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Ms Primarolo: I congratulate my hon. Friend the Member for Nottingham, South (Mr. Simpson) on his creativity in drafting these complex amendments, which aim, by way of a refund, to reduce the VAT rate on energy-saving materials to 8 per cent., putting it in line with that on fuel. He acknowledged, as other hon. Members have, that there are some drafting problems in that the Budget resolution is drawn so tightly that it is the only way in which the House can express its view on a proposal to reduce the VAT on energy-saving materials.
As the hon. Member for Ludlow (Mr. Gill) rightly pointed out, there are easier, less complex ways to achieve the same objective, but that is prevented by way of the Budget resolution. The House is left with this rather complicated method of expressing a view.
The hon. Member for Southend, East (Sir T. Taylor) called for the formation of a popular front--one-nation Members of Parliament acting in unison to defend those who, through their poverty, are cast out by the Government by the prevention of reasonably priced energy-efficient materials.
Instead of giving us bureaucratic and technical excuses, the Government should be agreeing to take the proposals forward in the 12-month period provided by the amendments, and should come back next year with clear proposals on how the will of the House can be enacted. We disagree with the Government. We do not believe that the proposals would be ruled out by the sixth directive, but we are prepared--as the hon. Member for Southend, East rightly challenged us to be--to put it to the test.
We shall support the amendments, not because they are the best way in which to achieve our ends but because they are the only way that is offered to us. The Minister must explain whether he is against the principle that VAT on energy-saving materials should be the same as VAT on fuel, or whether he is telling us that Brussels prevents us from making them the same. If Brussels is preventing us, he should clearly explain why. We believe that he has no reasons to offer and we shall vote against the Government.
Mr. Heathcoat-Amory:
It is clear from this debate and other debates that the House is strongly committed to the cause of energy efficiency. No one who heard the hon. Member for Nottingham, South (Mr. Simpson) can doubt his commitment to that aim, which is shared by me
The hon. Member for Nottingham, South pointed out that he--as well as perhaps other hon. Members--has previously raised the issue of cutting the rate of VAT for energy-efficient material. I must make the point, however, that that request must take its place alongside many others that I receive for favourable and reduced rates of VAT on a range of other goods and services. Many right and hon. Members who are present have written to me--often on behalf of constituents--urging lower rates of VAT for hotel and tourist accommodation, for example. There has been a strong campaign for that recently. Requests have also been made about repairs to buildings, particularly historical buildings and churches. People have also asked for lower rates on sanitary products for women--that is strongly urged on the Government from time to time--and for more favourable VAT treatment for the disabled and for charities in general. All those cases--
Mr. Simpson:
I am sorry to interrupt the Minister's winding-up speech, but does he understand that what I was asking for was no more than what was requested by a former Chancellor of the Exchequer--a level playing field, so that we do not tax energy saving more heavily than energy consuming?
Mr. Heathcoat-Amory:
Yes, but other people urging other cuts use precisely the same argument. For instance, we apply VAT at the full 17.5 per cent. to repairs to listed buildings, whereas alterations to listed buildings are zero-rated. So people writing to me make the same point: why not have a level system, with zero rating applying to both?
I promise the hon. Gentleman that he is not unique in drawing our attention to perceived anomalies in the VAT system. As a Minister, I have inherited a system containing within it anomalies that doubtless we would like to correct in various ways--but to choose between the well-argued and plausible cases put to us would be highly invidious.
The other examples that I gave are all well argued and heartfelt, yet to concede on all of them would seriously erode the VAT tax base, and would mean that taxes had to go up elsewhere. I also urge another reason on the House. Our long-standing policy is to favour a simple VAT system with a single positive rate operating with our zero rates.
The single exception to that, as the hon. Member for Nottingham, South pointed out, is VAT on fuel and power. We originally wished that rate to increase to the standard rate. Indeed, all other countries with VAT systems have a standard rate for fuel and power. But here, Parliament decided that the rate should stay at 8 per cent., so 8 per cent. is where it will remain. In administrative terms, that is not a serious erosion of the principle of simplicity, because fuel and power are easy to define and there are comparatively few suppliers, so it creates no undue complexity either for taxpayers or for Customs and Excise.
However, I contrast that starkly with the case before us. Building materials are in an entirely different category. We are dealing with an enormous range and quantity of
products, some of which are, and some of which are claimed to be, energy-efficient. To draw up a definitive list of energy-saving materials and services that would receive favourable tax treatment would be extremely difficult.
Some products and services are used solely to improve energy efficiency, but there are many others whose energy-efficient qualities are secondary to their main purpose, or even incidental. For example, gas-fired condensing boilers are more expensive than ordinary boilers, but also markedly more fuel-efficient.
I am sure that the purpose of the amendments is to encourage the installation of such boilers by giving them favourable VAT treatment. But it is not clear that the primary purpose of such a boiler, or of any boiler, is energy-efficiency. The primary purpose of a condensing boiler is to produce hot water. It would not fall within the definition drawn up by the supporters of the amendment.
A more general objection that applies to any scheme to reduce VAT for this diverse range of products is that someone would have to decide when a boiler was sufficiently energy-efficient to qualify for the reduced rate of VAT. Who would decide? Who would draw up the list? When would a new switch on a boiler sufficiently improve its energy efficiency to qualify for the tax privilege?
Mr. Nicholas Winterton (Macclesfield):
I am listening to my right hon. Friend's explanation, but will he stop reading from the brief prepared by either Customs and Excise or the Inland Revenue and give a guarantee to Conservative Members that he will look seriously at ways of exempting energy efficiency from the higher rate of VAT? If he fails to do so, he will fail to get the full support of Conservative Members.
Mr. Heathcoat-Amory:
I am not reading from a brief prepared by Customs and Excise. I am referring to my notes made for the purpose of resisting the clause. I confidently expect to see my hon. Friend in the Division Lobby with me, because he has been a proponent of deregulation and the simplification of the tax system.
The proposed scheme and the proposed reduced rate for the complex range of energy-efficient materials would be a recipe for doubts and litigation that would make nonsense of our pledge to simplify the tax system and deregulate burdens on business--particularly small businesses. My hon. Friend has been a doughty champion of small businesses and the need to remove burdens from them. The amendment would add to their burdens, because small businesses would have to make sense of the secondary legislation and the complex borders and dividing lines between what is and what is not energy-efficient material.
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