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Education action zones are having to pay back tens of thousands of pounds to central government in VAT. ...
Education action zones are having to pay back tens of thousands of pounds to central government in VAT.

The news came at the end of the financial year, after zone leaders had been encouraged by central government to think they could escape VAT by coming to an agreement with their local Customs and Excise offices.

Mark Pattison, chair of the network of councils involved in the zones, said he felt let down. Mr Pattison is education director at Blackburn with Darwen BC, whose education action zone will have to pay an estimated£70,000 to£80,000 in VAT.

He said: 'The network thinks it was not the government's intention originally when it gave the money. We are most worried about the impact it will have on the education programmes. They are less likely to achieve their targets if they get less money.'

A Customs and Excise spokesman said: 'There is usually quite a lot of VAT floating around tied with local government funding that can't be recovered.'

He said a supplementary grant to cover the money lost was the standard way of solving the problem, as happened with grant-maintained schools when they had to pay VAT.

A Department for Education and Employment spokeswoman said: 'A supplementary grant is one way we can make the money available to education action zones, but we'll have to look at the details surrounding it.'

Local Government Association education chair Graham Lane said: 'The money has gone from the Treasury to the DfEE to the zone, to Customs and Excise and back to the Treasury. It's just not the way to govern the country.

'When this happened with grant-maintained schools the government made extra money available to compensate, which it needs to do now.'

The DfEE has received 123 applications for education action zones in the latest round of bidding, around twice the number it received in the first round.

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