Newsmaker extra: Treasury tough guy

Stephen Cook

Ivan Lewis Economic secretary, HM Treasury - Bullish on service delivery, bearish on giving back the VAT.

If charities think they're likely to get a sympathetic hearing on the subject of VAT reform from Treasury minister Ivan Lewis, they would be well advised to go away and think again.

He wastes no time in making it clear that he's sticking to the Government's mantra on the subject and sees little point in raking over the arguments. "There have been two reviews," he says, with a glance at his brief to check the familiar phrase that follows, "and the Government has felt that there isn't really a solution that is practical, affordable, well-targeted and based on principle.

"Therefore, we'd rather demonstrate our commitment to the voluntary sector with targeted public spending measures and tax reliefs. In a way, it doesn't help anyone to try to reopen the debate. To keep suggesting there could be progress on VAT is unhelpful. The debate is unlikely to be reopened, so let's get on with the areas where we can make real progress."

He won't even budge on 'section 33 relief', the VAT refund local authorities get on service delivery. Charities don't get comparable relief and, when competing to deliver services, feel most keenly that they're not on the level playing field promised by the Government.

"There's no evidence that section 33 relief has a distorting effect on competition, and our guidance to funders is that funding should reflect the full cost of service provision by the voluntary sector," says Lewis.

His rather bearish demeanour doesn't change when he's asked about the change in Gift Aid audit procedures by HM Revenue & Customs - officials tightened the regime earlier last year without notice or consultation (Third Sector, 30 November).

"It's not a matter for ministers; it's for HMRC," he says. "As I understand it, discussions are going on about issuing detailed guidance to get rid of any confusion. There was a feeling that the previous system was flawed and that Gift Aid was being allowed for donations that didn't qualify."

Government loyalist Lewis moved to the Treasury from the Department for Education and Skills after the May election. He's well versed in the voluntary sector - before he entered the Commons in 1997 he headed the Manchester Jewish Federation. He's a supporter of Mencap, a trustee of the Holocaust Educational Trust, a member of the Amicus trade union and a Manchester City supporter.

He is less bearish when talking about the measures affecting the voluntary sector in the Chancellor's pre-Budget report, released the day before the interview. Its main news for the voluntary sector was the decision to use unclaimed assets in banks for youth and community services, but he's not able to offer any detail yet.

He talks enthusiastically about 'pathfinders', the report's proposal that a small number of local authorities should be persuaded to volunteer to implement the Compact in full. The idea is that other councils would see how well it works and follow suit, speeding up a policy that has proceeded at a snail's pace so far.

"It's a real attempt to tackle the scepticism about whether Compact Plus has been implemented in many communities," says Lewis. "We've made progress in the relationship between the statutory and voluntary sectors, but it's not gone far enough. Pathfinders will take it further."

So the message from the Treasury is that it is interested in smoothing the path to more service delivery but not inclined to respond to the growing sense of injustice over irrecoverable VAT. Perhaps the sector has to accept that it might need a new minister, a new Chancellor or even a new Government before there will be significant progress on this question.

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