VAT (Listed Properties)

Jesse Norman Excerpts

Wednesday 4th March 2020 Westminster Hall

[The Financial Secretary to the Treasury (Jesse Norman)]

It is a great pleasure to speak under your chairmanship, Sir Christopher. I think the debate has shown that this topic is of great interest in different parts of the country and to different parts of our community. There is widespread interest in it throughout the House, but also in parts well outside it. I thank my hon. Friend the Member for South Thanet (Craig Mackinlay), who is indefatigable and is learned in matters of tax, for calling the debate, and all other hon. Members who contributed to it.

My hon. Friend is known for his expertise in tax. I had suspected he was a Burkean in matters of preservation of our assets, our national heritage and the priceless inheritance of previous generations, and it was good to hear that Burkeanism in action. I salute him for it. I also salute him for his timing; he managed to secure the debate in the lee of a fiscal event that is due at some point in the not-too-distant future. I have found the debate engrossing.

I think we all agree that listed buildings are an integral part of the shared history of our British life and culture, and that they greatly enrich that history. The Government absolutely recognise—as, I know, does every Member of the House—the importance of protecting and making the most of that UK heritage. It is important not merely socially and culturally but economically.

As my hon. Friend will know, the Government released a heritage statement in 2017 setting out many ways in which they support this sector. It is important to remind ourselves that the Government write a cheque of £80 million or more towards heritage organisations. The listed places of worship grant scheme was discussed at some length. That and the UK heritage organisations do valuable preservation work. We also have Historic England and the Heritage Lottery Fund to fund and support general advice and assistance for the conservation of heritage, including listed buildings.

The Government recognise, however, the very specific challenges faced by private owners of listed properties in planning regulations. That is why the Government introduced measures to streamline the listed buildings consent regime in 2013, including by removing the need for specific applications for minor works to listed buildings and giving local authorities the power to grant a general consent.

My hon. Friend highlighted several mechanisms by which the goal he seeks could be achieved, one of which is to extend the reduced rate—or possibly a nil rate—to more goods and services, and so to reduce the up-front costs associated with the refurbishment and renovation of listed buildings. As he pointed out, we have some experience of a comparable relief in the past. Previously, approved alterations to listed buildings were zero-rated when used for residential use or by a charity. That relief was introduced to reduce the costs associated with restoring or enhancing the unique character of a listed building or prolonging its active life.

Importantly, however, that is not actually what happened. The majority of work carried out under that relief was for extension purposes rather than for maintenance, and the relief did not deliver the original point and purpose of the legislation. I am afraid that, in so doing, it deployed large amounts of taxpayers’ money in ways that were not contemplated by Parliament when it passed the legislation. That is why that legislation was withdrawn as part of the 2012 Budget.

[Wera Hobhouse]

Would not it therefore make sense just to define a little more what the VAT relief is for, rather than scrapping it for everybody?

[Jesse Norman]

Of course those are two entirely separate things. To remove a relief is to remove a very blunt and general instrument that is, by its bluntness and generality, open to abuse. In this case, it had the contradictory effect of potentially disincentivising repairs, because people focused on extensions, which was directly contrary to the purpose of the legislation. However, as has been recognised with the listed places of worship fund, there can be scope for a more targeted intervention through funds rather than tax reliefs. That is the other option we were given by my hon. Friend the Member for South Thanet.

As my hon. Friend knows better than probably any other Member, VAT is a broad-based tax on consumption, and the standard rate of 20% applies to the vast majority of goods and services. There are exceptions to the standard rate, but they are strictly limited by domestic law as well as by fiscal considerations. Hon. Members will appreciate that we are not short of requests for VAT relief in the Treasury. We have VAT reliefs for repairs and improvements, but of course that includes repairs to damage caused by floods or by the desperate events that have necessitated re-cladding of buildings for health and safety reasons. In total, we are presently dealing with about £40 billion of requests for relief, many of them triggered by the recognition that we are leaving the EU and seeking to exploit that fact for other purposes. We must place this proposal in that category.

It is estimated that introducing a relief for the repair and maintenance of all buildings would cost the Exchequer something like £4 billion a year. We do not have an estimate for listed buildings, but, as was pointed out, there are more than 450,000 of them in the UK, so such a relief would undoubtedly be very substantial in quantum. Of course, that is a constraint on what we can do.

Let me address the remarks by the hon. Member for Oxford East (Anneliese Dodds), who was commendably direct and straight about what exists: the 5% rate for the recovery of properties that have been empty for two years. She is absolutely right to point out the target issue versus the dead-weight cost, which I also highlighted. She is also right about our concerns, reflecting wider considerations on the state of the economy, and the need for a better understanding of the factual base for reliefs. Perhaps I can give her some comfort.

As the hon. Lady pointed out in response to my right hon. Friend the Member for Ludlow (Philip Dunne), who is no longer in his place, there is a relief available for the installation of energy-saving materials on residential properties, whether listed or unlisted. As she mentioned, we have measures to incentivise the use of listed buildings for residential purposes, as well as to increase the overall number of dwellings. Those measures cover listed buildings, so there is scope to support them in some circumstances.

I turn to some of the specific points made. My hon. Friend the Member for South Thanet pointed out that the relief is not directly comparable to its predecessor. The question of targeting is therefore central to what we have discussed. There is fairness, because listed and unlisted buildings are treated in the same way. The hon. Member for Glasgow Central (Alison Thewliss) said that the task for us all is to protect the homes that people live in, and of course an enormously larger number of people live in unlisted homes than in listed homes. The tax system tries to respect and acknowledge that intuition. It would be difficult to narrow the scope of a relief. Therefore, if one was to go down the path of a fund—my hon. Friend could raise that for a future fiscal event—such an approach could be a much closer fit and be accommodated within existing planning frameworks.

A point was made about anomalies. Of course, the tax system is full of anomalies and the question in many ways is which anomalies one seeks to eliminate—my hon. Friend wryly chuckles. Many of those anomalies exist in the nature of reliefs, and it would be an odd Financial Secretary indeed who wished to resolve an anomaly by creating another relief.

As a Government, we are committed to supporting the preservation of historic buildings and homes and the social and cultural contribution they make to our shared history. It is boilerplate but important to say that the Treasury keeps all taxes under review and is always willing to hear the case for what can be improved and refined. Even though we do not, at this time and for the reasons given, plan to change the VAT treatment of renovations or repairs, I thank everyone who has contributed to the debate.