HL Deb 28 October 1993 vol 549 cc934-5

3.22 p.m.

Baroness Robson of Kiddington asked Her Majesty's Government:

What additional moneys were allocated to health authorities and trusts to compensate them against the introduction of VAT at the standard rate on hospital building as a result of the decision of the European Court of Justice, and whether these additional allocations were also meant to cover VAT on projects funded by charitable organisations.

The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege)

My Lords, the Government provided approximately £187 million additional money for this purpose. An amount was included for value added tax on new capital projects funded by charities.

Baroness Robson of Kiddington

My Lords, I thank the noble Baroness for that reply. Does she agree that the original money has now become just one part of the pot and that it can no longer be specifically identified? Is she aware that, as a result, an increasing number of district health authorities are no longer prepared to find the VAT on charitable capital schemes? Further, can she tell the House what happens to capital works carried out by trusts, because they are funded by borrowing against their external financing limits? Is not there an incentive therefore for trusts to borrow less and let the charitable organisations pay the VAT? Does she further agree that to ask charitable donors to pay 17½ per cent. VAT is not viable?

Baroness Cumberlege

My Lords, the noble Baroness is absolutely right. That sum is no longer specifically identified. But it is built into the base budget of allocations of regional and district health authorities and trusts. When trusts accept schemes that will be funded by Leagues of Friends or other charitable organisations, it is important that they work together with the charity. Indeed, the total sum of money is often shared between the charitable organisation and the trust. I should like to put on record the enormous gratitude of the National Health Service to those organisations, which help build new projects.

Lord Boyd-Carpenter

My Lords, does my noble friend agree that it is a great pity that VAT should be applied on charitable developments or on hospitals? Are the Government prepared to agitate to get that silly decision reversed?

Baroness Cumberlege

My Lords, that is a subject more properly addressed to my right honourable friend the Chancellor of the Exchequer.

Lord McIntosh of Haringey

My Lords, is it the role of the Government to agitate? Surely it is the role of the Government to act.

Baroness Cumberlege

My Lords, the Government do act.

Baroness Robson of Kiddington

My Lords, will the noble Baroness entertain the idea that the Department of Health should issue stronger instructions to district health authorities and trusts to look after the charitable organisations that fund a certain amount of the capital building in the health service? Perhaps I may also tell her that no charitable organisation undertakes a capital project without the agreement of district health authorities and trusts.

Baroness Cumberlege

My Lords, VAT is only applicable to new capital projects and not to refurbished projects. It has to be taken into account as part of the total cost of the scheme. It is important that health authorities work with local organisations in order to come to a conclusion on that matter. I should like to say that the country would be a much poorer place without all the grannies who go paragliding and bungee-jumping in order to raise money for local fracture clinics.

Lord Tordoff

My Lords, surely the noble Baroness will agree that they do not do that in order to put VAT into the Treasury's pocket?

Baroness Cumberlege

My Lords, the way in which the Government accrue the funds that are necessary—income tax and VAT—is not a matter for me. It is a matter for my right honourable friend the Chancellor of the Exchequer.

Lord Hayhoe

My Lords, can my noble friend assure the House that the view of the Department of Health is that the Treasury in essence are not making a profit out of what is essentially charitable giving?

Baroness Cumberlege

My Lords, VAT surely is assessed on all new capital building. There is no question of a profit being made. It is a tax that has to be paid like any other tax.