Empty Homes (Value Added Tax) (Hansard, 8 July 1998)

§ Mr. Jonathan Shaw (Chatham and Aylesford)

I beg to move, That leave be given to bring in a Bill to reduce Value Added Tax paid on the renovation of long standing empty homes. The Bill would take a large knife and cut the waste of empty homes, which litter our towns, cities and countryside. Ours is a small island straining to provide enough decent housing for all its inhabitants. With the countryside under threat from development and inner cities in need of regeneration, we have a bewildering and contradictory situation that allows the building of new houses on green-field sites to be exempt from value added tax, yet penalises those refurbishing, converting or saving homes by charging them VAT at the full rate at 17.5 per cent. The Bill would provide a greater incentive to the building industry to bring empty homes back into use by reducing the level of VAT paid on their refurbishment. In doing so, it would help to create a more sustainable house-building policy.

In England and Wales, more than 800,000 homes are empty, and the great bulk of them are in the private sector. When publishing the White Paper, "Planning for the Communities of the Future", my right hon. Friend the Secretary of State for the Environment, Transport and the Regions announced that the target for building homes on previously developed land would increase from 50 to 60 per cent., which was a welcome move. As we frame a new housing policy, it is vital that we consider how to sustain existing property. Wasted homes that are lying idle could make a significant contribution to the Government's inherited figure of 4.4 million homes being needed—or however many we end up believing we need.

Lowering VAT to 5 per cent. on the renovation and refurbishment of homes that have been empty for more than a year would make that significant contribution to providing for the nation's housing. The Government have stated that they are committed to producing an agenda for sustainable development and, in doing so, have undertaken to consider moving taxation to environmental bads from environmental goods. We saw evidence of that in the vehicle fuel escalator and the reducing of burdens on home energy-saving materials in the recent Budget. Most environmental groups are convinced that the use of empty homes would not only provide a contribution to housing the nation, but save the existing fabric of buildings and reduce toxic greenhouse emissions associated with the manufacture and transportation of materials.

Much has been done to bring empty properties back into use, but it has been led principally by local authorities, often in partnership with housing associations. I was responsible for introducing an empty property strategy on my local council. Within 18 months, we had refurbished 100 empty homes, but the cost had to be transferred to tenants through higher rents. High rents can prove a barrier or a disincentive to low-income families, or to those who want to move from welfare to work. If my Bill had been in place, my council could have renovated 15 more properties. The same is true of many excellent local authority initiatives up and down the country. However, the matter cannot be left to local councils, because most empty properties are in the private sector.

1098 There is proper concern about how we define an empty property in need of refurbishment. My Bill would not provide a loophole for anyone who left home on holiday, returned via a do-it-yourself store and sought a reduction in value added tax. The Bill addresses the 250,000 empty homes of long standing, on which councils all over the country have full information because of the details that they are required to provide from their council tax work. Councils are well placed to issue exemption certificates, as local authority bodies have said. A mechanism is in place for the avoidance of fraud.

The next question is whether the Bill's proposals are achievable under European law. The Government have successfully negotiated a cut in VAT on fuel. They had to work hard for that, and cutting VAT again would require time-consuming and difficult negotiations. However, a modest, sustainable and sensible policy would be better than the ill-conceived and contradictory existing policy that allows barns to be converted and millionaire mansions to be built on green-field sites for social reasons, free of VAT, while local councils have to stump up the full whack when they bring a two-up, two-down terraced house back into use for a family on low pay. The policy is the wrong way round.

I concede that there would be an initial loss of revenue. However, we should not lose sight of the savings that my Bill would bring. Increasing work on empty homes will increase the VAT yield. More work for the construction industry means more national insurance and tax contributions. Lower rents will cut benefit bills, and grants to housing associations could also be reduced.

My Bill does not go far enough. I am constrained by the rules on Bills from promoting all that I would like. I want the Government to create a level playing field for the refurbishment of long-standing empty homes and the building of new homes on green-field sites by harmonising VAT at 5 per cent.—a move which was supported by more than 60 hon. Members on both sides of the House in early-day motion 1467. Harmonisation would yield £200 million a year for the Treasury if 176,000 houses were built. That truly would be a sustainable policy.

The Bill is supported by the Campaign for the Protection of Rural England, the Civic Trust and the Empty Homes Agency, which has done much work and which deserves tribute. Moreover, the Bill has been recommended to the Government by their own advisory panel on sustainable development.

Reducing VAT on refurbishment of long-standing empty properties to 5 per cent. is an important first step towards dealing with the waste that bedevils our community. We inherited an appalling legacy in social housing, with council house repairs running at £20 billion. The Government made a good start by releasing council house receipts, but many families still live in appalling bed-and-breakfast accommodation, which is bad for their health, bad for their children's education and an indictment of society. The indictment is all the greater when houses are waiting for renovation and builders want to do the work.