Clause 3 — Rate of value added tax

Part of Bill Presented — Shared Parenting Orders Bill – in the House of Commons at 9:15 pm on 13th July 2010.

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Photo of David Gauke David Gauke The Exchequer Secretary 9:15 pm, 13th July 2010

We are looking at what we can do to simplify the gift aid system so that charities of all sizes can make use of it. Some smaller charities do well out of gift aid. We want to do all that we can to strengthen charities, but the fundamental fact is that VAT is the right tax in these circumstances to raise additional revenue. There are restrictions within the VAT system as to what we can do to protect charities from that tax, but the Government as a whole remain committed to assisting charities as much as possible.

I should like to take the opportunity to respond to the comments made by Simon Hughes and my hon. Friend the Member for St Ives about the tension between renovation and new build and the incentives for them. I know that the Liberal Democrats have campaigned consistently on that matter for several years. As a Government we will continue to keep it under review. They make their case well.

I am aware that mountain rescue services have drawn the attention of a number of hon. Members to the case for exempting their vehicles from vehicle excise duty or extending their reliefs from VAT. I am sure that all of us in the House have huge respect and admiration for the work of the mountain rescue services and recognise the valuable contribution that they make to the safety of those enjoying the countryside. The case is well understood on both sides of the House, but as the Committee will no doubt be aware, mountain rescue teams, like other search and rescue charities, benefit from VAT reliefs on some but not all goods and services that they purchase. Such charities are also able to purchase free of VAT medicines, medical equipment including first aid kits, splints and stretchers, ambulances and certain vehicles designed to transport disabled people.

The mountain rescue teams also benefit from other VAT zero rates that apply to all charities. All of those zero rates are derogations from the normal EU VAT rules and represent benefits not enjoyed by charities in other member states. The mountain rescue teams estimate that they still pay something like £200,000 in irrecoverable VAT per year. However, it is well understood that there is no scope within the framework of long-standing EU VAT law for relieving more of their purchases from VAT, which is why the previous Government did not do so, despite receiving representations on a number of occasions. It would, therefore, serve no useful purpose to produce a report on the impact of the VAT increase on the service. It is argued that there could be a refund for the VAT costs, which is a public expenditure choice that I am sure the shadow Chief Secretary-formerly the Chief Secretary-was conscious of in his previous post, and we know what happened then.