I beg to move amendment 200, in clause 195, page 112, line 25, at end add—

‘(2) No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 unless the Chancellor of the Exchequer has reviewed the full impact of those changes on jobs, living standards and businesses, and placed the review in the Library of the House of Commons.’.

With this it will be convenient to discuss the following:

Clause stand part.

That schedule 26 be the Twenty-sixth schedule to the Bill.

It is a pleasure to serve under your chairmanship this morning, Mr Sheridan. I am sure there are some haunted faces around the Cabinet table when anyone mentions VAT, so perhaps it is better that the Chancellor is not here for clause 195. Although it makes changes that are more technical than those in other clauses, this clause still indicates the wider shambolic policy making that has defined the Bill.

Through schedule 26, the clause will, from October, impose VAT on supplies in relation to self-storage and approved alterations to protected buildings. The clause and schedule will introduce an anti-forestalling charge on such supplies if, for VAT purposes, they are treated as taking place before 1 October 2012, even though services are delivered or materials are incorporated into a building on or after that date. This is one of the elements of the Budget that have filled so many column inches and taken up so much time in Committee. I am sure that the Chancellor did not expect that when he said in the Budget:

“We will also address some of the loopholes and anomalies in our VAT system. For example, at present soft drinks and sports drinks are charged VAT, but sports nutrition drinks are not. Hot takeaway food on the high streets has been charged VAT for more than 20 years, but some new hot takeaway products in supermarkets are not. Some companies are using the VAT rules that exempt the rental of land to avoid the tax that their competitors are paying. We are publishing our plans today to remove loopholes and anomalies, but we will keep the broad exemptions on food, children’s clothes, printed books and newspapers.”—[Official Report, 21 March 2012; Vol. 542, c. 801.]

Since then, we have seen U-turn after U-turn. It seems that the bigger anomalies are in the Government’s policy-making process, rather than in the policies themselves.

Of the two VAT elements in the clause, the Government have already backtracked on one, having recognised that they got it wrong on churches that are altering their historic buildings, and we welcome that change. We tabled the amendment to highlight the concerns expressed by industry representatives, church groups and MPs about those two specific items, and to call attention in Committee to the ongoing confusion and uncertainty that surrounds the Government’s post-Budget policy-making process.

Will the Minister confirm whether the Government still intend to go ahead with the planned changes to VAT on self-storage? After all the uncertainty in economic policy in past weeks on matters ranging from hot pasties to static caravans, it is not unreasonable to suppose that some change might be in the offing, as interest in the Budget cools down. The truth is that the Government’s policy making over the past few weeks has been a mess. They have had to consult on proposals after announcing them, because they had not bothered to do so before. Time and again, they have had to make about-turns because of the disastrous Budget process that gave millionaires a tax cut, while asking millions to pay more.

To provide some background, the repair and maintenance of a protected building is standard-rated for VAT purposes, but the approved alteration of a protected building was previously zero-rated. The effect of the clause and schedule 26 is that VAT will essentially be payable on all building work carried out on listed buildings that are used as dwellings or for charitable purposes. In the Budget, that was presented as one of a series of corrections to anomalies, which originally included the changes relating to warm pasties. Was the Minister involved in the Budget’s scoring process, during which such options were considered? What consultation was carried out with major owners of listed buildings—and smaller owners—who may be affected?

Many churches in hon. Members’ constituencies will have made adaptations to their premises to make them more family-friendly and better to accommodate their congregations. When the related measures were termed anomalies in the Budget, did the Treasury know that Church of England churches and cathedrals spent £120 million on repairs in 2010-11, of which £23 million in VAT was reclaimed from the listed places of worship grant scheme? After the Budget and before the £30 million compensatory fund was announced, 29,000 people signed an e-petition against the plans, which would have hit places of worship hard. That shows the concern about the plans more generally.

I welcome the decision to compensate churches through the fund, but we are concerned about what the process implies about the Government’s approach to policy making, because it is not only churches that are concerned. Although only churches will benefit from the U-turns to date, not all protected buildings are places of worship, as the Minister knows. A huge number of listed buildings are not places of worship, and they are run by a range of groups, businesses and individuals. The Society for the Protection of Ancient Buildings said:

“VAT affects the ability of owners to care for their buildings, the viability of projects involving historic buildings at risk, and  the survival of firms that work in this specialist field. We wish to see works of care and repair to listed buildings supported, with no perverse incentive to alter or build anew. Owners of listed buildings fall within all income brackets. Poorer owners could be hit disproportionately by the proposal, particularly as wealthier owners sometimes use their homes as businesses. With very little public sector grant aid for secular listed buildings now available, owners are subject to additional controls and sometimes additional costs when appropriate traditional materials have to be used, but very rarely benefit from any corresponding state grants. Loss of any VAT concession for private secular owners would remove what little financial assistance there is for those who maintain many of the country’s listed buildings.”

What meetings has the Minister had with groups that run listed buildings that are not places of worship? Has he met the Heritage Alliance? Its chief executive, Kate Pugh, said:

“Adapting the finest of our historic buildings for modern use is essential to ensure they remain living, working resources for their communities, economically productive and a source of national pride, inspiration and delight. With its concession to the churches’ powerful lobby the Government has acknowledged the dire consequences a 20% increase in costs would have on our historic buildings; but places of worship, significant as these are, make up only 6.5% of listed buildings in England. What about the other 93.5%? Inequitable knee-jerk reactions such as this make for bad policy making. A full, properly considered review of the evidence is essential before such a valuable EU tax relief is lost.”

What estimate has the Minister made of the effect of the measure on the specialist construction industry? Will there be any more olive branches on offer to the people who are concerned about the changes, whether they are in the construction industry, the owners of the buildings, or local communities who want their listed buildings protected and improved?

The second part of the proposals relates to self-storage. The changes mean that all provision of self-storage facilities will become subject to VAT, ironing out the varying VAT treatments applied across the industry. Currently, an operator that has not opted to tax its premises and lets out a defined storage area to a customer can treat its services as an exempt supply of land. The new measures make all charges for storage in the UK subject to VAT at 20%. Therefore, anyone putting their excess possessions into self-storage from October will be subject to VAT at 20%, potentially adding 20% to the bill for storing their property.

The Red Book for Budget 2012 sets out that correcting anomalies for VAT purposes will yield £50 million in 2012-13, £115 million in 2013-14, £125 million in 2014-15, £145 million the next year, and £160 million the year after that. Those figures will include the pasty and caravan taxes, so do not reflect the yield only from self-storage and approved alterations to listed buildings.

Will the Minister inform hon. Members what the yield is expected to be, and can he split it between the yield for self-storage and that for listed buildings? Furthermore, does his estimate take into account the amount of storage space used by businesses, as opposed to individuals? If businesses using self-storage claim the VAT back, what effect will that have on the overall yield, and what will it cost the small businesses that offer these services to administer the scheme?

Will the Minister clarify the distinction in industry practice between firms that opt to tax their premises and those that do not? As I understand it, it involves a distinction between self-storage companies, which have proliferated in recent years, and removal companies,  which do not give up space directly to their customers. How many firms will be affected, and what will be the administrative burden on them?

We will not vote against the clause and schedule 26 standing part of the Bill, but it is important that the Government stop making policy on the hoof, as it has caused chaos and consternation among those directly affected by the changes, including, in this case, churches and other listed buildings, and the storage companies that we have discussed.

I shall just make a brief contribution. [Interruption.] They have heard me before. A large self-storage company is based in Poole, and it was a little surprised at the changes in VAT. Looking at the matter overall, though, many such companies should be able to reclaim quite a lot of VAT, so there may not be a massive effect. Part of the problem is that they tend to bill on a monthly basis—every 28 days. The danger with a 20% increase is that they will lose quite a lot of customers, who will review whether or not they wish to keep their storage facilities. There will be uncertainty. The value of a major public company fell by £50 million because of uncertainty about the impact of the VAT rise. I have written a letter to the Minister on the matter, and I hope that he reads it when it arrives. I look forward to further discussions with him in future.

It is a pleasure to serve under you, Mr Sheridan. Clearly, you bring a ray of sunshine to this meeting on what is otherwise a very dreich day outside. I am also delighted to follow on from my hon. Friend the Member for Leeds West.

Immediately after the Budget, we said that the Chancellor’s plans to close so-called VAT loopholes amounted to another stealth tax on lower and middle-income families and could force up the price of everyday goods and services. Following his recent series of U-turns, the Chancellor must be wishing that he had decided to put the closure of these apparent VAT loopholes at the bottom of his to-do list, rather than planning to hit consumers when they can least afford it. From the Prime Minister’s phantom pasty shop in Leeds to the Chancellor’s admission that he cannot even remember the last time he ate a pasty, senior Government figures have never looked more out of touch than they have on these VAT reversals on pasties and static caravans.

By the way, Mr Sheridan, coming from Scotland as we do, it would be remiss of me not to mention the great Forfar bridie—our equivalent of the Cornish pasty. At least the Government have seen sense on these proposals and have altered their plans, but as we all know, that was more to do with political expediency, and was forced on them by an outraged British public.

Many of my constituents still have concerns about other aspects of the Chancellor’s VAT plans. Several have contacted me about the introduction of VAT on sports nutrition drinks, highlighting their view that the imposition of the standard VAT rates on these drinks will push up prices for such products and damage small specialist manufacturers, as well as hitting jobs in the sector. There is also the fear that it could undermine consumer safety if those who regularly use these products choose to source them from less reputable suppliers via mail order or the internet.

The fact that milkshakes, drinking chocolate and Jaffa cakes will continue to be zero-rated for VAT also strikes my constituents as strange, given the desire to encourage healthier eating. Perhaps those products will be the Chancellor’s next target.

To get back to the issues before us, I want to focus my remarks on the plans to impose VAT on approved alterations to protected buildings from 1 October this year. Hon. Members will be aware that that move, dubbed the heritage tax by campaigners, has generated considerable concern among those operating in the culture and heritage industries.

Last month, the heads of 17 different organisations, including the Campaign to Protect Rural England, the Heritage Alliance, the Royal Institute of British Architects and the Country Land and Business Association, sent a letter to the Chancellor highlighting their opposition to the Government’s decision. They expressed the view that the decision puts the future of Britain’s historic buildings at risk by adding an extra 20% to the cost of giving them a sustainable future. They also stated that the removal of the zero rate takes away the incentive to obtain listed building consent, which is likely to lead to owners ignoring the consent system. Those expert organisations further suggest that the decision will have an adverse effect on the building industry, and that specialist building skills necessary for conversion projects will be lost. They point out that projects are already being axed or scaled down.

In a double-dip recession, opportunities for construction work and supporting tourism should be encouraged in every way possible. However, the measure will have the opposite effect, creating new barriers and disincentives for the heritage tourism sector, which currently contributes more than £20 billion a year to the UK economy and supports more than 450,000 jobs.

Although I acknowledge that the Government’s listed places of worship scheme will be extended to cover alterations, that accounts for less than half of all listed buildings, and Church groups have already said that the funds available will not be enough. Of course, no additional support will be available to help the National Trust, museums, theatres and libraries in listed buildings that are important for heritage, tourism and local communities.

The damage that the policy is set to do was neatly encapsulated by Ian Theodoreson, chief finance officer at the Church of England and chair of the Charity Finance Group. In a recent article in The Guardian,he states:

“Pay freezes can be unfrozen and departmental budgets can be pumped up again, but this is one of the government’s austerity measures that will have a real lasting and devastating impact – on churches, charities, communities and our country’s heritage.”

Like so many other aspects of the Chancellor’s Budget, the decision looks rushed, ill considered and counter to many of the Government’s other stated policy objectives on not only jobs and economic recovery, but protecting our historic built environment.

I hope that the Government will listen to the experts in the culture and heritage sector, as well as to Church leaders, on the issue, and rethink their plans to avoid the  kind of long-term cultural and economic damage that it is so widely predicted will be incurred if they press ahead.

Just for the sake of Hansard, the word “dreich” is Scottish code for bad weather.

It is a pleasure to serve under your chairmanship, Mr Sheridan—even if it is such a dreich morning. I think the word “dreich” does more than describe bad weather; it describes a mood as well. The word is almost untranslatable. We certainly know all about it—mainly because we have rather a lot of it. The difference here, of course, is that this dreich day is somewhat hot. I suspect that at home it may be just as wet, but considerably cooler.

I want to address the issues of listed buildings and VAT. When we consider some of the work that has been done in the past to some buildings—sometimes churches, but not always—we can see how they can be brought back into use in a very positive way. In my constituency, a Victorian school, which is somewhat surplus to requirements because the population has moved from the inner city, has been converted with considerable skill into a community asset. It has community meeting rooms and a number of organisations have offices there. They share facilities, such as reception and meeting rooms, which cuts the overheads for a lot of voluntary organisations. It has been made to be financially viable; it meets its costs and can continue to be maintained, but it required considerable alteration. Inside, it no longer looks quite like the old school it was. It is a very clever conversion.

A church in Edinburgh has been converted equally cleverly to a similar community use. The entire interior has been modernised with different floor levels and modern materials, such as steel. The VAT status not only performs an extremely useful function, but ensures that such buildings can still be used without some of the fundamental beauty that led to them being listed being necessarily impaired.

From time to time, our local newspaper publishes lists of buildings at risk to try to shame the various owners, whomever they might be—public, private, Churches or whatever—into doing something about them. They are often seen as eyesores; they might have been wonderful buildings, but if they are allowed to rot, they become an eyesore and a problem, and risk eventually getting to the stage of being unsafe and having to be demolished. Our local paper’s response is to say, “For goodness’ sake, do something about it.” Doing something about it is not always as easy as it sounds, because with such buildings it is extremely challenging to achieve the ends that people want. If we want to convert them to community use, there are financial challenges in making them viable in the long term, but it is easier to make them viable in the long term if the costs of conversion are not unduly increased by a proposal of the kind in the Bill.

A few years ago, the local newspaper highlighted the condition of a former roadhouse, which was a common building type. It could have been a beautiful art deco building, built when people were just beginning to get cars and go out of town to enjoy Sunday lunches, which has become common since. It is in a fairly deprived area. The 1930s, when it was built, was the start of a  new era in that respect. It was an area of new, mainly council, housing. Unfortunately, the area generally has fallen on difficult times over the years, although it is again undergoing regeneration.

In the midst of that, the roadhouse became a local pub with, I have to say, a somewhat risqué reputation. It was literally rotting. The owner was not doing very much with the building, and at one point it looked as though we would lose it. Fortunately, it has been completely renovated, with the help of grants from Historic Scotland and the Scottish Government. It is called the White House, and it was always sort of white, but it was very off-white for many years. It now stands as an iconic building in the area. It has been beautifully restored, but, again, for community use, which requires alterations that would be regarded as alterations, not repairs, to bring it up to the modern standards required, or thought appropriate, for public use.

I think that we could all name a number of such buildings, which are not necessarily churches but need to be given every assistance possible. I hope that, on that basis, the Government will reconsider the proposal. I hope that they will appreciate that, especially when organisations are seeking to make improvements so that the building can be used by the community and are seeking public funds to carry out the work, the proposal might be counter-productive: if the alteration costs are increased through VAT, there may be more demand on public funds to achieve the end.

Does my hon. Friend agree that it is a shame, or perhaps something stronger than shame, that many community groups that have been working for years to raise the money to refurbish a building, whether it be a church or the type of buildings that she has been talking about, will be unable to start work this year, which they had thought they could, because the increase in the charges on them is so enormous? That may mean that many buildings are never refurbished and fall into rack and ruin.

I fully agree. We have all seen buildings to which that has happened. People say afterwards, “It was a shame to lose that building,” but we should not allow that to happen.

If the hon. Lady thinks that buildings are not saved by the tax being put on changes, is she calling for the tax on repairs to be abolished as well?

I think that there is an issue there, as my Front-Bench team would agree. Having done a lot of work in the housing sector while I was on the local council, I know that the housing association movement, for example, has long campaigned for lower rates of VAT on the work that such bodies carry out. They find that, compared with the costs of the council, which does not pay VAT, the costs for carrying out even quite normal work, let alone major regeneration, are an issue. I know—I recall setting up the finances for some of these schemes with partner housing associations while I was on our local council—that that was quite a considerable factor in working out whether schemes would work, in view of the grant and loan available.

In the north-east of England—I am sure that this is also the case elsewhere in the country—we have been blighted by the theft of lead from church roofs and other buildings. Unfortunately, because of the nature of those buildings, quite often the level of insurance cover that they have and the level of cover generally that they have do not fully meet the costs of the repair that needs to be done. In fact, some churches have been attacked repeatedly in the past few years as the value of scrap metal and lead in particular has gone up. Therefore, through no fault of their own, the communities that support these buildings have to delay the repairs. This measure places an additional cost on such communities. The costs are becoming prohibitive in terms of getting the work done properly, if at all.

Order. Interventions are becoming somewhat lengthy. Can we keep them brief?

Thank you, Mr Sheridan. Although I was very interested in my hon. Friend’s intervention, I am not sure that it was entirely relevant to the matter under discussion. However, the issue that he raises is obviously another important aspect of the additional costs that people can incur.

It is ironic that being in possession of a listed building, whether as a public body, a community body or, indeed, an individual, can be a double-edged sword. Some people resist listing, on the basis that they would be able to do less to the building than they would otherwise. That seems a bit odd, but is perhaps understandable.

When I was on the council, I was fortunate, or unfortunate, in having the last of the city’s post-war prefabs in my ward. The aluminium with which they were built was rotting badly, and the council decided to demolish and rebuild those that remained in council ownership. An action group was set up to save the prefabs, and people threatened to tie themselves to bulldozers and so on. The issue became very heated. The population was generally older, as some people had been there for a long time and others had been housed there because the accommodation was on the ground floor and had easy access. I used to get people phoning me up to say that I had killed people; when an elderly person died, that was my fault, as a local councillor, because I had threatened their home. It was all very emotional. At one point, the local community group tried to get the buildings listed, as they were the last remaining prefabs in the area. That request was not granted, but it would have been a double-edged sword, as owners would have found it more difficult to carry out alterations to the buildings, had they wanted to do so. Sometimes we have to be careful what we wish for.

Finally, while I am name-checking things in my area, let me add that we have an old cinema that has a 1930s art deco exterior. It is a very beautiful building, and it is listed to some extent, but we have to be realistic; we want to be able to make alterations to the interior. The building has been sitting unused for a good number of years. That is not desirable and local residents are worried about that.

More generally on VAT, early on as a councillor I discovered that sometimes it is the apparently little  things that trip one up. Sometimes what gets councillors into the greatest trouble with the electorate—or with the local paper, which is often much the same thing—are not the big, multi-million-pound projects, but things that, on the face of it, often seem quite minor, simple and straightforward. They are the sort of things that seem sensible at an official level. Councillors agree to them, and the next thing they know there is public outrage and they are being castigated in the local press. Councillors have to think very carefully about what they are doing and not assume that what seems, on the face of it, to be a sensible tidying-up is the right way to go. That is a word of warning to Government, too. The detail—the small things—cannot be ignored. The consequences have to be considered before proposals are put forward.

My hon. Friend talks about consequences. The reality is that once VAT is put on something, under European rules it can never be taken away. Does she believe that the Government have not thought that through properly? If we discover that lots of listed buildings and so on are not being renovated, we cannot go back. Surely that is one of the consequences that has not been totally thought through.

I hesitate to venture on to the issue of Europe. I see that my hon. Friend the Member for Bassetlaw, who usually sits two places to my right, is not here at the moment. He would, no doubt, also wish to wax lyrical on the subject of Europe. I think one can, in some circumstances, apply for a derogation, but doing so is very complicated. Consequences always have to be considered. One has to think very carefully about what one is doing. The full detail has to be considered, and the implications thought through. Even if one changes one’s mind—as I think the Government have discovered, and as we discovered as a council—and does something about it, these things tend to hang around for ages.

We had a project at one point to put up a small and not terribly expensive artwork—at least, it was meant to be art. It was a sculpture made of tyres in our port area. It incurred the wrath of our local newspaper, and the issue went on for years. I was surprised that some considerable time later people would raise this as an issue, saying, “And if you hadn’t spent that money on those stupid tyres, you could have—”. Well, actually, we could not.

Would my hon. Friend agree that it was in fact a model of the Parthenon by a very famous sculptor, David Mach, who went to the Royal College of Art?

I certainly concede that. I was not necessarily expressing a view on the sculpture. I certainly know what the opinion of many of my constituents was for many years, because it was framed through a certain view that had been taken. The point I was making was that things like that may seem relatively minor, but they will keep coming back for a long time. That surprised me, because I thought that the subject had had its day. Although it might be to the advantage of my party, I am afraid that issues such as the pasty and caravan taxes may have currency long beyond the time when the  Government saw sense. Perhaps they would like to see sense on some other issues before it is too late.

May I say what a pleasure it is to serve under your chairmanship, Mr Sheridan? Further to my intervention on the hon. Member for Edinburgh East, I just wanted to declare an interest, as I live in a listed building. I thought I should put that on the record. [ Laughter. ]

Order.

It is a great pleasure to serve under your chairmanship, Mr Sheridan. It is also a great pleasure to follow the brief speech made by my hon. Friend the Member for North East Somerset. There is the concept of the listed building; I hope one day we will have the concept of a listed Member of Parliament, and I would seek to nominate him as the very first.

We have had an interesting debate this morning, but I fear that the substance of the clause has not yet had a fair hearing. I will also speak to amendment 200 and then deal with points that have been raised. Clause 195 introduces schedule 26, which provides for an anti-forestalling charge in respect of supplies of self-storage facilities and approved alterations to listed buildings. That is to prevent forestalling as a result of the changes announced in the Budget, which apply VAT at 20% to those supplies. The Committee will be aware that we committed at the outset to consulting on those and other VAT changes we announced in the Budget. Following that consultation, we are amending elements of the package, and we intend to bring forward those changes on Report.

Although none of the amendments affect the substance of the anti-forestalling legislation in schedule 26, or even the measures to which the anti-forestalling provisions apply, they will entail a minor consequential amendment to the wording of the schedule. We consider it sensible to present the whole package of changes on this issue on Report. I shall set out for the benefit of the Committee the amendments to schedule 26 that we will bring forward then. I hope that is helpful. They are part of a wider package of measures introduced to tackle a number of anomalies along the borderlines of the VAT exemptions and zero rates. The long lead-in time allows businesses time to prepare for the changes but, unfortunately, it also creates opportunities for tax avoidance.

Will the Minister give way?

I will, but I hope that the hon. Lady bears in mind my point about hoping to address in a moment the issues raised during our debate.

I am somewhat puzzled as to why we are debating the provisions. Have I heard the Minister correctly? Is he saying that even though the Committee is debating them, he will do another U-turn and bring measures back on Report? I am confused by what he has said, and I would be grateful if he could explain further what changes are likely to be made.

I appreciate that the hon. Lady is confused, and I will try to assist. Essentially, clause 195 and schedule 26 will remain in place, but a minor consequential adjustment is necessary, because of the way that we are implementing the VAT changes. The initial proposal was that the VAT changes would be addressed by a statutory instrument debated on the Floor of the House. However, because we have extended the consultation period by an additional two weeks, as the hon. Lady will remember, we will instead introduce the VAT changes on Report as part of primary legislation. We will all have the opportunity to take part in that debate on VAT changes in the next few weeks, and I am sure that we are looking forward to it. Whereas schedule 26 currently refers to changes made by order, they will actually be made by primary legislation. The changes to clause 195 and schedule 26 are minor, and there is no alteration to the substance, but we will have the opportunity to debate that substance again on Report.

I want to follow up on the question asked by my hon. Friend the Member for Bolton West. Although I am now clear on the technicalities and the process, will the Minister outline which particular policy changes may be brought in on Report? Will changes on self-storage and/or sports nutrition products be included, for example?

As far as policy is concerned, the hon. Lady will be aware that we made our announcements in the Budget. There will be changes to VAT on hot food and with regard to the policy on static caravans.

As for legislation on VAT changes across the board, including the adjustments I have just mentioned and other matters we have debated today, such as alterations on listed buildings and self-storage, all those issues will be addressed on Report, when changes will be brought in. Adjustments were originally going to be made by statutory instrument, but we will now make them all in primary legislation. All the changes announced in the Budget, including the changes that have been amended, will be dealt with on Report. I hope that that provides clarity for the Committee.

In the interests of absolute clarity on the process and the issues to be debated on Report, is the Minister suggesting that additional changes may happen at that stage? Is he aware of any?

No, I am not proposing any further policy changes. We are about to publish our response to the consultation process in the next few days. No further policy changes will be announced, but we will take the legislation through on Report. I hope that those comments are helpful. In the hope of dissipating any confusion that the hon. Member for Bolton West may have about clause 195 and schedule 26, let me say that the substance is unaffected by what we will address on Report.

I return to the proposals in front of us. By way of background, I should say that a package of measures were introduced in the Budget to tackle a number of anomalies along the borderlines of the VAT exemptions  and zero rates. It is right that there should be a reasonable lead-in time that allows businesses to prepare for the changes, but that also creates opportunities for tax avoidance. Businesses could attempt to arrange their affairs so that they continue to treat their supplies as VAT free after the VAT liability changes to 20%. Past experience with VAT rate changes has shown that affected businesses set up prepayment arrangements to exploit the lead-in period if no anti-avoidance rules are in place. Accordingly, on 21 March, I announced that legislation, effective from that date, would be introduced as part of the Finance Bill to protect the public finances from artificial avoidance of the change in VAT liability, thus ensuring that the VAT liability changes are fully effective.

This clause will ensure that the new VAT liability will apply as appropriate. It will apply, subject to the transitional arrangements, to construction work which is done after 30 September 2012; to materials which are incorporated into buildings after 30 September 2012; and to self storage facilities which are provided after 30 September 2012, even if the supply is treated for VAT purposes as being made earlier. It will do this by levying an anti-forestalling charge in lieu of the VAT that would have been due if the advance payment had not taken place. While the anti-forestalling charge will apply to supplies treated as taking place on or after 21 March 2012, by virtue of the prepayment, it will not become due until 1 October 2012. HMRC estimates that only a very small number of businesses will be affected, although the individual tax involved in some cases may be quite substantial.

As I said earlier, we will need to make a minor consequential amendment to schedule 26 when we bring forward changes to the package on Report. Those changes will now be made by primary legislation, so paragraph 1 of schedule 26 will need to be amended to reflect that, as it currently refers to supplies becoming standard-rated as the result of an order.

Amendment 200, which was tabled by the Opposition, would simply add a requirement not to make an order to effect the substantive changes without first reviewing the full impact of those changes on jobs, living standards and businesses. That amendment is virtually identical to new clause 3, which was debated and defeated in Committee of the whole House on 18 April. Given the previous defeat of an identical amendment, and given that the substantive measures will be fully debated on Report when we bring forward changes on the issue, I do not consider it a good use of time to debate that amendment at great length today. Suffice it to say that the Government have considered the impact of the proposed changes, and tax information and impact notes were published on Budget day. We will publish revised notes when the consultation responses are published in the near future.

In any case, the changes to policy that we have already announced regarding hot food and static caravans will ameliorate the impact of substantial parts of the Budget proposal. The amendment as worded is academic now in any event, as the Government no longer intend to make an order to effect the substantive changes; they will now be made by amendment on Report. For those reasons, I ask that the amendment be withdrawn. However, let me quickly try to address some of the concerns raised by Committee members about listed buildings and self-storage. On listed buildings, VAT has been  charged on repairs for listed buildings for a long time. It seems strange that there is a more favourable tax treatment for alterations than for repairs.

While the Minister is contemplating the differences between repairs and changes to buildings, will he say whether he would support Labour’s five-point plan, which says that VAT on repairs to buildings should be reduced to 5%?

There are two issues with that. First, the technical point is that there would still be, as I understand it, a distinction between repairs and alterations. I am not sure whether the hon. Lady is saying that Labour’s policy would be to have a 5% rate for alterations, but there would still be a distinction. As the distinction between repairs and alterations is quite difficult to assess, such a change would create a great a deal of complexity and result in disputes, which would take up a great deal of HMRC’s and taxpayers’ time.

Will the Minister give way?

Let me finish the point; I have not finished yet with Labour’s five-point plan. The other point—I will make it very briefly, because you would not want us to be diverted, Mr Sheridan—is that the five-point plan, which I do not believe the Labour party has ever costed, would add considerably to borrowing. It would add to our financial difficulties and it would be a reckless gamble with the public finances.

I want to explore the point about repairs and alterations. I do not deny that sometimes the dividing line can be difficult to discern, but it is discerned as a matter of course in many other situations. In my council, for example, improvement grants do not cover repairs, but they used to be provided for improvements, although that does not happen as often as it used to. I am not saying that people did not try to dispute the distinction, but it was perfectly possible and normal to make that distinction. The difference is perhaps that alterations to buildings give them a new use. Alterations enable the new uses that I mentioned in some of the examples that I gave.

To be fair, the hon. Lady acknowledged that the distinction can be a cause of dispute. It can distort behaviour, with people trying to arrange a change to a property in such a way that it is considered an alteration rather than a repair. Disputes about the distinction can cause difficulties for HMRC and taxpayers. It is an anomaly, and it is right that we have sought to address it.

I will address some of the questions that have been asked. On the funding of the listed places of worship scheme, we made it clear when the Budget was announced that we would expand the scheme so that churches would not be affected by the change in policy. We made an estimate at the time based on a Church report that suggested that the cost would be in the region of £5 million. After the Budget, we had further discussions with the Church of England, which led on the matter on behalf  of other Churches. It became clear that the cost to the Churches had been underestimated, but we had always made it clear that we would compensate them. We had a constructive dialogue with the Churches, and the Chancellor and I met the Bishop of London and others on a couple of occasions to discuss the matter. Given the new evidence that was presented to us, we expanded the listed places of worship scheme in a way that I think the Church of England and other Churches are happy with. Our engagement on that point has been constructive.

As far as the estimate for the construction industry is concerned, we published a tax information impact note that showed the overall assessment of the impact on the industry as a whole. That tax information and impact note will be updated, but we believe that the impact on the overall construction industry will be marginal. A concern was raised about the transition, and the point was made that plans often take a number of years. We want to be as flexible as possible on projects that were under way before the Budget. The consultation paper made it clear that we want the transitional rules to provide as much flexibility as possible. I hope that reassures the general heritage industry. I have had a number of meetings with the Heritage Alliance, English Heritage and a broad coalition of interested groups on the matter, so there has been strong engagement.

A number of hon. Members have mentioned self-storage. On revenue and the effect on business, I refer the Committee to the summary of impacts set out in the consultation paper. Some 250 VAT-registered self-storage businesses that do not opt to tax their supplies will be affected. Additionally, any unregistered suppliers of self-storage will have to register as a result of the measure. The number of those businesses is not known but is estimated to be about 50. An unknown number of unregistered businesses, businesses that make exempt supplies and charities that are unable to reclaim the VAT charged on self-storage will be affected.

One-off compliance costs have been considered and are expected to be negligible in total. An estimated 300 businesses are expected to incur costs from familiarisation with the new guidance, system changes, repricing and additional bookkeeping, but those costs are all expected to be small. Ongoing annual costs have been considered for the estimated 50 businesses that will have to register, and those costs, again, are expected to be negligible in total.

I am grateful for the letter from my hon. Friend the Member for Poole, and I know he has asked for a meeting about the concerns he has raised. I have not yet responded to him in writing, but, if he would accept my response here, I would be delighted to meet him. I am grateful to him for raising that point.

We will have an opportunity to return to these matters on the Floor of the House, but I hope the Committee appreciates that the clause and schedule 26 will be important in preventing forestalling in response to the upcoming VAT liability change. The provisions in schedule 26 are a fair and proportionate response to the threat of forestalling, and the changes we make on Report will ensure that the anti-forestalling elements will remain effective.

The Minister says that we debated a similar proposal in the Committee of the whole House, but there have since been substantial changes to the Bill,  with the U-turns on pasties and caravans. Given the change of circumstances, I think it is right and proper that we debate the measure this morning.

The Minister says that the Government are making amendments following consultation, but as my hon. Friends the Members for Bolton West, for Kilmarnock and Loudoun and for Newcastle upon Tyne North have said, what is happening is still unclear. What a mess: changes have been made to the Bill, and changes to changes will be made on Report. No wonder people, such as those who run shops selling pasties, are confused. I will be at Leeds railway station later this afternoon, although I will not be able to get a pasty because, as we now know, there is no pasty shop, despite the Prime Minister’s protestations. There has been a change to reduce VAT on caravans from 20% to 5%. Instead of correcting anomalies, which the Minister says the Government are trying to do, and which the Chancellor said at the Budget, it seems that, in fact, many more anomalies and much more confusion are being created. Far from taxation being tidied up, it is even more confused than before.

On listed buildings, the Minister says that he has met with representatives of English Heritage and others, but he does not seem willing to budge in the way that the Government have on VAT for churches. Similarly on self-storage, he says that he is happy to meet with the hon. Member for Poole, but although he recognises the additional costs and bureaucracy involved at a time when the Government say that they are trying to cut red tape for businesses, he does not seem willing to budge.

The hon. Member for Poole put it well when he said that businesses were surprised by the change, and with surprise comes additional cost and bureaucracy. My hon. Friend the Member for Livingston rightly said that the taxes are stealth taxes on families and businesses, and he spoke about something I had not heard of before. I am not sure if I am going to say it correctly, but I am sure, Mr Chairman, that you will correct me if I get it wrong. He spoke about the Forfar bridie.

Yes.

That was not bad, if I do say so myself. I will have to take an intervention if anyone wants to disagree. The Forfar bridie will also be hit by the anomalies and the confusion about VAT.

My hon. Friend the Member for Edinburgh East said that it was not just the weather that was miserable at the moment but the whole approach to the Budget. Many of us will see similarities between her constituency and ours, with buildings needing the adaptations and the VAT changes risking creating eyesores. The Opposition hope that the Minister and the Government will find ways of making assistance available to ensure that that does not happen.

My hon. Friend the Member for Bolton West said that plans to make improvements would be shelved because of the additional costs, leaving buildings to go to wrack and ruin. We very much hope that that does not happen, and that the Government will listen again to the representatives calling on them to make changes, particularly, as my hon. Friend the Member for Gateshead  said, at a time when families and businesses face other rising costs including those of insurance and repairs, and also of increased taxation, which we all, apart from millionaires, have to put up with.

I hope that, before Report, the additional confusion will be dealt with, and the changes, and the changes to changes, will be made. I also hope that changes further to those that the Minister has outlined today will be made in time to prevent some of the taxation changes from coming into effect and having a negative impact on families and businesses across the country. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 195 ordered to stand part of the Bill.

Schedule 26 agreed to.