Health and Social Care Bill

My Lords, we have discussed many aspects of equity and equality in relation to this Bill. In moving this amendment, I wish to draw attention to one matter that concerns the equity of provisions for VAT. Noble Lords will be aware that certain organisations, such as the NHS and charitable organisations, have particular exemptions in respect of VAT. I am not an expert in this area and certainly would be keen to hear from those noble Lords here today who are. It was only in January this year that we debated the unfair burden placed on charitable organisations that take on public services but cannot claim the same VAT exemptions as the health service providers they have succeeded. A major inequality exists with respect to irrecoverable VAT for charities providing healthcare services. While the NHS is able to recover VAT on, for example, certain non-business supplies, charities are unable to do so. Of course, the NHS’s ability to recover VAT on certain non-business supplies is written into Section 41 of the Value Added Tax Act 1994. Under current legislation, when services are transferred from the NHS to the charity sector, there is a VAT gap that needs to be filled either by charitable funds or by the local PCT. I shall give one small example, provided by Sue Ryder, one of they UK’s largest specialist palliative care providers. One of Sue Ryder’s hospices incurs £44,000 in VAT each year. If that hospice was run by the NHS, it would be able to recover 57 per cent of that amount under Section 41 of the VAT Act. That would allow the hospice to employ a nurse for around 44 weeks, or provide 1,500 bereavement sessions to families who had lost a loved one, or provide 2,500 hours of support from a carer. This amendment recognises that the Treasury has been engaged with the hospice sector to try to find a solution to the problem. I want to ensure that it remains on the Government’s agenda, so the amendment asks them to present a report to Parliament on this critical issue. I am grateful to Sue Ryder Care for making me aware of this issue. As many noble Lords are aware, Sue Ryder provides specialist palliative and long-term care for people living with cancer, multiple sclerosis, Huntington’s disease, Parkinson’s disease, motor neurone disease, stroke, brain injury and other life-changing illnesses. It is one of the largest specialist palliative care providers in the UK, offering 4 million hours of care, over 100,000 days of long-term residential care, with the help of more than 8,000 volunteers. It provides vital services for people in their darkest hours of need. Who would argue that we should not do all we can to ensure that this continues? Yet these services are threatened. They face an additional burden at a time when the Government are asking organisations such as Sue Ryder to do more. It could be one of the many ““any qualified providers”” that are invited to take over services such as hospice care under the Bill. As far as I am aware, there are currently 36 NHS hospices, all of which are rightly exempt from VAT. I understand that the issue is complex. It concerns EU legislation as much as our own national fiscal policies. Moreover, the Government have previously expressed concern that addressing the unfairness for the charitable sector would subsequently create problems for the private sector. Nevertheless, I am not convinced by these arguments and find it untenable to believe that this House, with all its creativity, cannot address this problem. It is surely unreasonable to expect those who give charitable donations to organisations such as Sue Ryder to pay tax twice—their donations are from income that is already being taxed, yet the vital services which their donations go towards supporting are then taxed again for VAT. This issue is not limited to hospice services but affects many charitable organisations providing a range of health services. The situation is made all the more grave by the recent increase in VAT to 20 per cent. Estimates by the Charity Tax Group state that, prior to the rise in VAT, charities were paying more than £1 billion in irrecoverable VAT and that, after the rise, this figure has gone up by an extra £143 million. Sue Ryder informs me that approximately one-third of its income is from statutory services. What this means in effect is that, without its valuable contribution to care, the cost of providing it in the NHS would be two-thirds more. We should not expect the charitable sector and those individuals who give their hard-earned money to support it to subsidise care that everyone agrees is vital, yet we do. We not only ask the sector to continue to provide these services at such significant cost-savings but we add insult to injury by saying that it should do so without the tax benefits given to the NHS. I am aware from a discussion on this same issue in the other place that various solutions have been put to government to rectify the problem. One is the so-called ““poppy”” solution, whereby a matching grant for the VAT is given by way of return to the charitable organisation. This solution worked well for the Royal British Legion, and it should be possible to have something similar for hospice-care providers. It has also been proposed that relief enjoyed by local authorities and other public bodies under Section 33 of the VAT Act 1994 and certain healthcare provisions under Section 41 of the same Act could be used to assist hospices. Alternatively, similar exemptions to those in operation across the education sector, where academies are able to enjoy the same exemptions as those given to local authorities, could be used. To date, the Government have taken no action on any of the proposed solutions. Given the scope in the Health and Social Care Bill for additional services to be taken on by the sector, the need for action is even more urgent. The amendment seeks to strengthen the duty on the Secretary of State to promote equality in health service provision and would require the Secretary of State to report to Parliament on the way in which VAT has been treated with respect to charities providing health services. This would enable us, in a transparent way, to see clearly the impact of any inequity in this kind of provision and also the total impact on the sector. I am aware that more will be needed. There will almost certainly need to be two solutions to the problem—one pre and one post NHS reform. It is for this reason that the amendment seeks a report and not a solution. We want to ensure that we create a sustainable solution that applies when the clinical commissioning groups commission care. In order to do that, we need to have the information about how this affects voluntary sector service providers. I am sure noble Lords will want to discuss the merits and potential benefits of this approach and I look forward to their contributions. I strongly hope the Minister will see fit to accept the amendment and recognise that the unfair treatment of charities that are taking on health services from the NHS must be addressed as an urgent issue if the aims of the Bill are to be realised. I beg to move.