Finance Bill

This is a particular problem, and I was about to pay tribute to my hon. Friend, who has done some important work with the Library in helping us to understand what this VAT increase will actually mean for Britain's charities. I also commend the work of the Charity Tax Group, which the hon. Member for St Ives (Andrew George) prayed in aid. Its assessment is pretty blunt—that this increase will cost Britain's charities £140 million to £150 million. Because much of that VAT cannot be reclaimed, Britain's charities stand to lose £60 million to £70 million. That is a lot of money, and certainly a lot for charities that are already struggling with contributions, which are down because of the recession. Many in the sector are worried about how voluntary contributions will rebound as the recovery sets in. Others who read the research will, like me, have been struck by the Charity Tax Group's case study of Action for Blind People, one of the largest charities in the UK, which provides free and confidential support for blind and partially sighted people. The study makes the point that the rise in irrecoverable VAT for Action for Blind People will total some £100,000 a year. Charities in that sector that are about to take such a hit must immediately look at which services they can no longer offer. That gives rise to a question that will concern Members in all parts of the House, and which demands an answer: how are these charities going to be compensated for this hasty increase in VAT? The increase appears to hit smaller charities hardest—a point made by both the House of Commons Library and the Charity Tax Group. They say that smaller charities such as those with an income of less than £30 million will be hit, as VAT currently accounts for some 3.6% of their income, compared with 2.3% for larger organisations with an income of more than £30 million. In other words, this VAT increase will create a greater gulf between bigger charities and smaller charities. That is obviously a concern because, as my hon. Friend the Member for Wrexham (Ian Lucas) pointed out, there is a big push on at the moment to ensure not a narrower role but a wider role for smaller charities in delivering public services.