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.