HC Deb 22 July 1999 vol 335 cc1315-6
5. Mr. Bob Russell (Colchester)

If he will reduce the level of value added tax charged on works undertaken to existing buildings. [91096]

The Paymaster General (Dawn Primarolo)

No. European Community agreements prevent us from bringing in a general reduced rate of VAT for works to all existing buildings.

Mr. Russell

I am disappointed by the Minister's response to what was meant to be a friendly question supporting the Deputy Prime Minister's document entitled, "Towards an Urban Renaissance". It would seem that it is not getting the support of the Treasury team. I wonder whether the Treasury and Treasury Ministers have bothered to read what has been proposed in the document. Given the hon. Lady's answer about value added tax, does she agree or disagree with some of the conclusions in "Towards an Urban Renaissance"? One passage states: We propose removing the anomaly whereby renovation work on empty dwellings carries Value Added Tax…at a punitive 17.5%, but new housebuilding is exempt. The paragraph continues: Ideally, refurbishment and conversion work should be zero-rated…we would propose applying the minimum rate of 5% VAT to all housebuilding and conversion. A significant proportion of the extra revenue raised should then be used to fund regeneration and development on recycled land.

Madam Speaker

Order. That was far too long a quotation.

Dawn Primarolo

I am grateful to the hon. Gentleman for reading to me a report which I have already seen. My right hon. Friend the Chancellor of the Exchequer met Lord Rogers yesterday. The urban task force's report is being considered carefully by the Treasury. Our response will be in the urban White Paper. I am a little surprised that the hon. Gentleman is not more familiar with VAT legislation, and particularly the prevention of returning to a zero rate.

Mr. David Drew (Stroud)

I thank my hon. Friend for her answer. The full version of the report is even better than the appendix. I urge her to bring VAT rates for new build into line with rates for existing buildings. That is the key issue, not the rate itself, and it is urgently needed to ensure the proper allocation of housing on brown-field sites, rather than relying, as we do too heavily, on green-field sites.

Dawn Primarolo

My hon. Friend is right. The Government want to encourage sustainable housing growth. We must carefully consider what role tax will play in encouraging such growth. Lord Rogers's recommendations are being carefully studied.

Mr. John Bercow (Buckingham)

Despite her risibly unsatisfactory answer to the hon. Member for Colchester (Mr. Russell), does the Paymaster General recognise the potential merit of the proposal made in February 1999—by the European Commission, curiously enough—for the imposition of lower rates of VAT on labour-intensive services? As her right hon. Friend the Chancellor is the heaviest plunderer of the pockets of the British people in the country's history, why does she not consider supporting that proposal, as it stands or in a suitably amended form?

Dawn Primarolo

As the hon. Gentleman knows, the proposals for an experimental reduced rate which are being discussed in the European Union are intended to reduce unemployment, and as he knows, unemployment in his constituency has gone down by 33 per cent. since the general election. It is the Government's view that in order to reduce unemployment, we should pursue the policies of skills development, job creation and a stable economy, which the Conservative Government did not pursue. With regard to those discussions, it is our view that they will not contribute to a reduction in unemployment, but we will study the proposals from member states for taking the matter forward.