Historic Buildings: Maintenance VAT (Hansard, 19 June 1984)

§ Lord Kennet
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ Lord Cockfield
My Lords, repairs and maintenance have always been liable to VAT since the tax was introduced and no change in that position has been made or proposed for listed buildings or otherwise. The concession announced for listed buildings, broadly speaking, excludes them from the extension of standard rate VAT to building alteration and reconstruction which my right honourable friend the Chancellor of the Exchequer announced in his Budget. In general, therefore, the status quo is being preserved for listed buildings. This followed representations made both inside and outside Parliament. There were also consultations with the Department of the Environment, the Historic Buildings and Monuments Commission, the Building Employers' Confederation and the British Property Federation.

§ Lord Kennet
My Lords, whether or not the recent change is a reversion to the status quo ante or has a new element in it, is it not the case that it does use fiscal means to discourage the repair and maintenance of historic buildings, which is what the public interest would like to see encouraged, and to encourage their substantial alteration, their gutting and their reconstruction, which is what the public interest would demand should be discouraged?

§ Lord Cockfield
My Lords, I am sure that the noble Lord would, in fact, welcome the concessions which were announced by my honourable friend the Minister of State at the Treasury, Mr. Barney Hayhoe, because those changes ensure that the fiscal impact is no different after the Budget from what it was before. So far as the liability on repairs and maintenance is concerned, this situation has existed since 1973 when the tax was first introduced. There have been numerous proposals that it should be changed, but successive Chancellors of the Exchequer under successive Governments have declined to make any change in that position. The reasons have been fully explained in debate. The last occasion on which this issue was debated was in another place in Committee on the Finance Bill on 30th April.

The Lord Bishop of Norwich
My Lords, may I ask the Minister whether he is aware that the changes 152 which have been made, and of which he has been speaking, will add very considerably to the already heavy financial burdens on the churches? I speak on behalf of the Churches Main Committee, though of course I speak as an individual Member of the House, which covers all the churches of England, and they are very anxious about this matter of value added tax. This seems to constitute a discouragement to voluntary giving, which must seriously affect the churches' ability to look after the buildings in their care. Is the Minister aware that representations have been made on this account to the Government and that no reply has, I think, yet been received on that narrower issue?

§ Lord Cockfield
My Lords, I entirely appreciate the concerns expressed by the right reverend Prelate. So far as the last point that he raised is concerned, I understand that my right honourable friend the Chancellor of the Exchequer will be replying shortly to the right reverend Prelate the Bishop of London, who wrote on behalf of the Churches Main Committee. As to the other points he raised, the concession announced by my honourable friend the Minister of State at the Treasury applies to listed churches, and so far as they are concerned the status quo is maintained. On encouragement of voluntary giving, this Government have taken a series of measures, particularly in the Finance Act 1980 and the Finance Act 1983, to encourage voluntary giving to charities —and, of course, churches are charities —improving particularly the conditions applying to deeds of covenant

The Lord Bishop of Norwich
My Lords, I thank the Minister for that reply, which helps us to understand the problem. I particularly thank him for the first part of his answer, that his friend the Minister in another place may well be replying to us. I am glad that the Minister was in his place to hear that great psalm: He that sweareth unto his neighbour and disappointeth him not, though it were to his own hindrance, shall not fall. I take comfort from that.

§ Lord Cockfield
My Lords, I am most grateful to the right reverend Prelate, and for the encouragement he gives me and other noble Lords to attend Prayers before the commencement of our proceedings.

§ Baroness Birk
My Lords, in spite of what various governments have done or have not done about VAT relief on listed and other ancient buildings, is the Minister aware that the definition "substantially reconstructing" involves a great deal of gutting and demolition and the changing out of all character of so many of our buildings? Could the Minister undertake to give further consideration in the coming year to the whole question of a newer definition and greater incentive in order to conserve and preserve buildings and also make them economically viable for other alternative uses?

§ Lord Cockfield
My Lords, I note the points made by the noble Baroness, and I shall most certainly draw them to the attention of my right honourable friend the Chancellor of the Exchequer. However, may I assure the noble Baroness that no substantial change has taken place in the definition of "reconstructing". 153 She will find full details of this in Press Notice No. 912, issued by the Board of Customs and Excise. The important point is that in many instances one needs substantial work on a listed building to be carried out in order to give it a second lease of life. This is what is behind it.

Lady Saltoun
My Lords, why are the Government always preaching about good housekeeping they are apparently anxious to discourage the policy of make-do-and-mend and to encourage people to destroy and build anew?

§ Lord Cockfield
No, my Lords. That is neither a fair nor an accurate interpretation of the situation. As I have said, the liability to VAT on repairs and maintenance dates right back to the beginning of the tax in 1973.

§ Lord Montagu of Beaulieu
My Lords, as chairman of the Historic Buildings and Monuments Commission, may I express its appreciation to Her Majesty's Government for their acceptance of the commission's arguments for the zero-rating of structural alterations to listed buildings. However, may I take this opportunity to express the commission's continuing concern with regard to the test under which alterations must reach 75 per cent. of the total cost. Will not Her Majesty's Government agree that perhaps it would be more realistic and equitable to make it 60 per cent., thus reducing the harshness of the test and resulting in more listed buildings being preserved for alternative use?

§ Lord Cockfield
My Lords, I am grateful to my noble friend for the first part of his remarks. As to the second part, I am assured that the new 75 per cent. test, which depends on different factors, has approximately the same impact as the existing 50 per cent. test which applies to all expenditure, including the repair and maintenance element in the total cost. It is a much simpler test to operate. I shall however draw the attention of my right honourable friend to what my noble friend has said.

§ Lord Grimond
My Lords, while I know that many of the bodies which the noble Lord the Minister has consulted are grateful for the change that has been made, may I ask whether it is not the case that they are still very worried about the impact of VAT on repairs to historic buildings? May I also ask the Minister whether it is intended that there should be further conversations with them about this matter in the hope that a more agreeable solution can be found?

§ Lord Cockfield
My Lords, as I have already said, the concession which has been announced is felt by the Government to meet the main criticism which has been made of the proposals. It is related specifically to listed buildings which can readily be identified. Perhaps I ought to add that in addition to this concession, the Government disburse approximately £17 million every year in grants towards the repair, maintenance and renovation of such buildings.

§ Lord Kennet
My Lords, may I ask the Minister whether the Government will have consultations with 154 the tourist industry, which was not on the list of those who had been consulted that was read out by the noble Lord, and which is now, I believe, our principal foreign exchange earner? It cannot be the Government's intention to encourage the gradual erosion and destruction of an important part of that industry's plant.

§ Lord Cockfield
My Lords, I simply cannot accept what the noble Lord says in the latter part of his supplementary question. On the contrary, this Government have done a very great deal to help and assist the preservation of our heritage. I appreciate that the number of bodies consulted was limited, but this was because of the necessity to make an announcement at an early date.

Lord Bruce of Donington
My Lords, can the noble Lord give some indication of the annual cost of the concession to which he has referred?

§ Lord Cockfield
My Lords, the annual cost of this concession is stated to be £10 million a year.