Small Charitable Donations and Childcare Payments Bill

Kirsty Blackman Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 11th October 2016 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

I am a fairly new Member of Parliament and was not here when the Small Charitable Donations Act 2012 was passed, so it is interesting to hear some of the history of how the small donations scheme started and how it has got to where it is just now. It was also interesting to hear about some of the changes being made as a result of looking back, three years in, and thinking about how the scheme has worked. I am pleased that the Government have taken on board some of the suggestions charities have made, to ensure that the scheme works as well as possible for those charities using it and for the Government, who have to administer it.

Some of the measures in the Bill are welcome. The SNP welcomes the removal of the eligibility criteria for new charities. That is a sensible way to go—it is sensible to make changes particularly in respect of the two-in-four-year criteria. The inclusion of contactless payment is to be welcomed. There was an interesting comment about text donations. I am not entirely sure how they fit in, but I would be keen for text donations to be included in the small donations part of gift aid and not just in the general part of gift aid, because so many people nowadays give by text message—it is a very easy way for people to give—but do not follow up with a text about their address. I have done the same thing.

I could be wrong, but from my reading of the Library briefing, I understand that the UK Government have the ability to change the matching requirement without the need for further primary legislation, as introduced in the Small Charitable Donations Act 2012.

Like the hon. Member for Salford and Eccles (Rebecca Long Bailey), we have concerns about the 10:1 ratio. My hon. Friend the Member for West Dunbartonshire (Martin Docherty-Hughes) mentioned charities that are run solely by volunteers. Some of those charities do not do gift aid because the paperwork is far too cumbersome. Doing general gift aid and gift aid small donations claims paperwork would be doubly cumbersome, particularly for those that do not have staff. Those are among our smallest charities. In some cases, they never get donations of more than £20. They work in our most deprived communities and therefore are most in need of those donations—they get £3 here and there but it is just too complicated for them to jump through the hoops of any of those schemes. They believe that they are unable to deal with the small donations scheme because of the requirement additionally to take part in the matching for the gift aid scheme.

It would therefore be good for the Government to consider the impact on small charities. As was mentioned, for those small charities, it will not involve huge sums of money and people spending thousands of pounds sending their children to private schools. For example, a local organisation in my constituency buys shovels so that people can clean the pavements in the winter time—they are smaller-use pavements that the council does not get to. It receives a very small amount of money, but is most in need of access to those schemes and is being excluded because it does not have the staff and the ability to fill in the paperwork. If the Government could consider that and the matching requirement, it could have an impact on small charities.

[Dr Poulter]

The hon. Lady is making a thoughtful and constructive speech and highlights some of the challenges for smaller charities that are mostly comprised of volunteers, who do not always have the understanding of and expertise in complex legislation when they are in post. That will clearly be the challenge of this and other legislation in the field. In that respect, is she saying—there may be merit if she is—that some of the anti-fraud measures are too restrictive and add complexity in respect of the funding requirements? Given the other anti-fraud measures in charities legislation, is there an argument for scrapping some of those measures altogether?

[Kirsty Blackman]

I would worry about the unintended consequences for anti-fraud legislation—I would not want to scrap those measures for very large charities that deal with large sums of money. We need to consider how very small charities, which cannot defraud the Government out of thousands of pounds in gift aid claims because they get donations of only £500 in total in a whole year—they will not break the bank—will access both the gift aid small donations scheme and the gift aid scheme in general. That is the majority of what I wanted to say on the gift aid small donations scheme.

On tax-free childcare, I cannot declare an interest in having set up a charity. As the parent of a five-year-old and a three-year-old, however, I can declare an interest in the current childcare voucher scheme and I am likely to be a beneficiary of tax-free childcare from next year when it is introduced. The childcare voucher scheme has been useful but limited, so I welcome some of the changes that will come in through the tax-free childcare scheme. These schemes will be easier to access for parents from less traditional employment backgrounds. That is a positive benefit, as is the uplift in the amount of money they will be able to claim. However, the UK Government’s proposals do not go far enough.

The Bill’s proposals on flexibility of dates and the ability to make requests digitally are hugely positive. The childcare voucher scheme has sometimes fallen down because of the inability to make some changes digitally. I know parents who have not changed the amount they claim when they needed to because it takes 15 days or so to make a change, and it involves a lot of printing out, posting and so on. The three-month rule is much clearer.

The UK Government’s proposals on childcare and inequality are not universal enough. The Scottish Government pledged in their manifesto to almost double the free early learning and childcare to 30 hours a week. Both my children have benefited from the uplift in free childcare and nursery places, and that has been hugely positive. Nursery places are now for three hours and 10 minutes a day. That is a length of time one can do something with, whereas two-and-a-half hours is not. By the time you get home and make a cup of tea, your morning has gone, whereas you can pop out and do a full shop in three hours and 10 minutes. Having those extra few minutes makes the biggest difference. The additional changes will make even more of a difference, with full days for two, three and four-year-olds. It is important that the changes are not just for three and four-year-olds, but some two-year-olds too. The changes mean that some three and four-year-olds will receive free school meals. Primary and one, two and three-year-old children in Scotland already receive free school meals. Again, that is a huge benefit. Again, I declare an interest as someone whose child receives free school meals—they are absolutely brilliant and he loves them. Nursery children will now also receive these meals.

The benefits that families in Scotland receive are universal, not means-tested. There is not a complicated means-testing system to decide which families receive them. There is no requirement for both parents to be working. Children across the board receive the benefits, which benefit both children and families. All children, whatever their demographic or socioeconomic background, are benefiting from high-quality free childcare.

We are also introducing baby boxes, again on a universal basis. They are an import from Finland and they have been hugely successful. The issues with the tax-free childcare scheme relate to it not being universal and not being provided to enough families. Some of the families most in need will not benefit from access to free childcare, particularly if they are going through the process of job seeking or anything like that. They are the ones who would benefit most from free childcare, which would enable them to access appointments, interviews and interview preparation, so the lack of universality is a concern.

We are largely supportive of the specific proposals in the Bill. We have concerns about gift matching and we will likely return to that next week, but I appreciate the opportunity to speak today.

--- Later in debate ---

[Mr Wilson]

I have not had a chance to look into it myself, but I am sure that the Financial Secretary will be happy to speak to my hon. Friend after the debate.

After business rates relief, gift aid is the most highly valued tax relief available to the sector. Since its introduction in 1990, it has grown substantially. It is now worth £1.3 billion a year to the sector, and robust and well-used processes have been developed to facilitate gift aid claims on most forms of donation. That includes text message, online and direct debit donations, and even the donation of goods to charity shops. The gift aid small donations scheme is a natural complement to gift aid, covering circumstances in which it is not feasible to obtain a gift aid declaration. I am particularly proud that the importance of the scheme to the charity sector has been acknowledged, and that the principles of the Bill have been welcomed throughout the House.

The changes in the Bill will make the gift aid small donations scheme significantly more flexible and generous. HMRC’s provisional estimates suggest that the reforms could benefit charities by up to £15 million a year, given that the 9,000 new charities that apply for recognition by HMRC each year are now entitled to claim top-up payments much sooner. Those figures will be certified by the Office for Budget Responsibility as part of the autumn statement.

Questions have been asked today about poor take-up and a lack of awareness of the small donations scheme. I can tell the House that 21,300 charities took advantage of the scheme last year, claiming a total of £26 million of Government support. We recognise that that is less than was forecast, but we want as many charities as possible to benefit from the scheme. That is why we are removing a number of the eligibility requirements and relaxing the community building rules, which will make it much simpler and easier for smaller charities to claim.

[Kirsty Blackman]

The changes in the eligibility criteria will make things easier for the charities that already claim, but I think that things will become more difficult for the established charities that have no staff support and must rely on volunteers. I do not think that they will benefit from the changes.

[Mr Wilson]

I think that the proof of the pudding will be in the eating. We constantly keep these matters under review.

As my hon. Friend the Financial Secretary said earlier, an outreach team in the Treasury is working on face-to-face presentations. So far, 650 charities have taken up that opportunity, and it has increased take-up. The feedback from the sector has been extremely positive, but we will continue to work on awareness and take-up with representative bodies in the charity sector. We are also launching a local charities day, which we hope will take place in December. That will provide a good opportunity to profile what local charities are contributing, and to ensure that awareness of the small donations scheme is at the forefront of their minds.

The Bill is a culmination of months of consultation and constructive discussion with the charity sector, and I would like to take this opportunity to pay tribute to the hundreds of charities, umbrella bodies and others that took the time to engage with the Government during the development of the Bill. Our engagement with the sector will not end with the conclusion of this review, however. A number of charities told us that a lack of understanding can contribute to unclaimed gift aid. We will therefore continue to work closely with charities and sector representatives to raise awareness of both gift aid and the small donations scheme, to maximise the relief claimed on eligible donations.

A number of hon. Members raised the matching rule, and I would like to take the time to go through that in a little more detail. I know that the hon. Member for Salford and Eccles (Rebecca Long Bailey) was particularly exercised by the proposed changes. This tax relief rightly benefits charities established and run by honest, committed people who are motivated to do good and who work hard for their beneficiaries. Unfortunately, the generous nature of these tax reliefs also attracts a dishonest minority who seek to exploit charitable status for criminal purposes. HMRC works closely with the Charity Commission for England and Wales, the Charity Commission for Northern Ireland and the Office of the Scottish Charity Regulator to protect our charity sector from those unscrupulous individuals. In 2015, more than 275 suspicious activity referrals were passed between HMRC and the charity regulators for further investigation.

Unlike gift aid, the gift aid small donations scheme does not provide a full audit trail to allow HMRC to link donations back to a specific named donor. The gift aid small donations scheme is therefore much more vulnerable than gift aid to fraud. That is why it is necessary to operate gift aid alongside the small donations scheme, so that we can best protect the scheme against fraud and exploitation by ensuring that funds are used only to support the important work done by bona fide charities. Public trust in charities has already declined due to poor fundraising practices. We really must ensure that, with the small donations scheme, we do not leave the door open to any future scandal and its consequent impact on public trust and confidence. I am sure that all hon. Members across the House will agree with me on that.

[Kirsty Blackman]

On the point about charities acting fraudulently, does the Minister not see that the charities that could benefit the most from the change to the matching rule are those that earn very small amounts of money, such as £500 or £1,000 a year? That is not going to cost the Treasury a massive amount of money, and there would not be a risk of massive financial fraud.

[Mr Wilson]

I want to stay on the subject of fraud, because we must guard carefully against it in the legislation. It might sound as though we are opening up quite small pockets of money, but when we put them all together, they add up to a much bigger total. The figures relating to the gift aid small donation scheme are not available in isolation. However, it is an unfortunate fact that unscrupulous individuals seek to exploit charitable status for criminal purposes. In May this year, three individuals were jailed for a total of 22 years for defrauding HMRC of £5 million in fictitious gift aid claims. In April this year, three individuals were jailed for a total of 11 years for submitting fraudulent gift aid claims totalling £340,000. In January this year, two individuals were jailed for a total of five years for attempting fraudulently to claim £500,000 in gift aid from HMRC. That is a really important point to make. We must make sure that this small donations scheme is not open to fraudulent activities.

The Bill removes two of the existing eligibility criteria that help HMRC to assess compliance with the wider gift aid scheme—the two-year registration requirement and the gift aid history requirement. The Government initially consulted on relaxing the gift aid history requirement to only one year rather than two. However, after listening to the views of the sector we have taken the decision to remove that requirement entirely, which is a significant simplification for charities. It is therefore necessary to retain the match-funding rule as a means of protecting the integrity of the scheme. As the Financial Secretary said in her opening comments, the scheme was always intended to be linked with the wider gift aid scheme, and the Government made that clear in 2012 and that remains the case today.

It is important to be clear that the gift aid matching requirement is not intended to disadvantage smaller charities. That is why the rule is progressive and is set at a modest ratio of 10:1. This means that a charity needs only to claim gift aid on donations of £10 to gain a small donations scheme allowance of £100. To benefit from the maximum small donations allowance, a charity must collect gift aid donations of just £800. Most would see that as a reasonable position to take. Requiring charities to match a proportion of their small donations with a small amount of gift aid donations incentivises charities to maximise their gift aid claims.

Unlike the small donations scheme, gift aid relief is not capped, relief can be claimed on donations of any size and it is not limited to small cash donations. Furthermore, the process of obtaining a gift aid declaration allows charities to develop ongoing relationships with their donors and can lead to a more resilient funding stream in the longer term. In terms of awareness for charities as well, the Government have funded the small charities fundraising training programme, which is worth more than £100,000. The Government appointed the Foundation for Social Improvement in partnership with the Small Charities Coalition and GlobalGiving UK as training providers to help charities with an annual income of up to £1 million to fundraise much more effectively than they have done in the past.

The hon. Member for Clwyd South asked why the matching ratio was set at 10:1. During the passage of the Bill in 2012, the matching rule was originally set at 1:1, but that was reduced to 10:1 after listening to representatives from the sector.

My right hon. Friend the Member for Meriden asked about gift aid and SMS donations. SMS text giving is a really easy way for donors to give to charity. Donors simply send a short code to a six-digit number to donate a set amount via their phone bill. There is an established process for donors’ gift aid SMS donations. Following the initial message, a reply is sent to the donor thanking them for their donations and asking for their name, house number, postcode and confirmation that they are a UK taxpayer. If the donor replies with that information, gift aid is added to the donation.

We also had a question about why cheques were not allowed. The aim of the gift aid small donations scheme is to allow charities and community amateur sports clubs to claim a gift aid style payment on cash donations received in circumstances where it is difficult or impractical to collect donors’ details. Giving by cheque means that the donor is giving their details to the charity and the extra amount of information needed to make a gift aid declaration is therefore relatively small. If it is practical for a donor to write a cheque, it seems reasonable to assume that it is practical for a donor to make a gift aid declaration.

I will briefly cover contactless debit and credit cards, because those donations face the same fundamental problem—a lack of opportunity for charities to stop and engage with their donors. Anyone who has passed through a tube station ticket barrier at rush hour will be able to attest to the speed of contactless technology, allowing individuals to tap their card to pay and walk through without breaking their stride.

I am very grateful to representatives of Cancer Research UK who took the time during the Government’s recent consultation to demonstrate a prototype contactless donation terminal currently being piloted by a number of large UK charities. These terminals, which are set to fixed donation amounts, allow individuals to donate quickly and easily in a similar way to donating cash. Extending the small donations scheme to include these types of donation will future-proof the scheme, allowing more charities to benefit as the technology becomes widely available.

We had a fairly lively discussion about the cost of child care and the importance of Government support for hard-working families. I hope that we can all agree that the amendments within the Bill are positive, making it easy for parents to access help with the cost of child care. I also hope that my right hon. and hon. Friends from all parties in the House can join me in welcoming the imminent introduction of tax-free child care. This new scheme will provide much-needed support with child care costs for the first time to working parents who are self-employed as well as those who are employed.

The Bill will make the gift aid small donations scheme more flexible and generous so that it can benefit a greater number of charities and donations. It will also make it easier for parents to access tax free child care. It is good news for civil society and good news for working parents, and I hope that all hon. Members will join me in supporting it. It is a Bill to make life simpler and easier for charities and working parents, and I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Small Charitable Donations and Childcare Payments Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Small Charitable Donations and Childcare Payments Bill:

Committal

The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 18 October 2016.

The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and up to and including Third Reading

Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.

Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.

Other proceedings

Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Jane Ellison.)

Question agreed to.

Small Charitable Donations and Childcare Payments Bill (Money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Small Charitable Donations and Childcare Payments Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Jane Ellison.)

Question agreed to.

Small Charitable Donations and Childcare Payments Bill

Kirsty Blackman Excerpts

Committee Debate: House of Commons
Tuesday 18th October 2016 Public Bill Committees

[Rebecca Long Bailey]

Clause 2 amends the types of donations eligible under the small donations scheme to include those made by contactless payment. Only cash payments under £20 are currently considered eligible donations. The Opposition support the clause but we question why contactless payments have been singled out in that way.

Amendment 1 would widen the scheme to include donations by text, by cheque or via the internet. A survey carried out by the Charity Finance Group for the National Council for Voluntary Organisations, the Institute of Fundraising and the Small Charities Coalition found that only 36% of the 340 charities surveyed wanted contactless payments to be included in the scheme. It also found that cheques were the method favoured for inclusion: more than 75% of respondents wanted them to be included. Half wanted text donations and two thirds wanted one-off online donations to be eligible. The amendment, which would include all those methods, is supported by the organisations mentioned and by the Charity Tax Group.

The Government’s likely response is that the methods do not need to be included in the scheme because a gift aid declaration can be provided, but the same logic applies to a bucket collection of cash donations: the fundraiser holding the bucket would simply need to hand over a pen and a piece of paper and—voilà—they have a gift aid declaration. However, the point is that it is difficult, albeit not impossible, to get the declaration. Most people send a donation via text in a spur-of-the-moment decision. A follow-up text is then required to ascertain whether the donation is eligible for gift aid, and most people are not as responsive as we would like, so it makes sense to include donations via text in the scheme. As for cheques, I understand that someone who is able to sign a cheque is probably able to sign a gift aid declaration at the same time, but 75% of charities surveyed said that including cheques would increase the efficacy of the scheme for them, so I would be interested to hear the Minister’s reasons for not doing so.

Amendments 2 and 3 would include SMS or text messages in the scheme. For the same reasons that I have already outlined, we see the logic in tabling them and we support them. I hope the Minister will accept our amendment or explain more fully her reasons for not accepting it, but I will not press it to a vote.

[Kirsty Blackman (Aberdeen North) (SNP)]

We support the amendments. As has been stated, a number of charitable organisations have got together and have come back with a really comprehensive survey that says that charities are hugely in favour of such an approach.

The gift aid small donations scheme is a really good Government initiative that has done part of the job it was set up for, but we can see from the number of people making a claim that it has probably not done as well as was intended—it has not quite reached the number of claims that were expected. That is partly because the way the world works has changed: people are giving through other methods. I rarely put money in a bucket, but I quite regularly make text donations or online donations, and I am as guilty as anyone of not following up with that second text with my name and address for the gift aid. In a world that is moving forward, we need to consider that.

I understand the Government’s reluctance to take on cheques, but it has been really clear from the groups that have come forward, particularly church groups, that they receive an awful lot of their funding from small cheques. It would be much better for them if they were able to claim for cheques under the gift aid small donations scheme. Although that may seem almost a backward step, we need to ensure that the gift aid small donations scheme works as best it can, particularly for small charities that do not have the staff—the people power—to fill in all the forms, which is still a requirement. Widening the gift aid small donations scheme would make it better, particularly for small charities.

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in this debate. I spoke on a similar clause four years ago when this Bill first went through Committee; I think that the hon. Member for Clwyd South was here as well. Looking back, many of the Members who served back then appear to have moved on to far greater things than I have, so they will not be repeating this debate.

It is worth looking back at the debate four years ago, when the topic was whether restricting the measures to cash was appropriate and whether we should include different technologies or different means of giving impulse donations for which getting a gift aid declaration is hard, in order to achieve the objectives of the scheme. The current scheme is worthy. It is meant to give a level of support equivalent to gift aid to small donations, in order to give hard-pressed charities extra money. It is regrettable that four years into the scheme, the amounts claimed are much lower than we thought. Ideas to help charities claim and achieve the £100 million that Government thought this would originally cost are to be welcomed.

Four years ago, I was perhaps a bit prescient on this point; I even referred to contactless payments in that debate. I thought that the world might move on, that cash would become less common and that we would all find different ways of donating, whether by making contactless payments on terminals or by clicking buttons in an app. The Bill risked becoming out of date quickly if we were not careful. I suggested at that point that perhaps the Government should take the power in the Bill to amend by statutory instrument the definition of “cash or cash equivalent” in that situation, so we could keep up to speed with technology and not have to keep coming back every few years to primary legislation to fix it.

Here we are four years on, trying to fix contactless payments. That is quite right, and I will happily support it. We have even included Android Pay and Apple Pay, again quite sensibly, but we cannot predict where we will be in four years’ time. How will impulse donations be made? Will it still be by text message, by app, by cash in a bucket or contactless payments, or will we have found some new technology, perhaps fingerprint swipe? It is hard to imagine where we will be in four years’ time. If we are to keep the Bill as effective as we want it to be, why not have that power available so that the Government can say quickly, “Let’s make a tweak here, and allow this to fall within the scheme”?

--- Later in debate ---

[Jane Ellison]

We are keen to extend the scheme to cover contactless as well as cash payments, but as those who were here in 2012 will know, the scheme augments what we expect charities to raise through gift aid donations and covers means such as bucket collections that it is just not feasible to do gift aid on. The scheme is capped. We actually want charities to claim as much as possible under gift aid, which is not capped and allows them to form a long-term relationship with donors, as many of us probably know from charities that we give to. From the simple point of view of a charity, a wholesale switch to claiming through this scheme rather than gift aid would move it away from such long-term relationships and limit what it could claim. The scheme is meant to be a complement to gift aid, not an alternative or a lighter-touch version of it, and it would be to many charities’ disbenefit if that were the case.

As I explained on Second Reading, the small donations scheme was never intended to cover methods of donations for which well-established and well-used processes for claiming gift aid already exist, such as donations made by SMS or online. It may help if I explain in a bit more detail the processes for claiming gift aid on electronic donations. As the Minister for Civil Society, the Under-Secretary of State for Culture, Media and Sport, my hon. Friend the Member for Reading East (Mr Wilson), outlined on Second Reading, there is a simple and well-established process that allows charities to solicit gift aid declarations from donors who make SMS donations. I take the point that the hon. Member for Aberdeen North made about the way people respond to that, but it is a pretty straightforward and well-established process none the less. The donor sends a short code word to a six-digit number—for example, “Dog” to 606060—to donate a set amount through their phone bill. A reply is then sent to the donor thanking them for their donation and asking them for their name, house number and postcode and confirmation that they are a UK taxpayer. Once the donor provides that information, the charity can claim gift aid.

I think that is a straightforward process, and I hope that hon. Members would agree that, in circumstances such as that, where a donor provides a charity with a ready means of making direct contact—their mobile phone number—it is feasible for the charity to solicit a gift aid declaration, and indeed many charities regularly do so.

[Kirsty Blackman]

Does the Minister not recognise that people generally see text messages as the same kind of thing as putting money in a bucket? They do not want to hang around or have to give their name and address. The two things are really parallel.

[Jane Ellison]

I have been stressing the point that this scheme was intended to work where it is not practical to establish such a relationship—where someone is passing in the street, is in a rush or whatever, and throws something into a bucket. That is not the same as an SMS donation. Yes, the motivation for an SMS donation might be quite instantaneous—perhaps someone has seen an advert or a documentary, or there is an appeal on the television, or whatever—but in terms of someone’s ability to respond to the gift aid query that follows, the relationship has been established, because they have given their mobile phone number. That is not comparable with a person rushing past someone with a bucket outside the supermarket and throwing something in, where that person is already on their way and cannot be pulled back to fill in a form.

--- Later in debate ---

[Jane Ellison]

I reiterate the comments I have already made. This is about how we make this scheme, which was always designed to be a complement to gift aid, work. We are separately consulting on some changes to regulations around gift aid, which are designed to make it easier. We are seeing an evolution in the way people are able to donate. The question is whether the amendments are suitable for this scheme, which was always meant to deal with the issue of cash or cash-like transactions—instantaneous donations, bucket collections and donations from people walking by in the street.

I am unpersuaded that a review in six months’ time would add anything to the information we have before us today. It goes without saying that all these things remain under constant review, and this small donations scheme is no exception. It is kept under review in the Treasury—the Treasury keeps charity and tax law under review—and the team there has regular meetings with key stakeholders. The Minister for Civil Society also has extremely regular contact with stakeholders, and I look forward to having contact with charities on charity taxation.

I hope to persuade the hon. Lady that there are already data out there. HMRC publishes a national statistics package every year, which contains an absolute wealth of data, including on the total amount claimed under the gift aid small donations scheme. That is a transparent approach and it allows interested parties to monitor constantly the take-up and the effectiveness of charitable tax reliefs. Of course there is more to do to encourage charities to take up such measures, but the answer lies more in the things I mentioned—the outreach I talked about and the work being done by the Minister for Civil Society—than in some of the changes that have been proposed today.

[Kirsty Blackman]

I appreciate the fact that the Government have consulted on the gift aid small donations scheme and received a variety of responses. Does the Minister not feel that charities and charitable organisations have largely spoken with one voice in calling for the methods under the scheme to be increased, at least a bit? I understand that things are under review, but do the Government not accept that it might be better to listen to people on this matter? I acknowledge that they have listened with regard to some of the other things they are doing.

[Jane Ellison]

Picking up on the hon. Lady’s last point, the Government have listened. There is always a bit of scepticism in politics—I think we have all felt it—on whether things change as a result of consultations, but the consultation in question was really open. We consulted and asked for ideas and, as a result the responses we received, made further liberalisations in the regime. I think that we have listened and that I have given good reasons why we do not want to go in the proposed direction for this scheme because of the nature of what it was designed to do. We are looking to future proof it for contactless payments.

On gift aid more generally, as I said, changes are already being proposed and there is a lot more we can do to increase charitable take-up. I am unpersuaded that the issues being advanced in this debate are the ones that will aid take-up without having unforeseen consequences. Perhaps we will debate those issues later in our discussions of other clauses.

--- Later in debate ---

[Jane Ellison]

I will of course draw the hon. Lady’s wider comments about childcare to the attention of the relevant Ministers.

[Kirsty Blackman]

I feel that as someone who is likely to be using the tax-free childcare scheme for eight or nine years, it is sensible for me to make some comments. The current childcare voucher scheme is quite cumbersome—particularly given the paper methods that are used—and difficult for people to access, so I am pleased that the Government have listened to comments about the need to change how parents can access the scheme and ensure that there is consistency. I am pleased that the Government have piloted online access and listened to parents about making changes to that.

I have a couple of questions. First, I would like to check that the Minister is committed to ensuring that during the scheme’s roll-out, which I understand will happen next year, it is kept under constant review and feedback from parents is looked at. A relatively small group of 400 or 1,000 parents may not cover all the circumstances that we might see once the scheme is completely rolled out, so it would be useful if the Government were to continue in listening mode, and I would very much appreciate that assurance.

My other question relates to the conversations about the scheme with the Scottish Government. At the SNP conference at the weekend, announcements were made about changes that the SNP Government will make to some of the ways in which parents in Scotland can access childcare. What discussions have the UK Government had with the Scottish Government about how this Government’s new tax-free childcare scheme will link into the Scottish Government’s consultations on and proposed changes to the types of childcare that parents can access with their free hours? The Scottish Government are looking at making changes to the flexibility of the free hours that are provided to parents in Scotland and the settings that parents can access with that childcare provision. How will that scheme in Scotland link to the tax-free childcare scheme? Have the UK Government had any conversations yet about that with the Scottish Government? If not, will they commit to doing so?

[Jane Ellison]

I thank the hon. Lady for her comments. Of course we want the tax-free childcare scheme to work for parents. It is designed to make their lives easier, and that must be central to the way we approach the roll-out, which will be gradual, robust and extensively trialled with a variety of parents, to ensure that we replicate as many different circumstances as possible, as she said.

On the hon. Lady’s second point, we always deal with issues that relate to the devolved Administrations as appropriate. I will look at her broader point about how different childcare policies interact, but I do not think that that is directly relevant to the clause. In general terms, I reassure her that we are always assiduous in ensuring that where there are issues of interaction with the devolved Administrations that pertain to Bills, those are sorted out at official level ahead of proceedings such as these.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Extent

Question proposed, That the clause stand part of the Bill.

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[Kirsty Blackman]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss new clause 2—Review of anti-fraud measures in relation to Gift Aid Small Donations Scheme—

“(1) The Chancellor of the Exchequer shall, within six months of the passing of this Act, publish an assessment of the efficacy of anti-fraud measures designed to regulate the Gift Aid Small Donations Scheme, including, but not limited to, the Gift Aid donations threshold.

(2) The assessment shall have particular reference to the efficacy of the matching requirement.”

This new clause would require the government to publish an assessment of anti-fraud measures designed to regulate the Gift Aid Small Donations Scheme.

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[Kirsty Blackman]

I appreciate having the opportunity to move the new clause. Two of the three pieces of evidence that the Committee accepted today strongly support its inclusion in the Bill, one from the Churches’ Legislation Advisory Service and the other from the Charity Tax Group. The other submission is not against the new clause, it just does not mention it. As was mentioned earlier, a paper produced by the National Council for Voluntary Organisations, the Charity Finance Group, the Institute of Fundraising and the Small Charities Coalition says that it is vital that the matching requirement is changed or removed.

I take Members back to when the gift aid small donations scheme was first brought in. I was not present, but the Library has kindly produced a briefing that covers some of the matters that were discussed, and particularly the matching requirement. The right hon. Member for Bromsgrove (Sajid Javid) was the Minister at the time, and I want to quote what he said in the course of the debate on that legislation. Government amendment 30 was added to the Small Charitable Donations Bill, and it allowed the Government to make changes to the matching requirement. He said:

“It will allow us to remove the matching provision entirely…Even so, charities would always need to claim some gift aid in each year to ensure that they can claim under the scheme…It is something that many charities have asked us to introduce”.—[Official Report, 26 November 2012; Vol. 554, c. 98.]

So back then, charities were in favour of flexibility in the matching requirement and argued for it, and ultimately, the Government accepted that.

Having read the comments of Members at that time, I think the reason for that amendment was that the figures are arbitrary. The gift aid small donations scheme was amended fairly heavily during its progress through Parliament, particularly in relation to the matching requirement. When the scheme was introduced, it was suggested that top-up payments should be claimed only for amounts up to £5,000, but that was increased to £8,000. It was also suggested that the ratio of claims through the small donations scheme to gift aid claims should be 1:1 to begin with. The Government moved on that and changed the ratio to 10:1. Both those figures are fairly arbitrary, and the fact that the Government moved so dramatically shows that the figures are not necessarily set in stone.

Small charities have to receive £800 in donations under the gift aid scheme in order to claim the maximum allowance under the gift aid small donations scheme. Some very small charities will not receive £800 in donations that they can claim under the gift aid scheme, but they might receive £8,000 in very small donations, whether through church collections, people writing cheques or people making contactless payments. Unless they have that matching £800, they cannot claim the full allowance under the scheme.

The new clause, which is in my name and is supported by my hon. Friend the Member for Glasgow Central, would get rid of the matching requirement. It asks the Chancellor of the Exchequer to carry out an assessment. Because the change does not need to be made under primary legislation, the Government can carry out the assessment and make the change without being required to bring the matter back before the House in the spectacular way that they have to do with some other things.

Our proposal is widely supported by charities and would very much help the smallest charities, which feel strongly about it. As Members of all parties have stated today, take-up of the scheme has not been as high as expected. I argue that that is because some of the smallest charities are not able to manage the paperwork that is required.

I am not suggesting that we get rid of the requirement to claim gift aid in general. It is reasonable, given the Government’s desire to prevent fraud, that they have charities make at least one claim and fill in the full version of the forms. It is not, however, reasonable for the Government to expect the smallest of charities to go through that cumbersome process to claim the full amount of £800 in gift aid on small donations. That view is strongly supported by the organisations that have taken the time to write to us.

I intend to press the new clause to a vote. I understand that the Government might not want to accept it today, but I would very much appreciate it if they would seriously consider before Report the fact that a 10:1 ratio is possibly not the right arbitrary level. If they will not consider abolishing the matching requirement, will they consider making the ratio 20:1 or 50:1? That would be hugely beneficial to the smallest of charities, which benefit most from the gift aid small donations scheme and do not have the people power to fill in many of the relevant forms. I want them to continue to fill in forms, but not so many.

[Rebecca Long Bailey]

New clauses 1 and 2 both get to the most important issue for the charity sector: the so-called matching requirement. The requirement is that to make a claim under the small donations scheme, a charity must receive a certain amount of gift aid donations in the same tax year. The total of eligible donations on which a charity can claim a top-up payment is restricted to an amount between equal and 10 times the net donations on which gift aid is claimed for the year.

New clause 1 would require the Government to carry out a review of the impact of abolishing the matching requirement within six months of the passing of the Bill, and Labour’s new clause 2 would require the Government to conduct a review into the efficacy of anti-fraud measures designed to regulate the gift aid small donations scheme, with particular reference to the matching requirement. On Second Reading, the Minister said that the requirement is

“to protect from fraud the small donations scheme, which has substantially fewer record-keeping requirements than gift aid—an important factor that was looked at when the scheme was first designed back in 2012. It is by retaining the rule that donations under the scheme must be matched with gift aid donations that we best can do that.”—[Official Report, 11 October 2016; Vol. 615, c. 215.]

However, as far as I am aware, she did not produce any evidence that the matching requirement is an effective anti-fraud measure.

As we have heard, the sector says that the requirement is a huge barrier for many small charities. They would like it to be significantly reformed, if not scrapped entirely. For instance, the Churches’ Legislation Advisory Service has suggested extending the requirement to 20:1. Given the Government’s reasons for not proposing any amendments to the requirement, the Opposition think that we should simply have a chance to see the evidence that the requirement works.

We agree, of course, that preventing fraud in the scheme is of paramount importance, but if the measure is simply adding a layer of red tape and is not effective, the Government should review it. The Charity Finance Group has highlighted the fact that only 275 reports of suspicious activity were shared between HMRC and charity regulators in 2015, which represents a rate of one suspicious activity per 500 charities. The group considers that to be a sign that fraud in the scheme is not of a high enough level to justify the effects of the matching requirement. That might well be the case, or it could be that the requirement is an effective caveat to the scheme, but we would only know that if there was a publicly available assessment of the effectiveness of all the measures in the scheme designed to combat fraud and of where the requirement sits within that. I can see no reason why the Government would not want to carry out such an assessment, and I hope that the Minister will accept our new clause 2, or work with us to table a Government amendment on Report that deals with any issues or concerns with our wording.

Finally, I would welcome the Minister’s comments in response to evidence produced by the Charity Finance Group, which welcomes the intention behind our new clause but believes that the Government should focus on increasing punishments for those who commit abuse and providing more opportunity for charities to report on suspicious organisations.

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[Jane Ellison]

I think that is right, and I thank my hon. Friend for that intervention. We are really trying to make this as simple and straightforward as possible, but we need some safeguards. That is why the matching rule is important. I would suggest that requiring HMRC to publish a detailed analysis of compliance activities and the efficacy of anti-abuse rules could be unhelpful. I would hate us inadvertently to provide a roadmap for fraudsters. If there was a requirement to publish that information, it would provide valuable information to that dishonest minority whom the Government are trying to root out.

I would like to reassure the Committee that HMRC works with charity regulators to ensure that charities are properly regulated, the abuse of charities is properly and robustly dealt with, and the tax reliefs claimed are used for charitable purposes. If a charity is suspected of fraud, HMRC will share that information with the Charity Commission, which can consider further action, including removal from the charities register. We have made it easier to report fraud. I hope that it goes without saying that all tax policy remains under constant review, and this scheme is no exception. The Government will of course continue to monitor the effectiveness of the small donations scheme, as they do with all charitable tax relief.

We are very keen to make sure that the good name of all those charities that do wonderful work at international, national and local level is not abused. I will give the Committee just one example. In May this year, three individuals were jailed for a total of 22 years for defrauding HMRC of £5 million in fictitious gift aid claims. I am afraid that there are more examples of large sums of money where that is true. Those people are out there and, as the report I cited earlier pointed out, they are very quick to spot loopholes, however well intentioned.

HMRC publishes a comprehensive national statistics package, to which I alluded earlier, which allows anyone to scrutinise the efficacy of the Government’s support for charities. However, requiring in legislation that the Government publish separate assessments within six months of the passage of the Bill is both arbitrary and unnecessary and, for the reasons I explained, in the case of one of the reviews it is likely to be impossible to prove what it seeks to prove. I therefore urge hon. Members not to press their new clauses to a vote.

[Kirsty Blackman]

Regarding the new clause that I tabled, I have asked the Government to undertake an assessment of the differential impact on charities of different sizes. As I have tried to make clear, both on Second Reading and today, my concern is particularly about the very smallest charities, some of which find that this is a barrier. I am slightly bothered by some of the conversation both today and on Second Reading. Perhaps I am naive, but I do not think that charities generally set out to defraud the Government. That is pretty unusual, and it bothers me how much of this conversation has been slanted towards concern about issues relating to fraud. I appreciate that some people try to commit fraud, but they are a small minority. It is only in relation to the largest amounts of money that we should be particularly concerned about that.

[Jane Ellison]

I want to clarify my remarks, which were principally centred on the fact that there are people out there who are fraudsters and who would seek to exploit loopholes in charity law and in gift aid rules. My comments were not focused so much on charities themselves being defrauders, although there have been one or two examples of this. Predominantly, this is about people exploiting charity law and the reliefs available in the same way that they exploit other loopholes.

[Kirsty Blackman]

I am really grateful for that clarification. I was concerned about the tone of some of the conversation that had been taking place. In relation to the new clause that I have tabled, I am asking the Chancellor of the Exchequer to look at the differential impact on different charities of removing the 10% matching requirement. The Government have made it clear, and it has been suggested by charities, that this could be changed to a different level of matching requirement.

The Government have accepted that this is a relatively arbitrary figure. It is good because it is a nice round number, but that is not necessarily helpful, particularly for the smallest of charities. I would very much appreciate it if the Government would consider accepting new clause 1, which looks at an assessment, and which would help those very small charities which most need this matching requirement to be removed.

Question put, That the clause be read a Second time.

Small Charitable Donations and Childcare Payments Bill

Kirsty Blackman Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 15th November 2016 Commons Chamber

I hope that the Minister will consider these points. A few years ago in this Chamber, we were told that such provisions could not possibly include contactless payments. The Government moved on that, and they moved on the rate of matching. To be optimistic, as we all want this Bill to work, I very much hope that the Government will shift a little on these issues too.

[Kirsty Blackman (Aberdeen North) (SNP)]

I rise to speak to new clause 4, which stands in my name and that of my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin), although I shall touch on the other new clauses in the group.

New clause 1, which would require HMRC to present an annual report, is reasonable and sensible. I was surprised by the amount of discussion we had in Committee and elsewhere about the possibility of charities using such a scheme for fraudulent purposes. Perhaps I was being naive as that had not crossed my mind a great deal, but apparently people are genuinely concerned about it. If the Government were to take on board Labour’s proposal in new clause 1, it would help to allay the fears of the general public about how charities are acting. I think that only a very small minority of charities are set up to act fraudulently, and the publication of such information would help to ensure that the public are aware of that.

New clause 2, not dissimilarly from a number of measures that we discussed in Committee, deals with the matching requirement. I will come on to that later. I understand why Labour Members have tabled new clause 3, which addresses local organisations that, unfortunately, are caught by some aspects of the way in which the Bill is written. I appreciate that that is an issue, so my colleagues and I will support Labour Members if they press it to a vote.

New clause 4 relates to the matching requirement and the associated threshold. When the first draft of the Bill was introduced in the previous Parliament, the Government supported a different matching requirement from what was eventually approved. During the consideration of that Bill, they also changed the proposals on the matching requirement so that they could edit it in the future, if necessary. That was a result of pressure by charities and organisations that had raised concerns about the arbitrary nature of the level that was chosen for the matching requirement.

I appreciate that the Government have moved on this in the past, but charities are now asking them to move further. As the hon. Member for Salford and Eccles (Rebecca Long Bailey) said, the National Council for Voluntary Organisations, the Charity Finance Group, the Institute of Fundraising and the Small Charities Coalition produced a paper saying that it was vital that the matching requirement was changed or removed. That is why we have brought the proposal before the House. Although we discussed this in Committee, we still feel that the Government need to look at it, while appreciating that they have the power to do so outwith this Bill.

If the Government do not accept the new clause, I would very much appreciate it if they considered the proposal in the future. This is not just about the SNP; our proposal is widely supported, including by the Labour party and by charities across the UK such as the Churches Legislation Advisory Service and the Charity Tax Group. If fears can be allayed about fraud, in particular, it would be reasonable for the Government to take some steps towards change. I do not want to talk for long, but I would appreciate it if the Government would seriously consider taking up this proposal. If they do not agree to the new clause, I hope that they will at least commit to looking at it at some point in the future.

[The Financial Secretary to the Treasury (Jane Ellison)]

I appreciate the spirit in which the new clauses have been spoken to, because we are all here for one purpose, which is to make sure that the Bill works as well as possible for the benefit of as many charities as possible. In responding to this short debate, I will try to offer evidence of the reasons why we cannot, or do not think that it is right to, accept the new clauses.

New clause 1 would require Her Majesty’s Revenue and Customs to publish every year an analysis of the number of penalties imposed; the circumstances giving rise to the imposition of those penalties; an assessment of the number of charities set up with the primary purpose of accessing the small donations scheme; and an assessment of the efficacy of the matching rule in preventing fraud. That relates to the general debate that we have had throughout the Bill’s progress about how we prevent fraud and a minority of people from exploiting the rules.

New clause 2 would require the Chancellor to undertake a review of the matching rule—the same is true, as we have just heard, of new clause 4—in consultation with the charity sector, and to lay a copy of the report by the end of the 2017-18 tax year.

New clause 3 seeks a power to prescribe by regulations an exemption for certain charities from the connected charities provision. The shadow Minister, the hon. Member for Salford and Eccles (Rebecca Long Bailey), is right to say that we debated that proposal in Committee and that I undertook to reflect on it. I will tell her where I have got to shortly. The new clause would require the Treasury to consult the scouts, guides, military cadet groups and other organisations before publishing draft regulations on or before 31 October 2017.

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[Kirsty Blackman]

None of us has suggested, at any stage of the proceedings on the Bill, removing all the anti-fraud measures. In fact, we were quite clear and measured in everything that we moved; it was about an assessment. New clause 1 is about responding to our concerns about the actual level of fraud and providing us with the relevant information to enable us to have a much more knowledgeable debate next time the matter comes up—specifically around the level, the percentage and the money that is involved—rather than about removing the measure entirely.

[Jane Ellison]

I understand that point, but my real concern is that the matching rule is the only remaining condition on this particular scheme. Obviously, there are other aspects to wider gift aid, but on the scheme that is the subject of this Bill, we are down to a simple last remaining condition that we believe helps to avoid the scheme being exploited fraudulently. I just do not accept the premise that it is sensible to remove it, to see what happens and then to come back to Parliament and say, “We removed it and, as we thought, it was exploited, so now we have to close that loophole again, but in the meantime we have lost public money and, more importantly, charities have lost their reputations.”

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[Kirsty Blackman]

It is nice to speak on Third Reading of a Bill when there has largely been agreement on many of the measures it contains.

The Government’s measures on the gift aid small donations scheme are sensible and logical steps forward, and it is good that more charities will be able to benefit from the scheme as a result. We were very clear that we would have liked the Government to go further, but we appreciate the steps they have taken, and the wide-ranging consultation they have undertaken.

We raised the matching requirement a number of times. My understanding is that the Government have the power to make changes to that requirement without the need for primary legislation anyway. It is useful to know that the Government can consider that if they receive future representations on the matter. Our concerns related in particular to volunteer-led charities—the very smallest charities, which perhaps do not have the administrative capacity to access some of these schemes. But I appreciate that the Government have committed to undertake a wider publicity effort on the gift aid small donations scheme and on how charities can access tax reliefs. I hope that charities across the UK will benefit from those changes.

The changes to the way that people will access childcare payments are sensible and seem more accessible than the current system. Having used the current system and struggled with some of its administrative impacts, I think the new scheme will iron out some of those flaws, and am pleased that even before the new scheme comes in the Government are re-evaluating it and looking to make it as accessible and as easy for parents to navigate as possible. I understand that a pilot will take place and that, by the end of next year, pretty much everyone should have moved over to the new scheme. I hope the Government will commit to re-evaluating the scheme as it goes forward, to ensure that it is as accessible as possible.

On that re-evaluation, in Scotland we are making changes to the early learning and childcare system, and are looking at a mass expansion so that as many families as possible can access free, good quality childcare that is easily accessible in local communities. In my local community, at Manor Park Primary School, 20 two-year-olds will take part in a trial that is taking place in my area and in a number of other places across Scotland. I am sure that the UK Government will be keen to learn from Scotland’s experience of the expansion of free childcare and will be looking at it for the future.

Thank you, Mr Speaker, for the opportunity to speak on Third Reading. As I have said, we are broadly supportive of the Bill but would have liked it to go further in some areas. However, we will not oppose its Third Reading.

Question put and agreed to.

Bill accordingly read the Third time and passed.