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NORTHERN IRELAND GRAND COMMITTEE

Ordered,



(1) the matter of the Northern Ireland economy, being a matter relating exclusively to Northern Ireland, be referred to the Northern Ireland Grand Committee for its consideration; and
(2) at the sitting on Thursday 26th March--
(i) the Committee shall consider, pursuant to Standing Order No. 114 (Northern Ireland Grand Committee (legislative proposals and other matters relating exclusively to Northern Ireland)), the matter referred to under paragraph (1) above; and
(ii) at the completion of those proceedings a motion for the adjournment of the committee may be made by a Minister of the Crown, pursuant to Standing Order No. 116 (1)(h) (Northern Ireland Grand Committee (sittings)).--[Mr. Betts.]

11 Mar 1998 : Column 724

Empty Homes (Taxation)

Motion made, and Question proposed, That this House do now adjourn.--[Mr. Betts.]

2.56 am

Mr. Jonathan Shaw (Chatham and Aylesford): The purpose of this debate is to make a contribution to the very welcome Government White Paper that my right hon. Friend the Deputy Prime Minister published recently, "Planning the Communities of the Future". When publishing the White Paper, he announced that the Government would increase the target for new homes built on previously developed land to 60 per cent. I and many others applaud that. However, much of the headline debate has focused on green-field and brown-field issues. It is vital that part of the debate includes how we make best use of empty properties and bring them back into use. There are 767,000 empty homes in England, the great bulk of which are in the private sector.

Existing but idle stock could make a significant contribution to the 4.4 million houses that will be required, according to current estimates. I want to discuss how we can unlock and recycle homes that are derelict and in need of refurbishment. To achieve that, we need changes in the application of value added tax to housing. There is an overwhelming case for harmonisation of VAT on new build and refurbishment of empty properties.

The Environmental Audit Committee, of which I am privileged to be a member, took evidence recently--[Interruption.]

Mr. Deputy Speaker (Mr. Michael Lord): Order. I do not know who is responsible for that pager, but Madam Speaker takes a very serious view of this matter.

The Economic Secretary to the Treasury (Mrs. Helen Liddell): I am sorry, Mr. Deputy Speaker.

Mr. Shaw: The Committee considered whether VAT should be harmonised between new build and empty homes. One of the witnesses who gave evidence was the Financial Secretary who, I regret, is not able to be here this evening. In the Committee, she reiterated the Government's commitment to sustainable development. Maximising the use of empty homes is the perfect example of sustainable development. It fulfils the three criteria: social, economic and environmental.

The pre-Budget report contains a commitment to taxing environmental bads and encouraging environmental goods. Most environmental groups are convinced that the use of empty homes would make a significant contribution to housing the nation, save the existing fabric of the buildings and reduce the toxic emissions associated with the manufacture and transportation of materials.

The current VAT system penalises those repairing or converting empty homes, as the full levy is charged, yet it encourages builders to attack green-field sites, as such development is zero-rated. When confronting the nation's massive housing problem, the previous Tory Government argued in Europe that, under article 17, the conversion of barns should be exempt from VAT, because there was a clearly defined social reason. Goodness knows how they managed to get away with that: in the same year,

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1994, local councils received 120,000 families as homeless, and only one of those families was rehoused in a converted barn.

My proposal is not new. There has been VAT exemption for social housing since 1977. It was agreed by the previous Labour Government that local authorities building new properties and refurbishing empty ones should be exempt, but in those days, local authorities were the main social housing provider and since then, the provision of social housing has expanded to housing associations and private enterprise, neither of which can benefit from VAT relief.

Housing associations have done a tremendous job in tackling the regeneration and refurbishment of our towns, cities and villages but, because of the full VAT, the homes, which are in the main provided for people on low incomes, have been more expensive to rent or buy. For low-income families or those wanting to move from welfare to work, high rents can often prove a barrier or a disincentive.

Some good work has been done. Local authorities have developed many empty homes strategies. In partnership with housing associations and private owners, they have devised many excellent initiatives and brought properties back into use. I was responsible for introducing an empty properties strategy in Rochester city council, and last year, I was proud to open the 100th empty home that, with grant aid and partnership, had been brought back into use--a decent home for a young family. Without the burden of VAT, we could have helped a further 15 families.

More can be done. VAT harmonisation would focus the energy and talents of our construction industry. At present, there is nothing to encourage investment in empty property refurbishment and every incentive to continue building on green-field sites.

Among the 767,000 empty homes in England are 230,000 that have been in disrepair for a year or more. The Empty Homes Agency, which has done so much good work, calculates that there are a further 250,000 potential homes in empty residential buildings, all of which, if put into repair, would attract VAT. Those homes represent £18 billion of assets, yet they remain idle.

What is the bottom line? As my right hon. Friend the Chancellor puts the finishing touches to the Budget, perhaps he can consider what the change would cost. Between 1994 and 1997, 90,000 such homes were brought back into use, but at a high cost to tenants, first-time buyers and Department of Social Security budgets.

My proposal would cause an annual loss in VAT collection of around £125 million. Set against that, there would be an increased collection of VAT at 5 per cent. on new build. If our targets for new housing of about 176,000 homes a year, and for renovated properties of about 70,000 a year, were met, at least £200 million would go to the Treasury. There would be no loss to the Treasury.

House builders might oppose a modest levy of 5 per cent., and their representative organisations have no doubt lobbied Treasury Ministers, but I ask my hon. Friend the Economic Secretary to consider the observations of the Royal Institution of Chartered Surveyors. It reported that such a levy would not be a barrier to new housing provision.

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Let us consider the value of arable land, at £3,000 an acre. That can increase to £400,000 if residential use is granted. It may just be possible to conceive that, within that profit margin, there is room to accommodate 5 per cent. The proposal meets the EC VAT law test. I am not arguing for zero-rating. I think that we have met the revenue test, and we have certainly met the environmental test. What, then, of collection? What of the administration and the red tape? How will that work?

Harmonisation is not problematic. It would rely on the issuing of exemption certificates in respect of homes that have been empty for a long time--for a year or more. All English councils already record such details as part of their council tax activity; this would ensure that the exemption would be properly applied.

Exemption certificates would not lead to the creation of tax loopholes in regard to refurbishment. They would not mean that everyone purchasing do-it-yourself materials--which contribute some £4 billion to expenditure--would be exempt; exemption certificates would not embrace such materials.

I ask the Government to explore my proposal. I know that the Local Government Association and Government regional offices would be anxious to help to devise a system that would create a simple exemption mechanism.

In directing the energies and skills of our builders--both large and small--to securing the best value for those investing in a sustainable resource, we must bear in mind that harmonisation of VAT on new build and refurbishment of empty properties creates a win-win situation. I think all hon. Members will find it odd, as I do, that a regime that seeks to allow member states to adjust VAT for clearly defined social reasons has not been harnessed to reflect our need to house the nation. The current arrangements offer little by way of sustainability. It is currently more economic to demolish homes and build new homes on the same site than to preserve and refurbish the existing ones. We are contriving to create a constructive vandalism that leads to the needless production of raw materials and emissions.

We are getting better at recycling metals, paper and other precious materials that we used to waste. Surely we can see the sense of recycling resources of more substance--wasted homes.

The proposals to harmonise VAT for the repair of empty properties have not come only from Labour Members, but from Opposition Members--and, moreover, from the Chartered Institute of Housing, the Civic Trust, the Campaign for the Preservation of Rural England and the Empty Homes Agency. As I said earlier, the Environmental Audit Select Committee, of which I am a member, has made similar recommendations.

I appreciate that, given the hour, the fact that I am a new Member and the fact that this is my first Adjournment debate, it is unlikely that my hon. Friend the Minister will disclose the Chancellor's decisions tonight, but I ask the Government to consider the issue seriously. I have tried to set out how harmonisation of VAT on new build and empty homes meets our sustainable development objectives. I believe that my proposal passes the test in relation to EC law, and there is certainly no loss to the Revenue; indeed, I think that there will be a net gain. It is workable, through the allocation of exemption certificates.

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I ask my hon. Friend the Minister to evaluate my proposal--if not now, at a later stage. I think that there is considerable consensus in favour of it, and I ask my hon. Friend not to put it in the tray marked "Too Difficult".


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