HC Deb 13 May 1999 vol 331 cc397-8
1. Mr. Norman Baker (Lewes)

What is his policy in respect of taxation on (a) house building and (b) house renovation. [83188]

The Paymaster General (Dawn Primarolo)

The construction of new housing is not taxed. The renovation of existing housing is subject to VAT at the standard rate.

Mr. Baker

Is it not time that the Government took notice of the Select Committee on the Environment, Transport and Regional Affairs and reviewed an obviously illogical policy which is bad for the environment? Surely it would be better if green-field housing were taxed and there were less tax on the renovation and improvement of existing property. That makes sense for the environment. It has no fiscal implications in terms of the amount of money that the Government receive, but it would be a good signal to send. Will the Government pursue that policy?

Dawn Primarolo

As the hon. Gentleman knows, the Government's policy is to discourage green-field development and to encourage sustainable housing growth through the use of brown-field sites. He is right to say that tax may play a part in that policy. As he is aware, the Government's statement of intent on environmental taxation makes it clear that we should consider tax and regulation and other items with regard to pursuing that policy. It is important that any change in tax policy does not cause further distortions, which would make the position worse. Therefore, of course the Government keep the tax position under review, because it is important that such distortion is not allowed to undermine Government policy.

Mr. Jim Cousins (Newcastle upon Tyne, Central)

The imposition of VAT on house improvement by the previous Conservative Government was undoubtedly a considerable act of folly, with damaging effects in some northern cities and the Welsh valleys, where there are very many elderly, low-income owner-occupiers who need house improvement support. When the Government's urban task force reports next month, will the Minister carefully consider proposals that will equalise the tax treatment of new house building and house improvement, so that those elderly, low-income owner-occupiers can maintain their homes, the quality that all of us would wish?

Dawn Primarolo

My hon. Friend will have noted that the previous Government put VAT on fuel, which was also damaging to those poor pensioner households. I know that, as a member of the Select Committee on the Treasury, he is aware that conversion services for housing associations, and the conversion of non-residential properties into housing, are zero rated. He is right to say that we should ensure that the tax system does not discourage the conversion or renovation of any property. Of course we are considering the matter.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)

I am sure that all hon. Members are worried about the decay of buildings in town centres. Would it not be a positive step if the VAT treatment were changed to give a positive response and an impetus to the development and refurbishment of town and village-centre properties?

Dawn Primarolo

Each of those who have spoken on this question have identified a different aspect of housing policy that they wish VAT to tackle—whether it be green-field sites, brown-field sites, the renovation of the inner cities or the importance of all housing in our communities. That shows the diversity and complexity of the problem that the Government are seeking to address. I should say that just one change will not give us the solution that we are looking for, which is why the Government are reviewing the position.

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