The pre-Budget discussion must have seized on the prospect with glee.
Making people who live in stately homes and grand townhouses pay VAT on their conservatories and swimming pools would demonstrate that the Cabinet millionaires were not favouring their rich friends despite the reduction in the 50p tax rate.
At first glance it would seem to be righting a glaring anomaly: why should owners of listed buildings be exempt from VAT on such examples of conspicuous consumption when it is levied on humbler folk adding an extra bedroom?
Like that other now infamous attempt to straighten out a VAT anomaly, the pasty tax, the matter of VAT on alterations to listed buildings turned out to be fiendishly complicated; so much so that anyone examining the effect of removing VAT would have quickly concluded it would cause more problems than it solved. Most obviously, in every part of Britain there is such a rich built heritage that people of all social classes live in buildings that are listed as being of architectural or historical interest. According to the Federation of Master Builders, half the people who live in listed buildings are in the four lowest socioeconomic groups and their members are seeing projects cancelled or put on hold because of the additional cost of VAT.
Despite all the headlines about eating humble pie, the Chancellor has clearly failed to learn from the fall-out over the toxic taxes he imposed in the Budget. A fast U-turn over VAT on heated pasties solved the problem because it was an acknowledgement that the policy was going to be unworkable. Removing the cap on rich philanthropists' tax-free donations to charity was a recognition (albeit belated) that it was focused on the wrong target. The problem was not the size of the gifts but their payment into private trusts rather than transparent charities.
In announcing a £30 million fund to compensate churches and other places of worship for the introduction of VAT on improvements and alterations to listed buildings, the Chancellor has failed to recognise the full extent of the anomaly he has created. A great variety of listed buildings, including many historic town halls, 19th-century mills and older town and village houses throughout Scotland are now community centres, libraries and museums, which need to alter or extend the buildings for their new purpose.
It is vital that listed buildings are kept in good repair, yet repair and maintenance costs, which tend to be higher on older buildings, are subject to VAT. As the Scottish Culture Secretary Fiona Hyslop argues in her letter to George Osborne, there is also a need for a reduction in VAT on these essential outgoings. Having acknowledged his misjudgment by exempting churches from the levy on alterations, Mr Osborne should do the same for repairs to all listed buildings, not only to maintain the built heritage but as part of a wider policy to boost much-needed construction jobs.
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