Cameron commits to funding reform for the “first” sector

Cameron commits to funding reform for the "first" sector

CHARITIES could be on the brink of saving around £lbn a year, after the Prime Minister said he would look at funding charities, voluntary organisations and social enterprises on the same basiS as government.

The Prime Minister made the announcement in parliament in response to a question on how to save charities from next year’s increase in VAT.

It has led to a call for an immediate VAT rebate to be introduced to put the third sector on the same footing as local authorities and other public bodies that are currently able to reclaim the VAT they spend.

Across the UK, charities pay £lbn in VAT every year, an amount that will rise by £150m when the tax goes up in January next year.

In Scotland this translates to around £115m a year.

The extra cash would enable the voluntary sector to better support vulnerable

people during the economically difficult times ahead, and is also necessary to create the Prime Minister’s vision of a Big Society, said sector leaders.

Speaking during Prime Ministers question time last week, David Cameron said:

"We will want to do everything we can to help what used to be called, rather condescendingly, the third sector but I believe is the fIrst sector: the excellent charities, voluntary organisations and social enterprises that do so much for our country.

"One thing we should do is look at funding them on the same basis as the government funds itself. The government is always very generous with its own bureaucracy, and it needs to recognise that so often these fIrst sector organisations have the right answers to the social problems in our country."

The chief executive of the Scottish Council for Voluntary Organisations (SCVO), Martin Sime, urged the Prime Minister to take immediate action before the VAT increase in January next year.

"David Cameron’s warm words on this issue are very welcome indeed," he said. "The third sector is currently battling against a tax injustice that undermines its ability to deliver effective public services.

"This week the Prime  Minister also announced his plans for a Big Society and I would urge him to recognise that the government needs to learn to nurture and support rather than direct and control such initiatives.

"If the UK Government really wants to help charities and voluntary organisations do more then there are some pretty simple steps it can take, such as removing petty restrictions which prevent unemployed people froin volunteering, allowing charities to reclaim VAT on the things they buy, and by making Gift Aid easier to claim." 

Stephen Bubb, chief executive of the Association of Chief Officer of Voluntary Organisations (ACEVO), writing in his blog this week, also called for the government to introduce a VAT rebate.

"I was delighted to see an exchange in the Commons on Wednesday at PMQs. Bob Russell MP is a good friend of the sector and one of the MPs ACEVO had been in touch with on the whole VAT scandal.

"David Cameron’s answer goes right to the heart of the issue of the unfair playing fIeld between us and the state in tendering.

"We are following up with the PM and the Chancellor. One solution we will be suggesting is what the HMRC do for academies. It refunds the academies’ VAT bills in full through a grant so that academies are not at a disadvantage with local authority schools.

"So a refund grant scheme maybe the answer. We are proposing this to government."

The Prime Minister’s Big Society plans include encouraging groups to run post offIces, libraries, transport services and shape housing projects.

This week he announced a pilot project through which the government will fund and encourage the creation of community groups.

However, fears have been raised that the government will be pushing community and voluntary groups to fIll gaps in public services arising as a result of cuts.

SCVO has this week written to Scottish Secretary Michael Moore urging the government to act on VAT and Gift Aid.