Small Charitable Donations Bill

Public Bill Committee, 23 October 2012.

Clause 1 - Top-up payments in respect of small donations made to eligible charities

Andrew Turner (Conservative, Isle of Wight)

I remind the Committee that with this we are discussing the following:

Amendment 17, in clause 11, page 6, line 28, leave out subsection (1).

Gareth Thomas (Labour, Harrow West)

It is a pleasure, Mr Turner, to serve again on a Committee under your chairmanship. We had an excellent debate on amendments 16, 17, 24 and 25. My hon. Friend the Member for Leeds East gave a particularly helpful speech on the challenges facing Her Majesty’s Revenue and Customs. My hon. Friend the Member for Edinburgh East gave a particularly considered speech exploring some of the problems, and on the Minister’s decision to link the small grants scheme to implementation by HMRC. The hon. Member for Birmingham, Yardley, who is not in his place today, gave a somewhat bombastic speech, but did so with charm, and perhaps that is why all hon. Members, particularly Opposition Members, view him with affection. The hon. Member for Stafford gave a more temperate and considered speech revealing concern about other parts of the Bill, if not the Government’s position on amendments 16, 17, 24 and 25. We then heard from the Minister, and I will come to some of his comments.

Reports over the weekend have re-emphasised some concerns felt by Opposition Members about HMRC being tasked with this Bill. Some suggested that eBay should have paid some £51 million in corporation tax, but HMRC, perhaps because of legislation or because of lack of staff, has not secured such payment, and that is one of a number of examples of concern outside the House, as well as inside, about poor levels of tax collection.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

Does my hon. Friend agree that there has also been concern over the weekend about HMRC and its ability to deal with the higher rate charges for child benefit? It is not clear at the moment whether the Government are on track for that to be done correctly.

Gareth Thomas (Labour, Harrow West)

My hon. Friend makes a good point. At my surgery on Friday I saw a constituent who has been waiting some time for clarity from HMRC about their entitlement to some of the remaining tax credits. I promised her I would write to the Minister, and I look forward to receiving his reply to pass on to my constituent.

I return to the reports over the weekend about eBay. They suggest that the problems of fraud in the charity sector, on which coalition Members dwelled at length in their interventions and contributions, pale into insignificance in comparison with tax avoidance that seems to be legal. That suggests that the Minister, when dwelling on the need for such high hurdles to prevent fraud in the charity sector, is engaging on what some might say is fiddling while Rome burns—a touch of the Neros.

Nevertheless, the Minister made some interesting arguments about HMRC’s continued control of the scheme. Opposition Members took particular note of the reforms on gift aid and the use of online systems. We will reflect further on what he said, and at this stage I do not intend to divide the Committee. I beg to ask leave to withdraw the amendment.

Gareth Thomas (Labour, Harrow West)

I beg to move amendment 13, in clause 1, page 1, line 5, leave out paragraph (b).

Andrew Turner (Conservative, Isle of Wight)

With this it will be convenient to discuss the following:

Amendment 15, in clause 1, page 1, line 19, leave out subsection (4).

Gareth Thomas (Labour, Harrow West)

Perhaps it is worth explaining for the benefit of the Committee and those who read our debates that amendments 13 and 14 seek to explore the issues around the need to be registered for gift aid to access what is, after all, a small grants scheme. Amendment 15 seeks to explore the Government’s motives for including the requirement to match gift aid donations in relation to deciding how much money under the small grants scheme each charity should receive. It is not clear at this stage why eligibility under the small grants scheme has to be linked to whether a charity can claim gift aid. I say that in the context of Ministers having claimed that this scheme was designed to help those charities that could not access, or were not accessing, gift aid in the first place. It is also far from clear at the moment why the payment to a charity under this scheme has to be limited by the amount of the gift aid claim; and why the sum that is granted to a charity depends on what donations it receives that are eligible to be counted towards its gift aid sum. Our contention is that such a measure will inevitably penalise the smallest charities, and that should be a concern to all members of the Committee, not just those on the Opposition Benches.

You will recall, Mr Turner, that we had a bit of an exchange about gift aid and whether Opposition Members were willing to give credit to the John Major Administration for introducing it. Looking back, I think it is fair to say that that Administration did not do a great deal of good for our country, but the lottery and gift aid were two measures of which Conservative Members can be proud. We supported the introduction of gift aid, and I hope that Government Members will, like the hon. Member for Stafford, be generous in their praise for my right hon. Friend the previous Prime Minister, who sought to expand the reach and success of the scheme. He brought in a series of reforms so that by 2010-11 the amount that was registrable under gift aid had risen to some £4.91 billion, securing for charities across the country a pay-out by HMRC of approximately £1.08 billion. Indeed, the latest figures suggest even greater success. Some £5.23 billion was registrable for gift aid in 2011-12 and £1 billion was paid out by HMRC to charities. By any definition, that is a success, of which all three main parties in the House can be justifiably proud, given the difference that it is making to charities. I welcome the further reforms that we touched on, such as making it easier to claim gift aid online, to which the Minister alluded. It is a cross-party measure that will make a difference and benefit charities.

However, it is worth remembering that, as the National Council for Voluntary Organisations made clear in their evidence 10 days ago, of the 163,000 or so charities in this country, just 65,000—about a third—claim gift aid back, according to the latest figures. That means that two thirds of charities—at first glance, just under 100,000 charities—do not receive anything under the gift aid scheme. Surely, that should be of concern to all Members as, inevitably, it means that charities that could benefit from the scheme do not benefit in the way in which perhaps Ministers originally intended—Ministers certainly allowed a number of small charities to think that they would benefit from it.

It is worth going back to some of the other evidence that we heard in Committee, and I ask Members who have copies of Hansard to turn to column 44, where the question was posed to representatives from the National Trust, RNLI and WaveLength. David Warrellow, the National Trust representative, when talking about the small grants scheme, said:

“I do not think that it has to be linked to gift aid necessarily.”

Tim Leech, from WaveLength, said “I would echo that.” Mr Spivey, from the RNLI, made it clear that he agreed with Mr Warrellow’s broad points, and said that HMRC should be given

“a bit more leeway to work with charities”.

He went on to say:

“The more detail you put in”

to a scheme of this nature,

“the more difficult it will be…why keep overlaying it with difficulties?”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 44, Q71.]

As he said, why keep increasing the hurdles that charities will have to jump over to access the small grants scheme?

It was not just those three witnesses who expressed concerns about the difficulty in accessing the scheme, and the link with gift aid. We heard also from Caron Bradshaw of the Charity Finance Group. She highlighted the problem of linking eligibility for the scheme to claiming gift aid. She said that

“the eligibility criteria will rule out the very charities that I think this was intended to reach out to in the first place—those very small, local groups that currently do not comply with, or make use of, the gift aid scheme.”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 47, Q77]

Peter Lewis, chief executive of the Institute of Fundraising, suggested that the anti-fraud measures—implicitly, the gift aid-linking requirement is one such measure—were too stringent. He went on to make the striking point—as did my hon. Friend the Member for Clwyd South on numerous occasions in her interventions—of comparison with Awards for All. He said:

“there are far lower fraud risks in relation to Awards for All than there are in relation to this scheme.”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 48, Q78.]

In Awards for All, charities can claim up to 10 times more than Ministers allow to be claimed under this scheme. Peter Lewis pointed out the need to be much more proportionate about the access criteria—remember, up to just £1,250 can be claimed under this scheme. If schemes such as Awards for All do not require hurdles such as registration for gift aid, why does this Treasury small grants scheme—that is what it is—need such criteria?

The chief executive of the Charities Aid Foundation, John Low, wondered aloud before the Committee why Ministers think the gift aid registration anti-fraud requirement is essential. He wondered whether it was because

“HMRC and the Treasury do not trust the Charity Commission to regulate charities sufficiently strongly and feel they have a need to impose their own measures on something that is not tax relief, but is public spending.”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 48, Q78.]

At first glance, that suggestion might appear rather cynical, but it would be useful to hear a little more from the Minister on the relationship between the Charity Commission and the Treasury. Does he think that relations between HMRC and the Charity Commission are quite as joined-up as they might be? The scheme, certainly in the minds of many in the charity sector, suggests that HMRC, and, implicitly, Treasury Ministers, do not have confidence in the Charity Commission, which would clearly be hugely concerning. Will the Minister explain why such a restrictive measure is needed? It would be extremely helpful to know his opinion of the Charity Commission.

Let me try to present the choice before the Committee on the amendments in stark terms—I recognise that this could be provocative to Government Members. We know, from a bit of online research, that that famous public school, Eton, is a registered charity, and, indeed, that it is registered for gift aid. Newton Farm parent teacher association, Friends of Newton Farm, which is based in my constituency, is not registered for gift aid. Here we have, on the one hand, a school that is a charity, which is potentially able to benefit from the scheme, and on the other hand, a charity serving a state school, which cannot benefit from the scheme. I pose it in those stark terms not because I want to open a debate about public schools—indeed, I am fortunate to have Harrow public school in my constituency. I think that Harrow is immeasurably better as a public school than Eton. I do not know whether that is because it has better political representation, but certainly the head teacher at Harrow is better than the head teacher at Eton, and the results and facilities are better at Harrow. However, I recognise that Eton is the public school with which Government Members will be comfortable and familiar. It is a charity and registered for gift aid, but small charities such as PTAs, including the one that supports Newton Farm school in my constituency, will not be able to benefit from the Bill. That is a stark example of the unfairness—the requirement to be registered for gift aid to claim up to £1,250—that amendments 13 and 14 seek to remedy.

I use the example of Newton Farm because last year it was the best performing school in the country. It had the highest average point scores in English and maths standard assessment tests. Of the pupils who took the test, 90% gained level 5, one level higher than expected for their age. Ofsted rates the school as “outstanding”, and thinks that the head teacher is “inspirational”, but it would appear that Treasury Ministers do not think that its PTA should benefit from the small grants scheme. It is incumbent on the Economic Secretary to explain why Eton should potentially benefit from the scheme, while PTAs, such as the one serving the best school in the country, will not.

Conservative Members may think that Pinner Park first and middle schools, which I attended, and where, again, the PTA is not registered for gift aid and therefore will not benefit from the scheme, arguably had an even more challenging bunch of pupils some 15 or 20 years ago. It surely deserves to benefit from this charitable small grants scheme. In his winding-up speech, will the Minister explain why this requirement, which is so divisive—between big charities and small charities, between charities registered for gift aid and those that are not—is necessary when such stringent conditions are not needed for other small grants schemes?

It is perhaps worth dwelling on the examples of the Friends of Newton Farm, or the Pinner Park first and middle schools PTAs, because they are not one-offs. There are roughly 19,000 PTAs across the country, but only 16% are registered for gift aid. It is quite likely that, in the constituency of the hon. Member for Banbury, there are PTAs doing immensely important work that are not registered for gift aid and therefore not able to benefit from this scheme. Given that only 16% of PTAs are registered for gift aid, it is possible that there are schools with PTAs that will not be able to benefit from this scheme in the constituency of the hon. Member for Chelsea and Fulham. The hon. Member for Brentford and Isleworth potentially has schools in her constituency with PTAs that are not registered for gift aid. Why should Eton be able to benefit from this Treasury small grants scheme, while those PTAs not registered for gift aid in her constituency will not?

Jeremy Lefroy (Conservative, Stafford)

I was waiting for the hon. Gentleman to come on to Stafford, but he has not quite got round to the nicer part of the country, up north of Birmingham. As Members of Parliament, could we not do some work by writing to all the PTAs in our constituencies, even now, before the scheme comes in, to recommend that they look at registering for gift aid? That would benefit them, of course, not simply in terms of the Bill, but because they could suggest that their tax-paying members contribute through a gift aid scheme, and hence raise more money for their schools.

Gareth Thomas (Labour, Harrow West)

That is an excellent idea, and Members may well want to do that. Perhaps it is incumbent on HMRC, with the guidance of the Economic Secretary to the Treasury, to write to all parent-teacher associations to explain how and why they may want to register for gift aid.

In my conversations with PTA-UK, the parent body for PTAs, representatives explained to me some of the reasons why PTAs do not register for gift aid. It might be worth the hon. Member for Stafford checking with PTAs in his constituency to see whether they experience the same problems that PTA-UK described to me. It noted the big churn in PTA members and the fact that PTAs have no paid staff to support their charitable work, instead relying heavily on volunteers. Given the other restrictions in the scheme’s design, there is concern that even if PTAs did register for gift aid, the amount of money that they would be able to claim under the scheme would be disproportionate to the effort of trying to register.

Mark Durkan (Social Democratic and Labour Party, Foyle)

Does my hon. Friend recognise that if MPs wrote to parent-teacher associations as the hon. Member for Stafford advises, the PTAs would be able to receive payments only from well into the next Parliament?

Gareth Thomas (Labour, Harrow West)

My hon. Friend makes an extremely good point. That is the even more restrictive part of the eligibility criteria, which we will come on to.

PTA-UK also pointed out to me that much of the income that PTAs secure cannot be registered for gift aid purposes—income derived from the school discos they organise in schools in the constituency of the hon. Member for Stafford, from summer fairs, or indeed from the buying and selling of Christmas cards produced by students in schools. If he bears in mind the huge amount of guidance that is required to be read by a charity that wants to register for gift aid in the first instance, perhaps it will be easier for the hon. Gentleman to understand why so many PTAs are not registered at the moment. Although I agree that we need to do more to encourage PTAs to explore the possibilities of gift aid registration to obtain the benefits from gift aid, surely this part of the Bill is not required to enable small charities to access what is relatively a small amount of money.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

Does my hon. Friend agree that the stark contrast is exemplified by information contained on the Eton website, which not only encourages people to give by gift aid, but has a gift aid calculator and information for higher rate taxpayers? It also encourages people to donate shares: it explains the tax incentives and has a stockbroker on hand to advise on how to maximise that—something I suspect most PTAs do not have.

Gareth Thomas (Labour, Harrow West)

My hon. Friend emphasises the divisiveness of this requirement of the Bill. I do not want to get into a debate about the merits of public schools. Harrow public school is in my constituency and I take pride in the achievements of that school’s young people in the same way that I take pride in the achievements of those who go to Newton Farm or Pinner Park school. However, my hon. Friend’s underlines the contrast between charities that have substantial capacity to benefit from the scheme—those that can rely on a stockbroker or can turn to clear sources of advice—and those smaller charities that do not have the same degree of support. They will be penalised and denied access to the scheme as my hon. Friend the Member for Foyle said, for at least three years.

Penny Mordaunt (Conservative, Portsmouth North)

I realise that the hon. Gentleman has the best intentions in highlighting the issues, but it is tremendously important to state that the scheme has been welcomed by the sector. While we scrutinise the scheme, we should be careful also to encourage people to take up the options that are available and, if they have not registered for gift aid, we should encourage them to do so.

I have worked in the charity sector for much of my career. It is incredibly important that we motivate charities to register. Eton is clearly an example of best practice and it has the resources and dedicated fundraisers, but in our communities we also have action groups, such as Community Action in Portsmouth, that perform those same functions to enable small charities to access the schemes and cut down on the legwork. We ought to be encouraging organisations to do that and giving credit to those support and capacity-building organisations in our constituencies.

Gareth Thomas (Labour, Harrow West)

I agree and I disagree with the hon. Lady—I apologise if I sound a little like a Liberal Democrat. I agree absolutely with her that we should do more both individually and through the good efforts of HMRC to encourage charities that are not registered with gift aid to register, but I disagree with her because surely it is incumbent on members of the Committee to scrutinise the Bill in detail and, where there are obvious problems, to encourage the Minister to use the time between the end of Committee stage and Report to table amendments to make the eligibility criteria to gain access to what is, after all, a small grants scheme much fairer.

However much as we might all praise the examples set by local capacity organisations, be it the Portsmouth voluntary action scheme, Croydon Voluntary Action, whose representatives I met yesterday, or other regional voluntary infrastructure bodies, I suggest to the hon. Lady that we have to recognise the fairly telling message from the statistics on those who benefit from gift aid at the moment. Only a third of charities are currently registered for gift aid, so although we surely need to do more to encourage them to register, we must also explore the unfairness in the Bill and encourage the Minister or indeed other Committee members to table amendments to put the position right.

Fiona Bruce (Conservative, Congleton)

The hon. Gentleman says a third of charities are registered and previously mentioned a figure of 65,000 charities. It is interesting that, on Second Reading, it was stated that 100,000 charities have actually claimed gift aid in the past four years and that research shows that another 80,000 might take it up as a result of the change in the legislation.

Gareth Thomas (Labour, Harrow West)

That does not equate with the message that we received from the National Council for Voluntary Organisations and others in our evidence sittings. I agree that we should all travel optimistically, but I think that we should listen to people with far more expertise than we have, who have genuine concerns about the many charities that will miss out as a result of way in which the Bill has been designed, in particular the requirement to be linked to gift aid.

Penny Mordaunt (Conservative, Portsmouth North)

I realise that the hon. Gentleman has a job to do in scrutinising the Bill, but it would give me some comfort if he undertook, when, hopefully, these measures come to pass, to encourage parent-teacher associations and other small charities in his constituency to make use of the gift aid scheme. They are able to do so and I do not believe that it would involve a tremendous amount of work for them, especially with the capacity-building organisations on hand.

Gareth Thomas (Labour, Harrow West)

If it would tempt the hon. Lady to vote with the Opposition on the amendments, I would be happy to give her an assurance that I will, both in my constituency and in the Front-Bench role that I am fortunate to hold, do what I can to encourage charities to register for gift aid. I come back to the reason why we tabled the amendment and suggest that, if the Minister is determined to dig his heels in, she uses her good influence on her Whip to encourage the Government to produce fairer eligibility criteria between Committee stage and Report.

Susan Elan Jones (Labour, Clwyd South)

The Churches were mentioned in a previous sitting. I doubt that anyone would disagree that one of the reasons why such a high proportion of churches are eligible for gift aid is that pretty much every diocese in the country has a stewardship adviser or stewardship officer. I would be a bit alarmed, however, if every local authority around the country employed someone whose role is basically to get schools into gift aid. We know what schools are, so would it not be better if they could all simply benefit from the scheme?

Also, on Second Reading, the hon. Member for Stafford made the point that school committees of pupils are often set up for only one year. Such groups would also be excluded from the scheme. If we all want smaller charities and PTAs to benefit, surely we should make the administrative simplifications proposed in the amendments?

Gareth Thomas (Labour, Harrow West)

My hon. Friend makes a good point. She underlines that many small charities lack the capacity to benefit from the Bill either immediately or, in many cases, for a minimum of three years, even if we are all successful in persuading every parent teacher association to sign up to gift aid in the next 12 months.

It is worth dwelling on what PTAs do and why 84% of them will therefore be disappointed that they cannot benefit from the scheme. PTAs raise about £8,000 per school on average; obviously, some raise substantially more. Collectively, they put about £110 million back into our schools, helping to finance such things as playground redevelopment, school trips and equipment that the Government cannot pay for, including iPads. It seems unreasonable that some PTAs might be able to access the Government’s small grants scheme to do more in those three areas, among others, but that others cannot. I urge the Minister to consider sympathetically the need to introduce different criteria that would deal with the Treasury’s concerns about fraud, but which would be fairer in ensuring that the small charities we are all motivated to help can benefit from the scheme.

It is worth underlining that the scheme was originally intended to help charities that do not claim gift aid, but it will now penalise those very charities by denying them access to the scheme for at least three years.

Fiona Bruce (Conservative, Congleton)

The hon. Gentleman will correct me if I am wrong—or the Minister will do so at the end of this debate—but I understood that the scheme was designed to complement the claiming of gift aid by charities that also receive cash donations in such small amounts that, for whatever reason, donors cannot be asked to provide their details. Effectively, the scheme is therefore a top-up on gift aid claims.

Gareth Thomas (Labour, Harrow West)

That is how the scheme is now being sold, but it is not what many small charities were led to believe. The Minister still has to answer the question why there is one rule for some charities and a different rule for smaller charities, much of whose income will not be registrable for gift aid purposes. We will come on to the concerns about the matching requirement later. Why is there one rule for some charities and another rule for others?

Sheila Gilmore (Labour, Edinburgh East)

Does my hon. Friend agree that Government Members appear to be talking about a rather different proposition from the one that was originally understood? They seem to see the Bill as one to encourage people to take up gift aid rather than to enable small donations to receive assistance from the taxpayer in the same or an analogous way. It was not my understanding that the Bill was intended simply to enable more people to take up gift aid.

Gareth Thomas (Labour, Harrow West)

My hon. Friend is right. It is even more important in these austere times to get right the eligibility criteria for one of the few large sums of money that remains for small charities to claim from the Government. There is even less reason for the Committee to tolerate a requirement that divides the charity sector between those whom Ministers think deserving because they have claimed gift aid, and those whom they do not think deserving because they have not claimed gift aid.

On the drafting of the criteria, it will perhaps be helpful to draw the Committee’s attention to the plight of Scout groups, some of which will miss out on support under the scheme. Some 70% of scout groups in England are registered for gift aid. In Scotland, the figure is 52%. I asked the Scout Association what proportion of scout groups in Bromsgrove were registered for gift aid, and it suggested that only 58.5% were, which is pretty low when compared with other districts. It is incumbent on the Minister to explain to the House and, through Hansard, to his constituents why some Scout groups in his constituency will be eligible for support under the scheme and why some 40% will not be eligible. Indeed, as my hon. Friend the Member for Foyle pointed out, even if they do register for gift aid, as the hon. Member for Stafford said in response to the letter that the Economic Secretary will send out to Scout bodies and PTAs in his constituency, they will not benefit under the scheme for another three years.

We were fortunate to benefit from the presence of the hon. Member for Banbury in the morning sitting last Thursday, but not in the afternoon.

Tony Baldry (Conservative, Banbury)

I would have been in like Flynn had a vote been called, but as a whole quarter of the Committee’s proceedings was taken up without the hon. Gentleman dividing the Committee, Hansard does not show my presence or my potential presence. However, I am really enjoying his contribution this morning

Gareth Thomas (Labour, Harrow West)

I reassure the hon. Gentleman that I was not attacking him for not being present, but merely expressing disappointment that he was not here on Thursday afternoon. Being the diligent servant of the House that he is, he will have read the debates that we had on Thursday and Tuesday and will have gone back to the Banbury Sea Scouts, of which I believe he is president, to check that they are registered for gift aid and will have presumably been reassured that they are. However, if Banbury is a little like the rest of the country in terms of Scout groups registered for gift aid, some 30% of Scout groups there are potentially not registered. Being the one nation Conservative that he has in the past professed to be, he will want to ask the Minister—if not in public, then in private—why there is one rule for the Scout groups in Banbury that are registered and one rule for the others that are not. As the vice-chair of the all-party Scout group—I am privileged to share that role with hon. Members from each of the other two main parties—and as a former Scout myself, I want all Scout groups potentially to benefit from this scheme. Why cannot the Minister design a scheme that allows all Scout groups to benefit from the outset, rather than having to go through the process of claiming gift aid and then waiting three years to benefit?

Fiona Bruce (Conservative, Congleton)

As a Guide ambassador, I would like to see Guides and Brownies registered. Can the hon. Gentleman confirm that there is nothing to stop other Scout groups or PTAs registering for gift aid? It is not as though we on the Government side are declaring some second-class charitable organisation. They have every option of registering and benefiting from these new arrangements when they come into force.

Gareth Thomas (Labour, Harrow West)

With respect to the hon. Lady, it is a question of whether they have the capacity to do so and whether, proportionally, it is worth making them jump through such hoops to register for gift aid as making them read the 60 pages of guidance or the 80 pages on the website if they do not want to and if they believe that their sources of income would not be registrable for gift aid purposes. The amount of money they would get is so small that it would not be worth the effort in comparison with all the other things that we expect volunteers to do.

Fiona Bruce (Conservative, Congleton)

From my knowledge of the Guiding movement, I can say that it is a highly professional organisation, with a great deal of expertise that I am sure is placed at the disposal of local groups. I am confident that they would be able to obtain the necessary professional advice and assistance to make a claim, should they wish to do so.

Gareth Thomas (Labour, Harrow West)

Perhaps the hon. Lady will intervene again and tell me whether 100% of Guide groups and Brownie packs are registered for gift aid. The Committee deserves to know. If she supports the Government’s position in this clause, she is effectively saying to those Guide groups and Brownie packs that are not registered for gift aid that they might be able to access the scheme, but unlike the registered group down the road, they will have to wait for three years before they can access the money. That is hardly fair.

Fiona Bruce (Conservative, Congleton)

The hon. Gentleman was making the point that groups did not have the capacity or expertise to register, but I believe they do have that expertise at their disposal. I am hopeful that, as a result of this legislation, many more will register.

Gareth Thomas (Labour, Harrow West)

I am sure that many do have the capacity, but the question is whether they decide, in the balance of all the things that they have to do as Guiders or Brownie pack leaders or Scout masters, that it is in their interest to do so. Can the hon. Lady and the Minister tell me why, given the variety of tasks that we expect volunteers in Scout, Guide, Brownie and Cubs packs and troops to do, we are creating this extra hurdle for those bodies that are not registered to jump over to access, in the best-case scenario, £1,250?

Mark Durkan (Social Democratic and Labour Party, Foyle)

My hon. Friend is setting out the problems with the Bill, because it disqualifies so many small charities from something that we all thought was going to be promised. This was meant to be a big society Bill, but we are being told that the big society does not extend to smaller charities. Is there not a “let them eat cake” quality to some of the interventions by Government Members?

Gareth Thomas (Labour, Harrow West)

If my hon. Friend will forgive me, I have tried to maintain a consensual tone in the Committee’s deliberations in order to attract one or two Government Members who are particularly committed to small charities to supporting my position, because they may also have concerns about the Bill. I may be making some progress with the hon. Member for Portsmouth North. The hon. Member for Stafford hinted at some concerns last week. I can see that I will have to work quite a bit harder with the hon. Member for Congleton, but I intend to do just that. I will try to convince her to come over to the Opposition’s viewpoint on this question.

Stephen Williams (Liberal Democrat, Bristol West)

The hon. Gentleman is making the case well, and I have some sympathy with him. Is it such a bad thing, however, if the Bill encourages more schools, Scout groups or other small community charities to up their fundraising, register for gift aid and engage more people in their communities? Surely that would be a good outcome. In connection with the schools that the hon. Gentleman mentioned, I commend to him, and suggest that he seeks out, an organisation called Future First, of which I have just become a trustee. It seeks to replicate in state schools the fundraising and network building that the public schools he mentioned are so good at.

Gareth Thomas (Labour, Harrow West)

Of course, it would be great if as a result of reading our deliberations in Hansard, charities rushed to sign up for gift aid. There are, surely, other ways of ensuring that more charities register for gift aid without requiring them to jump through the hoops that the Bill creates before they can access the small grants scheme. I pay tribute to the hon. Gentleman for taking up the trusteeship of Future First, and I wish the organisation every success. I feel that I may be making progress, because I have secured a little bit of sympathy from the Liberal Democrats, from the hon. Member for Portsmouth North and from the hon. Member for Stafford. It is only on the right of the Conservative party that I have more work still to do.

We have not so far considered the challenges that many community amateur sports clubs will face over eligibility for the Treasury small grants scheme, particularly as a result of the requirement to be registered for gift aid that amendment 13 seeks to remove. Ian Clark, whom my hon. Friend the Member for Leeds East mentioned on Thursday, is an adviser to the Sport and Recreation Alliance, which represents community amateur sports clubs. It is worth remembering that Mr Clark is a member of HMRC’s charity tax forum and he advised the Treasury on the Bill, although it is clear from the complexity of the Bill, and the evidence that he gave through the Sport and Recreation Alliance, that he was not listened to.

Mr Clark pointed out that each donation for gift aid purposes requires a written declaration by the donor, and that such declarations are difficult to obtain for most small, ad hoc cash donations. He went on to say that reputable annual surveys showed that the most regular way in which donors support charities is through small cash donations, which are the most difficult kind of donation to obtain signed gift aid declarations for. Small cash donations—from street collections, door-to-door collections or collecting boxes in shops or pubs—cannot be declared for gift aid, and many organisations that rely on such sources of income have tried hard to capture declarations so that they can be registered for gift aid, but without much success.

That comes back to the capacity point that the hon. Member for Congleton wanted me to dwell on. If someone had tried so hard and failed to get more of their donations registered for gift aid, it might put them off trying to persuade similar charities in their area to register.

Many charities also say that they find that the time and the costs of administering gift aid—this is Mr Clark’s point—outweigh the benefits. Let us remember the 60 printed pages of guidance, the 80 web pages and the minimum, I suspect, 20 pages more of guidance that the Minister will publish by the end of year about access to the scheme. Potentially there are 100 pages of guidance to register for this scheme. The priority for someone running a community or amateur sports clubs will be the 10 football teams of young people that he has to ensure are on the pitch on Saturday, not trying to register for gift aid.

There are other fundraising methods that community and amateur sports clubs and many small charities engage in that are not eligible for ordinary gift aid. I am sure there is not a member of the Committee who has not gone along to a charity jumble sale. There are probably not many members of the Committee who have not gone along to hear a charity choir. I think of the Harrow Apollo male choir, who are fantastic performers. Even fewer Members of the whole House will not have put money into a charity raffle. Small cash donations in door-to-door collections and money raised through jumble sales, concerts or raffles are not eligible for ordinary gift aid. So why would a community or amateur sports club necessarily put as its top priority registering for gift aid to get access to the relatively small amounts of money that it could get under this small grant scheme?

The views of many of the leading representatives of the charity sector were clear to us, probably before the Committee began its deliberations. Sir Stuart Etherington, the chief executive officer of the National Council for Voluntary Organisations, said:

“Even for those of us who spend a lot of time looking at Gift Aid, some of the restrictions are hugely complex to understand, and we fear this will be a barrier to charities taking part in the scheme.”

So the CEO of the biggest representative body for small charities in the voluntary sector is damning in his assessment of the requirement for this small grant scheme to be registered for gift aid.

On Thursday, we had the chance to consider the impact of the Bill on hospital radio stations. Members who were particularly diligent will remember that 40% of hospital radio stations that are registered as charities with the Charity Commission are not registered for gift aid. They are all run by volunteers. The Hospital Broadcasting Association does not believe that any hospital radio station around the country has any paid staff—anyone with time to fill in gift aid forms. Many do not receive sufficient donations to justify the administrative burden of registering for gift aid and of making claims on a regular basis. The Hospital Broadcasting Association emphasised to me, and tells us in its submission, that the majority of its funding comes from tin shakes, from bag-packing at supermarkets, from applications to the Big Lottery Fund’s Awards for All scheme or from charitable trusts. As a result, the majority of that fundraising is not eligible for gift aid claims.

I was lucky enough to volunteer at the excellent Radio Northwick Park when I was 16 and 17—not that long ago, Mr Turner, as you will recognise—which is just one example of the huge amount of good that hospital radio stations do around the country. Radio Nightingale at Rotherham general hospital is not registered for gift aid. It has been going since 1978, and there is no suggestion that massive fraud is being committed, so why is it not eligible? Chichester hospital radio is also apparently not registered for gift aid. It has been running since 1972. It would clearly be good were HMRC willing to spend some time with Radio Nightingale and Chichester hospital radio to explore why they have not registered for gift aid and to walk them through the website and the 80 pages of guidance to enable them to claim for gift aid, as the hon. Members for Stafford and for Congleton both hinted should happen.

We return, however, to the basic unfairness at the heart of this measure. Why should charities that have not registered for gift aid, which are doing a perfectly good job in serving their communities, not get access to what is, after all, a small grants scheme offering, at best, £1,250 when other similar charities, perhaps very close by, have registered and can potentially get access to the scheme? As my hon. Friend the Member for Foyle said earlier, even if Radio Nightingale and Chichester hospital radio registered for gift aid tomorrow, it would be a minimum of three years before they had the chance to get access to the £1,250. The same would be the case even if £5,000 of their income qualified under the rules in the Bill, which is highly unlikely given what we know from the Hospital Broadcasting Association. Given how much the availability of funding to the charity sector has been reduced, it is incumbent on the Minister to design a scheme that can benefit those small charities that are hurting most as a result of the loss of state funding. The Opposition believe that the link to gift aid will exclude far too many worthy charities from the scheme.

As I have alluded to, it seems that the gift aid requirement appears in the Bill as an anti-fraud initiative. We know from a freedom of information request by the Hospital Broadcasting Association that was answered in July 2012 and is mentioned in its evidence, that the rate of fraud in gift aid is around 1%. It is still absolutely important to have dedicated resources cracking down on that fraud, and we welcome the conviction for gift aid fraud alluded to by the head of the charity section of HMRC in his evidence. However, the level of gift aid fraud in the charity sector is not costing the Treasury anything like the level of revenues that eBay is alleged to have avoided, so it is important to keep the threat of fraud in perspective.

I suspect that the real reason why the link to gift aid is in the Bill is down to the cost of the scheme. Ministers made grand claims about how many charities would benefit. Indeed, in his contribution on the previous set of amendments, the Minister claimed that there was an unlimited pot for charities to draw on as a result of the scheme. I suggest to the Minister that that simply is not credible, given the scale of restrictive clauses in the Bill.

One wonders therefore whether the requirement to be registered for gift aid is intended to curb expenditure under the scheme. It is a comparatively less than transparent way of capping expenditure, and unfortunately it creates an entirely arbitrary set of deserving and undeserving charities. The only logical explanation for having to jump through the gift aid hoop to get access to the small grants scheme is the cap on the amount of money that the Treasury has to pay out under that scheme.

Amendment 15, which is linked to amendments 13 and 14, would delete the matching requirement in subsection (4). Perhaps I can pose the example of a small charity that provides support for disabled adults in the local community: the staff team work on a part-time basis; the majority of the charity’s work is performed by volunteers; and they have secured some statutory funding and a grant from a trust, but also cash collected by volunteers in collection buckets. The charity will struggle to benefit from the scheme as it stands. Because of the matching requirement, it stands to gain only a small amount, even if some of its income can be included towards the £5,000 figure. Given its limited staff and volunteer time, why would it want to wade through all the extra guidance that the Minister is going to publish, and the 60 or 80 pages of existing guidance, to secure what would be a relatively small amount of money under the scheme?

It might help if I bring my example to life with a couple of real examples. Last year, Winchester hospital radio had donations totalling £197.95 that were eligible for gift aid, so it was able to reclaim £49.48. It held a bucket collection at the local Sainsbury, which raised £450.93, so it would have been able to raise only about £99 under the scheme because of the matching requirement. Thanks to the kind generosity of the operatic society and the Theatre Royal in Winchester, it will be holding a collection as people leave the society’s performance of “The Merry Widow”. With good fortune, it hopes to raise close to £1,000, but it would still receive only about £99 under the scheme, because of the matching requirement in subsection (4). That is nowhere near the £1,250 that the Minister has said is the maximum.

Roch Valley radio is a charity based at a hospital in Bury. It got just £100 in small donations. It is registered for gift aid. Let us assume that it fulfils all the other criteria that the Minister has written into the Bill. It stands to secure just £50 under the scheme. The impact of the matching rule means that many charities will not be able to access anything like what Ministers had originally suggested they might, or indeed that which many charities had perhaps hoped, given the difficult funding times that they are in.

It is worth turning to the evidence from the policy manager from NCVO last Tuesday. She said that the matching rule, along with the three-year track record, presented the most difficulty for charities in accessing the full £1,250 under the scheme. Cath Lee, the chief executive of the Small Charities Coalition talked about the types of charities that would find it particularly difficult to benefit in full from the scheme. The first are start-up charities, because it would be a huge challenge for them to develop, to register for gift aid and to keep going to the stage where they met the three-year eligibility criterion. The second are those charities that do not already use the gift aid system because it is it is not easy to apply gift aid to their main sources of income. The third group that would struggle to benefit are those that just lack the capacity to engage with the gift aid system.

Susan Elan Jones (Labour, Clwyd South)

Does my hon. Friend agree that perhaps the most concerning aspect of this Bill as it stands—we very much hope it will be amended—is the matching principle? Under the scheme it is tougher than with many other statutory funders. Many statutory funders who adopt the matching principle will, for instance, take into account the hours of volunteers. Many voluntary sector organisations are concerned that a lot of smaller charities and many others will not benefit fully from the scheme simply because of the matching criterion.

Gareth Thomas (Labour, Harrow West)

My hon. Friend is right. The matching requirement is one of the big concerns of the charity sector, as is the three-year rule, which we will come on to in clause 2. The community buildings provision is hugely worrying for many charities.

The NCVO in its evidence pointed out that some 25,000 charities claimed gift aid of less than £1,000 a year. Of those it estimates that about half will be claiming less than £625 a year. So at the moment they have no chance of getting the full £1,250 under the scheme. At the moment only a third of charities would potentially qualify because they are registered for gift aid. Here is further evidence that an even smaller number of charities would benefit from the Bill because they do not currently claim gift aid of £625 or more, perhaps because of the way their income streams are currently organised.

When the Chancellor announced the scheme in his 2011 Budget, to great fanfare, he said that 100,000 charities would benefit. He said:

“Do the right thing for a charity, and the Government will do the right thing for you. It is a big help for the big society.”—[Official Report, 23 March 2011; Vol. 525, c. 962.]

That was a point that my hon. Friend the Member for Foyle emphasised in his intervention. The evidence to the Committee tells us that the Government will not do the right thing for people in a parent teacher association who do the right thing for pupils in their school, because they will not necessarily be eligible under the scheme. The Government will not do the right thing for those who do the right thing in their community and are part of the management of Guide or Scout groups, Beaver packs or Brownies, because unless they are registered for gift aid they will not be eligible for help under this scheme.

If someone is part of a successful hospital radio station, of one of the 40% that are not registered for gift aid, the Government will not necessarily do the right thing for them under the scheme, regardless of the huge difference they make to the quality of the patient experience. On this side of the House, we are used to the Chancellor being wrong about or over-hyping the likely success of his measures, but this seems to be a particularly graphic example of the difference between what the Government say, and the practice, when one gets to look at the detail.

Fiona Bruce (Conservative, Congleton)

First, does the hon. Gentleman not accept that there has to be some form of protection for the public, through a robust scheme, so that they can be confident that when they give small amounts of cash that cash will be properly collected and administered?

Secondly, is it not true that the Government have listened to the charity sector’s concerns? The original proposal was a 100% match of gift aid and the charity cash collection, and the Government have reduced that to 50%. A charity that claims a high proportion of cash through small donations will still be able to make a claim under the current proposals, and they would not otherwise be able to. The Government have gone a long way towards counterbalancing the need to protect against fraud with the need to gain the confidence of the public, and they have given as much opportunity as possible for small local charities to claim benefit from cash donations.

Gareth Thomas (Labour, Harrow West)

I would not want to push the hon. Lady even further away from our side’s position, just at the moment when I was hoping that my success with her colleagues might be opening her heart a little. I absolutely concede her two points. Of course we want to do what is proportionate and reasonable, and which helps to crack down on the risk of fraud, but there are other ways to do that, some of which we explored in the debate last Thursday. I do not want to go back down that road, but I encourage the hon. Lady to dwell a little on the train back to Congleton on the contributions that a number of Members made in that debate.

I accept that the Government have moved a little. I hope that the hon. Lady will use her influence with the Minister, as one of the 2010 intake of apparently “difficult” Conservative Back Benchers, to persuade him, if he is going to dig his heels in today, to use the time between Committee and Report to show more flexibility and ensure that more small charities can benefit.

The last set of examples that I would like to use to highlight the unfairness of the matching requirement in particular come from the Churches Conservation Trust. The trust has pointed out how the churches and communities it supports will be significantly disadvantaged as a result of the Bill. The hon. Member for Banbury was particularly delighted that the Church of England was happy with the Bill, and as someone whose partner is an enthusiast for the Church of England, I too am delighted that it is happy. Unfortunately, however, the Churches Conservation Trust, which keeps up the repair and maintenance of many former Church of England churches, has pointed out that the Bill will potentially make its work a bit harder than it had hoped it would when the scheme was first announced.

The trust does an excellent job in protecting more than 340 historic churches and keeping them open for future generations. In 2011-12, it had a total income of £183,998 from wall safe donations—from the safes in the walls of churches, into which people pop money when they are out for a walk, perhaps—but it points out that only £10,681 of that income was accompanied by a gift aid envelope. It can claim, therefore, only 5.8% of that wall safe income stream through gift aid.

Tony Baldry (Conservative, Banbury)

The Churches Conservation Trust is a single charity and, as a single charity, it can benefit from this legislation like any other charity that is registered for gift aid. What exactly is the hon. Gentleman saying the Government should do in respect of the trust as a single charity—that every wall donation box should be treated separately for the purpose of the Bill?

Gareth Thomas (Labour, Harrow West)

I am grateful to the hon. Gentleman for his intervention. I am only halfway through the example, so please bear with me, but I hope to show him that because a significant part of the Churches Conservation Trust’s income—to help pay for the upkeep of churches—comes from wall safe donations, it is not so much the registration for gift aid that is the issue; but that the matching principle, which amendment 15 draws attention to, potentially precludes the trust from benefiting as much as it might regarding the upkeep of particular churches.

Tony Baldry (Conservative, Banbury)

The Bill is entitled the Small Charitable Donations Bill, but at what level does the hon. Gentleman consider that “small” ceases to be small? Each year, the trust receives millions of pounds from the Church Commissioners, and my ears bleed as I listen to their submissions for more money. At what point is the hon. Gentleman suggesting that “small” should cease to be small? One can never keep a good Labour shadow Minister down in wanting the public purse to spend more money, but what does he think the limit for any single charity to receive should be?

Gareth Thomas (Labour, Harrow West)

With respect, in my opening remarks, right at the beginning of our discussions on Thursday, I made it clear that we do not seek to increase the level of funding that the Government have set aside for the scheme, but when small charities can potentially access £1,250 under the scheme, we should surely make it a little easier for all charities to benefit from it. I gently suggest to the hon. Gentleman that those churches and church communities that the Churches Conservation Trust tries to help may in the longer term be better off without the Bill’s matching clause.

The absolutely last point to make on this set of amendments is to contrast the work of Lord Hodgson—at the Cabinet Office’s request—to strip away red tape for charities, with the experience that charities now face with the Treasury under this scheme. Ministers are injecting a whole new layer of red tape for charities that want to claim £1,250. Community buildings are a particularly powerful example, but the registration for gift aid and the matching requirement will limit also, in dramatic ways, the ability of most charities to access the scheme and to benefit to the full £1,250. That is the crucial thing.

I hope that Government Members will be sympathetic to those concerns and will use their influence with the Minister to encourage the design of a fairer set of criteria.

Pat Glass (Labour, North West Durham)

I will be brief. I support the amendment. My questions to the Minister will relate to a small community charity with which I am involved.

My first official duty as the new MP for North West Durham was to attend the funeral of Sapper Daryn Roy, a young man who died in Afghanistan in late April 2010. He came from the village of Dipton in my constituency, and, as one would imagine, his death hit the village very hard. Following the funeral, I kept in touch with Daryn’s family, and together we decided to raise money to establish a memorial in the village, as there was no focus for villagers to mark their grief and to commemorate his memory.

I am told that there was a war memorial in Dipton, but it was removed some time in the 1970s for safekeeping when a new community centre was built, and unfortunately no one knows where it was removed to. As soon as people in the village knew that we were looking for the memorial, they got in touch to tell me how angry they and the families were that the memorial had been removed in the first place and that there was nothing to commemorate the young men—they were men in those days—who died in previous conflicts. The memorial and the fund have become important not only for Daryn’s family, but for the families of all the young men of Dipton who died fighting for their country in two world wars and every conflict since.

Most of the money will be raised from small charitable donations given by individuals through cheques or bucket collections at events. There will be some larger donations—the local YMCA in Consett kicked off the fund with a £1,000 cheque because all the staff knew Daryn and he was well known within the YMCA generally from his participation in sporting events—but most of the money will come in £1 and 50p coins collected by individuals in a village that is in one of the most deprived parts of the country.

When 1 heard the Chancellor’s announcement in the Budget, I thought that the Dipton memorial fund was exactly the kind of charity that the Government intended to benefit. I think that was the intention, but I suspect that once civil servants in the Treasury got hold of this and wrapped it in legal language, some aspects became much harder for small charities such as the Dipton memorial fund, which will not meet the conditions. The charity could register for gift aid or become connected to a charity that is registered for gift aid, but it would not get anything back for more than three years. This charity will not be in operation for three years; we expect it to raise the money to build the memorial and that the memorial to be in place well within three years. So the charity is clearly not going to qualify.

I cannot believe that was the Government’s intention. I think the Government made it very clear that it was that type of small, local community charity that supports very worthy causes that would benefit from the Bill. Even if the Treasury and the Minister cannot support the amendment, surely he can go away and consider a Government amendment with a form of words that will include such charities, which I think was the Government’s original intention.

Sheila Gilmore (Labour, Edinburgh East)

If you will allow, Mr Turner, in speaking to the amendments I will discuss the context within which we are asking organisations to operate in order to benefit from the scheme. For the most part, they will first have to register as a charity, with some exceptions, such as community sports clubs, which will have to go through other mechanisms. They will then have to register for gift aid and have to be in existence as a charity for three years. In addition, having overcome those hurdles, they will have to make gift aid applications for at least three years in the past seven. On top of all that, there is a cap on donations—it is not an open-ended scheme. It is not something by which people can make large claims. There is a cap on individual donations of £20 and a cap on the total amount that can be claimed of £1,250. Some organisations will receive even less than that because the sum will be related to the amount of gift aid claims that have been made that year, so if they have not reached the necessary total, they will be claiming even less than £1,250. Although some of the smaller organisations that have been referred to could well register for gift aid and make their claims, they could still be in a position where the amount that they could claim back through the scheme would be limited.

My hon. Friend the Member for Harrow West spoke about organisations such as PTAs in a lot of schools. A fairly small primary school, for example, might not have a large parent body in any event, let alone a parent body that attracts moderate donations that would attract gift aid. Many of the parents might not, in fact, be taxpayers.

Gareth Thomas (Labour, Harrow West)

Does my hon. Friend accept that one of the problems facing PTAs in some parts of the country, including the excellent Newton Farm PTA, is that the majority of parents at a school might not speak English as their first language, so in language terms even accessing the information to understand how to go through the gift aid process could be a challenge.

Sheila Gilmore (Labour, Edinburgh East)

I can see why, in certain respects, that could be a serious consideration.

It is entirely possible that an organisation that has gone through all the hoops and managed to satisfy all the requirements will put in a gift aid claim for as little as £50, enabling it to claim only £100 under the small donations scheme, even if it had collected substantially more through various activities, such as can collections, school fairs and so on, in which money is collected in relatively small sums but which throughout a year might amount to a considerable sum. Government Members have rightly said that it is important to encourage people to give and to build up donations, but even though such organisations will have done that and put considerable effort into so doing, they will discover at the end of the year that the amount they can claim back under the scheme is extremely small—much less than the maximum of £1,250—simply because they have not received many donations on which a gift aid declaration was obtained. That might be because such small organisations are unable undertake different activities because of the organisational work involved, or the fact that that is not how they receive their donations.

I do not think it was the scheme’s intention that people in that situation should not get the benefit, even if they have collected money in various ways and made the effort that Members have said is so important. Organisations should be encouraged to raise money for themselves and not depend on money from elsewhere, but many of the organisations that we are discussing, including youth groups such as the Scouts, Guides and many others—I have a woodcraft folk group in my constituency that would be in a similar position; it is a small group, but an enthusiastic set of people are involved—will probably, even if they go through all the hurdles I have described, find that the amount they can claim is small anyway.

We must ask ourselves whether all the conditions are absolutely necessary. In drawing up the Bill, we have got to the point where complication has been laid upon complication and it becomes extremely difficult to step back and say, “Hold on a minute. Is this exactly what we intended?” I am slightly disappointed that Members, particularly Government Members, feel obliged to defend all the detailed terms of the Bill just because that is how it is drafted.

When I first agreed to sit on this Committee, started reading the material and listened to the witnesses last week, a lot of people said, “What are you doing at the moment?” I told them, “I’m about to sit on this Bill Committee”, and I told them what it was about. Although I have been a Member of this House for only two and a half years, I have managed to serve on a number of Bill Committees. I said to quite a few people, both at home and down here, “Unusually, I think this might actually be a Bill whose terms we can scrutinise in an open way, and we may actually make some helpful changes.” I am still hopeful that that might be the case, and that people will not dig in and say that it is Government against Opposition.

This is not about spending a lot more money, for example, which is the usual reason given for not accepting Opposition amendments on various issues. We are not suggesting that the donation cap should be raised, and we are not asking the Government to spend more money; we are suggesting that the scheme might be asking small charities to spend an unusual amount of time and effort in order to get very little. We should be thinking about their time, effort and money.

A lot goes into running such organisations, and as we know, many people do not necessarily appreciate that. We have all been at committee meetings and other such meetings where people come along and say brightly, “Why don’t you do this, that or the next thing?” and the committee members look pained, because they have been working extremely hard to keep the whole organisation going and working up applications, and somebody has come along with a bright idea. Usually, of course, they co-opt that person on to the committee, but they might not be keen to do so. The amount of work already done by volunteers on management committees for such organisations is onerous, and it is one reason why people sometimes cannot come forward. It is not just about coming to meetings once a month; it is about doing everything that needs to be done in between.

The Bill makes constant reference to fraud. It is important to be proportionate. We are not dealing—in my view, at least—with a scheme that will give people huge opportunities to commit significant fraud, although I do not condone any fraud. To make a lot of money fraudulently under the scheme, one would have to set up numerous organisations in order to make claims, as well as satisfying all the other conditions. I urge Government Members to think carefully about that. Do we need all these conditions? Do we need one built on the other? Even if they still feel that registration for gift aid is an important part of the scheme, why do we have the matching requirement? Some organisations will not be able to get many gift aid declarations from their supporters because of the nature of their work or their fundraising, so even if they have collected the requisite sum in donations they will get much less than the maximum amount. Is that really what we want to achieve?

We will debate yet another condition in the next clause—the requirement for a charity to have made a gift aid application in three of the previous seven years—but we are currently dealing with two requirements: the requirement to register for gift aid, and the matching requirement. We should be asking whether we really need both of those, and whether we are making the process unduly difficult for no good reason and exaggerating the risk of fraud.

It would be comparatively easy for an organisation to register as a charity and register for gift aid, after which it could immediately begin to claim amounts considerably larger than those at stake in the top-up scheme. It would not need to wait three years to do so, it would not be required to have made claims in three years out of the previous seven and there would be no cap on the amount that it could claim. The argument is that that is easier to check, because people have to fill in their name and address and sign the declaration to prove that they are a UK taxpayer. However, as we have heard in evidence—the representative from HMRC mentioned this—there are opportunities for fraud within the system. People have attempted, sometimes successfully and sometimes not, to make fraudulent gift aid claims. In such cases, although the sums involved are potentially much larger, there are far fewer obstacles involved in making claims.

If the difference is simply that the system can be policed through applications, I suggest that that will not happen in every case. I am sure that checks and monitoring are carried out, but there is huge potential for people to set up organisations and immediately make claims for more substantial amounts of money than those involved in top-up payments. I urge the Government to consider carefully that they risk setting up a system in which people have to jump through many hoops, only to find that they can claim no more than £100 or £200. If that happens, the scheme will not achieve its desired aims.

I submit that the scheme was intended not simply to top up gift aid for organisations that are already involved with it, but to close the acknowledged gap between smaller organisations that often cannot get additional taxpayer support because they depend heavily on small cash donations, and larger organisations that usually can get such support. Many of the organisations that people had in mind initially will get very little out of the Bill, even when we have gone to all the trouble of debating it. I still hope that the Government might support at least some of our amendments and reduce the burden on what are mainly very small organisations.

Sajid Javid (Conservative, Bromsgrove)

May I say what a pleasure it is to serve under your chairmanship, Mr Turner?

Amendments 13 to 15 are designed to remove the requirement for the amount of small donations on which a claim is made under the scheme to be matched by gift aid claims on donations of at least half the amount—in other words, that for every £10 of small donations on which a payment is claimed, the charity must claim at least £5 of donations under the current gift aid scheme. As hon. Members are aware, the matching provision has been introduced to help Her Majesty’s Revenue and Customs protect against fraud, as I will explain in detail.

Gareth Thomas (Labour, Harrow West)

Will the Minister accept at the outset that the inclusion in the Bill of the link to gift aid means that a whole series of small charities will miss out?

Sajid Javid (Conservative, Bromsgrove)

I will address the impact of the provisions in a moment.

I know that the provisions that we discussed during the previous debate and the matching requirements that we are now talking about are some of the least popular features of the scheme, and I know that some charities will be restricted in the amount they can claim under the small donations scheme because they do not receive enough donations under gift aid. Charities and their representative bodies, as well as hon. Members, have told us that the provisions are disproportionate in relation to the level of fraud that will be found in the scheme. The anti-fraud provisions are probably the greatest area of contention in the Bill, and what we have heard today backs that up. This is the first debate on fraud in Committee and I doubt it will be the last, so it is worth setting out in detail the issues we need to consider.

Why do we have the anti-fraud provisions? It is quite natural that charities should dislike the matching rule and question whether HMRC’s concerns are proportionate. The people in charities and their representative groups that we come across in our daily life, and those we heard from during our evidence session on Tuesday, are all concerned about genuine charities. Quite reasonably, they want to get on with their charitable work and maximise their income, and not be burdened with too much administration. We would not expect them to come across much fraud in their experience—why should they?—but, whether we like it or not, the generous tax reliefs that are on offer to charities, particularly through the gift aid scheme, are a very attractive target for those who do not have charitable motives and want to exploit the system for their own gain.

The hon. Member for North West Durham referred to a very worthy cause in her constituency. She spoke eloquently about a serviceman who made the ultimate sacrifice for our country, and about the need for a memorial in the local community to commemorate not only what he did but what others have done. That is a very worthy cause, and no member of the Committee would question it. She rightly pointed out that, under the matching requirement and some of the other provisions, it is unlikely that such a charitable cause could benefit from the small donations scheme. However, I hope that, as I go through the arguments, she will accept why we need the provisions.

The intention is not to exclude worthy causes such as the one the hon. Lady highlighted, but to separate genuine causes from those that people would unfortunately take advantage of if the Bill was too relaxed and did not deal with fraud. Whether we like it or not, there are people who are determined to use legislation for ill means rather than for its real intention.

Gareth Thomas (Labour, Harrow West)

I accept that the provisions are included in the Bill with the best of intentions and motives. However, given that 84% of parent teacher associations are not claiming gift aid and will not therefore benefit from the scheme, does the Minister not recognise that it is incumbent on him to recognise the reality of the situation facing those small charities, and to try to come up with a fairer set of eligibility criteria?

Sajid Javid (Conservative, Bromsgrove)

Let me address the hon. Gentleman’s point. I noted that he mentioned parent teacher associations several times. First, HMRC rightly does not make a judgment—whether under the current gift aid system, or the system the Bill would create—about what is or is not a charity. That would be the wrong place for the judgment to be made. The judgment is made under the Charities Acts, and the Charities Act 2006 in particular, which I assume the hon. Gentleman supported. Whether parent teacher associations are charities is determined by that Act. When they are charities, many parent teacher associations are already in the gift aid scheme, as he conceded, although he rightly pointed out that the majority are not. It may well be that many of them can join the gift aid scheme, but have thus far, for whatever reason, failed to do so.

Gareth Thomas (Labour, Harrow West)

The majority of parent teacher associations are registered charities already, but only 16% are registered for gift aid. The Minister may say that HMRC does not decide what is a good charity for the benefits of the small grants scheme, but putting the Treasury’s eligibility criteria into the Bill means that the Treasury implicitly chooses which charities are good, and can therefore benefit under the scheme, and which are not good, and therefore cannot benefit. The Minister surely accepts that point.

Sajid Javid (Conservative, Bromsgrove)

In the Bill, we do not make any value judgment about whether charities are good or bad. All charities that meet the requirements of the Charities Act are, in my opinion, good charities.

Gareth Thomas (Labour, Harrow West)

Why cannot they benefit from the Bill?

Sajid Javid (Conservative, Bromsgrove)

The hon. Gentleman asks why they cannot, therefore, benefit from the Bill. A great number of charities can benefit from the Bill, but the eligibility criteria that we have put in place are designed to prevent fraud on a scale that would be unacceptable to the public purse.

Susan Elan Jones (Labour, Clwyd South)

The matching criteria, as the hon. Member for Congleton stated, have been changed. I did not quite understand why they were set at the level that they were in the first place, but, rather like Pythagoras’s theorem, I presumed there was something in it somewhere. If it was not necessary at that level to combat fraud, why is it necessary at this level, or, indeed, at any level? Does the Minister accept what Mr Edwards said when he gave evidence—that HMRC’s job is to detect fraud? When I asked Mr Edwards whether the specific charity to which he referred was registered with gift aid, he basically said, “Yes, of course it was.” Is not the reality that the link between the matching criteria and fraud is negligible? In fact—though I hesitate to say it—it is practically not there at all.

Sajid Javid (Conservative, Bromsgrove)

The matching criteria are an important principle in dealing with fraud, and I will explain that in more detail.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

Before the Minister moves on from that point, I wonder whether I have understood him correctly. I heard him say that it is not HMRC’s job to decide whether a charity is a good charity—someone else has to make that decision. I therefore cannot understand why, if the Charity Commission has decided that a charity is fit for purpose, HMRC cannot simply accept that decision.

Sajid Javid (Conservative, Bromsgrove)

Because HMRC’s job is to fight fraud and protect the public purse.

Fiona Bruce (Conservative, Congleton)

I would like to return to the welcome I gave to the reduction to 50% from 100% of gift aided donations being matched to cash donations, which is laudable. Given that we have heard evidence recently, in particular the witness evidence in the earlier hearing, and at the risk of debunking the initial impression I gave to the hon. Member for Harrow West about the tenderness of my heart, will the Minister consider whether there is any scope for a further reduction, which would, of course, be marvellous news for thousands of charities across the country?

Sajid Javid (Conservative, Bromsgrove)

I thank my hon. Friend for her intervention. The matching principle is important for dealing with fraud. As my hon. Friend pointed out, she has raised the issue of the percentage of matching with me before. The Government have already reduced that percentage from their original intention. I say to my hon. Friend that I am minded to look at that again. The most important thing is the principle itself, and combating fraud. I am happy to look again at the percentage of matching to see if any further action can be taken to make things easier for some charities.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

Still on fraud, can the Minister tell us whether there is any evidence to suggest that newly set up charities are more likely to be involved in fraudulent activity than well-established charities?

Sajid Javid (Conservative, Bromsgrove)

If the hon. Lady will allow me, I have a lot more to say about how the principle helps protect against fraud. Perhaps I will answer her question as I make progress.

HMRC sees the whole range of compliance behaviours among charities, from the vast majority of charities, which are compliant and honest, to a small but corrosive minority that are deliberately non-compliant and are fraudsters. HMRC has to perform a balancing act to make sure its compliant customers can access the tax reliefs to which they are entitled as easily as possible while protecting the public purse against fraud. For very good reasons, HMRC does not disclose full details of the fraud it encounters, or the methods it uses to counteract fraud; disclosing that information would be tantamount to advertising how to beat the system.

Gareth Thomas (Labour, Harrow West)

The Minister surely accepts the evidence of the freedom of information request to HMRC. From that, we can see that HMRC estimated that about 1% of claims under gift aid were fraudulent. That would conceivably equate to about £10 million under this scheme; eBay is being accused of avoiding corporation tax of fives times that amount, but we have not heard Ministers jumping up and down over the weekend, or indeed yesterday or today, suggesting that they are going to put in place a whole bunch of new measures to sort that out. Does that not suggest, again, that the Minister needs to be extremely careful and proportionate about implying that there is huge fraud in the charity sector, when all the evidence shows that, beyond that 1%, there is not?

Sajid Javid (Conservative, Bromsgrove)

The hon. Gentleman raises the issue of tax avoidance, and has mentioned a specific company. No doubt other companies are being mentioned in the press. First, where tax avoidance is being practised, that is clearly happening within the rules that were put in place during the hon. Gentleman’s time in government. A far more important point is that this Government have dedicated a huge amount of resources to closing tax loopholes and to dealing with tax evasion; the more important point is what we are actually doing, including the Government’s commitment to look at general tax avoidance legislation. I do not believe that that action was contemplated during the hon. Gentleman’s time in government.

The fact is that HMRC sees and deals with significant levels of gift aid fraud. HMRC has stopped over £10 million of fraudulent gift aid claims in each of the last couple of years, but clearly the total amount of fraud in the system will be higher than that. It would not be possible to stop all gift aid fraud without swamping the gift aid process with expensive compliance resource and making the administrative burden on charities unbearable. All that can be said is that the minimum amount of fraud in gift aid is currently estimated to be around £10 million each year.

Charities complain about the administrative burden of gift aid as it is. We want to help reduce that burden as much as we possibly can. HMRC is introducing a new online system for charities to claim gift aid from next year. That service will make claiming easier and charities will get faster repayments. However, gift aid still depends on the donor providing a gift aid declaration. That declaration ensures gift aid is a tax relief, but it is also an essential tool for HMRC to check a charity’s compliance with gift aid.

The hon. Member for Edinburgh East made several comments. One of her key points was her description of the small donations scheme as too complicated. To take advantage of this scheme, a small charity can receive donations of up to £5,000 in cash, bank them and fill in a simple form, and HMRC will make a top-up payment directly into the charity’s bank account. It is a simple process—probably the simplest that can be designed, taking into account anti-fraud provisions. HMRC will also publish detailed guidance on how to use the scheme. It will be slightly more complicated for charities that use the connected charities rule, for obvious reasons, but even in cases where they are using community buildings rules or some of the other rules under the Bill, it will hopefully be a one-off process. Once the charity has dealt with it in its first year, it can keep relying on the same claim procedure it used in the past.

Sheila Gilmore (Labour, Edinburgh East)

I understand what the Minister is saying about the end result of making a claim, and that this will be simple because the charity will simply have to prove its donations, but my point was about the number of hurdles that people have to overcome before they can ever get to that point.

Sajid Javid (Conservative, Bromsgrove)

The hon. Lady has noted that what she calls hurdles are some of the necessary requirements that need to be in place to combat fraud. The new scheme gets rid of the need to collect a gift aid declaration. That will ease the burden on charities significantly, which is the primary objective of the scheme. However, together with the fact that the scheme is cash based, it means that HMRC will have virtually no hard information on which to check whether a claim under the scheme is correct. HMRC will make payments under the scheme virtually on demand. If there were no links to gift aid, the scheme would be based on the pure trust that the charity and the people acting on its behalf are honest and capable of administering the system correctly.

Susan Elan Jones (Labour, Clwyd South)

The Minister has already suggested that, with those charities currently claiming gift aid, there is an estimated £10 million of fraud, so how will the provision be a deterrent?

Sajid Javid (Conservative, Bromsgrove)

If deterrents were not in place today, the number would be far larger than £10 million.

Susan Elan Jones (Labour, Clwyd South)

How do we know?

Sajid Javid (Conservative, Bromsgrove)

I think it is obvious. If the hon. Lady is asking about the relationship between the amount of fraud and anti-fraud measures, clearly if there were no anti-fraud measures, the amount of fraud would be higher. Remember, £10 million is the minimum amount that HMRC knows about. Clearly, there will be some fraud that cannot be caught or is harder to find.

Gareth Thomas (Labour, Harrow West)

Just to support the point of my hon. Friend the Member for Clwyd South, why do we not go back to the example of the Awards for All scheme, where the figure that can be claimed under it is ten times higher than the maximum envisaged under this scheme and where the level of fraud is no higher than that to which the Minister has alluded? Charities are not required to register for gift aid to access the Awards for All programme, so why is it required for this small grants scheme?

Sajid Javid (Conservative, Bromsgrove)

As we have discussed before, Awards for All is a grant-making scheme.

Gareth Thomas (Labour, Harrow West)

This is a grant-making scheme.

Sajid Javid (Conservative, Bromsgrove)

No, Awards for All is a grant-making scheme that is entirely subjective. The small grants scheme is an objective scheme. As long as a charity meets the eligibility criteria, there is rightly no cap on the number of charities that can take part in this scheme. It is therefore an objective scheme and the comparison is completely inaccurate. Different ways would be needed to combat fraud.

We know that there is at least £10 million fraud in gift aid and, as there are fewer controls under the new scheme, it is obvious that it will come under attack. Multiple charities and multiple community buildings mean that the potential top-up payments could easily reach tens and hundreds of thousands of pounds. Without safeguards, that level of risk to the public purse is simply not acceptable. The eligibility provisions, which we will debate later, will help HMRC assure itself that the charity, at the time it becomes eligible for the scheme, is likely, although not guaranteed, to be trustworthy. However, personnel can change, fraudsters can lie low, and, just because a charity appears to be trustworthy at a particular time, that does not mean that it will always remain trustworthy. HMRC needs some way of checking whether a charity remains compliant after it becomes eligible to make claims on small donations. The charity’s conduct when administering gift aid is the closest proxy for HMRC to be able to reassure itself that a charity is continuing to comply with the rules of the new scheme.

The original consultation in March proposed a matching ratio of 1:1 small donations to gift aid donations. The Government listened to concerns raised at the consultation, and the Bill specifies a matching ratio of 2:1 small donations to gift aid donations. However, eliminating the matching provision altogether, as the amendments intend, would increase the cost of the scheme.

Gareth Thomas (Labour, Harrow West)

Ah!

Sajid Javid (Conservative, Bromsgrove)

The Opposition spokesman says, “Ah!” from a sedentary position. I note that in response to a question earlier today from my hon. Friend the Member for Banbury, the hon. Member for Harrow West—he can correct me if he wishes—said, “I am not seeking to increase the amount of money the Government have set aside for this scheme.” Does he wish to intervene?

Gareth Thomas (Labour, Harrow West)

The Minister quotes me absolutely accurately. We are not seeking to increase the amount of money under the scheme, but we are seeking to get fairer access to the funding that is on offer under the scheme, hence the reason for the allowance.

Sajid Javid (Conservative, Bromsgrove)

The hon. Gentleman will accept by now that his amendment, because of fraud and other reasons, would increase the amount of money spent on this scheme?

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

I seek clarification. I understand that, in response to a question from the hon. Member for Congleton, the Minister said that he was minded to look again at some of these issues. What would be the impact on the cost of the scheme, and what does he have in mind?

Sajid Javid (Conservative, Bromsgrove)

I am attached to the principle of matching, because it is necessary to deal with the risk of fraud and to combat it where it occurs. The ratio itself is something that I am minded to look at again. If there were changes to the ratio, I would consider carefully whether the estimates would make much of a difference to the battle against fraud. I will look at that carefully.

Susan Elan Jones (Labour, Clwyd South)

The Minister is being very generous with his time and I am grateful. I am intrigued. He mentions that Awards for All operates under subjective criteria. This scheme operates under objective criteria. Yet he speaks of a set sum of money. After hearing what he says, if we are not successful—I very much hope that we are—in changing his mind on the matching criteria, his place in history will be assured in the voluntary sector, at least. If we are not successful, let us suppose that every one of us then goes out to every charitable group we know in the country and says, “Please register for gift aid, and, what is more, the Minister has said that there are objective criteria”, every charity would be able to come into this scheme. Is that correct?

Sajid Javid (Conservative, Bromsgrove)

I thank the hon. Lady for her kind words. There is no cap on the number of charities that can benefit from this scheme. They have to meet the eligibility criteria, but as long as a charity meets that criteria it can take advantage of this scheme. She says that every hon. Member could go out and encourage charities to take advantage of this scheme, or the gift aid scheme. That is quite right, and we all should. In fact, in January, I am holding a charity funding day in my constituency, in Bromsgrove. A number of groups have been invited, and they are going to explain to charities how they can take advantage of both Government and non-Government schemes—both grants and tax relief schemes. I would encourage the hon. Lady to do the same.

The hon. Member for Harrow West talked about PTAs. I think there were some in his constituency that were claiming gift aid, and he said that some scout groups are not claiming and others are. I would also encourage him to hold a charity funding day in his constituency. Maybe he already has, but if he has not, and wants to know how it is done, he is very welcome to come to Bromsgrove in January to observe for himself.

Gareth Thomas (Labour, Harrow West)

It is an extremely tempting invitation to go to Bromsgrove. I could look in on the young people in Rubery, who the Minister is not supporting, but to discuss that would be to digress. At his open day in Bromsgrove, will officials from HMRC be present to answer any detailed questions the charities have? If so, will he offer the same facility to Opposition Members who may want to take him up on his suggestion?

Sajid Javid (Conservative, Bromsgrove)

I have not secured exactly who is attending on that day. I may well invite HMRC, but if I do, it will be in my capacity as a constituency MP, and I am sure that whatever level of support they would give to me they would make available to the hon. Gentleman as well, were he to follow my example and hold a charity funding day. If he did come to Bromsgrove, he would also have time to see the new £5 million youth facility in Longbridge.

We have had a useful debate on these principles and the reality of fraud in the system, and I am sure that we will revisit some of these issues.

Mark Durkan (Social Democratic and Labour Party, Foyle)

The Minister has said that to alter the qualifying criteria in the way that the amendments suggest would add to the cost of the scheme. Is that not an admission that the criteria in the Bill specifically preclude a number of charities, thereby denying them the benefits and, of course, containing the cost of the scheme for Government?

Sajid Javid (Conservative, Bromsgrove)

This Government make no secret that when a new scheme is put in place, it comes straight from the public purse. As the hon. Gentleman knows, this is not a tax relief scheme; it is a top-up scheme that complements the gift aid system, so we have to be very mindful about the cost to the public purse. That is good practice for the Government, and it is important that we maintain it. Changing the eligibility criteria would lead to changes in the costings for the programme, but part of that, as we have discussed today, would clearly be an increase in fraud.

Sheila Gilmore (Labour, Edinburgh East)

I very much welcome the Minister saying that he is willing to look again at the matching criteria, but could he be more specific as to why he thinks that element of the Bill will cause a difference to the amount of fraud? We are dealing with organisations that have relatively low levels of gift aid-type donations, but they still have to establish that they have brought in the donations they say they have. I am puzzled as to why that in particular is seen as a fraud element, as opposed to, for example, people having to register in the first place and meet all the other requirements.

Sajid Javid (Conservative, Bromsgrove)

The hon. Lady asks a good question. The matching principle is there, alongside other criteria, because it ensures that there is an ongoing relationship between the charity concerned and HMRC with regard to gift aid. The gift aid process is more vigorous in terms of providing checks and the chance for HMRC to look at the audit trail of gift aid claims and so forth, if it so wished. It gives HMRC comfort that, if claims were then made by that charity under the provisions in the Small Charitable Donations Bill, there would be a check against fraud. That is the reason for the matching principle. Separate to that is the percentage of matching that is required, which under the Bill is a ratio of 50%, as the hon. Lady knows. I am minded to consider that again. I should like to be satisfied that a change in that ratio favouring charities would not have any significant impact on the fraud element of the matching principle.

We all want to support charities as much as we possibly can, but as legislators we also have a duty to protect the public purse. Removing the matching provisions would lead to increased fraud at an unacceptable cost to the public purse. I ask the hon. Gentleman to withdraw his amendment.

Gareth Thomas (Labour, Harrow West)

As the Minister said, we have had an interesting debate. I am tempted by his offer for me to visit his constituency and sit at the top table of the charity event that he plans. Having had the chance to visit one part of his constituency in April last year and help secure the election of a Labour team of councillors in that area, I am tempted to take up his offer. However, I worry for the Minister at that event, because although I would want instinctively to speak up for him, one Member of Parliament to another, unless he changes the next set of eligibility criteria that we are likely to discuss, he will have to explain to all the local charities that he is trying to persuade to sign up to gift aid why, even if they do go through all the hoops that he wants them to go through and read the 80 pages of website guidance, and so on, they still cannot get any money under the scheme for three years.

The Minister has not explained why he thinks it tolerable to maintain the essential unfairness under these eligibility criteria. Why is it reasonable that the larger well-established charities, such as Eton, which has considerable capacity to support gift aid and claims—it is registered for gift aid and has been meeting its requirements for some time—should benefit from this small grant scheme, presumably securing £1,250 a year on an ongoing basis? The Parent Teacher Association simply does not have the capacity to complete the gift aid process and fill gift aid forms, and the other forms that are implicit, even if they are online, because of all the other pressures on that small charity. Will the Minister say why is that fair? We did not hear about that.

Leaving the requirement to claim gift aid in the Bill will be divisive: it divides the larger charities from smaller ones and divides start-up charities from well-established charities and means that charities that do not already use the gift aid system will not benefit, and, as I said, charities without the capacity to go through the form-filling process will not benefit from the scheme. Although it is reasonable for the Minister to say that HMRC does not make a judgment as to what constitute a good charity—I hope that I quote him correctly—he fails to accept that he is implicitly determining, as a Minister, what counts as a good charity for the purposes of accessing this scheme and what constitutes a charity that is not good and therefore cannot access the funding.

I listened with interest to the Minister’s exchange with the hon. Member for Congleton. I apologise for suggesting that she was hard-hearted and unreasonable. I do not think that I used those words, but if I gave that impression it was in error. I hope that other Government Committee members follow her trenchant example on the amendments that we will discuss later.

In the light of the Minister’s offer to reconsider the scale of the matching required, I beg to ask leave to withdraw the amendment.

Clause 2 - Meaning of “eligible charity”

Gareth Thomas (Labour, Harrow West)

I beg to move amendment 18, in clause 2, page 2, line 8, leave out subsection (1).

Andrew Turner (Conservative, Isle of Wight)

With this it will be convenient to discuss the following: amendment 19, in clause 2, page 2, line 12, leave out subsection (2).

Gareth Thomas (Labour, Harrow West)

The purpose of the amendments is to delete one of the further big unnecessary hurdles that Ministers want to create for charities accessing the small grants scheme. If it is unreasonable to require many small charities to jump through the hoop of registering for gift aid, it seems even more unreasonable and disproportionate to require three years’ worth of gift aid claims. I say gently to the Minister that the suspicion remains that the clause has been inserted into the Bill not as an anti-fraud measure but as a cap on how much is spent under the scheme. He should clarify for the benefit of the charity sector that that is the honest intent behind the clause.

I note that in the Minister’s winding-up remarks on the previous clause, he mentioned significant levels of gift aid fraud. Presumably, that is why he thinks he needs to continue to peddle to the charity and voluntary sector the idea that three years’ worth of claims must be produced, even though, given what he has said, there are few spot checks further down the line once registration for gift aid has been successfully completed.

The hon. Member for Stafford said in an intervention during my speech that we as Members of Parliament should all encourage people to claim gift aid. That is a perfectly reasonable point. Whenever charities approach us, if they have the time and capacity, we should clearly point them in the direction of gift aid if they are not registered. The hon. Member for Portsmouth North said that she thought that a considerable number of local infrastructure bodies and councils for voluntary action could support very small charities in claiming for gift aid, and the hon. Member for Congleton gave the example of people who work for guide groups and Brownie packs, suggesting that they have the capacity to claim gift aid.

Let me be clear: I do not think that the people who work for such charities do not have the capacity to claim gift aid. The question is whether it is a proportionate task for them, bearing in mind all the other tasks that they face in running charities. When they discover that, as a result of the subsections under discussion, even if they do claim gift aid, they will have to wait for three years to get access to funding, we may well meet with some scepticism as to why a small start-up charity may want to go through the hoops of registering for gift aid—however much we may want to persuade them otherwise.

Another question prompted by this set of subsections is why one needs a three-year waiting period to claim what is a relatively small grant or top-up payment, as the Minister calls it, when no similar probation period is required to access ordinary gift aid. The Minister needs to explain that disparity. Let us recall the figures. A pot of roughly £1 billion is currently allocated under gift aid. The Minister intends that £100 million—10% of the gift aid total—should be available under the new scheme, but charities will have to wait three years to get a chance of having access to it. There is no three-year wait for access to the £1 billion. Why is there such a difference? I return to wondering whether the proposal is not an anti-fraud measure and whether it is actually motivated by cost. We look forward to hearing the Minister’s answer.

There are other small grants schemes that do not require charities to be registered for three years with the administrators before they can get a grant of £1,250 or less. For the Minister’s sake, I return to the rather inconvenient example of Awards for All, where 10 times the amount on offer under the proposed scheme can be claimed. There is no three-year wait, and the level of fraud appears to be no higher than it would be under the new scheme. Most local authorities do not require a charity to have been registered with them and to wait for three years in order to get access to the small amounts of funding that they still have available for charities. Indeed, given the huge cuts that many local authorities face down the line, it is just as well that they do not.

Clause 2 was without question one of the most contentious measures during the evidence sessions. Many of the representatives from the charity sector were worried that charities will miss out on accessing the Treasury small grants scheme because of the three-year matching rule. The policy manager at the National Council for Voluntary Organisations specifically pointed out that the three-year track record requirement was likely to prevent many of the NCVO's smaller members from benefiting. She mentioned that she had received responses

“from organisations as diverse as the Telford and Wrekin Senior Citizens’ Forum, the Wiltshire Rural Music School, Cumbria Action for Sustainability and Southside Young Leaders’ Academy.”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 19, Q32.]

The Opposition can throw into the pot of organisations that will suffer a whole range of parent teacher associations, and I am very conscious of the example of the Friends of Newton Farm, the PTA that covers the most successful primary school in the country.

John Robertson (Labour, Glasgow North West)

I remind the Committee that with this we are discussing the following:

Amendment 19, in clause 2, page 2, line 12, leave out subsection (2).

Gareth Thomas (Labour, Harrow West)

I am grateful to have the opportunity to serve again under your chairmanship, Mr Robertson. I will, if I may, gently encourage you to look out for attempted intimidation by the Government Whip and protect those of us on the Opposition Benches, with all the odds stacked against us in these debates.

John Robertson (Labour, Glasgow North West)

Order. There will be no intimidation from anybody. Any intimidation will come from me.

Gareth Thomas (Labour, Harrow West)

I am delighted to hear you give that guidance, Mr Robertson, and I thank you for it.

Just before we broke for lunch, I had highlighted the evidence from the National Council for Voluntary Organisations, raising the concerns of some of the smaller organisations that are its members about the requirement for three years of gift aid claims to have been made before a charity might be eligible under this small grants scheme from the Treasury. They were the Telford and Wrekin Senior Citizens’ Forum, the Wiltshire Rural Music School, Cumbria Action for Sustainability and Southside Young Leaders’ Academy.

I hoped that the concerns of the Telford and Wrekin Senior Citizens’ Forum might appeal to the hon. Member for Banbury such that he would want to participate in the raising of concerns with the Minister about this harsh, restrictive part of the eligibility criteria. The hon. Gentleman is not in his place, but perhaps the Minister will want to reflect on a similar organisation in his constituency. I do not know whether there is a Bromsgrove and Worcester senior citizens forum. Let us imagine that the organisation to which I am referring has not put in for gift aid. The event that he is proposing to organise in January successfully persuades it to put in for gift aid. Nevertheless, under this clause, that senior citizens group will not benefit at all from this scheme for at least three years.

I look to the hon. Member for Stafford, whom I suspect has the most sophistication and interest in musical things of Government Members, to be able to share the sense of concern that the Wiltshire Rural Music School might have. I do not know whether there is a Stafford rural music school, but let us imagine the situation that the Wiltshire Rural Music School is in and how it feels. It is not yet registered for gift aid and is worried about the three-year funding rule. Potentially, a very good organisation stands to lose out under this scheme. He surely will be able to recognise that that is not a unique experience and problem.

Jeremy Lefroy (Conservative, Stafford)

I am indeed passionate about music, and there is a fine Staffordshire young musicians charity, which is already registered for gift aid if I am not mistaken and of which I think I am a member, although perhaps I owe it this year’s subscription, so I thank the hon. Gentleman for reminding me to renew my subscription.

Gareth Thomas (Labour, Harrow West)

I am grateful to have the opportunity to be helpful to the hon. Gentleman. I hope that he will be helpful to organisations such as the Wiltshire Rural Music School by raising its concerns, as well as his concerns, with the Minister about the three-year rule.

Cumbria Action for Sustainability has raised concerns, but perhaps the hon. Member for Brentford and Isleworth will want to wonder whether there could be a Brentford action for sustainability that is similarly worried about the three-year funding rule—a charity that might be an ally in her fight with the Treasury about a third runway for Heathrow. What a tragedy it would be if such a body were not able to claim assistance under this scheme because of the Minister’s insistence on the three-year rule.

Lastly, the Southside young leaders academy, no doubt doing extremely valuable work to encourage the next generation of leaders—perhaps, for a similar organisation in Chelsea and Fulham, the hon. Member for Chelsea and Fulham might be the most appropriate person to champion that next generation of wannabe leaders, expressing concerns to the Minister about the three-year funding rule. A series of organisations—small charities perhaps registered for gift aid already but not necessarily with three years of claims in place—could, with a more generous set of eligibility criteria, benefit from the scheme; because of the sub-section as drafted, however, they stand to lose out on the possibility of up to £1,250. Given the scale of the concern that we in opposition have had played back us, although I am sure that by now Government Members are familiar with it as well, I urge the Minister to think again about what he can do to make this aspect of the eligibility criteria less onerous.

I have drawn the attention of the Committee to what the NCVO said, but the Charity Tax Group has also made its concerns clear. Helen Donaghue, the director of the Charity Tax Group, at an evidence session last week, said that she would like to see the three-year rule changed so that, for example,

“smaller and newer charities could be encouraged to take advantage of this new provision.”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 17, Q31.]

Cath Lee, chief executive of the Small Charities Coalition, shared worries about not only the matching issue, which we discussed earlier, but the three-year provision, which is a real concern for smaller charities.

In addition to the NCVO, the Charity Tax Group and the Small Charities Coalition, other representatives of the charities sector have been equally concerned about the scale of what will now be required to get access to the scheme under the three-year gift aid claims rule. Again at an evidence session, John Low, the chief executive of the Charities Aid Foundation, said:

“The Bill now requires charities accessing the scheme to have been claiming gift aid for three years”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 46, Q77.].

Similarly, Caron Bradshaw, the chief executive of the Charity Finance Group, noted that this part of

“the eligibility criteria will rule out the very charities that I think this was intended to reach out to in the first place—those very small, local groups”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 47, Q77.]

that we are all familiar with and that struggle to get sufficient funding from the different income streams available to them. Her concerns were particularly striking, because she emphasised that the majority of her members are large charities—the smallest having a membership of 100,000 people and the largest being the Wellcome Trust—but that she was concerned to ensure that the smaller community charities should benefit from this scheme in a way that at the moment they will not be able to.

Mr Robertson, you were not here this morning, but we dwelt on the problems facing parent teacher associations, highlighting the fact that only 16% of PTAs are registered for gift aid. The hon. Member for Stafford rightly encouraged all Committee members—and the whole House, I assume—to push for more PTAs and small charities to register for gift aid. However, if subsection (1) remains in the Bill, the concern is that even if our efforts were successful, small charities would still not get access to funding under the scheme for at least another three years and potentially for four years, depending on when in the tax year they sought to register.

We gave the example of Eton, which is registered for gift aid at the moment and, as my hon. Friend the Member for Kilmarnock and Loudoun said, has a huge capacity to help people claim gift aid. It is one charity that is benefiting from the scheme, but 84% of PTAs—organisations that seek to serve our communities and help bring in extra resources to make the journey through primary and secondary school that little bit easier for our young people—are not registered, and they are not likely to be able to claim under the scheme, because they do not meet the three-year rule.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

Does my hon. Friend share my concerns that from the statistics we have heard, 65,000 organisations claimed gift aid last year, but a far higher number are registered for it? The Institute of Fundraising has suggested that the figure may be around 100,000. As the Bill requires charities to have claimed for three years, there may be a number of charities that have perhaps only claimed once, or that have lapsed and may not be eligible for the scheme if they have not claimed for three of the past seven years. That would rule out a significant number of charities.

Gareth Thomas (Labour, Harrow West)

My hon. Friend makes an extremely helpful intervention by pointing out the recent comments by the Institute of Fundraising. I draw the Committee’s attention to the fact that there are about 163,000 charities registered with the Charity Commission, but there are many others that do not have to register with that organisation. I understand that Lord Hodgson estimates that there are approximately 350,000 charities in the UK, the vast majority of which will not be able to benefit from what is effectively a small grants scheme from the Treasury, because of the extremely restrictive three-year gift aid claims measure.

It strikes the Opposition that, notwithstanding the requirements relating to gift aid and their eliminating a whole series of charities from potentially accessing the scheme, the three-year rule is particularly pernicious, in that it would prevent the participation of many charities, PTAs and Scout groups. I am sure, Mr Robertson, that you will be particularly interested in the relatively low level of registration—just 52%—of many Scout groups in Scotland. Some 48% of Scout groups in Scotland will not be able to take advantage of the Bill, and not only because they are not registered for gift aid; even if, through an intervention by you, the hon. Member for Stafford or Her Majesty’s Revenue and Customs, they started to register for gift aid now, because of the three-year rule that the Minister has so far insisted needs to stay in the Bill, they would not have access to the Treasury’s small grants scheme until the end of the current Government’s term.

This morning, I was encouraged by the fact that the hon. Member for Congleton took the opportunity to put gentle pressure on the Minister. It was heart-warming to see, if I may say so. We sensed that the hon. Member for Portsmouth North shared one or two concerns about the Bill, and we know that the hon. Member for Stafford has one or two. Given the scale of concerns about the three-year rule, I hope there will be some equally heart-warming interventions—not only from the hon. Member for Congleton but from the hon. Members for Stafford and for Portsmouth North—to try to persuade the Minister, if not today then certainly between the end of Committee and Report stages, to exercise his influence in the Treasury and persuade the Government to re-write this part of the eligibility criteria. The Minister tempted me with an offer to join him in Bromsgrove at an event that he is hoping to organise for his constituents. I worry that he will not get the positive reception that he deserves at such a gathering, unless he can show that he has exercised his influence in the Treasury and amended this unnecessarily pernicious part of the of the eligibility criteria.

I am attracted to the possibility of travelling with the Minister. However, we would have to go in standard class; I do not know whether he would be up for that. Nevertheless, I urge him for his own sake, well in advance of that January meeting, to look again at the clause. The Institute of Fundraising is clear that this is potentially a big problem for many worthy charities that could benefit under the scheme.

Sheila Gilmore (Labour, Edinburgh East)

It is a pleasure to serve under your chairmanship, Mr Robertson.

Clause 2 contains restrictions that seem out of proportion to what we are trying to achieve. Those restrictions are not applied in other respects to much larger organisations that gather more money and simply want to use the gift aid system. The inclusion of such provisions underestimates the degree to which many small organisations will struggle to meet the “three years out of seven” provision, for example, which applies after they have already registered for gift aid. At that point, they must operate the gift aid system for three years and make a claim, which might prove difficult for some, depending on the nature of their fundraising in a particular year and how organised they are in beginning to work the gift aid system, even if they register for it. The provisions require organisations to operate the gift aid scheme for three complete years from setting up and operate it for three of the last seven years. Although some organisations may do everything efficiently and effectively in their first three years—they may set themselves up, get signed up and start collecting money via gift aid, and then show that they had made three years of claims—and do it at least in year four, for others it may take longer, because in their first three years they may have had other things to think about as they set up, with committees and training and learning about how to do things, and may only hear about the new system as they get going. So it may be two or three years into their existence before they begin to operate gift aid, and then they would have to do so for three years.

In some cases, people may be waiting for assistance for which the Bill should provide. Everybody here agrees that it is good to encourage small organisations to collect money and to encourage donation, but the first time some of them may be able to claim some of this money could be five, six or seven years into their existence. For new organisations that are just getting off the ground and trying to build up the service that they are providing, whatever their charitable purpose, additional help may be particularly important in those early years, because they have to build up a local reputation for themselves, build up the nature of their work and get more people involved who may be willing to give more money. Indeed, charities often have to show the kind of work that they are doing in order to encourage people to start donating.

For many of those organisations, there is already a lot to do without having to get completely signed up for this scheme. Yet this is the very time when, if they have managed to secure donations—perhaps of less than £5,000, so they may not get the full payment, even if they were collecting moneys—getting some extra money in those early years could make the difference. It could get them going and functioning well, and enable them to become more self-supporting. It seems odd that we are piling difficulty upon difficulty.

Gareth Thomas (Labour, Harrow West)

I do not know whether my hon. Friend has had the chance to reflect on the evidence from Kevin Russell, who is the technical director for Stewardship. In his evidence, in column 10 of the Official Report last week, he talked about the difficulties that non-conformist churches might have in persuading people to set up new churches. They engage in something called “church planting”. The three-year rule would be a disincentive for those newly planted churches to go independent, because they would have to wait so long to access the potential £1,250 under the scheme.

Sheila Gilmore (Labour, Edinburgh East)

Indeed. That is an example from an organisation that, were it setting up something new, would have a certain amount of support from elsewhere. They would have the difficulty of not being able to make claims under the scheme, but, in terms of learning about it, they are probably slightly better placed than some of the even more independent, smaller organisations, and genuinely local organisations that have been set up to fulfil some local need that people have identified. A lot of good will and hard work goes into this sort of voluntary work.

Gareth Thomas (Labour, Harrow West)

My hon. Friend is making an important speech. Do Mr Russell’s comments not have further significance because he was one of the Government witnesses invited to appear before the Committee? If one of the Government’s own chosen witnesses has serious concerns about how the organisations in his care may suffer as a result of the three-year rule, does she agree that the Minister should take even greater cognisance of that?

Sheila Gilmore (Labour, Edinburgh East)

The Minister should not just take cognisance of that; he should respond in light of the evidence that was given across the board—the verbal and written evidence that we have received and the discussion that has taken place in the voluntary sector. The only real reason constantly being given for ignoring all that is that we are trying to drive out fraud, which just seems extreme. Again, I hope that the Minister will look at the whole thing and decide whether, in his barrier of requirements that an organisation is to meet to allow their small donations to be topped up in such a way, all the elements are necessary. At the moment, other than perhaps the matching one—I was pleased to hear the Minister rolling back a little on that—the Government are still keeping all the others in place. It seems unnecessary to make them all apply.

To say that organisations have to be in existence for three years to prove their bona fides is one thing but, on top of that, there is the requirement to have had the three out of seven years making applications for gift aid. Why do we need all those requirements? Even if it were felt that we need to have some monitoring and control, and confidence that the organisation is bona fide, the Government have put in place something that is over-elaborate for the purpose that it will serve.

Gareth Thomas (Labour, Harrow West)

My hon. Friend makes a good point about the number of anti-fraud elements under the Bill. Does she remember the question asked by the hon. Member for Brentford and Isleworth at column 20 of the record, pressing the head of policy at the National Council for Voluntary Organisations on the three-year issue and whether she thought it was worth while? The head of policy made it clear that she thought that there was a reason to link the scheme to gift aid, but said that she was not sure how much additional protection the full three years provision builds in. Surely that is an important point of which the Minister should be aware. The checks that HMRC does through the linking to gift aid tend to be far more at the beginning of the process than two or three years down the line.

Sheila Gilmore (Labour, Edinburgh East)

I agree with my hon. Friend that it is important to listen to the evidence given by an organisation that is working constantly with large and small charities to help them get off the ground. They need a great deal of help. The organisation is aware of the challenges that can be presented by such a system. The last thing we want is to put off people from accessing the scheme and, indeed, put them off being active in their communities and being part of such organisations. Management committees of charities sometimes find it difficult, especially when they are getting off the ground, when they are faced with a whole plethora of requirements. People will step away from such a regime. I have seen it happening in organisations in my constituency. People are quite enthusiastic to start with and like the idea, but when faced with far too much organisation and bureaucracy, they just say that it is not for them. It is hard to sustain the committee of a new charity. Everyone knows just how difficult it can be to urge people to become involved.

We do not want to put people off. If we were dealing with much greater sums of money, the case could be made for such an elaborate system. That is not to say that small amounts of fraud do not matter, but when dealing with such issues there must be proportionality—and that seems to be absent from the Bill.

Pat Glass (Labour, North West Durham)

I wish to make a few remarks about the additional bureaucracy that meeting the eligibility criteria would place on small community-based charities. We all support the principle behind the Bill, but the bureaucracy involved is not inconsiderable. It is almost impossible to get through in charitable trusts and administering charities anyway. As my hon. Friend the Member for Edinburgh East said, such organisations already have to struggle. In the evidence we heard last week, someone referred to using a hammer to crack a nut, and I want to make the Minister aware of how difficult the bureaucracy around charitable trusts can be.

I know from bitter experience that such cases are sometimes impenetrable. I remember starting work many years ago as a new assistant director in a north-east local authority and someone walking into my office and handing me—along with the curriculum review, the strategy for planning school places, the child protection review and all kinds of other important pieces of work—three large boxes marked “charitable trusts”. I subsequently learned that every new assistant director for the past 20 years had been handed those boxes and told to get on and sort it out, and I really did try. When I unpacked the boxes, I found charitable trusts going back 50, 60 or 70 years that were linked to schools and areas of the curriculum that were long gone. I particularly remember one called the Captain Carver Trust—it is imprinted on my heart—which awarded an annual scholarship for temperance studies for the best boy at Bede grammar school in Sunderland, who then went on to university. Captain Carver was a young man who, like many others, was killed at the Somme in the first world war, and his family left a large capital sum in trust to his memory at his former school.

I really tried with that one, but my difficulty was that Bede grammar school—the wonderful Victorian building, covered in ivy, still exists just off the dual carriageway on the way into Sunderland from Durham—had become a co-ed sixth-form college many years previously. Legislation has overtaken the trust, and it is not now possible or moral to award a scholarship to the best boy, excluding all the excellent girls, and temperance studies is no longer part of the national curriculum—if it ever was. The nearest subject that I could find was RE, although I got bids from those teaching citizenship and other related subjects. I talked to the trustees and governors of the sixth-form college, who were understandably desperate to unlock the money to support brighter but poorer students. I also talked to the charity commissioner and to the council’s legal department. They all wanted to help, but nobody knew how to unlock all that money. I made some progress, but not enough. When the next assistant director started work, I packed it all up and handed it on to them.

That is just a demonstration of how difficult and impenetrable such things can be. I had neither the time nor the resources to deal with it properly. The problem was that there was a huge amount of money locked up in that one trust—and I had about 30 or 40 of them in the three boxes—and I could not unlock that money at all. If that is multiplied by the 152 local authorities and by the many schools in this country with similar charitable trusts containing lots of money that they cannot unlock, we could just about pay off the deficit.

Penny Mordaunt (Conservative, Portsmouth North)

The hon. Lady is making an interesting point. Bureaucracy is a major concern to many small charities. However, I am not sure about the point that she is driving at, because is it not an argument for this precise scheme, in that it will not pile bureaucracy on to a small local charity in the way that an open or closed grant programme would?

Pat Glass (Labour, North West Durham)

I have to disagree with the hon. Lady. The new scheme will place additional bureaucracy on small local community charities that do not have the capacity to deal with it. That is the problem. I just do not understand why the Government are seeking to make this already worryingly complicated area yet more complex.

Gareth Thomas (Labour, Harrow West)

A series of charities have made clear just how difficult it would be if this subsection were enacted. Here is a promising ministerial career just beginning and possibly set to be almost irrevocably damaged, because the Minister will be known as the Minister for charitable red tape.

Pat Glass (Labour, North West Durham)

I agree with my hon. Friend, but I do agree with the direction of travel of this piece of legislation. It is good in intent and I would not like to see it bogged down or to see charities not take advantage of it simply because they did not have the capacity to do so.

Finally, I want to make a personal plea. I talked this morning about the Dipton memorial fund in my constituency. We also have a small charity called the Cobweb orchestra. It exists to provide instruments and tuition to anyone who turns up. My husband has turned up a couple of times as he has quite a lot of musical talent. I always intend to take my violin out and go along one day because I have really good technique—but not an ounce of talent. It takes membership fees and collects small donations. Every penny of that money goes back into instruments and booking rooms and so on.

The Cobweb orchestra contacted me following the Chancellor’s announcement. It is concerned that as a result of the changes in gift aid it will lose £9,000. I am not entirely sure that it will, but because of the complexities I have not been able to get an answer. It is more than a year since I wrote to the Treasury. I have had one holding response and nothing more. I am abusing my position here on the Committee to ask the Minister whether he or one of his staff would meet with me and someone from the Cobweb orchestra to go through these concerns.

Gareth Thomas (Labour, Harrow West)

My hon. Friend will know from reading the exchanges last Thursday that we discussed the huge workload pressures HMRC will face as a result of cutting 10,000 jobs and the piling on of an additional scheme. The fact that she has not had a proper reply may be just one small symptom of that. Perhaps Ministers should have been a bit more sympathetic to our first group of amendments.

Pat Glass (Labour, North West Durham)

I agree. The Minister was looking at me encouragingly so I take that as a yes. I thank him.

Sajid Javid (Conservative, Bromsgrove)

I welcome you to the Chair, Mr Robertson. It is a pleasure to serve under your chairmanship. We have had a good debate so far on the clause. The hon. Members for Edinburgh East and for North West Durham made good contributions, and I will try to answer some of the points they raised in the next few minutes. It is clear that like everyone in the Committee they are passionate to ensure that we can do as much as we can to help small charities.

As the hon. Member for Harrow West set out, the third group of amendments seeks to challenge the three-year eligibility criteria for charities wishing to claim under the small donations scheme. This was another of the key issues raised by charity sector representatives during Tuesday’s evidence session and it is a point that has been raised with me by stakeholders directly. So it is right that we spend some time discussing this provision in the Bill. Let me start by setting out how this element of the clause is intended to work.

Eligibility for the scheme is defined by reference to gift aid claims made in the past by the charity. For a charity to be eligible to claim the top-up payment, it must have a minimum three-year track record of successfully claiming tax relief under gift aid. This is one of the qualifying conditions the Government set out when the Chancellor first announced the scheme in Budget 2011. There are essentially two components to this test. If a charity or community amateur sports club is to be eligible to take part in this scheme, it must have been recognised as a charity or CASC for tax purposes for three consecutive tax years. Secondly, it must have made gift aid claims in at least three of the previous seven tax years without a gap of three tax years between claims.

I heard the hon. Gentleman argue, as several have before him, that this means that new charities or charities that have not claimed gift aid in the past are unable to access the benefits of this scheme until they have built up a track record. The new scheme, however, is based on cash donations, unlike the gift aid scheme, and there are very limited donor records with a cash system, if any at all. That means the scheme will inevitably attract fraudsters. As with the matching rule set out in clause 1, the three-year qualifying period is an essential part of the scheme to ensure that it is adequately protected against fraud. HMRC sees a high number of cases of fraud every year. As we have discussed, a minimum of more than £10 million has been detected and stopped in each of the last two years.

Gareth Thomas (Labour, Harrow West)

During a series of efforts by the Opposition to draw the Minister’s attention to the Awards for All scheme, he has consistently failed to explain why the eligibility criteria for that scheme, which result in the same low level of fraud as under gift aid, could not be used for the Treasury small grants scheme. It is time that he explained why such a draconian set of eligibility criteria are required under this scheme, when other Departments are happy to allow much bigger sums to be allocated to small charities with less onerous eligibility criteria.

Sajid Javid (Conservative, Bromsgrove)

When we discussed the previous set of amendments, we touched on fraud and the need for this type of criteria.

Penny Mordaunt (Conservative, Portsmouth North)

It is rare that I am able to say that I speak with authority on an issue in this House, but I was the director of two lottery distributors. I was bought in to crisis-manage the Community Fund and then set up the Big Lottery Fund. I have devised programmes like Awards for All and Heroes Return. I support the measure because the bureaucracy for the charity is less than any grant scheme—even the light-touch grant schemes of Awards for All. There are strict criteria, but the actual effort that a charity has to go through to make use of the scheme is much less than even those light-touch grant schemes.

Sajid Javid (Conservative, Bromsgrove)

I am grateful to my hon. Friend for helping to answer the point made by the hon. Member for Harrow West.

Requiring charities to operate gift aid correctly for the three tax years before claiming payments under the new scheme means that the charity will have been subject to HMRC checking and tests. Therefore, HMRC can be more certain that the charity is bona fide for the purposes of claiming under the new scheme and that it is able to operate gift aid without significant errors.

One of the hon. Gentleman’s points, if I understood him correctly, was that charities will not be eligible unless they claim gift aid each year. To clarify, that is not exactly how the system will work. It recognises that many charities, although they are registered for gift aid with HMRC, do not claim each and every year. Charities do not need to claim for consecutive years; they need to claim for at least three years in the past seven, as long as the gap between claims is no longer than two years. Of the 100,000 or so charities that are registered with HMRC, 65,000 will claim in any particular year, but many will not claim every year. It is not the same 65,000 each year. Charities have an ongoing relationship with HMRC.

While the initial checks HMRC undertakes when a charity first registers for gift aid will enable some fraudulent charities or individuals to be caught, they will not catch all cases; nor will that enable any judgment to be made about a charity’s ability to claim gift aid correctly.

Gareth Thomas (Labour, Harrow West)

Why does the Minister think it reasonable that a charity that registers for gift aid can secure gift aid moneys in its first year of claims, but a charity that seeks to access funding under the top-up scheme has to wait at least three, possibly four and perhaps even seven years?

Sajid Javid (Conservative, Bromsgrove)

There are several reasons. One key reason why a charity can start to benefit as soon as they register for gift aid is that gift aid claims require information from the donor including their name, their address and a statement that they are a UK taxpayer. There is an audit trail, so when HMRC wants to audit claims from a charity it can follow that paper trail. Those requirements make it harder for fraudsters to take advantage, whereas in the small donations cash scheme, the cash element and the fact that no details are collected about the donor make it easier for bad people to take advantage if they are determined to do so.

HMRC needs to build knowledge of a charity and the people managing it to check that it is claiming gift aid correctly and to follow up on any causes for concern. There have been calls, as we have heard today, for a reduction in the three-year period, but reducing the lead-in time would increase the cost of the scheme and inevitably increase the amount of money that is paid in fraudulent claims.

Gareth Thomas (Labour, Harrow West)

To be clear, does the Minister consider the restriction of the amount of money that can be claimed under the scheme to be a benefit of the clause?

Sajid Javid (Conservative, Bromsgrove)

No, I see as one of the key benefits of the clause the fact that it helps to tackle fraud. In the evidence sessions, a tapered eligibility period was suggested, in which either the limit to which a charity can claim would increase gradually, or the ratio at which the charity had to match gift aid to small donations would change over three years. I have looked at those options, and I think that they would introduce additional costs to the scheme and change the calculations of potential fraud. Most importantly, they would add complexity because a charity would have different limits or matching levels in different years. The charities involved will be new to gift aid and getting used to the process for the first time, and it would be counterproductive to add another level of complexity by introducing a variable donations limit. We want the scheme to be simple to operate for charities, and we want it to enable them to claim easily alongside gift aid.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

Has the Minister given any thought to the fact that there may well be some charities that do not have a gift aid record but can none the less demonstrate that they are bona fide charities that would meet the criteria in other ways, rather than new charities? I think that the Minister is concerned about new charities springing up and making fraudulent claims. Did he consider whether there is some way of allowing such bona fide charities to benefit from the gift aid top-ups sooner?

Sajid Javid (Conservative, Bromsgrove)

Clearly, when such issues were raised in my meetings with charity groups and other interested parties, we considered other ways of dealing with the matter. For the reasons I have set out, however, we need a system that balances the interest of the taxpayer with our desire to help charities.

Under this group of amendments, the hon. Member for Harrow West again referred to parent teacher associations, and he mentioned a certain public school. I think he was trying to make the contrast that it is easier for some schools or PTAs than others to raise money through gift aid or to benefit from this scheme. I draw his attention to a document published last year that he may not have seen. It is from HMRC and was specifically designed with some of his issues in mind. I do not know whether he has had a look at “Gift Aid and Payroll Giving”, but I will let him have a copy afterwards. It is detailed and easy-to-follow guidance that was developed by HMRC last August. I believe that, when it was published, it was roundly welcomed by schools and other organisations for its conciseness and for helping many more PTAs to claim. It is the kind of document that I shall distribute on my charity day in Bromsgrove in January, and I encourage the hon. Gentleman to hold his own charity day in his constituency and to take advantage of such documentation.

The hon. Member for North West Durham made some good points. She specifically asked about the Cobweb orchestra, but clearly I do not have the details of that case at hand. She mentioned the figure of £9,000 in lost claims, but I cannot go into that. She asked whether it would be possible to have a more detailed discussion, and I am happy to ask HMRC officials to meet her, if that would prove helpful.

In summary, I hope that I have clearly set out why it was necessary to include the provision. We must protect the Exchequer from fraud, but it is also important to protect the charitable sector’s good name from those who wish to exploit it. I agree with hon. Members that a balance needs to be struck between preventing fraud and allowing access to the scheme for bona fide charities. We have found that balance, and I therefore ask the hon. Member for Harrow West to withdraw the amendment.

Gareth Thomas (Labour, Harrow West)

As the Minister said, we have had a good debate. In particular, my hon. Friend the Member for Edinburgh East drew attention to the pressure on trustees and those who serve on charity boards in relation to fundraising and to how, notwithstanding the comments of the hon. Member for Portsmouth North, charities will sense an extra burden should they want to register for gift aid and take advantage of this scheme.

My hon. Friend the Member for North West Durham gave the specific example of the Cobweb orchestra, and it was good to hear the Minister commit his officials to meeting her. My hon. Friend’s broader point was that small charitable organisations, such as the ones she mentioned, stand to lose out by not being able to access up to £1,250 under the scheme because of the harshness of the particular subsection.

I have emphasised the concerns of a whole series of representative bodies that speak for small and, indeed, larger charities about the subsection that we are seeking to delete. I did not mention—perhaps I should—the concerns of that excellent organisation Community Matters, which specifically focuses on the needs of small charities in our communities, or of the National Association for Voluntary and Community Action, which is another of what are termed infrastructure bodies for small charities. NAVCA also believes that existing charities that are already recognised by HMRC for tax purposes, by being registered for gift aid, should be able to receive payments for small donations without having to wait three or four years.

Our concern, which I have to say the Minister has not yet satisfied, is that the provision has been written into the Bill to create a cap on the level of expenditure on the scheme. If the Minister had been quite transparent and open about that, we would have at least understood that point. He did not convince us why a three-year waiting period is needed to get access to the small grants scheme but not for payments under the gift aid scheme. We will reflect on his arguments. I will not press the amendment, but I look forward, Mr Robertson, to catching your eye on amendment 21, which is a humble effort to get the Minister out of the hole he is in on this issue. I beg to ask leave to withdraw the amendment.

Gareth Thomas (Labour, Harrow West)

I beg to move amendment 21, in clause 2, page 2, line 9, leave out paragraphs (a) and (b) and insert—

‘(a) It meets the management condition as defined in paragraph 4 of Schedule 6 to the Finance Act 2010;

(b) It has submitted at least one Annual Return or Annual Update to the Charity Commission.’.

Sajid Javid (Conservative, Bromsgrove)

Amendment 21 sets out alternative qualification criteria for charities under the new scheme. It is something that we have examined; we considered alternative measures to stop fraud under the scheme. We wanted views on the issue from the charitable sector so we asked in our consultation earlier in the year whether there were any other proposals. However, no workable ideas were suggested. While I thank the hon. Gentleman for his proposal, it is something that we have considered already and, unfortunately, it would not fall into a workable category. I shall explain why.

Not all charities are required to register with the Charity Commission or its devolved counterparts. I remind members of the Committee that the regulation of charities is a devolved matter and that the Charity Commission is responsible only for regulation in England and Wales. The devolution of responsibility means that there are different criteria throughout the United Kingdom for the regulation of charities. There are different definitions of “charity”, different thresholds for registration and different requirements for the filling in of annual returns.

In England and Wales, for example, the smallest charities are not required to register with their regulator. All charities with income below £5,000 are exempt from registering. That means that the very smallest charities—those that could benefit the most from the Bill—would be excluded from the scheme, and I am sure that that is not the intention of the hon. Member for Harrow West. That group of charities can register voluntarily with the Charity Commission but, for many charities, the process of registering with the Charity Commission and completing an annual return would be more time-consuming than registering with HMRC for gift aid. That option also brings with it the benefit of gift aid income for that charity.

That example also highlights the fact that the amendment would not work, as it would fail to take account of the devolved nature of charity regulation. As drafted, it would only allow charities that are required to register with the Charity Commission of England and Wales to claim under the small donations scheme. I am not sure whether the hon. Members for Edinburgh East and for Foyle support the amendment, but, if they did, and it was actually made, it would mean that the charities in the devolved nations that they represent would not be able to benefit from the Bill.

If we were to expand the provision to tie the eligibility to the other devolved regulators as well, the differences in regulation would mean that there would be different treatment for charities operating in different areas of the UK. That is an impractical suggestion that would only increase complexity and the administrative burden for charities, HMRC and the charity regulators. That is not the intention of the Bill. I maintain that, for the reasons I set out in the debate on the previous set of amendments, it is necessary to keep a link between the gift aid scheme and the new scheme to prevent widespread fraud. I therefore ask the hon. Gentleman to withdraw his amendment.

Gareth Thomas (Labour, Harrow West)

I am grateful to the Minister for taking the time to consider our amendment. We wanted to suggest to him a one-year time frame for which charities would have to wait in order to access the scheme, hence the suggestion of one annual report and/or one annual update having to be filed. We recognise that the Minister wants to see charities undergo an initial inspection, hence the reference to the fit and proper person test.

We have not heard, in either the Minister’s answer to this amendment or his answer to the previous set of amendments, why there is a requirement to have claimed gift aid in three out of the previous seven years. Why not two years? Why not one year? I hope that the Minister will reflect on that, because, as a number of hon. Members of all parties on the Committee will recognise, there has been consistent concern about the three years within seven requirement in clause 2, and the way in which it will significantly deter small charities from registering for gift aid. The Minister says that one of the potential benefits he sees coming from the Bill is that it will encourage more of the huge number of charities in this country that are not currently benefiting from gift aid to register. I suspect that, were there no three years within seven requirement, he would be more likely to achieve his objective of more charities registering for gift aid.

That was the essential purpose behind this humble proposal—a change in direction from the Minister and his team. I recognise the drafting complications that he quite properly set out in his answer. I will beg leave to withdraw the amendment, but, in so doing, I urge the Minister to use the time between now and the end of Committee to reflect on whether three years in seven are required, as opposed to one year or two years.

Mark Durkan (Social Democratic and Labour Party, Foyle)

I note that my hon. Friend is minded to withdraw the amendment, which I would have been happy to support, although it would also require some consequential amendments, as the Minister has pointed out. The relevant committee in the Northern Ireland Assembly has said that it would be minded to support a legislative consent motion for this Bill in the Assembly, but has also made it clear that it would want that legislative consent to extend to considerable amendments, including a number that clearly relate to what he has been talking about.

Gareth Thomas (Labour, Harrow West)

I welcome the comments of my hon. Friend and I am grateful for his bringing in that perspective from the Northern Ireland Assembly. I welcome his willingness in principle to support our amendment. Given my hon. Friend’s interest and the specific concerns of Northern Ireland, I hope that the Minister will take an additional interest in the possibility of shifting down from a three years out of seven requirement to perhaps a two or one year requirement. Nevertheless, because of the clear drafting issues with the amendment, which we knew about when it was tabled, I beg to ask leave to withdraw the amendment.

Gareth Thomas (Labour, Harrow West)

I beg to move amendment 22, in clause 2, page 2, line 15, leave out subsection (3).

John Robertson (Labour, Glasgow North West)

With this it will be convenient to discuss amendment 23, in clause 2, page 2, line 25, leave out paragraph (b).

Gareth Thomas (Labour, Harrow West)

Again, this is a pair of probing amendments. We want to probe the Minister’s intentions regarding any penalty that charities might incur. Ministers clearly think that there is a considerable risk of fraud, but many charities worry that the level of bureaucracy and the potential for mistakes in the claims that they make is equally considerable. This is an opportunity for Ministers, whatever they and their Back-Bench colleagues may think about how easy it is to register for gift aid and therefore to benefit from the new scheme, to reflect on the fears of many charities that HMRC may penalise them at the merest hint of a mistake. The Committee may know that that is an unfair or unwarranted fear, but it is real and has been reflected in our discussions with a series of organisations.

I also gently encourage the Minister to consider the discussions that the Committee will have when discussing clauses 6 to 9 and the whole new concept of “community buildings”, which is completely unfamiliar to the vast majority of charities and charity lawyers. It is novel and potentially very complex. We know that there are no new resources within HMRC to dedicate to explaining the small grants scheme. The Minister may well be influential enough—albeit in his Back-Bench capacity—to persuade HMRC to come along to his charity day. I suspect that it would be unreasonable to think that 650 such charity days with HMRC in attendance could take place before the scheme is established. While charities in Bromsgrove may benefit from coming along to his session with HMRC officials, it is simply not realistic to think that there will be enough time before the scheme comes into existence for every charity that may benefit to have enough exposure to HMRC properly to understand all the different elements of the eligibility criteria, particularly the new concept of “community buildings”.

The Minister may want to dwell on the language that he has been using in the course of our debates. Every speech has been peppered with references to fraud and the need for anti-fraud measures. As I have made clear, we all want fraud to be prevented as far as possible. However, an unintended consequence of the Minister’s speech being littered with references to fraud in the charity sector and among organisations claiming gift aid is that it may further underline the worry that if people get a claim wrong, they will be considered to be putting in a fraudulent claim.

I give one further example of the potential for concern among charities. In his evidence to the Committee on Tuesday, the Minister talked about the existence of the £50 note in a bucket collection, and how, if there was such a note in a bucket collection, it would probably have come from just one person and would clearly not be eligible. I do not know whether it is the Minister’s intention for HMRC to carry out spot checks on whether £50 notes are being counted, but there is the possibility that a group of people might make a collective donation with a £50 note after pooling their £10 and £20 notes. In that case, it is not clear whether that would be regarded as eligible to be counted towards the £5,000 maximum sum—a small example of the potential for charities’ concern.

Susan Elan Jones (Labour, Clwyd South)

By the same token, some sharp-eyed person who has taken a great interest in what our Committee has been deliberating on might spot a £50 note and think, “I know that £50 donation will not be eligible under this scheme. What if, in its place, I put two £20 notes and a £10 note?”

Gareth Thomas (Labour, Harrow West)

My hon. Friend raises an interesting conundrum for the Minister to ponder. We might think that these series of questions are relatively minor in the great scheme of things for a small charity to reflect on. However, if a charity is worried that if it makes a mistake it might be regarded as having put in a fraudulent claim and, as a result, feel the full force of HMRC bearing down on it, then this set of probing amendments is an opportunity for the Minister to provide reassurance. It is an opportunity for him to explain the process, both internal and external, when charities believe they have made an honest mistake and HMRC perhaps believes differently, and to resolve those concerns. I look forward to the Minister taking advantage of this opportunity to set those understandable concerns at rest.

Tony Baldry (Conservative, Banbury)

Some bits of the Bill are complex. May I assure the hon. Member for Harrow West, who is just leaving his place, that the Church of England, which after all has 16,000 churches and therefore 16,000 charities, is perfectly confident that it will be possible to write guidance that will make it very straightforward for charities to comply with this? After all, by definition, every charity that is involved with this scheme is already registered for, and working with, the gift aid scheme. This provision just builds on that scheme, and we ought to try and remember that it seeks to enhance it.

Every Sunday, I have a bit of a crisis. My crisis on a Sunday comes at that bit where the clergyman says, “Peace be with you”. The crisis is, do I shake hands? How many hands do I shake? Do I kiss my wife? If I kiss my wife, do I have to kiss other members of the congregation? Do I have to kiss the vicar? At the same time, I have to fill in my gift aid form, because that is usually when the collection comes around, or near enough, with the offertory hymn.

As a consequence, a lot of people put money in that would have counted towards gift aid if it had been in the gift aid envelope.

In the Bill, we seek to build on what already exists. There is a danger that Opposition Members are trying to complicate what the Treasury is generously doing, which is giving charities another £100 million on the gift aid scheme that they would not otherwise have got. Organisations up and down the country will benefit considerably.

The Church’s working relationship with HMRC has been, and is, extremely good, and we have always found HMRC to be positive and understanding when talking to us to resolve problems. That has been the case both for individual churches and for the Church Commissioners, which, after the Wellcome Trust, is the second largest charity in the country.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

The hon. Gentleman speaks with great knowledge about matters that concern churches, but does he accept that the points we have been making mainly relate to small charities, which do not have the same structures or practices as churches? Some of the difficulties that we are expressing particularly concern small charities, which desperately need the money in the same way as his own church congregation and others would.

Tony Baldry (Conservative, Banbury)

In today’s world of websites, it is easy to put perfectly straightforward guidance on websites for anyone to see, so I do not think we should allow ourselves to be daunted by the thought that charities will not be able to grasp the legislation. We should keep on saying, “Thank you very much!” to the Treasury for giving an extra £100 million to charities, which is very welcome.

Sajid Javid (Conservative, Bromsgrove)

The Opposition have set out what they describe as a probing amendment to see how strict the scheme should be in excluding charities that have incurred penalties from HMRC. It may help if I start by setting out our rationale for including that provision. If a charity makes a false or erroneous claim for gift aid or for the top-up under this scheme, it may be charged a penalty. If that happens, the charity will cease to be eligible for a top-up payment under the scheme for the tax year in which the false claim for gift aid or top-up payment was made, and for the next two years.

We have introduced that condition because we need to apply rules that will encourage good compliance by charities. The condition will ensure that the scheme is operated properly and is protected against abuse. If a charity does not comply with the gift aid rules, it is reasonable to assume that it may not be complying with the rules of the gift aid small donations scheme. HMRC does not hand out penalties lightly; only where a charity has not taken reasonable care, or where there is deliberate error in claiming, will a penalty be issued. Our experience of the gift aid scheme is that many penalties are suspended, because we take into account the fact that a charity’s breach of the rules may have been completely unintentional. HMRC’s intention in imposing penalties is to encourage good compliance, and a suspended penalty may be enough to achieve that.

The hon. Member for Harrow West mentioned the example of someone who made a cash donation of a £50 note, and he asked what would happen if, despite the charity’s best efforts, HMRC picked up on that and said that it was clearly more than £20 from a single donor. That is not the kind of thing for which HMRC would impose a penalty. It is really about what HMRC would consider serious non-compliance with the regulations.

Gareth Thomas (Labour, Harrow West)

Perhaps with hindsight, the £50 note was a poor example, but surely the Minister must recognise that the complexity of the provisions concerning community buildings is a real concern, given their novelty for many charities. How will he ask HMRC to handle mistakes that are made by small charities wanting to take advantage of this scheme if they fall foul of the various parts of the community buildings provisions?

Sajid Javid (Conservative, Bromsgrove)

Clearly, charities that wish to take advantage of the community buildings provisions would need to be more involved with the eligibility criteria. The key aspect of doing that properly for the charity is the guidance that will come when this Bill is passed. I mentioned earlier the excellent example of good guidance by HMRC for schools related organisations. I would expect similar high quality guidance to come about as a result of the Bill. When the Bill becomes law and charities start to take advantage of its provisions, perhaps in the first year issues will be drawn out and so guidance can be updated. For charities that remain unclear, even with the guidance, or which have a unique issue that concerns them, there is an HMRC helpline. Many larger charities have a relationship with HMRC. Even where they do not there is a helpline they can call to get immediate clarity.

Gareth Thomas (Labour, Harrow West)

Perhaps the document that the Minister has mentioned a couple of times will be to small charities what IPSA’s guidance is to Members of Parliament: extremely helpful, but nevertheless having somewhat complex rules. Although it is incumbent on all of us to do our level best to adhere to IPSA’s rules, every Member will recognise the scope for mistakes and error and for reputations to suffer as a result. There are already 80 pages of website guidance on adherence to gift aid, and there is more guidance to come from the Minister. He must accept that there is the potential for real mistakes and genuine misunderstandings to occur. I ask him again: how will he handle such mistakes?

Sajid Javid (Conservative, Bromsgrove)

I think the hon. Gentleman would accept that no matter what system is used, there will be eligibility criteria. There will be hurdles for charities to clear to fulfil those criteria. There is always the potential for a charity to make a mistake. When mistakes are made there needs to be some kind of penalty process. The key is that that penalty process, operated in this case by HMRC, needs to be proportionate and to take into account the individual circumstances. I think I have given enough examples during the debate of how HMRC intends to approach this and how it will deal with gift aid. Over £1 billion is claimed in gift aid each year but only a handful of penalties are handed out. Many of those are suspended penalties. That is probably a good guide to the number of penalties that may result from this new scheme.

Mark Durkan (Social Democratic and Labour Party, Foyle)

Obviously, the Minister and the Treasury have felt the need to provide some element of ineligibility where a charity falls foul of HMRC’s systems or standards. Did they not consider any other issue in relation to the standing of charities that might make them ineligible?

Sajid Javid (Conservative, Bromsgrove)

I thank the hon. Gentleman for his intervention. I am not 100% clear about his question. I am not sure whether he has something else in mind.

Mark Durkan (Social Democratic and Labour Party, Foyle)

It occurs to me that sometimes, decisions have been made about the standing of a body that has been established as a charity and has taken money as a charity. Atlantic Bridge was one example. As I understand it, it was the Charity Commission that said it was not sure that the purposes for which that charity was spending money were appropriate. I am not sure what subsequent action HMRC took in relation to gift aid or anything else.

More currently, the Minister mentioned the differences between the different charity commissions and the different statuses for charities. There is controversy in England at the minute about the Charity Commission’s attitude to the Plymouth Brethren. I am not sure that that attitude is replicated in Northern Ireland. Is HMRC saying that it decides which churches are charities and ignores the Charity Commission, or does it at any stage take account of the Charity Commission’s concerns about the standing or conduct of charities?

Sajid Javid (Conservative, Bromsgrove)

I thank the hon. Gentleman for clarifying his question. HMRC follows the definition of charities under the Charities Act and it will apply its own understanding of that Act. There are charities that claim gift aid or get other benefits from HMRC that are not registered with the Charity Commission. Equally, I think I am correct in saying that there are charities registered by the Scottish authorities under Scottish law that are not necessarily recognised by HMRC as charities. There is no plan to change HMRC’s approach to working with charities and how it recognises them.

HMRC pays some £1 billion each year to charities under gift aid, as we have heard, and such large amounts of money inevitably attract fraudsters.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

Before the Minister moves on to another issue, I want to probe the point he made on mistakes and penalties. What are the most common mistakes that charities have made in relation to gift aid, which may well be replicated and should be highlighted so that people do not make them?

Sajid Javid (Conservative, Bromsgrove)

This is not the appropriate place for me to give such examples, but if the hon. Lady has interest in that, I can get her more information.

Gareth Thomas (Labour, Harrow West)

If the Minister does not want to give examples now—and in the light of his interest in holding conferences for charities, so they can understand all the different tax reliefs and their eligibility under this scheme—will he ask HMRC to organise a number of similar one-day meetings in the major urban centres, in order to allow members of representative bodies that are concerned about this clause to come to one of those sessions? In those sessions, HMRC could set out in detail how to access the scheme, who will benefit, common mistakes that charities make when they claim for gift aid and things to avoid when they are trying to understand whether they are eligible for the community buildings part of the Bill. I fear that the hon. Member for Banbury is a little complacent about the scale of difficulty people face in trying to access 80 pages of website guidance and the numerous other bits that are coming through. Why not, as part of reassuring charities on this issue, commit to a series of one-day conferences to allow HMRC to explain in detail what is required?

Sajid Javid (Conservative, Bromsgrove)

My hon. Friend the Member for Banbury is many things, but he is anything but complacent. I cannot stand for that kind of attack on my hon. Friend and his reputation.

The hon. Gentleman asked about HMRC working with charities to ensure that charities can take full advantage of the scheme, which we would all want to see. He may be interested to know that HMRC is planning a four-stage publicity campaign over the next few months to alert charities to the new online gift aid system and the small donations scheme. As well as media publicity, HMRC is planning to write in the new year to every charity that has claimed gift aid within the past few years to tell them about the online gift aid system and the new scheme. In addition, it has regular meetings with charities as well as with some of the representative bodies. I am sure the hon. Gentleman welcomes that engagement.

Gareth Thomas (Labour, Harrow West)

That is indeed welcome. However, if the Minister will forgive me, that point does not answer my question. He is happy to divert the attention, time and effort of one or two HMRC officials to go to Bromsgrove. I gently encourage him to hold that event not there, but in Birmingham, so that a far bigger range of organisations can come along. He appeared willing to encourage HMRC to go to an event that I might organise. Rather than my organising it, why does HMRC not organise big events in London, Glasgow and other big urban centres?

The Bill is complex. Government Members may not think it as complex as we have suggested, but many small charities have understandable concerns. Why not have a small number of set-piece occasions, at which any of those involved with small charities who are worried about what they have to do under the legislation could speak in person to a representative of HMRC? The Minister will make that happen for charities in his constituency. Why will he not make it happen for many other small charities?

Sajid Javid (Conservative, Bromsgrove)

I have already explained HMRC’s engagement process with regard to the new online system and small charitable donations, and that process is extensive. HMRC has an outreach team that travels, on an ongoing basis, throughout the UK and covers many issues, which will clearly include this new Bill.

The hon. Gentleman mentioned the event that I plan to hold in Bromsgrove, which is a funding day—targeted for January—to encourage charities to make the most of the help available. He asked why HMRC does not do the same in other constituencies. It is an event that I will plan as a constituency MP. HMRC may or may not be part of it; that is a decision for HMRC to make. If he wants more such events to take place, I suggest that he take up that idea with the leadership of his party, as many coalition Members have done, and encourage Labour Members to hold similar events, which I am sure would go down well in their constituencies. If he is a bit stuck for ideas on how to organise such events, I am happy to arrange a session with the aides in my parliamentary office, so that he can work-shadow them for the day and learn about how to help charities.

On fraud, HMRC pays about £1 billion a year to charities under the gift aid system, and such a large amount inevitably attracts fraudsters who will, and do, attack any payment system, looking for weaknesses, so we have to minimise our vulnerability and protect the taxpayer. In earlier debates, we amply covered the need for measures to protect the scheme against fraud, so we do not have to go through that again. I hope hon. Members agree that we cannot leave the Exchequer open to fraud and abuse. It is our duty to protect taxpayers’ money and ensure that it is spent correctly. I therefore ask the hon. Gentleman to withdraw the amendment.

John Robertson (Labour, Glasgow North West)

Before I call Mr Gareth Thomas, let me make clear my position on coffee. Although I am not a stickler for the rules regarding coffee, I do not expect the Committee Room to be turned into a coffee house, so please take note.

Gareth Thomas (Labour, Harrow West)

I am grateful to the Minister for taking the time to respond to several of the concerns that small charities have asked us to mention. Nevertheless, I am struck by the sense that it would be worth while for him to encourage HMRC to organise a number of set-piece occasions at which it could go through the details of the Bill. He made me an incredibly generous offer, and it would indeed be an act of charity were I to come and offer counselling to his staff, but I am happy to contemplate that in the round. The Minister has made several useful points, as a result of which I beg to ask leave to withdraw the amendment.

John Robertson (Labour, Glasgow North West)

Before we discuss the next amendment, let me make it clear that it is not my intention to call a stand part debate. We have covered the clause fairly well. Having said that, I will show a certain leniency in the next debate if some subjects are raised. If that is all right with everybody, we will carry on.

Sajid Javid (Conservative, Bromsgrove)

I beg to move amendment 1, in clause 2, page 2, line 27, at end insert—

‘(c) a penalty is not to be regarded as having been imposed if all of the penalty is suspended (or the decision that a penalty is payable is cancelled on appeal); but this does not apply to a suspended penalty that subsequently becomes payable.’.

Gareth Thomas (Labour, Harrow West)

I will listen with particular interest to what my hon. Friend the Member for Foyle has to say when he catches your eye, Mr Robertson. My initial instinct is that the amendment would be helpful. I welcome it, albeit with the caveat that I shall listen with interest to my hon. Friend.

The amendment underlines the complexity implicit in the way in which the Bill is drafted. It would be good to hear from the Minister in his winding-up speech a couple of real-life examples of when the proposal might be helpful. I understand that the amendment has been drafted as a result of worries expressed by my hon. Friend the Member for Foyle on Second Reading. Nevertheless, it would be good to hear some worked-through examples. Perhaps the Minister has asked HMRC to convince him that the measure is worthy of being accepted.

It would be helpful if some of the 150 members of staff that HMRC will have in its charity section—the charity outreach team—organised several meetings that small charities can attend, at which they can properly understand the ins and outs of the scheme. It is really not good enough for the Minister to say that he is happy to make representations to HMRC that some of its staff should attend a meeting in his constituency. He has a responsibility to make sure that small charities throughout the country have the opportunity to benefit from face-to-face meetings with HMRC experts. Perhaps that argument is why we are the party of one nation, and his party can no longer claim that mantle. I look forward to listening to my hon. Friend the Member for Foyle.

Mark Durkan (Social Democratic and Labour Party, Foyle)

I welcome the amendment and the terms in which the Minister has addressed it. I am a politician who can take yes for an answer, and the Government have taken on board a legislative issue that I raised. The gift aid scheme’s penalty provisions, as couched in the Bill, are perhaps too sweeping. They are not qualified in any way that would allow for the fact that a penalty could be suspended or overturned on appeal, and the Minister’s amendment sensibly corrects that.

I credit the Government with listening to what some of us said on Second Reading, and I encourage the Minister to listen to some of the other practical concerns and criticisms that many of us are expressing about some of the other provisions. The amendment is about tidying up and smoothing aspects of the Bill that could otherwise be jarring and difficult for charities, and I hope that the Minister will extend the same consideration in some other areas.

Sajid Javid (Conservative, Bromsgrove)

I welcome the kind comments made by the hon. Member for Foyle, and I thank him again for raising his very good point on Second Reading, as that enabled us to act.

The hon. Member for Harrow West asked about the kind of errors that could lead to penalties. They are the common mistakes that are made in the gift aid process: computational errors, failure to obtain valid gift aid declarations and late claims—those made out of time. The amendment seeks to ensure that if HMRC believes that one of those, or another, mistake might have been made—sometimes, unfortunately, they are intentional acts rather than mistakes—but on further investigation realises that something was incorrect or that there was bad information, it is able to relieve the penalty in a way that does not affect the charity or its ability to claim under the terms of the Bill.

The hon. Member for Harrow West also mentioned publicity. The HMRC publicity campaign for the gift aid online system and the scheme that we are discussing today is extensive. Writing to every charity that has claimed gift aid in the past three years is an excellent way to advertise the scheme, and to invite charities to ask questions. If the shadow Minister believes that HMRC should consider going to certain parts of the country—perhaps he has his constituency, or elsewhere, in mind—either he, as the local Member of Parliament, or a local charity or group of charities, is at perfect liberty to invite it to go there or send representatives. The decision would be HMRC’s to make.

Gareth Thomas (Labour, Harrow West)

The Minister said that HMRC plans to write to charities that have previously applied for gift aid. As I understand it, part of the point of the top-up grant scheme, as Ministers have described it, is to encourage more charities to apply for gift aid. Therefore, what publicity campaign and level of correspondence will there be for the almost 300,000 charities that have not claimed gift aid in the past year? Will they be written to by HMRC? Surely they should be.

Sajid Javid (Conservative, Bromsgrove)

The hon. Gentleman is right. Part of the scheme’s attraction is to get more charities interested in gift aid and therefore in this scheme. If they are not currently on HMRC’s database, clearly they will not receive a letter, but hopefully they will be attracted by the extensive media campaign that will accompany this measure.

Gareth Thomas (Labour, Harrow West)

Surely it is not rocket science for somebody from HMRC, at the Minister’s instruction, to get on the phone to the Charity Commission or the Office of the Scottish Charity Regulator and ask for databases of charities. With e-mail addresses, HMRC might write to charities about this new measure.

Sajid Javid (Conservative, Bromsgrove)

HMRC has various sources for getting information on charities. The Charity Commission for England and Wales, the Charity Commission for Northern Ireland and the Office of the Scottish Charity Regulator are all sources. There are also other representative bodies of charities. We saw some of them in the evidence sessions. There are many others. We can rely on HMRC’s working with them to ensure that all the charities that can benefit from the scheme have the opportunity to do so.

Clause 3 - Meaning of “small donation”

Gareth Thomas (Labour, Harrow West)

I want to reflect on some comments that John Hodge from the Law Society of Scotland made in the evidence that he gave us last Tuesday. He raised concerns about the drafting and purpose of clause 3(2), which talks about how a small donation made to a charity

“applied to purposes other than charitable purposes”

cannot be treated as a small donation. He pointed out that a charity has to apply all its funds for charitable purposes. He wondered whether Ministers were intending that small donations be applied only to primary charity purposes—for example, the food going to a homeless person rather than towards the administrative costs of the charity that was ensuring that the food was dispensed to that homeless person. He asked whether small donations to be counted under the scheme would have to be put in a separate account from donations that might help to cover the administrative costs of the charity.

What is the purpose of subsection (2)? If someone as distinguished as Mr Hodge is not clear that he understands the purpose behind a particular subsection, it underlines concerns about the complexity of the Bill, and HMRC will have to be extremely active in explaining the purpose of the different parts of the Bill to the small charities not currently claiming gift aid, as well as those that are claiming.

Lastly, I want to ask about subsection (3), which specifically references the Trustees of the National Heritage Memorial Fund; the Historic Buildings and Monuments Commission for England; the Trustees of the British Museum; and the Trustees of the Natural History Museum. I did not get—the Minister will forgive me for saying so—a clear answer when I asked about the motivation behind subsection (3). I recognise that it is in line with gift aid provisions, as he stated. However, has there been specific lobbying by the four organisations concerned? They are somewhat different in size from the types of charities that Ministers once said would be the prime beneficiaries of the scheme, although I do not suggest that they should not be beneficiaries. Interestingly, one of the four organisations that is so affected, English Heritage—the Historic Buildings and Monuments Commission for England—has been subject to cuts of some 32%. Did Ministers include it in the list as some small compensation for the scale of the cuts that it faced? It would be good to hear from the Minister the purpose of subsection (2). Is he absolutely confident that he and his officials have drafted it right? Will he set out in more detail the purpose and intent behind subsection (3)?

Sajid Javid (Conservative, Bromsgrove)

Clause 3 sets out the meaning of small donation for the purpose of the scheme. A small donation as defined in the Bill means a gift made to a charity, provided that it meets each of the conditions set out in the schedule to the Bill. The clause states that membership fees cannot be small donations. A small donation must be used by a charity for charitable purposes, and any part of a donation that is not used for charitable purposes does not qualify for the top-up payment.

In answer to the hon. Gentleman’s question, the purpose of subsection (2) is to exclude from the definition of small donation any income that is used by a charity for non-charitable purposes. For example, a charity may make a loan to a trustee, which is a non-charitable purpose. If funds were raised but used for a non-charitable purpose, that portion would be excluded from eligibility under the terms of the scheme.

Gareth Thomas (Labour, Harrow West)

Just to be clear, does that mean that administrative costs are not a problem, and that there is no need for two separate accounts to pay for the food that goes to a homeless person and the administrative costs of the homelessness charity? It would be good to get 100% clarity on that. Is the loan to a trustee the only example that the Minister and his officials can think of where subsection (2) would apply, or are there other similar examples? For the benefit of those who seek to understand the legislation, it would be useful to have further clarity if there are other scenarios in which subsection (2) would apply.

Sajid Javid (Conservative, Bromsgrove)

The example of a loan to a trustee is the only one I can think of. For clarification, administrative costs are not caught by subsection (2), because they are a legitimate use of charitable donations.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

I am interested to hear the Minister say that the loan to a trustee is the only example that he can think of. Does he have information on how many times that has happened? In my experience of being involved in running charities, it is not something that happens regularly.

Sajid Javid (Conservative, Bromsgrove)

As the hon. Lady said, I do not believe that it happens regularly, but I do not have any numbers at hand to show how often it happens. I am happy to try to find out if there is more information available from HMRC on that. If such information is available, I will see whether I can provide it.

The hon. Member for Harrow West asked about the four organisations that are mentioned in subsection (3). These organisations are listed to provide absolute clarity in the Bill. They are all state-created organisations and as such, and in accordance with the regulations under which they were created, they are not permitted to use money for unauthorised purposes.

Gareth Thomas (Labour, Harrow West)

The Minister will remember the evidence from David Warrellow from the National Trust, which maintains similar sorts of buildings to those maintained by English Heritage. As a result of the Government’s proposals on community buildings, he believes that the bulk of National Trust properties will not be able to claim under the Bill. If clause 3(3) stays in the Bill, as the Minister clearly intends it should and we would not want to prevent, it creates another form of division between National Trust properties on the one hand and English Heritage properties on the other.

Sajid Javid (Conservative, Bromsgrove)

I do not believe that this subsection creates a division. It recognises an established fact: as the law currently stands, these organisations are not permitted to use money for unauthorised purposes and so they are excluded from the provisions of clause 3. The requirement for the donation to be used for charitable purposes does not apply to the trustees of certain national museums or the Historic Buildings and Monuments Commission for England. The reason for this is simply to maintain consistency with the gift aid rules.

Schedule 1 - Meaning of “small donation”: conditions

Gareth Thomas (Labour, Harrow West)

I beg to move amendment 26, in schedule 1, page 12, line 9, after ‘any currency’, insert

‘cheques, text or internet donations’.

Nigel Mills (Conservative, Amber Valley)

On reading the hon. Gentleman’s amendment, I am not sure that Oyster card donations would fall within the terms he proposes. Is that correct?

Gareth Thomas (Labour, Harrow West)

I would be very happy to support an amendment that the hon. Gentleman might move on Report to improve still further this clause, following, I trust, his support for this amendment.

It is interesting to note the comments of a number of the witnesses who gave evidence to us last week. Mr Warrellow, from the National Trust, said:

“there ought to be provision in legislation to allow HMRC to accept alternative forms of payment.”

He pointed out that

“Technology is fast-moving, and we have things such as contactless payments”—

and suggested that such arrangements should apply to small donations under the terms of the Bill. He also suggested that

“HMRC should have the power to allow alternative forms of payment in the future, certainly once the scheme has bedded down and once the other technologies that are coming in are more frequently used for charitable donations.”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 43, Q69.]

Surely we ought to give serious thought to taking on board Mr Warrellow’s comments. John Low, the chief executive of the Charities Aid Foundation, made a similar point, making reference to the need for slightly more imaginative drafting of this part of the Bill.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

Will my hon. Friend consider whether the Bill, as it currently stands, covers such circumstances where, for example, someone decides to give a £20 gift voucher to the local food bank, perhaps because they want to ensure that the money is used directly to benefit individuals in those charitable purposes? More and more supermarkets now have cards on which people can put money, and people may wish to make donations that way. As currently drafted, does the Bill deal with that, or is that something that my hon. Friend thinks ought to be looked at?

Gareth Thomas (Labour, Harrow West)

The Bill as currently drafted would appear not to allow for donation in the way that my hon. Friend describes. I recognise that that would not be covered by our amendment either, but if the Committee was so minded to agree to it, perhaps we could go a little further on Report and widen the provision to cover those particular examples.

Susan Elan Jones (Labour, Clwyd South)

In a previous discussion, the Minister, in response to a point made by my hon. Friend the Member for North West Durham, said that if one made a donation in any currency—euro, dollar, yen or whatever—then that would be acceptable in the current scheme. It seems a bit peculiar for all of them to be acceptable, when it is not possible for a donation to be made in British pounds by cheque, text or via the internet. Does my hon. Friend agree?

Gareth Thomas (Labour, Harrow West)

My hon. Friend makes a very good point. I urge the Minister to listen to the intervention and explain why he proposes to be such a dinosaur on this matter. I recognise that there are one or two other issues that are linked to the type of donations permissible. Perhaps, given how directly they are related, it would be permissible to reference them now. The most pressing issue for discussion relating to the schedule, particularly on how a donation might be made, is whether the £20 figure is too low.

Mr Robertson, you and other members of the Committee will be aware of the considerable concern in the House about the activities of payday loan companies. Let us imagine a scenario in which those payday loan companies come together and discuss how well all their businesses are doing. They are in a celebratory mood and think that they ought to make a donation to a charity. They are walking past the local citizens advice bureau or debt advice agency and they decide to make a small donation to them. If they are the chief executives of those companies, £20 will not be a particularly large amount for them to donate. They may well want to donate £50 or £100. Why should larger sums of money, but still relatively small in the context of their salaries, from the more well-off not be permissible under the terms of the Bill?

The scenario that I have described of the chief executives of payday loan companies coming together and meeting is not an unrealistic one. We know that it has happened and that it has happened recently. Indeed, we know that it happened at the Conservative party conference, where payday loan company chief executives paid—would you believe?—£1,250 for the privilege of meeting the Minister and a series of other people. It is possible that they emerged from meeting the Minister, having discussed the Bill, and thought, “Let us go away and donate some money to charity.” Under the terms of schedule 1, in order to allow that citizens advice bureau or that debt advice agency to benefit from their donation, they would have had to limited their donation to just £20. When replying to amendment 26 and in the more general debate on schedule 1, I ask the Minister to consider why the £20 figure is so low. Why are those on bigger incomes, who give proportionately more in small cash donations, not allowed to give a higher sum than £20?

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

I want to highlight an issue that charities have raised with me that relates to the sad circumstances of funerals, where charitable collections may be taken. In such cases, people may well put a cheque in a box for the charity. They may not be in a position to fill in a gift aid form and it would not necessarily be appropriate. None the less, why would it not be appropriate in such circumstances to treat those donations as small charitable donations?

Gareth Thomas (Labour, Harrow West)

My hon. Friend makes a good point, and that is one of the glaring inconsistencies that will be permitted unless the Minister is willing to show some imagination and to allow or encourage a change to the schedule as drafted.

The Opposition’s concerns can be gently summarised as follows. Why does the Minister want to stay a bit of a dinosaur in terms of the way in which he limits small cash donations? Why should those on larger salaries, for whom £20 is neither here nor there and who want to donate a larger sum in cash, be denied the opportunity to help charities to the extent that they would like?

Nigel Mills (Conservative, Amber Valley)

It is a pleasure to respond to the amendment. I am sorry to disappoint the hon. Member for Harrow West, but I cannot support the amendment. However, I do have some sympathy with the principle that he is trying to establish. We tested the issue quite thoroughly during the evidence session last week, and I was persuaded by some of the Minister’s arguments that, for some of what is listed in the amendment, it would be possible to get the gift aid details from the donor. I am concerned, however, that we locking the Bill purely into cash. We may find in a few years’ time, or perhaps a bit less, that people will start to use cash less and will have some other electronic means that may not fall into the definitions in the amendment, which is why I cannot support it.

I can think of one current example. Coming through St Pancras station yesterday, I saw a box into which people can deposit Oyster cards with remaining credit that they no longer need, and Railway Children gets the money.

Fiona Bruce (Conservative, Congleton)

May I just say that my son is currently studying abroad in the Netherlands where apparently all outlets, businesses and so forth have to operate and provide services on a cashless basis, and so basically he does not carry cash but simply a card?

Nigel Mills (Conservative, Amber Valley)

I am grateful to my hon. Friend for that intervention. That is, of course, the point. My point was that in a station someone can now donate money to the Railway Children charity by dropping into a box an Oyster card that has any money left on it. I think that that raised just under £5,000 a couple of years ago for that charity; that was the last detail that I could find. Coincidentally, £5,000 is a useful number for this debate. However, I cannot see any logical way in that situation whereby the charity or Transport for London could get me to sign a gift aid declaration, given that I had bought an Oyster card, did not give any details and was just donating the whole card. It is clearly an equivalent to a cash donation.

I suspect what we will find as the years go by is, as my hon. Friend just said, that we will all start donating with our funny new credit cards, whereby they are just swiped by a reader and someone donates £2 or £5, or it will even be possible to get some kind of app for a phone that does the same thing. I am not sure in that situation whether, if I am persuaded as I walk by a collection point to donate £2, I will want to stop to provide my name, address and all the other gift aid details. I think that that donation is meant to be the equivalent of my putting a £1 coin or £2 coin in the collection box.

I gently suggest to the Minister that he might want to think about future-proofing the Bill. I am not suggesting that he should bring something into effect from the start, but he could just insert a clause that will allow HMRC to have the power to redefine “cash” to include some kind of electronic equivalent. That seems a reasonable thing to have in the Bill. It means that if life moves on and we all change the way that we behave, he would not need to come back in a few years’ time with primary legislation to make this change; he could just pass that order. I think that it would be similar to the powers that are already being given to the Treasury in clause 13; it would just change “cash” to some kind of electronic equivalent. HMRC could then set out exactly what that would be. I accept that, for things such as credit cards or even texts, whereby we have heard it may be possible to get a gift aid declaration from people, there may be no need for that power, but I suspect that there are already some things, and there will be more in the future, for which getting that declaration just will not be possible and the change that I propose would simply extend the scheme to cash-equivalent small donations.

Jeremy Lefroy (Conservative, Stafford)

I just want to add to what my hon. Friend has said, with which I am entirely in sympathy. I would like to make a point that I raised during the evidence session and which I think the hon. Member for Kilmarnock and Loudoun mentioned in an intervention a few moments ago. It is about donations at funerals. Often large amounts of cash are raised, which are then split between two or three different charities. It is then the responsibility of the church, or wherever the funeral is held, to divide up the money that is received in cash between those particular charities.

Clearly, it is physically pretty impossible for the church to split the cash into two or three. What they will normally do is bank the entire amount and then give a cheque to each of those charities. I just wanted to ask the Minister whether, under those circumstances, the Bill will provide for that cheque to be treated as quasi-cash, or whether we can make a slight amendment that will allow these sums to be included as being eligible as small cash donations, which indeed they are and were originally, when they were given, but they have had to be—as it were—translated into cheque form for ease of administration.

Sajid Javid (Conservative, Bromsgrove)

I have been called many things, but I have never been called a dinosaur before. However, if opposing this amendment makes me a dinosaur, I am a dinosaur today, because the amendment would broaden out the gift aid small donations scheme to cover not only cash donations, but donations in non-cash form, namely donations by cheque or text, or donations made over the internet.

It might be worth reminding the Committee of the primary objective of the scheme. It is to provide a gift aid-style top-up payment in situations where it is difficult or unduly burdensome to collect a gift aid declaration from the donor. The most obvious examples of that are when a charity is making a street collection or when a religious group is passing a collection plate around during a service or prayer meeting. In such a situation, it would be difficult to ask everybody who is making a contribution to stop, inquire whether they are a UK taxpayer and request them to fill in a form with their name, address and other details.

Susan Elan Jones (Labour, Clwyd South)

The Minister makes the point about the practicality of getting a gift aid declaration. He says that it would probably not be practical, yet he also says that any currency is acceptable, but that cheques are not. I do not wish to do anything that would damage what my hon. Friend the Member for Foyle has suggested, but if one was making a donation of a euro, a dollar or a yen, may I suggest that they are probably not eligible for gift aid? It does seem a strange anomaly that if someone makes a donation to a charity by cheque, the charity concerned would be exempt from the scheme.

Sajid Javid (Conservative, Bromsgrove)

If the hon. Lady will allow me, I will come on in a moment to donations by cheque and why they are being treated differently.

John Hemming (Liberal Democrat, Birmingham, Yardley)

I have recently been abroad and have €5 hanging around in my wallet. I would quite like to give it away to charity. It would be nice to have a scheme whereby the Government got a bit of extra money for the tax that I have paid.

Sajid Javid (Conservative, Bromsgrove)

In relation to a donation that is just a couple of pounds, if someone has given a few pounds to a church collection, it would be unrealistic to ask for the details that would be required for a gift aid declaration. That means that charities are missing out on potential gift aid donations that are received in such a way, and it is exactly what the gift aid small donation scheme is designed to tackle. The scheme will fill this gap in the context of donations for which it is difficult or unduly burdensome to collect the necessary paperwork.

Sheila Gilmore (Labour, Edinburgh East)

The Minister does not want to be described as a dinosaur, but he is perhaps assuming, as we all did until relatively recently, that if someone gave small amounts to organisations, they would do it in cash and if they gave bigger amounts, they would write a cheque. They may even do it online. Increasingly, is it not the case that people are making even very small donations in a way that they would never have thought about doing before—they may use things such as Text to Give or go online—so there is no longer the distinction that once existed?

Sajid Javid (Conservative, Bromsgrove)

Giving by cheque or through using digital technology means that the donor is already giving their details to the charity, and the extra amount of information needed to make a gift aid declaration is relatively small. Where a charity has an ongoing relationship with a donor, they should use gift aid if at all possible. Compared with a bucket collection on a busy street, it is considerably less burdensome to ask someone to provide their details if they are prepared to sign a cheque or go to a website to make a donation.

Gareth Thomas (Labour, Harrow West)

I want to echo the point made by my hon. Friend the Member for Edinburgh East. If one goes on eBay, wanting to sell or buy something, I believe that there is the provision to make a donation to charity. When someone is busy and leading a hectic life and they want to get their bid in or they want to put their property up for sale, why is that different from the couple of scenarios that the Minister has painted of the money going into the box at a prayer collection, or the person in the street who is busy doing their shopping? They are comparable, albeit different situations. One is eligible under this scheme and the other is not.

Sajid Javid (Conservative, Bromsgrove)

Perhaps the hon. Gentleman could clarify his question. I thought that he was referring to buying products on eBay. I am not sure what the connection is between that and charitable donations.

Gareth Thomas (Labour, Harrow West)

My understanding is that there is provision on a number of auction websites, including those that eBay run, for one to make a donation to charity at almost the same time as one is seeking to make a purchase through eBay. Why should the donation through that route not be eligible, when it is a similar scenario to that of the busy person throwing some coins into a box or some money into a collection tin at a prayer meeting? The level of busyness of the person concerned is broadly the same, yet one donation is eligible and the other is not.

The rest of the debate is in Hansard.