed.

However, that distorts the housing construction market because only contractors who can fulfil both functions can tender for the contracts. At a time when the Government and the Opposition want to see expansion of the construction sector, it is remiss of the Government to introduce an anomaly which will lock out a section of the building industry.

The legislation affects major interest for leases and will thus have a detrimental effect on housing associations. A "major interest" for leases is considered to be a period of 21 years or more. By granting a long lease, the developer of a dwelling can apply for a zero rate of VAT on the first rental payment, which allows all the VAT that is paid on professional fees to be recovered.

However, housing associations come under the control of the Housing Corporation and its rules prevent the granting of a major interest lease, except for shared ownership and right to buy. Therefore, housing associations that have assured and secured tenancies are exempt from VAT because of their short leaseholds. There is an obvious way around that problem, but the Government choose not to see it.

It is accepted that the current legislation is weak, and its interpretation has been stretched by various VAT tribunal decisions. However, the zero rating of dwellings has resulted in lower rental charges, and anything that disturbs or undermines that situation is clearly undesirable. By changing the legislation in effect to reverse tribunal decisions, which in many instances have provided the relief that the housing associations need, the Government are inadvertently damaging those associations. The strict interpretation of the new legislation could prohibit zero rating because the raft extends above ground level. That concerns the development and conversion of buildings as well as their rehabilitation.

The effect of the VAT rules—particularly those in the building and construction order—will mean that, although local authorities could recover VAT, they are prohibited from raising the finance to redevelop their properties and they are expected to transfer some of their properties to housing associations. However, housing associations could be inhibited in developing that stock because the private lender will he concerned that, as a result of the additional VAT imposed on refurbishment, the level of rent that would need to be charged could make the property unviable.

The legislation also inserts the word "first" in item 1, which means that the first tranche payment for the freehold sales will be exempt from VAT, allowing no VAT recovery. In Scotland, the law prohibits the granting of a longer lease for a residential building. Therefore, the shared ownership developments in Scotland will not be able to recover VAT incurred on the initial development, while their English equivalents can. That seems to be an unnecessary provision.

There are other instances where housing associations recover dwellings from long-lease holders as a contractual obligation. Those dwellings are then let on a further long lease and currently all the grants of long leases are zero-rated. In future, only the first will be zero-rated and the resultant cost could be as much as £400 per dwelling in irrecoverable VAT.

I have already explained the detrimental effect that the legislation could have on embryonic housing associations. The process involves a lead housing association taking on the development of property—the purchase of the land and the building of the dwellings—and then allowing the smaller housing association to manage that activity. The ownership is finally transferred to the smaller housing association when it is able to raise the necessary finance. The order will require VAT to be passed on in the cost to the embryonic associations, which, in turn, would push up their costs.

The question of homelessness and the role of housing associations as well as local authorities should be important to all hon. Members in the House. We regret that the Government are able to damage an already very fragile relationship through complex VAT legislation and, unfortunately, we believe that that is what the order does.

The concept of VAT seems to be flawed in the Value Added Tax (Protected Buildings) Order also. The order is specifically aimed at buildings of national heritage significance and it requires that relief be geared at alteration rather than preservation. The concept of that section of VAT law seeks to encourage the alteration of our national heritage buildings in order to claim back VAT, rather than maintain them through repairs.

The problem is that the zero-rating relief extends only to alterations. That is an historic problem and it is difficult to see how it could be solved. I am sure that many hon. Members have been lobbied recently by bishops, church wardens and others associated with the church about the terrible burden of paying VAT on repairs and maintenance. That measure has skewed access to our national heritage as many churches and cathedrals have now established an entry payment. The money is not collected particularly rigorously, but establishing the structure to collect it enables the churches to try to offset and reclaim some of their VAT payments.

I ask the Paymaster General to re-examine that issue because we are out of line with our European partners who protect their national heritage. It seems ridiculous that we seek to protect our national heritage by encouraging people to alter it.

In conclusion, the orders presented today—particularly the construction order—will damage housing associations, whether they are registered under charitable rules or not, and they could lead to higher rental charges. The Government have dressed them up as a series of technical changes, and technical changes are included in the orders as well. However, we intend to oppose the Value Added Tax (Construction of Buildings) Order because we believe that nothing should be allowed to undermine our crusade to tackle the scourge of homelessness and poor housing in our society. By undermining housing associations, the Government make our task more difficult.

5.20 pm

Mr. Barry Field (Isle of Wight)

May I first declare an interest that is not in the Register of Members' Interests? I live and have my constituency office in a listed building or, as Treasury-speak would have it, a protected building. I must say that, when the tide comes over our garden wall and the wind is in the north—the building sways with it—it feels extraordinarily like an unprotected building to me. I would prefer that the term "listed building" be used.

My hon. Friend the Paymaster General and I have been in correspondence about the anomalies to which the hon. Member for Bristol, South (Ms Primarolo) referred. There appears to be a tax incentive to alter a listed building, rather than to preserve it. The most celebrated case of that recently was when His Royal Highness the Duke of Edinburgh berated the local authority on the Isle of Wight for taking the Royal Yacht Squadron to task for fitting plastic windows into a listed building.

The extraordinary anomaly is that the Royal Yacht Squadron could recover the VAT for fitting the plastic windows because it was an alteration to a listed building, but it cannot—like many of us who occupy listed buildings—get any help with the additional costs of maintaining a part of our nation's heritage.

In correspondence, my hon. Friend prays in aid to me the fact that EC rules do not allow for an alteration to VAT once we have departed as a nation from the zero rate. He will recall the exchanges we had on Second Reading of the Finance Bill. I am sure he appreciates that I fully understand that rule.

The question about this order is whether he has actually tested that position with the EC. Has he suggested to the EC that, while we understand the rule that there should be no return, there could be a substitution? In the case to which I am referring, it would make so much more sense to substitute VAT relief for the maintenance of a protected building rather than for its alteration, for reasons which I am sure the House is aware of. I hope that my hon. Friend will be able to answer that point when he winds up.

I shall now transfer my attention to order No. 279 which, as my hon. Friend indicated, is known as the option to tax. The proposal is to retain the option as applying to buildings and all subsequent supplies, while introducing an ability to revoke the option after 20 years. The British Property Federation has sought to apply the option to individual supplies of a building, effectively at lease level. Revocation would automatically occur on expiry of the lease. The BPF also seeks revocation after ten years where the lease term is greater.

There have in the past been significant problems in defining the extent of a building for the purpose of the option, particularly in the context of complexes of buildings. The current proposals perpetuate the problems, although an attempt has been made to clarify the definition of a complex. It is the BPF's view that the new proposals will not simplify matters at all, since Customs has had great difficulty in drafting the new rules and litigation likely to be necessary to define them.

The BPF put forward proposals—echoed by many commentators in the property world—for an option at lease level, as it would entirely remove this area of uncertainty, while at the same time offering the property industry far greater flexibility to negotiate lease terms freely according to economic factors such as the tenants' ability to recover VAT, as happens successfully elsewhere in the EC.

The Minister's response to the proposal has been that it would be almost impossible to police. The BPF does not share that view. The necessary calculations to apportion input tax for buildings with mixed taxable and exempt supplies are already carried out for buildings of mixed commercial and non-commercial use, so many taxpayers and VAT control officers will be familiar with them.

Furthermore, Customs has expressed concern that smaller taxpayers will not be able to cope with such arrangements. The BPF points out that the taxpayer could opt for all his supplies of a building if he considered a mixture too complicated or could not otherwise satisfy Customs' requirements. The change to an option at lease level could be introduced in a way which took gradual effect as leases expired or new leases were granted.

Finally, the Minister's argument that revenue will suffer is—in the BPF's view—unfounded, since as many taxpayers are likely to opt in the knowledge that it would not bind them permanently as will de-opt. The 20-year revocation period currently offered will not take effect until the year 2009, and will therefore be of no practical value for many years to come. The BPF suggested a 10-year period would still not have immediate effect, but would allow scope for planning to meet changing economic circumstances in the shorter term.

The reason for refusing the 10-year period has been the fear of avoidance schemes which have been experienced by some EC members, principally where a lease—which must be negotiated between the parties at arm's length—provides no significant rent flowing until after the expiry of an initial ten-year option period, thus permitting the recovery of substantial input tax, while attracting minimal output tax.

The BPF's view is that the capital goods scheme contained in the general regulations enacted in accordance with article 20 of the EC's sixth directive which provides for input tax adjustments according to supplies made up to ten years after incurring the input tax affords protection for Customs.

In addition, the new orders propose that consent for revocation would have to be obtained through Customs (Article 4 (b) (5) (c)). Therefore, in cases of perceived avoidance, Customs could withhold its consent and the revenue would effectively be protected. My hon. Friend sees the orders as a measure of deregulation. I have to say to him that, having recently had personal experienced of this particular VAT minefield, I believe the proposals will almost inevitably have the opposite effect.

5.26 pm

Mr. Malcolm Bruce (Gordon)

The hon. Member for Bristol, South (Ms Primarolo) said that dealing with the orders was like wading through treacle, and I congratulate her on her perseverance. She highlighted a number of concerns, and there are one or two others which I wish to touch on.

It was also interesting to hear the comment of the hon. Member for the Isle of Wight (Mr. Field) about the fact that the order has been introduced as a form of deregulation. It would appear to be a difficult nettle to grasp, because, as soon as Ministers bring in variations, they are in danger of creating other anomalies and confusions and altering the balance, which would not be their intention.

Unfortunately, these are statutory instruments which are not amendable, which is the reason why—if we are dissatisfied with any of them—we are forced to vote against the whole instrument in an attempt to persuade the Government to come back with some revised thinking.

There are one or two questions which I would like to address to the Minister which might help to clarify the situation. It has been suggested that housing associations could be disadvantaged by the measure, because they will transfer from being exempt to zero rating, and consequently will be unable to reclaim VAT.

If that is the case, the first problem which arises is that housing associations are funded from the taxpayer. I hope that the Government acknowledge that it does not make a lot of sense to give those associations money from the taxpayer and then put them in a position where they have to pay, in effect, excess tax, in as much as they will be unable to recover what they otherwise would have done.

Mr. Heathcoat-Amory

In order to stop this point gathering momentum and being based on a wrong premise, I can assure the hon. Gentleman that the position of housing associations will improve as a result of these orders. They will be able to zero-rate conversions—that is not open to them now—and in no other way will their tax position deteriorate. So if the hon. Gentleman opposes this collection of orders, he must explain to the housing associations precisely why he feels that they are being disadvantaged.

Mr. Bruce

I am grateful to the Minister. If his assurance means that housing associations will in all circumstances be better off under the order, I obviously welcome that.

In my constituency, there is an old mill, which, in spite of several attempts to revive it, is on its last legs and no longer producing. All the signs are that it is likely to be acquired by a housing association and converted to use as residential accommodation—[Interruption.] The hon. Member for Erewash (Mrs. Knight) suggests that I am discussing Scotland, and that Scottish law on long-term tenure differs from English law. Can the Minister assure me that a housing association seeking to develop the mill will qualify for zero rating and thus be able to claim full relief? That would be a welcome assurance.

Three hundred yards away the said mill is another empty building in the same town. It has been derelict for many years, and there is a wish to convert it to a day care centre for the elderly. I am sure that all hon. Members who take an interest have received a briefing from the Charities Tax Reform Group—I am sure that the Minister is aware of it—in which the group says that the exclusion of conversions of commercial buildings to non-residential relevant charitable use represents an unfair anomaly. One can only wonder why the Government have decided to implement it.

Across the country, conversions of old buildings to new dwellings or for community purposes are to be actively encouraged. They reinvigorate derelict sites and provide many benefits to the community—laudable activities which are at all times to be encouraged. In response to an earlier intervention the Minister seemed to confirm that such conversions will be at a disadvantage.

I claim no expertise in this area. I have read the orders, but without knowing all the details of the background law, it is difficult to understand what they are getting at. Hence I rely on the people most directly affected to communicate their views to Members of this House—and they say that the order creates an unfair anomaly.

I ask the Minister to respond to these concerns at the end of the debate. Why should not such conversions benefit; why cannot the Government extend to them the benefits that the order entails? If the Minister cannot give me a satisfactory answer, it will be quite legitimate to vote against the orders.

The difficulty we always face with such instruments is that they are to be taken as a whole. It is quite legitimate to vote against them this evening, not because we disagree with the tidying-up measures and extensions in them, but because we say that they have not satisfactorily dealt with an anomaly, which I have described. The Government should go away and come back with improved orders, or at least assure us that another instrument may be in the offing to deal with the problem. That seems entirely reasonable.

My last point relates to listed buildings. The Minister touched on certain anomalies that have resulted from VAT tribunal findings, to the effect that certain building works that most people would regard as repairs have been treated as alterations. When people repair old buildings, they will inevitably consider whether that can be done in a manner that is in character with what is already there, while improving on the old materials. Obviously, they consider whether the improvements will be in keeping with the old appearance. Suggesting that, in so doing, they should fail to qualify for relief seems to me to be applying the rules too strictly.

Much more seriously, as the hon. Member for Isle of Wight (Mr. Field) said, this may act as a positive encouragement not to preserve our heritage and to change it simply in order to qualify for VAT relief. The Government cannot really believe that to be sensible or desirable.

It should not be too difficult to give directions to Customs and Excise officers or VAT officers, making it clear that there are reasonable boundaries. The point is that VAT relief for listed buildings should be designed to ensure that they are properly repaired, in character, not to encourage people to alter buildings' character simply to qualify for tax benefits. That clearly pushes in the wrong direction, and creates an unnecessary tension in the tax system, which the Government should remove.

I know that other hon. Members want to speak, so I shall curtail my remarks. I hope that the Minister will answer my questions, and that he will understand that, if we vote against the orders, it will not be because of an objection to their fundamental reforms; it will be because some important points have not been dealt with.

.35 pm

Mr. William O'Brien (Normanton)

Most of the points about the orders were fully ventilated by my hon. Friend the Member for Bristol, South (Ms Primarolo), who dealt particularly with housing matters. I shall therefore not go over them again.

Earlier I intervened on the Minister to make a point about the effect that the first order will have on charitable organisations. It is difficult to understand the Government's reasoning. They allow VAT to be disregarded when converting a derelict dwelling to a house or residential dwelling, but they deny the same concession to charitable organisations that want to convert derelict dwellings to day centres for the elderly, the disabled, the young disabled or the chronically sick.

Many of those organisations work to provide respite care for the less fortunate people in our community. Most of them do the work voluntarily, thus helping health authorities and social services departments. Yet the Minister tells us tonight that these charitable organisations will receive no assistance under the order in the form of relief from VAT. I consider that shameful.

We have no chance of amending the orders: they are a case of all or nothing. My hon. Friend the Member for Bristol, South correctly said—outlining the complications in this bunch of orders—that because of the unfairness of the first order we have no option but to vote against them. Had more Conservative Members been here to hear the Minister say that charitable organisations will receive no assistance for converting derelict dwellings to day centres, I assume that they too would have voted against the orders.

My hon. Friend the Member for Bristol, South also discussed large-scale repairs to church buildings and to historic buildings owned by local authorities, churches and other charitable organisations. Those who wish to repair and maintain historic buildings such as churches and cathedrals will face the imposition of value added tax at 17.5 per cent. In general, it is the community that cares for such buildings and promotes improvements. The Minister is saying that there will be no concession when repairs and improvements are undertaken.

I have corresponded with the Treasury on behalf of the Bishop of Wakefield, who has made representations in the past. It is disappointing to hear the Minister reiterate his opposition to my arguments.

My concern is heightened by the Minister saying that the Government do not intend to assist charitable organisations, churches and religious organisations in the maintenance and conversion of buildings that would be to the benefit of the community generally.

If the Minister cannot give any assurances this evening, I hope that he will understand that we are saying that the orders do not help people who are in great need. Disabled and elderly people will suffer because the Government are not prepared to give any serious consideration to their needs.

As my colleagues have said, we shall vote against the orders. I hope that in doing so we shall impress upon the Government the need to propose further orders to give relief to charitable organisations and religious organisations that are working hard to maintain communities and historic buildings while providing care and attention.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

On a point of order, Madam Deputy Speaker, relating to the accountability of the Secretary of State for Health to the House. We debated health care on Monday and we spent all day yesterday on health care issues when debating the Health Authorities Bill on Report and on Third Reading. The Secretary of State spoke in both debates.

This afternoon, in answer to a written question, the right hon. Lady has announced a rise in prescription charges of three times the rate of inflation. She could not possibly have made the decision this morning. She must have known about it on Monday and she certainly must have known about it on Tuesday, yet she did not share the information with the House. Perhaps you, Madam Deputy Speaker, will advise me whether the Secretary of State has sought to make a statement on this important matter. Perhaps you will also advise me on whether it was treating the House with due and proper respect for the right hon. Lady to have withheld a statement from us yesterday.

Madam Deputy Speaker

It is not for the Chair to dictate to members of the Government or any hon. Member what they should or should not say to the House. I gather that the announcement has been made in the form of a written answer, which is a well-precedented method of providing information to the House. There are Ministers on the Treasury Bench, and I have no doubt that they will convey the views of the House to the Secretary of State for Health. I am sure that there will be other ways of dealing with the matter. I am confident that hon. Members will try to find apposite ways in which to raise it properly. We cannot do more now.

Mr. David Evans (Welwyn Hatfield)

On a point of order, Madam Deputy Speaker.

Madam Deputy Speaker

Is it on the same point of order?

Mr. Evans

Yes. Would you agree, Madam Deputy Speaker, that it is a bit rich for Opposition Members to talk about prescription charges when it was a Labour Government who introduced them in the first place?

Madam Deputy Speaker

That is not a point of order for the Chair.

Mr. Ian McCartney (Makerfield)

On a point of order, Madam Deputy Speaker.

Madam Deputy Speaker

Is it on the same point?

Mr. McCartney

Yes; it is a genuine point of order.

When I was a member of the Opposition Front-Bench team with responsibilities for health, the issue before us was raised on a point of order last year. I remember that a ruling was given by Madam Speaker on the way in which such information should be released. Until last year, there was a precedent that information about increased prescription charges was not released in the form of a written answer. Following Madam Speaker's ruling, I believe that the Secretary of State for Health made a statement. Perhaps a check should be made to ascertain whether Madam Speaker's ruling has been broken by the Secretary of State's written answer.

Madam Deputy Speaker

I am not aware that any rule has been broken. However, in the light of the hon. Member's remarks, I shall have the matter checked.

Mr. McCartney

Thank you, Madam Deputy Speaker. I have spoken from my recollection. If I have misled you, I apologise in advance. Thank you, Madam Deputy Speaker, for taking up a serious and important matter.

Madam Deputy Speaker

Let us continue with the debate.

5.46 pm

Mr. Clive Betts (Sheffield, Attercliffe)

I shall take up the issues raised by my hon. Friend the Member for Bristol, South (Ms Primarolo), who spoke from the Opposition Front Bench about housing associations. There is concern given the current climate. For example, only 500 local authority homes were built last year. The number of people on the housing waiting list in my constituency is rising all the time. They are waiting for homes to rent because they cannot afford to buy as the economy stands. In reality, their only hope is to look to housing associations, of which there are many in my constituency. The associations wish to develop new homes or substantially to improve existing properties.

Only yesterday, the Committee considering the Finance Bill discussed Government policy, which sometimes, inadvertently, can have a detrimental effect on housing policies. We discussed rather complex matters, which included qualified indexed securities and how the withdrawing of the tax advantages that those securities enjoy could lead to additional costs for housing associations. There is a real financial problem for the associations. The reduction of housing association grant towards the costs of development has put pressure on the associations. The Government probably intended that to happen. They want the associations to go into the private sector to raise money.

The additional costs that have to be borne by housing associations in raising more private sector finance have forced up rents to a point where the Government are becoming worried about the benefits that they are having to pay tenants. A poverty trap is developing. People can enter housing association properties as tenants only if they are on benefit or they can afford to pay high rents of £70 or more that the associations have to charge. Any measure that causes extra costs to fall upon the associations will ultimately bear upon their tenants.

If the tenants are on benefit, they can pass the costs back to the Government, which means that the Government will not save anything. At the same time, some people who are not on benefit will not be able to pay increased rents. Our concern is whether housing associations will incur additional costs because of these orders and, if so, whether the Government understand what those costs are. If the Government accept that the costs exist—associations have given me evidence that they do—are they prepared to reconsider the matter rather than simply continue with orders that could have a considerable impact?

I received a letter from Northern Counties Housing Association Ltd., which is very active in the Sheffield area. It provides a number of high-quality homes, from which my constituents and many others in the north benefit. It says that, having assessed its development programme, this year some £5 million of the programme will be affected by the order, which comes into effect on 1 March 1995. It concluded that, for a full development year, the order would cost it between £750,000 and £1 million.

I am not sure whether the Paymaster General heard those figures or whether he is otherwise engaged on the Front Bench, so I shall repeat them for his benefit. Northern Counties Housing Association Ltd. says that the impact of the order on its finances will be £750,000 to £1 million a year in extra VAT, which it will have to pay. That is its own assessment of the complications of the order. The Minister must respond to that issue, because if that housing association is affected, I cannot believe that other associations will not have similar problems.

Embryonic associations are, by their very nature, small. Many of them are just starting and they will not necessarily have people with the accountancy skills and expertise to interpret the orders to determine precisely the VAT impact for their own accounts. No doubt, once they begin to recognise the effect of the orders, the information given to us by Northern Counties will come through from the other associations and will show the costs, which will fall not only on the associations but their tenants. Those costs will restrict some people becoming housing association tenants in new properties.

Mr. McCartney

On a point of order, Madam Deputy Speaker. I apologise to hon. Members on both sides of the House and to you personally, but it is related to the point of order that I raised earlier. I have been to the Library, to assist the House, and have obtained a copy of the ruling that was made by Madam Speaker, in relation to a matter that was raised by my hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett).

Madam Speaker issued quite a stern warning and made it clear how she expected the matter to be dealt with in future. Madam Speaker had this to say: The written answer given yesterday, which is in columns 95 and 96 of Hansard, is concerned almost entirely with the proposed level of prescription charges for the year 1993–94, and is described as 'pursuant to' an answer of 15 February to the hon. Member for Erith and Crayford (Mr. Evennett), which is at column 162. I have noted that the Select Committee on Procedure, in its third report of Session 1990–91, stated its belief that 'the use by Ministers of "pursuant" answers is inherently undesirable.' The report goes on to say: 'The offence is compounded when … an answer is given which claims to be "pursuant" to an earlier reply but which in fact has only the most tenuous link with it.' As we well know, the House has not had the opportunity to debate the Procedure Committee's recommendations on how the practice should be dealt with. But I wish to make it clear that I deprecate the use of the 'pursuant' device by Ministers to make written statements such as this without giving proper notice to the House. I hope that that clears up the points of order, and that we can now get on with our business."—[Official Report, 3 March 1993; Vol. 220, c. 301–302.] Madam Speaker made it clear how she wished matters to be dealt with in future. I hope that that is helpful to you, Madam Deputy Speaker, and to the House. Perhaps the Secretary of State for Health will now come to the House—the business could be rearranged—and make an appropriate statement to my hon. Friend who raised the original point of order.

Madam Deputy Speaker

As I just explained to the hon. Gentleman, I am causing my own inquiries to be made. I would not wish to make any further point on the matter at the moment.

Mr. Betts

The point that I am making on behalf of the housing associations is that there appears to have been a change of practice. Housing associations fear that work that they had carried out that was previously zero-rated will now not he zero-rated because it is not covered by the order. I would like the Minister to respond to that.

He seemed to be saying earlier, when justifying the order, that there have been examples in the private sector of people trying to claim that different reeds on thatched cottages meant that the property was being converted. Anyone can reach the rational judgment that that is not so. I presume that more substantial conversion works that have been carried out by housing associations have been zero-rated in the past but will not be in future as result of the orders. In an attempt to clear up one or two obvious anomalies, it appears that the Government are changing the approach, which will have an effect on genuine conversion works and mean they will he subject to VAT at the full rate in future.

No doubt the Minister will tell us that these matters must be consistent with practice in the rest of the European Union, that the Commission will take a dim view of it or that the European Court will pass judgment if the Government act in any other way. I remind the Minister that, when the European Court looked into UK policy in 1985, it ruled that the Government's stated policy of facilitating wider home ownership was a legitimate social goal. It did not in any way challenge the zero-rating and relief on new buildings to be used for domestic, relevant residential or relevant charitable purposes. The Government probably have more room to manoeuvre in that area than they have so far led us to believe.

I do not want to give the impression that zero-rating of conversions of non-residential properties to residential properties is opposed by the Opposition. There are many derelict ex-industrial and commercial properties that can be converted for residential purposes, and we support zero-rating of those conversions to encourage that process. I would argue, however, that, in many parts of the country, there are simply no such old industrial and commercial properties. They may be prevalent in the old textile areas, but they certainly are not in steel areas like my own, where ex-steel buildings were often little more than tin sheds, which certainly cannot be converted in any meaningful way.

The conversion work that takes place in my area tends to be of residential rather than commercial buildings and therefore would be subject to VAT at the full rate. I ask the Minister to reflect on that, because it seems that zero-rating might simply encourage people who convert barns into luxury homes rather than provide for the needs of people who need rented accommodation in our city areas.

I now deal with the issue of piggy-backing of embryonic associations and the point about leases, which was raised by my hon. Friend the Member for Bristol, South. It is a serious point; it could stop that practice. It is the only way in which many small associations can get started, and I hope that the Minister will give it further thought. We cannot amend the orders, but at a later date the Minister could table some proposals to deal with that.

The order could lead to a nonsensical position. Options are open to local authorities to deal with rundown stock. I can think of one estate in my constituency that has now been renovated, but where difficult choices would he posed by the order. It is an estate of old maisonette blocks, and a number of options could be available. If the local authority had the money, it could choose simply to repair those properties and put in new central heating schemes and new windows, in which case it would not pay VAT. It could top the maisonettes and convert them into single-storey houses—that process is quite common now—and that would not be subject to VAT. It could raze the properties to the ground and build on the concrete bases, which would not be subject to VAT. It could demolish them completely and start again and build new homes, if it had the resources, which would not be subject to VAT.

If, however—this has happened—it wants to do a deal to raise money and sell some of the properties to a housing association and use the proceeds of the sale to refurbish its own properties, the housing association then has a different range of choices. If it demolished the properties completely and builds new properties on separate sites around the overall site, VAT would not be payable. However, if it simply made repairs or did small jobs such as installing new central heating systems that would be subject to VAT.

If the housing association decided to take the top off maisonettes and convert them to single-storey properties, would such work be zero rated or subject to VAT at 17.5 per cent? If a housing association demolished properties completely and built homes on the concrete base that was left, would that be a conversion or a new build and would it be zero rated or subject to VAT at 17.5 per cent?

It appears that housing associations' choices will he conditioned and directed by the VAT regime into which the order introduces distinctions. I am not sure whether those distinctions are helpful. I am not sure whether they help the process of rational choice for housing associations. Some of those choices will now carry full VAT where previously they did not and that means extra cost for housing associations. Will the Minister assure every housing association in Britain that the order will not mean any extra costs for them? Many of them believe that the costs will be substantial and that rents will rise as a result.

6 pm

Mr. Heathcoat-Amory

My hon. Friend the Member for Isle of Wight (Mr. Field) and the hon. Member for Normanton (Mr. O'Brien) referred to repairs to protected or listed buildings. I should like to restate what I set out at the start of my remarks about the distinction between alterations and repairs with regard to such buildings.

In 1984, alterations to buildings generally were made subject to VAT, but at that time, the relief for alterations was retained for protected buildings. Hon. Members may regard that as an anomaly, although I do not think that during the course of the debate any hon. Member has called for the withdrawal of that zero rate.

If it is an anomaly, it is one that is valued by the heritage lobby and it is quite distinct from the question about whether repairs to all buildings, whether listed or not, should be zero-rated. At the moment, they are all subject to VAT at the standard rate. Because of the sixth Council directive, we cannot introduce new zero rates. That directive was negotiated and agreed in 1977 by the Labour Government, so Opposition Members would not wish to disown that.

With regard to a possible reduced rate for repairs, we have no plans to introduce any reduced rates beyond that obtaining for domestic fuel and power. I, as Minister responsible, receive many requests for new reduced rates for all sorts of goods and services. Recently, we had such a request for energy-efficient goods and equipment.

We resist those, partly because of the expense and the revenue lost, which would simply have to be made up elsewhere by taxing other people at a higher rate, but also because any reduced rate creates new distinctions and borderlines, which creates scope for disputes and litigation. Therefore, in the interests of administrative simplicity, we shall stick with our system of standard rates and a zero rate.

We can introduce reduced rates only if they are on annexe H of the sixth Council directive. Repairs to churches and ecclesiastical buildings do not appear on that annexe. The matter is being reviewed, and the Commission was required to bring forward proposals for consideration by the Council of Ministers. The Commission has reported, and it is not recommending any substantial change to that list of permitted reduced rates. In any case, the reduction would require unanimity by the Council of Ministers, so it is extremely unlikely, given the facts that I have outlined, that a reduced rate for repairs, whether to all or only listed buildings, will be introduced.

I do not have much time to answer the debate, but my hon. Friend the Member for Isle of Wight raised the question of the option to tax, which he thought should be extended to individual leases as well as to whole buildings. I may not be able to answer all his points, and he will forgive me if I write to him about the detail, but I can say that to do as he requests would introduce a new element of complexity into the system at a time when we are trying to deregulate.

These orders are deregulatory in intent, and if we were to try to permit the option to tax to apply to individual leases, complications would be created in a single building when some are taxed and some are not. For example, how would VAT be attributed to common services such as lift repairs or the repointing of brickwork? That would be complex and regulatory at a time when we are trying to move in the opposite direction.

My hon. Friend complained that the revocation of the option of 20 years was too long. We shall continue to review that, but I think that he would be generous enough to agree that to allow revocation at all is at least an important first step, and that is provided for in the order.

Several hon. Members referred to housing associations. I should say at the outset that the Housing Corporation is providing capital of about £1.2 billion a year for the next three years for housing associations, and that will also lever in about £550 million a year of private sector capital to promote housing association projects and enable them to go ahead.

The main point that I wish to make is that the orders give housing associations a new opportunity to take advantage of conversions for the first time. The new relief will help housing associations to convert non-residential dwellings into student accommodation, hospices, children's and old people's homes and so on.

There would be some dismay in the outside world if a party in the House were to vote against the orders, because this is a relieving provision which has been welcomed by the housing association movement. I frankly could not understand the reasoning of the official Opposition or individual Opposition Members in apparently opposing this relieving order.

It is true that small housing associations often use larger ones as agents to undertake large building or conversion projects, but they are not put at a disadvantage as regards VAT. Under the present law—this is carried forward in the new order in item 3 of the construction order—architects' and surveyors' fees are not recoverable—there is nothing new or unusual about that—but no additional liability arises as a result. There is no extra cost to housing associations here. I can give that assurance to the hon. Member for Sheffield, Attercliffe (Mr. Betts), who asked me about that. This is a relieving measure.

Housing associations are being given a giant new opportunity to help revive and regenerate in urban areas by the use of conversion. They can take rundown, non-domestic buildings, such as warehouses or mills, as the hon. Member for Gordon (Mr. Bruce) instanced, and turn them into dwellings, flats, or residential accommodation for the old or the sick.

Ms Primarolo

Will the Minister give way?

Mr. Heathcoat-Amory

If the hon. Lady will forgive me, I am trying to answer a point that she made.

It is a new opportunity for housing associations, and for the first time it will all be zero-rated. If the order is not passed this evening, housing associations will not be able to take advantage of those new opportunities.

To answer another point that was raised in the debate, it is true that, during the construction of dwellings, a certificate has to be issued by the housing association concerned, that in effect self-regulates the zero-rated status of the work in question. It is therefore a requirement that the housing association is registered with one of the national associations, of which there are four.

In practice, that creates no difficulty, but in view of the hon. Lady's interest in the matter and because we all want housing associations to succeed, I shall ask Customs and Excise to keep under review registration and the working of the new concessions.

As they are relieving measures that empower housing associations to undertake new work, it is obviously not our intention that there should be any problem in practice with the working out of the orders and we shall keep them under review. I assert with absolute confidence, however, that the housing association movement as a whole will benefit and would require some explanation if any hon. Members or parties were to oppose the measures in the House.

The last point was raised by the hon. Member for Normanton who—

It being one and a half hours after the commencement of proceedings on the motion, MADAM DEPUTY SPEAKER proceeded to put forthwith the Question necessary to dispose of them, pursuant to order [17 February].

The House divided: Ayes 281, Noes 254.

Division No. 82]	[6.11 pm
AYES
Ainsworth, Peter (East Surrey)	Duncan, Alan
Aitken, Rt Hon Jonathan	Duncan-Smith, Iain
Alison, Rt Hon Michael (Selby)	Dunn, Bob
Allason, Rupert (Torbay)	Durant, Sir Anthony
Arbuthnot, James	Dykes, Hugh
Arnold, Jacques (Gravesham)	Elletson, Harold
Ashby, David	Evans, David (Welwyn Hatfield)
Atkins, Robert	Evans, Jonathan (Brecon)
Atkinson, David (Bour'mouth E)	Evans, Nigel (Ribble Valley)
Atkinson, Peter (Hexham)	Evans, Roger (Monmouth)
Baker, Rt Hon Kenneth (Mole V)	Evennett, David
Baker, Nicholas (North Dorset)	Faber, David
Baldry, Tony	Fabricant, Michael
Banks, Matthew (Southport)	Fenner, Dame Peggy
Bates, Michael	Field, Barry (Isle of Wight)
Batiste, Spencer	Fishburn, Dudley
Bellingham, Henry	Forman, Nigel
Bendall, Vivian	Forth, Eric
Beresford, Sir Paul	Fox, Dr Liam (Woodspring)
Biffen, Rt Hon John	Fox, Sir Marcus (Shipley)
Booth, Hartley	Freeman, Rt Hon Roger
Boswell, Tim	French, Douglas
Bottomley, Peter (Eltham)	Fry, Sir Peter
Bowden, Sir Andrew	Gale, Roger
Bowis, John	Gallie, Phil
Boyson, Rt Hon Sir Rhodes	Gardiner, Sir George
Brandreth, Gyles	Garnier, Edward
Brazier, Julian	Gill, Christopher
Bright, Sir Graham	Gillan, Cheryl
Brooke, Rt Hon Peter	Gorst, Sir John
Brown, M (Brigg & Cl'thorpes)	Grant Sir A (SW Cambs)
Browning, Mrs Angela	Greenway, Harry (Ealing N)
Bruce, Ian (Dorset)	Greenway, John (Ryedale)
Burns, Simon	Griffiths, Peter (Portsmouth, N)
Burt, Alistair	Grylls, Sir Michael
Butcher, John	Gummer, Rt Hon John Selwyn
Butler, Peter	Hague, William
Butterfill, John	Hamilton, Rt Hon Sir Archibald
Carlisle, John (Luton North)	Hamilton, Neil (Tatton)
Carlisle, Sir Kenneth (Lincoln)	Hampson, Dr Keith
Carrington, Matthew	Hanley, Rt Hon Jeremy
Carttiss, Michael	Hannam, Sir John
Cash, William	Harris, David
Channon, Rt Hon Paul	Haselhurst, Alan
Chapman, Sydney	Hawkins, Nick
Clappison, James	Hawksley, Warren
Clark, Dr Michael (Rochford)	Hayes, Jerry
Clarke, Rt Hon Kenneth (Ru'clif)	Heald, Oliver
Clifton-Brown, Geoffrey	Heathcoat-Amory, David
Coe, Sebastian	Hendry, Charles
Colvin, Michael	Heseltine, Rt Hon Michael
Congdon, David	Hicks, Robert
Conway, Derek	Higgins, Rt Hon Sir Terence
Coombs, Anthony (Wyre For'st)	Hill, James (Southampton Test)
Coombs, Simon (Swindon)	Hogg, Rt Hon Douglas (G'tham)
Cope, Rt Hon Sir John	Horam, John
Cormack, Sir Patrick	Hordern, Rt Hon Sir Peter
Couchman, James	Howard, Rt Hon Michael
Cran, James	Howarth, Alan (Strat'rd-on-A)
Currie, Mrs Edwina (S D'by'ire)	Howell, Rt Hon David (G'dford)
Curry, David (Skipton & Ripon)	Hughes, Robert G (Harrow W)
Day, Stephen	Hunt, Rt Hon David (Wirral W)
Deva, Nirj Joseph	Hunt, Sir John (Ravensbourne)
Devlin, Tim	Hunter, Andrew
Dicks, Terry	Hurd, Rt Hon Douglas
Dorrell, Rt Hon Stephen	Jack, Michael
Douglas-Hamilton, Lord James	Jackson, Robert (Wantage)
Dover, Den	Jenkin, Bernard

Jessel, Toby	Rifkind, Rt Hon Malcolm
Johnson Smith, Sir Geoffrey	Robathan, Andrew
Jones, Gwilym (Cardiff N)	Robertson, Raymond (Ab'd'n S)
Jones, Robert B (W Hertfdshr)	Robinson, Mark (Somerton)
Jopling, Rt Hon Michael	Roe, Mrs Marion (Broxbourne)
Kellett-Bowman, Dame Elaine	Rowe, Andrew (Mid Kent)
Key, Robert	Rumbold, Rt Hon Dame Angela
Kilfedder, Sir James	Ryder, Rt Hon Richard
Kirkhope, Timothy	Sackville, Tom
Knapman, Roger	Scott, Rt Hon Sir Nicholas
Knight, Mrs Angela (Erewash)	Shaw, David (Dover)
Knight, Greg (Derby N)	Shaw, Sir Giles (Pudsey)
Knight, Dame Jill (Bir'm E'st'n)	Shepherd, Colin (Hereford)
Knox, Sir David	Shersby, Michael
Kynoch, George (Kincardine)	Sims, Roger
Lait, Mrs Jacqui	Skeet, Sir Trevor
Lamont, Rt Hon Norman	Smith, Sir Dudley (Warwick)
Lang, Rt Hon Ian	Smith, Tim (Beaconsfield)
Lawrence, Sir Ivan	Soames, Nicholas
Legg, Barry	Speed, Sir Keith
Leigh, Edward	Spicer, Sir James (W Dorset)
Lennox-Boyd, Sir Mark	Spicer, Michael
Lester, Jim (Broxtowe)	Spink, Dr Robert
Lidington, David	Spring, Richard
Lightbown, David	Sproat, Iain
Lilley, Rt Hon Peter	Squire, Robin (Hornchurch)
Lloyd, Rt Hon Sir Peter (Fareham)	Stanley, Rt Hon Sir John
Lord, Michael	Steen, Anthony
Luff, Peter	Stern, Michael
Lyell, Rt Hon Sir Nicholas	Stewart Allan
MacGregor, Rt Hon John	Streeter, Gary
MacKay, Andrew	Sumberg David
McLoughlin, Patrick	Sweeney, Walter
McNair-Wilson, Sir Patrick	Sykes, John
Madel, Sir David	Tapsell, Sir Peter
Maitland, Lady Olga	Taylor, Ian (Esher)
Malone, Gerald	Taylor, John M (Solihull)
Mans, Keith	Temple-Morris, Peter
Marlow, Tony	Thomason, Roy
Marshall, John (Hendon S)
Marshall, Sir Michael (Arundel)	Thompson, Sir Donald (C'er V)
Martin, David (Portsmouth S)	Thompson, Patrick (Norwich N)
Mates, Michael	Thornton, Sir Malcolm
Mawhinney, Rt Hon Dr Brian	Thurnham, Peter
Merchant, Piers	Townend, John (Bridlington)
Mills, Iain	Townsend, Cyril D (Bexl'yh'th)
Mitchell, Andrew (Gedling)	Tracey, Richard
Mitchell, Sir David (NW Hants)	Tredinnick, David
Moate, Sir Roger	Trend, Michael
Monro, Sir Hector	Trotter, Neville
Montgomery, Sir Fergus	Twinn, Dr Ian
Nelson, Anthony	Vaughan, Sir Gerard
Neubert, Sir Michael	Viggers, Peter
Newton, Rt Hon Tony	Waldegrave, Rt Hon William
Nicholls, Patrick	Waller, Gary
Nicholson, David (Taunton)	Ward, John
Norris, Steve	Wardle, Charles (Bexhill)
Onslow, Rt Hon Sir Cranley	Waterson, Nigel
Oppenheim, Phillip	Watts, John
Ottaway, Richard	Wheeler, Rt Hon Sir John
Page, Richard	Whitney, Ray
Paice, James	Whittingdale, John
Patnick, Sir Irvine	Widdecombe, Ann
Patten, Rt Hon John	Wiggin, Sir Jerry
Pawsey, James	Willetts, David
Peacock, Mrs Elizabeth	Wilshire, David
Porter, Barry (Wirral S)	Winterton, Mrs Ann (Congleton)
Porter, David (Waveney)	Winterton, Nicholas (Macc'fld)
Portillo, Rt Hon Michael	Wolfson, Mark
Powell, William (Corby)	Yeo, Tim
Rathbone, Tim	Young, Rt Hon Sir George
Redwood, Rt Hon John
Renton, Rt Hon Tim	Tellers for the Ayes:
Richards, Rod	Mr. Timothy Wood and Mr. Bowen Wells.
Riddick, Graham

NOES
Abbott, Ms Diane	Field, Frank (Birkenhead)
Ainger, Nick	Flynn, Paul
Ainsworlh, Robert (Cov'try NE)	Forsythe, Clifford (S Antrim)
Allen, Graham	Foster, Rt Hon Derek
Alton, David	Foster, Don (Bath)
Anderson, Donald (Swansea E)	Foulkes, George
Anderson, Ms Janet (Ros'dale)	Fraser, John
Armstrong, Hilary	Fyfe, Maria
Ashton, Joe	Galbraith, Sam
Austin-Walker, John	Galloway, George
Banks, Tony (Newham NW)	Gapes, Mike
Barnes, Harry	George, Bruce
Battle, John	Gerrard, Neil
Bayley, Hugh	Godman, Dr Norman A
Beckett, Rt Hon Margaret	Godsiff, Roger
Beggs, Roy	Golding, Mrs Llin
Berth, Rt Hon A J	Graham, Thomas
Bernn, Rt Hon Tony	Grant, Bernie (Tottenham)
Bennett, Andrew F	Griffiths, Nigel (Edinburgh S)
Bermingham, Gerald	Griffiths, Win (Bridgend)
Berry, Roger	Grocott, Bruce
Betts, Clive	Gunnell, John
Blunkett, David	Hain, Peter
Boyes, Roland	Hall, Mike
Bradley, Keith	Hanson, David
Bray, Dr Jeremy	Hardy, Peter
Brown, Gordon (Dunfermline E)	Harvey, Nick
Brown, N (N'c'tle upon Tyne E)	Hattersley, Rt Hon Roy
Bruce, Malcolm (Gordon)	Henderson, Doug
Burden, Richard	Heppell, John
Byers, Stephen	Hill, Keith (Streatham)
Caborn, Richard	Hinchliffe, David
Calaghan, Jim	Hodge, Margaret
Campbell, Mrs Anne (C'bridge)	Hoey, Kate
Campbell, Ronnie (Blyth V)	Hogg, Norman (Cumbernauld)
Campbell-Savours, D N	Home Robertson, John
Caravan, Dennis	Hood, Jimmy
Cann, Jamie	Hoon, Geoffrey
Chidgey, David	Howells, Dr. Kim (Pontypridd)
Chisholm, Malcolm	Hoyle, Doug
Church, Judith	Hughes, Kevin (Doncaster N)
Chapham, Michael	Hughes, Robert (Aberdeen N)
Clark, Dr David (South Shields)	Hughes, Roy (Newport E)
Clarke, Eric (Midlothian)	Hughes, Simon (Southwark)
Clarke, Tom (Monklands W)	Hutton, John
Clelland, David	Illsley, Eric
Clwyd, Mrs Ann	Ingram, Adam
Coffey, Ann	Jackson, Glenda (H'stead)
Cook, Frank (Stockton N)	Jackson, Helen (Shef'ld, H)
Corbett, Robin	Jamieson, David
Cousins, Jim	Janner, Greville
Cox, Tom	Jones, Barry (Alyn and D'side)
Cunliffe, Lawrence	Jones, Ieuan Wyn (Ynys Mon)
Cunningham, Jim (Covy SE)	Jones, Jon Owen (Cardiff C)
Cunningham, Rt Hon Dr John	Jones, Lynne (B'ham S O)
Dalyell, Tam	Jones, Martyn (Clwyd, SW)
Davidson, Ian	Jones, Nigel (Cheltenham)
Davies, Bryan (Oldham C'tral)	Jowell, Tessa
Davies, Rt Hon Denzil (Llanelli)	Kaufman, Rt Hon Gerald
Davies, Ron (Caerphilly)	Keen, Alan
Davis, Terry (B'ham, H'dge H'I)	Kennedy, Jane (Lpool Brdgn)
Denham, John	Khabra, Piara S
Dewar, Donald	Kilfoyle, Peter
Dixon, Don	Lestor, Joan (Eccles)
Dobson, Frank	Liddell, Mrs Helen
Donohoe, Brian H	Litherland, Robert
Dowd, Jim	Livingstone, Ken
Dunnachie, Jimmy	Lloyd, Tony (Stretford)
Eagle, Ms Angela	Llwyd, Elfyn
Eastham, Ken	Loyden, Eddie
Enright, Derek	Lynne, Ms Liz
Etherington, Bill	McAllion, John
Evans, John (St Helens N)	McAvoy, Thomas
Ewing, Mrs Margaret	McCartney, Ian
Fatehett, Derek	Macdonald, Calum

McFall, John	Redmond, Martin
McKelvey, William	Reid, Dr John
Mackinlay, Andrew	Rendel, David
Maclennan, Robert	Robinson, Geoffrey (Co'try NW)
McNamara, Kevin	Rogers, Allan
MacShane, Denis	Rooker, Jeff
McWilliam, John	Rooney, Terry
Maddock, Diana	Ross, Ernie (Dundee W)
Mahon, Alice	Rowlands, Ted
Mandelson, Peter	Ruddock, Joan
Marek,Dr John	Sedgemore, Brian
Marshall, David (Shettleston)	Sheerman, Barry
Marshall, Jim (Leicester, S)	Shore, Rt Hon Peter
Martin Michael J (Springburn)	Short, Clare
Martlew, Eric
Maxton, John	Skinner, Dennis
Meale, Alan	Smith, Chris (Isl'ton S & F'sbury)
Michael, Alun	Smith, Llew (Blaenau Gwent)
Michie, Bill (Sheffield Heeley)	Soley, Clive
Michie, Mrs Ray (Argyll & Bute)	Spellar, John
Milburn, Alan	Steel, Rt Hon Sir David
Miller, Andrew	Steinberg, Gerry
Mitchell, Austin (Gt Grimsby)	Stevenson, George
Moonie, Dr Lewis	Stott, Roger
Morgan, Rhodri	Strang, Dr. Gavin
Morley, Elliot	Straw, Jack
Morris, Rt Hon Alfred (Wy'nshawe)	Sutcliffe, Gerry
Morris, Estelle (B'ham Yardley)	Taylor, Mrs Ann (Dewsbury)
Morris, Rt Hon John (Aberavon)	Taylor, Rt Hon John D (Strgfd)
Mowlam, Marjorie	Taylor, Matthew (Truro)
Mudie, George	Timms, Stephen
Mullin, Chris	Tipping, Paddy
Murphy, Paul	Touhig, Don
Oakes, Rt Hon Gordon	Turner, Dennis
O'Brien, Mike (N W'kshire)	Vaz, Keith
O'Brien, William (Normanton)	Walker, A Cecil (Belfast N)
O'Hara, Edward	Walker, Rt Hon Sir Harold
Olner, Bill	Wallace, James
O'Neill, Martin	Walley, Joan
Orme, Rt Hon Stanley	Wardell, Gareth (Gower)
Parry, Robert	Watson, Mike
Pearson, Ian	Welsh Andrew
Pendry, Tom
Pickthall, Colin	Wicks, Malcolm
Pike, Peter L	Wigley, Dafydd
Pope, Greg	Williams, Rt Hon Alan (Sw'n W)
Powell, Ray (Ogmore)	Williams, Alan W (Carmarthen)
Prentice, Gordon (Pendle)	Wise, Audrey
Prescott, Rt Hon John	Worthington, Tony
Primarolo, Dawn	Wray, Jimmy
Purchase, Ken	Wright, Dr Tony
Quin, Ms Joyce
Radice, Giles	Tellers for the Noes:
Randall, Stuart	Mr. Joe Benton and Mrs. Barbara Roche.
Raynsford, Nick

Question accordingly agreed to.

Resolved, That the Value Added Tax (Construction of Buildings) Order 1995 (S.I., 1995, No. 280), dated 8th February 1995, a copy of which was laid before this House on 8th February, be approved.

Mr. Andrew Mackinlay (Thurrock)

On a point of order, Madam Deputy Speaker. I understand that, while this afternoon's statement about the future of Northern Ireland was being made, the Government announced that prescription charges would be raised. That was a deliberate sneaky venture on the Government's part, to hide a move that was reprehensible and highly controversial. I wonder whether a Minister has been given an opportunity to make a statement announcing just what is involved in today's proposals.

Madam Deputy Speaker

The hon. Gentleman was clearly not in the House when the matter was first raised.

Mrs. Margaret Beckett (Derby, South)

Further to that point of order, Madam Deputy Speaker. I understand that points of order were raised with you earlier about precedent. Are you now able to clarify the way in which such matters have been handled in the past, and can you also tell us whether the Secretary of State has expressed her intention to make a statement in the House? She spoke in the House on Monday—and, indeed, yesterday" although there was no need for her to take part in yesterday's debate, because she had not served on the Standing Committee—but apparently did not feel able to raise an issue resulting from a question that can only have been tabled yesterday.

Mr. Dennis Canavan (Falkirk, West)

On a point of order, Madam Deputy Speaker.

Madam Deputy Speaker

Order. I think that I should deal with the points that have already been raised.

I have no knowledge of any intention to make a statement. No doubt Madam Speaker would be apprised of any such intention first in any event. As for the main issue that has been raised, I must tell hon. Members who have raised points of order in seeking a precedent that the present case is not on all fours with that precedent.

When the Speaker deplored a particular practice, that related to using a question that had already been answered and, at some later stage, giving information pursuant to that. That has not happened today. The question concerned was tabled straightforwardly; it is on the Order Paper, and was replied to by means of a written answer. Even if the present case had been on all fours with precedent, the fact remains that the Speaker—although she said that she deprecated it—did not rule it out of order; I gather that the matter is still being considered by the Procedure Committee.

I must therefore rule that what happened was perfectly in order, although hon. Members may not like that particular method of handling the provision of information.

Mrs. Beckett

Further to the point of order, Madam Deputy Speaker. I do not want to detain the House, but what worries Opposition Members particularly—apart from, as you say, the manner and the matter: a huge increase in prescription charges has been put through—is the fact that, although the question was tabled yesterday and it must have been known that it would be answered straight away, the House was not given the information.

Madam Deputy Speaker

I must make it clear that the Chair is not responsible for the content of any Minister's speech, or indeed for the speech of any hon. Member.

Mr. Canavan

On a point of order, Madam Deputy Speaker. May I return to the question of precedent? Have any British Government ever raised prescription charges by more than 2,500 per cent. without sending a Minister to the House to make a statement to try to justify such criminal taxation of the sick?

Ms Angela Eagle (Wallasey)

On a point of order, Madam Deputy Speaker. I listened with interest to your explanation of the position relating to precedent. Is it not the case, however, that last year, when a rise in prescription charges was sneaked out in the way that Madam Speaker so deprecated, the Secretary of State for Health had to make a full statement in the House? Should she not do so again this week?

Madam Deputy Speaker

It is not for the Chair to decide whether a Minister of the Crown should or should not make a statement. I understand, however, that this does not preclude the making of a statement.

Mr. Peter L. Pike (Burnley)

On a point of order, Madam Deputy Speaker. Does the Speaker not have some right to tell the Procedure Committee that it should report on the matter as soon as possible? There is clearly concern, and a feeling that the procedure now being used is increasingly becoming an abuse of the rights of hon. Members to ask questions about important issues.

Madam Deputy Speaker

I cannot answer for what Madam Speaker may or may not wish to do, but it is open to the hon. Gentleman to raise the matter directly with the Procedure Committee.

Mrs. Alice Mahon (Halifax)

On a point of order, Madam Deputy Speaker. If prescriptions had gone up in line with inflation, they would now be 53p instead of £5.25. Is not it a discourtesy to the House and to yourself that the Secretary of State for Health has done this? Is not the decision a scandalous attack on the sick?

Mr. David Shaw (Dover)

Further to that point of order, Madam Deputy Speaker. An important issue is involved here. It is possible that my right hon. Friend the Secretary of State for Health could help us, because we need to know that the standards that are being followed today were followed precisely by the Labour Government when they introduced prescription charges all those years ago. In 1976, they cut the hospital—

Madam Deputy Speaker

Order. It is clear that we are moving into a discussion of the merits or otherwise of the matter. That is not a matter on which I can rule, or on which I wish to take further points of order. I hope, therefore, that any further points of order will strictly relate to order and not to the merits or demerits of the decision.

Mr. Jeff Rooker (Birmingham, Perry Barr)

On a point of order, Madam Deputy Speaker. I seek your guidance only in relation to the order. The next business of the House involves two one-and-a-half-hour orders, so an obvious opportunity exists for business to be interrupted and for the Leader of the House or the Secretary of State for Health to make a statement later tonight.

Madam Deputy Speaker

That is not a matter for me.

Mr. Thomas Graham (Renfrew, West and Inverclyde)

On a point of order, Madam Deputy Speaker. I have just heard that the Secretary of State for Health intends to put 15p on prescription charges. Many of our constituents can ill afford medicine at present. Surely it is in order for Back Benchers to debate such a measure.

Madam Deputy Speaker

I am sure that the ingenuity of all Members will ensure that the matter is raised in various ways, but we cannot continue with the matter now. We must proceed with the next business.

MADAM DEPUTY SPEAKER then put the remaining Questions required to be put at that hour.

Resolved, That the Value Added Tax (Protected Buildings) Order 1995 (S.I., 1995, No. 283), dated 8th February 1995, a copy of which was laid before this House on 8th February, be approved.

Resolved, That the Value Added Tax (Input Tax) (Amendment) Order 1995 (S.I., 1995, No. 281), dated 8th February 1995, a copy of which was laid before this House on 8th February, be approved.

Resolved, That the Value Added Tax (Buildings and Land) Order 1995 (S.I., 1995, No. 279), dated 8th February 1995, a copy of which was laid before this House on 8th February, be approved.

Resolved, That the Value Added Tax (Payments on Account) (Amendment) Order 1995 (S.I., 1995, No. 291), dated 8th February 1995, a copy of which was laid before this House on 9th February, be approved.