Health and Social Care Bill

My Lords, like other noble Lords, I declare an interest in charitable organisations that are in the register. When it comes to the details of VAT and its complications, my expertise is roughly equivalent to that of Vince Cable. In the light of that, I took the very sensible advice of my noble friend Lady Wheeler and discussed matters with a charity here in London. It was quite an enlightening experience. I was told that the change in the world of voluntary organisations has made a significant difference to their position in relation to VAT. At one time, much of their income came from grants; now it is increasingly contracted. As contracting organisations, they become liable for the tax. For example, a new build for that particular organisation at one time would not have attracted VAT, but now it does; and as we have heard, there are other examples of that happening. Moreover, some of the services that it provides are exempt, as in education and social care, while others are not. As the noble Baroness, Lady Finlay, told us, smaller organisations in particular have to invest resources in getting the necessary advice to deal with their VAT problems. The organisation to which I spoke had an even more complicated position. It has a building, and because it is carrying out work that is both subject to VAT and not subject to VAT, it has effectively had to split the building into those parts that provide services that are exempt and others that are not; and there is a problem with mixed use in part of the building. It has to monitor and record everything scrupulously and file returns accordingly, so it is an extremely difficult position for such organisations. I congratulate my noble friends Lord Patel of Bradford and Lord Noon on bringing this amendment to the House, as it throws light on a significant anomaly affecting very many voluntary organisations—the very sector that all of us, especially I suppose the Government, in the light of their proclaimed belief in the big society, would wish very much to encourage. The amendment does not require a change in the law at this stage; it merely seeks a report. It is time that this long-running matter, which has endured for many years under Governments of both political persuasions, should be resolved on the basis of a report. It is of growing importance, as the noble Baroness, Lady Finlay, again reminded us, because of the position of any qualified provider, which would now be open to a wider range of organisations. At the moment, the anomaly exists in relation to the charitable sector and the National Health Service, but clearly there are other implications, including for the social enterprises to which the noble Baroness, Lady Barker, referred. In that context, it is interesting to consider the position of the voluntary sector compared with other organisations, some of which purport to be social enterprises. I cite the example of Circle, of which we heard a good deal last week and read about over the weekend. This organisation has now taken over the management of the Hinchingbrooke Hospital, which apparently had a pre-tax loss of £44 million in its last year. When it floated on the stock market, its prospectus said that growth would place, "““a strain on its managerial, administrative, operational, financial, information technology and other resources and could affect its ability to provide a consistent level of service to its patients””." I cannot imagine that any voluntary organisation, or most other social enterprises, would have come within a mile of obtaining a contract under those circumstances, and it seems strange that that contract should be given to an organisation of that kind while the voluntary sector is significantly handicapped by the current VAT regime. I hope very much, therefore, that the Government accept the amendment and undertake the review that it suggests, so that we might take matters forward and relieve them of a burden which reduces nobody’s profits but does reduce the capacity of the sector to provide a better and wider-ranging service to the people whom it seeks to serve, and in whom we all have an interest.