HC Deb 08 December 1988 vol 143 cc427-8
9. Sir Peter Emery

To ask the Chancellor of the Exchequer whether he will list the total level of value added tax estimated to be provided by charities during the forthcoming financial year and the amount provided by charities over the last five years.

Mr. Lilley

I regret that this information is not available.

Sir Peter Emery

This Government have probably done more than any other to encourage giving to charities, but does my hon. Friend not realise that they are suffering considerably after donations have been made because some leading charities are paying £1 million or £2 million more in VAT? Those who make donations to charities do not believe that their money should be used for that purpose. Will my hon. Friend ask the Chancellor to consider that matter when he is thinking about next April's Budget?

Mr. Lilley

I thank my hon. Friend for his remarks about the Government's policies to encourage charitable giving, and I pay tribute to him for his consistent interest in this issue. My right hon. Friend considered the possibility of a general VAT relief, but decided against it. First, it is inconsistent with and would not be permitted under European Community law, although specific reliefs might be. Secondly, my right hon. Friend decided that it would be better to concentrate on encouraging the act of charitable giving, since it is clearly right that the amount of tax relief that a charity receives should be related to the amount of giving that it is able to attract. It is also good that, whereas £1 of VAT relief is worth just £1, an extra £1 of tax relief on the act of giving has a multiplier effect and encourages extra charitable giving.

Mr. Rooker

What are the Government doing to distinguish between charities whose purposes we all understand and charities set up exclusively to avoid tax? What action are the Government taking to ensure that those charities are shut down?

Mr. Lilley

From time to time measures are introduced in the Finance Bill to prevent the use of tax legislation as tax loopholes. Another safeguard is provided through the charity commissioners, who are required to examine the matter.

Mr. Higgins

Does my hon. Friend agree that there are real difficulties in giving VAT relief to charities? Were not those dificulties recognised when the tax was introduced? Do not the compensation advantages in tax that were given to charities at that time, and continued by successive Conservative Governments for the same purpose, vastly exceed the actual cost to charities of VAT?

Mr. Lilley

My right hon. Friend is absolutely right. Because of the benefits that we have given to charities and the inducement that we have given to encourage charitable giving, the amount of charitable giving has doubled in real terms since 1979.