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By Ian Lucas MP - 18th October 2010
Ian Lucas MP writes for ePolitix.com ahead of his adjournment debate on VAT and charities.
Charities are one of the cornerstones of any constituency.
Any MP knows this and one MP who certainly does is David Cameron. They are certainly, as Sellar and Yeatman would put it, a "good thing".
This is why the concept of a 'Big Society' is a smart political move. Charities will play a bigger role in our prime minister's 'Big Society'.Which MP could possibly do anything to make matters more difficult for charities?
The local village hall group, the parent's organisation for children with disabilities, the hospice providing palliative care to those in need – all these are areas where people step in, take responsibility for their community and do their bit. They are very familiar to all MPs.
Within my own constituency, there has been a massive expansion in the charitable sector since I was elected in 2001. Charities provide more services, receive more public money and employ more people.
Through the prime minister's 'Big Society', he says, the work charities new and old are expected to undertake will grow further, as the government passes fresh responsibilities on to them.
Why then has his government already announced a tax increase for them which will make their job more difficult?
The VAT increase to 20 per cent will hit charities especially hard and channels charities' money direct to government.
Charities, as the Charities Tax Group among others have shown, are in an almost unique situation with regards to VAT. With commercial groups and organisations, consumers ultimately pay any rise in VAT as the increase in prices suppliers make to cover the tax is eventually passed on to the end consumer.
This is not the case for councils or charities, whose services, when provided free or at reduced cost, clearly do not pass on VAT costs. Councils receive refunds on the VAT they charge- but charities do not. Any increase in VAT is worse for them than most businesses and local authorities.
In July, when the government voted to increase VAT to 20 per cent, I worked with other Labour MPs to put down amendments to ensure charities were exempted from the rise.
MPs on the government benches voted overwhelmingly to impose the rise – and against any exemption for charitable organisations.
If the 'Big Society' is to be any other than a soundbite, the prime minister must think again and act to remove the additional tax he has decided to levy upon charities. Their crucial ability to provide care to our constituents will, otherwise be hit hard.
Article Comments
Ian Lucas MP is right: the VAT increases will hit the voluntary sector harder than the commercial sector, and come at a time when most charities are already deeply concerned about future funding. Indeed, when we investigated the likely impact of the VAT increase on our own organisation, we estimated it would end up costing us hundreds of thousands of pounds over the next few critical years - at a time when we, alongside many others in the sector, will be absorbing the impact of future public spending cuts.
The Charities Tax Group has long campaigned for the rules on voluntary paying VAT to be looked at again, but until this larger problem has been solved, we would certainly support Ian Lucas' campaign for charities to be exempt from this new increase. The Government has made it clear that it wants voluntary organisations to play a major role in the Big Society, and we are eager to play our part. But this is made more difficult when financial pressures are so enormous; reconsidering the VAT increase would ease them considerably.
Su Sayer, chief executive, United Response
20th Oct 2010 at 7:24 am
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