Lord Cope on VAT for building repairs

Lord Cope of Berkeley raised a thorny issue in the House of Lords yesterday:

"Lord Cope of Berkeley asked Her Majesty’s Government:

Whether they support the European Commission’s proposal to allow member states to reduce the rate of value added tax on repairs to and the renovation of housing and listed buildings.

Lord Davies of Oldham: My Lords, the Government generally support member states having the flexibility that would be allowed by the legislative proposal regarding reduced VAT rates adopted by the European Commission in July, including the elements to which the noble Lord refers.

Lord Cope of Berkeley: My Lords, I am grateful to the noble Lord for that reply, particularly as the noble Lord, Lord Mandelson, dodged the question the other day. Does he agree that the only reason why the anomaly of a zero rate on new buildings and 17.5 per cent on repairs has gone on for so long is the European directive governing VAT? Will the Government press very hard the few nations that object to a change, particularly Germany, to try to ensure that the Chancellor of the Exchequer has the opportunity to make such a change now that targeted tax cuts are back on the agenda?

Lord Davies of Oldham: My Lords, I am sorry that the noble Lord made that slighting remark about my noble friend Lord Mandelson, who was merely reflecting that the issue is not yet decided in Europe. Before making a judgment, Britain must await the normal budgetary process, which is the responsibility of the Treasury and not of the Department for Business, Enterprise and Regulatory Reform. On the noble Lord’s more general point, I have indicated that the Government are in favour of the changes proposed by the Commission. He is right that a number of countries are still to be persuaded, but we have considerable hopes of making progress on that and of the directive being passed shortly."

This debate has been raging for many years. It does seem to retard the cause of keeping our fine and old buildings in good repair to levy VAT. Does anyone have any good arguments in favour of the status quo?