asked Her Majesty's Government:

Whether they support the European Commission's proposal to allow member states to reduce the rate of value added tax on repairs to and the renovation of housing and listed buildings.

My Lords, the Government generally support member states having the flexibility that would be allowed by the legislative proposal regarding reduced VAT rates adopted by the European Commission in July, including the elements to which the noble Lord refers.

My Lords, I am grateful to the noble Lord for that reply, particularly as the noble Lord, Lord Mandelson, dodged the question the other day. Does he agree that the only reason why the anomaly of a zero rate on new buildings and 17.5 per cent on repairs has gone on for so long is the European directive governing VAT? Will the Government press very hard the few nations that object to a change, particularly Germany, to try to ensure that the Chancellor of the Exchequer has the opportunity to make such a change now that targeted tax cuts are back on the agenda?

My Lords, I am sorry that the noble Lord made that slighting remark about my noble friend Lord Mandelson, who was merely reflecting that the issue is not yet decided in Europe. Before making a judgment, Britain must await the normal budgetary process, which is the responsibility of the Treasury and not of the Department for Business, Enterprise and Regulatory Reform. On the noble Lord's more general point, I have indicated that the Government are in favour of the changes proposed by the Commission. He is right that a number of countries are still to be persuaded, but we have considerable hopes of making progress on that and of the directive being passed shortly.

My Lords, given the case in current economic circumstances for a stimulus to construction activity, and given the importance in any case of acting to remove the present perverse disincentive to conserve houses and listed buildings, will the Government not just support the introduction of the directive but seize the opportunity next year to use the discretion that the directive allows? Indeed, will they urge the Commission and ECOFIN to introduce the directive as rapidly as possible?

My Lords, I appreciate my noble friend's interest in listed buildings. On VAT, he will already know that Britain has additional powers with regard to certain activities relating to listed buildings. However, he is right to press for additional benefits and we will be looking at that once the European decision is taken.

My Lords, the Minister's Answer seemed to indicate that this matter would not be dealt with with any urgency. Will he consider the fact that, perhaps because of roofing or other difficulties, many historic buildings are in danger and in urgent need of something being done? Will he look at the possibility of speeding that up?

My Lords, I did not want to convey any lack of urgency on the issue. The European directive is expected shortly and the noble Baroness will know that the Pre-Budget Report, when taxation changes may be effected, is also imminent, so we are not talking about undue delay. I was reflecting that, with regard to listed buildings, the UK is in a slightly better position than the rest of Europe because we recognise particular features of Britain's historic past, and we intend to improve on that.

My Lords, the Minister talked in general terms about a timetable. In his view, on the current timetable facing the Commission, would it be possible for the Government to introduce a reduced rate of VAT in next year's Budget? If not, will they put additional pressure on the EU to bring the timetable forward?

My Lords, I have no specific doubts on the timing. The noble Lord will recognise that, as I said, the European decision is imminent and, although the date of the Budget has not yet been set for next year, we will have time before it is set. I do not want to convey the idea that we automatically follow what the European Commission offers as a possibility. We are in favour of the measure because it will give flexibility to states, but the House will appreciate that we currently give significant advantages on VAT to small businesses and the construction industry. For instance, the threshold does not start until a turnover of £67,000, which is vastly higher than the norm in Europe.

My Lords, further to his helpful replies, will my noble friend acknowledge that by agreeing to the ECOFIN motion on 7 December he will be helping small businesses in the construction industry and will be helping to renew the national infrastructure, as well as having the benefit of working in cohesion and in concert with our partners?

My Lords, the Government have made it clear that they want to assist the construction industry and housing in particular. There is a dimension with regard to listed buildings, which has been identified accurately today. I am not in a position to pre-empt or preordain the Government's decision on VAT, but we have announced our strategy on and intentions towards small businesses. The construction industry will benefit and a decision will be taken on VAT at the appropriate time. The House will recognise that that appropriate time will be in the Pre-Budget Report and the Budget.

My Lords, will the noble Lord confirm that there is no need to wait for a Budget to make a change because there are already provisions on the statute book in relation to the regulator to do so without waiting for the Budget?

My Lords, of course that is the case, but the noble Lord will appreciate, with his vast experience of Treasury matters, that we have to look at the VAT issue in the round. He will know just how significant VAT is—

Noble Lords:

No.

My Lords, in this instance we are talking about more than £1 billion of revenue. I know that the Conservative Party might be entirely reckless about income to the state at a time when it has no control over the coffers, but I noticed that, when asked for its taxation proposals today, it proved to be a little coy.

My Lords—

My Lords, we are now well into the 16th minute.