Small Charitable Donations Bill

Mark Durkan Excerpts

Monday 26th November 2012 Commons Chamber

[Gemma Doyle (West Dunbartonshire) (Lab/Co-op)]

Charities are facing challenging circumstances, with falling financial support from the Government and falling regular donations as a result of the squeeze on people’s spending. This is a tough environment for any charity to work in. Furthermore, the reliance on the charitable and voluntary sector is increasing, as we are seeing from the number of food banks that are springing up and the greater reliance on homelessness services.

We owe it to charities to help them out when we can, and I must admit that the Chancellor’s announcement of these proposals was one of the few parts of the Budget that I welcomed. Now that we have had a chance to look at the details, however, we see that there are still some outstanding issues. We will of course support the Bill on Third Reading, but I still have concerns about accessibility for many of the charities that could benefit most from it.

Offering charities the chance to take advantage of a gift aid top-up is of course welcome. My constituency is facing a number of serious challenges, but we are fortunate to have a thriving charitable and voluntary sector that does much good work throughout the area. I am thinking of the small charities run by a handful of local volunteers, such as Home from Home in Dumbarton, and the Clydebank Asbestos Group, which has a very wide reach but relies on a small team of dedicated volunteers, as well as the slightly larger ones with some staff, such as Y Sort-It in Clydebank. They all contribute so much, working alongside the services offered by the local authorities to help with a range of issues.

As I am sure other Members will recognise, it is often many of the smaller charities which are getting by on tiny incomes that help so much with the provision of local services. Many of them do not have steady income streams or the time and manpower—or, often, the womanpower—to administer complex donation rules. They rely on simple methods of fundraising, such as bring-and-buy sales and collecting donations in buckets on the street. Those small activities all add up.

I am sure that, like me, many of those smaller charities will be pleased with the effect that the proposals could have on their incomes. They remain concerned, however, about the restrictions that could make them ineligible. The Government need to ensure that the rules will work for charities and not against them. As my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) has comprehensively set out, we need the Bill to help charities out, not to add to the burden of bureaucracy.

Bureaucracy can be a headache for small charities. Compliance with the rules is essential—they are there for a reason—but they can pose real difficulties, particularly for the smaller charities. A Treasury spokesperson said the Government’s proposals were intended to reduce the administrative burden on charities, but I am not sure that that is what they will do. It is possible that the bigger charities, not the smaller ones, will benefit.

The Government’s amendments are helpful; they are heading in the right direction. The original proposals could have resulted in the smallest charities losing out the most, because placing so many conditions on the new top-up would have made it difficult for those charities to take advantage of the scheme. I am pleased that the Government seem to have recognised the problem with the three-year criterion, and that they are moving towards a two-year period instead. That will widen the benefits to include more charities. However, the proposals will still favour the larger charities that have a history of gift aid claims over the smaller ones that rely on bucket donations.

Similarly, the Government’s amendments do not properly reflect the needs of newly established charities, which will naturally not have any history of gift aid claims. The hon. Member for Banff and Buchan (Dr Whiteford) said that her amendment would acknowledge the fact that, although many charities are proactive in their work, there are those that react to events. A charity might be set up to react to a natural disaster, for example; another might be set up in memory of a loved one. Newly established charities often receive a significant proportion of their donations at the very beginning, and their donations might subsequently tail off. Under the current proposals, they would not be able to claim top-up payments related to those important initial donations.

Our amendments are intended to help those small and new charities by removing the lengthy start-up period and replacing it with a probationary period. That would provide a real benefit. It would allow all charities without a claims history, whether new or established, to benefit from the top-up scheme while keeping the protections in place. It is important to have protections against fraud, but I believe that our proposed probationary period would be sufficient in that regard. I therefore encourage Members to support our amendments.

We need to ensure that we get the scheme right. The Government’s own “Giving” White Paper, published last year, made it clear that they wanted to work more with business and charities to make it “easier and more compelling” for people to give time and money, and so make the change that they want to see. Our amendments would make it much easier for the Government to meet their aims.

New clauses 1 and 2 would ensure a proper review of the impact of the measures on access to the scheme. The charity and voluntary sector deserves to have the rules properly reviewed, with a report being laid before Parliament so that all Members can see how accessible the scheme is. I hope that, in the spirit of openness and transparency that the Government say they are in favour of, all Members will consider supporting the new clauses.

The simple principle of giving charities the extra bit of help that is contained in the Bill is very much welcome, but the proposals could and should go further. As the Bill stands, thousands of small charities could lose out. Our amendments would take a few steps towards giving charities that extra support, and I hope that Members will support them.

[Mark Durkan (Foyle) (SDLP)]

As other hon. Members have already said, many practical concerns and suggestions were aired and shared by members of the four parties represented when we discussed the Bill in the Public Bill Committee. It is important that we use the Report stage to return to a number of those issues. I do not intend to rehearse all the arguments that were made in Committee. This is not the time for “Here are our best bits” or for simply making our pitches again. However, it is important to reflect on the fact that the Minister indicated that he was listening to some of the points that were made in Committee, even if he refuted many of the others. That is reflected in some of the Government amendments that he will no doubt speak to later. I welcome the fact that further progress has been made, just as I welcome the fact that, in Committee, the Minister tabled an amendment to clause 2 as a direct response to an issue that I had raised on Second Reading. I appreciate his doing that.

There is still a basic problem with the Bill. The original Budget promise made by the Chancellor of the Exchequer was widely welcomed across the House, and certainly in the charity sector. People expected something along the lines of what they thought had been promised—that the equivalent of gift aid would be available, with certain conditions, to charities, without them having to fulfil all the gift aid criteria and the necessary processes attached to them.

--- Later in debate ---

[The Economic Secretary to the Treasury (Sajid Javid)]

I will start by reflecting on the Bill’s constructive Committee stage, and I thank the Opposition for their continuing support. I also thank the hon. Members for Edinburgh East (Sheila Gilmore), for Clwyd South (Susan Elan Jones), for Banff and Buchan (Dr Whiteford), for West Dunbartonshire (Gemma Doyle) and for Foyle (Mark Durkan) for their contributions to today’s debate. I will try to answer as many of the issues raised as I can.

Proceedings in Committee, and now on Report, have provided an excellent challenge to and scrutiny of the Bill—as they should have done—and I hope it is clear from the amendments that they have tabled that the Government have listened to hon. Members from across the House. The amendments in this group cover mainly the eligibility conditions for charities that wish to claim under the small donations scheme. New clauses 1 and 2 would have a wider effect, as they require HMRC to publish certain details about the scheme as a whole. Amendment 21 would require HMRC to publish details of the connected charities and community buildings rules. Government amendments 28 and 29 are minor and technical and simply change the Government Department to which powers in clauses 7 and 8 are given.

In Committee we debated a variant of new clause 1 and the same text of new clause 2. I opposed the measures then, and I am afraid I shall oppose them again today, as I will amendment 21. As I explained in Committee, we need neither the new clauses nor amendment 21. We are already doing much of what they ask and it would not be a good use of civil servants’ time to duplicate that work.

Let me start with the annual report. As I said in Committee, HMRC publishes national statistics on the cost of various charitable tax reliefs three times each year. Once the gift aid small donations scheme is up and running, HMRC will include details of that in those national statistics. HMRC does not separately identify gift aid claims by types of organisation, regions of the UK, or their regulators. Those details are not published for gift aid claims and it would not be a good use of HMRC’s time to produce such information for this scheme.

HMRC does not collect information on whether a charity is exempt or excepted. Charities would have to provide that extra information, and HMRC would need to change its IT system to cater for that. Again, that cannot be a good use of resources for either charities or HMRC. HMRC does not publish details of fraud rates in particular schemes or tax reliefs, as that would be tantamount to advertising them to fraudsters. I therefore cannot commit to publishing such information. All information that HMRC can reasonably publish will be published, and interested Members will be able to find all relevant information on its website.

New clause 2 would require a review of the scheme two years after the Act comes into force. As I said in Committee, the Government are committed to a review of the scheme three years after it has started. That will allow enough time for the scheme to get up and running, and for charities to learn about it and get used to claiming. Any less time than that, and the review would not be representative of the scheme. A two-year review would be premature, but it would be wrong to think that no one will look at the scheme for three years. HMRC engages with charities every day through its helpline, outreach and audit teams. It will listen to what charities are saying and look for ways to improve the scheme.

HMRC’s charity tax forum has been discussing this scheme since it was announced in March 2011. The forum will share experiences of the scheme as it beds down, and identify areas for improvement. HMRC keeps all guidance under review and makes changes as necessary so that any issues raised can be responded to without having to wait for three years to pass.

Amendment 21 would require the Treasury to carry out a separate review of the scheme in relation to the community buildings and connected charities rules. As they currently stand, the community buildings and connected charities rules will affect only a few charities. For the vast majority who take advantage of the scheme, such rules will be irrelevant and can be ignored. Most charities are not connected with other charities, and do not operate within community buildings or collect more than £5,000 in small cash donations.

We will debate later more Opposition amendments on the community buildings and connected charities rules. The amendments would extend those rules—and their complexities—to a far larger number of charities. Whatever the outcome of that debate, I do not believe that amendment 21 is necessary. I have already said that we will review the scheme after three years, and that review will be wide ranging and look at all aspects of the scheme. It seems unnecessary and wasteful to hold another review 12 months earlier to look at just a small part of the scheme; it would be better to review everything at the same time.

The hon. Member for Harrow West (Mr Thomas) spent two Committee sittings setting out his concerns about HMRC, which he doubted would have enough resources to administer the scheme—if we go ahead with all these reviews and reports, he may well be right. I do not feel that the new clauses or amendment 21 are a necessary or effective use of public resources, and I therefore ask the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) not to press them.

New clause 3 was tabled by the hon. Member for Foyle, and amendments 32 and 33 by the hon. Member for Banff and Buchan. They are designed to support new and smaller charities and to mitigate the effects of a three-year eligibility period. I hope that hon. Members have noted the amendments that I tabled on eligibility requirements, and that my proposal to drop the eligibility period to two years goes some way to allaying their concerns.

We debated new clause 3 at length in Committee, but I am afraid the concerns that I raised still apply. HMRC would be expected to gather information from other agencies to check the credibility of small charities. That would place a significant administrative burden on it to verify each and every charity that applied through that route. HMRC would be required to make subjective judgments about whether a charity was in or out, and would be constantly at risk of a legal challenge to its decisions. The scheme would be impractical in operational terms and I ask the hon. Member for Foyle to consider not pursuing the new clause.

[Mark Durkan]

The Minister suggests that under the new clause, HMRC would have to check with all sorts of other agencies, but the measure clearly states that HMRC can provide for a scheme to which charities may apply. It would be up to the charities to produce and submit the verifying information. It would not be HMRC’s duty to verify information with other charity regulators or anybody else; it would be up to the charity making the claim to produce the necessary evidence as laid down in the scheme.

[Sajid Javid]

I thank the hon. Gentleman for that point. He sat on the Public Bill Committee and will understand from those debates—probably more than most Members in the Chamber today—the eligibility requirements. I know that he welcomes some of the Government amendments, but the remaining eligibility requirements provide a degree of protection for the public purse, so that charities that make claims and use the benefits introduced by this Bill are those that HMRC has good reason to believe are using the measure in the right way, and there is protection against fraud. I have looked closely at his new clause, which he has tabled with the best of intentions, but it is not a change that we can afford to make at the moment.

I turn to amendments 32 and 33, tabled by the hon. Member for Banff and Buchan. Again, I am afraid I cannot support them. They would allow certain charities— those with an annual income below £25,000 and those set up for specific projects and events, such as she described—to claim top-up payments from the time when they were established without meeting any other eligibility requirements. I sympathise with the intention behind the amendments, but they would cost a lot of money—tens of millions of pounds.

Most small charities starting up have an annual income well below £25,000, and those set up in reaction to events such as disasters would also qualify for payments under the amendments, so nearly every new charity would qualify immediately. As I said, I sympathise with the intentions behind the amendments, but it is essential to have some eligibility requirements, otherwise the scheme will be wide open to fraudsters and the cost to the public purse will rocket.