Jerry Cowley (Mayo, Independent)
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Question 113: To ask the Minister for Health and Children if the system of VAT being added on to the care services provided by commercial companies to older people will be removed; her views on whether the Government is adequately providing essential care services for older people; and if she will make a statement on the matter. [29555/06]

Seán Power (Kildare South, Fianna Fail)
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Home care packages for older people deliver a wide range of services. They are delivered through the Health Service Executive by a range of providers, including the Health Service Executive, voluntary groups and the private sector. They consist of a mixture of grants, contracted care services, therapeutic input and equipment and other such community services to facilitate the older person to remain living in his or her home.

Home care services provided directly by the Health Service Executive do not generally come within the scope of VAT, as public bodies are not regarded as taxable persons. It does not charge VAT on the services it provides and cannot recover VAT incurred on its input costs.

Where home care services are provided by private companies for a consideration in the course or furtherance of business, the provider may be obliged to register and account for VAT at the appropriate rate depending on the type of service provided. Home care provided to individuals consists of services which may be liable to VAT at different rates. The current VAT treatment of such services is in accordance with the EU Sixth VAT Directive, with which Irish VAT law must comply.

Officials from the Department of Health and Children, the Revenue Commissioners, the Department of Finance and the Health Service Executive are examining VAT liability for home care services provided by private companies to older people. In particular, they are trying to ensure the home care services provided under home care packages are exempt from VAT in a manner that complies with EU law.

The Government has made services for older people a priority. This means supporting older people in dignity, to live in their own communities, for as long as possible. Additional funding for services for older people and palliative care, amounting to €150 million, has been allocated in the 2006 budget. This is the largest ever increase in funding for services for older people. It is important to have a high quality of residential care available for those who require it and additional funding was also made available in the 2006 budget for the subvention scheme.

Jerry Cowley (Mayo, Independent)
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It is a national scandal that the State is failing to provide necessary services for older people. Even though some must scrimp and save to support themselves in their homes, the Government cruelly imposes VAT on the companies providing care services. These companies inevitably pass on this charge to the person who must pay to keep an elderly relative at home. Such people are being unfairly doubly charged. This points to the duplicity of the Government which, on one hand, encourages the private sector to provide services for older people which are its responsibility to provide, while, on the other hand, making it more difficult for older people to buy the service they are compelled to buy because the Government will not do so. It is absolutely ludicrous.

I am encouraged by the Minister of State's reply that he is reviewing the situation. Will he remove this inequity immediately? It is a crippling charge. The Government is not providing adequate home care for people who require that service. The available home care packages are limited. In particular, those who are trying their best to keep older relatives at home must not only provide the cost of paying a private company to do what the State will not do but also face the further cost of the VAT that is cruelly taken by the Government on that charge.

The Minister, Deputy Harney, encouraged these companies to provide these services, no doubt to satisfy the Progressive Democrats' private profit agenda. No mention was initially made that VAT at 13.5% would be charged for those services. Only those who are registered for VAT and have a VAT number, which is not the case for most of those looking after elderly relatives, can get that money back. "Liveline" listeners were lining up to talk about this issue and they have a strong case. I ask the Minister of State not merely to talk about reviewing the situation but to tell us whether the Government is committed to removing this inequitable charge.

Seán Power (Kildare South, Fianna Fail)
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Will the Deputy let us know if he has a magic wand or is doing something we are not? As I explained, the Government must comply with the relevant EU directive. Officials from the Department and the HSE are working with the Revenue Commissioners and officials from the Department of Finance to see if there is some way to overcome the issue.

We appreciate the value of home care packages and the wonderful work that is being done in this area. In last year's budget, the amount of money available for this service was almost trebled. This resulted in an increase in the number of packages available from 1,100 in 2005 to 3,000 this year. These services keep people out of hospitals and facilitate the early discharge of elderly patients. They are provided by several providers, including the HSE. We are keen to see a situation where this service could be provided VAT free, which would make it more affordable for families. It would also mean the Government would be in a position to provide more home care packages.

We showed our commitment in last year's budget which included a major investment in this service. That investment will continue.

Jerry Cowley (Mayo, Independent)
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Does the Minister of State not agree this burden is too great for many people? How can VAT be charged on this service when there are civil servants and others employed by the Government in the service who should be able to recognise the inequity of this charge? The system is supposed to serve the people but seems rather to serve those who are making profits. The interests of the latter appear to have the upper hand over the needs of the public. It is wrong that a situation can arise whereby people are trying their best to pay for a service and must then face a second charge imposed by the Government. How did such a situation come about, especially given the Government's encouragement of private companies to provide this service? Is it part and parcel of the Government's role to act in this way or will we ever see a situation where people are put before profit?

Seán Power (Kildare South, Fianna Fail)
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It is not a matter of putting people before profit. As I explained, home care packages are provided by several different bodies, some of which are private and one of which is the HSE. The current VAT treatment of such services is in accordance with the EU's sixth VAT directive, with which we must comply.

Catherine Murphy (Kildare North, Independent)
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The Minister of State is correct that we will all benefit from the home care packages if they serve to reduce the dependence on hospital beds. It is important that people are confident that this is a solution for which they may opt. Given that 13.5% of €150 million is in the region of €20 million, is the Department of Health and Children seeking to reclaim this money from the Department of Finance? If not, this charge serves to reduce the funding that should be directed towards the home care package. It is desirable that this amount should be further increased and the most important issue is that it covers the costs of the service.

I am aware there are delays in payments under this scheme. I have dealt with several people who have had to get loans to cover the first two months before the payment comes through. This is a particular difficulty for persons on the low end of the income scale. These problems must be resolved if this service is to be an option for people across the spectrum. The VAT charge should be repaid from the Department of Finance to the Department of Health and Children so that the funding of €150 million is not reduced by 13.5%.

Seán Power (Kildare South, Fianna Fail)
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We are developing a much more flexible approach in dealing with home care packages. In some instances, people are given the money when they can provide the required service themselves. We have entered into discussions, as I outlined already, with the view to reaching a situation where this service can be provided without VAT. If we can do so, we will be in a position to provide a far greater number of home care packages throughout the country. As I mentioned, we have already increased the availability from 1,100 last year to 3,000 in 2006. In the first six months of this year, an additional 1,800 clients became in receipt of home care packages.

I will investigate what Deputy Murphy said about delays in payments and respond to those concerns at a later date. I appreciate the difficulty such delays would cause.

Liam Twomey (Wexford, Fine Gael)
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It is obvious patients are not getting a fair deal on this issue. From the perspective of the taxpayer, if the Government is spending this amount of money, a cost benefit analysis should have been done. Does the Minister of State know how much it costs the HSE to provide each home care package? Taking into consideration a 25% premium, which comprises the VAT and the profit of the private company at a minimum, is the Minister of State saying private companies can deliver the same quality and type of service at a lower rate than what it would cost the HSE to hire home helps to provide exactly the same service? According to the Government's value for money audits, there is an obligation on the Department to undertake such an analysis to ensure it is getting the best value for the taxpayers' money. Has this been done or is there an intention to do so?

There is no way around the VAT issue because its imposition is necessitated by an EU directive. The Minister for Finance, Deputy Cowen, has not managed to do it when answering parliamentary questions in this House and it is highly unlikely anybody else will come up with a solution. Has the Minister of State at the Department of Health and Children, Deputy Seán Power, ever done a cost benefit analysis on this issue comparing private sector delivery of this service with that of the Health Service Executive?

Seán Power (Kildare South, Fianna Fail)
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We had a number of pilot projects throughout the country providing these home care packages and the feedback suggested they worked exceptionally well. We decided, on that basis, to increase our investment from 1,100 to 3,000 home care packages throughout the country.

The Health Service Executive and also the private sector provide this service and competition must be welcomed in this area. In some cases the private sector may provide a more flexible service. It is important that we continue to invest in this and if we reach a point where this service can be provided VAT free, all the better and all the more money we will have to spend to provide home care packages for more people throughout the country.

Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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We must proceed to Question No. 114.

Liam Twomey (Wexford, Fine Gael)
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If the VAT issue fails, does that mean this initiative may be withdrawn?

Seán Power (Kildare South, Fianna Fail)
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We have not reached a conclusion on it. We are seeking a solution and our experts in different areas are examining it to see if it can be overcome.