HC Deb 29 January 1981 vol 997 cc1066-7
10. Mr. Greville Janner

asked the Chancellor of the Exchequer whether he will now exempt charities from valued added tax.

Mr. Lawson

Charities do not in general have to charge VAT on their charitable and welfare activities. As to VAT on their purchases, I refer the hon. and learned Gentleman to the answer that my hon. and learned Friend the Minister of State gave on 7 November to the right hon. Member for Manchester, Wythenshawe (Mr. Morris).

Mr. Janner

As charities are bearing such an enormous weight of social responsibility which would otherwise rest on the public, is it not ludicrous to penalise them by levying VAT so that so many of them, great and small, are facing enormous financial difficulties? As the Government exist primarily on a diet of faith and hope, is not a touch of charity to charities now called for?

Mr. Lawson

The law relating to VAT on charities is precisely the same as it was when the Labour Government were in office. The main difference is that in the Budget last year this Government introduced substantial benefits for charities, worth in all £30 million in a full year.

Mr. Moate

Has my right hon. Friend seen the estimate by Dr. Barnardo's that in 1981 it will pay £450,000 in VAT, although half of its expenditure is for children referred to the organisation by statutory bodies mainly concerned with handicapped children? Will he reconsider the matter to see whether some concessions can be made?

Mr. Lawson

We consider carefully how best to assist charities. As I said, in his Budget last year my right hon. and learned Friend introduced a range of reliefs for charities, worth in all £30 million, which is a substantial sum. We shall continue to keep the matter under consideration. We are not convinced that the best way to help charities is by a change in their VAT treatment.

Mr. Ashley

Apart from being socially unjust, is it not economic nonsense to penalise voluntary associations that help to keep disabled people out of expensive institutions? Is the right hon. Gentleman aware that this is one instance where the Government can save money by spending it?

Mr. Lawson

I know the right hon. Gentleman's deep desire, over many years, to assist charities and good causes. However, we consider carefully which is the best way to help charities. The Government whom he supported did not believe that his suggestion was the best way. It has to be borne in mind that much charitable income and expenditure, such as rents, the purchase of buildings, staff costs and grants, are not subject to VAT. The situation is rather more complicated than the right hon. Gentleman's question would suggest. The measures that we have taken so far are an earnest of our determination to assist charities.

Mr. Jay

Judging by the results so far, does the Financial Secretary consider that the Government's first incentive Budget of June 1979 has been an unqualified success?

Mr. Lawson

I am not quite sure what that question has to do with charities—unless the right hon. Gentleman is putting himself forward as one.