The Lord Bishop of Chelmsford
To ask His Majesty’s Government what steps they are taking to improve the sustainability and quality of existing buildings, including by cutting value added tax to incentivise building repairs and maintenance.
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Penn) (Con)
My Lords, the Government are committed to improving the sustainability of existing buildings. The Autumn Statement expanded the current zero rating of VAT on the installation of qualifying energy-saving materials in homes until March 2027. This relief, worth more than £1 billion, now also includes additional technologies and extends to buildings used for charitable purposes. Additionally, the Government are investing £12 billion in Help to Heat schemes to ensure that homes are warmer and cheaper to heat.
The Lord Bishop of Chelmsford
I declare my interest as the Church of England’s lead bishop for housing. I thank the Minister for her Answer. Would she not agree that, as a point of principle, it is preferable to incentivise restoring and renewing buildings which already exist, rather than purely incentivising new building? The present system encourages new build over reuse. While it is clear that we need more housing in particular, this does not encourage a culture of sustainability. The Listed Places of Worship Grant Scheme has been a great help for certain kinds of buildings, but it is only for places of worship, it is due to expire in 2025 and it requires considerable administration. Now that the UK has left the EU, the rate of VAT on repairs is in the gift of His Majesty’s Government. Will they commit to the principle of sustainability by undertaking a review of the potential benefits of a lower rate of VAT on repairs?
Baroness Penn (Con)
The reality is that we need both to restore and repair existing buildings and to encourage new build to address our housing supply issues. We have a reduced 5% rate of VAT for renovation works on residential properties, including the conversion of buildings from one residential use to another; on conversions from commercial to residential; and on the renovation of properties which have been empty for two years or more prior to renovation work. We are looking carefully at this issue. Since we left the EU, we have had requests for relief totalling about £50 billion across different forms of VAT. This request needs to be seen in the context of that bigger figure.
Lord Cormack (Con)
My Lords, I declare an interest as a vice-president of the National Churches Trust and of the Lincolnshire Churches Trust, and one who has been a churchwarden for 36 years. It really is crucial that the Government recognise that the most important group of historic buildings in our country are our parish churches and give them some assistance. The Listed Places of Worship Grant Scheme is coming to an end, as my friend the right reverend Prelate said, and we do not wish to see the parish churches of England crumbling into decay.
Baroness Penn (Con)
I absolutely recognise the points that my noble friend is making, but the Listed Places of Worship Grant Scheme is making a real difference to churches, as recognised by the right reverend Prelate. It gives grants covering the VAT on repairs of over £1,000 to listed buildings used as places of worship. It is not coming to an end; it runs until the end of March 2025. Of course, any decisions for the spending review period after that will come in due course.
Baroness Finlay of Llandaff (CB)
My Lords, have the Government undertaken a cost assessment of the number of schools that have asbestos in them and that are also affected by RAAC? They need replacing, because the children in these schools are currently at risk of exposure to asbestos fibres, and the same applies to many hospital buildings. Has there been a comparison of the costs of renovation versus replacement for these public buildings?
Baroness Penn (Con)
Both the Department of Health and the Department for Education are taking forward very careful programmes to address the issue of RAAC. As part of that, I am sure they will consider the most cost-effective way of addressing those issues. My noble friend Lady Barran is working very closely on the schools issue, to ensure that all schools affected by RAAC have it removed or remediated as soon as possible.
Baroness McIntosh of Hudnall (Lab)
My Lords, will the Minister spare a thought for the small but significant number of people who live very modestly in listed buildings? I have to declare an interest, being one of those people. I live in a very small house which happens to be listed, in a conservation area. The business of repairing and maintaining it is extremely expensive and very difficult to achieve, partly because the planning system does not co-operate on very small interventions which could make a significant difference—for instance, insulation. What are the Government doing to help this situation?
Baroness Penn (Con)
I acknowledge the point that the noble Baroness has made. We are doing two things in this area. We have updated the National Planning Policy Framework so that, in determining planning applications, local planning authorities should give significant weight to the need to support energy efficiency and low-carbon heating improvements to existing buildings. Specifically on the practical planning barriers that households can face when they are in conservation areas or listed buildings, in our energy security strategy, published last year, we committed to reviewing the barriers that people in such buildings face. That review is under way and I believe that the outcome will be published shortly.
Baroness Pinnock (LD)
My Lords, I have relevant interests recorded in the register. I want to turn our attention to people’s homes. Some 20 years ago, Kirklees Council offered free loft and cavity wall insulation to every home, regardless of tenure. It was largely funded by energy companies, and 100,000 homes benefited from that scheme. Will the Government learn from that pioneering scheme and consider its introduction across the country in order to achieve the COP 28 agreement?
Baroness Penn (Con)
My Lords, we learn from all successful schemes in this area, and you will see similar provisions in our current schemes, including the contribution of energy companies to the cost of improving insulation for households. We have a number of different schemes. They tend to focus, at the initial stage, on those on lower incomes who will most benefit from the reduced bills that improved energy efficiency will bring, but as we move towards achieving our net-zero targets, we will need to have the whole country covered. The expansion of our schemes takes it further—for example, the extended discount on heat pumps that we announced earlier this year.
Baroness Taylor of Stevenage (Lab)
My Lords, with all homes to be highly energy efficient by 2025, with low-carbon heating and zero carbon, what estimate have the Government made of the cost of this for social housing, which is likely to run into hundreds of thousands of pounds for each local authority and registered providers, at a time when the cost of living crisis means rent increases are unlikely to be able to meet these costs?
Baroness Penn (Con)
I do not have a figure for the overall cost, but the noble Baroness is absolutely right that it will be important for social housing to help make the transition. A lot of our early support has focused on this housing stock—for example, through the social housing decarbonisation fund—because local authorities will need support to take these measures and because the benefits of greater energy efficiency and lower bills need to be targeted at lower income households first.
Lord Swire (Con)
They tried to silence me.
The right reverend Prelate is absolutely right to raise this issue again, and we should continue to raise it. The Government hid for years behind the fig leaf of the EU, saying they were unable to vary the rate of VAT. We are now out of the EU and this is the time to look at that. If the Government are serious about reusing and refurbishing our stock of older properties, they should look again. We are not asking for any kind of VAT reduction; we are looking for parity. I do not understand the intellectual argument for two rates of VAT—one which clearly discriminates against the built heritage sector. On that subject, I just say to my noble friend that, if she talks to anybody in the heritage sector, as I am sure she does, she will find that the backlog of repairs because of this pernicious rate of VAT is now extremely concerning.
Baroness Penn (Con)
I say to my noble friend that we are taking advantage of the flexibilities we have since leaving the EU in reducing rates of VAT. We have announced that the installation of qualifying energy-saving materials in residential accommodation has a zero rate of VAT until March 2027. This support is worth over £1 billion and will help households and charities improve their energy efficiency in buildings and reduce carbon emissions. As I said earlier, we get requests to reduce the rate of VAT across a number of different areas, and we consider them very carefully, but they have to be considered in the context of how much revenue VAT raises. As I said, the total cost of requests across different areas has totalled some £50 billion since we have left the EU.