Let me deal briefly with each of those themes in turn. Many questions were asked on the fundamental point of the scale of our ambition by, among others, the hon. Member for Hackney South and Shoreditch, my hon. Friend the Member for Cheltenham (Martin Horwood) and the hon. Member for Stoke-on-Trent North (Joan Walley), with whom I have served for many years on the Environmental Audit Committee. The issue was also

10 May 2011 : Column 1131

addressed in particularly informative contributions from the right hon. Member for Oldham West and Royton (Mr Meacher) and the hon. Member for Brent North (Barry Gardiner). I am pleased to respond to them by saying that I can announce two important developments. First, my Department will publish a formal aim—that is, on the face of the Bill—to take reasonable steps to improve the energy efficiency of the English residential sector by 2020 so that emissions from that sector follow a trajectory that is consistent with the UK carbon budgets. Secondly, I will table an amendment that commits to an annual report to Parliament on the specific contribution of the green deal and the ECO, within the context of contributing to the carbon budgets set out by the Climate Change Act that have so concerned Members from all parties in the course of the debate.

Many Members raised the issue of the ECO and fuel poverty. Fuel poverty is key to the essence of the Bill and we will certainly be judged on its success. Those Members included the hon. Member for Hackney South and Shoreditch and my hon. Friend the Member for Bracknell (Dr Lee), who is a member of the Select Committee on Energy and Climate Change as well as of the Conservative friends of Bangladesh and so has a particular interest in international climate change issues. The hon. Member for Southampton, Test (Dr Whitehead), with his usual expertise, focused on the ECO and the role it plays in the potential levies cap. The hon. Member for Brighton, Pavilion had some very vivid cases of fuel poverty from her constituency that will be reflected across the land, as did the hon. Member for Hackney South and Shoreditch.

Let me be clear that the ECO is designed to work hand in glove with the green deal to help the most vulnerable households and hard-to-treat properties. The ECO will deliver heating systems and insulation in the most effective way to help low-income vulnerable households heat their homes affordably and it will be tightly targeted. The ECO and the warm home discount provide a range of support mechanisms for low-income vulnerable households. I have heard the calls for more information and so I commit today to bring forward details on the ECO before we go into Committee.

On the subject of robust consumer protection, we heard the shadow Secretary of State’s questions about who will be the regulator and whether we could have more detail. The right hon. Member for Oldham West and Royton wanted to know more about how the green deal would work for vulnerable energy users. My hon. Friend the Member for Northampton South (Mr Binley), in his very statesmanlike speech, also highlighted the need for more protection for the most vulnerable in society.

There will be strong consumer protection. It will be necessary to propose that level of detail in statutory instruments, through which we will all have the opportunity to scrutinise those important points in more detail. There will be a green deal quality mark for installers and warranties against installation failure and poor workmanship. The golden rule is that the charge attached to the Bill should not exceed the expected savings at the time of the assessment and that will be crystal clear. The Consumer Credit Act 1974 will offer protection for green deal customers. I really appreciate the way the

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industry has got involved on this important issue. Voices such as Kingfisher and the Builders Merchants Federation are essential in helping us to design the green deal so that big companies and local small and medium-sized enterprises can get involved while at the same time offering strong consumer protection.

The question of involving communities and tackling the private rented sector was raised by my hon. Friend the Member for Warwick and Leamington (Chris White), the hon. Members for Stoke-on-Trent North, for Hartlepool (Mr Wright) and for Brighton, Pavilion, the right hon. Member for Oldham West and Royton and the hon. Member for Southampton, Test. We will take robust action on the face of the Bill in respect of the private rented sector. Before we came to the House today, we listened to various voices from a number of stakeholders on the subject of the Home Energy Conservation Act 1995 and we have decided to retain parts of HECA, to breathe new life into it and to ensure that it becomes part of our way of ensuring uniform delivery of the green deal across Britain. We will table those amendments in Committee.

The question of green growth and investment was mentioned by my hon. Friend the Member for Winchester (Mr Brine), who made a very powerful speech arguing that the green deal is a great carrot, rather than a stick, that will throw up a huge number of business opportunities. He also rightly tested us on the need for more training opportunities, which we are taking very seriously. The hon. Member for Angus (Mr Weir) also asked whether we would be letting in small businesses. My hon. Friend the Member for Winchester pointed out that this could mean 100,000 jobs or more. It is important that we do not just capture the carbon savings, but that we really capture the industrial opportunities that this big market push will afford us.

Barry Gardiner: Will the Minister give way?

Gregory Barker: I will not, I am afraid, because there is very little time.

On energy security and moving beyond oil dependence, the Chairman of the Select Committee made a very important contribution at the beginning of the debate pointing out the need for stability in electricity markets and for investors and about the role for nuclear and the important role of renewables. That will be delivered through the next stage of our redesign and renewal of the sector in energy market reform. Those points were all reiterated by the hon. Members for Cheltenham and for Angus and my hon. Friends the Members for Northampton South and for York Outer (Julian Sturdy), who listed a number of energy security measures, as well as by my hon. Friend the Member for Waveney (Peter Aldous), who spoke forcefully about offshore renewables, and my hon. Friend the Member for South Suffolk (Mr Yeo). We are very keen to see a resurgence in renewables and support for new technologies, including carbon capture and storage. I promise to write to hon. Members about any important points they have raised that I do not cover in what will be a rather hasty wind-up now.

In summary, no one should underestimate the sheer scale of the ambition that underpins the Bill, which has the potential to upgrade the homes of every family in Britain by allowing every household to access finance

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for up to £10,000-worth of energy improvements irrespective of age or status. Further subsidy is available for hard-to-treat homes and, of course, the fuel-poor. The Bill will unleash the most far-reaching programme of British home improvements since the second world war. It will drive down family energy costs and will insulate consumers against further sharp rises in future. The Bill will unleash billions of pounds in new investment in our green economy and will create thousands of new green jobs.

The Bill will directly help those in poor rented accommodation whose landlords refuse to make improvements, and it declares war on the root causes of fuel poverty. The Bill will deliver huge steps towards meeting our carbon reduction targets and it will strengthen British energy security. The Bill will create a brand new market and will drive choice and competition. It will unleash British research and development as well as technical and industrial innovation that should propel the UK to the forefront of the giant global markets for energy efficiency, products and services—exports up, emissions down. The Bill will deliver greater choice to the consumer and fairer access to investment for the fuel-poor and it will be a massive boost to British businesses. I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.


Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Energy Bill [Lords]:


1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 21 June 2011.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on consideration and Third Reading.

Other proceedings

7. Any other proceedings on the Bill (including any proceedings on consideration of any Message from the Lords) may be programmed.—(Bill Wiggin.)

Question agreed to.


Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Energy Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of—

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(1) any expenditure incurred by the Secretary of State or the Gas and Electricity Markets Authority by virtue of the Act, and

(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Bill Wiggin.)

Question agreed to.


Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Energy Bill [Lords], it is expedient to authorise—

(1) the imposition by virtue of the Act of charges under licences issued under the Electricity Act 1989 or the Gas Act 1986, and

(2) the payment of sums into the Consolidated Fund.—(Bill Wiggin.)

Question agreed to.

Business without Debate

delegated legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

International Development

That the draft African Development Fund (Multilateral Debt Relief Initiative) (Amendment) Order 2011, which was laid before this House on 17 March, be approved.—(Bill Wiggin.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

That the draft African Development Bank (Twelfth Replenishment of the African Development Fund) Order 2011, which was laid before this House on 17 March, be approved. —(Bill Wiggin.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

That the draft African Development Bank (Further Payments to Capital Stock) Order 2011, which was laid before this House on 17 March, be approved.—(Bill Wiggin.)

Question agreed to.

European Union Documents

Motion made, and Question put forthwith (Standing Order No. 119(11)),

Working Time Directive

That this House takes note of European Union Document No. 5064/11 and Addendum, Commission report on Member States’ Implementation of the Working Time Directive and No. 5068/11 and Addendum, Commission Communication on Reviewing the Working Time Directive; and supports the Government’s approach to emphasise to the Commission and the UK’s European partners the Government’s determination to retain the individual’s right to opt out of the 48-hour working week, whilst seeking additional flexibility on the two problematic areas of on-call time and compensatory rest.—(Bill Wiggin.)

Question agreed to.

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St George's Day (Public Holiday)

9.59 pm

Jessica Lee (Erewash) (Con): I present and support the petition prepared by George’s Tradition, with 3,674 signatures supporting the petition or wording in similar terms.

The petition states:

The Petition of residents of the Erewash constituency and others,

Declares that England is one of very few countries in the world that does not have a public holiday to celebrate its national day; notes that St Patrick’s Day is a bank holiday in Northern Ireland, and that St Andrew’s Day is a voluntary public holiday in Scotland; and further declares that everyone who is part of England should be able to celebrate its traditions, its heritage and the English way of life with a public holiday on St George’s Day.

The Petitioners therefore request that the House of Commons urges the Government to bring forward proposals to make St George’s Day a public holiday in England.

And the Petitioners remain, etc.


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Hospices (VAT)

Motion made, and Question proposed, That this House do now adjourn.—(Bill Wiggin.)

10.1 pm

Bob Russell (Colchester) (LD): The hospice movement is a great British success story. If we wanted to think of something that epitomises the big society, the 209 independent hospices the length and breadth of the land, with an army of more than 100,000 volunteers, tick all the boxes.

The hospice in my Colchester constituency—St Helena hospice, named after the town’s patron saint—which serves the whole of north Essex, has around 800 volunteers who help in a wide variety of ways, raising money and organising events, working at several charity shops and helping at the hospice itself, which is centred on an ancient farmhouse, Myland Hall. Around 180 professionals are employed by the hospice as medical and key support staff, but without the volunteers the hospice could not exist. It is very much a partnership, which for the past 25 years has been a beacon of community involvement. But all this has been achieved with one arm—financially speaking—tied behind their backs.

I refer to the unfairness of the value added tax which penalises the charitable hospices while exempting exactly the same level of operation undertaken at the 36 national health service hospices and hospitals, which are VAT-exempt. This unfairness—the taxman taking money raised for charitable good causes—does not affect hospices alone, of course, but tonight’s debate is specifically about hospices. I look to the coalition Government to take urgent action to provide the necessary means to ensure that the VAT currently paid is refunded so that the money can be spent for the purposes for which it is raised or donated—the treatment of patients.

I am grateful to Help the Hospices, the national umbrella group, for its assistance with background briefing for my speech. I also thank the Charity Tax Group for the information that it provided. The Charity Tax Group estimates that before VAT was raised to 20%, the total irrecoverable VAT across all charities was more than £1 billion. The new higher level of VAT has cost the charitable sector an estimated extra £143 million. For the record, I voted against raising VAT to 20%.

This is not the first time that I have raised with the Government of the day the unintended consequences of VAT charged to charities, and thanks to my intervention several years ago the then Chancellor of the Exchequer, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), moved quickly to came up with a solution whereby the Royal British Legion receives a matching grant for the VAT it is required to pay on the production of its Remembrance day poppies. I invite the coalition Government to use this as a precedent to give matching grants to hospices for the VAT that they pay, as an interim measure in advance of seeking to amend the legislation to exempt them from VAT as if they were part of the NHS for this purpose. After all, the work they do is no different from what the NHS does, other than the fact that it involves the voluntary and charitable sector.

If the “poppy” solution is not acceptable, I invite the Government to see whether the relief enjoyed by local authorities and other public bodies under section 33 of

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the Value Added Tax Act 1994 and certain health care provisions under section 41 of the same Act could be used to assist hospices. Failing that, why not adapt the provisions in the Finance Bill to ensure that academy schools can recover VAT on non-business supplies in the same way as local authorities can? If it is okay for academies—educational establishments that are not universally welcomed—applying the same solution to hospices would probably generate near unanimous approval. In this respect, I congratulate the hon. Member for Scunthorpe (Nic Dakin) on his ten-minute rule Bill earlier this year, which proposed a simple legislative solution.

When the original European Union VAT system was developed, the special position of charities was not considered. Alas, because hospices provide services that are either exempt from VAT or outside the scope of the VAT system, they cannot recover the VAT they pay on their expenditure on supporting their charitable aims. This is something that I am sure Members across the House would want to see changed.

Increasing demand for hospice care, alongside the Government’s public service reform and big society agendas, is likely to result in more care services being transferred to hospices. Indeed, I am grateful to the Sue Ryder charity, which already has seven hospices. It first alerted me to this serious problem, telling me:

“A recent transfer of an NHS hospice to Sue Ryder under the Transforming Community Services initiative has sparked interest in the viability of charities taking on other NHS hospices and services. We believe there should be a level playing field in VAT between charities and the NHS so that all possible funds can go towards the delivery of care.”

Martin Horwood (Cheltenham) (LD): One of the Sue Ryder care hospices is in my constituency, and I warmly support what my hon. Friend is saying. Does he agree that as we see the outsourcing of more NHS services to providers such as Sue Ryder, that could deliver a windfall to the Treasury rather than directing funds where they are most needed, which is to health and palliative care?

Bob Russell: I am grateful to my hon. Friend for raising that point, which I was just about to mention. Let me be financially blunt about this: if the hospices did not exist, the excellent work that they do would fall to the NHS and cost the public two to three times more because of the considerably lower cost of hospices, brought about by the special working combination of professionals and volunteers, with fundraising and so on, which is the basis on which hospices were founded and have existed over the years.

I understand that, on average, charitable hospices receive about one third of their funds for the services they provide from statutory sources, which leaves two thirds to be raised to cover all the other costs. This already challenging target is not helped when it is realised that the taxman is helping himself to 20%. I am advised that most local hospices do not have three-year agreements with NHS commissioners, relying instead on year-on-year negotiations that are, by their very nature, subject to budgetary pressures within the NHS. Alarmingly, a survey of member hospices conducted by Help the Hospices last March found that 64% of primary care trusts had frozen NHS funding for hospices for the period 2010-14.

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I will set out some statistics about the excellent job that the nation’s hospices do. Collectively, they provide more than 26 million hours of specialist care and support every year, 90% of which is provided through day care services and care in people’s homes, and 77% of adult palliative care in-patient units are run by hospices, with the voluntary sector providing 2,139 adult in-patient beds, compared with just 490 provided by the NHS. All children’s in-patient units in the UK are run by the voluntary sector. Independent voluntary hospice expenditure increased by a fifth between 2007 and 2009, which indicates the continuing growth and importance of hospices in the life of the nation. More than £1 million is raised every day for the nation’s hospices, from fundraising, legacies and donations.

The value of the voluntary work carried out by the 100,000-plus volunteers is estimated to be worth in excess of £112 million every year. Help for Hospices has told me:

“Hospices are unique among providers of healthcare because they contribute so significantly to the funding and provision of hospice and palliative care. In 2009, hospices spent £687 million. For every £1 the State invests in local charitable hospices, those hospices deliver £3 worth of care.”

It thus makes sense that the burden of VAT on hospices should be lifted so that they can do even more good for the benefit of the communities that they serve.

Help for Hospices also told me:

“Hospice care receives overwhelming public support in the UK. A recent survey showed more than 80 per cent of people believe everyone with a terminal illness should have the right to receive hospice care.”

My only observation is that I am amazed the figure is as low as 80%.

I would like to say a little more about the St Helena hospice in Colchester, which I visited on Saturday ahead of this evening’s debate and in order to inspect the newly extended Joan Tomkins day care centre, which was officially opened to coincide with the annual fete in the grounds of the hospice.

The original day care centre, named in memory of the late wife of local business man Mr Robin Tomkins, whose generosity made the building possible, was opened in April 1988 by the Princess of Wales. I remember that well, because my mother was in the nearby hospice and died a few days later. The princess spoke to my father at my mother’s deathbed, and he spoke afterwards of the warmth of compassion that she had shown.

St Helena hospice, the main building, was officially opened in April 1986 by Her Majesty Queen Elizabeth, the Queen Mother, so we have just celebrated its 25th anniversary. As an aside, I should have said that my mother was one of the volunteers in the early months after the hospice opened.

Like other hospices throughout the country, St Helena is rooted in the local community that it serves. It provides free medical and nursing care and therapy to adult patients with any diagnosis. Alongside the two day centres there is also one at Clacton, and there is in-patient accommodation in the purpose-built extension to the historic Myland Hall.

Services are also provided for patients in their own home. Indeed, in the past five years there has been a 58% increase in the services in patients’ homes. St Helena hospice also provides pre and post-bereavement support

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to family members, including children, and attached to the hospice is an education centre, providing education for health and social care professionals.

It will cost St Helena hospice more than £4.6 million in the current financial year to provide its valuable services, and it would be great if it did not have to pay value added tax, but could instead spend that money on the purposes for which people wish it to be used—supporting the work of their local hospice.

Help for Hospices told me:

“As the population ages and people approach the end of life with ever-more complex co-morbidities, a spectrum of highly flexible and adaptive hospice and palliative care services need to be available.”

Jim Shannon (Strangford) (DUP): Not only the services and the care provided but also hospice-build should be exempt from VAT. Does the hon. Gentleman agree that the Minister should address that in his reply?

Bob Russell: The hon. Gentleman makes an exceedingly good point. We have the nonsense, right across the construction industry, whereby new-build is VAT-exempt, but when a building is added to or converted, as in the instance to which I believe the hon. Gentleman has just referred, VAT is levied. When a hospice wants to extend its building, as in the extension and modernisation of the Joan Tomkins day care centre that I mentioned, VAT is levied, as I understand it. That is wrong.

Help for Hospices also told me:

“The Government has committed to a ‘level playing field’ for all organisations delivering public services. However, charitable hospices continue to face extra costs that statutory and private providers do not.

Tax burdens should be removed from hospices where they can be. This is particularly necessary as hospices are providing public services and investing considerable charitable funds into the ‘health economy’ and, unlike other private and public providers of healthcare, are subject to significant funding and contracting challenges.”

I believe that the public would overwhelmingly take the view that the coalition Government should urgently introduce measures to deal with the unfairness of levying VAT on our hospices. I have put forward suggestions as to how that can be achieved, and I now invite the Minister to pursue these matters.

10.14 pm

The Exchequer Secretary to the Treasury (Mr David Gauke): I congratulate the hon. Member for Colchester (Bob Russell) on securing this debate and on speaking with such evident passion and knowledge about the hospices in his constituency and the hospice movement more widely. I think I speak for all Members in expressing a sense of admiration for what the hospice movement does. I certainly know of the fantastic work that a number of hospices perform in my constituency.

I am pleased to have a further opportunity to explain and discuss the Government’s policy on an issue that has generated considerable interest and is evidently of concern to a large number of hon. Members. It might be helpful if I could start by reminding Members of the current position with regard to VAT and the constraints that we are acting under. Before I do so, I would like to confirm how much the Government appreciate the energy

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and input of charities across a wide spectrum of national life and interests. We can all agree on the important role that they play in our society and agree that we are fortunate that they are prepared to come forward with their immense contribution.

As we all know, VAT is a broad-based tax levied on final consumption. It is charged by registered businesses on their supplies and can be recovered by a business when the purchase is destined for use in the making of supplies that carry VAT. In this respect, charities are no different from others when they are in business, as they can recover VAT. A business, however, bears the VAT on purchases when it is making supplies that are exempt from VAT. Since the supplies it makes do not carry VAT, it is unable to claim back the VAT. Exemption is applicable to a limited range of supplies such as the rent of land and buildings, education and health care. The application of an exemption has to be in line with international agreements—in this case, the principal VAT directive. Since health care is included in the list of exemptions, we are obliged to apply an exemption.

The hon. Gentleman’s central concern is how the impact of VAT on hospices can be mitigated. Ideas that have been mooted include the application of a refund system or arrangements similar to those applying to the NHS. With regard to a refund system, it would, in principle, be possible to introduce such a system in respect of the non-business activities of charities. However, such refunds, as a matter of Government expenditure rather than taxation, would place a very significant cost burden on the Exchequer, especially given the current fiscal position. Furthermore, many charities are engaged in activities where they could be in direct competition with private sector organisations: those activities include the provision of care and welfare services. A refund scheme for VAT incurred in relation to these services would represent a distortion of competition. Any scheme that could be devised would be complex and administratively burdensome for charities to operate.

Bob Russell: Will the Minister explain where the competition is in the treatment of cancer patients? That is something new to me; I did not realise that it was in the competitive world.

Mr Gauke: I wanted to apply this initially to the broad issue of costs incurred by charities as a whole. Clearly, there can be an issue in the provision of care and welfare services more generally, and I was looking at it in that context rather than specifically with regard to hospices.

It is true that the NHS can recover the portion of its VAT costs that relate directly to out-sourced services used in the provision of free healthcare—for example, cleaning, laundry, catering and estate management. That amounts to about 20% of the total VAT incurred across the NHS. This ability to reclaim some VAT costs is taken into account as part of the overall funding arrangements for the NHS. Refunds do not extend to VAT paid on goods and services purchased to support business activities that are exempt from VAT, such as private health care and property rental.

In addition to the obligation placed on the Government to ensure that the VAT system is fiscally neutral and does not distort competition, it is not within our gift to change unilaterally a VAT system unanimously agreed

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in Europe and applying in the single market. We need to apply the mandatory exemption in relation to the business supplies of health care providers, with the associated block on recovery. Similarly, under European agreements the Government cannot extend existing VAT zero rates or introduce new ones. Reduced rates can be applied only to a specific list of goods and services, and there is no such reduced rate that applies to all supplies made by all charities.

Nic Dakin (Scunthorpe) (Lab) rose

Mr Gauke: I give way to the hon. Gentleman, who takes a great interest in this matter.

Nic Dakin: The Minister is giving a detailed explanation, which is very helpful. May I refer back to situations in which a hospice, for example, takes over services that were previously run by the NHS, for which the NHS could recover VAT on non-business services? Surely such an imaginative Minister can find a way of transferring that across to the hospice movement so that it is cost-neutral for the Exchequer, but beneficial to the community.

Mr Gauke: If the hon. Gentleman will forgive me, I will come back to that point. It is kind of him to say that I am going through this in a detailed way. If I may, I will proceed and then come back to what we can do. It is worth making the point that the last time we tried to change the list of matters that can be zero rated for VAT, it took six years and some negotiation.

It is worth highlighting the help that Government provide for charities. We are limited in the support that we can give through changes to the VAT system, but it is important to understand that the Government can and do support charities more widely through the existing VAT system and in other ways. We are committed to retaining the existing VAT zero rates that apply specifically to charities, which provide a benefit of about £200 million a year. Those include VAT zero ratings for qualifying charities on sales of donated goods, for medical and scientific equipment, and for goods for use by disabled people. Charities are not charged VAT on the costs of advertising and public media. They also qualify for zero rating on the construction of certain buildings to be used for charitable purposes. All those zero rates are derogations from the normal EU VAT rules and are not enjoyed by charities in other member states. Charities also benefit from the more widely available VAT zero rates that are applicable to purchases.

The UK has one of the most generous tax systems in the world for charities. Our existing reliefs for charities are worth more than £3 billion a year. Gift aid is the largest single relief, and it is now worth nearly £1 billion to charities each year. Our position, which is in line with that taken by successive Governments, is that the most appropriate way of supporting charities is to encourage charitable giving, rather than to create a complex and burdensome system of additional reliefs or refunds.

Martin Horwood: As a former director of fundraising for a national charity, I tell the Minister that encouraging giving is easy to say, but more difficult to achieve, whereas a VAT refund would make a substantial and immediate difference. The problem of the burden on the charity would be easily overcome in exchange for the

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benefit. The important point, which has been made, is that as we commission more health care services, it will not be cost-neutral for the Treasury, but will give a windfall benefit to the Treasury. Surely something can be done so that at least new services that are provided gain a refund for VAT, and do not just deliver a benefit to the Treasury for no benefit to the community.

Mr Gauke: Again, hon. Members are raising fair points. To jump to the conclusion, we are looking closely at this area.

The help that we provide to charitable giving is important. Charities are central to our big society agenda. The 2011 Budget announced the most radical and generous reforms to charitable giving for 20 years, including reducing the inheritance tax rate when 10% or more of the net estate is left to charity. From 2013, a new scheme will allow charities to claim a gift aid-style top-up on small donations that they receive without gift aid declarations for up to £5,000 for each charity every year. Overall, 100,000 charities can benefit from the 2011 Budget changes to the tune of about £600 million.

It is also worth mentioning the transition fund that was announced at the spending review. It makes £100 million available to charities, voluntary organisations and social enterprises that are delivering front-line services and are affected by reductions in public spending. The fund provides grants of between £12,500 and £500,000 to help organisations make the changes necessary to thrive in the long term. Funding was made available in 2010-11 and 2011-12, and the fund is focused on helping organisations transit and adapt to the new funding environment rather than merely keep going. The first 18 awards were made on 15 February, with further awards in March, April and May.

The Government continue to examine ways of ensuring that VAT does not act as a barrier to the reform of public services, which was the point that the hon. Member for Cheltenham (Martin Horwood) raised. We are examining such options where they are open to us and affordable within agreed funding arrangements. For example, the Government announced in the Budget that we would continue to consult charities and organisations in other sectors to explore options for implementing the EU VAT exemption for cost sharing. I can tell the House that one of the options under consideration is to issue a consultation paper on the subject within the next two months, and we are exploring that possibility closely.

More widely, there are often ways of mitigating the impact of VAT within the existing system. For example, where local authorities and other public bodies enter into contractual rather than funding arrangements with charitable providers, it can greatly lessen any irrecoverable VAT incurred by those providers in many cases. It has to be acknowledged, however, that such an approach does not offer much scope for services that fall within the health exemption.

As I said earlier, I recognise that there is genuine concern about VAT among people involved in hospices. That was why, in March, I met the hon. Members for Scunthorpe (Nic Dakin) and for Leeds North West (Greg Mulholland) and people working in the hospice sector, including for Sue Ryder. Following that meeting I asked officials to continue the dialogue, and they have met subsequently with the intention of exploring any

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viable options. I hope that that provides some reassurance, although I cannot give more detail at the moment. I am certainly keen that we explore options.

Mr Robin Walker (Worcester) (Con): Will the Exchequer Secretary respond to a suggestion that has been made by Richard Shaw, the treasurer of the excellent St Richard’s hospice in my constituency? He has suggested that under the NHS reforms, if hospices’ income from doctors’ consortia could be deemed to be VAT standard rating, that would allow hospices to recover a lot more VAT on their charges. Will that be one of the options that his officials look into?

Bob Russell: It will now.

Mr Gauke: As the hon. Member for Colchester has just muttered, it will now. My hon. Friend the Member

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for Worcester (Mr Walker) has put that thought on the record, and my officials will certainly take it up.

As I said, there is clearly strong feeling in the House on the subject, and rightly so. We all recognise and respect the value of the hospice movement, and we all recognise the opportunities and benefits of a greater diversity of supply of services. We agree that it would be most unfortunate if the workings of the VAT system were to get in the way of sensible progress. I hope that my comments will provide reassurance to the hon. Member for Colchester that we understand the issues that have been raised and that the Government are taking them very seriously. I hope that we can continue to work closely with the hospice movement in developing proposals.

Question put and agreed to.

10.28 pm

House adjourned.