Something distinctly odd is going on at the Treasury. First we have Gordon pledging to follow in Tony’s footsteps when he finally gets to step into his size 10s.
Now his mandarins are showing a degree of open-mindedness in an area where they’d previously been firmly closed: harmonising VAT on new build and refurbishment.
This is a welcome gesture, and one that the industry has long campaigned for. Currently, there is no VAT on new build, but refurbishment attracts a 17.5% rate – which, say campaigners, makes a nonsense of the regeneration agenda and the drive to bring empty homes back to life. The vibe from the Treasury has been that, a) it needs the revenue, b) there are no votes in changing the policy, and c) why should it help Mayfair landowners to do up their Georgian terraces? Officially, it says any change to VAT rates would have to be agreed by the European Union. However, campaigners say if it wanted to, it could overcome the obstacles – particularly while the UK is holding the EU presidency. It could make a case on sustainability grounds, and possibly under the Lisbon Agenda’s drive to improve the EU’s competitiveness.
Of course it’s not quite as simple as that, particularly as the wheels of the government’s housing policy seem to be falling off. If the rates were harmonised at, say, 8.5%, this could be an additional burden on the housebuilding sector. And as we reported last week, these are difficult days for the industry. The growth areas are being hamstrung by problems with planning, nimbyism and lack of infrastructure cash, housing starts are falling (see page 21) and social housing levels could also fall because, if the housebuilders aren’t building, then the affordable housing won’t happen either. And now English Partnerships’ plan to built 15,000 homes in London has been curtailed.
Despite all that, this is the ideal time to consider a change to VAT. With David Miliband running a rule over the communities plan and the Treasury considering the Barker Review’s views on a development tax, it makes perfect sense to work out how VAT might fit into the bigger policy picture. At the very least, we should promote a debate about it.
In 2000, Tony Blair showed vision in putting his imprimatur on the drive to achieve better public buildings. Five years on, we can see that, as with so many of New Labour’s targets, achievement is falling short of aspiration (see pages 22-23). On the positive side, the government stands by its aspirations – although not the ministerial design champions who were supposed to realise them. This problem is well recognised by Tessa Jowell, who is to combine the roles of the departmental champions into a single voice in Cabinet. But she won’t be able to achieve much by herself. On the everyday level, each government project needs its own independent champion at the outset. This should prevent the long-term benefits of design being eclipsed by the more immediate expediencies of time and cost.
Denise Chevin, editor