HL Deb 22 January 1975 vol 356 cc111-4

2.56 p.m.

Lord MONSON

My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether, in view of the energy crisis, they will exempt materials used for domestic roof insulation from VAT on the ground that this is the most cost-effective method of minimising heat loss from private houses.

Lord JACQUES

My Lords, materials used in the initial insulation of lofts are already zero-rated when supplied together with installation services by traders registered for value added tax. This applies to existing as well as new houses. A householder insulating his existing house himself has to pay tax on the materials he buys, but tax at 8 per cent. on the cost of those materials should not deter the prudent householder, bearing in mind the savings to be gained on fuel costs. A special relief for insulating materials would unfortunately give rise to formidable control problems as many of the materials which are useful for insulation are used esentially for other purposes.

Lord MONSON

My Lords, I thank the noble Lord for his reply, and apreciate the difficulties of classification of materials which he cites. Would not he agree, first, that roof insulation is essentially a form of work undertaken by the householder himself rather than by an outside contractor? Would not he further agree that it is somewhat illogical for the Department of Energy to be mounting an expensive full-page campaign in the national Press to encourage householders, among other things, to undertake roof insulation themselves, while at the same time this desirable action tends to be discouraged by the imposition of VAT, particularly as other less cost-effective forms of insulation, namely, double-glazing and cavity wall insulations, are normally exempt from VAT by virtue of declaring them as improvements carried out by a contractor?

Lord JACQUES

My Lords, double-glazing and insulation of the walls stand in exactly the same position as insulation of the roof. When the work is done by a contractor the services and the materials are zero-rated. It is when the house-holder does it himself that it is standard rated, and that applies to wall insulation, double-glazing, as well as to roof insulation.

In connection with the materials involved, there are three formidable problems. First, there is a whole range of materials used for insulation at ceiling and above ceiling level, and some invidious distinctions would need to be made if some were to be zero-rated and others standard rated. Secondly, many of these materials have other uses, and it would be quite impossible to restrict any tax concession to insulation. It would have to be much wider than that. Thirdly, you have to remember that this tax, unlike purchase tax, goes right down to the retail level where there are not thousands but millions of transactions. Every time you move away from the standard rate, then you make it more and more difficult to assess the amount of tax which is payable by the retailer.

Lord INGLEWOOD

My Lords, the noble Lord spoke of invidious distinctions. Will not he agree that the most invidious distinction which has come out of these questions and answers is the way that work done by contractors is treated as exempt from VAT, zero-rated, but when the individual householder does the same work in order to make his family more comfortable and to be more proud of his home, then Her Majesty's Government insist that he should pay tax?

Lord JACQUES

My Lords, it is a question of control. When the work is done by a contractor, a registered trader, it is possible to control the use of materials; it is known that it is being used for that purpose. To sell the materials without any such control is an entirely different matter.

This is the kind of tax concession which, if granted by successive Governments, within a period of five to ten years would create a tax riddled with anomalies. The situation would require another Gerald Nabarro to ask Questions to expose those anomalies.

Lord SHINWELL

My Lords, in view of my noble friend's declaration, which is somewhat surprising, that the operation of Value Added Tax involves millions of complications, may I ask him to ex-plain why the Government introduced VAT?

Lord JACQUES

My Lords, I will reply to two points on my noble friend's question. First, this Government did not introduce VAT. Secondly, VAT was instituted by the previous Government because they wanted to tax services as well as goods, a matter for which there is a strong case.

Lord ELTON

My Lords, may I ask whether the noble Lord can confirm therefore that the effect of this regulation is to give business only to those who make the improvements professionally? Will he remind the House of the name of the noble Lord, who I think was introduced by Mr. Hilaire Belloc, who … fiddled with the electric light, It struck him dead and served him right, It is the duty of the wealthy man To provide employment for the artisan".

Lord SHINWELL

My Lords, in view of my noble friend's answer to my simple question, is it not about time that we ceased the practice of blaming the previous Government for everything that has happened? Should not we abolish that practice?