Small Charity Sector

Tuesday 3rd March 2026 Westminster Hall

[Sir Roger Gale in the Chair]

14:30

[Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)]

I beg to move,

That this House has considered the small charity sector.

It is a great privilege to serve under your stewardship, Sir Roger. I am astonished and happy to see that so many Members take the small charity sector seriously, because it is a serious issue. As you will specifically know, Sir Roger, the sector is critical to everything that we do. The Government can do only a certain amount; the two other groups that aid the people and support the natural fabric of society are families and small community groups and charities. Small charities do much more than even the large charities that we hear all the headlines about. The charities that do the most are the ones about which we probably know the least. The purpose of this debate is to find out about them and discuss what we can do to help them.

I want to start with a few facts and figures that may astound colleagues from all parties. First, the “UK Charity Insights Report” found that 30%—fewer than a third—of charity leaders think that the sector is in a healthy position. Some 44% of charity leaders cite cost rises as one of their main challenges, up from 14% four years ago. We know that that is the case for many charities. Demand for charities’ services is growing, with 83% of charities recording an increase in demand over the last 12 months. Only one in 10 charity leaders said that they have been able to smoothly meet the rise in demand.

The “UK Giving Report 2025” said that although donations from the public to charity increased to £15.4 billion in 2024, which is quite remarkable, really, only half of people say that they donated to charity in the previous 12 months. That, obviously, is to do with levels of income. I am not making a party political point; this is just a statement about the situation for these small community groups.

The downward trend is evident across all age groups, but it is especially pronounced among young people. A little more than a third of 16 to 24-year-olds say they donated or sponsored in the past 12 months, compared with 52% in 2019. The small charity sector has been doing fantastic work, but it has been healthier. I hope that it can become a focus for us and the Government. It is a delicate flower and we need to nurture it in everything that we do.

[Alex Easton (North Down) (Ind)]

Will the right hon. Member give way?

[Sir Iain Duncan Smith]

I will indeed.

[Sir Roger Gale (in the Chair)]

Order. It is obvious that a large number of Members wish to participate in the debate; time is going to be very short. Before we embark on the inevitable round of interventions, which are perfectly permitted, I remind hon. Members who intervene that they are expected to remain for the whole debate.

[Alex Easton]

Does the right hon. Member agree that the small charity sector, including community and faith-based groups, plays a vital role in reaching the hardest-to-reach communities—not only in my constituency of North Down, but across our United Kingdom? Does he agree that the sector should be commended on its local leadership, which so often fills the gaps in statutory provision?

[Sir Iain Duncan Smith]

I do indeed. I am going to be careful about taking an intervention unless the Member nods their head to suggest that they are prepared to stay for the rest of the debate. I am like a spider at the centre of the web, but I promise I will not trap anyone if I do not have to; I have great confidence in Sir Roger’s stewardship.

Some 20 years ago, I visited the Easterhouse estate in Glasgow, which was one of the most deprived communities in the United Kingdom. At that time, the people there no longer looked to Government as their safety net from poverty; instead, it was local charities that stepped forward. People at the grassroots were present every day, patiently helping people into work and out of debt and addiction. The lifespan of individuals there was incredibly low, much lower than the UK average. That visit stayed with me throughout the latter part of my time as party leader. I saw deprivation and problems, but I also saw innovation at a local level to solve key problems. Innovation is critical, and that is what the small charity sector is about.

For that reason, I founded the Centre for Social Justice in 2004 to create a bridge between local poverty fighters and policymakers here in Westminster; we described it as connecting the back streets of Britain to the corridors of power. The work that the organisation does now is informed by an alliance of more than 1,000 grassroots charities. Today it is led by former charity leader and CSJ award-winner Andy Cook. This is all about real people doing things away from Westminster and achieving things that are never exalted enough; nor is experience of them ever transferred to central Government.

The CSJ harnessed the experiences of those charities to identify five distinct pathways to poverty, which it could then change; that idea still holds as true today as it did when I set the organisation up. Those pathways are worklessness and welfare dependency; addiction; educational failure; debt; and of course family dysfunction and breakdown. What I learned about the impact of worklessness and the other pathways helped to shape some of my thinking later on.

Every year since 2004, we have had an awards programme that recognises outstanding small community groups and charities that work quietly but effectively across the country. To see what they have achieved is one of the most moving things. They will not be known to many people, but what they do is remarkable and the lessons from their work ring out to policymakers. Instead of inventing new ways of doing things, we should look at what these groups do, see whether we can bring it to Westminster and, if necessary, make legislation that shapes lives along the same lines.

I want to refer to some community groups and charities that I know about—I hope other Members will do the same, to give a cross-party sense of what is going on in our communities. The first I want to talk about is Ripple, a suicide prevention charity based in Portsmouth. After the tragic suicide of her brother Josh, Alice Hendy dedicated herself to preventing harmful online internet searches from leading others to the same fate. We face a growing nightmare out there, with many people committing suicide as a result of what they see online. It is a real problem.

From her bedroom in Portsmouth, Alice created a browser extension that intercepts crisis searches, offering a calming breathing exercise before signposting people to accessible local services. I have seen it myself, and it is quite brilliant—the members of the Government who saw it were also taken aback by how remarkable it is. What began as a response to personal tragedy has become a lifesaving tool that has now been downloaded—believe it or not—more than 2 million times. This is a small idea, from a small set-up in a bedroom, that is now being used more and more widely.

That is why we need to learn from what these groups are doing, pick it up and see what we can do centrally. Many individuals will not have committed suicide as a direct result of that particular initiative, but there are many other examples. With the right Government engagement, tools like Ripple’s could be made available in schools, hospitals and jobcentres across the country, for example, yet Alice and her team still have to approach institutions one by one.

I say again to the Minister: these are the kind of huge, life-changing things we can take from this debate—I am sure colleagues will give similar examples—and we do not have to invent them from scratch, because they already exist.

Another shining beacon in our charity network is the BAC—the BAC O’Connor centre in Staffordshire; I first encountered it some years ago during my visits to grassroots charities. For 30 years, BAC O’Connor has been helping people to recover from addiction. We have long argued that, for obvious reasons, addiction is a reinforcer of poverty. BAC’s founder, Noreen Oliver, who sadly is no longer with us, was a much-loved member of this family. I was lucky enough to visit the centre again last year with the hon. Members for Neath and Swansea East (Carolyn Harris) and for Burton and Uttoxeter (Jacob Collier).

Some still new to political leadership in various other parties think that simply legalising drugs is a single-stroke way of ending the drugs problem and saving lives. BAC O’Connor believes in changing and transforming lives; its rehabilitation programmes remind us that recovery, not normalisation, remains the desired outcome. BAC O’Connor does groundbreaking work, as I am sure the hon. Member for Stoke-on-Trent Central (Gareth Snell) will want to explain further. It created its own restaurant for those coming out of addiction and is a very good example of what I am talking about.

In my constituency of Chingford and Woodford Green there are some remarkable small charities, from which the Government could learn important lessons. They include the Dream Factory, founded in 2008 by Avril Mills BEM. It supports children with life-limiting or life-threatening conditions or with severe disabilities by making their dreams—the things that they hoped or wished to do but have not been able to—a reality. It is a simple device: no matter what their situation is, Avril wants to hold them and say that they are worthy of achieving some of their dreams, although they may not be around long enough to see all of them.

Wanstead and Woodford Migrant Support, a Christian charity based in Woodford Green, offers free immigration advice, housing support, advocacy and social spaces for refugees, asylum seekers and vulnerable migrants. By providing community-based advice early, it helps prevent homelessness. Immigration and housing policy should recognise and learn from its preventive work and the savings created by local and interactive support.

There are others. Read Easy Waltham Forest offers free, confidential one-to-one coaching for adults who want to learn to read. One of the main reasons why people—mostly young men—end up in prison is that they simply cannot read and write. We discovered that they are too embarrassed to go into jobcentres, where they will be confronted by things that they need to read and write. They will probably be sitting in front of an efficient woman who is trying to help them, and they are embarrassed about admitting that they simply cannot read what she is putting in front of them. They will leave the jobcentre and fall into a life of crime because, without reading and writing, there is nothing out there that people can do for regular work. Many people who cannot read and write struggle; that is an often overlooked barrier to employment and to a straightforward, well-lived life.

The central issue that I hope this debate will address is this: the Government take grassroots charity too much for granted—they did before and still do now, to a greater or lesser degree; this is not party political, as I said. The Government fail to listen when charities are delivering what works, and I urge the Minister to raise that point with her colleagues. They ought to be looking with MPs at what is going on in their constituencies and seeing what we can bring forward. The Government should rise up to serious, lifesaving policy work that does not need degrees or involve people writing new policies on the backs of envelopes and everybody getting excited about them. The programmes of these charities have been tried and tested, and they work—in life, it is always a good start to look at what works and copy it. That is what most of us would want to do.

We need to foster a stronger culture of philanthropy in the UK that is closer to the American model. In its “Supercharging Philanthropy” report, the CSJ proposed practical steps to get us there. It suggested unlocking matched funding schemes to drive philanthropy and creating an evidence fund, so that smaller organisations can prove their impact and compete on a higher-level playing field. I want this debate to focus on how the Government can better learn from charities. There is a clear policy pipeline through which Ministers and Departments can systematically learn from grassroots charities working on the ground.

The problem is that larger charities have public affairs teams and a lot of money, so they can fill up the inboxes of the Government on a daily basis, which they do—I have experience of that. I am not attacking them; I am simply saying that the real innovation is in smaller charities. It is the same in the economy—job creation in the business sector is all about small businesses. They are the ones that take the risks, are dynamic and produce the most employment in the United Kingdom.

Small charities and community groups are exactly the same: they are innovators that see a problem, want to solve it and innovate to do that. When it works they really grow, but it is difficult because there is a glass ceiling that they must get through to reach the Government. That is what the Centre for Social Justice is trying to enable, but the issue needs to be recognised on a wider scale. That innovation must be harnessed to produce solutions.

I remain proud of what the CSJ has done to bring these voices to the national debate. The CSJ Foundation has now given more than £25 million to grassroots charities and hopefully will raise more. I hope that, as this debate continues, the Government will listen and recognise that, through discussions with groups such as the Centre for Social Justice and others, we can harness and recognise the issues. There are a significant number of colleagues here for a debate such as this on a normal day, and they all work with local community groups and charities. Let us find a way to show what is really good about what those do and get the Government to act, once and for all, on things that we know work, rather than doing experiments in public policy.

I rest on the basis that those charities are the lifeblood of what keeps society going, and we do not recognise them fully enough. I know that colleagues do, but the Government never do.

[Several hon. Members rose—]

[Sir Roger Gale (in the Chair)]

Order. Could colleagues who wish to speak please remain standing while the Clerk ticks off the names? I do not normally do this from the Chair, but 10 Members have put forward their names in advance; I propose to call them first. In order, on the Opposition Benches they are Peter Bedford, Danny Kruger, John Cooper, Wera Hobhouse, John Glen and Jim Shannon. On the Government Benches they are Brian Leishman, Patrick Hurley and Terry Jermy.

I am going to put a time limit of three minutes on each speech; that should take us—allowing for interventions—to just past quarter past 3. We have to call the Front Benchers at 3.30 pm, so there should be a little wriggle room at the end for anybody who was not on that list and wishes to speak. Otherwise, your card is marked, so intervene. I will also not allow interventions from anybody who arrived after the start of the debate.

14:47

[Brian Leishman (Alloa and Grangemouth) (Lab)]

It is a pleasure to serve under you in the Chair, Sir Roger. I thank the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) for securing this important debate.

When times are hard, the charity sector is always asked to do more. The unholy trinity of austerity, which made millions poorer, a global pandemic, which widened the inequalities created by that austerity, and the ongoing cost of living crisis has placed incredible demands on the charity sector across various communities in my constituency—I will speak about some of the fantastic charities that do so much.

It was an honour to be invited by Andy Roxburgh and Johanna Wilkinson to celebrate the Wee County Veterans 10th birthday just a few weeks ago. That group provides camaraderie and companionship for veterans who find themselves back on civvy street. There is no doubt that the support that the group has given has saved the lives of brave ex-servicemen and women.

The Sauchie Community Group has done so much for nearly 35 years. Laura’s Tiny Tots group gives children the best start in life; Anne always guarantees a warm welcome at Chatty Latte; and Keith’s recently formed history group preserve and promote Sauchie legends. There are also lots of other positive mental health activities in various musical groups, all of which are fantastic. The Sauchie resource centre is always busy.

Love in a Box was founded by two ladies from Alloa: Sharon McCafferty and Margaret Douglas. They want every kid in Clackmannanshire to experience the festive season. They make sure that every child wakes up on Christmas morning with presents to open.

Heading across the Forth to Grangemouth, it was a pleasure to meet Kirsty from Talbot House, who runs a lunch club for pensioners. Coming together to spend an afternoon in company over a meal and playing bingo is a social highlight for so many.

In Larbert and Stenhousemuir, Keeping Larbert and Stenhousemuir Beautiful was originally set up to tidy green spaces and plant and maintain flowers in the community. Now, it also runs a food pantry for vulnerable people in low-income households. It is a vital community drop-in centre for local people to come and spend some time.

Then there is the Carronshore heritage forum, a volunteer-led organisation dedicated to strengthening local community spirit in the village through projects, initiatives and events. For example, it is always great to see so many people come to the Christmas lights switch-on and for kids to meet Santa Claus. I thank the trustees, Craig, Colin, Stewart, Gordon, Robert and Davy, for inviting me along to serve up tasty dinners at the senior citizens Christmas lunch. It was commented that seeing an MP do an honest day’s work was somewhat refreshing.

14:50

[Mr Peter Bedford (Mid Leicestershire) (Con)]

It is a pleasure to serve under your chairmanship, Sir Roger. I thank my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) for introducing this immensely important debate. The UK’s charity sector is facing mounting challenges. Just like many small businesses, charities across the country have seen a sharp increase in their running costs, driven by persistent inflation and, unfortunately, unhelpful economic policies from the Treasury.

The increase in the national living wage, the rise in employers’ national insurance contributions and changes to business rates have placed considerable pressures on organisations that do so much for our constituents in need. For a sector that contributes £20 billion in economic value to the country each year, that should concern us all. As we have heard, these organisations are more innovative and grassroots-led, and ultimately they are generally supported by the public. If small and medium-sized charities continue to close at the current rate, it will impact our communities and place further strain on already stretched public services.

[Claire Young (Thornbury and Yate) (LD)]

Small charities with excepted charity status, including many individual scout and guide groups, do not have a registered charity number. 1st Ram Hill Scouts in my constituency tell me that they reckon they are excluded from about 80% of grants because they lack a charity number. Does the hon. Member agree that that is a serious sustainability priority for small groups?

[Mr Bedford]

The hon. Member has made her point clearly, and I am very sympathetic to the argument she puts across. In my constituency, I have seen the impact of these economic policies and the tough environment for small and medium-sized charities such as Wyggestons and Trinity Almshouses, which provides sheltered accommodation and residential care. It believes that the Charity Commission could also be doing more to support these groups.

Meanwhile, other charity-funded local care providers, such as Rainbows hospice for children and young people and LOROS, have made it clear that the economic climate is making their future more uncertain. These organisations are incredibly important to my constituents, and it would be an absolute travesty to see them reduce their services or close altogether. The Government need to think about creating a carve-out for the charity sector, so that it does not have to pay astronomical employment costs—something that Conservative Members argued for during the national insurance debate. That would be a sensible move to protect jobs and sustain local services, and it would command broad public support.

To conclude, charities are at the heart of our communities. They reduce pressure on public services and command widespread public support, yet we in this place are not doing enough to support and protect them. I urge the Government to listen carefully to the arguments that the CSJ and my right hon. Friend the Member for Chingford and Woodford Green have eloquently presented. My plea to the Government is to create a carve-out for the wider sector to ensure that running costs do not drive many charities, including those in my constituency, to close.

14:53

[Patrick Hurley (Southport) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Roger. In the interests of time, and given your advice, I have cut a huge chunk from my speech, in the hope that we can get more colleagues in. I wish to commend two charities in my constituency, and then make two requests of the Minister.

First, I commend Greta and the team at the Light for Life charity. I want to place on record my thanks to them—they are in Parliament today, and when the debate is over, I will go to see them. Light for Life provides support to people experiencing homelessness, at the most vulnerable point in their lives. It provides food and essential supplies and, perhaps more importantly, respect and connection to those in real difficulty.

I also want to recognise Richard and the team at Compassion Acts, with its food bank provision and financial and monetary advice to families; in the past, it has provided school uniform support to children who need it the most. These are the sorts of small charities that are, as the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) mentioned, the backbone of our communities. We would be much worse off without them.

There are some practical ideas that would, I hope, make a positive difference to the charities sector. One is to unlock unclaimed gift aid and match-funding mechanisms, which could incentivise and increase philanthropic giving, especially if targeted and supported directly for the smaller charities sector. Another proposal is to establish an evidence fund, maybe also financed from unclaimed gift aid, which would help small charities to demonstrate impact and compete more fairly for grants and contracts against the big boys—the larger charities that we all know and that overwhelm our inboxes.

I would be grateful if the Minister could address two questions. Does the Department view match funding as a practical tool to increase giving to small and medium-sized charities? Secondly, what steps can be taken to ensure that small charities can engage meaningfully in tendering grant applications and consultations?

14:56

[Danny Kruger (East Wiltshire) (Reform)]

I have two quick declarations of interest. I am the founder and still chairman of a charity working in prisons. It is 21 years old this year. My second declaration of interest is the fealty I owe to the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith)—my original, and still my feudal lord. He is the leader that I first worked for. I pay tribute to all the work he has done over many years. I remember very well the Easterhouse visit and setting up the Centre for Social Justice, and all the work that he has done over the last two decades to advance the cause of social justice, particularly through the work of small charities.

We all love our small charities, and I, too, could run through a list of brilliant ones that work in East Wiltshire—I do want to quickly mention the LINK service, which drives people around the county, particularly to medical appointments. That is such an important service, provided totally free and voluntarily to the community.

However, I want to use the time I have to make a more strategic point. The role of small charities is not just for us as MPs to champion in a sort of neutral sense—“Oh, aren’t they good?” There is something profoundly important about this network for public policy. I was involved, as the right hon. Member for Chingford and Woodford Green was, in those early years of thinking about social responsibility in the era of David Cameron. I think the big society was the best thing that David Cameron did—except perhaps for calling a referendum on the European Union—yet it did not quite work.

It did not quite work for two main reasons. One is that the Treasury did not really believe in it— George Osborne never got the point of the charity sector and its role in public life and in policy. Secondly, the difficulty is that if the state starts to support charities, it ends up basically enabling big charities to occupy the space that state agencies did previously. They effectively game the provisions that are made with the purpose of supporting the small charity sector, to exclude the small charities and create barriers to entry for those small organisations that it is so difficult for national Government to see and to work with.

Fundamentally, we need a big, new settlement with the charity sector; in fact, with society itself. This is not just about registered charities. It is about social organisations in all their forms. We need to trust communities much more fully, with all the mess, the disparity and what is called the postcode lottery that that can sometimes induce. We need to support philanthropy and direct public support—I think the United Kingdom could become the absolute global centre of philanthropy. The City of London should regard that as one of its key investment markets.

But this is not actually just about money, private or public. It is about the state enabling and authorising its agency throughout the public sector to rely meaningfully on the charity sector, so that it can do that in all the areas we have been discussing, including addiction, re-offending, homelessness, children in care—these knotty, wicked problems that cause so much distress and pain in our society and which the state is so inadequate at dealing with.

14:59

[Terry Jermy (South West Norfolk) (Lab)]

It is a pleasure to serve under your chairship, Sir Roger. I thank the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) for securing this debate.

During my life, I have been involved with a number of different charities across my constituency, either in an employed capacity or voluntarily. That has included the Keystone Development Trust, the Benjamin Foundation, the Charles Burrell Centre and the G.W. Staniforth Charity. It is through that involvement that I have come to appreciate how small charities are so often crucial to local communities. They provide essential services and respond quickly to new risks or increases in demand. Sometimes they are formed out of personal tragedy, as was the case with the Benjamin Foundation set up by Richard and Vanessa Draper to remember their son Benjamin, who tragically passed away.

The services that small charities provide are crucial. It is important that organisations are supported by the Government. That support could materialise in many ways, but I want to highlight one in particular: access to cash and banking. Many groups and charities tell me that they increasingly struggle to process funds that they receive in cash. Although many things can be purchased digitally, if you are anything like me, Sir Roger, the odds are that you still buy raffle and tombola tickets with cash. The lack of availability of banks, particularly in rural areas such as mine, is now a real barrier to fundraising for smaller charities. The added costs of processing cash and the associated risks of staff and volunteers handling cash are important to consider. I ask the Government to give some thought to what can be done to assist local charities with this practical challenge.

I want to take a moment to thank the dozens and dozens of small local charities across my constituency and the volunteers that sustain them, including two groups that I have been able to meet with recently, the Downham Art Circle and Swaffham environment group. In the interests of time, I shall finish there.

15:01

[John Cooper (Dumfries and Galloway) (Con)]

It is a pleasure to serve under your chairmanship, Sir Roger. We Scots are often portrayed as parsimonious—or, to put it another way, as tight as two coats of paint. It is a myth largely down to comedian and singer Sir Harry Lauder, who, to raise money for wounded great war veterans after the death of his son in 1917, portrayed on stage a canny Scot who regarded every penny as a prisoner. Lauder raised £1 million for charity—an astronomical sum. How ironic that such generosity birthed the legend of the tightwad Scot. Today, in straitened times, our generosity continues, with an estimated £1.2 billion donated in 2023 and 76% of Scots reporting some sort of charity donation.

Another myth that persists is that deprivation and poverty are issues only in urban areas—not so. My constituency is rural and gorgeous, but people cannot eat the scenery. Rural isolation, loneliness and poverty are sadly all too real amidst the splendour of the Galloway hills. Loneliness and social isolation are profound challenges across Dumfries and Galloway. Our scattered communities, limited public transport and persistent digital exclusion—we have many notspots—leave many individuals cut off from social contact.

However, the people of Dumfries and Galloway are resilient self-starters and we have a plethora of charities fighting to make lives better. Take our telephone and in-person befriending service, A Listening Ear, which is having a real impact, delivering community-led preventive solutions to mental ill health. Its modest budget provides a big bang for a small buck. Prostate Buddies is reaching out to men, urging them to get checked for what is too often a silent killer, and offering advice and support so that more men can get treatment sooner.

There are dozens of similar such initiatives, often volunteer-led, that could benefit from greater support from Government. Take The Usual Place café, which is right next to my constituency office—I am a frequent flyer there. That charity takes young people with a range of mental and physical issues and teaches them catering skills, which massively boosts their chances of finding paid employment. Even with a thriving café and external catering business, The Usual Place has struggled financially, not least since the Government increased employer national insurance contributions.

Small charities do mighty work, especially in rural areas such as Dumfries and Galloway. May I make a plea for them to have a seat as the Government draw up the policy table? Sir Harry Lauder sang “Stop Yer Tickling, Jock.” Perhaps we should update that to “Start Yer Listening, Minister.”

15:04

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) on securing this debate and on his kind words about Noreen Oliver. I had the pleasure of meeting Noreen when I was first elected. The legacy she leaves in north Staffordshire is phenomenal. Noreen’s Recovery Lounge, which the right hon. Gentleman mentioned, is in Fenton Manor in my constituency. It is a wonderful place, which provides the opportunity for people in alcohol and drug addiction recovery to spend meaningful time with other people and acquire work experience and skills. That is something that we should all aspire to.

I commend to the debate the recent report from Voluntary Action Stoke on Trent, the infrastructure organisation expertly led by Lisa Healings and her team, that brings together multiple parts of the charitable sector, offering the support and guidance they need. The report points out that there are 396 registered charities operating in Stoke-on-Trent, spending a collective amount of £144.7 million. That is a phenomenal amount of investment into my city, and its value is huge. That money is being spent to prevent much greater demands on other services. It closes the gaps in some communities, to give people the life chances and opportunities they would not otherwise have.

That money cannot come from the public sector alone. Nicky Twemlow, the newly appointed chief executive of the YMCA, founded the Made in Stoke network, which brings together people who have a physical or social connection to Stoke-on-Trent, trying to ensure that they can use their philanthropic aims to fund small charities in Stoke. It is a matchmaking service that is having a real benefit.

Although there are many wonderful things in Stoke that I could talk about, I just want to touch briefly on three changes that would help. One issue is the short-term cycle of funding; charities often tell me that they get funding for one or two years. By the time they have stood up a project, it is time to start shutting it down again. By the time they have recruited staff, they are worried about redundancy costs. Another concerns large contracts for commissioned services by the third sector from public sector bodies, but the value of the contract is so large that small charities are shut out. Unless they can offer huge swathes of different services, they are unable to get a look in. The big charities mentioned by the right hon. Member for Chingford and Woodford Green get all the spoils, when a coalition of smaller charities could deliver a service more effectively and with more focus on a community but they cannot compete on the price point.

My final point, which I want to raise briefly, is around the complex nature of the needs that too many of these charities are meeting. In Stoke we have lots of good charities, such as Chit Chat 4U, Birches Head Get Growing or Step-Up Stoke CIC. They are often trying to meet one need, but that is spread across multiple phases. If there were a way the Government could help with multiple needs assessments that allow charities to work collectively, it would be a massive boon for my city.

15:07

[Wera Hobhouse (Bath) (LD)]

It is a pleasure to serve under your chairship, Sir Roger. I thank the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) for securing this important debate.

I hear time and again from local Bath charities that they are disadvantaged due to their size. They are incredible, committed and dedicated niche charities, doing excellent work in our communities. Because they are small and locally focused they can deliver swift, sensitive and tailored personal services to the people who need them, but they are disadvantaged because they are small. They are disadvantaged because they cannot afford a team of experienced bid writers who know the tips and hacks to unlock the larger funding schemes, and because they are all going for the same pots of funding at the same time, for largely the same aims. They are also disadvantaged because they lack the economies of scale that benefit the nationals, and the central infrastructure to navigate onerous administration, monitoring and governance rules.

I recently convened a roundtable of smaller charities all working in the domestic abuse space in Bath, to hear about their challenges. Outstanding local charities such as Southside, the Nelson Trust, Developing Health & Independence, Voices, Society Without Abuse and Julian House attended, along with our local authority partners, officers and councillors, who are vital elements for policy setting, commissioning and delivery. Bringing them together created a space to work towards a more joined-up response for domestic abuse victims and survivors in Bath, working together rather than competing with each other.

Overwhelmingly, I heard from them how the fragmentation of local delivery impeded their effectiveness, and how partnerships and collaborations were key to reducing that. As a result, regular roundtables are now taking place, at which they share best practice, limit duplication of support to some clients, and locate the gaps in provision to others. It is an opportunity to map out a clearer, more collaborative and less fragmented domestic abuse pathway for local organisations. We are creating a space where charities can build rapport with one another while discussing some of the issues that the sector faces.

I hope that will begin to eliminate the barriers that smaller charities face due to the administration, monitoring and governance issues that the large national charities navigate with relative ease. I hope that in this way we can ensure that the size of a charity never determines the difference that it can make. While I echo the concerns that have been raised today, I very much hope that my example from Bath can help other hon. Members and the charities in their local areas.

15:09

[Andrew Ranger (Wrexham) (Lab)]

It is a pleasure to serve with you in the Chair, Sir Roger. I congratulate the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) on securing this debate.

The stories, as has been said many times, of small and medium-sized charities and the impact that they have can be seen across our cities, towns and communities. They are the ones directly impacting lives and making a day-to-day difference on the ground in our communities. We have much to thank them for, but also much to learn from them. One such charity from my constituency that I often mention in Parliament is WeMindTheGap. Every year it works with hundreds of young people for whom traditional education may not have worked, and who may have fallen through the gaps. Through its holistic programmes, including long-term mentoring, paid work placements, skills development and pastoral support, it often gives the young people that it works with a new lease of life, and 70% of “Gappies”—as they are known—move on to work, training or future education.

WeMindTheGap works in and supports schools and similar organisations, providing specialist and targeted measures that they do not always have the capacity to provide themselves. Those partnerships make a tangible difference to both pupils and schools, with bespoke solutions in partnership with schools, colleges, businesses and others. This is the power of smaller charities.

Programmes such as these are particularly timely given the recent release of CSJ’s “Lost Boys” report, which painted an increasingly bleak picture for young men from disadvantaged and working-class backgrounds, highlighting rising educational disengagement and economic inactivity. I ask the Minister to describe how the Government can help support charities such as these and the vital work that they are doing in that sphere.

In the interests of time, I will conclude my remarks by thanking all the smaller charities in Wrexham and beyond for the vital work they do, year in and year out, in so many different but equally impactful ways.

15:12

[John Glen (Salisbury) (Con)]

Thank you for chairing this debate, Sir Roger. I thank my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith), who for 34 years has made such an enormous contribution in this place. When he set up the Centre for Social Justice, he was determined to look at the deeper causes of social problems in our country. It has been instrumental in doing so. I agree with him that the annual attempt to champion and reward all those charities doing so much throughout the country is really important.

I also draw attention to the previously mentioned “Supercharging Philanthropy” report. It looked across six hubs around the country, undertook serious engagement and came forward with 39 recommendations across 90-odd pages. It is a serious attempt to look at how we can underpin more support for small local charities that exist across our constituencies, and how we can bring back some of the things that have happened before around community-matched funding challenges. There is an enormous pool of surplus wealth that many are seeking to invest in activities and actions in communities that make a real difference. The Government could do well to look at the options that exist and those 39 recommendations and see what can be brought forward.

I want to make a specific point about several charities in my constituency, many of whom I have engaged with—and one or two of which I am a patron of. In particular Rise:61—of which I am not a patron—is embedded in a distinct community of Bemerton: Bemerton Heath. It is run by Robin Imeson, who has basically devoted his life so far to youth work in that community. He lives there and runs bike clubs, drop-ins and creative clubs with his team. He also runs football and drama workshops. They have been absolutely foundational to the lives of hundreds of young people on that estate.

I ask the Minister to reflect that, in the context of the Pride in Place work that is going to happen in Bemerton, she could ensure that the role of small charities is put front and centre of the options that neighbourhood plans and boards have. It is important that those people who really understand what is going on in a community are allowed to be meaningful beneficiaries, over 10 years, of the investment the Government are making, and that everything is done to hear their voices. Often they are taken out of the main conversation, so I welcome the opportunity today to talk of Rise:61 and of the enormous contribution they make to my constituency in many ways and forms.

15:15

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to serve under your chairship, Sir Roger. I thank the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) for leading the debate. We should do more to ensure the long-term sustainability of the charity sector.

I declare an interest as chair of the all-party parliamentary group for international freedom of religion or belief. Our secretariat is run by a small charity called the FoRB Foundation, the task of which is to raise awareness, recover rights and rebuild the lives of those affected by FORB violations. The foundation has many volunteers who make the time to do many things.

The charity sector in Northern Ireland is a major employer, with some 53,620 employees, representing some 7% of the total workforce. Some 4.3 million people across the UK have sought the support of charities in recent years, highlighting the need for charity support nationwide.

Let me name a few of the charities in my constituency. The Ards suicide awareness group started a few years ago, and it reaches out to try to help those of a male disposition, and in respect of those who have unfortunately lost their lives. There are also food banks, the Home-Start team, the Beyond the Battlefield veterans team, and the Link, where a number of churches come together to give help.

Beyond the Battlefield provides pivotal and comprehensive support for veterans, service members and their families. It offers free, specialised services, including counselling for post-traumatic stress disorder; housing assistance for the homeless; help with war pensions, benefit entitlements and medical claims; and support through tailored long-term care.

The Newtownards food bank, which is run by the House church—Richard, Natalie, Lisa and their team—reminds us all of the scale of how food poverty is affecting Northern Ireland, and how critical the small charity sector is in terms of food poverty. Those are just a few of the charities in my constituency.

Between 2014 and 2023—excluding the pandemic years 2020 to 2022—the average number of registered charities that was removed annually was about 63. That tells us that there is a decrease in the number of charities being sustained annually. Many small charities, especially those with limited reserves, are under significant pressure, and that has been exacerbated by cuts to core Government grants.

Sustained Government support is critical for the survival and effectiveness of Northern Ireland’s small charity sector. Without adequate funding, many organisations will face closure or the scaling back of essential services, putting vulnerable communities at risk. We must never underestimate the impact of charities on the community and how they have saved so many from personal and financial devastation. I very much look forward to the Minister’s response; not to throw any pressure on her, but the charities need help.

15:18

[Mr Angus MacDonald (Inverness, Skye and West Ross-shire) (LD)]

I congratulate the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) on securing the debate.

I want to speak briefly about mental health charities. Fundamentally, we have an enormous problem in the UK: the public sector no longer funds the mental health sector properly, and the charities cannot fill the gap. Almost 800,000 kids in the 16 to 24-year-old group are not in education or employment, and covid has meant that the situation is effectively becoming a national emergency for the young. We all see in our casework an enormous number of parents getting in touch about their children. We have a big issue.

There is one thing that the Minister could do to help. My wife’s father committed suicide. He was a farmer in Northern Ireland. Without the charities that I know of, I think a lot more people who are contemplating suicide would take their own lives. I would like to mention the charities Ewen’s Room, Lochaber Hope, and Mikeysline in Inverness. They have one particular request. Unlike VAT-registered businesses, charities cannot reclaim the VAT they pay on essential costs, from maintaining their premises to repairing vehicles. Does the Minister agree that reviewing the VAT rules for small charities could be a practical and immediate step to relieve some of the intense financial pressures facing the sector?

15:19

[Ayoub Khan (Birmingham Perry Barr) (Ind)]

It is an honour to serve under your chairmanship, Sir Roger. I thank the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) for securing the debate.

From my short time as the Member of Parliament for Birmingham Perry Barr, and having spent over a decade as a local councillor, I know how small charities form the very lifeblood of our area. Although larger organisations no doubt do incredible amounts of good, I have found that it is the smaller groups that can only be found at the grassroots level that can reach out to the people who are most in need.

I have had the privilege of meeting and working with many small-scale local charities in my time, and I am always encouraged by the hard work and decency of those looking to make our community a better place. Let me give three quick examples. The George Coller Memorial Fund is a local charity that has punched well above its weight over the years, campaigning successfully to enable schools to store and administer emergency inhalers—vital treatments—and recently campaigning to make a dose counter mandatory in emergency inhalers, which we are working on.

I want to recognise and pay tribute to the work of Faizan Global Relief Foundation UK, which mobilised at the peak of the bin strikes, when there were piles and piles of rubbish across the city of Birmingham, to help the local community. The foundation also does enormous work with our youth, trying to address knife crime, substance abuse and so much more.

I also want to raise the plight of Kevin, a retiree who volunteers day and night to run the Bethany food bank in my constituency. The charity feeds over 1,000 people a month, but receives its donations largely in the form of food rather than cash. With Birmingham city council applying only limited relief on business rates, Bethany food bank is at risk of shutting down permanently amid a cost of living crisis.

Those sorts of small organisations do enormous work in constituencies up and down the country. When they are being squeezed at the same time as the cost of living is spiralling out of control and families are so desperate, we must support organisations that do not require an enormous amount of financial support but actually deliver so much. Will the Minister indicate what additional grants the Government can make available to smaller charities, because they are the charities that have the greatest impact?

15:22

[Dr Roz Savage (South Cotswolds) (LD)]

I thank the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) for leading this important debate.

The small charity sector plays a crucial role in supporting communities in my constituency and across the whole country. Some 86% of the small charities working in the south-west have an income of under £100,000. One of the greatest privileges of my role as an MP is meeting the amazing people behind these organisations: the volunteers, organisers and community leaders who give so generously of their time and energy to help others.

That commitment to local action speaks directly to Liberal Democrat values: localism, community power, and the belief that solutions are strongest when they are shaped by the people closest to the challenge. Our small charities live out that principle every single day. Their impact might not be fully measurable, but I know it is massive. They demonstrate that when people look out for one another and create opportunities for others to flourish, society becomes more resilient, more compassionate and more connected.

I would like to recognise just a few of the exceptional organisations in my constituency, many of which are now included in my Stronger South Cotswolds initiative. I am proud to be patron of the Churn community hub in Cirencester, which works to reduce isolation and improve wellbeing; HEALS of Malmesbury supports individuals and families who are vulnerable or experiencing hardship, offering help ranging from debt advice to emergency food provision; and the Tetbury Goods Shed brings people together for creative opportunities that span the generations.

I would love to namecheck a few other incredible organisations—I hope they will forgive me for not being able to do full justice to their value: Fruitful Malmesbury, Greening Tetbury, Cirencester Pantry, Sustainable Sherston, Food for Thought Cotswolds, Working 4 Wellbeing, the Cotswold friends, People For You, Pips Community café, Tetbury Area Youth and Community Trust, and the many groups that support people suffering from cancer, dementia, Parkinson’s and other ailments.

Those charities, as valuable as they are, are in crisis. Rising employer national insurance contributions place a direct financial strain on them, and the ongoing cost of living crisis compounds the challenge. As households struggle, donations fall and fundraising becomes harder, while at the same time more and more people turn to charities for support. We have rising demand, falling income and increasing costs. If we truly value the small charity sector—and we should—let us look at how we can make more funding available to it.

15:24

[Liz Jarvis (Eastleigh) (LD)]

It is a pleasure to serve under your chairmanship, Sir Roger, and I congratulate the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) on securing this important debate. It has been a pleasure to hear about so many wonderful charities and volunteers.

Small local charities have played an increasing role in the community life of this country and have stepped in to fill critical gaps in public services. They support young people, the elderly and the isolated. They counsel the bereaved, look after abandoned animals and reach people in crisis when statutory services cannot. A thriving voluntary sector is essential.

Small charities in my constituency—including Pavilion on the Park, the Eastleigh Basics Bank, Fledge, the Asian Welfare and Cultural Association, St Francis Animal Welfare and 1Community—all do fantastic work, and I am incredibly proud of the contribution they make every day, the commitment of all their volunteers and staff, and the work they do to strengthen the bonds in our community. However, as we have heard, small charities are facing huge challenges.

[Helen Maguire (Epsom and Ewell) (LD)]

Will my hon. Friend give way?

[Sir Roger Gale (in the Chair)]

Order. I am terribly sorry; I appreciate that there are conflicting demands on Members, but the hon. Lady must be aware that if a Member comes in late, it is quite straightforward: no intervention.

[Liz Jarvis]

Decades of real-terms funding cuts, a cost of living squeeze on donations, rising operating costs, and the Government’s decision to increase employer national insurance contributions without exempting the charitable sector have piled pressure on organisations that are already struggling.

Small charities account for the overwhelming majority of the sector by number. Micro and small charities are defined as those with incomes under £10,000 and between £10,000 and £100,000 respectively, and they make up over 80% of all registered charities. Charities with incomes under £1 million represent 96% of the entire sector. By contrast, the UK’s largest charities—those with incomes over £10 million—make up less than 1% of the sector by number, yet account for the majority of total income.

Given the vital community work that small charities carry out, it is concerning that the majority of donations are given to bigger rather than smaller charities, which do not have the resources and superior brand recognition of bigger organisations. Small local charities do not have the financial runway and resilience built into their operations to weather storms.

The demand for charitable services is rising sharply, with the proportion of people receiving food, medical or financial support from charities having tripled in five years. However, around 42% of charities spent more than they received, and well over half are now running deficits. More charities are closing, and most of those closures are among organisations with incomes below £1 million. Nearly a third of voluntary organisations now describe themselves as vulnerable or struggling. Many expect to freeze recruitment and make redundancies as a direct consequence of financial pressure.

I urge the Minister to reduce the financial burden faced by small charities. What more can be done to supercharge philanthropy across the UK? How can we unlock billions in unclaimed gift aid and dormant funds and explore match-funding mechanisms, which can significantly increase donations? We should ensure that small and medium-sized charities can engage meaningfully in tenders, grant applications and policy consultations, rather than being crowded out by larger organisations.

Small veterans charities, including Veterans Dementia Support UK in my constituency, are not immune to the challenges facing the sector. The CEO of Veterans Aid has warned that if these specialist organisations disappear, the Government will lose the very partners they depend on to keep veterans from falling into crisis. I hope the Minister will reflect carefully on that.

The fact is that more charities are closing at a time when increasing numbers of people depend on their services. If we continue on this course, we risk losing an essential pillar of the social fabric that holds our communities together. It is absolutely crucial to ensure that small charities are supported in the UK. They are embedded in their local communities and are often their beneficiaries’ only lifeline. The Government must take all necessary steps to ensure they can maximise their impact for the people and communities who depend on them.

15:30

[Joe Robertson (Isle of Wight East) (Con)]

It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) on securing this important debate. Few others—indeed, perhaps no one else in this place—have done more over the last 20 years to champion the causes of social justice, a field in which many of our small charities operate.

Over the last five years, the charity sector has faced unprecedented pressure, with donations falling and volunteer numbers still not recovered to pre-pandemic levels. Rising costs driven by the autumn Budget, increased national insurance contributions and post-pandemic expenditure outstripping income have placed a strain on small charities, limiting their ability to support local communities. These organisations remain consistently underfunded and frequently overlooked, and the current funding model is proving unsustainable for too many. Small and medium-sized charities with incomes under £1 million account for 97% of all charity closures in the past decade.

Financially, the current system works against small charities, favouring large, well-established organisations with the capacity to navigate complex processes and absorb financial shocks. Too many smaller charities are excluded from the core unrestricted and multi-year funding that would give them the stability and ability to plan ahead. Instead, they are often trapped in cycles of short-term grants, burdensome applications and reporting requirements that, for them, are often disproportionate to some of the modest sums available. Meanwhile, 88% of charitable income in England and Wales goes to just 5% of registered charities, leaving the remaining 95%—the small charities that form the backbone of the sector—far more vulnerable to declines in public giving. Without a shift in Government focus towards these organisations and the vital role they play in their communities, that gap will only continue to widen.

Small and medium-sized charities are often better placed than large national charities to know their communities and to deliver lasting change in people’s lives. A number of charities on the Isle of Wight do just that. For example, Aspire is a community hub that runs food pantries, suicide prevention programmes and the award-winning “Living Well and Early Help” service. More recently, it has opened accommodation in Ryde for women who would otherwise face being homeless. We also have the award-winning Tidal Family Support centre and PATCH—the People’s Approach to Cancer Help—which helps people with the costs of accessing health appointments across the Solent on the mainland. Community Action Isle of Wight and the Bay Youth Project do important youth intervention work in Sandown, Lake and Shanklin.

Such smaller charities are often more agile in responding to the needs of their communities, typically spending a lower proportion of their income on fundraising and lobbying so it can go directly to delivering on their charitable objectives. Many funders value that closeness, preferring to support organisations that have deep, long-standing relationships with the people they serve. Charities often focus on meeting immediate needs, allowing them to respond quickly to people in their local communities, yet many corporate donors feel it is harder to justify supporting smaller charities, partly because they have fewer resources to showcase their work. Some national charity brands are, of course, used by local charities, such as Age UK Isle of Wight—and Age UK is in many constituencies and areas across the country. There is often a misunderstanding that they benefit from central donations, but very often they are in fact small, local charities, entirely reliant on local fundraising—notwithstanding the benefit of that brand association with an excellent national charity such as Age UK.

Smaller charities are often so absorbed in day-to-day delivery that they lack the capacity to analyse evidence and present impact in the way that funders increasingly expect, which leaves them at a disadvantage when bidding for support. Smaller charities can also lack meaningful avenues to feed their experience into national policy, with few mechanisms in place for Government to learn from their frontline insight. Their limited national influence, stemming from the absence of large public affairs teams, stands in stark contrast to the growing professionalisation of major charities—which in itself is of course a good thing.

I am pleased to have been appointed as a commissioner to the Centre for Social Justice’s midlife mission, looking at how to support people approaching midlife and beyond to thrive in the labour market. The CSJ aims to bring together more than 1,000 small charities to give voice to and inform the work that they are doing.

I now address the Minister directly. Last year, the Government announced the creation of the Office for the Impact Economy, intended to help Whitehall to identify, source and build partnerships to scale the social impact of public investment and expand opportunities across the country. Since that announcement, however, there has been no public update on how that initiative is being implemented, or how the associated funding is being used.

I ask the Minister this: first, to what extent does she recognise match funding as a core tool for leveraging public funds, and what steps are being taken to expand its use across Government? Secondly, what mechanisms does the Department have in place to ensure that small and medium-sized charities can engage meaningfully in tenders, grant applications and policy consultations, and that the administrative burden of doing so does not exclude them? Finally, will the Minister establish a £585 million evidence fund, as recommended by the CSJ, paid for through one year of unclaimed gift aid, enabling small charities to demonstrate impact and to compete more effectively for contracts and grants?

15:38

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stephanie Peacock)]

It is a pleasure to serve under your chairship, Sir Roger. I congratulate the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) on securing this important debate. His commitment to small charitable organisations is evident not only in his speech, but through his work in that area, and indeed in this place, over many years.

I begin by paying tribute to small charities and the critical support that they provide to people across the country, which has been highlighted today. Small charities make up the vast majority of the voluntary community and social enterprise sector. Those responsive, locally engaged groups are often best placed to understand the strengths, capabilities and cultures that make up their local communities. In this debate, we heard a number of examples, and I want to mention a few of them.

The right hon. Member spoke about Ripple, based in Portsmouth, and about how, in response to personal tragedy, it set up a lifesaving tool. It is incredibly important that he shared that example with the House today, and I will reflect it to the relevant Minister. My hon. Friend the Member for Alloa and Grangemouth (Brian Leishman) spoke powerfully about a number of charities, as did Members from across the House. My hon. Friend the Member for Southport (Patrick Hurley) said that Greta, a representative of one of his local charities, is here in Parliament. I join him in welcoming them.

The hon. Member for Dumfries and Galloway (John Cooper) raised important issues, such as digital poverty, that affect rural communities. I pay tribute to the hon. Member for Bath (Wera Hobhouse), who shared an example of her work bringing local domestic violence charities together; I am pleased to hear that that work is ongoing. The right hon. Member for Salisbury (John Glen) raised a specific question about Pride in Place. It is a policy led by the Ministry of Housing, Communities and Local Government, and I have met with the relevant Minister. The policy is grounded in local leadership, but I will ensure that the right hon. Member’s points are put to that Minister and will write to him accordingly.

The hon. Member for Strangford (Jim Shannon) raised the importance of small charities in tackling food poverty, something that I have seen in my constituency. That point was also made by the hon. Member for Birmingham Perry Barr (Ayoub Khan); I will write to him about his specific question, but I will touch on some of the points he made later in my speech. I congratulate the shadow Minister, the hon. Member for Isle of Wight East (Joe Robertson), on his new role at the CSJ, and will address some of the points he put to me later.

Yesterday I met a range of charitable organisations at events hosted by the York Centre for Voluntary Services and the Kirklees Better Outcomes Partnership. Those charities play a vital role in their local communities, giving a voice to those living in poverty, supporting unpaid carers and empowering women, often victims of domestic violence, to improve their lives. In my area of Barnsley, whether it be BIADS—Barnsley Independent Alzheimer’s and Dementia Support—of which I am a patron, or the world-class Barnsley Youth Choir, small charities are at the forefront of innovation and social change.

In last month alone I have met two great small charities from across the country: the Family Volunteering Club, a small charity led by Maddy Mills, creating opportunities for young children and their families to volunteer, and Ruff & Ruby, a King’s award-winning youth charity carrying out important work in Stoke-on-Trent. Ruff & Ruby has the UTH CITY app, which connects young people with resources, education, employment, volunteering and suicide prevention. Indeed, my hon. Friend the Member for Stoke-on-Trent Central (Gareth Snell) gave some excellent examples of its work, and I was pleased to visit his area last year to meet a number of charities and hear at first hand about the work they are doing.

I acknowledge the financial pressures faced by the sector. The hon. Member for Inverness, Skye and West Ross-shire (Mr MacDonald) and a number of others put to me points around national insurance, which we have debated a number of times, and a specific point about VAT. That is an issue for the Treasury, but I will reflect his request to the relevant Minister and write to him. We want to reduce administrative burdens on businesses, including charities, by a quarter by the end of this Parliament. Last October, I set out a series of changes to the financial thresholds for charities that will come into force this year. These will save charities an average of £47 million each year, while ensuring that the regulation of the sector remains proportionate.

The civil society covenant, which represents a fundamental shift in how Government works with the sector, 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 towards the end of last year to discuss how the civil society covenant can help the Government to connect with the whole sector. In that context, I do not recognise the right hon. Member for Chingford and Woodford Green’s characterisation that the Government do not listen and engage, or that they simply take small charities for granted. I acknowledge that we can always do better, but the covenant is about having the ambition to do exactly that.

The Department for Culture, Media and Sport has launched an £11.6 million local covenant partnership fund. The fund will support local government, public service providers and civil society organisations to work collaboratively to tackle local policy priorities and better meet the needs of local communities. Outside this place, I know that there have been questions from charities regarding the Digital Markets, Competition and Consumers Act 2024; while that question has not been raised in this debate, I make it clear to Members and the sector that charities can continue to claim gift aid where eligible and compliant with consumer law, where it applies.

I met with the Chair of the Culture, Media and Sport Committee, the hon. Member for Gosport (Dame Caroline Dinenage), and the shadow Secretary of State, the hon. Member for Droitwich and Evesham (Nigel Huddleston), to discuss the topic last week, alongside colleagues from the Department for Business and Trade. I am aware of the sector’s concerns and I am committed to working with colleagues in DBT and His Majesty’s Revenue and Customs on the issue. I wrote to the Chair of the Committee today in response to her letter to me on Friday to provide an update and confirm that, in relation to gift aid, secondary legislation is not necessary at this time.

I will touch on some of the broader DCMS and Government support for charities, answering a question put to me by my hon. Friend the Member for Wrexham (Andrew Ranger). Last summer, DCMS published the Government’s first ever dormant asset strategy, mapping out how the £440 million of funding will be distributed. That will include £132.5 million to benefit young people and £87.5 million for social investment. Funding will go towards providing small, affordable loans to grassroots organisations alongside tailored support to help small enterprises to grow and become more financially resilient. I recognise that there is a need to support more civil society organisations to grow their income from public sector contracts. At present, civil society organisations secure just 4% of the total value of those contracts, a figure that has remained unchanged for the past 10 years.

The national procurement policy statement published in February 2025 underlines the Government’s commitment to strengthening the UK economy by maximising opportunities for civil society organisations to access public contracts. That is a clear signal that the sector’s expertise and value will be recognised and supported throughout the public sector, highlighting our ambition to make it easier for civil society organisations of all sizes, and small and medium-sized enterprises, to deliver public contracts. I think that answers the point made by my hon. Friend the Member for Southport.

[Wera Hobhouse]

Does the Minister agree that small local charities cannot compete with national charities? We have made that point time and again, but she has not made any comment on how competition can be achieved or how local charities can get priority. I have many examples in Bath where a national charity gets a bid through the bidding process but does not deliver as well as a local charity. We find that out afterwards, but then it is too late.

[Stephanie Peacock]

That is a very fair point, and one that I have seen in my own constituency of Barnsley. In the interest of time, I will not share the details of my example, but I will take that point away and write to the hon. Lady directly on it. We want to address that specific point through the covenant.

Moving on to the second point of my hon. Friend the Member for Southport about tax reliefs for charities, charities and their donors received around £6.7 billion in tax relief in the 2024-25 tax year. The long-running gift aid scheme has raised over £1.7 billion alone during that period. I attended a roundtable hosted by Amazon and co-chaired by Gordon Brown on the new VAT relief for business donations on goods to charities. As the Chancellor announced at the Budget, that new relief will increase the supply of essential items available to charities and make it easier for businesses to support charitable work. The former Prime Minister deserves huge credit for his leadership on that issue throughout his establishment of Multibank.

As he outlined in his speech, the right hon. Member for Chingford and Woodford Green and the Centre for Social Justice have a keen interest in growing philanthropy in the UK, especially for small charities. A number of other Members raised that issue too. We recognise that many small charities rely on donations from the public to support their work, and while I am aware that there is more work to do, I acknowledge the £15 billion that was donated last year. We want to better connect, unlock and partner with philanthropists to mobilise private funds for public good, a point put to me by the hon. Member for Eastleigh (Liz Jarvis). I recently chaired a roundtable on that subject, bringing together philanthropists, business leaders and other Government Departments to discuss how we can build philanthropic giving into Government missions.

We are committed to a place-based philanthropy strategy. That will set out how the Government can create an environment that encourages philanthropists to support local communities and ensures that the benefits of philanthropy are felt nationwide. Indeed, the hon. Member for East Wiltshire (Danny Kruger) raised the issue of philanthropy being a priority for the City of London. I was pleased to attend and speak at the Giving and Impact summit last year at the London Stock Exchange.

The shadow Minister mentioned the Office for the Impact Economy. Launched by the Prime Minister, it is the Government’s new central hub for investors, philanthropists and businesses looking to make social impact. The office will make sure that charities can access funding beyond traditional grants and give direction to individuals and organisations looking to make a difference. I am happy to set up a meeting for Members who are interested in that area with the new office, so please do contact me.

We cannot debate charities without mentioning volunteers. Volunteers keep charities running, with around 12 million volunteers giving their time and commitment each year. Yesterday in York, I met the National Association for Voluntary and Community Action, which shared with me the work it does to encourage people to get involved in a variety of ways. It was a particular pleasure to speak to the young volunteers, and I wish the York Centre for Voluntary Services the very best with its volunteering fair tomorrow, which will bring together many charities from across their city.

[Jim Shannon]

The Minister is right to recognise the importance of volunteers, and we all recognise that—we meet them every day of our lives—but charities also employ people and pay their wages, so there is an economic advantage to having them as well. Does she recognise that?

[Stephanie Peacock]

I absolutely recognise those volunteers and staff members, who often do huge amounts of work to deliver amazing outcomes. The hon. Gentleman makes an incredibly important point, as always. I know that volunteers across the country dedicate their time—week in, week out.

If the House will indulge me, I want to share an example from my own area of Barnsley. Last Saturday, I took part in the Barnsley parkrun along with my hon. Friend the Member for Barnsley North (Dan Jarvis). It is a brilliant initiative, organised by volunteers every week. We ran the parkrun alongside Oliver Smith, who is just nine years old. He is running nine marathons in four months to raise money for the Brain Tumour Charity following his dad’s diagnosis. Oliver’s commitment to fundraising and raising awareness is incredibly inspiring, and I want to take this opportunity to pay tribute to all his amazing efforts. I was also pleased last week to visit a small charity in Barnsley, the Barnsley Hospital Charity, which has run a number of campaigns over the years and is currently raising funds particularly for breast cancer care.

My Department wants to do what it can to support volunteering. We have commissioned an open data initiative that will help break down barriers for more people to get involved in the causes that mean the most to them. It will make it easier for small charities to advertise volunteering opportunities and expand their reach, generating further support and interest for their work in their local areas.

[Gareth Snell]

One thing that might help is if there was a settled model for how small charities could quantify volunteer hours to use as a bank against matched funding. Some charities in my patch tell me that they have lots of social value but no cash, and when they go for matched funding, the funders want to see an income stream, not necessarily the other things they have. If there was a way that everyone recognised and supported of quantifying those other things, it could free up income from philanthropic organisations to be match funded against time, assets or skills.

[Stephanie Peacock]

My hon. Friend makes an incredibly important point; the young volunteers were also talking to me about that data point yesterday.

One example is that the DCMS launched the voluntary, community, and social enterprise business hub last year, alongside the VCSE Crown representative. The hub contains a host of resources intended to support civil society organisations in finding and bidding for public funding. That is especially important for smaller charities with fewer resources to dedicate to seeking out such funding, and it is a vital source of information in our mission to encourage more civil society organisations into public sector contracts. Obviously, however, data is helpful across the board.

[Danny Kruger]

This is such an important debate. I want to pick up on the suggestion of the hon. Member for Stoke-on-Trent Central (Gareth Snell). Although it is obviously very helpful if small charities, which do not have financial resources or indeed necessarily the right data, can demonstrate their value to the public sector, let us not build systems that force charities into a model that really works only for public sector agencies or large charities. The whole value of these small projects is that they do not have those clear processes, outputs and data, with everything being reduced to unit costs. We have to have a system that actually honours the way that charities work, rather than trying to force them into some kind of proxy of that quantitative model for demonstrating value. Why do we not just localise public sector funding so that small charities can be properly trusted?

[Sir Roger Gale (in the Chair)]

Order. Colleagues will have noticed that I have deliberately allowed the Minister to overrun her time because, given the time, it seemed important that she was able to respond fully to the debate. I now have to remind the Minister that I want the right hon. Gentleman who introduced the debate to have time to wind up properly.

[Stephanie Peacock]

I take that point, Sir Roger, and I heard what the hon. Member for East Wiltshire (Danny Kruger) said.

I will end where the right hon. Member for Chingford and Woodford Green began. He spoke about how the Government, families and community groups can work together, and are best placed, alongside small charities, to support local areas and to tackle challenges. He said that the ones that do the most, we often hear the least about. I think this debate has gone some way to changing that by shining a light on so many brilliant examples of hard working charities across our country. I conclude by acknowledging the huge contribution that small charities make, and I thank them for all their work.

15:54

[Sir Iain Duncan Smith]

This has been an excellent debate, not least because all parties have been represented in it, and all parties have spoken with one voice. We value the incredible efforts made by local community groups and charities, but all of us also recognise that much more can be done to release them and to recognise some of the incredible schemes that they have come up with—I named a number of them. There have been many suggestions about the best way to do that.

There have been comments about the need to modernise gift aid, and to uprate the thresholds of the gift aid small donations scheme, so that charities that receive small cash donations can get gift aid-style repayments of tax. That is a useful idea that has been put forward. There is also the whole idea of placed-based giving. Small charities are embedded in communities throughout the UK, and it is important that local and placed-based giving is encouraged so that smaller charities are supported and can continue delivering their vital services.

I also picked up a general concern, which is quite right, about the fall-off of corporate giving in the UK towards the small charities sector. The big problem is that—forgive me, I cannot remember who made this point—something in the order of 80% of charitable giving goes to about 20% of all charities. They are the big charities that are staffed up with lots of people to lobby us and to always come in and see us. The small community groups and charities, however, that do 80% or more of the work often do not get access to that. Rewarding companies for supporting charities and community groups in their local areas would be a very good way of increasing corporate giving.

Only 25% of British businesses donate to charities in the form of time, cash or goods. An estimated £4.26 billion was donated by British businesses in 2024, and that was flatlining. I say to the Minister that we need to do more to encourage a greater level of local support and giving, because philanthropic giving is vital. I mentioned in my opening remarks that we need to look at what the USA does in its tax structure for charitable giving. Particularly, we want to look at small community groups and charities benefiting from that, and raising more money given directly by those individuals, who are rewarded for that because it is a common good.

This debate has been an excellent opportunity. I recommend that anybody who wants to inform themselves more about the policy work speaks to the Centre for Social Justice. All parties are welcome to look at this. I hope to have a chance at some point to meet the Minister to discuss with her any possibilities that we can raise.

I have one abiding thought. Recently, we held another of our annual awards where we give out money to winning charities in six categories—money matters to small community groups and charities. I have to say that it was one of the most moving experiences that I have had. I listened to people who have grown their support groups out of tragedy in their own families and communities, and have risen to that and overcome it. Alone among all other reasons, it is not the structure or organisation, but the beating heart of small community groups and charities that helps us survive out there. It is time that we motored on in recognising them and making sure that they get a proper fair crack at what is out there to help them deliver their great services.

Question put and agreed to.

Resolved,

That this House has considered the small charity sector.