Editorial: Treasury plays hard to get over VAT issue

Stephen Cook, editor

The case for reform of VAT in relation to charities as expounded by the Charities Tax Reform Group over the years has always been a powerful one. Since the election it has become even more powerful because of the commitment in the Labour manifesto that the voluntary sector will be enabled to compete on equal terms with the public and private sectors over service delivery.

At the moment the VAT system compels the voluntary sector to compete with one hand tied behind its back. Local authorities providing care services, for example, can recover the VAT paid on resources and equipment, but charities providing the same kind of services cannot do so.

It would be interesting to hear the Government's justification for allowing this situation to continue in the light of its own manifesto commitment.

For the past two weeks, Third Sector has been asking for an interview with the relevant Treasury minister so that this and other questions can be explored. The initial response was that we couldn't have an interview, but financial secretary John Healey or economic secretary Ivan Lewis might supply an article. The implication was that they wished to keep a firm grip on the agenda rather than submit to a less predictable session of questions and answers.

When we queried the refusal of an interview, there was some progress: the minister would be willing to give an interview after all, but was extremely busy at the moment and couldn't do it until September, when he would be able to talk not just about the VAT issue but all the other Treasury measures that affect the sector. In the meantime, we could submit some written questions, which, in the press officer's rather eerie phrase, the Treasury would reply to "as an institution".

So, in the absence of anything else, we will do that: watch this space.

No doubt it will be impressed upon us what great things the Treasury has done in recent years, what with Gift Aid and the £580m annual benefit it brings. Gift Aid is a great boon: the Government deserves credit for it and the sector is remiss in not making better use of it. But it does not remedy the injustices imposed on the sector by the VAT system, which retrieves for the Treasury all but an estimated £80m of the Gift Aid largesse.

Meanwhile, the CTRG continues to meet Treasury officials to press the case - more power to its elbow.

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