Small Charitable Donations Bill
Public Bill Committee, 16 October 2012.
John Robertson (Labour, Glasgow North West)
Before we begin, I have a few preliminary announcements. Members may, if they wish, remove their jackets during the Committee’s sittings. Will all Members please ensure that their phones and pagers are turned off or switched to silent mode during these meetings?
As a general rule, my fellow Chair and I do not intend to call starred amendments that have not been tabled with adequate notice. The required notice period for Public Bill Committees is three working days. Therefore, amendments should be tabled by the rise of the House on a Monday for consideration on a Thursday, and by the rise of the House on a Thursday for consideration on a Tuesday. Please note that the House is now expected to rise at 5.30 pm on Thursdays.
For those members of the Committee who are less familiar with the process of taking oral evidence in Public Bill Committees, it may be helpful if I explain briefly how we will proceed. First, the Committee will be asked to consider the programme motion, debate on which is limited to half an hour. We will then consider a motion to report written evidence, followed by a motion to permit the Committee to deliberate in private before taking oral evidence, and I hope that we can take those motions formally. Assuming that the three motions are agreed to, the Committee will move into private session. Once the Committee has deliberated, the witnesses and members of the public will be invited back into the room and the oral evidence will begin. If the Committee agrees to the programme motion, we will hear oral evidence this morning.
Tony Baldry (Conservative, Banbury)
On a point of order, Mr Robertson. As hon. Members may know, I am Second Church Estates Commissioner, so I have a particular interest in the well-being of the Church of England. It will benefit considerably from the Bill, but I do not want to have to explain that I am the Second Church Estates Commissioner every time I speak in Committee. I hope that declaring that interest at the start will suffice for the duration of our proceedings.
John Robertson (Labour, Glasgow North West)
I thank the hon. Gentleman for that, and I am quite happy, if everybody else is, for that to be the case.
Examination of Witnesses
John Robertson (Labour, Glasgow North West)
We will now hear evidence from representatives of the United Synagogue, Stewardship and the Church of England. Will you please introduce yourselves to the Committee for the record?
John Robertson (Labour, Glasgow North West)
Thank you for coming. Before we take the first question, I remind all Members that questions should be limited to matters within the scope of the Bill and that we must stick strictly to the timings in the programme order that the Committee has agreed. I do not want to interrupt Members or witnesses mid-sentence, but if I need to do so, I will.
Gareth Thomas (Labour, Harrow West)
Good morning, gentlemen. I direct this question mainly at Mr Jacobs and Mr Preston, although I do not want to preclude you from coming in on it too, Mr Russell. Do any of your member organisations have problems claiming gift aid, or does every synagogue and every Church of England church claim the maximum amount?
Gareth Thomas (Labour, Harrow West)
How would you amend the Bill to make it better, if you could? That question is for all three of you.
John Hemming (Liberal Democrat, Birmingham, Yardley)
A basic question: will the burden of administering the scheme be proportionate to the benefits? Will it be a worthwhile exercise, or is it really too much hassle?
John Hemming (Liberal Democrat, Birmingham, Yardley)
What you are saying is that it is not necessarily stuff in the Bill; it is a question of how HMRC handles it. Referring specifically to the Bill, is there something we can simplify—to make it easier—or is it really just a question of how HMRC takes it?
John Hemming (Liberal Democrat, Birmingham, Yardley)
So, basically, it might be around the right balance?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
Thank you very much to everyone for coming along this morning and giving evidence.
May I probe a couple of points in slightly more detail so that I am absolutely clear about your views? I want to probe the point about the matching amounts, because there seems to be a slight nuancing there. In an ideal world—correct me if I have misunderstood this—you would not want to see the matching provision, but you recognise that is a price that has to be paid. I would like to understand if I have that correct.
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
May I probe the issue about £20 being the definition of a small cash donation? What is your view on that? Has it been set at the correct level, or should it be different?
Tony Baldry (Conservative, Banbury)
Mr Preston, you are the national stewardship and resources officer of the Church of England.
Tony Baldry (Conservative, Banbury)
Am I right in thinking that the Church of England strongly welcomes this Bill?
Tony Baldry (Conservative, Banbury)
Have you made an estimate of how much you think parishes up and down the country are going to benefit by the small donations scheme?
Tony Baldry (Conservative, Banbury)
Given the amendments that the Minister has tabled, are there any further amendments to this Bill that the Church of England is looking for?
Tony Baldry (Conservative, Banbury)
The Church of England is content now with this Bill as it stands, and you consider that it needs no further amendment?
Tony Baldry (Conservative, Banbury)
The Minister dealt with the question of the definition of community buildings by the amendments he has tabled. Could I ask you about the proposed definition of connected charities? Is that appropriate in your view? Do you have any comments you want to make on connected charities?
Tony Baldry (Conservative, Banbury)
So in effect, the recent amendments that the Government tabled have responded to any lingering or outstanding concerns that you had about the Bill?
Jeremy Lefroy (Conservative, Stafford)
Have you or any of the organisations that you represent made any analysis of the impact of taking people out of tax through raising the individual tax allowance—the basic tax allowance—given that often the people at the lower end of the income scale are some of the most generous contributors?
Jeremy Lefroy (Conservative, Stafford)
Would you agree with an analysis of this Bill that, for the first time, it brings some equality in the treatment of taxpayers and non-taxpayers in respect of their charitable donations?
Susan Elan Jones (Labour, Clwyd South)
Mr Jacobs has already answered this question, but may I ask Mr Russell and Mr Preston whether they know what percentage of their churches actually claim gift aid? The reason I ask is in terms of the requirement of three years of gift aid. Clearly, there are some very positive aspects of the Bill, but my fear is that, while some of the larger and more organised churches will benefit—and many others too—because of concerns about fraud, we could be in a position that little St John’s church down the road with 12 members, many of whom do not pay tax, will not benefit at all. I am interested in your answer.
Gareth Thomas (Labour, Harrow West)
I wonder, Mr Preston, what conversations you have had with the Churches Preservation Trust? I suppose that it would have a similar concern to the point about church planting, where a former church has potentially been brought back into use, either as a church or for other forms of community activity. Yet the three-year rule could, for example, preclude it from benefiting from this Bill as it is drafted.
Gareth Thomas (Labour, Harrow West)
Have your three organisations received funding from other Government bodies? What has your experience been of that?
Mark Durkan (Social Democratic and Labour Party, Foyle)
As you have all said, churches by their nature have a very strong relationship. It is membership-based giving that you are generating; therefore you are able to have very high levels of gift aid participation. Mr Preston, you have said that you do not see the need for any other amendments to the Bill. However, is there not an element of, “Well, okay, I have got mine, because the Bill particularly suits churches”? It is very good as a “Small Church Donations Bill”. In terms of the broader pastoral interests of the church, is it as good as a Small Charitable Donations Bill?
Mark Durkan (Social Democratic and Labour Party, Foyle)
Following what you said, Mr Preston, about not wanting to encourage one-off donations, there are obviously occasions where you will seek one-off donations, where one-off donations will be motivated by the public. Again, those who are in pastoral roles in communities will often be involved in situations where one-off funds are created in response to a single event. It might be a tragic criminal event, as we have seen recently, that impacts on a community, where there is not just a local response, but a national response where people want to give something to show support. It may be in response to a natural disaster. It is very naturally motivated giving that takes place then, and the funds created often have pastoral figures as their patrons as a way of giving assurance that it is not a scam and so on. Is it right that that sort of giving should be specifically precluded from benefiting from the provisions of the Bill?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
I hear what all members of the panel are saying about simplicity and ensuring that bureaucracy does not overtake absolutely everything. On Second Reading, we heard from Ministers that the top-up payments, as they described them, were essentially not actually a form of tax relief. Given that it is estimated that some £100 million will potentially come into the sector as a result of the top-up payments, is HMRC the best arm of government to be administering the scheme, or are there other ways to run the scheme?
Mary Macleod (Conservative, Brentford and Isleworth)
When you were going through the details of the Bill, I am sure that you went out to relevant parties, churches and synagogues to get a response and their thoughts on this. Did they give you any additional feedback on the Bill? What was their general feeling in terms of how they would benefit from it?
Mark Durkan (Social Democratic and Labour Party, Foyle)
To go back to connected charities and the issue of possible one-off funds in response to particular dramatic events, do you see any issues arising there? Often those one-off funds end up being in the care of a particular church figure or church premises. Do you see any difficulties there?
Gareth Thomas (Labour, Harrow West)
If one of the Government’s objectives was to ensure that as many church charities as possible were going to benefit from the Bill, why not devolve responsibility for the administration of these grants to the Church of England directly in your case, and to the Jewish community to your organisation, Mr Jacobs, and other church organisations, Mr Russell, to you?
Gareth Thomas (Labour, Harrow West)
Let me just confirm—you expect every one of your members to benefit from this scheme?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
Mr Russell, let me take you back to your comment about the training you have done and the issues potentially raised for guidance. You talked about the “what if” questions that people had brought to you. Will you briefly give us the top five “what ifs” that have to be addressed in guidance? What are people most worried about?
Jeremy Lefroy (Conservative, Stafford)
I have one slightly technical question, which I would like to know whether you have considered. At funerals, donations are often made to various local charities, particularly local hospices or even smaller charities, and often donations are split between two or three different causes. Do you see a problem if, for instance, the church that collected those cash donations on behalf of local charities were then to bank them and provide the charities with a cheque for the donations, rather than physically giving a third of the cash to each? Could that be a problem?
Jeremy Lefroy (Conservative, Stafford)
My question is whether you would see a problem in terms of the legislation, with the charity receiving the money in the form of a cheque or a bank transfer from the church.
Mary Macleod (Conservative, Brentford and Isleworth)
Mr Jacobs and Mr Russell, I think you are both accountants, and often accountants like complexity, but everyone has talked about operational simplicity within this. Can you expand on whether there is anything you would like to feed back to HMRC, or as part of the Bill, on simplicity? Mr Preston, you are in marketing. What can we do to make this as simple as possible, in order to get churches, synagogues and organisations engaged?
John Robertson (Labour, Glasgow North West)
That brings us to the end of the allotted time for these witnesses. May I thank them on behalf of the Committee? Thank you very much.
Let me say to members of the Committee, supplementary questions are fine; you do not need to ask me if you want to ask one. It is the same as evidence sessions in a Select Committee. If I think you are taking too long, I will move on to something else.
John Robertson (Labour, Glasgow North West)
We will now hear evidence from representatives of the National Council for Voluntary Organisations, the Charity Tax Group and the Small Charities Coalition. Welcome to our meeting, and please introduce yourselves to the Committee.
Gareth Thomas (Labour, Harrow West)
Thank you very much for coming to give evidence this morning. Could you set out what problems charities might have in achieving the eligibility criteria to receive the full £1,250 in grant?
Gareth Thomas (Labour, Harrow West)
Could you make those concerns a bit more real by giving us examples of real-life organisations that could lose out from the Bill as drafted?
Mary Macleod (Conservative, Brentford and Isleworth)
I find it quite interesting that in the first evidence session we had three men from religious organisations and we now have three ladies from non-governmental organisations and the voluntary sector. Welcome to you all and thank you for coming.
How much do the organisations that you work for feel that the Bill will have an overall benefit?
Mary Macleod (Conservative, Brentford and Isleworth)
May I push you a bit on the three years? Do you not feel it is worthwhile? I can understand why you were saying that it would be nice if it was perhaps less, but is it not important to have some safeguards in there, so that to say that an NGO or a charity has to prove itself first is reasonable, and that is why there is that three-year rule?
Jeremy Lefroy (Conservative, Stafford)
Given that the link with gift aid and the three-year registration period is designed to counter fraud, can you think of other ways that might deal with that equally effectively?
Jeremy Lefroy (Conservative, Stafford)
It seems that tying in with gift aid makes sense, but from your knowledge of your sectors, how many, or what percentage of charities would find it extremely difficult to get any gift-aided income because they are aimed at and supported by groups who are not taxpayers—older people, young people, students or those on low income, perhaps? Do you have any figures on that?
Susan Elan Jones (Labour, Clwyd South)
Can I go on to the matching principle that we have been talking about? I was very interested in points you made earlier, Ms Ravenscroft, about some of the small charities. When I first saw the figure of £625, I thought, “Well, it’s not that much,” but if the small charity that I managed in north London is anything to go by, it is quite possible to have quite a diversity of income sources and not reach that figure every year.
This is not just about charities the bulk of whose income comes from statutory sources. There are, as Mr Lefroy said, a whole range of other things involved to do with, say, non-taxpayers. Some charities will have reasonably sizeable donations from Church or other faith congregations, charitable trusts and, in some cases, legacies. In many communities, events are a more usual source of fundraising. All those activities are good in themselves—I know arguments can be made about the tax status of charitable trusts, Churches or whatever—but the end result, under the terms of the Bill, is that people cannot claim. How do you think we get round that, so that we are not saying to small charities, “Go back to your drawing boards and waste all the time you would have spent running your organisations thinking about whether you can get church members to give to you directly or get the money in other ways”? Would it not be best if this principle was dropped?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
Thanks to everyone for coming along and giving evidence. I wonder if I could ask each of you specifically about community buildings, because there was a lot of concern about the complexity of the scheme as proposed, and the Government have tabled some amendments in relation to that. Could you explain some of the difficulties that organisations would face in relation to the community buildings proposals? Do you believe that the amendments now solve all those issues, or are there still areas in which you would like to see further change made as the Bill proceeds?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
May I pursue that slightly? You raised questions to do with the letter of the Bill. Of course, that is very important; it is exactly what we have to scrutinise. I am trying to tease out whether there are further things in the Bill that you would like to see amended. Are you content that everything could be dealt with by guidance, or would that simply be too complicated?
Pat Glass (Labour, North West Durham)
Charlotte, you gave us some very helpful figures on the charities that will be affected by the three-year track record and the matching rule. Have any of you done any estimation of charities that will be affected because they simply will not be in existence for three years? I am thinking about groups that I am involved with, where communities have come together to raise money largely from small donations for a specific project, and they will be done and dusted and finished in three years. Even though they qualified for gift aid, they will never qualify for this funding. Have you any idea how many of those kinds of groups there will be?
Pat Glass (Labour, North West Durham)
Can you guess how many charities there are that complete their work within three years and then disband?
Nigel Mills (Conservative, Amber Valley)
Just on that point, one type of local charity that we see a lot is the type that is raising money for health treatment for a child, or for certain medical adaptations. That is a situation where everyone has huge sympathy and they raise a lot of money quickly through bucket shaking, but it would be completely out of this system, because the child will presumably have had the treatment, one way or another, within those three years. That is a further example. My question is on whether we are in danger of double-regulating here. We seem to want HMRC to quality control charities and check that they are real, substantial and not fraudulent, but do we not have Charity Commission registration and requirements to do exactly the same thing?
Gareth Thomas (Labour, Harrow West)
Clearly, there is concern on all sides to prevent fraud in the charity sector and, given the debate that took place after the Budget around the charity tax cap, there is certainly concern in some quarters about levels of fraud in the charity sector. Can you give us a sense of your estimates of the level of fraud in the sector, particularly among those charities that do not claim gift aid?
Gareth Thomas (Labour, Harrow West)
Sure. I am not querying your commitment to anti-fraud measures; I am just trying to think through the variety of ways in which government, in all its forms, gets money to small charities. Presumably there are a variety of ways in which one prevents fraud, but the specific linkage to gift aid suggests that HMRC has concerns about the level of fraud within the sector. Is that a concern that you have heard or that you share?
Sheila Gilmore (Labour, Edinburgh East)
I just want to clarify something. Maybe I misunderstood, but if a charity registers for gift aid, can it start to claim gift aid right away? If so, why is there this additional barrier of having had to claim the gift aid for three years in order to get into the small donation scheme? It is a double barrier. Am I right in thinking that once you have registered yourself for gift aid, you can start to claim it right away and that it might be quite large amounts?
Sheila Gilmore (Labour, Edinburgh East)
The amounts involved here are relatively low. Would that not in itself give some protection to the Treasury?
Mark Durkan (Social Democratic and Labour Party, Foyle)
You indicated earlier that there was some suggestion that there may be a behavioural change or reorientation on the part of some charities. In terms of some locally-based charities with a more international outlook that I am aware of, some have a relationship with each other where one is a bigger charity and tends to have an emphasis on gift aid. Others work very much in connection with schools and youth groups in particular, to generate funding through them, and have no reliance on gift aid. They are quite happy to relate to each other in profile; they do not bump into each other or crowd each other’s fundraising calendar. They complement each other in that way. There is concern that this Bill means that the second, smaller charity, which concentrates more on what can be done through schoolchildren and events, will have to start using gift aid as well. It is not where they have been until now, but it is where they have to go.
Mark Durkan (Social Democratic and Labour Party, Foyle)
Helen, you have mentioned the possibility of a review period in terms of some of the questions out there about the Bill. If there were to be a review clause in the Bill, what do you think would be a reasonable time line for that review? Are there are any particular aspects that you think should be specifically included in that review?
Susan Elan Jones (Labour, Clwyd South)
Moving on to the fraud point, I am interested that you seem to think, from your evidence, that the balance is too much in favour of the detection of potential fraud rather than in assisting small charities in some cases. No doubt, at some point, as with every scheme known to humanity, there will be some story somewhere about some bloke in a back bedroom who has bought a motorbike on the basis of the scheme; we will have three days when we all get excited about that and then, rather than pursuing the obvious route of prosecuting the chap who has got the motorbike, we might look at this as a disproportionate problem. An analogy that I am interested in is the Awards for All scheme, under which I think—correct me if I am wrong—grants of up to about £10,000 are awarded, and I do not think that you even have to be a registered charity but only a community group. If the lottery is prepared to think that that is valid and acceptable, with certain checks, I am wondering whether it is fair to say that things might be a bit disproportionate as they stand in terms of the fraud aspect.
Gareth Thomas (Labour, Harrow West)
The definition of a small donation is £20 in cash. Do you think that it should be as limited as that? Should it be higher or lower? What is your view on the method of the donation included in the schedule?
Gareth Thomas (Labour, Harrow West)
So you do not think that cheques or donations by text message should be included?
Penny Mordaunt (Conservative, Portsmouth North)
This is a very quick question. You might not have an answer, but I want to go back to the community building rule, which sought to address an unfairness. HMRC picked a solution that was nice and straightforward for itself, but, given that that unfairness arises from how something is constituted, do you have any other suggestions for criteria the HMRC could have used?
Mark Durkan (Social Democratic and Labour Party, Foyle)
I have a small question arising from cash donations and the issue of denomination. Where I live, which is right on the Irish border, many donations received by local charities, and even local churches under planned giving, are often in euros, because it is an area where people are using euros to go over the border to buy petrol, and so on, and many people’s dealings are on a cross-border basis. If denominations are a question, is currency potentially a question in the border areas of Ireland?
John Robertson (Labour, Glasgow North West)
I thank you on behalf of the Committee for coming. Thanks very much.
Examination of Witness
John Robertson (Labour, Glasgow North West)
I welcome a representative of the Law Society of Scotland to give evidence. Please introduce yourself.
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
Thanks very much for coming to give evidence. To begin with, could you set out your general views on the Bill, which I believe are supportive, wanting to see as many organisations as possible take advantage? Could you also identify particular issues, specifically around the definition of a charity, as the Bill uses the English definition? Does that pose any potential problems for Scotland?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
May I probe slightly on the clause you mentioned? We are engaged in line-by-line scrutiny, which is an opportunity, if we feel that that particular part is not necessary or should be amended, to do something about it, notwithstanding the wider context in which representations are going to be made to the Scottish Government. Should the Committee be looking to either remove or amend that clause?
John Robertson (Labour, Glasgow North West)
If Members have no further questions, that brings us to the end of our business this morning.
Examination of Witnesses
Andrew Turner (Conservative, Isle of Wight)
We will now hear oral evidence from representatives of the RNLI, Wavelength and the National Trust. Welcome to our meeting. I remind Members that questions should be limited to matters within the scope of the Bill and that we must stick strictly to the timings in the programme order that the Committee has agreed. I hope I shall not have to interrupt you in mid-sentence, but I will do so if I need to.
Gareth Thomas (Labour, Harrow West)
Thank you very much, gentlemen, for coming and for being willing to give evidence to us. Could you set out how you think the Bill as it is currently drafted should be changed? Or is it perfect?
Gareth Thomas (Labour, Harrow West)
On that point, what estimate do you have of the number of properties that you will not now be able to claim on?
Fiona Bruce (Conservative, Congleton)
My question is to Mr Spivey. In my constituency, which is about an hour from the sea, there are several active RNLI fundraising groups. Obviously they have no community buildings and there is no charitable work carried out in this inland area. What percentage of your cash collecting do you think is derived from similar sorts of activities that do not come under the category of a community building collection?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
I wonder whether I could probe a bit more in relation to the community buildings? This is a question for the National Trust in particular. Is your concern mainly about the pay per entry issue, or are there other aspects of the legislation and amendments as drafted that would make it difficult for the National Trust to make use of that particular aspect of the Bill? My other question is for the RNLI: can you give us some examples of how you think we could alter the legislation to ensure that all the areas from which your small cash donations potentially could come can be counted for gift aid?
Susan Elan Jones (Labour, Clwyd South)
I have a question for the RNLI concerning your local branches. Am I right in thinking that for most, if not all, of these local branches, the committee would be voluntary?
Susan Elan Jones (Labour, Clwyd South)
Perhaps a good proportion of what they do would be organised community events?
Susan Elan Jones (Labour, Clwyd South)
So they are events they would perhaps charge people to attend. There are clearly some very welcome parts of this legislation, but do you think that there is a danger that, because all these people are volunteers, they may think, “Well, actually, I can’t be bothered to do this”? Is it likely that, on a national level, you would turn around and say, “If we want to benefit from this legislation it would be much easier to try to get individual supporters to give”? Do you think that some of the restrictions would make some of your voluntary committees just say, “No, we can’t be bothered”?
John Hemming (Liberal Democrat, Birmingham, Yardley)
Further to Mr Spivey’s point, are you saying that it is a question of the detail of the evidence required by HMRC, rather than the wording of the Bill?
John Hemming (Liberal Democrat, Birmingham, Yardley)
But the burdens come from the implementation rather than the statutory regulation.
Gareth Thomas (Labour, Harrow West)
One reason for a number of the Bill’s clauses is to protect against fraud. To what extent have you had concerns about any members of your organisations being involved in fraud? Has there ever been a prosecution brought by HMRC, or any other body, because of concerns about fraud in organisations that are under your umbrellas?
Gareth Thomas (Labour, Harrow West)
Mr Leech, you slightly pre-empted me with your experience of other forms of Government funding. Will the three of you say what other sources of Government funding you receive, if any, and what you have to do to receive those sums of money and to protect against fraud?
Gareth Thomas (Labour, Harrow West)
Sums as low as even £1,250.
Sheila Gilmore (Labour, Edinburgh East)
In terms of some of the other requirements, your organisation will be affected by the requirement to be able to match through previous gift aid, for example. Do your smaller organisations—member organisations—already collect sufficient money via gift aid to meet that requirement?
Sheila Gilmore (Labour, Edinburgh East)
At the moment, do your component parts that would meet the requirements for community buildings, and so would get over that barrier, account for gift aid separately, or do you normally deal with that centrally?
Sheila Gilmore (Labour, Edinburgh East)
Is it your understanding that each component bit would have to satisfy the matching requirements?
Sheila Gilmore (Labour, Edinburgh East)
I am not sure; I just wondered whether you knew.
Sajid Javid (Conservative, Bromsgrove)
It is the charity itself.
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
A question for clarity and to have this on record. You talked about the proportionality of what you are expected to do to get the additional top-up payments. Do you think that the administration you have been asked to do is proportionate, given the amount that the charities will get? Is there a better way to do it, and is there something that could be done to simplify the process?
Gareth Thomas (Labour, Harrow West)
Are you happy with the way in which a small donation is defined in the schedule as having just a £20 limit and just being in cash? Should the limit be higher or lower? Should you be able to make other forms of donation of that sort of value?
Mark Durkan (Social Democratic and Labour Party, Foyle)
On the issues of the problem of the qualifying period and the linkage to gift aid, and how that might hamper some charities, can I ask if any of you, in the course of your various activities, are aware of how credit unions are treated by the FSA under Treasury legislation, according to whether they are version 1 or version 2? There are different levels of treatment given to credit unions, depending on their size and scale, and the type of services and activities they offer and support: one treatment for smaller, newer credit unions, and a different treatment for bigger, more established ones. Might that same sort of sensible feature translate to how charities are treated? As well as taking money from the public, credit unions get benefits and grants. They are treated at two different levels; have you considered whether charities could be treated in a similar way?
Gareth Thomas (Labour, Harrow West)
To pick up a point mentioned by my colleague, but to ask the question in a slightly different way, this is a scheme that is designed to get a maximum of £1,250 to small charities. Is there a better way to achieve that end, in your view, than to link it with gift aid and require you to jump through all the different hoops that you have just been talking us through?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
I want to come back briefly to community buildings. One of the jobs that we have to do as a Committee is look at the wording of the Bill. We have heard quite a bit about things that could potentially be clarified in guidance; hopefully, that would not be pages and pages of guidance, but short and sharp. I wonder if that would be useful in relation to the community buildings clauses, particularly because it seems that, with the best of intentions, efforts to try to simplify that have had unintended consequences for others. Do you now feel—from your organisation’s perspective—that the actual wording of the Bill in relation to community buildings needs to be further amended? Or could the issues that you are concerned about be sorted out in guidance?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
In relation to those two examples—residential and commercial—are there concerns that that would impact on the National Trust in particular?
Nigel Mills (Conservative, Amber Valley)
Earlier, you answered a question about whether cash donations will be replaced by some modern form of technology. Are you aware of any schemes—or are you considering implementing any schemes—that achieve that? I think I have heard of swiping your Oyster card to donate £2 to a charity rather using cash. Do you have any specific examples of that?
Nigel Mills (Conservative, Amber Valley)
Do you see that as an alternative to impulse-giving of cash—that is the old swipe by phone or follow a link or something and just give a small amount, rather than its being an extension of a more formal dimension?
Nigel Mills (Conservative, Amber Valley)
Do you think that we are a few years from the RNLI collecting tin being replaced with a collecting chip point that you can swipe?
Andrew Turner (Conservative, Isle of Wight)
If members of the Committee have no further questions, I will suspend the sitting for five minutes.
Andrew Turner (Conservative, Isle of Wight)
We will now hear evidence from representatives of the Charities Aid Foundation, the Charity Finance Group and the Institute of Fundraising. Welcome to our Committee. Please will you introduce yourselves?
Gareth Thomas (Labour, Harrow West)
Is it a perfect Bill, as drafted, or do you want some changes to it?
Gareth Thomas (Labour, Harrow West)
But the three of you would say that, wouldn’t you, given the jobs you hold? Part of the Government’s desire is, perfectly reasonably, to protect against fraud. Why are you saying that there are not other ways to protect against fraud?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
I want to pursue the point that Mr Low was getting at. On Second Reading, we heard Ministers say that, in essence, this is not tax relief. Does that mean that there could be a better system for getting the amount of money that the Treasury believes could be claimed through this scheme into the sector, other than using HMRC as the vehicle?
Andrew Turner (Conservative, Isle of Wight)
Order. The sitting is now suspended for 15 minutes. If there is a second, consecutive Division, we will resume in 30 minutes.
Andrew Turner (Conservative, Isle of Wight)
Mr Lewis, I believe you were speaking.
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
May I ask in particular about clause 5, which talks about the connected charities and connected persons? There was some concern raised about that on Second Reading and the Government have tried to alleviate some of those concerns through amendments. Do you think that all the concerns have been addressed? Would the amendments make it better—would they make a difference—or are there other changes that you would like to see, particularly in relation to connected charities and connected persons?
Susan Elan Jones (Labour, Clwyd South)
May I clarify, if possible, from the three of you that what you are saying is in effect that charities with professional staff are much more likely than other smaller community and voluntary organisations to be able to deal with this, simply because they will know how to get through the hoops? I am thinking of something we mentioned earlier today—a small charity that potentially did not have £625 in gift aid per year. Perhaps an organisation with a professional fundraiser, or something like that, might look at this and say, “Well, hold on”. If it has, say, a church collection coming in, will it go back to the church and say, “Hang on, take back your cheque for £500 which you have kindly given us and let’s have individual members give it so that we can get round the regulations”? There are ways round this, but it will not necessarily be the sort of bother that will appeal and there will not necessarily be the know-how for some smaller organisations to deal with it—is that what you are effectively saying?
Susan Elan Jones (Labour, Clwyd South)
So if each of you could change the Bill in any two ways, what would you pick?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
Mr Low mentioned community buildings and it will be no surprise that we have an interest in that, given that there has been a lot of concern raised about those clauses. The Government have put forward some amendments to clarify that, but we have heard that there are some potential unintended consequences of that. Could you explain to us how you would like to see those provisions clarified or changed? Does it have to be changed in the Bill or can it be sorted through guidance?
Gareth Thomas (Labour, Harrow West)
Caron, I think you used the phrase, “You have to draw the line somewhere.” Presumably, part of the thinking behind some of the complexity in the Bill is to try to stop an unlimited amount of money being spent through this scheme—I think the Government have said that they expect about £60 million to be spent in the first instance. If that is the amount of money that is available, and the maximum amount that you want to give out is £1,250, would there be a better way of allowing small charities to claim access to that sort of sum?
Andrew Turner (Conservative, Isle of Wight)
If hon. Members have no further questions for this set of witnesses, that brings us to the end of this part of the evidence session and I thank our witnesses very much for coming.
Andrew Turner (Conservative, Isle of Wight)
We will now hear evidence from the Economic Secretary to the Treasury, Sajid Javid, and his officials.
Gareth Thomas (Labour, Harrow West)
Could you talk us through the motivation for clause 3(3)?
Gareth Thomas (Labour, Harrow West)
I asked the question because I was in conversation with the House of Commons Library, and it made it clear that its interpretation of the clause is that it brings the four named organisations into the remit of those that can take advantage of the Bill. I am surprised by that, in the context of what we have just heard from the National Trust. It said that up to 200 of its properties—presumably similar to the types that the Historic Buildings and Monuments Commission for England or the National Heritage Memorial Fund might support—will not be able to claim as a result of the new clause that the Government have tabled.
Gareth Thomas (Labour, Harrow West)
But the trustees of the British Museum could organise a bucket collection as a result of being included in this Bill and claim £1,250 back.
Gareth Thomas (Labour, Harrow West)
You do not make the Bill fit with gift aid in terms of the types of small donations that can be registered. We heard from the previous panel of speakers that text giving is included in gift aid, but not in this Bill.
Sheila Gilmore (Labour, Edinburgh East)
I was wondering why it was felt to be perfectly adequate to allow quite large organisations to start claiming quite large amounts of gift aid immediately, as soon as they register, but it was not in order for smaller organisations who have registered for gift aid to begin using this scheme.
Sheila Gilmore (Labour, Edinburgh East)
But given that you have a cap on the amount, which is relatively low, the scope for fraud would appear to be equally limited, whereas with gift aid you are dealing in some circumstances with quite large amounts that people could claim are gift aid. It is not only the charities that could get money from the gift aid system; in some cases, the donors could, if they are higher-rate taxpayers. We have a system in which, potentially, a lot of money can be lost to the Treasury, but here you have got the requirement to be a charity—in most cases, though not all—the requirement to register, and then some further requirements, including a cap. Would the requirement to register gift aid and the cap be enough?
Sheila Gilmore (Labour, Edinburgh East)
A small independent charity that wants to start using the system has to meet all those criteria, including the matching criteria, the three-year track record and so on, before they start to claim. If I have understood this correctly, however, a single church that meets the community building test, and all the other tests that go with that, can start to claim right away—up to a £5,000 donation—and get the £1,250, because the parent already meets the other requirements. Again, the onus on the independent small charities is much greater than on an organisation with lots of limbs. Is that fair?
Nigel Mills (Conservative, Amber Valley)
Minister, you said earlier that the Bill is there, quite rightly, to help small charities to raise money from bucket collections—from donations. The looks, however, as though it works much better as a “small charitable donations” Bill—as it says on the tin—rather than as a “donations to small charities” Bill. Is that what is intended?
Nigel Mills (Conservative, Amber Valley)
But the Bill seems disproportionately to help larger charities with the existing processes and systems in place, while making it quite hard for those very small, local, community ones, which I think we would all like to help, because they do not have the gift aid history and that support behind them. That may be accidental, but is that a concern that you share with regard to how the Bill will apply?
Nigel Mills (Conservative, Amber Valley)
May I give you the example of a local charity for a child in need of medical treatment abroad, or an implement that one cannot get on the NHS, for which a lot of money is raised quickly by the community? I am sure that you have seen such charities as often as I have. That will be completely outside the scope of the Bill, because that money will be raised and spent and the charity gone within the three-year period. That does not seem quite consistent with what we are all trying to achieve.
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
On Second Reading, the then Economic Secretary to the Treasury made it clear that she wanted the new scheme to be set up in such a way that it would not be exploited. She highlighted that,
“HMRC pays around £1 billion a year in gift aid to charities, and such large sums inevitably attract fraudsters.”
She said that,
“the generous nature of charitable tax reliefs means that they are vulnerable to exploitation”.—[Official Report, 4 September 2012; Vol. 549, c. 169.]
Can you say how many cases there have been and how much has been lost to fraud?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
An estimate would be helpful. We are trying to get at the scale and to try to pin down whether the proposals in the Bill are proportionate, so an estimate of the amount that has been lost to fraud and the number of cases would be helpful. Thank you.
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
I have a question on a slightly different point, which was referred to in the summing-up speech by the Exchequer Secretary to the Treasury on Second Reading. He suggested that reducing the three-year limit, as had been proposed during the debate, would significantly increase the cost of the scheme. Can you say by how much it would increase the cost, if the limit was reduced to two years, and to one year?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
Would you be able to have those numbers for us?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
I think that would be helpful because the Minister said during the debate that it would increase the cost and we are trying to get the scale of things. We have talked about £10 million in fraud, and I would like to know how many millions it would take to change the scheme.
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
May I raise one other point, for the moment? On Second Reading, it was also stated in the summing up that the basic scheme was very simple and that charities would not be required to keep records over and above what is “good practice.” Who will define that good practice?
Tony Baldry (Conservative, Banbury)
First, I congratulate you, because in the two and a half years that I have been involved with the Church of England, this is the first time that it appears to have agreed unanimously on anything. So well done for getting unequivocal support from the Church of England for the Bill, with no suggestion of any amendments.
Minister, you have estimated that the Bill will be worth £100 million a year for charities and sports clubs by 2015. On what basis have you calculated that? How has that calculation been arrived at, just out of interest?
Tony Baldry (Conservative, Banbury)
That is very good.
Presumably, there is going to be—Minister, you were saying this—some very straightforward advice for charities so that they can work their way through. For example, when I looked at clause 1(2), I froze because it took me back to O-level algebra. I had very little time to work this one out; it would be a challenge for any colleague. I can see quite a lot of treasurers of small charities freezing at this point:
“The amount of the top-up payment is—
…where”
R is defined as
“the percentage rate of the basic rate of income tax for the tax year in question.”
Hopefully, you will have a website, briefing and literature so that small charities in towns and villages can understand how they apply this.
Tony Baldry (Conservative, Banbury)
May I turn to clauses 6 to 8, which are about community buildings? I want to make sure that I have understood them correctly. I am president of the Banbury Sea Cadets, a charity. Do I understand that the Banbury Sea Cadets will be able to raise up to £5,000 in respect of the building in which they operate in Banbury and an additional £5,000 for all donations made outside the building? Walk me through how I can make sure that all the charities I am involved with get a double-dip.
Tony Baldry (Conservative, Banbury)
That is very clear. So it is £5,000 per charity—no more than that.
Tony Baldry (Conservative, Banbury)
Thank you
Gareth Thomas (Labour, Harrow West)
Mr Edwards, you are the head of the charity section at the Treasury. Can you tell us how many staff it will take to implement the scheme and to manage it on an ongoing basis?
Gareth Thomas (Labour, Harrow West)
Even more important.
Gareth Thomas (Labour, Harrow West)
You are clearly very concerned about the level of risk of fraud. Presumably, as a result of your worries that affected the way in which you designed this scheme, you had a look at the Awards for All scheme run by the Big Lottery Fund and advised Francis Maude and other Cabinet Office Ministers that they needed to tighten up the eligibility criteria for accessing that scheme, because they are substantially less tight than those that you appear to propose to implement under this scheme.
Gareth Thomas (Labour, Harrow West)
Forgive me for interrupting, Mr Edwards. So there was no joined-up Government thinking and no attempt to look at best practice. Regarding this sum of money—£1,250 maximum for charities—nothing was done to look at what else other Government Departments allowed to happen to make the impact on the small charity that might apply proportionate.
Jeremy Lefroy (Conservative, Stafford)
I welcome this excellent scheme, which has been a long time coming and will do a great deal of good. I talked earlier about the number of people coming out of income tax over the next couple of years as the allowance is raised. Has a calculation been made of the reduction in the gift aid that might be claimed as a result of people who were taxpayers no longer being taxpayers, and hence no longer being eligible for gift aid reclamation?
Jeremy Lefroy (Conservative, Stafford)
As a supplementary to that, have you done any calculations on how much additional gift aid you expect to be reclaimed on the back of the fact that many charities will begin to look at registering to reclaim gift aid as a result of this system?
Jeremy Lefroy (Conservative, Stafford)
What sort of order are we talking about? Would you be looking at perhaps an additional 50% on top of what this scheme will generate that will go to charities.
Jeremy Lefroy (Conservative, Stafford)
But you certainly expect some form of increase in the amount of gift aid reclamation purely because of this scheme?
Fiona Bruce (Conservative, Congleton)
On Second Reading, I raised concerns about the fact that hospices, which rely largely on donations from the public, would be excluded from benefiting due to the community buildings restriction on residential use. Has the Minister given that further consideration?
Fiona Bruce (Conservative, Congleton)
That is very helpful.
In your report on the public reading stage, you confirmed that not every building in which a charity operates will be classed as a community building and that decisions will need to be taken on a case-by-case basis. A little earlier you said that the guidance needs to be as clear as possible. Particularly with the increasing elderly population, will the distinction blur between a hospice and a care home run by a charity for those who are coming towards the end of their life? How can you ensure that we do not end up down the road of unwelcome disputes or even costly litigation on this issue?
Susan Elan Jones (Labour, Clwyd South)
I am delighted to hear that you managed to catch the £500,000 fraudster. However, could you tell me whether that fraudster had made successful gift aid claims?
Susan Elan Jones (Labour, Clwyd South)
Does that not therefore prove that the fraudster would have got through initially under these criteria, whereas small charities that have not made gift aid claims will not?
Susan Elan Jones (Labour, Clwyd South)
But, effectively, a clever fraudster could probably claim gift aid, so in a sense that is my answer.
May I raise a further point that was made on Second Reading by a Conservative Member, Mr Stewart of Milton Keynes South, about a talking newspaper charity that was set up by his father? Mr Stewart said that the charity was very small, and that if it raised £1,000 a year, it was doing well. He said that many of the people who gave to it had visual impairments, and that while it was a free service, many people made donations of £5, £10 and so forth. He said that many donors were elderly and therefore
“not the kind of people who generally fill out gift aid forms.”
He went on to say:
“I do not know whether the charity my father set up…has ever claimed gift aid, but I suspect that it has not. Therefore, it would not be able to take advantage of the proposed scheme for three years.”—[Official Report, 4 September 2012; Vol. 549, c. 194.]
There really are stories like that.
I suspect that there is a major difference between the types of fraudsters. While it is clearly something that needs to be investigated, I suspect that it is not difficult to get through the gift aid criteria and claim—you would have to be a fairly stupid fraudster if you could not do that. However, what about small community groups such as the one that Iain Stewart mentioned? Should not they not be eligible for this scheme?
Susan Elan Jones (Labour, Clwyd South)
But surely unless this is considered—this is the point that Mr Stewart and others have raised—very small charities and community groups will be at a disadvantage under the scheme. While I really welcome what the Bill will do for churches—it will be extremely beneficial—there are clearly small charities that will be at a disbenefit under it.
Susan Elan Jones (Labour, Clwyd South)
Yes, but I do not think that that is it.
Mary Macleod (Conservative, Brentford and Isleworth)
Minister, a number of witnesses have told us that charities will benefit from this, but they also suggested a few changes. It was said that we now live in a digital age. Was any consideration given to other ways of raising money, such as the use of credit cards or texting? A small charity might use such methods because they are easy.
Mary Macleod (Conservative, Brentford and Isleworth)
One of the issues that was raised earlier today was the three years. Did you, in your analysis of this, see a big difference between two years and three years, and why did you discount two years? I believe that there should be some history of the gift aid process, but why is it three years?
Penny Mordaunt (Conservative, Portsmouth North)
I want to touch on a couple of issues that came up in the previous evidence sessions. The first is about charities that do not have a diverse fundraising portfolio and that are largely reliant on tin-rattling falling foul of the three-year criteria, and the second was about the missed opportunity of encouraging small charities to take the leap and get involved with gift aid. It has been a trend in the sector over the past few years to almost discourage those very small micro-charities being set up. Rather than a family that has lost a child to a particular disease setting up a charity in their name, they are contacting a larger existing charity and founding an appeal in their name or funding their research programme.
I do not necessarily want to present those negatives as an upside, but it strikes me that there might be an upside. Have you thought about how this will affect some of those charities being set up and whether they are set up as individual charities, or whether this would act as an incentive for them to not be set up, but for those people instead to approach other charities that might be able to make use of this and other schemes? Did you have any thoughts about that when you were creating the Bill?
Penny Mordaunt (Conservative, Portsmouth North)
And for charities that might be set up in the future. I am thinking particularly of things such as medical research, where, in an effort to get more bang for the cause that many charities might be working towards, the sector tries to get them to be part of a larger organisation, rather than there being other organisations set up, particularly at a local level, that compete. That would benefit from your reform.
Mark Durkan (Social Democratic and Labour Party, Foyle)
Before I ask more practical questions about the Bill, I want to ask for some clarification or reconciliation between two earlier answers. We were told that the estimated cost would be £100 million and that those estimates would go to the OBR and so on, so we were told that that had been factored in and we did not need to hear the details. Subsequently, however, when the question was asked about what the consequence was of the cost in relation to gift aid—what extra cost there would be in terms of gift aid—we were told that that had not been factored in and that there were no costs available. If it is going to be £100 million extra cost, surely that does take in the extra cost to gift aid. If these charities are going to be claiming this money if they are also claiming gift aid, is the gift aid extra to the £100 million or is the gift aid a known sum within the £100 million?
Mark Durkan (Social Democratic and Labour Party, Foyle)
Yes, but as long as the Bill has been in existence, participation in and receipt of gift aid has always been the qualifier for—
Mark Durkan (Social Democratic and Labour Party, Foyle)
So the £100 million is not just for top-up payments? It includes top-up payments and extra gift aid.
Mark Durkan (Social Democratic and Labour Party, Foyle)
I still think there are big questions around the £100 million figure on the basis of all we have heard. Sticking with the issue of gift aid as the qualifier, I accept that the Government need to scam-proof any generous measure that they are introducing, including those in relation to small charities. But why do you see gift aid as being the only verifier that there can be in relation to charities? There are bona fides and donations. Are there not other ways of verifying this other than gift aid?
Mark Durkan (Social Democratic and Labour Party, Foyle)
There are many local charities that we know have not historically participated in the gift aid scheme, partly because of the nature of the areas in which they worked. The population from whom they would draw a lot of their income were not going to be people who would be interested in applying or able to apply for gift aid. We also hear from some charities that there is a bit of a switch-off with gift aid, not just because of the form-filling but because people start to suspect that once they fill in a form and give their details for gift aid they will then be hit with raffle books coming at them through the post and that all sorts of other demands will be made on the back of the information that is yielded to charities for gift aid. There are lots of different reasons why either charities or donors are averse, to one degree or another, in relation to gift aid.
Insisting to charities that in order to benefit from this scheme they have to go down the route of gift aid when it may not be particularly feasible for them seems onerous. It is one thing to put in qualifying criteria, but when those criteria have the effect of disqualifying bona fide charities that we all know, surely we as legislators have a duty to try to come up with a better way through for those charities.
Mark Durkan (Social Democratic and Labour Party, Foyle)
Of the 180,000 charities, that is just over a third.
Mark Durkan (Social Democratic and Labour Party, Foyle)
But just on that point, in committing to the review, would you accept a review clause in the Bill?
Andrew Turner (Conservative, Isle of Wight)
Under Standing Order No. 83C (11), I have the discretion to allow the questioning of the last group of witnesses at an afternoon sitting to continue for a further 15 minutes. Therefore, we shall continue until 5 pm.
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
Will the Minister explain the rationale for Government amendment 6 to clause 6, which he tabled, regarding who is eligible to be considered as a “group member”?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
I would like to probe the issue of charitable activity, but I wondered why there is that specific amendment. Just to be helpful, the explanatory statement says:
“This amendment, and amendments 4 and 5, have the effect that small donations collected in community buildings do not count towards the “community building amount” for the purposes of clause 6 unless they are collected from persons with whom the charity is carrying out the charitable activity.”
In lay person’s terms, could you explain what that actually means? Who is able to donate, and who is not, for the purposes of the top-up payments?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
So, just to be absolutely clear, if the meeting, the charitable activity, is taking place among the 10 members and someone else in the building happens to think, “That is an excellent charity, and I would like to give them a tenner,” that tenner does not count for these purposes?
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
May I ask another question?
Andrew Turner (Conservative, Isle of Wight)
So long as it is not too specific, because we are meant to discuss general issues now.
Cathy Jamieson (Labour, Kilmarnock and Loudoun)
I will try to make it general. The question is on the definition of people who are the beneficiaries of activities. Will the Minister or officials explain again—sorry, this perhaps does veer into the specific clause, but I think it is important to probe some of this.
Andrew Turner (Conservative, Isle of Wight)
You will normally have an opportunity to do that later in the week.
Gareth Thomas (Labour, Harrow West)
How will you deal with charities that make mistakes, as opposed to fraud? A couple of subsections of clause 2 refer to penalties. Will you talk us through the process that you might use to judge whether someone has made a deliberate error, veering towards fraud, or an innocent mistake?
Gareth Thomas (Labour, Harrow West)
That space between deliberate error and genuine mistake is sometimes contested. How do you allow independence of judgment in that process? Is it just a matter of how you feel when you wake up in the morning, Mr Edwards, when one of your staff brings an example to you, or do you go to a Minister or talk to others who give money to charity? How do you reach that judgment and allow someone to have a genuine review?
Mark Durkan (Social Democratic and Labour Party, Foyle)
I represent a border constituency. It is not uncommon in Northern Ireland for various churches, not just Catholic churches, to have cross-border parishes, and many local charities have cross-border engagements. Some do not, but in the course of their collections they may have euros going into the tin simply because many of my constituents go over the border for family and other reasons, such as buying petrol and diesel and often that is the currency they have to hand. Will there be an issue or problem for charities about what counts as a cash donation? People may have to consider the denomination of the notes and whether they are £20 or £50 notes, but will there be an issue about whether the currency is sterling or another currency?
Andrew Turner (Conservative, Isle of Wight)
If Members have no further questions for the Minister, we conclude our business for this afternoon. The Committee will sit again for clause-by-clause consideration of the Bill at 11.30 on Thursday in Committee Room 9.