Modifications of Schedule 5 to Value Added Tax Act 1983

Orders of the Day — Finance (No. 2) Bill – in the House of Commons at 10:30 pm on 30th April 1984.

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Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr 10:30 pm, 30th April 1984

I beg to move amendment No. 11, in page 133, line 5, leave out 'ambient air' and insert 'room'.

On page 133, in schedule 6, there is a definition of hot food. It is clearly stated that it is food

which . . . has been heated for the purpose of enabling it to be consumed at a temperature above the ambient air temperature". Initially, the amendment was tabled as a probing device to ascertain what the Government thought they were doing when they used the phrase "ambient air temperature" in respect of hot food. I understand "ambient" to mean "surrounding", in this instance surrounding the food item. There is a problem, because some food items in cabinets, especially in a fish and chip shop on a very hot day, could be cooler than the room temperature. That sort of potential anomaly should be resolved by the Government having the opportunity to make clear what they mean by "ambient air temperature", and the amendment is designed to provide that opportunity.

When I tabled the amendment I started swotting up what "ambient air temperature" meant. It was then that I came across a Customs and Excise notice that was published on 13 March, headed BN2/84 and entitled

Value Added Tax: Hot Food and Drink". On page 2 of the notice, hot food is defined as food above room temperature.

There is nothing about ambient air temperature. It is clear that "room temperature" must be "ambient air temperature" according to the Bill, but the VAT notice and the Bill are different. If I am correct in assuming that the two descriptions are the same, the Government will be able to accept the amendment. If they are different, either the Bill or the notice is wrong. I should like to give the Minister a chance to explain what is meant by the Bill before I decide whether to press the amendment to a Division.

Photo of Mr Peter Rees Mr Peter Rees , Dover

I appreciate the motives that have led the hon. Member for Birmingham, Perry Barr (Mr. Rooker) to move the amendment. I hope that I can reply as constructively and lucidly as his opening deserves.

It is true that there is a difference in the formulation of the test between the notice that was put out at the time of the Budget and the Bill. That is because the notice is designed as far as possible to be in layman's language and generally intelligible. The hon. Gentleman will readily appreciate that the Bill has to stand up to close forensic probing and examination in a court of law. He will be the first to know that the language used in a court of law is not generally in use in common parlance. I hope that that explains to his satisfaction the difference between the notice and the Bill.

I shall not attempt to paraphrase "ambient", because I think that the hon. Member for Perry Barr understands the word and perhaps the entire Committee does. The notice attempted to explain it, and if I tried to put a second gloss upon it I might confuse rather than elucidate. I shall give one practical reason why the amendment would not be suitable. I look at the amendment with an open mind. I believe the hon. Gentleman accepts there is no great political principle between us. We want at this point in the debate to achieve a measure that is intelligible for those who must live with the legislation in their daily commercial lives.

I give one example in which room temperature would not be a suitable criterion. There was, for example, a food stall in Parliament square. Room temperature would not be a suitable term to be used in such cases. The legislation is designed to convey the meaning of hot food that has been heated to, and is meant to be consumed, above the general outside temperature, which is not necessarily room temperature.

The hon. Gentleman asked—I accept his point—whether ambient temperature means the temperature in a hot room in which food temperature means the temperature in a hot room in which food temperature is less than room temperature. That is extremely unlikely. Body temperature is 98·6 deg F. A room in which the temperature is 100 deg F would be very hot. Food is, however, regularly consumed at 120, 130 or 140 deg F. The definition in the schedule is designed to exemplify that difference. The legislation intends to cover food meant to be eaten at a temperature normally above room temperature. Obviously, I cannot legislate for the black hole of Calcutta. If we had to construct VAT legislation for that abnormal case, to which we hope British taxpayers will not be exposed in future years, we might come up with some extraordinary results.

Room temperature will not cover every case. The House will next debate factors designed to cover sales to people outside a building or not standing on a premises. We shall consider also sales from stalls in the open air. I am sure that, on reflection, the hon. Gentleman will recognise that his amendment will not suit such occasions. For those perhaps inadequately explained reasons, I hope that the hon. Gentleman will not feel obliged to press the amendment to a Division.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr

I am grateful for what the right hon. and learned Gentleman has said. He has helped me. I am interested in ensuring that those outside who take note of our debates, especially those in the industry who are interested in this matter, know clearly what it is possible for the Government to do. Because there is a difference between the Bill and the Customs notice, I am worried that people outside might start to mess around with food temperatures. There is no question but that that action could lead to health risks. If a person starts playing around with what he believes is room or ambient temperature, or with containers, a public health risk might be created. If the Chief Secretary to the Treasury makes it clear that ambient temperature and room temperature mean the same and that the Government do not want people to mess around artificially changing temperatures to avoid VAT, thereby creating a health risk, I shall leave the matter as it stands.

Photo of Mr Peter Rees Mr Peter Rees , Dover

I accept the hon. Gentleman's point. It is one on which I wished to reassure myself. It would be wrong for registered traders to attempt to do that. In many cases—I shall not assure the Committee that this will always occur—such actions will fall foul of the hygiene regulations. The hon. Gentleman and I both spotted the problem. I hope he recognises that we have done our best to answer it by the precise definition that we have adopted.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr

I beg to move amendment No. 13, in page 133, line 7, at end insert—

'(c) paragraph (b) above shall not apply to hot food the items of which are packaged separately.'.

The Chairman:

With this it will be convenient to take amendment No. 18, in page 133, line 7, at end insert—

'(c) paragraph (b) above shall not apply to hot food supplied in containers or other packaging provided by the customer.'.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr

Both amendments are designed to make it clear beyond any doubt that there is a distinction between take-away catering and other forms of catering, such as restaurants. There would be no confusion if the packaging of take-away foods were such that the items were packaged separately. I understand that that is the practice in the Republic of Eire where potato chips are rated at 23 per cent. VAT, as is anything put with them, but if the items are wrapped separately they are zero rated.

Another clear means of making the distinction would be for the customer to provide his or her own packaging for the take-away food. As I said many hours ago—and no one has since rebutted the suggestion—the industry estimates that 80 per cent. of take-away meals in this country are eaten in the home.

A clear and practical distinction between take-away meals and sit-down meals with no possibility of error or evasion would be provided if either or both of the amendments were accepted.

Photo of Mr Peter Rees Mr Peter Rees , Dover 11:45 pm, 30th April 1984

Again, I should very much like to oblige the hon. Gentleman on these two amendments. I recognise the Labour party's reservations about the principle of imposing VAT on take-away food, but, on the premise that it is to be imposed, I judge that the hon. Gentleman genuinely seeks to improve the Bill. I wonder, however, whether he has reflected on some of the practical difficulties that would arise from the amendments.

Amendment No. 13 is designed to take out of the charge to tax items of hot food that are packaged separately. Clearly, this is a fine point of contruction. I am advised, however—the Committee will forgive my personalising this—that if the hon. Gentleman went along to the fish and chip shop with an old copy of Hansard to wrap the cod but accepted the chips in paper provided by the shop, the take-away food would not be subject to VAT. If, however, he had no packaging material and had to accept both items in an old copy of the "Perry Barr Chronicle", or whatever is the major newspaper in his area, he would be charged VAT at 15 per cent. I do not know whether our fellow countrymen, who have perhaps not been following our debates as closely as they should, could be persuaded that such a fine and difficult distinction would be worth while. The scope for avoidance—a matter which I know is close to the hon. Gentleman's heart—would certainly be enormous.

Amendment No. 18, again, is designed not to extend VAT at standard rate if the purchaser brings his own packaging. It would thus be a matter of forward planning. If one had time to bring one's own foil container or, to draw on my distant military past, one's own mess tin, the food would not be subject to VAT, but if one had to dash along in a hurry to buy one's Chinese take-away or curry or fish and chips, one would have to pay VAT. Again, the hon. Gentleman may, on reflection, feel that such a fine distinction might not commend itself to our fellow countrymen.

Starting from the premise that take-away food should be subject to VAT — I recognise the Opposition's reservations about the principle—I should have thought that the kind of distinction suggested by the hon. Gentleman would be too haphazard and whimsical in operation to achieve much support outside the Committee. I hope that the hon. Gentleman, on reflection, will feel able to seek leave to withdraw the amendment.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr

The Minister and my constituents clearly occupy different strata of the world. If a take-away food enterprise was given the opportunity to say to its customers, "If you bring your own packaging, there will be 15p in the pound off", that would make a considerable difference to the business in question.

I do not entirely follow the Minister's point on amendment No. 13 about the use of Hansard or another journal. I do not deny that there would be problems connected with amendment No. 13. However, the main thrust of my earlier argument is relevant. Fish and chip shops represent 49 per cent. of take-away outlets, and it would be easy for the fish and the chips to be packaged separately in packaging provided by the shop. The amendment does not require the customer to take his own packaging.

I do not believe that the amendments are at all impracticable, but, at this time of night, I do not intend to press amendment No. 13 to a Division.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr

I beg to move amendment No. 14, in schedule 6, page 133, line 7, at end insert—

'(c) paragraph (b) above shall not apply to hot food supplied from mobile premises.'.

The Chairman of Ways and Means:

With this it will be convenient to discuss the following amendments: No 16, in schedule 6, page 133, line 7 at end insert—

'(c) paragraph (b) above shall not apply to hot food supplied to a customer not situated on the supplying premises.'. No. 17, in schedule 6, page 133, line 7, at end insert—

'(c) paragraph (b) above shall not apply to hot food supplied to a customer who at the time of supply is situated on the public highway or other premises, not being those of the supplier.'.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr

Like amendments Nos. 11 and 13, these amendments would clearly distinguish between take-away and sit-down catering, and would destroy the Chancellor's argument about the competition between the two forms of catering.

The amendments are all about cases where the customer is not physically on the premises which are supplying the hot food, or where the premises are mobile, in which case the customer might or might not be on the premises. I accept that it would not be possible to adopt all the amendments together, because in some respects they contradict each other. There is, however, an argument for excluding the mobile take-away operation, whether it is serving fish and chips, Indian food or chicken. I am thinking of a properly-constructed van, conforming to all the necessary regulations. By no stretch of the imagination could hot take-away meals provided from a mobile van whose customers queue on the pavement, in their own road or elsewhere, be construed as competing—this was the Chancellor's excuse in the Budget debate—with other forms of catering. There is every reason to exclude the supply of hot take-away food from mobile premises from the imposition of VAT.

Amendment No. 16 covers a situation where the customer is not on the premises. The premises could well be a shop, but I suspect that even in Doncaster, Mr. Walker, there are restaurants where there is a window for the supply of some items of hot take-away food. That is quite a normal arrangement. The customer does not enter the premises, and the service provided in no way competes with a sit-down restaurant operation. The customer queues up on the pavement outside the window of a shop where there is a counter for serving hot take-away food. There is every reason for exempting such an operation.

Amendment No. 17 is slightly different as it covers, for example, a fish and chip operation in a football ground car park. I have considered such operations that might be excluded not because of a desire to wreck or filibuster but to point out that a vast area of take-away food business is in no way compatible with restaurant sit-down meal operations. If ever there were a golden opportunity for the Government to help the really small business man, the one-off self-employed person who has used redundancy or unfair dismissal pay and a bank loan to buy and fit out a van to operate a mobile fish and chip shop, here it is. I see no practical difficulties in the Government accepting amendment No. 14.

Photo of Mr Peter Griffiths Mr Peter Griffiths , Portsmouth North

I was pleased to see the amendments grouped together as the grouping solves a problem for me. I want to highlight a problem with the Bill and the grouping enables me to know that I am speaking at the right time.

I support the main thrust of the amendments but not as broadly as the hon. Member for Birmingham, Perry Barr (Mr. Rooker). I wish to make a plea on behalf of mobile caterers who operate as part of travelling fairs, which are part of our traditional life, and suffer because of the loss of sites and high transportation costs. Hot food at a travelling fair is often sold not as a meal but as part of the entertainment. Chips and hot doughnuts, for example, are not sold in competition with the rest of the catering industry—not even in competition with the take-away food industry. Such operations are often run on a small scale. Operators of entertainments in fairs are often part of small family businesses and the sale of hot food is frequently ancillary to rides or competitive amusements.

I do not know how far the Opposition intend to press the amendments but I hope that my right hon. and learned Friend will feel able to give me an assurance that he will see how, if the amendments are not pressed or carried, the Bill will affect travelling fairs and their operators who make a valuable contribution to a traditional way of life that we would regret being pushed out of existence because of increased costs.

Another reason why VAT should not be extended to this area is that such small-scale operations are usually run by families, and the sheer bureaucracy of book-keeping and return-making would not be cost-efficient. It would cause a nuisance to the fairground operators and would not produce much revenue for the Treasury. I hope that my right hon. and learned Friend will monitor the way in which these proposals will affect showmen in travelling fairs.

12 midnight

Photo of Mr Peter Rees Mr Peter Rees , Dover

I listened carefully to the hon. Member for Birmingham Perry Barr (Mr. Rooker) who, as I understand it, wishes to draw an even greater distinction between cafes and restaurants, mobile entities purveying take-away food and the static take-away food shop. He buttressed his case by arguing that mobile take-away operations are a useful avenue for the small business man to invest his capital. The hon. Gentleman will be the first to recognise that if we accepted his amendment some large take-away chains might decide to take advantage of this method. For example, the amendment would allow Kentucky Fried Chicken or a hamburger chain to operate in this way. On reflection, the hon. Gentleman will recognise that although it is attractive to say that mobile operations are especially suited to the small business man, his amendment cannot be limited to the small business man.

In reply to the point made by my hon. Friend the Member for Portsmouth, North (Mr. Griffiths), I should say that the very small business man such as he described would normally be below the VAT registration limit of £18,700 turnover.

I ask the hon. Member for Perry Barr to reflect whether it is right to put such emphasis on mobility. In exceptional cases, the amendment might allow other meals to be served in a large mobile caravan. The crux of the hon. Gentleman's case is that if one collects take-away food from the supplier's premises, one should pay tax. If, however, it is brought to one's street or even to one's front door, one should not pay tax. I am not sure that that distinction is worth pursuing. If anything, one could say that a person who must go all the way to a fixed take-away should be advantaged, as against the person who sits in his house and listens to the bell on a van as it comes down the street.

Amendment No. 16 seeks to zero rate hot food supplied to a customer not situated on the supplying premises. The practicalities of that suggestion are that if someone entered a take-away shop through the front door and collected his food in the normal way, he would be charged standard rate VAT. However, if his food was passed to him through a hatch in a side street, he would not. I wonder whether that is the sort of distinction that we want to build into the Bill.

A similar point applies to amendment No. 17. If one is standing on the public highway and the food is served through a hatch—the hon. Gentleman might also have in mind a mobile stall—why is it more meritorious to buy one's take-away food from such an operation, which might be in competition with the fixed take-away shops? That occurs in my constituency of Dover. That case was raised with me for quite different considerations—the people were worried about the planning implications. However, I wonder whether we should build in that advantage for the mobile purveyor of take-away foods. I am not persuaded that such a distinction would commend itself to the world outside.

Throughout our lifetimes we have all enjoyed travelling fairs, and we would be reluctant to do anything that might damage them or the quality of amusement and pleasure that they offer to our fellow countrymen. I do not believe that take-away food is an integral part of what is offered, nor am I absolutely persuaded that this measure would necessarily affect the kind of supply that my hon. Friend the Member for Portsmouth, North has in mind.

As a matter of law and practice, it would be possible to detach the supply of take-away food and offer it through a related but not the same organisation. Alternatively, if the operators are in the scale that my hon. Friend seems to have in mind, they could be below the registration limit.

I gladly give an undertaking to monitor the situation, but I hope my hon. Friend will not expect me to go any further. We are not in the business of damaging a historic method of entertainment and supply. I hope that the practicalities will be such that when we have reflected on this and monitored it for 12 months, he and I will recognise that nothing fundamental has been done to the travelling fair industry.

On all those grounds, I hope that the hon. Member for Perry Barr will not press his amendments to a Division.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr

The right hon. and learned Gentleman has not been very helpful. I have been a modicum of reasonableness and have tempered my language. I thought that I made a pretty good case.

I accept that mobile premises need not necessarily be run by the small man. I can envisage the entrepreneurs among my hon. Friends getting organised and knocking that argument from under me. On the other hand, given the way in which the right hon. and learned Gentleman started to respond, I thought that he was about to offer an amendment to amendment No. 14 on Report to meet this point.

The main thrust of all these amendments was not to create further anomalies, and this is where the Minister's argument does not stand up. He spoke of distinguishing between a mobile cafe and a stationary cafe and implied that people should have VAT-free food if they walked to the take-away shop rather than having the food delivered. The situation that these amendments cover are as far removed from the kind of competitive catering that the Chancellor referred to in his Budget speech as the moon is from the sun. This shows that the Government are not prepared to concede that they may be wrong in comparing the vast array of take-away businesses which are not remotely competitive with restaurants.

I agree that this could also apply to big businesses, but not many big businesses carry on mobile take-away operations at present. If they were to create new jobs and take the place of some of the shops that will close, the purpose of the amendment would not be such a bad idea. I shall therefore take the opportunity of asking my hon. Friends to divide the Committee on amendment No. 14.

Question put, That the amendment be made:—

The Committee divided: Ayes 92, Noes 204.

Division No. 259][12.09 am
AYES
Atkinson, N. (Tottenham)Clay, Robert
Bagier, Gordon A. T.Cocks, Rt Hon M. (Bristol S.)
Barron, KevinCohen, Harry
Beckett, Mrs MargaretColeman, Donald
Beggs, RoyConlan, Bernard
Beith, A. J.Cook, Frank (Stockton North)
Benn, TonyCorbyn, Jeremy
Bermingham, GeraldCowans, Harry
Blair, AnthonyCraigen, J. M.
Boyes, RolandCrowther, Stan
Bray, Dr JeremyCunliffe, Lawrence
Caborn, RichardDavies, Rt Hon Denzil (L'Ili)
Campbell-Savours, DaleDixon, Donald
Dobson, FrankMeadowcroft, Michael
Dubs, AlfredMichie, William
Duffy, A. E. P.Milian, Rt Hon Bruce
Eadie, AlexMiller, Dr M. S. (E Kilbride)
Fatchett, DerekNicholson, J.
Field, Frank (Birkenhead)O'Brien, William
Fisher, MarkPark, George
Flannery, MartinParry, Robert
Foster, DerekPatchett, Terry
Fraser, J. (Norwood)Penhaligon, David
Freeson, Rt Hon ReginaldPike, Peter
George, BrucePrescott, John
Gould, BryanRedmond, M.
Hamilton, James (M'well N)Robinson, G. (Coventry NW)
Harman, Ms HarrietRogers, Allan
Hart, Rt Hon Dame JudithRooker, J. W.
Hattersley, Rt Hon RoyRoss, Ernest (Dundee W)
Hogg, N. (C'nauld & Kilsyth)Ross, Wm. (Londonderry)
Hughes, Sean (Knowsley S)Sedgemore, Brian
Jones, Barry (Alyn & Deeside)Skinner, Dennis
Kennedy, CharlesSmith, C.(Isl'ton S & F'bury)
Kirkwood, ArchibaldSoley, Clive
Leadbitter, TedSpearing, Nigel
Leighton, RonaldStott, Roger
Lewis, Ron (Carlisle)Thomas, Dr R. (Carmarthen)
Lofthouse, GeoffreyWalker, Cecil (Belfast N)
McDonald, Dr OonaghWallace, James
McGuire, MichaelWardell, Gareth (Gower)
McKay, Allen (Penistone)Welsh, Michael
McKelvey, WilliamWilson, Gordon
McTaggart, RobertWoodall, Alec
McWilliam, John
Madden, MaxTellers for the Ayes:
Marshall, David (Shettleston)Mr. Frank Haynes and
Maxton, JohnMr. Stuart Bell.
Meacher, Michael
NOES
Aitken, JonathanCope, John
Alexander, RichardCouchman, James
Amess, DavidCranborne, Viscount
Arnold, TomCurrie, Mrs Edwina
Ashby, DavidDorrell, Stephen
Aspinwall, JackDouglas-Hamilton, Lord J.
Atkins, Rt Hon Sir H.Dover, Den
Baldry, Anthonydu Cann, Rt Hon Edward
Batiste, SpencerDunn, Robert
Bellingham, HenryDykes, Hugh
Bendall, VivianEdwards, Rt Hon N. (P'broke)
Berry, Sir AnthonyEggar, Tim
Biggs-Davison, Sir JohnEmery, Sir Peter
Blaker, Rt Hon Sir PeterFallon, Michael
Boscawen, Hon RobertFenner, Mrs Peggy
Bowden, A. (Brighton K'to'n)Finsberg, Sir Geoffrey
Bowden, Gerald (Dulwich)Forman, Nigel
Boyson, Dr RhodesForth, Eric
Braine, Sir BernardFowler, Rt Hon Norman
Brandon-Bravo, MartinFox, Marcus
Bright, GrahamFreeman, Roger
Brinton, TimFry, Peter
Brooke, Hon PeterGale, Roger
Brown, M. (Brigg & Cl'thpes)Galley, Roy
Bruinvels, PeterGardiner, George (Reigate)
Bryan, Sir PaulGarel-Jones, Tristan
Budgen, NickGoodhart, Sir Philip
Bulmer, EsmondGoodlad, Alastair
Burt, AlistairGorst, John
Butcher, JohnGow, Ian
Carlisle, John (N Luton)Greenway, Harry
Carlisle, Kenneth (Lincoln)Gregory, Conal
Carttiss, MichaelGriffiths, Peter (Portsm'th N)
Chapman, SydneyGrist, Ian
Chope, ChristopherGround, Patrick
Clark, Hon A. (Plym'th S'n)Grylls, Michael
Clark, Dr Michael (Rochford)Hamilton, Hon A. (Epsom)
Clark, Sir W. (Croydon S)Hamilton, Neil (Tatton)
Clarke, Rt Hon K. (Rushcliffe)Hampson, Dr Keith
Cockeram, EricHanley, Jeremy
Colvin, MichaelHannam, John
Coombs, SimonHargreaves, Kenneth
Harris, DavidMitchell, David (NW Hants)
Havers, Rt Hon Sir MichaelMoate, Roger
Hawkins, C. (High Peak)Moore, John
Hawksley, WarrenMorris, M. (N'hampton, S)
Hayes, J.Morrison, Hon C. (Devizes)
Hayhoe, BarneyMorrison, Hon P. (Chester)
Hayward, RobertMoynihan, Hon C.
Heathcoat-Amory, DavidMudd, David
Henderson, BarryMurphy, Christopher
Hickmet, RichardNeedham, Richard
Hirst, MichaelNicholls, Patrick
Hogg, Hon Douglas (Gr'th'm)Normanton, Tom
Holland, Sir Philip (Gedling)Norris, Steven
Hooson, TomOppenheim, Philip
Howard, MichaelOsborn, Sir John
Howarth, Alan (Stratf'd-on-A)Ottaway, Richard
Howarth, Gerald (Cannock)Page, Richard (Herts SW)
Howell, Rt Hon D. (G'ldford)Patten, Christopher (Bath)
Howell, Ralph (N Norfolk)Pawsey, James
Hubbard-Miles, PeterPeacock, Mrs Elizabeth
Hunter, AndrewPercival, Rt Hon Sir Ian
Jessel, TobyPollock, Alexander
Johnson-Smith, Sir GeoffreyPowell, William (Corby)
Jones, Gwilym (Cardiff N)Powley, John
Jones, Robert (W Herts)Proctor, K. Harvey
Jopling, Rt Hon MichaelRath bone, Tim
Kellett-Bowman, Mrs ElaineRees, Rt Hon Peter (Dover)
Key, RobertRhodes James, Robert
King, Roger (B'ham N'field)Rhys Williams, Sir Brandon
Knight, Mrs Jill (Edgbaston)Ridley, Rt Hon Nicholas
Knowles, MichaelRoberts, Wyn (Convey)
Knox, DavidRyder, Richard
Latham, MichaelShaw, Giles (Pudsey)
Lawler, GeoffreyShelton, William (Streatham)
Lawrence, IvanShersby, Michael
Leigh, Edward (Gainsbor'gh)Sims, Roger
Lennox-Boyd, Hon MarkSkeet, T. H. H.
Lester, JimSoames, Hon Nicholas
Lewis, Sir Kenneth (Stamf'd)Speller, Tony
Lilley, PeterStanbrook, Ivor
Lloyd, Peter, (Fareham)Stewart, Allan (Eastwood)
Macfarlane, NeilStewart, Ian (N Hertf'dshire)
MacKay, Andrew (Berkshire)Stradling Thomas, J.
MacKay, John (Argyll & Bute)Sumberg, David
McNair-Wilson, P. (New F'st)Taylor, John (Solihull)
Major, JohnThompson, Donald (Calder V)
Malins, HumfreyVaughan, Sir Gerard
Malone, GeraldViggers, Peter
Maples, JohnWakeham, Rt Hon John
Marland, PaulWaldegrave, Hon William
Marlow, AntonyWardle, C. (Bexhill)
Mather, CarolWarren, Kenneth
Maude, Hon FrancisWatts, John
Mawhinney, Dr BrianWhitney, Raymond
Maxwell-Hyslop, RobinWiggin, Jerry
Mayhew, Sir PatrickWolfson, Mark
Mellor, DavidYeo, Tim
Merchant, PiersYoung, Sir George (Acton)
Meyer, Sir Anthony
Miller, Hal (B'grove)Tellers for the Noes:
Mills, Iain (Meriden)Mr. David Hunt and
Mills, Sir Peter (West Devon)Mr. Tim Sainsbury.

Question accordingly negatived.

Photo of Mr Archy Kirkwood Mr Archy Kirkwood , Roxburgh and Berwickshire

I beg to move amendment No. 19, in schedule 6, page 133, line 7, at end insert—

'(c) paragraph (b) above shall only apply to caterers providing hot food from retail outlets which have an annual turnover in excess of £100,000.'.

The amendment follows the spirit of the last group of amendments, as implied by the hon. Members for Birmingham, Perry Barr (Mr. Rooker) and for Portsmouth, North (Mr. Griffiths), in that it seeks in a positive way to consider the impact of VAT on hot food as it will affect small business men. The Committee had its say earlier on clause 10, which I regret and think is a mistake. However, if clause 10 must be retained, it is fair to consider in a positive way the effects that it will have on small businesses.

The Minister said that the VAT cut-off point is currently over £18,000, which I accept. The brevity of my case in no way lessens the importance that I attach to the point. Small business men who purvey a trade in the way of fish and chip shops and small bakers—and all hon. Members have such businesses in their constituencies—with a turnover of below £10,000 are in serious difficulties. The changes made with the acceptance of clause 10 will exacerbate those difficulties.

I freely admit that the annual turnover figure of £100,000 was chosen because the Federation of Self-Employed Small Businesses took the view that 85 per cent. of all businesses in the United Kingdom have an annual turnover of less than £100,000, the bulk being unincorporated businesses. The vast majority of small retail food outlets referred to in the amendment fall into that category. Although we would be prepared in a constructive way to consider some other level of annual turnover, the figure of £100,000 has been chosen in the way that I have described. Some small retail food outlets at the bottom level of the annual turnover league are struggling.

The Government made great play of the way in which they are trying to assist small businesses. The Opposition do not see very much evidence of that on the ground. The magazine produced by the Federation of Self-Employed Small Businesses included an article in its April edition with the headline,

It is a disappointing budget for small businesses. That is reflected in the discussions that I have had in my constituency with small businesses.

This is a probing amendment to give the Government a chance to consider the situation of small businesses that operate at the bottom of the annual turnover league. I do not believe that this would cost the Government much, but it would do a great deal to provide a service for communities like mine in rural areas. The bulk of such businesses provide hot meals for schoolchildren at lunch time. After all, the cuts in school meals mean that such shops purvey that great Scottish delicacy, the hot pie, to schoolchildren. It is the only hot meal that some of them get during the day. The same applies to fish and chip shops. Indeed, I have a constituency interest. Fishermen in my constituency catch the best cod, which is used in making the traditional Scottish fish supper.

For the sake of some of those small, struggling retail food outlets, the Government could, at little cost, and as a gesture of good will, consider accepting the amendment, or, at least on Report, suggest an annual turnover figure that is acceptable to them. They could then give some of those retail outlets the protection that they so desperately need.

Photo of Mr Max Madden Mr Max Madden , Bradford West

I do not want to detain the Committee unduly, but perhaps the Chief Secretary could take this opportunity to give us some information about the way in which the Government intend to apply VAT to the take-away restaurants of the ethnic minorities. Earlier, the Financial Secretary was at pains to point out that the Government's proposals did not represent an attack on their restaurants, but it is beyond dispute that many Asian, Chinese, Greek and other restaurants will be seriously disadvantaged as a result of imposing VAT on hot take-away food.

I also hope that the Chief Secretary will be able to tell us what steps the Government are taking to ensure that there are bilingual VAT inspectors—and we have been told that only 12 extra inspectors will be recruited to deal with the additional work created — who can give explanations, clarification and assistance to those who will have to operate VAT for the first time. What is being done to produce explanatory notes, notices and other material in the main ethnic minority languages? What steps are being taken to provide information in the main ethnic minority newspapers about the impact of VAT, how it is to be operated, as well as information about other aspects — [Interruption] — that have arisen during our proceedings today.

My comments may be of little concern to Conservative Members, but they pay a great deal of attention to the Asian business sector, and I should have thought they would be prepared to consider seriously the difficulties that that sector will experience in operating VAT, and the problems that they are creating for Asian business men. Such matters are of no little concern to the many Asian business men in my constituency, and no doubt to those in the constituencies of Conservative Members as well.

What arrangements are being made to provide seminars and other means of distributing information to those restaurateurs, who will be involved in the detailed application of VAT? I hope that the Chief Secretary can give us some information, as many of us who represent constituencies with considerable ethnic minority interests will be questioned extensively at our advice centres in the coming weeks and months and about the impact of these proposals. It would be very helpful if material was produced in the languages of the ethnic minorities and if they had information about what steps the Government are taking to assist Asian and other ethnic minority restaurateurs in such matters.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr 12:30 am, 30th April 1984

The Opposition sympathise with the amendment. I hope that the Chief Secretary this time will give a figure and tell us the cost of implementing the amendment. All his arguments about VAT on food in relation to previous amendments do not apply. Anomalies will not be created and the arguments about sit-down meals and take aways do not apply. The argument is about the small business man versus big Government. Has the Chief Secretary received representations about the tax?

Photo of Mr Peter Rees Mr Peter Rees , Dover

I appreciate the spirit in which the amendment has been moved. I am glad that common ground was established earlier between the principal Opposition party and the Government, because we do not wish to damage small businesses. I am glad that that consensus embraces the Liberal party.

There is a general cut off at £18,700, which will take the small business man out of tax. The amendment proposes that we go wider than that. I am not certain that the suggestion would advantage those whom the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) wishes to benefit, or the general administration of VAT. There would be two cut-off points: £18,700, below which no-one need register, and the Liberals' £100,000, which would not preclude the operator from being registered or trying to deregister, but would take him, or part of his supplies, out of charge to tax. That would create considerable administrative difficulties. I do not like resisting an amendment on that ground, but I must emphasise the difficulty.

The charge of VAT on take-away foods will advantage to a small degree the cash flow position of small businesses — [Interruption.] The hon. Member for Truro (Mr. Penhaligon) finds this amusing, either because he does not grasp the argument or because there are not many take-aways in Cornwall. I shall explain. Because VAT is charged at the point of supply, but has to be accounted for by the registered trader at the end of three months, it is calculated that on average the delay will be about two-and-a-half months. During that period the trader has the benefit of the customer's money.

Photo of Mr Peter Rees Mr Peter Rees , Dover

I know that the hour is late, but. I shall attempt to clarify the argument if the hon. Member for Workington (Mr. Campbell-Savours), who intervenes from a sedentary position, thinks that it is worth it. He has a quick mind and he should reflect overnight. I believe that he will be a member of the Standing Committee. It is calculated that there will be a £4 million cash flow advantage to traders.

Photo of Mr Peter Rees Mr Peter Rees , Dover

That is a matter for speculation. We discussed that earlier. I am concerned with the impact of the amendment on the trader's cash flow.

I come to a matter of construction, because there is a difficult ambiguity in this amendment, which says that the charge

shall only apply to caterers providing hot food from retail outlets which have an annual turnover in excess of £100,000. Does that mean that each outlet may have a turnover of up to £100,000? Does it mean that the £100,000 applies only to take-over food, or does it apply to everything?

Photo of Mr Peter Rees Mr Peter Rees , Dover

There is nothing improper about a take-over. I know that if the right hon. Gentleman is left in his present position he will acquire a great grasp of financial matters. Coming fresh from Home Office matters, he is perhaps not familiar with take-overs.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

Not as clever as the right hon. and learned Gentleman.

Photo of Mr Peter Rees Mr Peter Rees , Dover

The right hon. Gentleman is right. I have to reflect on the legal implications of take-overs. With all the right hon. Gentleman's great responsibilities, he probably has never had to deal with them. We will bear with him until he gets level with his new responsibilities.

The ambiguity inherent in this amendment could let in a much wider range of traders than the hon. Member for Roxburgh and Berwickshire possibly has in mind. I recognise the spirit in which he moved the amendment, but he will understand that on that basis we find it difficult to accept.

I know that the hon. Member for Bradford, West (Mr. Madden)—as I am dealing with his point I assume that he might like to hear what I am saying, but if he does not I shall not trouble the Committee any further—has a strong constituency interest in this matter. However, many ethnic restaurant proprietors have been battling with die complexities of VAT since it was introduced. If they serve food on the premises, they have been coping since 1972–73. I have no strong information that they have found it more difficult — how can I pick my words with delicacy, Mr. Dean? — than indigenous restaurant proprietors.

If the hon. Member can bring any firm evidence to my attention, or to that of my hon. Friend the Minister of State, that these new provisions will create difficulties in Bradford or other areas, we will see what we can do administratively to assist. We are interested to see that the administration of this measure should be as smooth and effective as possible. I hope that that reply will satisfy the hon. Gentleman.

I know and admire—if he will allow me to say so— the assiduity and relentless precision of the hon. Member for Birmingham, Perry Barr (Mr. Rooker). I am not on this matter—perhaps not for the last time—able to give him a precise figure, because of the ambiguities to which I have drawn attention. I do not wish to sound critical of the amendment. Having served in opposition, I know how difficult it is to produce watertight amendments. In view of the ambiguities I did not think that it was worth costing the amendment. I am sorry, therefore, to cheat the hon. Member out of a precise figure. I will hope to be better briefed on other occasions. On that basis, I hope that the hon. Member for Roxburgh and Berwickshire will not feel obliged to press this matter to a Division.

Photo of Mr David Penhaligon Mr David Penhaligon , Truro

I believe that we have heard one of the most extraordinary arguments ever presented in favour of a tax increase. The Minister was, in essence, arguing that he has done a great favour to all the little businesses that exist in my county to feed the great tourist trade which is part of Cornwall's economy, whether in north Cornwall or down the north Cornish coast towards St. Ives, by imposing 15 per cent. VAT.

I assure the Minister that within Cornwall I shall do my best to let all those small, independent family businesses which sell some fish and chips for a few months of the year while trying to eke out a living in one of the remoter parts of the country know what a favour he has done them.

It is clear from the Minister's argument that if he had increased VAT on fish and chips to 30 per cent. or 40 per cent. a bonanza would be available in our country. The Minister presented an extraordinary agument. I have heard few others to compare with it during my membership of the House.

The Minister criticises the amendment for its lack of precision on definition. He was fair enough to recognise the problems that sometimes exist for the Opposition.

The Financial Secretary could have costed out a few scenarios involving a limit of £100,000 because it is clear that the amendment refers to the small, one or two-man family business represented by a shop or firm with a turnover of less than £100,000 a year. Small shops in my county which sell fish and chips or Cornish pasties—I assure hon. Members that the pasties that are sold in Cornwall are edible, even if those sold in London are not — should be exempted in the way the amendment suggests.

The hon. Member for Birmingham, Perry Barr (Mr. Rooker) deserves an answer to the question that he asked. If exemption up to £100,000 were given for the family-owned business, what would be the cost? Would it be £1 million, £20 million or £100 million? I suspect that it would not even make a dent in the Chancellor's expectations from the duty. Many of these small businesses feel that they face a rough time ahead, and I suspect that some of them will go to the wall. For the right hon. and learned Gentleman to pretend that a marginal improvement in cash flow makes up for the additional burden being imposed by the Government is outrageous.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr

As the hon. Member for Truro (Mr. Penhaligon) said, the Financial Secretary put forward a novel argument in saying that this new imposition on these small businesses will aid their cash flow. The fact that the right hon. and learned Gentleman was able to refer to the figure of £4 million in respect of additional cash flow must mean that Treasury officials did some work on the subject, so enabling the Financial Secretary to give the piggy bank effect of VAT on take-away food shops.

It is a basic requirement that, when Opposition Members move amendments and give rough estimates of the cost, Ministers should clarify the position more precisely. In other words, we expect Ministers to come prepared to answer arguments put forward in support of amendments. If the right hon. and learned Gentleman could not give a precise figure, he could at least have said, if such were the case, "This would cost billions of pounds. The amendment must, therefore, be withdrawn."

My earlier reference to the bone idleness of the 1983 intake of Conservative Back Benchers should be applied also to the right hon. and learned Gentleman's advisers at the Treasury if they have not produced any figures for any combination of family firms with turnovers of less than £100,000. As I say, some calculations must have been done to enable the Financial Secretary to mention the figure of £4 million as the piggy bank effect. It is a disgrace that he did not ensure that his staff did their work during the Easter break.

Photo of Mr Archy Kirkwood Mr Archy Kirkwood , Roxburgh and Berwickshire

We have had a useful exchange on the issues raised by the amendment. I look forward to reading the remarks of the Financial Secretary in the Official Report because I do not have a sharp enough mind to follow the logic of the accounting acrobatics that the right hon. and learned Gentleman put to the Committee. I hope that the Government will give consideration between now and Report to the spirit as well as the content of the amendment. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Mr Michael Latham Mr Michael Latham , Rutland and Melton 12:45 am, 30th April 1984

I beg to move amendment No. 21, in schedule 6, page 133, line 14, leave out from 'substituted' to end of line 15 and insert—

  1. '(a) in the course of construction or demolition of, or
  2. (b) in the course of alteration work undertaken by:—
    1. (i) registered charities, including churches in respect of their own buildings
    2. (ii) the owners of properties of special historic, architectural or aesthetic merit, in respect of such properties, or
  3. (c)in the course of the construction of free standing properties designed as annexes to existing buildings, and built within their curtilage, but physically separated from them, or
  4. (d) in the course of the conversion of disused or derelict agricultural barns or storehouses for the purposes of creating new residences or industrial properties.'.
I declared my interest in the housebuilding industry in an earlier debate and I shall not repeat it. I shall define the amendment, which is strictly limited. It would not maintain zero rating for domestic extensions, double glazing or for the majority of items, which we have already discussed, which would be liable to VAT. That is the meaning of paragraph (a).

The first proposal is that alteration work that is done by charities and churches to their own buildings, or by the owners of heritage properties, should remain zero rated. The Churches main committee has expressed its grave concern to hon. Members. It warns that the new tax will amount to a great deal of money additional to the existing bill for VAT which amounts to several million pounds annually. The bill for the Church of England alone might well amount to an addional £5 million a year.

I shall quote briefly two examples. A church in an area of high unemployment is to be extended to provide 100 extra seats at a cost of £30,000. The parish has raised almost £26,000 but is finding it hard going to raise the remaining £4,000. It will now have to raise an extra £4,500, which will be an almost impossible task.

Secondly, the United Reformed Church is spending £275,000 on providing an additional floor in a lofty listed church, which is to be financed from the sale of some land. The cost will increase by about £40,000, which the local congregation has no hope of raising. All hon. Members should regard those as disturbing and serious examples which require remedying.

Many hon. Members are better qualified than I am to speak about heritage properties and the matchless inheritance of Britain. The problem is not so much the maintenance of the great historic houses, for those involved are more concerned about the VAT which is already levied on repairs. It is the fine properties, often in urban areas and essential parts of street scenes, which in recent years have been the target for sensitive conversion rather than demolition. If the practical alternative is now to be demolition and reconstruction at a zero rate, or conversion with 15 per cent. added, the scheme is likely to become entirely unviable and demolition will be threatened, or else the building will decay.

The chief executive of English Heritage, the new name for the Historic Buildings and Monuments Commission for England, Mr. Peter Rumble, has warned hon. Members of the serious effect on the operation of the Building Preservation Trust. The Historic Buildings and Monuments Commission for England received many letters setting out schemes that would have to be halted because the work involved in continuing them would no longer be viable. I understand—this was stated by Lord Montagu of Beaulieu in a letter to The Times of 6 April—that the project for the thermal baths at Buxton has been halted by the Derbyshire Historic Buildings Trust. Exciting schemes, such as converting derelict 19th century and architecturally valuable warehouses or industrial properties, may well become financially unviable—all the more so if they are to be carried out by voluntary or charitable bodies.

I shall mention other examples which have been drawn to my attention involving the Derbyshire Historic Buildings Trust. The first example is Rydes garage, Wirksworth. The cost, net of purchase, was £40,500. It is estimated to break even and the purchaser is unable to increase his payment. There could be completion before 1 June; but the trust would not have proceeded with the project if it had known that VAT would be applicable.

Another example is 14–24 Market place, Eckington. The cost, net of purchase, was £60,000. The decision, is not to proceed beyond the feasibility study stage as the project will barely break even given current market value of properties in the area. It is not possible for savings to cover VAT of about £9,000. The trust states:

No Trust project has ever shown a surplus of 15% (except Golden Valley) and in retrospect it is unlikely that any of the 100 or more properties so far dealt with would have been proceeded with. Therefore in the future ii is certain that the Trust cannot operate as it has, and may face winding up. The Committee may be aware of the especially strongly worded pamphlet produced by SAVE. One paragraph should suffice. It states:

In the next five years, if Mr. Lawson's proposed changes in VAT are implemented as planned on June 1, the number of applications to demolish listed buildings and buildings in conservation areas will increase dramatically, perhaps tenfold, and local authorities, the Department of the Environment, civic societies and conservation groups will not be able to stem the tide. The number of consents to demolish will rise accordingly and Britain's architectural heritage will be drastically, brutally and irrevocably diminished. The Historic Buildings and Monuments Commission for England thinks that for the Chancellor to accept the amendment and zero-rate historic or listed buildings might cost about £20 million per annum. As the estimated yield of the tax is about £450 million per annum, that does not seem to be too much to protect our heritage. The Chancellor is a civilised and cultured man. I cannot believe that he wants to be seen as the man who brought bulldozers back as a remedy for the treatment of Britain's matchless street scenes or listed buildings.

I hoped that the proposal in paragraph (c) would be unnecessary and that even the Bill, as it stands. would permit the zero rating of new free-standing buildings within the curtilage of another one. I am worried about this matter because the Royal Institute of British Architects warned its members about a specific example. The institute referred to a new gymnasium on an existing school site, which, although it is detached, is regarded by Customs and Excise as attracting VAT because it is not a new building on its own site. That hardly ties in with the completely contradictory advice, which has apparently been given to the British Property Federation by Customs and Excise, that works of construction involving a single wall facade above foundation level would probably be zero rated when a major interest, freehold or long leasehold, is eventually made.

Surely, we cannot have got ourselves into the position whereby a new separate building would be taxed. but an existing building, of which only the facade had been maintained, would escape the tax. Such anomalies, already coming in show the need to get the details properly sorted out.

Paragraph (d) would zero rate the conversion of agricultural barns or strorehouses into living accommodation or new factories. Every hon. Member who represents a rural area would have many such cases in his or her constituency. Recently, one constituent wrote to me, saying:

I purchased a Grade II listed Tithe Barn . . . in October 1983: the barn was in a state of dilapidation which if uncorrected would have led to its collapse in a short period. I secured full planning permission in January 1984 to restore the barn and convert it to a house for my occupancy. The estimated building costs exceed £60,000—more than the cost of building an equivalent house from scratch. This we did not want to do—we care for old buildings! It must be contrary to Conservative policy and instinct to opt to prevent old barns being turned into new homes or into rural factories providing employment. I cannot believe that the Government prefer that barns should be demolished and new buildings put in their place or that they should stand empty and eventually fall down.

The amendment is limited in scope. It has substantial support among many experts worried about our heritage and the environment. I commend the amendment to the Committee.

Photo of Mr William Clark Mr William Clark , Croydon South

I wonder, Mr. Deputy Speaker, whether it would be convenient to discuss my amendment No. 22 with amendment No. 21. It is analogous to the amendment moved by my hon. Friend the Member for Rutland and Melton (Mr. Latham). In view of the lateness of the hour, there would be no point in having two separate debates on a similar subject. The amendment is in page 133, line 17, leave out '(1A)' and insert—

'(1A) Any reference in items 1 or 2 or the following Notes to the construction or demolition of any building includes a reference to a supply which, apart from a structure retained in compliance with conditions made under the Town and Country Planning Act 1971, would be treated as a supply in the course of construction or demolition of a building. (1B)'.

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

If it is acceptable to the Committee, we shall discuss amendments Nos. 21 and 22 together.

Photo of Mr William Clark Mr William Clark , Croydon South

I fear that in considering planning permission to develop a property the interpretation of a new and an old building is nonsense. My hon. Friend the Member for Rutland and Melton referred to charities. I am sure that my hon. Friend the Minister realises that charities are widely based. I should not for one moment give VAT exemption to, for example, the Moonies. Consequently, until we have fixed the definition of a charity it is difficult to include this in our fiscal system.

Photo of Mr John Hannam Mr John Hannam , Exeter

I appreciate my hon. Friend's point about not wanting to give relief to all charities, because there are one or two rather doubtful ones, but all recent Finances Bills have granted relief on covenants to all charities without any more detailed distinction being made.

Photo of Mr William Clark Mr William Clark , Croydon South

I did not say that I agreed with that. Indeed, I think that it is quite wrong in the case of some charities. I am saying that we should be careful about trying to introduce ideas of what is a charity into fiscal legislation, although I understand the spirit of my hon. Friend's argument. Recognised charities such as churches, those which take care of the handicapped, and so on, should of course be included, but we must have a very clear definition of what is a charity.

Planning permission is sometimes given only if the developer retains one wall, two walls, or whatever. As I said earlier, Customs and Excise is on record as saying that if a developer retains one wall as a facade due to its historical importance that is considered a new building, but if two walls are retained it is an extension of an existing building. I have never heard such rubbish in my life. At that rate, no one will ever develop a corner site, for the simple reason — I say this to my hon. Friend the Minister with the greatest humility —that that corner sites usually have two facades and thus would presumably not qualify for zero rating.

In some inner city buildings, all four walls are of historical importance. It cannot be right that Customs and Excise should be the final arbiter as to what is a new building, depending on how many old walls are left, rather than on what a reasonable person would define as an old building or a new building. The developer, of course, would be delighted to pull all the walls down and thus avoid the expense of shoring them up with scaffolding, and so forth.

It is not only walls that one has to worry about. Many listed buildings have ceilings, staircases and other features that must be preserved. I wonder whether Customs and Excise and Treasury Ministers have considered the effect of this on our old buildings. I shall not rehearse the arguments so excellently made by my hon. Friend the Member for Rutland and Melton, but if we are to maintain the heritage of historic houses we must not do anything that wll act against the preservation of old buildings.

The planning permission argument is indicative here. There is no vested interest or possible collusion between the developer and the planner. If the planning authority lays down conditions for the development and they are met, whether it be the retention of two or three walls, the ceilings, the staircase, or whatever, the development should be regarded as a new building and zero rated. There could also be an anomaly where, in a terrace — a Regency terrace, perhaps—one of the houses is in such bad repair that it must be pulled down and redeveloped. That would be a new building, but there would be two original walls, one on each side. With corner and terrace sites, it is nonsense for Customs and Excise to say, "This is a new building."

I hope that before Report my hon. Friend will give us an assurance—an assurance more categorical than that which he gave us on a previous occasion—that he will consider this matter sympathetically. Otherwise, there will be the ridiculous nonsense of argument after argument about what constitutes a new building, and appeal after appeal. We do not want that.

1 am

I am not arguing about whether VAT should or should not be extended. My argument is that in establishing the principle of a new tax—and this is indeed a new tax, or, one might say, a tax on new products—we should be clear about what we are taxing. We should not leave it to the Customs and Excise to determine whether a building is new or is the extension of an old one.

I trust that I have convinced my hon. Friend that there is a special point to be considered here. The problem will not go away, and it must be reconsidered on Report.

Photo of Mr John Hannam Mr John Hannam , Exeter

I support my hon. Friend's amendment, which would provide VAT relief for charities. A campaign has been waged for some time to secure some relief for charities from the burden of VAT. The Charities VAT Reform Group hoped to gain a concession on VAT from the Budget, and the members of the group were very disappointed not to receive such a concession. They were even more taken aback by the proposed imposition of VAT on building alterations, which will add to the financial burden already imposed on them by VAT.

The Charities VAT Reform Group represents about 200 charities. The figures about the extent to which the charities will be affected are frightening. The largest charity — the Imperial Cancer Research Fund — will have, for the year beginning 1 June, to pay an additional £330,000 in VAT. The National Children's Home will have to pay an additional £200,000. The Jewish Blind Society will have to pay £100,000, the Spastics Society £120,000, Help the Aged £150,000 and the Royal National Institute for the Blind £95,000. Those figures do not account for the exemptions for building alterations which have been given by the Chancellor since the Budget. It is very difficult for charities to assess how those exemptions will affect them, but most of them believe that the effect will be minimal.

The exemptions are laid out in a statutory instrument, the Value Added Tax (Handicapped Persons) Order 1984, which will exempt from tax the construction of ramps or the widening of doorways and passages to assist a disabled person in moving about a building. This will be extended to such work carried out either by a disabled person to his home or by a charity, but not by anyone else.

A further exemption will be given to the installation of for the first time of a bathroom, washroom or lavatory for use by a disabled person, provided that it is on the ground floor of the person's private residence. That exemption will not be extended to lavatories, washrooms or bathrooms installed in any place other than a private residence, and then only if it is for the very first time and on the ground floor.

The large charities which provide residential homes in connection with the purposes for which they are established will benefit from those exemptions only to a very limited extent. It is difficult for them to assess how the exemptions will affect them, but the Spastics Society has been able to estimate a reduction of anything between 25 per cent. and 40 per cent. in the additional burden imposed immediately following the Budget, but that will still leave its VAT bill at anything between £70,000 and £90,000.

The Royal Association for Disability and Rehabilitation has given figures for residential homes. I shall take the example of a short-stay residential home in Norfolk. Various alterations, extensions, adaptations and repairs need to be made to the house, at an estimated net cost of just over £720,000. Immediately following the Budget and the announcement that VAT was being extended to all alterations, the VAT bill was calculated at just over £108,000 and with the recently announced exemptions it has been calculated at £93,000. That compares with a pre-Budget bill of only £30,000. Despite the exemption, therefore, the VAT bill is still three times the bill prior to the Budget and as been reduced by only 14 per cent. The extra £93,000 is no small sum for a charity to raise, purely to pay VAT. It is beyond doubt that many charities will have severely to curtail building work.

Residential homes frequently make good use of old buildings which therefore need a great deal of alteration work. An additional 15 per cent. on the cost of such work will be a severe financial blow. Among many other alterations, homes such as the one in Norfolk that I have mentioned need to provide accessibility to all floors. The all-party disablement group and all disability organisations outside Parliament have been concerned with such provision. We look forward to all new buildings being required to have such accessibility. In the meantime we should do all that we can to encourage alterations to assist people to move about buildings. The exemption from VAT of the installation of ramps recognises the need for horizontal accessibility, but adaptions for vertical mobility are notably absent from the exemptions. An integral part of that provision is the installation of lifts. Although chair and stair lifts are exempt from VAT their use is restricted. Charities will want to provide larger lifts and yet their installation will not be exempt from VAT.

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

Order. I am sorry to interrupt the hon. Gentleman., but he is now straying into an amendment that has not been selected. He must restrict his remarks to amendments Nos. 21 and 22.

Photo of Mr John Hannam Mr John Hannam , Exeter

I was hoping to show the effects on charities of the imposition of VAT and therefore the need to support the amendment to give charities relief. The Royal Association for Disability and Rehabilitation has highlighted work done by some charities, especially those concerned with the elderly and the disabled. Many of the part III residential homes consist of extensions to small homes. Prior to the Budget they would not have been subject to VAT, but it seems that they might well be subject to it now. The charities are utterly unclear and would like some clarification on the matter. I hope that my hon. Friend will give a clearer definition of what is considered an alteration and what is considered construction work in regard to such extensions to smaller buildings.

I have tried to give some idea of the effect of VAT on charities engaged with disabled and handicapped people. Having given the figures and in view of the accepted principle of giving relief to voluntary organisations that raise funds to provide many of the services that the Government ask them to provide, I hope that, having understood the effects of imposing VAT, my hon. Friend will feel the need to examine some way in which to provide relief.

My hon. Friend's amendment refers to charities, churches and heritage buildings, and I, with many of my hon. Friends, fully support the call for relief for this valuable part of our historic fabric. But in the absence of a debate on the problems of the disabled, I ask for consideration to be given to the plight of charities now that, far from being relieved of VAT, they face substantial increases in their tax burden.

Photo of Mr Roger Freeman Mr Roger Freeman , Kettering

I support the amendment of my hon. Friend the Member for Rutland and Melton (Mr. Latham). I also support the plea of the Historic Buildings and Monuments Commission that the Government should zero-rate building alterations to listed buildings. It might help the Committee if I reminded hon. Members of the three justifications for that plea. First, if this proposal goes through unaltered, new construction and demolition will be zero-rated, but alterations will carry a 15 per cent. VAT rate, and although local authorities have the power to prevent buildings from being demolished, the balance will be tipped in favour of demolition. This amendment does not seek to preserve the interests of one section of the community, but seeks to preserve Britain's national heritage.

Secondly, the state sometimes compulsorily lists buildings whether or not the occupants wish it. In those cases, and especially for grade II listed buildings, a financial obligation is placed upon the occupants or owners. If such a burden is placed on them, they should have special VAT status.

Thirdly — I am grateful to the chairman of the Georgian Group for bringing this to my attention—the cost of alterations to listed buildings is much greater than it is for ordinary residential buildings, not only because of the cost of materials but because of the construction work involved.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

My hon. Friend said that buildings could be listed whether or not their owners wished it. In many cases the owner is not even consulted about whether it should be listed.

Photo of Mr Roger Freeman Mr Roger Freeman , Kettering

My hon. Friend's point raises a different issue. I was addressing the economic obligations and disabilities of those who occupy or own listed properties.

The cost of alterations to listed buildings is approximately five times greater than the cost of altering residential buildings. For those three reasons, I hope that the Minister will say something positive tonight in favour of our heritage.

Photo of Tim Yeo Tim Yeo , South Suffolk

I support the amendment moved by my hon. Friend the Member for Rutland and Melton (Mr. Latham). I am worried, as are many hon. Members, about the effect of these proposals on charities. As my hon. Friend the Member for Exeter (Mr. Hannam) said, the financial effects will be disastrous.

The philosophy of the Government's fiscal policy as outlined in the Budget is to shift the burden of tax from income to expenditure. I entirely support the philosophy, which is justified in respect of most taxpayers—higher expenditure taxes are compensated by lower income taxes—but for charities, which do not pay income tax, this increases the burden on one side and offers no compensation on the other. Charities are one of the long-term losers from this philosophy, and the problem is likely to get worse.

1.15 am

I very much regret that the framing of the Budget resolutions prevented us from debating any amendments to remove the burden of VAT from charities completely. It is a pity that such discussion is blocked in this way, but as we cannot discuss that, we can concentrate on building alterations. A large number of charities of all sizes spend a considerable portion of their income on building alterations on their own premises, on the premises of the beneficiaries for which those charities exist and on properties that have been bequeathed and which require adaptation before they can be properly used. Because of that, there will inevitably be a risk that many projects will be jeopardised as a result of their becoming liable to VAT.

My hon. Friend the Member for Exeter listed some of the figures and I wish to add three or four more—the Royal British Legion, £200,000; the Royal National Lifeboat Institution, £45,000; Dr. Barnardo's, £125,000. Those are simply the costs of VAT imposed by this year's Budget in addition to the existing VAT burden which all these organisations bear.

The organisations that have already been mentioned have a total VAT burden running at well over £1 million a year. That is a lot of voluntary fund raising. Many tins will have to be rattled on the street corners merely to benefit Customs and Excise.

All charities with any kind of residential operation will be heavily penalised by these Budget proposals. That will apply whether those facilities are for children, old people, the handicapped and so on. The small concession referred to earlier is welcome, but the net impact of the Budget proposals is negative even for those charities that deal primarily with disability.

This position is highly anomalous. In many cases these charities provide services that are similar to those provided by local authorities—for example, in special education, old people's homes and residential care for severely handicapped adults and children. It is quite ridiculous that local authorities should be able to recover VAT by virtue of their inclusion under section 20 of the Value Added Tax Act 1983, yet charities that may be carrying out precisely the same functions are unable to recover their VAT. That is particularly unjust at a time when the Government have proclaimed their wish to have a proper partnership between the state and the voluntary sector. I very much hope that my hon. Friend will take account of these points.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

I rise briefly to offer the Opposition's support for the two amendments that we are now discussing.

The Minister of State will recall from the previous debate on the general application of VAT to building alterations that not one of his hon. Friends was able to give the new tax any sort of support. When this debate comes to an end, I think he will find that not one of his hon. Friends will have done other than demand in most passionate terms the exemption of those institutions described in amendment No. 21 and the alterations to the Town and Country Planning Act contained in amendment No. 22.

After a series of speeches of such passion, it would be unthinkable for the Committee to be denied the opportunity to vote on these amendments, especially if the Minister were not prepared to give a more categorical assurance about the Government's attitude than the one he gave in the previous debate. I am sure that the hon. Member for Rutland and Melton (Mr. Latham), with his history in these matters, would not want to seek to ask leave to withdraw his amendment, but were he to do so, I do not think that the Committee would give him leave.

I suspect that the Minister is faced with a dilemma that all Ministers ought to face at some time during their period of office — making a proper promise and a genuine concession, or finding a number of his hon. Friends opposing him in the Lobby.

I have two or three comments to make on the merits of the arguments that have been advanced. The argument relating to charities is obvious and overwhelming. There is a complication in that charities are defined by statute in this country in such a way that, as well as a multitude of virtues, a multitude of sins is included in the definition. I am not disposed to make the distinction in the debate tonight, but the hon. Member for Exeter (Mr. Hannam) advanced such a powerful argument for genuine charitable charities that it must the unanimous view of the Committee that those institutions should not be required to pay tax on the services that they provide for the handicapped, the dispossed and the underprivileged.

The case for the preservation of historic heritage buildings is enhanced by the descriptions that we have all received from those institutions that are trying to reclaim old buildings and are finding, even now, that it is only just possible for them to do so. They are able to demonstrate from their balance sheets that, with an extra 15 per cent. on the cost, they will be unable to do so. The simple facts were described earlier. Time after time, it will turn out to be more profitable to demolish and rebuild rather than to rehabilitate. That alone should prevent the Government from applying the 15 per cent. VAT in those cases.

Some of the most important work of restoration and preservation is done privately and in the commercial sector. One of the advantages of such work is that the heritage is preserved, and the buildings are kept as living entities, fulfilling some part in the community. They are being used and worked, and that means that they must be rehabilitated and changed on a commercial basis. The 15 per cent. can make all the difference between pulling down and rehabilitating.

For those reasons, I shall ask my hon. Friends to support these amendments when they are voted upon, as I am sure that they will be if the Minister does not give a positive assurance that he will move in the way suggested by his hon. Friends. I do so with the reservation that, as I go to the decaying inner city of Birmingham on Wednesday and Thursday and see houses there to which there should be alterations for the benefit of local communities, I shall feel slightly guilty if the Committee decides that it is not prepared to give assistance to those things that are part of our national heritage.

Having said that, and having done my best in earlier amendments to spare this tax on other worthy causes, when the hon. Member for Rutland and Stamford calls us to vote, I shall be delighted to join him in the Division Lobby.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

The question that faces my hon. Friend the Minister is not whether he will give a concession but what sort of concession he will give. I shall address my remarks to the heritage point. How will my hon. Friend give an exemption to the heritage lobby without destroying the whole basis of the extension of VAT? The argument rests on whether the exemption is to be given to conservation areas, as has been argued, or is to be restricted to listed buildings.

If it is to be the latter, to which grade is it to apply? It must be restricted to listed buildings, because the conservation area goes too wide and is likely to have an affect on house prices in conservation areas. I suspect that it may be arguable that it should be restricted further to listed grade 1 buildings and grade 2 star buildings rather grade 2 buildings, and perhaps my hon. Friend will comment on that.

As the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said, the provisions give incentive to demolishing at the moment. I am not certain how my hon. Friend will get through this one, unless he again gives an exemption for listed buildings, as this seems to be the only logical way to proceed. I am sure that he will enlighten the House.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

I had not intended to intervene, but as it has just been suggested that the category of listed buildings should be truncated to grade 1 or grade 2 star, I make it clear to the Front Bench that anything less than full listed buildings will be unacceptable.

The law, which is unsought by the owner of the building, requires that what in other circumstances would be a demolition followed by the building of a new building, which would be zero rated, must instead be the preservation of certain features of the building, at the request, not of the owner of the building but of the planning authority. In those circumstances that reconstruction must count as a new construction.

After all, the circumstances when the owner bought that house were not the same as the Bill is attempting to impose. They are not of the owner's making. The Government control listing. It is not done by local authorities. Therefore, the criterion that is used is in the control of a fellow member of the Cabinet. It cannot be claimed that this is open to abuse, except in the sense that listing is suddenly slapped on without consulting the owner of the building and giving him no opportunity to put what could be an entirely reputable case for not listing it. Buildings are sometimes listed in the most arbitrary and unjust manner. However, what is listed is wholly under the Government's control. They should say that where demolition is not allowed because the building is listed, reconstruction therefore, will, under the Bill, count as zero-rated construction. It is up to the Government to amend the law so that such reconstruction is zero rated.

Photo of Mr Barney Hayhoe Mr Barney Hayhoe , Brentford and Isleworth

This short and important debate has concentrated particularly upon charities and listed buildings of the heritage.

I am advised that paragraph (c) is redundant. The presumption of my hon. Friend the Member for Rutland and Melton (Mr. Latham) was correct. I should certainly be prepared to deal with that further in correspondence if he wishes, and indeed with some of the marginal points that have been made. If hon. Members wish to put them to me I shall attempt to clarify the position.

The debate has concentrated upon the position of charities and my hon. Friends the Members for Exeter (Mr. Hannam) and for Suffolk, South (Mr. Yeo), both of whose work on this aspect of the matter is well known to the House, have argued the case for the general relief on charities in respect of their building work. They will recognise that that would inevitably lead to pressure for relief for other charitable activities. Such general relief has been considered many times and ruled out on cost grounds and on grounds that were referred to by my hon. Friend the Member for Croydon, South (Sir W. Clark) and the right hon. Member for Binningham, Sparkbrook (Mr. Hattersley). Therefore, I am riot able to commend that case to the House. Indeed, the amendment of my hon. Friend the Member for Rutland and Melton appears to go wide in applying to all buildings owned by charities although his intention might well have been to restrict relief to buildings owned and used by charities.

Widespread concern, has been expressed by many hon. Members about the effects on listed buildings of this particular extension of VAT. There are worries that it would lead to demolition of important sections of our heritage and the feeling that something must be done. I accept that as things stand the extension of VAT to building alterations would add to the cost of major works on historic buildings and such work may involve giving a new use to the old building and thus preserving it for posterity. The balance of judgment might well be changed as a result of VAT being applied so that the pressures for demolition would increase, as my hon. Friend the Member for Kettering (Mr. Freeman) so clearly explained. While a general concession would run into problems the existence of statutory lists of buildings of special historical and architectural interest makes it possible to consider a concession which could be limited to structural alterations to such listed buildings, including churches. Such a relief would be designed to help avoid the further destruction and demolition of heritage buildings. However, I make it clear that repairs and maintenance work would continue to be taxed as under the existing provisions.

I am happy to give the undertaking to the House that between now and Report we will consider a concession along those lines, and I hope that I will be able to announce the detailed provisions of such a concession before the end of May so that we would be ahead of the effective date of bringing building alterations into tax. This could be carried forward, if need be, on an extra stautory basis until the Report stage of the Bill.

In view of that undertaking, I hope that my hon. Friend, recognising that what I have said about structural alterations to listed buildings and churches is a significant concession, will not press the amendment, and that my hon. Friend the Member for Croydon, South will not move his amendment. Although what I have said does not go as far as he would wish, nevertheless, I think it meets a significant worry that has been expressed about listed buildings. I take the point of my hon. Friend who said that one does not differentiate between Grade I and the others. What I have said would concern structural alterations to all listed buildings.

Photo of Mr William Clark Mr William Clark , Croydon South

Will my hon. Friend clarify something for me? Amendment No. 22 relates to a situation where a planning authority insists that certain parts of a building remain standing, or that certain interior parts of a building may have to remain intact. Can he give me an assurance that between now and Report he will see whether it can be ensured that development is not held up? If planning authority is not given because something has to remain of the old building, development in inner cities particularly will be retarded, which will be detrimental to the economy.

Photo of Mr Barney Hayhoe Mr Barney Hayhoe , Brentford and Isleworth

I cannot give the assurance in the very wide terms that my hon. Friend seeks. If the buildings are listed, that will be so.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

Can the Minister help me with one further definition? We all welcome the idea that it is all listed buildings and churches, which I take it means all places of worship.

Photo of Mr Roy Hattersley Mr Roy Hattersley , Birmingham Sparkbrook

It is listed buildings that are churches. As I understand it, the Minister is saying that they will have to fall within both classifications.

Photo of Alan Beith Alan Beith Opposition Whip (Commons)

Having pressed the Minister strongly in the earlier part of the debate, from the alliance Bench I welcome the concession, and the extent of it, to all listed buildings. There are further points and aspects that may not be covered by the concession which we will want to explore when the Bill comes back to the House. However, as the Minister has gone quite a long way on the main point about heritage buildings, I am sure that it would be right for the hon. Gentleman not to press his amendment.

Photo of Mr Michael Latham Mr Michael Latham , Rutland and Melton

I think that all hon. Members will agree that this has been a useful debate. It has ranged over a number of important matters. It would be churlish of me to do other than welcome the concession that my hon. Friend has given from the Front Bench. When a Minister gives so positive an undertaking as he has done, there is no other honourable course than for the hon. Member concerned to seek to withdraw his amendment.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Jim Wallace Jim Wallace , Orkney and Shetland

I beg to move amendment No. 23, in page 133, line 19, leave out 'not'.

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

With this, it will be convenient to discuss amendment No. 24, in page 133, line 22, at end insert

'with the exception of any conversion, reconstruction, alteration or enlargement of any existing building or civil engineering work, wholly or mainly undertaken for the purpose of insulating, draught proofing, double glazing or in any other way improving its thermal efficiency.'.

Photo of Jim Wallace Jim Wallace , Orkney and Shetland

The amendments principally seek to exempt from the extension of VAT to building alterations those alterations that are made with the prime intention of improving energy efficiency in houses and factories. Ministers in the Department of Energy regularly tell us that the Government support the concept of energy efficiency. Indeed, for some months Ministers from the Department of Energy have been breakfasting industrialists up and down the country, extolling the virtues of energy conservation. Even more recently, we have been told about it by means of a touring caravan which apparently has something called a talking head. A press release from the Energy Efficiency Office states:

One interesting feature of the Caravan is a talking head, an animated mannequin of Brian Murphy, TV's 'L for Lester'. He tells visitors how he discovered the importance of improving the efficiency of his own heating system by watching his neighbours getting more money to spend on holidays through cutting their energy bills. So one would hope, or at least think, that one would not have to spell out the arguments in favour of energy conservation and efficiency to this Government.

However, it appears that other Departments try to undo what the Secretary of State does. Last winter, the Welsh Office directed local authorities to freeze funds specifically allocated for domestic insulation. Cutbacks in expenditure on public housing have made it less likely that effective improvements will be done to poorly insulated housing stock. Now the Budget extends VAT to building alterations, including those undertaken for the prime purpose of improving energy efficiency in factories, industrial and business premises and, in particular, houses.

Such an extension of VAT is wrong in principle. The revenue that will accrue to the Treasury as a result cannot match the enormous savings—which we are regularly told about by Ministers from the Department of Energy—that can result fom improving energy efficiency. One of the arguments that the Secretary of State for Energy and his Ministers constantly put forward is that insulation is important because of its cost effectiveness. Indeed, the animated mannequin that is touring with the Energy Efficiency Office caravan is trying to make that very point to householders. One cannot help but think that taxing insulation and energy conservation measures must reduce that cost effectiveness and make that option less attractive to many of those who would otherwise be encouraged to make energy efficiency improvements to their homes.

In turn, that will affect demand, with all the consequences that has for the many small businesses involved in energy conservation. In 1973, at the time of the oil crisis, when the Department of Energy told us to "Save It!", the energy conservation industry boomed, but in the latter part of the 1970s and the early part of this decade, people became dangerously complacent over expanding North sea oil production and many of the small energy conservation industries suffered badly and some went out of business. It is only in the past year or 18 months that a good number of them have started to see things improve. Now that there is some sign of improvement, it would be disastrous if we allowed a major setback by taxing something that we are told the Government think is a worthwhile objective.

I shall try to anticipate some of the Minister's arguments. In a letter dated 13 April, addressed to me the Secretary of State for Energy gave a reason for believing that this additional tax would not be so important. He said:

The substantial increase in personal disposable incomes, which will result from the changes in income tax, will also help consumers to offset these extra costs. It defies the imagination to believe that a Budget increase in wages of £1·21 per week, excluding the effect of indexing personal taxation, will in any way influence those who would otherwise have undertaken a major item of capital expenditure involving alterations to improve their home insulation. If the Secretary of State for Energy believes that a small increase in weekly take-home pay will encourage that with an additional 15 per cent. on the capital cost, he is stretching our credibility.

Earlier this month the Secretary of State even said that at least people always had the option of doing work themselves. In a letter to me dated 14 April the Minister said:

successive Governments have consistently resisted pressure to introduce a relief for energy saving work as such.

The argument, "We have never done it before", has been a feature of bureaucratic conservatism for many years. We challenge it. Why should we not give relief to energy saving? After all, the Government give direct financial assistance to nuclear energy production, for instance.

We hear repeatedly about the money that the Government give to the coal industry. Energy conservation is important to our overall energy strategy. Why are the Government not prepared to back that policy with specific relief?

Energy conservation has a role to play in energy strategy. It has an important role in job creation, particularly in rural areas, where there are many old houses with poor insulation, and in inner cities where unemployment is high. It has a social role to play in improving housing stock by providing better insulation and so cutting the fuel bills of many poor, elderly people. We urge the Government to accept the spirit of the amendment and to support their own policies by making an exception for work directed towards conserving energy.

Photo of Mr Gerry Bermingham Mr Gerry Bermingham , St Helens South

I do not propose to discuss matters which I discussed earlier but to which the Minister failed to give a satisfactory reply. This amendment deals with insulation. The domestic arguments are well-known, as are the benefits to society. Perhaps the Minister will take on board one point which relates to the industrial sector. If the industrial sector is assisted, as it is currently by other Departments, by being encouraged to develop thermal efficiency, the overall costs will be reduced.

If it is found that such development will cost 15 per cent. more because of the Government's imposition of 15 per cent. VAT on thermal efficiency some industries will be discouraged from investing in that way. Overhead costs of fuel consumption will rise and product prices will also rise.

Surely it would be in everyone's interest to balance overheads and the costs to society and to encourage industry to insulate by not imposing VAT on insulation. A limited amount of energy is available for the next 150 years. It makes sense to conserve oil, coal and nuclear stocks.

1.45 am

It must be in our interests to conserve as much energy as possible so as to stretch the years of fuel availability and keep overall fuel costs down. To do that, we should insulate and ensure that every possible energy conservation method is used. However, we have a Government who preaches the doctrine or of energy conservation and a Treasury which preaches the idea of penalties for conservation.

Whereas the Minister was not prepared to accept the removal of VAT on alterations, I hope that he will accept this amendment dealing with insulation. I hope that the Government will think again.

Photo of Mr Barney Hayhoe Mr Barney Hayhoe , Brentford and Isleworth

In speaking to these amendments the hon. Member for Orkney and Shetland (Mr. Wallace) concentrated on amendment No. 24. As the House is aware of his interest in energy conservation that i s understandable, and more so perhaps because amendment No. 23, I am advised, would be a wrecking amendment which would have the effect of nullifying the whole of the extension of VAT to building alterations and would have a first-year cost of £250 million and a full-year cost of £450 million. It was the matter that we resolved a moment ago, and I will put it on one side.

The purpose of amendment No. 24 is to zero rate energy-conservation work to existing buildings and civil engineering works. The cost of zero rating such work is not easily quantifiable as much work arguably imposes thermal efficiency. I am advised that it would be in excess of £100 million and would sufficiently affect the overall balance of the Budget for the tax loss to have to be made up in some other way.

I hope that the Committee will accept that wide-ranging exclusions from standard rating of work to existing buildings will inevitably lead to pressure for relief for other types of work. I am sure that we all recognise that improved insulation is highly desirable, but it is arguably no more worthy of special VAT treatment than essential repairs or modernisation, or work to assist crime prevention or home safety. In those circumstances, I must advise the Committee not to accept the amendment.

While one recognises the value of improved insulation, the costs involved are so substantial that I cannot advise the House to accept the amendment, and if it is put to the vote I hope that my hon. Friends will vote to reject it.

Photo of Jim Wallace Jim Wallace , Orkney and Shetland

The Minister said £100 million. Does that take into account the energy costs which will not be saved and which his hon. Friends in the Department of Energy tell us would be saved?

Photo of Mr Barney Hayhoe Mr Barney Hayhoe , Brentford and Isleworth

No. The hon. Gentleman has raised a fair point. The figure that I have given is the best estimate of the loss of VAT revenue.

Photo of Jim Wallace Jim Wallace , Orkney and Shetland

This matter has been given an airing. I beg to ask leave to withdraw the amendment at this stage although we reserve our position as to future action.

Amendment, by leave, withdrawn.

Question proposed, That this schedule be the Sixth Schedule to the Bill:—

The Committee divided: Ayes 183, Noes 66.

Divison No. 260][1.48 am
AYES
Aitken, JonathanGriffiths, Peter (Portsm'th N)
Alexander, RichardGrist, Ian
Amess, DavidGround, Patrick
Arnold, TomGrylls, Michael
Ashby, DavidHamilton, Hon A. (Epsom)
Aspinwall, JackHamilton, Neil (Tatton)
Atkins, Rt Hon Sir H.Hampson, Dr Keith
Baldry, AnthonyHanley, Jeremy
Batiste, SpencerHannam, John
Bellingham, HenryHargreaves, Kenneth
Berry, Sir AnthonyHarris, David
Biggs-Davison, Sir JohnHavers, Rt Hon Sir Michael
Blaker, Rt Hon Sir PeterHawksley, Warren
Boscawen, Hon RobertHayes, J.
Bowden, A. (Brighton K'to'n)Hayhoe, Barney
Bowden, Gerald (Dulwich)Hayward, Robert
Boyson, Dr RhodesHeathcoat-Amory, David
Braine, Sir BernardHenderson, Barry
Brandon-Bravo, MartinHickmet, Richard
Bright, GrahamHirst, Michael
Brinton, TimHogg, Hon Douglas (Gr'th'm)
Brooke, Hon PeterHolland, Sir Philip (Gedling)
Brown, M. (Brigg & Cl'thpes)Hooson, Tom
Bruinvels, PeterHoward, Michael
Bryan, Sir PaulHowarth, Alan (Stratf'd-on-A)
Budgen, NickHowarth, Gerald (Cannock)
Bulmer, EsmondHowell, Ralph (N Norfolk)
Burt, AlistairHubbard-Miles, Peter
Butcher, JohnHunter, Andrew
Butterfill, JohnJohnson-Smith, Sir Geoffrey
Carlisle, Kenneth (Lincoln)Jones, Gwilym (Cardiff N)
Carttiss, MichaelJones, Robert (W Herts)
Chapman, SydneyJopling, Rt Hon Michael
Chope, ChristopherKellett-Bowman, Mrs Elaine
Clark, Hon A. (Plym'th S'n)Key, Robert
Clark, Dr Michael (Rochford)King, Roger (B'ham N'field)
Clark, Sir W. (Croydon S)Knight, Mrs Jill (Edgbaston)
Clarke, Rt Hon K. (Rushcliffe)Knowles, Michael
Cockeram, EricKnox, David
Colvin, MichaelLatham, Michael
Coombs, SimonLawler, Geoffrey
Cope, JohnLawrence, Ivan
Couchman, JamesLeigh, Edward (Gainsbor'gh)
Cranborne, ViscountLennox-Boyd, Hon Mark
Currie, Mrs EdwinaLester, Jim
Dorrell, StephenLewis, Sir Kenneth (Stamf'd)
Douglas-Hamilton, Lord J.Lilley, Peter
Dover, DenLloyd, Peter, (Fareham)
du Cann, Rt Hon EdwardMacKay, Andrew (Berkshire)
Dunn, RobertMacKay, John (Argyll & Bute)
Dykes, HughMajor, John
Edwards, Rt Hon N. (P'broke)Malins, Humfrey
Eggar, TimMalone, Gerald
Fallon, MichaelMaples, John
Fenner, Mrs PeggyMarland, Paul
Finsberg, Sir GeoffreyMarlow, Antony
Forman, NigelMather, Carol
Forth, EricMaude, Hon Francis
Fox, MarcusMawhinney, Dr Brian
Freeman, RogerMaxwell-Hyslop, Robin
Gale, RogerMayhew, Sir Patrick
Galley, RoyMellor, David
Gardiner, George (Reigate)Merchant, Piers
Goodhart, Sir PhilipMeyer, Sir Anthony
Goodlad, AlastairMiller, Hal (B'grove)
Gorst, JohnMills, Iain (Meriden)
Gow, IanMills, Sir Peter (West Devon)
Gregory, ConalMitchell, David (NW Hants)
Moate, RogerShaw, Giles (Pudsey)
Moore, JohnShelton, William (Streatham)
Morris, M. (N'hampton, S)Shersby, Michael
Morrison, Hon C. (Devizes)Sims, Roger
Morrison, Hon P. (Chester)Skeet, T. H. H.
Moynihan, Hon C.Soames, Hon Nicholas
Murphy, ChristopherStanbrook, Ivor
Needham, RichardStewart, Allan (Eastwood)
Nicholls, PatrickStradling Thomas, J.
Normanton, TomSumberg, David
Norris, StevenTaylor, John (Solihull)
Osborn, Sir JohnThompson, Donald (Calder V)
Ottaway, RichardVaughan, Sir Gerard
Page, Richard (Herts SW)Viggers, Peter
Pawsey, JamesWakeham, Rt Hon John
Peacock, Mrs ElizabethWardle, C. (Bexhill)
Powell, William (Corby)Warren, Kenneth
Powley, JohnWatts, John
Proctor, K. HarveyWolfson, Mark
Rathbone, TimYeo, Tim
Rees, Rt Hon Peter (Dover)Young, Sir George (Acton)
Ridley, Rt Hon Nicholas
Roberts, Wyn (Conwy)Tellers for the Ayes:
Ryder, RichardMr. David Hunt and
Sainsbury, Hon TimothyMr. Tristan Garel-Jones.
NOES
Atkinson, N. (Tottenham)McGuire, Michael
Bagier, Gordon A. T.McKelvey, William
Barron, KevinMcWilliam, John
Beckett, Mrs MargaretMadden, Max
Bell, StuartMarshall, David (Shettleston)
Benn, TonyMaxton, John
Bermingham, GeraldMeadowcroft, Michael
Boyes, RolandMichie, William
Caborn, RichardMiller, Dr M. S. (E Kilbride)
Campbell-Savours, DaleO'Brien, William
Clay, RobertParry, Robert
Cocks, Rt Hon M. (Bristol S.)Patchett, Terry
Cohen, HarryPenhaligon, David
Conlan, BernardPike, Peter
Cook, Frank (Stockton North)Prescott, John
Corbyn, JeremyRedmond, M.
Cowans, HarryRobinson, G. (Coventry NW)
Dixon, DonaldRogers, Allan
Eadie, AlexRooker, J. W.
Fatchett, DerekRoss, Ernest (Dundee W)
Fisher, MarkSedgemore, Brian
Flannery, MartinSkinner, Dennis
Fraser, J. (Norwood)Smith, C.(Isl'ton S & F'bury)
Freeson, Rt Hon ReginaldSoley, Clive
George, BruceSpearing, Nigel
Gould, BryanStott, Roger
Hattersley, Rt Hon RoyWallace, James
Haynes, FrankWardell, Gareth (Gower)
Hogg, N. (C'nauld & Kilsyth)Welsh, Michael
Hughes, Sean (Knowsley S)Woodall, Alec
Kirkwood, ArchibaldYoung, David (Bolton SE)
Leadbitter, Ted
Leighton, RonaldTellers for the Noes:
Lofthouse, GeoffreyMr. James Hamilton and
McDonald, Dr OonaghMr. Allen McKay.

Question accordingly agreed to.