Historic Buildings: VAT on Repairs (Hansard, 15 February 1995)

§ The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Henley)
My Lords, the information is not available. Repairs to all buildings have been liable to the standard rate of VAT since 1973. The VAT paid on all repairs is charged by registered builders, who periodically declare to Customs and Excise the total VAT charged by them to all their customers without further analysis.

§ Lord Boyd-Carpenter
My Lords, while thanking my noble friend for that not particularly informative reply, perhaps I may disclose an interest. I am the churchwarden of a beautiful church in the country now under repair. Is my noble friend aware that the amount raised by VAT on this kind of work is trifling in proportion to the national revenue, but harsh in its operation on those who are desperately trying to raise money to repair and keep beautiful buildings in good order? Is there not an overwhelming case for waiving VAT on this kind of transaction altogether?

§ Lord Henley
My Lords, I do not believe that there is an overwhelming case, as my noble friend Lord Mackay made clear on another occasion when he repeated that my right honourable friend had made clear that he has no plans for a reduced rate of VAT on anything other than domestic fuel and power. However, we see considerable scope for providing support for historic churches or other heritage buildings. Government funding for the repair of English historic buildings is channelled through English Heritage and this year English Heritage will receive over £105 million in government grants from the taxpayer. Of that, English 692 Heritage has been allocated an estimated £44 million in grant assistance, of which £10.5 will go to assist church restoration and £4.3 million for cathedrals.

Lord Bruce of Donington
My Lords, is the Minister aware that under the European Community's sixth directive the Government have powers if they wish to use them? In the same way that lotteries and gaming institutions are exempt from VAT, it is open to the Minister to order that the tax on church repairs be stopped, if he wishes to do so. Does the Minister want to do so or not?

§ Lord Henley
My Lords, under the Sixth VAT Directive, to which the noble Lord referred, my right honourable friend has powers, under the list of suppliers of goods and services which may be subject to reduced rates of VAT, to apply a reduced rate of not less than 5 per cent. on specific items. That includes supply, construction, renovation and alteration of housing. It would not go as far as a reduced rate on churches because they do not come under the heading of housing or, for that matter, housing provided as part of the social policy. If we wanted to amend that list of suppliers in the Sixth VAT Directive at Annex 2, we would have to go to ECOFIN and unanimity would be required.

§ Lord Jenkins of Hillhead
My Lords, does the Minister recognise that this is a remarkable interchange, in that the noble Lord, Lord Bruce of Donington, does not blame the European Community for the position? Does not that show the strength of the case which has occurred to some of us for a long time past that one can, without paying VAT, build the ugliest building it is possible to design but one cannot repair the most beautiful building without paying it?

§ Lord Henley
My Lords, as I believe I made clear earlier, if it was an alteration, the VAT would be zero rated; it has been zero rated since 1984. As regards the first point, like the noble Lord I found it a remarkable intervention from the noble Lord, Lord Bruce. However, on this occasion, rather than attacking the European Commission, he is attacking my right honourable friend the Chancellor of the Exchequer.

§ Lord Clark of Kempston
My Lords, I too have a vested interest, in that I am chairman of an appeal for my local church in the country. Does not my noble friend agree that it is ludicrous that historic churches receive a grant from English Heritage, yet when that grant is used, the expenditure is subject to 17.5 per cent. VAT? Surely that must be changed.

§ Lord Henley
My Lords, as I made clear, my right honourable friend the Chancellor of the Exchequer does not see a case for further reduced rates of VAT other than that for domestic fuel and power. As I made clear also, we provide help through grants and other help which we can provide to charities or charitable donations. There is also the possibility of help through the National Heritage Memorial Fund. We do not see a reason for making a specific exemption in this case.

The Bishop of Ripon
My Lords, in the light of the Minister's comments on English Heritage, does he 693 accept that more is paid out by the churches in VAT than is received by them from English Heritage? Is that a satisfactory position?

§ Lord Henley
My Lords, I do not accept that case, as I made clear in my first Answer. The information is not available. I am aware that, when we had another debate on the subject on 31st January this year, the right reverend Prelate's colleague, the right reverend Prelate the Bishop of Norwich, made that suggestion. As we made clear on that occasion, there is support from English Heritage and also help from the taxpayer in many other ways.

§ Lord Stoddart of Swindon
My Lords, can the noble Lord clear up some confusion? My noble friend Lord Bruce of Donington is seldom wrong on matters European. He told us that the Government have the power to vary the VAT rate on church repairs, yet the Minister said that we do not have the power unilaterally to do so and we would have to go to ECOFIN and obtain a unanimous decision to reduce or revoke VAT on church buildings. Can he tell us what the truth is? Will he also say whether, if the Government had the power to reduce VAT, they would do so?

§ Lord Henley
My Lords, as always, I was right and the noble Lord, Lord Bruce, was wrong. I shall send the noble Lord a copy of Annex 2 to the Sixth VAT Directive, to which I referred, which is the list of the supply of goods and services which may be subject to reduced rates of VAT. That would then be a decision for national parliaments. The list includes a number of different items and, on buildings, Item 9 mentions the supply, construction, renovation and alteration of housing provided as part of social policy. I do not believe that that covers churches.
As regards the wider issue, as I made clear, my right honourable friend does not see a case for a reduced rate of VAT. Therefore, even if such a power should be granted by an amendment to the list, he would not seek at present to make use of it.

§ Lord Boyd-Carpenter
My Lords, does it not strike my noble friend as a little odd that a lottery should be free of tax but the repair of an ancient and historic church is taxed?

§ Lord Henley
My Lords, as I made clear, my right honourable friend does not see a case for further complicating the VAT structure by bringing in reduced rates in this case.

The Earl of Gowrie
My Lords, how can my noble friend deny that a church is a house? Is he not aware that most of us were brought up to believe that a church is a house with a rather distinguished Resident?

§ Lord Henley
My Lords, I take the point made by my noble friend, but I do not believe that in law a church is defined as housing provided as part of the social policy.

Lord Bruce of Donington
My Lords, the right reverend prelate made the assertion that the amount paid out by the Church in respect of VAT is exceeded by the amount which it receives from English Heritage. The 694 Minister disputed that. If he does not know the amount of VAT that has been paid, as he said in the earlier part of our proceedings, how does he know that the right reverend Prelate is wrong?

§ Lord Henley
My Lords, I hope I did not say that I disputed the figure. I simply said that I could not accept it.

§ Baroness Rawlings
My Lords, as the Minister can see that VAT is very unpopular in this case, will the Government put their mind to thinking of new ways to help people pay for listed historic buildings and churches?

§ Lord Henley
My Lords, that is obviously a matter for the Department of National Heritage. As I made clear, a number of sources of funds are available for assistance in heritage matters: support from English Heritage, similar arrangements in Scotland, support offered through the tax system for charitable donations, and so on. I could go on.

§ Lord Peston
My Lords, when the Minister answered his noble friend Lord Boyd-Carpenter by saying that the information was not available—and I believe that those were his exact words—did he mean that it was not available because it could not be made available, or was it not available because the Treasury has not done the work and made it available? The reason for asking the question follows what the right reverend Prelate asked. It would help all of us to gain a purchase on the question if we could relate the amount of money raised on VAT on repairs to the amount of grants given by English Heritage. It is difficult to make sense of the matter unless we have a numerical balance. Is there any way in which the Treasury could carry out the work and give us the answer, or is that impossible?

§ Lord Henley
My Lords, the figures are not available for the reasons I gave in the second part of my original Answer. The registered builders who periodically declare to the Customs the total VAT charged by them to all their customers do so without any further analysis.

§ Lord Marlesford
My Lords, I must declare a similar interest to that of my noble friend Lord Boyd-Carpenter. Does the Minister agree that the virtual financial bankruptcy of the Church of England means that we shall increasingly find that the funds which parishes have previously been able to devote to the repair of churches will have to be siphoned off by the diocese to keep the show on the road? What is really needed is an increase in order of magnitude, or perhaps two orders of magnitude, in the money given to English 'Heritage for that purpose. Is that not a much better way than introducing further aberrations into the VAT system?

§ Lord Henley
My Lords, I am grateful for my noble friend's support for not bringing further aberrations into the VAT system. I would rather not comment on the state of the Church's finances, but as regards the 695 physical state of the churches, I remind my noble friend of what the right reverend Prelate the Bishop of Norwich said in our previous debate: Taken overall, most of our ancient churches are in a better state of repair than since the Middle Ages and the quality of the work is such that it will last for generations".—[Official Report, 31/1/95; col. 1399.]