Treasury 'blunder' leaves ancient churches in danger of falling apart

Diana Kitson is praying the tower of her 12th-century church doesn't explode. It has an alarming crack in the east side and is bulging under the weight of its bells. Experts say a sharp frost could see it blow.

Advancing years and poor workmanship have been blamed for the state of Great St Mary's, in Sawbridgeworth, Hertfordshire, a church where Queen Elizabeth I and Anne Boleyn once worshipped. But so has an astounding piece of government bureaucracy.

A seemingly generous VAT reduction scheme announced by Gordon Brown last year has actually made things worse by eating up a church repair fund run by English Heritage.

Mr Brown asked the European Union for permission to reduce VAT on repair work to listed churches from 17.5 per cent to 5 per cent by 2003. But in order to implement VAT relief at once he announced a new grant allowing churches to reclaim the tax straight away – and asked the Department of Culture, Media and Sport to pay the bill.

The DCMS then told English Heritage, its conservation watchdog, to find the cash. And English Heritage in turn raided its own church repairs budget, removing £6m from a fund that Great St Mary's and other medieval churches had been relying on.

The result is that thousands of ancient parishes now face their biggest funding crisis in centuries, according to the Historic Churches Preservation Trust. Great St Mary's is one of the most important medieval churches in the country, with links to William the Conqueror, Henry IV and Henry V. Its leaking roof, dry rot and collapsing tower need £500,000 of essential work.

Ms Kitson, a lay minister at the church, was expecting a substantial grant from English Heritage. But thanks to the VAT scheme, English Heritage has been forced to say no.

James Blott, the director of the preservation trust, said that there is already a "crisis of repair" in England and Wales, caused by a combination of dwindling congregations, bodged Victorian repairs, and a shortage of skilled craftsmen.

Charles Leggatt, a voluntary fund raiser for St Andrew's in Irnham, Lincolnshire, needs £200,000 to replace the roof on the Grade I listed church, built in 1180. The roof was last replaced in 1858 and, because the wiring dates from 1960, the leaking water is a fire hazard. He had been led to expect a £100,000 cheque from English Heritage by June last year and is still waiting. "It is robbing Peter to pay Paul," he says. "St Andrew's houses one of the very few Easter Sepulchres. The worry is the church could burn down. It is a swindle perpetrated by Gordon Brown and the Treasury. If it's not a con then it's a blunder."

Ms Kitson said her parishioners had been led to expect a £100,000 grant from English Heritage. "We are legally obliged to ensure the repairs are done," she says, "unless we close the building. But as it contains some of the finest monuments in Hertfordshire there would be an outcry if we did."

Oliver Pearcey, the director of conservation for English Heritage, said that £6m had been lost to new grants – but only for this year and last year.

"It is a good scheme and the Treasury has reacted to pressure from conservation groups who have been calling for a VAT reduction," he said. "We couldn't just find that money out of thin air and the only way we could find it was to reduce grant offers. But it is only for two years and only a contribution. We are hoping that the amount of VAT claimed back will far exceed £6m, so it is new money. And for every church that hasn't had a grant for this year, 10 or 15 that couldn't have got any money can claim back their VAT."

A spokeswoman for the DCMS claimed that the scheme would eventually represent £30m of "new money".