The recommendation that charities providing statutory health services should receive a VAT rebate is contained in A Fair Playing Field for the Benefit of NHS Patients, a report published yesterday by the health regulator Monitor in response to a requirement in the Health and Social Care Act 2012.
The report contains about 30 other recommendations to make health commissioning fairer, some half of which refer to the voluntary sector.
Under existing tax rules, NHS providers can recover VAT on some non-business supplies that voluntary sector organisations cannot. This means it can be more expensive for charities to provide the same service. Monitor estimates this might account for up to 3.5 per cent of a typical charity’s costs.
In his preface to the report, Hunt says that VAT refunds are "a complex issue" that requires "further consideration over the next few years".
"Before taking action in any of these areas it will be critical for the government to assure itself that the recommended changes would both result in a fairer system and improve services offered to patients," he says. "The government is currently satisfied that the way in which public sector NHS providers access the VAT refund scheme is appropriate.
"We will also look again at the case for extending VAT refunds to the non-business activity of charitable providers of NHS services, within the rules of the scheme."
The report also raises concerns about the difficulty of raising capital for charities, compared with the NHS and private providers, and about the impact of pensions
And it says commissioners fail to consider alternative providers and that procurement is too complex.
But it says that commissioners need access to better training, information and support if they are to deliver what is required of them.
The Monitor report has been received positively by several healthcare charities and sector umbrella bodies.
"If the Exchequer agrees to this measure, for Marie Curie it would mean a saving of nearly half a million a year for our hospices alone," said a spokeswoman for Marie Curie Cancer Care.
However, Peter Holbrook, chief executive of Social Enterprise UK, said that although it was "vital that the government does not delay in responding to Monitor’s recommendations", the proposed changes to the VAT regime were not as beneficial as they first appeared.
"They are only likely to affect providers where there’s no competition," he said. "This is perhaps good news for some charities operating in areas of market failure, but most of our members operate in competitive markets."