Hospices (VAT)

Debate between Bob Russell and Martin Horwood

Tuesday 10th May 2011 Commons Chamber

[Bob Russell (Colchester) (LD)]

The hospice movement is a great British success story. If we wanted to think of something that epitomises the big society, the 209 independent hospices the length and breadth of the land, with an army of more than 100,000 volunteers, tick all the boxes.

The hospice in my Colchester constituency—St Helena hospice, named after the town’s patron saint—which serves the whole of north Essex, has around 800 volunteers who help in a wide variety of ways, raising money and organising events, working at several charity shops and helping at the hospice itself, which is centred on an ancient farmhouse, Myland Hall. Around 180 professionals are employed by the hospice as medical and key support staff, but without the volunteers the hospice could not exist. It is very much a partnership, which for the past 25 years has been a beacon of community involvement. But all this has been achieved with one arm—financially speaking—tied behind their backs.

I refer to the unfairness of the value added tax which penalises the charitable hospices while exempting exactly the same level of operation undertaken at the 36 national health service hospices and hospitals, which are VAT-exempt. This unfairness—the taxman taking money raised for charitable good causes—does not affect hospices alone, of course, but tonight’s debate is specifically about hospices. I look to the coalition Government to take urgent action to provide the necessary means to ensure that the VAT currently paid is refunded so that the money can be spent for the purposes for which it is raised or donated—the treatment of patients.

I am grateful to Help the Hospices, the national umbrella group, for its assistance with background briefing for my speech. I also thank the Charity Tax Group for the information that it provided. The Charity Tax Group estimates that before VAT was raised to 20%, the total irrecoverable VAT across all charities was more than £1 billion. The new higher level of VAT has cost the charitable sector an estimated extra £143 million. For the record, I voted against raising VAT to 20%.

This is not the first time that I have raised with the Government of the day the unintended consequences of VAT charged to charities, and thanks to my intervention several years ago the then Chancellor of the Exchequer, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), moved quickly to came up with a solution whereby the Royal British Legion receives a matching grant for the VAT it is required to pay on the production of its Remembrance day poppies. I invite the coalition Government to use this as a precedent to give matching grants to hospices for the VAT that they pay, as an interim measure in advance of seeking to amend the legislation to exempt them from VAT as if they were part of the NHS for this purpose. After all, the work they do is no different from what the NHS does, other than the fact that it involves the voluntary and charitable sector.

If the “poppy” solution is not acceptable, I invite the Government to see whether the relief enjoyed by local authorities and other public bodies under section 33 of the Value Added Tax Act 1994 and certain health care provisions under section 41 of the same Act could be used to assist hospices. Failing that, why not adapt the provisions in the Finance Bill to ensure that academy schools can recover VAT on non-business supplies in the same way as local authorities can? If it is okay for academies—educational establishments that are not universally welcomed—applying the same solution to hospices would probably generate near unanimous approval. In this respect, I congratulate the hon. Member for Scunthorpe (Nic Dakin) on his ten-minute rule Bill earlier this year, which proposed a simple legislative solution.

When the original European Union VAT system was developed, the special position of charities was not considered. Alas, because hospices provide services that are either exempt from VAT or outside the scope of the VAT system, they cannot recover the VAT they pay on their expenditure on supporting their charitable aims. This is something that I am sure Members across the House would want to see changed.

Increasing demand for hospice care, alongside the Government’s public service reform and big society agendas, is likely to result in more care services being transferred to hospices. Indeed, I am grateful to the Sue Ryder charity, which already has seven hospices. It first alerted me to this serious problem, telling me:

“A recent transfer of an NHS hospice to Sue Ryder under the Transforming Community Services initiative has sparked interest in the viability of charities taking on other NHS hospices and services. We believe there should be a level playing field in VAT between charities and the NHS so that all possible funds can go towards the delivery of care.”

[Martin Horwood (Cheltenham) (LD)]

One of the Sue Ryder care hospices is in my constituency, and I warmly support what my hon. Friend is saying. Does he agree that as we see the outsourcing of more NHS services to providers such as Sue Ryder, that could deliver a windfall to the Treasury rather than directing funds where they are most needed, which is to health and palliative care?

[Bob Russell]

I am grateful to my hon. Friend for raising that point, which I was just about to mention. Let me be financially blunt about this: if the hospices did not exist, the excellent work that they do would fall to the NHS and cost the public two to three times more because of the considerably lower cost of hospices, brought about by the special working combination of professionals and volunteers, with fundraising and so on, which is the basis on which hospices were founded and have existed over the years.

I understand that, on average, charitable hospices receive about one third of their funds for the services they provide from statutory sources, which leaves two thirds to be raised to cover all the other costs. This already challenging target is not helped when it is realised that the taxman is helping himself to 20%. I am advised that most local hospices do not have three-year agreements with NHS commissioners, relying instead on year-on-year negotiations that are, by their very nature, subject to budgetary pressures within the NHS. Alarmingly, a survey of member hospices conducted by Help the Hospices last March found that 64% of primary care trusts had frozen NHS funding for hospices for the period 2010-14.

I will set out some statistics about the excellent job that the nation’s hospices do. Collectively, they provide more than 26 million hours of specialist care and support every year, 90% of which is provided through day care services and care in people’s homes, and 77% of adult palliative care in-patient units are run by hospices, with the voluntary sector providing 2,139 adult in-patient beds, compared with just 490 provided by the NHS. All children’s in-patient units in the UK are run by the voluntary sector. Independent voluntary hospice expenditure increased by a fifth between 2007 and 2009, which indicates the continuing growth and importance of hospices in the life of the nation. More than £1 million is raised every day for the nation’s hospices, from fundraising, legacies and donations.

The value of the voluntary work carried out by the 100,000-plus volunteers is estimated to be worth in excess of £112 million every year. Help for Hospices has told me:

“Hospices are unique among providers of healthcare because they contribute so significantly to the funding and provision of hospice and palliative care. In 2009, hospices spent £687 million. For every £1 the State invests in local charitable hospices, those hospices deliver £3 worth of care.”

It thus makes sense that the burden of VAT on hospices should be lifted so that they can do even more good for the benefit of the communities that they serve.

Help for Hospices also told me:

“Hospice care receives overwhelming public support in the UK. A recent survey showed more than 80 per cent of people believe everyone with a terminal illness should have the right to receive hospice care.”

My only observation is that I am amazed the figure is as low as 80%.

I would like to say a little more about the St Helena hospice in Colchester, which I visited on Saturday ahead of this evening’s debate and in order to inspect the newly extended Joan Tomkins day care centre, which was officially opened to coincide with the annual fete in the grounds of the hospice.

The original day care centre, named in memory of the late wife of local business man Mr Robin Tomkins, whose generosity made the building possible, was opened in April 1988 by the Princess of Wales. I remember that well, because my mother was in the nearby hospice and died a few days later. The princess spoke to my father at my mother’s deathbed, and he spoke afterwards of the warmth of compassion that she had shown.

St Helena hospice, the main building, was officially opened in April 1986 by Her Majesty Queen Elizabeth, the Queen Mother, so we have just celebrated its 25th anniversary. As an aside, I should have said that my mother was one of the volunteers in the early months after the hospice opened.

Like other hospices throughout the country, St Helena is rooted in the local community that it serves. It provides free medical and nursing care and therapy to adult patients with any diagnosis. Alongside the two day centres there is also one at Clacton, and there is in-patient accommodation in the purpose-built extension to the historic Myland Hall.

Services are also provided for patients in their own home. Indeed, in the past five years there has been a 58% increase in the services in patients’ homes. St Helena hospice also provides pre and post-bereavement support to family members, including children, and attached to the hospice is an education centre, providing education for health and social care professionals.

It will cost St Helena hospice more than £4.6 million in the current financial year to provide its valuable services, and it would be great if it did not have to pay value added tax, but could instead spend that money on the purposes for which people wish it to be used—supporting the work of their local hospice.

Help for Hospices told me:

“As the population ages and people approach the end of life with ever-more complex co-morbidities, a spectrum of highly flexible and adaptive hospice and palliative care services need to be available.”