The Value Added Tax (Reduced Rate) (Energy-Saving Materials) Order 2019

Debate between Lord Benyon and Lord Spellar

Monday 24th June 2019 General Committees

[Richard Benyon (Newbury) (Con)]

I have some sympathy with the Minister. As a Minister in 2010, I inherited a situation where the Government were being taken to the European Court and were going to be subject to substantial multimillion pound fines on an occasion when the British Government intended to have a stronger environmental ambition than the rest of the European Union. That continued to happen relentlessly throughout my three and a half years as a Minister, attending international forums where we were promoting ideas and ambitions that were greener and more environmentally friendly than those of the rest of our European partners.

I remember a conversation during the EU co-ordination meeting at a congress of the parties in Hyderabad, in which an appalling person from the European Union—a Brit, actually—threatened the British Government that if we continued to hold out for our high ambitions, which I think were on biodiversity targets, we would go against the principles of the Lisbon treaty and we would be subject to a fine. I have never had my pro-European tendencies tested more than when I was representing Britain in international forums and had to spend hours sitting in European co-ordination meetings, only to hear such a thing.

The Opposition spokesman, the hon. Member for Bootle, can have a bit of fun on these occasions, but because he is a sensible person he knows that if he were in Government he would not want to put the Government in the position of having to pay a huge infraction fine. My friend, the right hon. Member for Warley, knows too that the timetable of such things is not in the Government’s gift. Very quickly we could find ourselves in a position, regardless of where we are in terms of our exit from the European Union, where we are at risk.

It is not something that any of us feels comfortable with. I and other Members are working hard on a proposal to the Government that may be of some assistance in trying to find a way forward, both while we are members of the European Union and soon after we have left.

[John Spellar]

May I help the right hon. Gentleman with his difficulty? The reason the European Commission behaves like that towards the British is because the British civil service rolls over to it. Were our civil service prepared to be as robust as the French are in response, there could be a much more realistic relationship. One could not imagine French Ministers in a similar position introducing a measure in this way, with this timescale.

[Richard Benyon]

I respect the way in which the right hon. Gentleman presents that argument, but I think he knows that that is a fallacy. Such things are frequently said, but I assure him that my civil servants were as robust as they could be, and I and my fellow Ministers were as robust as we could be. However, we came up against the legal bulwark of the Lisbon treaty, and there was nothing that we could do.

I wish to probe a couple of points. Some years ago, a similar situation arose regarding VAT on repairs to churches. The Government produced something called the listed places of worship grant scheme to offset that. Could the Minister suggest a grant scheme to offset the cost as part of a future Budget? If we leave the European Union at the end of October, it would be good to have some idea of the Government’s ambitions post exit.

Secondly, under current HMRC guidelines, battery installs can attract the reduced 5% rate only if they are installed at the same time as new solar, unlike all the other technologies defined as energy saving by HMRC, which can be installed separately. However, the proposed HMRC change means that any combined solar and storage system is likely to be over the 60% material/install threshold and, therefore, will attract the full 20% VAT rate. I would like to ask the Minister about the option for HMRC to allow stand-alone battery installs to attract the 5% rate, opening up the battery retrofit market to around 1 million homes that already have solar.

The justification for defining batteries as energy-saving materials is that domestic PV customers in the UK typically self-consume just a quarter of energy generated, because solar generation tends to be in the daytime, whereas UK home power demands tend to be at night. The rest will be spilled on to the grid. If a customer buys a battery, their self-consumption proportion typically would increase to around 70%—a huge efficiency improvement to the overall system for the customer, with the added benefit of reduced energy bills. Would the Minister consider that as a way forward?