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The Lord Bishop of Wakefield: My Lords, I am grateful for this opportunity to give a particularly warm welcome to the Government's statement on VAT and church buildings. Church buildings are part

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of the nation's heritage. They are maintained and repaired by the Churches, in particular by the Church of England, on behalf of the whole community. The statement is welcome because, while the Churches currently receive about £20 million in public grants towards the maintenance and repair of those buildings, many of which are national architectural treasures, they have a current annual expenditure on VAT of more than £40 million, nearly £30 million of which is paid by the Church of England. In other words, the Churches currently have to pay in VAT more than double the amount that they receive in public grant.

That unsatisfactory situation was recognised in a debate in the House in 1995. It forms the substance of the Eckstein report to be published later this month and has prompted strong personal representations to the Government by my colleagues the most reverend Primate the Archbishop of Canterbury and the right reverend Prelate the Bishop of London on behalf of all the Churches.

After years of difficult dialogue on the issue with both Conservative and Labour Governments, it is good to hear today's announcement, as far as it goes. However, there is still some way to go, as the Minister has made clear. The Government still have to refer the matter to the European Union. What will be the timetable for that? We need a timetable, not least to help in planning budgets and appeals for major maintenance and repairs and to ease the burden of fund-raising, particularly on noble clergy spouses--or is it clergy spice in the plural?

Will the Minister also give an assurance that, in referring the matter to Europe, the Government will continue their present level of commitment and press the case with perseverance and vigour? I repeat that the announcement is most welcome and the Churches of all denominations will be grateful to the Government for it. Our welcome and gratitude will be even greater when the proposals are put into effect.

Lord McIntosh of Haringey: My Lords, I am grateful to the right reverend Prelate for his welcome. I hope that he will not be disappointed, but the Statement was slightly elliptical. I said that the measure would cover repairs to churches, but I meant only repairs to listed places of worship. I think that he expected that, but I wanted to set the record straight. As to the timetable for getting the agreement of the European Commission, I can say only that we shall make an immediate application. The Commission has said that it will make no revision to legislation covering reduced rates until after 2002, but it has confirmed that

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it plans to report on the scope of reduced rates later this year. That is why it is important that we put our views on record as soon as possible.

The Lord Bishop of Wakefield: My Lords, in the light of the Minister's clarification, my warm welcome, though still genuine, is ever so slightly less warm than it was.

Lord McIntosh of Haringey: My Lords, would the word "tepid" apply?

Lord Boardman: My Lords, to what extent is the prior consent of the European Community needed for the Government's proposals to be carried out, apart from the question of repairs to churches?

Lord McIntosh of Haringey: My Lords, it is implicit in what I have said that the agreement of the European Commission is required for the change that we propose. However, as I made clear in my answer to the right reverend Prelate the Bishop of Wakefield, the European Commission is already looking at revisions to legislation covering reduced rates. There is no question of the measure being ruled out from the start.

Baroness Castle of Blackburn: It is obvious to all of us that this complicated Statement will require careful study before we can assess exactly what it means. I shall give some examples, on which perhaps I shall get some enlightenment.

I welcome the Government's recognition of the strength of the argument that some of us have been advancing for some years on the disincentive nature of means-testing. It is right to show concern for those who have been grumbling for a long time because they find that, having been prudent, saved, bought a house and got another pension, they are worse off than if they had spent the lot. I am glad that the Government recognise that we were right, but I should like the Minister to make it clear whether the Government have simply raised the ceiling, in which case the principle of disincentive remains. The Government talk about people who have made modest savings and modest investments in second pensions. No doubt we shall get enlightenment. Can we have a clearer explanation of whether this complicated Statement has removed the ceiling of disincentive?

One other thing puzzles me. I should be glad if the Minister could alleviate my curiosity. If it is wrong in principle to give the benefits of an earnings link all the way up the line to everyone who has invested in the state insurance scheme because that would absorb resources that should go to the poor, why is it in principle right to increase the fuel allowance to £200 all the way up the line? Have I misunderstood? Will someone with £20,000 or £30,000 a year get the increased fuel allowance? If not, where will that contribution to income be cut off? I am sorry if I am being dense, but clearly stated principles help to ensure good government.

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Perhaps the Government are finally acknowledging that we were right when we said that operating complicated means tests was much more expensive than just giving people a hand-out as of right. Presumably the Government's line of thought may have been, "Oh well, it would be terribly complicated. We would have to peer into people's coal scuttles and then ask them what their income was". Or the Government's argument may be that this fuel increase--this contribution all the way up the line--is only a little one. Therefore, their illegitimate child is only very small.

I should like to know what the Government's line of thought is. There are many other such queries that will have to be clarified and perhaps unearthed by questioning the Government before one can acclaim even the best parts of this Statement.

Lord McIntosh of Haringey: My Lords, I certainly welcome what my noble friend Lady Castle says about the need for further consideration and further discussion. Within the limits of the parliamentary time available, my noble friend Lady Hollis and I will be happy to participate in that.

I suppose that it would be too much for me to expect a welcome from my noble friend for the substantial changes that are being introduced to alleviate and eliminate pensioner poverty. It would not have been in keeping with the way in which she has approached these issues. However, I believed that we had moved beyond the earnings link argument. I believed that we had reached the stage of showing that an earnings link applied to the basic state pension, which would cost £6 billion and would give £2 billion to those with an income of more than £20,000 a year; in other words, those least in need. I also believed that we had shown that the extension of the earnings link to those in need, as set out in detail in this Statement, is the right way to proceed. I still hope that we may reach agreement on that.

As to whether that proposal is out of keeping with the £200 winter fuel allowance, I can only say to my noble friend what she very well knows: 30,000 pensioners die every year, partly because of lack of fuel. Pensioners tend to be at home more, they tend to live in less well insulated houses and, in humanitarian terms and in terms of social justice, this move seems to us to be the right way to proceed.

Lord Ezra: My Lords, in putting my question to the noble Lord, I declare that I am president of the National Home Improvement Council. In that capacity, I welcome the announcement that VAT cuts are to be made to reduce the cost of residential property conversions and that tax relief is to be given to bring empty flats over shops back into use. However, I wish to ask the noble Lord whether, in the pre-Budget consultation period, serious consideration will be given to extending VAT cuts to home improvement in general, bearing in mind that such improvements carry the full weight of VAT at 17.5 per

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cent, whereas new build carries no VAT and thus puts pressure on greenfield development, which I believe the Government wish to contain.

Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Ezra, has made that case most effectively, not only now but over many years, and government must listen to him. He asked whether that case will be considered during the pre-Budget consultation period and the answer is certainly yes. However, the proposals put forward by the Government are as I have read out, and I am glad to have his modified welcome to them.

Viscount Cranborne: My Lords, declaring an interest as chairman of the St Albans Cathedral Trust, I wonder whether the Minister will accept the welcome that many of us feel for the measures in relation to listed church buildings. Does he also accept that it is very curious indeed for a sovereign parliament to have to ask permission from a foreign body before it can change taxation measures?

Secondly, does the noble Lord accept that, perhaps on reflection, he was a little cavalier in his dismissal of the complications which now beset every business, particularly small businesses? Does he accept that through the nature of this particular chancellorship it is becoming increasing clear that complication is an attraction in itself? Further, does he accept that increasingly not only are we small businessmen becoming tax gatherers for the Government but that disincentive to investment and, indeed, to investment in this country as opposed to other countries is now very powerful as a result of the extraordinary complexity in which the Treasury seems to revel in administering its relationships with small business?

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