HL Deb 12 November 2003 vol 654 cc1351-3

The Lord Bishop of London asked. Her Majesty's Government:

What progress they have made in negotiations with the European Commission to introduce a 5 per cent rate of VAT on repairs and maintenance to listed places of worship; and when they expect the necessary changes to the European Union VAT regime to be made.

The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)

My Lords, the Government are negotiating hard in the current EU negotiations for a reduced rate of VAT on the repair and maintenance of listed places of worship. We recognise the importance to the community of these buildings and the heavy burden that their upkeep can impose, particularly on small congregations.

In the mean time, we continue to provide support through the Listed Places of Worship Grant Scheme, which has paid out grants in excess of £15 million since it began in 2001. In addition, English Heritage has offered to listed places of worship a total of £75 million in grant-in-aid since 1997.

The Lord Bishop of London

My Lords, I am most grateful to the Minister for his courteous and very constructive reply. Is he aware that a delegation led by one of his colleagues from another place—the Second Church Estates Commissioner—met yesterday with Commissioner Fritz Bolkenstein to discuss the VAT issue? One of the difficulties seems to be a lack of clarity about the different regimes which obtain in member countries of the Union on caring for historic buildings, and not least ecclesiastical buildings. Would the Minister be willing to use his good offices to assist in a survey of the comparative regimes in the Union as part of the campaign to preserve flexibility in VAT rates; a campaign in which the Government and all those who care for historic community assets are united?

Lord McIntosh of Haringey

My Lords, I can certainly confirm that the Government are in favour of flexibility in VAT regimes; always provided of course that by encouraging flexibility we do not sacrifice the derogations we already have, some of which are not shared and are envied by other member states. Certainly, the suggestion that there should be a survey of actual practices in different member states which exercise local options is a very valuable one. I should like to think about it and communicate with the right reverend Prelate.

Baroness Platt of Writtle

My Lords, it was very encouraging to hear what the Minister just said, and I wish them well in Brussels. Does he agree that it is better to have zero VAT if possible and not to resort to grants because that is double bureaucracy? After all, churches are used for entertainment, tourism, education and so many valuable things that they are worth a zero VAT rating.

Lord McIntosh of Haringey

My Lords, I certainly agree that we would prefer to have a reduced rate of VAT rather than the grant system. I think the Churches would agree that a grant system is better than nothing.

Lord Newby

My Lords, I declare an interest as a clergy spouse. In the spirit of flexibility, would the Minister consider extending the reduced rate of VAT currently being contemplated for listed places of worship to unlisted places of worship, on the basis that whether or not a church is architecturally distinguished it still plays a major part in binding communities together?

Lord McIntosh of Haringey

My Lords, we have a number of priorities to balance. There are indeed unlisted places of worship. There are also other listed public buildings which are not places of worship in charitable or non-profit occupation and use. It is not easy to suggest any extension to what we are fighting for—and have not yet obtained—when we are still in negotiation.

Baroness Hayman

My Lords, my noble friend will be aware of concerns on another aspect of zero rating on VAT—that of the charitable sector in this country—where the abolition of zero rating on issues such as the purchase of research equipment or the sale of donated goods would have tremendous detrimental effects on many charities. I remind the House of my interest as chairman of Cancer Research UK, which would stand to lose something like £13 million if the proposals were to go ahead. Will my noble friend reiterate the Government's hitherto very robust stand on this and confirm that they will be willing to use their veto on the Council of Ministers if necessary?

Lord McIntosh of Haringey

My Lords, it is indeed the case that any Commission proposal to remove the zero-rate derogations would require unanimity. This covers not just equipment for charities, but children's clothes and footwear and also equipment for disabled people. So it is very important to us—important to the extent of more than £1 billion—that we do not lose these derogations. We would indeed be prepared to veto any proposal which would bring that about.

The Lord Bishop of Derby

My Lords, I echo the appreciation of the Churches and faith communities for the Government's consistent support for this project for VAT reform. Given that the European Commission's initial proposals about changes to the VAT regime did not appear to favour the case being made by Her Majesty's Government, will the noble Lord assure all UK faith groups that the Listed Places of Worship Grant Scheme will be allowed to continue in the event of failure in the EU VAT negotiations?

Lord McIntosh of Haringey

My Lords, I can go part way towards that. I can certainly give an assurance that the grants will remain in place until the outcome of the review is known. To go beyond that is more than can be expected of any Treasury spokesman.

Lord Palmer

My Lords, I was greatly heartened by the Minister's initial reply to the right reverend Prelate. Does he agree that charging VAT on the repair of existing buildings discourages their reuse or repair? Of course, that encourages urban sprawl on greenbelt land. I must declare an interest as the treasurer of the All-Party Parliamentary Group on Architecture and Planning.

Lord McIntosh of Haringey

My Lords, I understand the argument that is made for what is called "flat VAT"—there is certainly a possible distortion if there is an encouragement to new construction and a discouragement to repair. That is particularly important for listed buildings. But I must remind the noble Lord, Lord Palmer, that we have a zero rate for construction that includes buildings for charitable purposes and housing. To lose that would be a severe blow indeed; but we do not intend that to happen.

Lord Campbell of Alloway

My Lords, what is the position generally in the European Community? For example, does the Church of Rome have to pay VAT on the maintenance of its cathedrals?

Lord McIntosh of Haringey

My Lords, I would rather duck the first question than the second one, I think, although I really want to duck them both. What is the general state of affairs in the European Community? I could give an hour-long speech on that. I do not know what the Church of Rome does, but of course Catholic churches and cathedrals are included in listed places of worship.

Baroness Hooper

My Lords, is the Minister aware that the Parliamentary Assembly of the Council of Europe is working on the idea of setting up a database as a guide to good practice on tax incentives and to identify anomalies? Does he support that initiative?

Lord McIntosh of Haringey

Yes, indeed, my Lords.

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