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The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stephanie Peacock)
It is a pleasure to serve under your chairmanship, Mr Twigg, and I am glad to respond to this debate. I begin by congratulating the hon. Member for Gosport (Dame Caroline Dinenage) on securing this important debate. The hon. Lady’s support for membership-based charities is evident from her speech and through her work as the Chair of the Culture, Media and Sport Committee. Of course, it is always a pleasure to hear from the hon. Member for Strangford (Jim Shannon). I thank him for his kind words. I would like to take this opportunity to thank all those who work, volunteer and donate to charities across the country.
The UK has many notable membership charities, including our great national museums and galleries, such as the V&A and the Tate, the caretakers of our heritage, including the National Trust and English Heritage, and our celebrated arts organisations, from the National Theatre to the English National Opera. The hon. Lady gave so many powerful examples, as did other Members. She rightly highlighted the huge number of people across the country who are supporters and members of these organisations.
The Government highly value the work that the sector does and the social value it delivers. It is an incredible force for public good. Over the past year, I have had the opportunity to visit and meet with many charities, including the Samaritans, Citizens Advice, London Plus and the NCVO, to name just a few. Each has reminded me of the vital and inspiring work that charities do each day.
I will address the main concerns that the hon. Lady has rightly and understandably raised, and then talk about some of the broader support that the Government are offering the sector. I recognise, and I am very sympathetic to, the concerns raised by the hon. Lady about the implications of the Digital Markets, Competition and Consumers Act for charities with membership schemes.
Just two weeks ago, I spoke to some of our national museums about that very issue. I know that funds raised from membership schemes are a vital source of income for membership-based charities. Earlier this year, the Department for Business and Trade consulted on the secondary legislation that would be required and has since been engaging regularly with the sector to understand its concerns better and make sure its voices are heard. I am very grateful to the charitable sector for its engagement so far with the Department for Business and Trade on those proposals. I reassure hon. Members and charities that the Government continue to carefully consider these issues, particularly the cooling-off period and the additional administrative costs.
It is important to say that I did meet and speak to the relevant Minister, the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Halifax (Kate Dearden), and I would be very happy—she would be as well—to meet the hon. Member for Gosport to discuss this issue further. She will understand that this is not my policy area, but I have relayed the concerns to the DBT. I am confident that we will be able to find an acceptable solution, because the DBT will shortly publish the Government response to the consultation on subscription regulations, and we are committed to continuing close engagement with charities. Although I acknowledge that it is not my Department, I want to specifically address the point about the response to the letter, and a date for the roundtable, that she references. I will endeavour to get both those issues dealt with as soon as possible, to get her a date and a response. There is also the offer of a meeting with me and the relevant Minister.
On a related note, I hope that the charity sector will be reassured by His Majesty’s Revenue and Customs’ guidance, which has been changed to set out its interim position, so that charities can continue to claim gift aid on eligible membership subscriptions. The Government’s intention remains that eligible charities can continue to claim gift aid on the same basis as now.
I acknowledge the concerns that Members have raised about the impact of national insurance contribution increases on charities. I have met representatives from the sector to discuss the NICs changes on more than one occasion, and of course we debated the issue in this Chamber in January. As part of last year’s Budget, the Government took a number of difficult decisions on tax, welfare and spending, to fix the public finances, fund public services and restore economic stability. In her open letter to the voluntary sector on the issue, my right hon. Friend the Chancellor of the Exchequer stated that raising the rate of employer national insurance contributions for charities was one of the most difficult decisions that she had to take in that Budget.
The Government recognise the need to protect the smallest businesses and charities, which is why we more than doubled the employment allowance, taking it from £5,000 to £10,500. That means that more than half of employers—including charities—with NICs liabilities will either gain or see no change this year, and eligible employers will be able to employ up to four full-time workers on the national living wage and pay no employer NICs. In addition, we expanded eligibility for the employment allowance by removing the £100,000 eligibility threshold, to simplify and reform employer NICs so that all eligible employers now benefit, and all charities are eligible for the EA, even if they are wholly or mainly carrying out functions of a public nature.
I will now move on to some of the broader support that the Government are giving. I know that in recent years charities have faced significant challenges, including a difficult funding situation. I have seen that at first hand in my own constituency, where I am a patron of BIADS—Barnsley Independent Alzheimer’s and Dementia Support—which is a charity supporting people across the area. I recently met its representatives, alongside my constituency neighbour, my hon. Friend the Member for Barnsley North (Dan Jarvis)—the Minister for Security—to discuss its challenging circumstances. It is one of a number of brilliant Barnsley charities that support local people; its challenges are reflected across the borough.
The Government are committed to supporting the sector in a number of ways, including direct funding to aid its vital work. That includes the £270 million arts everywhere fund, which delivers on the Government’s “Plan for Change” to support growth and increase opportunities. It can provide support for organisations in need of urgent financial support and infrastructure work. In June, the DCMS published the Government’s first ever dormant assets strategy, setting out our ambitions for boosting participation, ensuring its continued good governance and illustrating how the next £440 million of funding will be distributed. In July, the Chancellor announced £500 million for the better futures fund—the largest outcome fund of its kind in the world—to support 200,000 struggling children, young people and their families through innovative impact funding projects.
Alongside direct funding, the Government continue to support charities via tax reliefs and exemptions. Charities and their donors received about £6.7 billion in tax reliefs in the 2024-25 tax year. The long-running gift aid scheme paid out more than £1.7 billion during that timeframe alone, benefiting more than 67,000 organisations. Charities also benefit from a range of VAT reliefs, estimated to be worth more than £1 billion annually. The Government are committed to removing tax barriers where possible. The Chancellor announced in the Budget that we are introducing a new VAT relief for business donations of goods to charities for onward distribution or use in their services. The new relief will boost the supply of essential items to charities, enabling them to reach the people and communities who need them most.
Cultural organisations, many of which are charities, also benefit from tax reliefs, which help to ensure that they can share their world-class productions, performances and arts with more people across the country. Since April 2025, theatres, orchestras, museums and galleries have benefited from higher tax relief rates of 40% for non-touring productions, and 45% for orchestral and touring productions. Finally, museums and galleries exhibition tax relief was also made permanent.
Charitable giving is one of the most commendable characteristics of British society, and the Government recognise the importance of fundraising to the charity sector. It would be remiss of me not to highlight the remarkable work being done across the impact economy sector and the vast potential for increasing funds for civil society. Charitable giving and philanthropic investment build on the British spirit of generosity. A remarkable £15 billion was donated to charities last year.
I have often heard that more can be done to grow philanthropic investment. That is why earlier this year I outlined how the Government will better connect, unlock and partner with philanthropists. As part of this work, the Secretary of State has committed to the development of a place-based philanthropy strategy. It will set out how the Government can create an environment that encourages philanthropists to support local communities and ensure that the benefits of philanthropy are felt nationwide.
We are going even further to promote investment in civil society. The recently launched Office for the Impact Economy provides a front door for investors and purpose-driven business to partner with Government to extend their social impact across the nation. DCMS will be working closely with the office to build capacity and capability, driving cross-Government strategy at all levels of government to make every pound of public funding go further.
As well as providing funding to the voluntary, community and social enterprise sector, the Government have committed to reducing administrative burdens on businesses, including charities, by 25% by the end of this Parliament. That is why in October I set out a series of changes that we will make next year to the financial thresholds for charities. Updating the financial thresholds will save charities an average of £47 million each year, while ensuring that the regulation of the sector remains proportionate and effective.
All that work is underpinned by the civil society covenant, which represents a fundamental shift in how the Government work with the sector. It is a recognition of the value that civil society brings, and a commitment to work in partnership to deliver better for citizens and communities. I was pleased to meet a number of civil society organisations at London City Hall a few weeks ago to discuss how the civil society covenant can help the Government to connect across the whole sector.
I am delighted that No. 10 this week announced plans for the civil society council, which will work in partnership with Government at the highest level to drive and oversee implementation of the covenant. Kate Lee, the chief executive officer of NCVO, will chair the council, and an expression of interest process, which opens this week, will identify members from across the diversity of civil society.
I again thank the hon. Member for Gosport, the Chair of the Select Committee, for securing this important debate and giving us all the opportunity to raise the profile of this important subject. I want to continue to further Government support for membership-based charities, whether that is direct or indirect financial assistance, improving the philanthropic environment, or bringing in charities to work more closely in partnership with the Government. I have heard the serious points she made, and I am happy to follow up with her after the debate.