HC Deb 18 December 2003 vol 415 cc1716-7
14.Sue Doughty (Guildford) (LD)

How many respondents to the recent Treasury consultation on economic instruments to improve household energy efficiency supported a rate of VAT of 5 per cent. for the supply and installation of energy-efficient products or materials in non-grant schemes when householders employ contractors. [144729]

15. Brian White (Milton Keynes, North-East) (Lab)

How many respondents to the recent Treasury consultation on economic instruments to improve household energy efficiency supported capital allowances and enhanced capital allowances for companies to write off investments in energy saving equipment provided to social landlords and households. [144730]

The Economic Secretary to the Treasury (John Healey)

The Government have published a summary of consultation responses, which is available on the Treasury website. It explains that we received 126 responses to the consultation, of which 120 supported a reduced rate of VAT for the supply and installation of energy-efficient products or materials, and 67 supported capital allowances.

Sue Doughty

I thank the Minister for his answer and for the response he gave earlier to the hon. Member for Nottingham, South (Alan Simpson). Will the Minister continue to examine closely the issue of reducing VAT on energy-saving materials and admit that the Government were wrong to suggest that Europe was stopping them reducing VAT to 5 per cent.? Will he make an announcement as soon as possible so that people can put plans in place to reduce the scourge of fuel poverty in this day and age?

John Healey

The hon. Lady serves on the Environmental Audit Committee, so I am surprised by her question. I would have expected her to know that it is wrong to say that without a change in Europe we could introduce a reduced rate of VAT on, for instance, energy-saving materials for do-it-yourself installation in homes. She is also wrong to say that without a change in Europe we can introduce a reduced rate for energy-efficient products such as fridges, boilers and light bulbs. We continue to battle with our friends in other member states in Europe to try to win the argument and we will consider the much narrower areas where we have the scope within the European system to introduce reduced rates that could help to achieve greater energy efficiency in the UK.

Brian White

I thank my hon. Friend for his earlier responses and I congratulate the Government on the swift announcement today of their combined heat and power targets for the whole of the Government estate, as required by the Sustainable Energy Act 2003. I wish to draw his attention to the frustration in the industry at the fact that the barriers that the Treasury consultation document so rightly identified could be addressed more quickly if the issue of capital allowances were tackled. I urge him to do that when the Government present their energy efficiency plan in February.

John Healey

In many ways I understand the point that my hon. Friend makes about impatience and frustration in the industry, but I hope that he will see the pre-Budget report as encouraging. It confirms that we see the case for using economic instruments to promote energy efficiency in the home and that we are considering a range of possible fiscal measures, including the capital allowances in which my hon. Friend is so interested. The work is complicated by the European review of reduced VAT rates and by a review that we have to undertake of the operation of corporation tax. Without a clearer idea of the outcome of both, it is difficult to make hard decisions. Nevertheless, we do not want to delay such decisions or announcements any longer than we need too.

Sir Sydney Chapman (Chipping Barnet) (Con)

While I appreciate that in the area of energy efficiency VAT rating is a matter of EU directive interpretation and the decision of the Chancellor in his next Budget statement, will the Minister undertake a cost-benefit analysis well ahead of the Budget, which would indicate the loss to the Revenue on one side, if a selected group of energy efficiency materials had a lower rate of VAT—in particular, thermal insulation materials—against, on the other side, the benefits from improving energy efficiency in households? That would be helpful for the Government and the House in interpreting whatever measures the Chancellor announces in his next Budget.

John Healey

As the House will expect, we do such analyses of the economic costs and benefits of any potential policy measures. This is part and parcel of the case that we are making in Europe to have greater freedom in the United Kingdom to introduce reduced rates. Clearly, those calculations and that analysis will be part of any decisions that the Government take and the Chancellor announces as part of the Budget next year and beyond.