Air ambulance charities have welcomed the Budget announcement that the government will refund their VAT on fuel costs, after a two-year campaign.

George Osborne announced today that all air ambulance charities will be eligible for an annual grant of £65,000 for the next five years to cover the cost of VAT on fuel costs, following a review by HMRC. There are 25 air ambulance charities registered with the Charity Commission, and several of them took to Twitter to welcome this afternoon’s announcement.

Inland safety boat charities will also get an annual £1m grant for the same reason; the RNLI already has a special agreement with the EU to exempt it from VAT on fuel. However there was no mention today of mountain rescue charities, which have also been campaigning for a VAT exemption.

Clive Dickin, national director of the Association of Air Ambulances, told civilsociety.co.uk: “It is excellent news - we have been lobbying government for two years to bring the treatment of VAT on air ambulances in line with other emergency services.”

He added that the measure “should be extended across all charities”.

There are 45 mountain rescue charities registered with the Commission. A spokesman for Mountain Rescue said: “Since we started campaigning for VAT relief some years ago we have always been told, both by Labour and Conservative governments, that their hands were tied and that any VAT relief would have to come from Europe and apply to everyone in Europe.

“That would appear to be contrary to what you're saying about the air ambulance concession and will, no doubt, be picked up by Tim Farron MP with the appropriate minister.”

He added that mountain rescue teams receive a grant or around £1,500 per team from central government, “but it has always been stressed that this has nothing to do with VAT relief”.

The Liberal Democrat MP Tim Farron has been leading the campaign to exempt mountain rescue charities from VAT.

An e-petition started by a member of the public, that called on the government to refund VAT payments on fuel for air ambulances, reached 100,000 signatures in the summer of 2012, triggering a debate by MPs in Parliament.

Conservative MP Guy Opperman introduced the motion calling for a review, and today he tweeted: “Air ambulance VAT campaign success! Great news. Thanks George. Only possible due to economy recovering.”

£1m for a second London air ambulance

London’s Air Ambulance will also receive a £1m grant from the government to pay for a second air ambulance, following the launch of a fundraising campaign by the charity in January 2014.

The charity predicts that a second ambulance will mean it can reach an extra 400 patients per year.

Graham Hodgkin, chief executive of London’s Air Ambulance, said: “This is fantastic news.” But he added that the fundraising campaign would continue: “The money will cover the cost of running a second aircraft and extended flying hours for one year so we’ll also be stepping up our efforts to raise the £6m a year needed to keep the helicopter trauma service running in the capital.”