VALUE ADDED TAX—REGISTRATION

HC Deb 11 July 1972 vol 840 cc1426-46

Mr. Joel Barnett

I beg to move Amendment No. 12, in page 103, line 37, at end insert: '3. Providing that in computing the amount referred to in 1(b) of this Schedule the annual sales of any branch of a charitable body shall not be taken together with any other branch or the parent body'.

Mr. Deputy Speaker (Miss Harvie Anderson)

With this Amendment it will be convenient to consider Amendment No. 13, in line 37, at end insert: '3. Providing that in computing the amount referred to in 1(b) of this Schedule the annual sales of a local political party shall not be taken together with any other local party or the national party'.

Mr. Barnett

This Amendment deals with the size of exemption for the purposes of VAT. The Government have chosen an exemption limit of £5,000 a year on sales. Amendment No. 12 deals with charities, but the principle involved is identical in the case of political parties, which are referred to in Amendment No. 13. I shall deal mainly with charities. Most hon. Members will consider that, even though we all have a personal interest to declare in Amendment No. 13, perhaps Amendment No. 12 is the most important.

As the Bill stands, we have the rather silly situation that where a branch of a national charity like Oxfam runs an annual fete or bazaar and sells as little as £500 worth of goods, that sum will have to be aggregated with the proceeds of sales held by other branches. It would thus be brought into the VAT net, and, although its sales would be less than the amount of £5,000, it would nevertheless be subject to VAT. The same principle applies, of course, in the case of political parties.

4.30 p.m.

Mr. James Ramsden (Harrogate)

I think I can help the hon. Gentleman. Surely this argument is not just about bazaars but also about an even more common thing nowadays—the shop actually conducted by voluntary help selling donated goods on behalf of a charity. That is becoming more and more a method of raising funds.

Mr. Barnett

The right hon. Gentleman's point is absolutely right, and I was coming to it.

I want to make it clear that for me this is not the major problem, nor is it the major problem, as I hope to show a little later, as far as the churches and charities are concerned. It is a comparatively minor aspect of the problem as far as they are concerned. I see that another group of Amendments has been selected to deal with the major problem. Nevertheless, I would not wish to imply that this Amendment is not important. It is very important, dealing as it does in the way I have indicated with the case of bazaars and fétes and, as the right hon. Gentleman has said, the growing number of cases of shops.

In the case of major charities, such as Oxfam and others, each of the branches would be aggregated, according to my reading of the Bill, although I hope I am wrong. In the case of smaller charities, this is probably a marginal problem with which many of them will not be concerned. But other charities will have the difficult task of deciding in a given year whether there has been more than £5,000 worth of sales in a small group of charities that makes up one body. In most cases aggregation would make them liable, and if this Bill remains unamended they will have the ridiculous job of reconstituting all the branches, because, clearly, they would not leave themselves open to paying VAT if they could avoid it, and they could legitimately avoid it.

But it would be a crazy situation to put all the charitable bodies in this country in the position of having to take tax-avoidance measures in order to do a job on which they really should not be taxed. All hon. Members will agree that to put them in that situation would be absurd, and I do not believe that this is what the Chancellor intended. Obviously, the position has to be clarified because, if it is not, each branch of each charity will be put in an impossible situation.

In the case of a small charity which did not know whether its sales were going to be over £5,000 a year and, therefore, subject to a tax of 10 per cent. there would be a serious disincentive to fund-raising. A particular group of charities, although not the very big ones, might realise that if their sales amounted to £5,000 in a year they would be free from VAT but if they sold £5,500 worth of goods they would have to ask their customers to pay £550 VAT on the extra £500 of sales. If they did not charge it directly to their customers, which would be difficult in the case of a charitable shop, fete or bazaar, they would be liable to pay one-eleventh of the amount of their total sales. They could not charge it on their invoices because they would not issue invoices in the normal way. So they might well decide that the extra £500 worth of sales was just not worth going for.

I cannot imagine that it is the Chancellor's intention to have this effect on charitable bodies and the many thousands of voluntary workers who do such magnificent work throughout the country, but that could well be the situation.

I should like to deal briefly with one or two examples. All hon. Members will know of the great problem which is going to be created because the charitable bodies sell donated and second-hand goods. Quite apart from the accounting problem if they were left subject to VAT, which would be a terrible imposition on voluntary workers, it must be asked whether the public would want to pay VAT on second-hand goods which they knew had already been subjected to that tax.

There is the further absurd anomaly of the lady who knits a jumper, pays the tax on the wool and donates the jumper to a charity for sale. That jumper would then be subject to VAT, and she might well think twice about knitting it at all; I hope not, but there may well be people who would. I cannot think that that is the intention of the Chancellor.

Again, this could have a very serious effect on charities at their bazaars and fêtes, in particular where people arrive with small amounts of money, with the intention of spending perhaps £1, because that is all they can afford. This would mean that all the charity would receive would be 91p. I cannot imagine that that is the Chancellor's intention.

Then there is the silly anomaly that if one makes a gift of a silver teaset to a charity, which then sells it, that teaset is subject to VAT; but if one makes a gift of shares it is free from capital gains tax. I am not making any point about whether there should be that freedom from capital gains tax; I have already welcomed the relief given to charities in this direction; but I cannot imagine that that is the way the Chancellor intended his tax to work. Again, if these charitable branches are going to be subject to VAT, so are the entrance fees when they have fund-raising functions at the first night of a film or a show. I fear that the psychological effect on voluntary workers could be substantial.

The Amendment which I am moving now is no substitute for the major Amendments that will be moved later. Many hon. Members on both sides of the House have Amendments down about this. Exemption is in many ways an unsatisfactory way of relieving charities from tax, because, as we all know—although it was not clear to many in the country and I imagine it is still not clear to some—one of the hubble-dubbles of this tax, to borrow the expression used by the hon. Member for Folkestone and Hythe (Mr. Costain), is that exemption is not exemption; that is to say, there will be an element of VAT in it even when there is exemption. So exemption for charities is, for that reason, not a very satisfactory method of relieving them from tax. However, it would go some way towards helping, particularly the small branches of the larger charities. Above all, it would be especially helpful in stopping double taxation on gifts which have been given to charities and resold. It would also remove some of the worst forms of anomalies. I have referred to some already. It would make life easier for charities. However, the only real way to help we shall come to later when I hope the House will agree to relieve charities altogether of this tax.

Mr. Peter Rees (Dover)

In this debate it is not necessary to go into the thorny question of how far charities should be exempted or zero-rated. Frankly, somewhat sweeping claims have been made for totally exempting the trade or trades carried on by charities in new goods, although I see the force of the suggestions by the hon. Member for Heywood and Royton (Mr. Joel Barnett) for excepting sales of second-hand goods. On this point I ask my right hon. Friend the Chancellor to consider how liberally the Customs and Excise could operate Clause 14 on sales by charities of second-hand goods collected by their members.

I am concerned about the practical implications of leaving charities within the value added tax net. Certain sophisticated and well-organised charities—one might mention Oxfam or Save the Children Fund—which have paid organisers and many helpers could no doubt cope with the burden of keeping records and accounts and accounting for value added tax. However, many charities which depend at local level on devoted bands of amateurs, often few in number. Would they have to keep for three years the accounts which the Customs and Excise might require? I ask, almost in jest: would the Customs and Excise require such charities to deposit security before organising a fete? Of course not. But there are all kinds of practical implications.

I hope my right hon. Friend will consider some kind of relief for such charities on the lines suggested. There is a precedent in the Bill. Clause 23(1) enables companies trading in separate divisions to register each division. Some charities are incorporated as companies. It may be that the Customs and Excise would regard such charities trading at local level as operating in separate divisions. However, many other charities are not incorporated but depend on some trust deed. They are based on a fiduciary relationship. They would not be covered by that Clause. As the hon. Member for Heywood and Royton pointed out, it would be possible to reduce them to small entities within the £5,000 limit by setting up a series of individual settlements, each individual trust paying over its proceeds to the central headquarters. This seems an unnecessary, troublesome and complicated solution to a simple problem. Therefore, I very much hope that on these practical and compassionate grounds my right hon. Friend will find it possible to offer some relief on the lines of this Amendment.

4.45 p.m.

Mr. Dalyell

I hope the House will forgive me if I speak at slightly greater length than I normally do.

First, I should like to refer to what the hon. and learned Member for Dover (Mr. Peter Rees) said about Oxfam. He said there may be some charities like Oxfam which perhaps could cope with the administrative burden. Those of us who went to the meeting organised by Oxfam on 6th July will recall that the administrative burden was one of the major points made by Mr. Kirkley and his colleagues.

Mr. Peter Rees

I am willing to retract that. I have no detailed knowledge of the administration of Oxfam. I was comparing it in my mind with Guide Dogs for the Blind in my area, which I know is less well organised although equally enthusiastic for its cause.

Mr. Dalyell

I should like to underline the hon. and learned Gentleman's argument. I was about to say that if Oxfam cannot cope, what about local branches of Guide Dogs for the Blind, Lifeboat, and those myriad other charities which we know so well?

Oxfam says: All the charities which disperse goods and services in this country—like The Spastics Society—will suffer considerable rises in costs under the workings of VAT. Charities such as Oxfam which raise large sums of money through sales of donated goods in charity giftshops will be subject to a levy of 10 per cent. VAT on shop income. This will seriously affect the amount they have to spend on helping the poor, the hungry, the disabled, and the needy. Oxfam alone may have to hand over £150,000 in VAT levies on giftshop sales next year. In the questioning that went on a week ago at the meeting in Westminster Hall I was convinced it was not exaggerating. Oxfam makes the point: For the millions of British people who support deserving causes in cash, kind, time and energy, this is indeed a depressing prospect. I echo what was said by the hon. and learned Member for Dover about the psychological consequences. At branch level there is a problem. My hon. Friend the Member for Portsmouth, West (Mr. Judd) is interested in this point. I will not take a South of England point. I should like to go on with Oxfam and the worries of the Scottish branch. Miss Delia Halloran of 80, Hanover Street, Edinburgh, the Scottish Secretary of Oxfam, who is well known to many of us, says: Why are the Government now breaking the traditions of special treatment over taxation of charities? This has been a British tradition of the past. As my experience on the voluntary side has shown me where we were not liable to income tax or SET the Government itself recently showed its approval of charitable activities by granting tax concessions in the Budget. So its intention to inflict VAT on them seems somewhat illogical. This is how it looks to many charities and people of all political parties. Our case in Oxfam is somewhat different from that of other charities in that we are the largest operator of charity gift shops and will have to pay 10 per cent. on all our sales. Miss Halloran again gives the figure of about £150,000 throughout the whole country. I ask the Chancellor, if he is to wind up, whether the Treasury's calculation is that Oxfam will lose about £150,000? There has been a great deal of publicity, so the Treasury should have a figure.

To go back to the previous Amendment, on which I expected an answer—it was no fault of the Financial Secretary in the "hubble-dubble"—it would be useful if the suggestions made in these Amendments could be costed. We ought to have some idea of the costs we are talking about on each of these Amendments.

Miss Halloran goes on: The people who donate clothes and goods to Oxfam do so in good faith knowing that the profits go to help the hungry overseas. What will they do now? Also, how will our workers feel when they have given of kind, time and energy to raise £1,000 in a shop but have only £900 to show on the return. I know as a voluntary worker how I shall feel"— as she puts it— working for three weeks without raising anything. I think that this psychological aspect is significant. So again I directly ask the Chancellor: what attention has been paid to the psychological effect on charities?

I now come to two or three technical points. Oxfam says: The main effect of VAT on charities will be to increase expenses and reduce income; administration will cost more"— it comes back to the point made by the hon. and learned Member for Dover— (more expensive equipment and much more paper work accounting), the provision of services will cost more (running homes, transport, maintenance, etc.)—and income from gifts will be less. Two other general effects can be forecast, though we do not know how likely or serious they will be"— again I ask for the Treasury's estimate— there may be a reduction in the number of donors and volunteers; people at present willing to give their time and goods for free may be less keen to do so if they feel that one-tenth of their contribution (some three-quarters of an hour a day for a volunteer shop worker) is going to the Government; in an attempt to avoid"— it makes the point not to evade— the tax, charities may find themselves splitting up various parts of their activities into separate groups so that no one group has a gross income of more than £5,000 a year. It is not yet clear how allowable this would be (the Customs and Excise has given conflicting replies to different charities); if it were allowable it would result in a pointless proliferation of charities with a consequent increase in administrative work. Let us give credit where credit is due. They admit—and so do I—that the Government have made sizeable concessions to charities. These concessions, as they relate to estate duty, are put at £15 million a year, but they affect charities very unevenly. Those with a large legacy income tend to do best. The concessions are, however, reduced by losses arising out of the Budget. The net gain for Oxfam from the Budget will be £42,500, while the loss of income due to VAT will be £165,000. On the swings the gain is £42,500, and on the roundabouts the loss is £165,000.

Mr. Toby Jessel (Twickenham)

How was this figure of £42,500 arrived at by OXFAM as being what it would gain from legacies as a result of the Budget? Surely it is ridiculous to attempt to put such a precise figure on it? As the Budget makes it possible for there to be a bequest of £50,000 without estate duty, it would need only one bequest a year to reach that figure.

Mr. Dalyell

Some charities receive estate duty bequests. I asked how the figure was arrived at, and I was told that it was the average of legacies received over the last five or 10 years. This is basically an estate duty figure. I took it on trust, and I think that it is a fairly reasonable figure.

Mr. Jessel

Is it not incorrect to analyse the last five years and project the result into the future? Does not that method fail to allow for the dynamic effect of any change resulting from the Budget which might cause more people to leave legacies to charities?

Mr. Dalyell

That is an imponderable. I see the Chancellor making a note. I hope that when he replies to the debate he will give the House an assessment of the Treasury's view. I have given some figures. It is for the Treasury, with all its resources, to comment. If I am wrong, I shall listen, and if the case is convincing I shall be convinced, but this is what I have been given by serious people.

The psychological effect will be considerable. Human nature being what it is, if people think that a sizeable proportion of their time on charitable work is going to the State they may well be less willing to do it. This affects all those who have interests in charitable organisations. If my case is wrong, I hope to be convinced by the Treasury. It is up to the Treasury Bench to take these things serious and to let hon. Members know the Government's view.

Mrs. Peggy Fenner (Rochester and Chatham)

I hope that the hon. Member for West Lothian (Mr. Dalyell) will forgive me if I do not follow the line of his argument, because I want to avoid the trap of dealing with the claims of charities about the money which they will lose if they remain within the VAT system and to confine myself to the Amendment which seeks to clear up the ambiguity about branches of parent bodies of national charities.

I hope that my right hon. and hon. Friends at the Treasury will look at this again. I made my only contribution in Committee on this very subject because I could see the tremendous difficulty in which charities would find themselves. I accept my right hon. Friend's assurances about the other provisions in the Budget being designed to ensure a substantial benefit for charitable bodies, and I accept, too, what my hon. Friend the Financial Secretary said in committee: A very high percentage of the smaller charities are, by definition, unlikely to have a taxable turnover of over £5,000 a year and will therefore be exempt from VAT."—[Official Report, Standing Committee E. 8th June, 1972; c. 628.] It is interesting to note that in this country there are 100,000 defined charities falling within the Income Tax Acts and accepted as such by the Charity Commissioners. That figure increases by 2,000 a year, and I am sure that my hon. Friend is right when he says that the majority of them will fall within the £5,000 a year turnover and will therefore be exempted.

A large proportion of the charitable work done in this country is carried out in our towns by branches of national charitable organisations. Special reference has been made to Oxfam. In my speech in Committee I referred to Dr. Barnardo's, a charity with which I am connected and which I know well. But all the charities affiliated to the National Council of Social Services, and those which are not, which operate on a national level both for work overseas and for social services in this country will be confronted with the same difficulty, namely, whether the annual incomes of branches will be aggregated with those of the national bodies and they will be required to keep records and be properly within the VAT system.

I know that it is my right hon. Friend's intention to help charities. I ask him to look again at the needs of branches of national charities and to try to do something about this ambiguity. I share the view expressed by the hon. Member for West Lothian that it will be an enormous deterrent to individual branches if they have to keep records of the sums involved when my right hon. Friend has shown that within a turnover of £5,000 a year it would be administrative nonsense to operate within the VAT system.

I ask my right hon. Friend to look at this provision again, especially because of the comments of my hon. and learned Friend the Member for Dover (Mr. Peter Rees) about companies which can disaggregate their total incomes. Let us not submit charities to the task of disaggregating all their branches merely for the sake of an administrative pattern. I know that in Committee I was not able to convince my hon. Friend, but I hope that since then my right hon. Friend has been able to give the matter careful consideration and that he will today put forward a proposal to get rid of this ambiguity.

5.0 p.m.

Mr. Frank Judd (Portsmouth, West)

The hon. Lady the Member for Rochester and Chatham (Mrs. Fenner) has spoken with a great deal of practical experience of the problems of charities in the front line. A characteristic of the whole issue with which we are concerned in this Amendment and in a number of others is the difference between those who, at one stage or another in their lives, have been in the front line of charitable organisations and the theoreticians who, sitting in the objectivity, as they see it, of Whitehall, are able to look at how this could rationally and neatly be organised if only the volunteers and activists within the movement would see good sense.

I speak with a great deal of feeling on this point because for seven years before I became a Member of the House I was the secretary of a national charitable organisation. I am now the vice-chairman of the National Council of Social Service. I have seen the strength of feeling of countless charitable organisations pouring in in the form of anxious inquiries and protests to our headquarters in London. Obviously we shall have the main debate on this whole issue later, but I want now to take up a couple of points and to introduce another.

Hon. Members on both sides of the House have already referred to the psychological impact of this provision. We must try to bring ourselves down to the ground and think of the grass root problem. People who man charities in the front line locally are people with a passionate concern about a particular social problem. They want to be able to get on with the job of ministering to the need and to receive the funds necessary to do that with the minimum possible number of administrative and bureaucratic complications. Every piece of legislation introduced will either inhibit some of that voluntary spirit or else lead people over the years, unwittingly I suspect, into at least technical breaches of the regulations and the law. For that reason alone I hope that the Chancellor and his colleagues will be willing to look at this again and to reconsider the position.

The other point I want to make we shall hear more about in the main debate on charities later. We heave heard reference to the argument about swings and roundabouts. But this is such a sweeping generalisation of the reality in the world of charities that it is meaningless. A large number of charities, such as that for which I was working before becoming a Member of Parliament, will not benefit from the Budget concessions but will be liable for value added tax. We should look at their problems and the extra burdens being put upon them.

Dealing specifically with the issue of local branches and their liability, may I first make a point and then put a very specific question to the Chancellor. In the organisation of national charities there is very often a complicated relationship between the headquarters organisation and the branch, and all sorts of ad hoc arrangements may be worked out which enable the branch to retain a certain proportion of the funds it raises locally for local activities. It seems that this complication has not been thought through by the Treasury. How shall we decide how much of the money raised by a local operation, in the spirit of the operation, is intended for a completely localised piece of social work or charitable activity and how much is intended for the national organisation of that particular branch, although that branch may be legally an integrated part of the national organisation?

Dr. Alan Glyn (Windsor)

This would apply equally well to a branch which was told to raise certain funds and that anything received above those funds was to be given to the main association; or vice versa, if the main charity used some of the funds raised by the branch.

Mr. Judd

The hon. Gentleman is serving to illustrate the complexity of the possible relationships, and I am grateful to him. My point was about the way in which funds may be applied to the work itself. My specific question to the Chancellor is this. We all know that although the Government are committed to value added tax as a major taxation in its own right, a great deal of the impetus for this must relate to our possibly entry to the EEC. Have the Chancellor and his colleagues undertaken any specific research into how this works out in some of the member countries of the EEC? There have been reports—it would be interesting to see the results of a Treasury investigation into this—that in a number of member States of the EEC where VAT exists there is exemption for branches of the kind we are discussing. If the Government are so hell bent on harmonising our system of taxation and social administration with that of the Six, they might do their homework better and ensure that the system they wish to operate is similar to the system operating in the Six.

The Chancellor of the Exchequer (Mr. Anthony Barber)

It would probably be convenient for the House if I were to intervene in the debate now.

I say immediately to the hon. Member for Portsmouth, West (Mr. Judd) that I have made it crystal clear in the past that the decision to introduce value added tax in this country was taken quite independently of our application to join the European Economic Community.

Mr. Arthur Lewis (West Ham, North)

But the right hon. Gentleman will still introduce it.

Mr. Barber

I am sure that the hon. Member for West Ham, North (Mr. Arthur Lewis) will accept that from me as being the case. After all, I was the person who took the decision.

The object of the Amendments is to provide that in determining whether a charity or, indeed, a political party has a taxable turnover above £5,000 a year and so would be liable to registration, the taxable turnover of any branches and the parent body should not be aggregated but should be considered separately.

For two reasons, which I shall come to shortly, I hope and expect that the hon. Member for Heywood and Royton (Mr. Joel Barnett) will seek the leave of the House to withdraw the Amendment.

First, the position under the Bill as at present drafted is that any branch of a charity which is a separate legal entity—for example, a separately incorporated business or a local voluntary committee of well wishers acting under the general approval of the central body but with no formal responsibility to it—could be considered separately for registration and registered or exempted according to its turnover. As separate legal persons they would be considered separately in the first instance. I need not go over this aspect again because it was dealt with in Committee by my hon. Friend the Financial Secretary.

There has been some reference to other changes in the Budget. The Amendment is fairly narrow in scope although, from what has been said, it is obviously considered to be of great importance. It is not fair for the hon. Member for Portsmouth, West, who is a very fair man about these matters, to suggest that every change in legislation appears to be disadvantageous to charities. The simple fact is that the changes I made in the Budget concerning capital gains tax and bequests were of great importance. They were certainly fairly costly to the Exchequer. I decided to do this—which is more than previous Governments have done—because I believed that this was one of the best ways of helping charities. Although this is not the occasion to go over this particular aspect again, I say in passing that I agree entirely with the intervention of my hon. Friend the Member for Twickenham (Mr. Jessel), who put the matter very fairly when he spoke about what this would mean to charities. One cannot just look back over the past. Obviously it is bound to have an effect on people's intentions in the future.

Mr. Dalyell

Is not part of the difficulty here that the blanket definition of charities can be very misleading? We know that there are some charities—for instance, the National Trust—which by their nature attract legacies. Other charities, equally by their nature, do not attract legacies.

Mr. Barber

This is one of the great problems in this whole area. I am pleased that the hon. Gentleman recognises it. There are about 100,000 charities and they vary greatly. I prefer the view taken by my hon. Friend the Member for Twickenham to that of the hon. Gentleman, namely, that in the future the action we have taken on estate duty will have a marked effect. I hope that those charities which, perhaps, have not done very well in bequests in the past will set their stall out now to try to do better.

The Amendment is recognised on all sides as of very considerable importance. Apart from the Amendment, I have had a number of representations, not only from my hon. and learned Friend the Member for Dover (Mr.Peter Rees) and my hon. Friend the Member for Rochester and Chatham (Mrs. Fenner), but also from other of my hon. Friends who have personal experience of charities which would be affected by the matter we are discussing.

I can see immediately what is behind the Amendments. They are concerned with the case of a local charity or political association which may well be linked, affiliated or connected in some way to a national charity or to a national political party, but which in substance would appear to those who work for it to be a local committee of voluntary workers with no formal responsibility to the central body, although it may well have identical objectives. It presents a very real problem. I am thinking of the genuine local fetes, jumble sales, sales of work and charity shops which have become more and more important in recent years, and other types of money-raising activities where the turnover is less than £5,000 a year. I am thinking of those places where there is no significant unfair competition with the local commercial trader.

There are difficulties and I cannot advise the House to accept the Amendments because they are defective in their drafting. If anyone wants to know why I will explain, but I hope that the House will take it from me that they are defective. However, I should like to see whether it is possible to meet the obvious intention behind the Amendments by treating branches of charities and political associations as separate entities for the purposes of VAT even if they are not formally separate from the parent body. If necessary Amendment to the law could be made in the Finance Bill next year.

Meanwhile, any charities which are faced with the problem I have described—some spring obviously to mind but there may be others which have not got round to making representations on the point—should get in touch with the Customs and Excise to discuss the situation before the date on which they would normally be due to register. The Customs will be giving further guidance about this before registration begins. For reasons which I know the House will fully understand I cannot commit myself at this stage but with the clear promise that I have given I hope the hon. Member will see fit to withdraw the Amendment.

Mr. Dalyell

Some of us who put the case would like to thank the Chancellor very much for this reasonable answer. Does it mean, for example, that Oxfam in Scotland can in a sense be treated as an entity different from Oxfam as a whole.

Mr. Barber

It means that any branch, or what is normally thought of as a branch, even though it may be formally —by which I mean in law—otherwise, and for the purposes of VAT not separate from its parent charity, should be treated in substance for the purposes of VAT as if it is a separate entity. That was what I understood to be the purpose of the Amendment. I think that is right and it is certainly the point put to me. What is proposed will be of wide assistance.

The next thing is for the Customs to go into the matter with the charities which are particularly concerned about this aspect and then my hon. Friend the Financial Secretary and I can deal with it personally and hope that if all goes well we shall be able to bring forward a provision to deal with the matter in the next Finance Bill.

5.15 p.m.

Mr. Joel Barnett

With the leave of the House I wish to say without any further ado that I am most grateful to the Chancellor, as I am sure all hon. Members are. He has entirely met the point that I made and that I know had the support of Members on both sides, and I accept his undertaking in the way it has been given. In the circumstances I have no——

Mr. Arthur Lewis (West Ham, North)

On a point of order. Some hon. Members have been sitting here trying to catch your eye, Miss Harvie Anderson. There are other points to be made beside those made by the pro-Marketeers. A point was made by my hon. Friend the Member for Portsmouth, West (Mr. Judd), concerning the Common Market and before my hon. Friend withdraws the Amendment there are points I should like to make.

Mr. Barnett

I do not know if one's attitude over the Common Market is related to the matter——

Mr. Lewis

Give me a chance to speak.

Mr. Barnett

I entirely take my hon. Friend's point. If he wishes to make an anti-Market speech I have no objection, but I hope he will not mind if I make a speech accepting what the Chancellor has said as meeting entirely the point I have been making. I do so regardless of my feelings on the Common Market. I will delay further the words I intended to use, always providing my hon. Friend catches your eye, Miss Harvie Anderson.

Several Hon. Members rose——

Mr. Deputy Speaker (Miss Harvie Anderson)

There is no need to get unduly exercised about the point of order which has been raised. The hon. Member for West Ham, North (Mr. Arthur Lewis) is in order to raise the point of order and the hon. Member for Heywood and Royton (Mr. Joel Barnett) is equally right in delaying the point he intended to make. I think it is the wish of the House for me to call Mr. Arthur Lewis.

Mr. Arthur Lewis

I was compelled to raise my point of order, because the rules of the House would have meant that if my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) had sought the leave of the House to withdraw his Amendment I would have to oppose him in order to be able to speak. I did not wish to do that. I do not want to make either a pro-or anti-Market speech.

My hon. Friend the Member for Portsmouth, West touched briefly upon the point which I do not think the Chancellor dealt with and therefore I wish to raise it. I have had, as I expect most hon. Members have, a number of circulars from a number of charities about VAT. I have had one in particular from the Committee for Assistance to the Aged. Of some 50 sponsors, 30 are pro-Marketeer Members of either the House of Commons or the House of Lords. The Chancellor said that whether or not we went into the Common Market he had intended to introduce VAT. We accept that. But we all know that if we join the Common Market we will have no choice but to introduce VAT.

My hon. Friend the Member for Portsmouth, West explained that in the Common Market some countries impose VAT on charities and some do not. The Chancellor should have done his homework and given us information about that. He has said quite rightly that the Government have helped charities with concessions on bequests and capital gains tax which will mean a considerable saving for some of them. We accept this and we pay tribute to what the Government have done because other Governments have failed to do it. But the smaller charities, those which are not so well known, do not often get large bequests and for them there will be no saving. Equally, those that operate on a shoe-string budget will not derive much benefit from the capital gains concession.

The Chancellor has promised to take action in the next Finance Bill. But if we go into the Common Market many things will happen which will preclude the House from having the right to alter or amend any decisions reached in Brussels.

This is not hypothesis. Let us assume that we join the Common Market in January, and the Commissioners say that VAT on charities shall apply in all countries within the enlarged EEC. Let us assume that the Chancellor is outvoted, despite all his powers of persuasion, by nine votes to one. I do not think the veto can apply, and therefore he can do nothing about it. When he reports to the House we shall have no right to amend what is proposed. The Whips will be on, and it will be accepted. That means that the Chancellor, honest as he may be, will be unable to do anything about it in his next Budget. He will tell the House, "I am sorry. You have agreed under the European Communities Act that we shall be bound by the decisions of the Council of Ministers. The Council of Ministers has come to this decision, although we in Britain opposed it, and we must unfortunately give way on this issue", as the Government have given way on a number of other issues and will give way on issues even now being discussed. He will say, "Although I gave my promise in all good faith, I cannot do anything about it".

Mr. Kenneth Lomas (Huddersfield, West)

It does not matter whether we are pro-Market or anti-Market. I am in favour of joining Europe, and have made my position quite clear. I think we shall go in. Whatever our views, the Chancellor has the opportunity to decide what taxes shall be applied to charities or any other bodies. The real point has nothing to do with being in or out of the Market. We should try to find out from the Chancellor why he intends to impose a tax on charities at all.

Mr. Lewis

My hon. Friend came in just at the conclusion of the speech of my hon. Friend the Member for Portsmouth, West. The question does have something to do with whether we join the Market. It is true that at present the Chancellor can impose VAT on charities if he wishes, or take it off, which he is not going to do. At present he can say that he will take it off in next year's Budget. What he cannot do is to say what may happen between now and next year if we go into the Common Market and the countries with VAT on charities say, "We want to harmonise the tax and make it generally applicable, as we have done on wines, spirits and a hundred and one other things." It is true that this country would probably oppose that, but we should be the odd one out. We should be bound by the majority vote. The veto applies only if it can be proved that the decision is diametrically opposed to the national interest of a country. We cannot argue for contracting out of a general value-added tax on all charities in all the countries of the Ten, as we could with whisky. We could say that it should not apply to whisky, because we should be the only country in the Ten affected. Therefore, we should have to give way, as on a number of other issues already on the 2,000-odd regulations, which we have had to agree to in toto, with no chance of reading them, amending them or doing anything about them. The Chancellor knows this to be the case.

If the Chancellor can give me a guarantee that, come what may, if the Common Market countries agree to a harmonisation of whatever tax it might be on charities, we shall not have to implement it if we do not want to, I will accept that. But I have doubts about the pledge the right hon. Gentleman is now giving, because the Common Market countries may well override him when the time comes.

Dr. Glyn

My right hon. Friend the Chancellor has made a great concession. But I should like him to spell out very carefully the position of organisations like St. John and the Red Cross and Oxfam, where every individual branch is part and parcel of the same organisation. As I see it, if they register in the spring there will be a period of about six months when they will be liable before the next Finance Act. It would be helpful if the major organisations like those I have mentioned knew their exact position between now and the next Finance Act. Branches cannot possibly be separated from the main organisations by virtue of the organisations' charters and the whole of their structure.

Mr. Barber

I hope that organisations such as those which my hon. Friend has mentioned will take advantage of the suggestion I made of forthwith getting in touch with the Customs and Excise.

Captain Walter Elliot (Carshalton)

If my right hon. Friend can nod his head, indicating a favourable answer to my question, I shall sit down at once. Did his favourable reply to the debate include the political parties?

Mr. Barber indicated assent.

Mr. David Mitchell (Basingstoke)

I am most grateful for the assurance my right hon. Friend the Chancellor has given.

Like many other hon. Members, no doubt, I have had a large deputation of various charities come to see me. My right hon. Friend has gone at least part of the way to meet the problems they raised. However, there are three other points.

First, I understand very clearly the difficulties which face the Government in giving a blanket exemption to charities. Some are perhaps rather diverse in their activities and might not commend themselves wholly to my right hon. Friend. If he can say a little more today about the treatment it is intended to give to second-hand goods, that will be helpful. I realise that there is a power to make regulations, but if we could know a little more about what it is intended to do in those regulations, and could have assurances, it would go a long way to solving the problem of the sort of charities which receive second-hand items, which have already borne tax when purchased and which would bear double tax if they were sold in a charity shop or charity bazaar.

Secondly, there is the question of the book work involved in issuing invoices in a charity shop. A limit of £20 instead of £10 for a simple invoice not having to show VAT worked out as a separate item would go a long way to solving this problem. There are few items sold worth over £20 in these shops, but there are a number worth between £10 and £20. Dealing with the £5,000 put, a lot of these shops are just under that figure now and on the basis of the assurance the Chancellor has given they will be happy. But in four years' time £5,000 will be rather different. Can we have an assurance that the £5,000 can be altered without fresh legislation?

Mr. Barnett

I content myself by asking leave to withdraw the Amendment.

Amendment, by leave, withdrawn.