Opinion: Gesture politics for Band Aid

Lisa Harker, chair of the Daycare Trust, who writes in a personal capacity

The new version of the Band Aid single Do they know it's Christmas? will be released next week and looks set, once more, to raise a stack of cash for Africa.

Gordon Brown's decision to refund the VAT paid on sales of the CD and accompanying DVD has been welcomed, and could mean a saving of around £5m for the Band Aid Trust.

However, the Chancellor's generous gesture should not be interpreted as a sign that moves are afoot to reduce charities' VAT burden, despite the dogged efforts of the Charities' Tax Reform Group to persuade the Government to change existing rules.

When the subject was last given serious consideration by the Government in 1999, it concluded that no changes to the VAT system should be made.

It felt that the obstacles to reducing charities' tax bills could not be overcome and, more significantly, that doing so would be prohibitively expensive. Charities currently pay more than £400m in irrecoverable VAT a year and, understandably, the Chancellor isn't keen to lose that kind of money from the public purse.

The Chancellor's decision to waive the VAT payment in this case was less a reflection of his concern about the tax burden faced by charities than a political necessity.

In 1985, the then Conservative government gave a donation to charities working in sub-Saharan Africa which was equivalent to the VAT collected on sales of the original Band Aid single. Gordon Brown could hardly pocket the VAT proceeds of this year's Band Aid single when his Tory predecessors had not done so, particularly when he has personally championed the Government's work to tackle global poverty.

So the celebrations of the Charities Tax Reform Group, which has been campaigning to reduce the sector's VAT bill for years, will need to be put on ice for the time being.

Rather than raise expectations, the Government ought to come clean about its position on VAT and acknowledge that the Band Aid concession is a special case rather than an indication of a change of direction.

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