19 Jan 1998 : Column 1243

House of Lords

Monday, 19th January 1998.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Oxford.

Listed Churches: VAT on Repairs

Lord Lloyd-Webber asked Her Majesty's Government:

    Why Value Added Tax at the standard rate of 17.5 per cent. is levied on the repair bills of listed churches (grade I and II), even when the repairs have been partly funded by English Heritage and its equivalents in Wales, Scotland and Northern Ireland.

Lord McIntosh of Haringey: My Lords, building repairs have been taxed at the standard rate since VAT started in 1973. The Government do not consider it appropriate to make an exception for listed churches.

Lord Lloyd-Webber: My Lords, I thank the Minister for his reply, which I am sure he appreciates I find a little disappointing. If one wandered across the road to Westminster Abbey one would see that its central tower was unfinished. Surely, it is ludicrous that the central tower could be completed but would not be subject to VAT when at the same time the fabric would be subject to a 17.5 per cent. rate of tax. Is the Minister aware that the total amount of money given by English Heritage is less than that collected from the Churches in the form of VAT on church repairs? Since the EU has agreed a concessionary rate of 5 per cent. on church repairs and repairs to listed buildings, does the Minister agree that it would be a wonderful recognition of Jesus Christ's contribution to the millennium to allow church repairs to be treated in that way?

Lord McIntosh of Haringey: My Lords, I believe that the noble Lord underestimates the extent to which money is made available by the Government to listed churches. In the current financial year English Heritage has allocated £20 million to the churches grant scheme. The Department for Culture has allocated £2.4 million to the Churches Conservation Trust. There is also money available from the Heritage Lottery Fund.

As to the paradoxical situation whereby repairs are standard rated whereas alterations are zero-rated--here I agree with the noble Lord--although alterations were originally zero-rated when we introduced value added tax, the relief was proposed to be withdrawn by the noble Lord, Lord Lawson, when he was Chancellor of the Exchequer in 1984. Under great pressure he conceded that this should not be the case for any listed building, but he had no power, and the Government have no power, to change the standard rate for repairs.

Lord Bruce of Donington: My Lords, can my noble friend confirm that there is nothing in European

19 Jan 1998 : Column 1244

legislation, notably the sixth directive on VAT, that takes away the right of the British Government to make a change should they so desire?

Lord McIntosh of Haringey: My Lords, no. The sixth directive allows new reduced rates rather than new zero rates, which are not permitted. It allows these reduced rates to be applied only to housing and not to the buildings which are the subject of this Question.

The Lord Bishop of Oxford: My Lords, are Her Majesty's Government willing to press the European Commission to add listed building repairs to the services eligible for reduced rates of VAT, of course at national discretion, ultimately with a view to abolishing VAT on these buildings altogether?

Lord McIntosh of Haringey: My Lords, no. The Government take the view, as did the last government, that if VAT is to be effective it must be as simple as possible. To begin to make a distinction between listed churches and other listed buildings would add to the complexity of collection of VAT.

Baroness Platt of Writtle: My Lords, does the Minister agree that the churches of this country, especially the listed ones, are an important part of the national heritage--even more so as we approach the celebration of 2,000 years of Christianity? Would it not encourage all the volunteers who give their time, talent and money to maintain our churches if the Government made a move in their direction and at least reduced the level of VAT, which I understand is affected by the European directive but comes up for reconsideration every two years?

Lord McIntosh of Haringey: My Lords, I have no quarrel with the sentiments behind the question put by the noble Baroness, but she is wrong in saying that we have power to apply zero-rating to buildings of this kind. Our powers within the VAT directives are quite limited, as I explained to the right reverend Prelate the Bishop of Oxford.

The Lord Bishop of Ripon: My Lords, I should like to press the point made by the noble Lord, Lloyd-Webber, on the amounts involved. Does the Minister agree that a figure of about £18 million is paid by the Churches in VAT, which is comparable with the figure that he has already given? Does he agree that effectively the Government take back the money that they give to the Churches? If the Minister is not willing to alter the regulations on VAT, would not a simple way forward be to make the grants much larger to take account of the VAT that must be paid?

Lord McIntosh of Haringey: My Lords, the VAT bill of the churches as a whole--I refer to all Churches and not just the Church of England--applies very widely and includes the bill to all charities. It would be

19 Jan 1998 : Column 1245

particularly difficult to try to exclude the Church with most listed buildings from this general rule and neither this nor any other government have felt able to do so.

Baroness Maddock: My Lords, did the Minister hear the deputy Prime Minister on the radio this morning imploring builders to build in cities rather than on greenfield sites? As the Minister said, 17.5 per cent. VAT is charged on all repairs to all buildings and renovations, including energy efficiency measures, and yet if one builds on greenfield sites the tax is not levied. Does the Minister believe that that is something that should be looked into seriously if we are not to cover our green belts with houses?

Lord McIntosh of Haringey: My Lords, I am afraid that I did not hear the deputy Prime Minister this morning. The zero-rating of all new construction applies to greenfield sites and to what are called brownfield sites in the cities. The difficulty regarding the distinction between repairs and alterations, which is what led Mr. Lawson, as he then was, to seek to withdraw the relief for alterations, is that it is possible to disguise one as the other. For that reason, all governments have thought it desirable to have a consistent regime.

Baroness Rawlings: My Lords, I am amazed by the Minister's reply. I remember distinctly, as I am sure the whole House does, that in opposition he was keen to have those changes made. He was always pressing the government. We have heard encouraging noises from the Secretary of State and his department. Surely they now have the chance to do something.

Lord McIntosh of Haringey: My Lords, I have explained the restrictions on government action which are the result of the VAT regime. If the noble Baroness is referring to the review of charities tax announced in the July Budget, I can tell her that there have been 2,500 replies and that further consideration is being given to the replies. It is likely that there will be a further consultation document in the spring. The Government are in no way resiling from their intention to review charities tax law.

Lord Kennet: My Lords, is my noble friend aware that since 1973 this matter has been one of the principle bones of contention between those concerned with the preservation of ancient buildings and the Government? Is he aware that its effect is to cause the owners of old churches and other listed buildings to let decay continue, because of the forbidding aspect of VAT, until there is nothing for it but partial demolition and alteration, which is VAT free? That is a major cause of the loss of listed buildings.

Lord McIntosh of Haringey: My Lords, I agree with my noble friend that the effect of the distinction between repairs and alterations is paradoxical and does not

19 Jan 1998 : Column 1246

always reflect what we would wish to happen to listed churches. As he says, the issue has been there for a long time. The underlying paradoxes behind it do not change.

Ambassadorial Appointments

2.47 p.m.

The Earl of Carlisle asked Her Majesty's Government:

    Whether they will invite a United Kingdom citizen from an ethnic minority who has served the nation with distinction to serve as ambassador in one of the United Kingdom's major embassies at an early opportunity.

The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, my right honourable friend the Secretary of State for the Foreign and Commonwealth Office has made it very clear that he wants to broaden the base from which we draw our ambassadors overseas. We are committed to increasing the representation of minority ethnic and other under-represented groups in the FCO, especially at senior levels. If an individual from outside the FCO who had served the nation with distinction had the right personal qualifications and experience to do the job, we would certainly want to consider inviting him or her to serve as an ambassador in one of our major embassies, regardless of his or her ethnic background.

Next Section Back to Table of Contents Lords Hansard Home Page