Taxation: Charitable Donations
Private Members’ Business
12:30 pm
William Hay (DUP)
The Business Committee has agreed to allow up to one hour and 30 minutes for the debate. The proposer will have 10 minutes in which to propose and 10 minutes in which to make a winding-up speech. All other Members who wish to speak will have five minutes.
Peter Weir (DUP)
I beg to move
That this Assembly expresses concern at the proposals by the chancellor of the exchequer is the government's chief financial..." class="glossary">Chancellor of the Exchequer to limit tax relief on large charitable donations; believes that this could have a devastating impact on charities; and calls on Her Majesty’s Government to abandon this approach.
I am delighted to propose the motion. I am glad, in light of the general admonishment made earlier, that I do not have to join you by Skype or videoconference but have managed to make it here in person and do not have to Facebook my speech in. In light of the nature of the subject, we will not even be adding a smiley face at the end of the discussion.
I welcome the opportunity to raise what I think is a very important issue. I know that some in the media have been critical of the issue because it is not one that we have direct control over, but the impact on local charities could be very significant. I will say more about that in a moment.
There was considerable focus on a number of issues when the Budget was announced. The Government’s point of view was that they were lifting a number of people out of the taxation system or reducing the levels of taxation, but, at a more critical level, there were changes to the top rate of tax, the so-called Robin Hood tax in reverse, which impacted on working pensioners, and the so-called pasty tax, which included an extension of VAT.
The announcement of a change to the tax relief on charitable donations did not initially attract a great deal of attention, although there has been considerable comment subsequently. This issue is close to my heart, as my late father was the covenant secretary of my local Presbyterian church and would have dealt with this issue. He saw the considerable impact of the change to the tax regime brought in by the previous Government.
For those who have not been following this, the Chancellor’s intention, as announced in the Budget, is that, from April 2013, the Government would introduce a cap on certain unlimited income tax reliefs. Under the plans, previously uncapped tax reliefs, including charitable donations, would be capped at £50,000 or 25% of a person’s income, if that was higher. In a point of unassumed irony, it is due to come in on 1 April 2013, the same time as the reduction in the higher rate of tax from 50% to 45%.
There has been a subsequent firestorm. Treasury Minister David Gauke said that he thought the impact on charities would be in the region of £50 million to £100 million. That is widely disputed by charities across the UK. If the impact is going to be insignificant from the Government’s point of view, when that Government deals with a Budget that runs to hundreds of billions of pounds, we have to question why they are pursuing this in the first place. The reality is that the figures are much greater than that. This is not purely linked with the charity aspect, but, in referring to the wider changes, different Treasury figures have been quoted. One set of figures state that, by 2014-15 on one calculation, there could be £870 million worth of a difference. Another set of figures states that, because of the post-behavioural costings, there will be around £500 million of a change. We seem to be awash with figures.
The reality, though, is that this will have a very significant impact. Last year in the UK, in the region of £11 billion was given to charities. I suspect that charitable contributions from Members of the House were not at the level that will be impacted by the proposed tax changes, but, as well as being dependent on relatively small donations from a large number of people, charities are very heavily dependent on quite large donations from a relatively small pool of people. For example, the figures suggest that 45% of the £11 billion given to charities in the past year came from just 7% of donors. From an impact point of view, it is, therefore, not surprising that a lot of the large charities in the UK, such as Cancer Research, Save the Children, Concern Worldwide, the National Trust, Age UK and The Duke of Edinburgh’s Award, have all written to show their opposition, as, indeed, have local philanthropists such as Sir George Bain, John Agnew and Angila Chada.
The situation is such that the proposals will not simply impact on the big charities. As Members know, in many cases, a lot of the larger charities have projects that filter down to grass-roots level and use, for example, smaller charities, churches and community organisations to deliver schemes on the ground. So, in Northern Ireland there will be a real impact not just at the higher levels of larger charities but on much smaller charities.
We should recognise the context in which the proposals are set. One researcher described it as a perfect storm for charities. It is hitting at exactly the wrong time, because there is greater demand on charities during a recession. Indeed, according to a recent survey, 69% of charities in the UK have experienced an increase in demand. At the same time, a lot of people’s disposal income has been reduced because of the recession. As a result, they have cut back on the things that they see as being non-necessities, including charitable giving, which has reduced to some degree. Thinking about the projected impact, again, a survey found that eight out of 10 philanthropists said that they would rethink their charitable donations and that some would be forced to cut their charitable donations by 40%. So, the proposals could have a very real impact.
As indicated, there has been a high level of concern about and response to the proposals. In the House of Commons, my colleague Jim Shannon and others from across the political spectrum have signed an early day motion expressing concern about them. The proposals have also been opposed by the official Opposition and, as I indicated, by a range of charities. However, it is not just the usual suspects who are critical of the Government. For example, virtually all newspapers from across the political spectrum, including the likes of the ‘Daily Telegraph’ and the ‘Financial Times’, have expressed concern. Indeed, those who might be described as conservative commentators, such as Dominic Lawson and Fraser Nelson, who are hardly the type of people to jump on the general opposition bandwagon, have been highly critical of the proposals. I think that there are a number of reasons why they have been critical of the proposals’ weaknesses. We are told that the proposals are about ending tax avoidance. Obviously, targeting people who avoid tax is to be welcomed. However, that has been lumped in with targeting people who are attempting to offset some of their tax by putting it under company accounts or, indeed, by bogus activity. That issue is easily solved. If the idea is to prevent that degree of tax avoidance, the issue of charities, particularly legitimate charities, should be decoupled from that. If there is a concern that bogus charities are in some way being used as a device to avoid tax responsibility, that can be easily dealt with, particularly in Northern Ireland, where we have a commission that looks after charities, while other bodies look after charities’ bona fides. The reality is that, on a number of occasions when the Government have been pressed on the number of people that they feel would gain some benefit from this, particularly in the use of charities, they have never been able to produce figures, which suggests that the proposals are like a hammer being used to crack a nut.
Indeed, the practicalities of the proposals have also been criticised by experts in the field, such as the Chartered Institute of Taxation and the Institute of Chartered Accountants in England and Wales. So, it appears that the proposals will not work, are ill thought-through and run contrary to the spirit of government policy. We are told that David Cameron’s great idea is the big society, in which society contributes a lot more to what is happening on the ground than the Government. However, here we have a device that runs against the level of intended philanthropy. I am not getting into the debate on the lowering of the high level of taxation from 50p to 45p, but it seems that the Government have a remarkable sense of priorities. They reduce the level of taxation for the highest earners in our society, and, at the same time, their one punitive measure for high earners discourages them from giving to charity.
It is clear from some of the remarks that the Government have made and from the indications given by George Osborne and David Cameron that they intend to consult on the issue in the summer, that it is dawning in some people’s minds, prompted, no doubt, by parliamentarians of various ilks, that this is a bad idea, and the Government seem to be in slight retreat from it. It is important that, for the sake of the most vulnerable in our society who benefit from a lot of charitable work, the Assembly sends out a clear-cut message about where we stand on the issue.
Peter Weir (DUP)
The Government were wrong to put this proposal forward in the first place. It is due to take place on 1 April 2013, so there is still time for the Government to withdraw it. I urge the House to support the motion and make that clarion call to the Government.
Mickey Brady (Sinn Féin)
Go raibh maith agat, a Cheann Comhairle. As Mr Weir said, we do not have control over this matter, but it will have an impact here if it comes to pass. Initially, the British Government argued that their purpose and aim was to stop people using bogus charities for their own benefit. If such a problem exists, surely it can be addressed by regulators. It is interesting that almost half of charitable donations come from fewer than one tenth of donors. If tax relief is reduced, it could mean that many donors would simply give less. It is also possible that, with a lower financial commitment, they may feel less motivated to provide time and other assistance.
Charitable donations in Britain lag behind America significantly. To reduce this gap and promote what is called “the big society”, surely it would be better to encourage more donations, not discourage those that are already being made. If the new proposals come into force, they will undoubtedly hinder fundraising for many charities. Surely a message needs to go out that philanthropy is essential and should be valued. It appears that the message that will be sent out is that such charitable donations are regarded as some kind of tax fiddle.
According to the Government, the revenue raised if the measure is implemented, when put into context, could be £50 million. That is not a great deal in the overall scheme of things, but charities, as Mr Weir pointed out, would argue that the final figure could be a lot higher. A clear distinction needs to be drawn between charitable giving and other activities that attract relief. Tax breaks that are purely for self-interest need to be separated from those that benefit the wider public.
Peter Weir (DUP)
I thank the Member for giving way. Does he agree that one of the flaws in the proposal is that any expert who has looked at it will say that the idea of tax avoidance is a red herring? If people give to a genuine charity on that scale, it is mathematically and financially impossible for them to make a gain.
Mickey Brady (Sinn Féin)
I thank the Member for his intervention. I absolutely agree with him that there is no doubt that it is a red herring. Indeed, when the Charity Commission was set up in the North — it was dealt with by the Committee for Social Development, of which I am a member — there was much debate around what constituted public benefit. That debate is ongoing.
The good intentions of those big donors to charity need to be recognised and applauded, and the Government need to recognise the case for charitable giving. In this time of continuing recession, surely it needs to be recognised that philanthropy has a particular strength in advancing the frontiers of knowledge and promoting artistic endeavours.
Tax avoidance is not the same as donating to charities such as Macmillan Cancer Support, the Red Cross and many others, which rely on the money that they get to carry out their work, which is often about supporting some of the most vulnerable people in our society. Surely the Government should be able to tell the difference between tax avoidance and supporting valuable charity work.
George Osborne has said:
“We’ve capped benefits. Now it’s right to cap tax reliefs, too.”
That was said about a Budget in which the taxation rate for the richest was lowered to give them more. To make such a comparison is totally disingenuous, as benefits will be savagely cut, and many vulnerable people will have to cope with reductions in their benefits that will certainly change the quality of their life.
Leslie Cree (UUP)
I welcome the opportunity to speak on the issue. The Ulster Unionist Party recognises the important work of charities in Northern Ireland and throughout the United Kingdom, and, in the knowledge that they often rely on the financial support of what has been referred to today as philanthropic giving, we support the motion and commend the Members who tabled it.
Charities are regulated by the Charity Commission for Northern Ireland, and they seek to deliver:
“A dynamic and well governed charities sector in which the public has confidence, underpinned by the Commission’s effective delivery of its regulatory and advisory role.”
Therefore, I believe that we have a system in place in which charities operate in a firm and fair regulatory environment where the public can have trust in the fact that, on the whole, charities produce positive and tangible benefits. Indeed, they play an integral part in many aspects of life in Northern Ireland. Educational charities such as our universities are essential in providing the economy with the skills and knowledge to grow the private sector and keep Northern Ireland in its current position as a region renowned for its skills base. Others, for example, the Positive Futures programme, address the issues associated with learning difficulties.
Many charities deal specifically with the important issues of poverty and social deprivation. In particular, I mention the Simon Community, which does a great deal of work in my constituency of North Down, as well as the NSPCC and Barnardo’s. Aside from the practical help that they provide, these organisations often produce detailed research that can inform and shape government policy. Adequate support of the social economy is also imperative. Although government funding obviously has a role in this, individuals can and do give money to social enterprises. All of these types of charity rely heavily on the goodwill of donors to fund some of their activities, but that may be affected after the proposals outlined by George Osborne in the Budget last month to change the tax relief that donors can receive in respect of large donations to charities. From 6 April 2013, the maximum will be £50,000 a year or 25% of the donor’s income. The result of this is a significant decrease in the amount of tax that philanthropists can claim back and, therefore, a reduction in the money given to charities. In this instance, the end result certainly does not justify the means. Tax avoidance should not be tolerated, and I commend any attempt to ensure that those earning the highest incomes pay their fair share, but it seems to me that this particular measure would hinder the very organisations that we should be encouraging.
The PwC report, ‘Managing Charities in the New Normal — A Perfect Storm?’, which a Member referred to, outlines the fact that the measures that the chancellor of the exchequer is the government's chief financial..." class="glossary">Chancellor of the Exchequer is seeking to bring in come at the worst possible time. The research shows that 93% of fundraisers say that money was more difficult to raise in the past year and 94% expect it to get harder over the next 12 months. PwC’s work also shows that charities believe fundraising to be an important means of income in the current fiscal climate, with 66% planning to increase their fundraising activity. Therefore, it seems clear that George Osborne’s decision will clearly disadvantage the good work that is being done by charities at a very challenging time. Indeed, I am reminded that a previous Labour Chancellor made a similar mistake when he introduced a tax on pension funds. We all know that that has had a devastating effect on all final salary pension schemes.
Mr Weir mentioned that Her Majesty’s Revenue and Customs could bring in as much as £100 million through limiting tax relief. However, this means that there would be £500 million of lost donations, and we are told that that is a conservative estimate. Indeed, very big sums could be involved, and this is not an acceptable outcome. One positive aspect is that the Prime Minister has indicated that he is willing to listen and that full formal consultation will occur. I certainly hope that he will review his plans on charitable taxation, given that the proposal is not to be introduced until next year. That is what this House is calling on him to do, and I support the motion.
Go raibh míle maith agat, a Cheann Comhairle. Éirím le tacaíocht a thabhairt don rún seo, agus gabhaim buíochas leis na Comhaltaí a thug faoi bhráid an Tionóil é inniu. I support the motion, and I thank the Members who brought it to the Floor of the House today.
The Chancellor’s plan to reduce tax relief on charitable donations has caused considerable opposition from many voluntary and community sector groups which believe that they will lose substantial sums of money as a result. While we value the contribution made to our society by the national health system, the welfare state and other government agencies, the sad truth is that many aspects of our community’s health and welfare are not sufficiently funded by government and need to be supported by the voluntary, community and charitable sector — the third sector, as it has become known.
One has little difficulty finding examples from the over 3,000 organisations that are backing the “Give it Back, George” campaign and that benefit from charitable donations. Those organisations deal with research into all types of illness and disease for which there is not yet a cure and for which ongoing research and support are needed. They include organisations that advance the arts, sports, music and mental health or deal with eating disorders, youth matters, hospice matters, arthritis, carers in general, community development etc. That list in not exhaustive. In many cases, the organisations have arisen from fundraising that has been initiated by the relatives of a sufferer of one of those diseases or disorders or, indeed, sadly, by the relatives of a person whose death has been caused by one of those illnesses. Quite often, a local campaign eventually becomes a national campaign, and a charity is set up.
Although the Government collect less tax as a result of tax relief on charitable donations, major economic support is provided through the scheme to charities that do the important work involved. Of course, if the Government were to cap the relief available on charitable donations, there is absolutely no guarantee that the improved tax take would be redistributed to charities or to the research and development work that many of them currently engage in and fund. It is also important to remember that many of the third sector groups that benefit from charitable tax relief also raise additional funds by other means that add value to the effects of charitable donations. Often, where an organisation requires a cocktail of funding to complete a project, charitable donations are the spur for further donations to complete that cocktail. So, at the end of the day, donations that are encouraged by tax relief enable the third sector organisations to do work that badly needs to be done and that, at the end of the day, results in a lesser drain on government resources.
Under the plans announced in the recent Budget, individuals who give money to charity will only be able to claim tax relief on 25% of their total income or on £50,000, whichever is higher. The cap will be introduced from April 2013 and will apply to gifts of cash and shares. There will be a consultation, and I hope that the views of the Assembly will be included in that.
As other Members said, the proposals are aimed at thwarting people who donate to false charities. However, there is little evidence that that takes place on any great scale. There is a requirement by Her Majesty’s Revenue and Customs (HMRC) in almost every case that donors must provide the bona fides of the charity to which they are donating.
I conclude by reiterating my party’s support for the motion, and I hope that the Chancellor will take on board the views of this House.
Judith Cochrane (Alliance)
I, too, welcome the opportunity to speak in support of the motion. Critics might contest that there is an air of duplication in the nature of the motion, following a similar debate in Westminster a few weeks ago. However, I commend the Members for bringing the motion to the House. Imitation is the sincerest form of flattery. Indeed, it is something that we in the Alliance Party take great comfort in every time we hear others talking about a shared future.
In recent days, I have been contacted by representatives from a range of charities in Northern Ireland, who are understandably concerned that the proposal will have significant negative consequences for our charitable sector. Although I support the drive to scrutinise unlimited tax reliefs, I would argue that greater and more realistic consideration needs to be given to that specific proposal, taking on board the expertise available within the charitable sector, to ensure that the proposed cap does not hinder the significant work of charities across the UK.
The Northern Ireland Council for Voluntary Action (NICVA) has recently expressed concerns, supporting the Give it Back, George campaign. It has reasoned that the addition of the cap will serve only as a disincentive to potential philanthropists, with the impact likely to be felt not only by large charities but by smaller voluntary and community groups that benefit from grant-making trusts and foundations.
Our society consistently lags behind our western counterparts, such as the US, in relation to charitable donations and philanthropy. In that regard, it seems that the best way to address that problem would be to encourage more donations, not to discourage those already being made. I know that it could be argued that the upper-rate tax relief cap on donations may only affect a small number of high earners in our society, but, as others have already mentioned, in the UK, nearly half of all charitable donations come from fewer than 10% of donors — those affectionately known as the rich. The media do little to improve the public perception of the wealthy in our society, and, at times, key figures from within the golden ranks do themselves few favours either, but the truth is that, in relation to this proposal, many of those individuals regularly give away a high percentage of their income. It is large donations such as those that provide the lifeblood to our charitable sector.
(Mr Principal speaker is in charge of proceedings of the House of Commons in..." class="glossary">Deputy Speaker [Mr Molloy] in the Chair)
There is a growing perception that, through donating such large sums to charity and receiving — currently — unlimited tax relief on their donations, wealthy donors are somehow profiting from some fairytale charity loophole. However, as others have said, that is simply not true. The sad reality of reducing tax relief on those donations would mean that many donors would simply give less. There is also an ironic sense of illogicality to the proposals when we seek to align them to the Government’s own ambitions for sustainability and growth in the third sector in the hope that it can fill a vital role in the road to economic recovery.
In addition to the financial red tape being tied around charitable foundations, the Treasury has also confirmed that community interest tax relief (CITR) will be included in the proposed cap. For those Members unfamiliar with CITR, the scheme encourages investment in disadvantaged communities by giving tax relief to investors who invest in community development finance institution that, in turn, provide loans to businesses and social enterprises. It almost seems in this instance that, while one hand from Westminster is patting the third sector on the back and seeking to provide assistance and support, the other is tightening the noose around its neck.
I am sure that Members will agree that there is some merit in concerns exercised over bogus and foreign charities being utilised in order to exploit the system, but the frequency and impact of such practices simply does not hold weight when compared to the frequency and impact of charitable giving. The problem of tax avoidance through the use of charitable relief should ultimately be dealt with by an effective HMRC. Having also discussed the matter with the Charity Commission for Northern Ireland, I have faith in its ability to investigate alleged charity misconduct or mismanagement.
It is my contention that, if we wish to seriously support our charitable foundations and strengthen our third sector, it is vital that we provide them with resolute support in relation to these proposals. The overriding principle in all of this should not simply be deterring a minority but emboldening the majority. It is on those grounds that I lend my support to the motion.
Alastair Ross (DUP)
It is refreshing that we have support for the motion from all around the Chamber. Indeed, it is perhaps surprising that we are listening to Sinn Féin supporting tax breaks for the wealthy in society. I think that it reflects the outrage among the public about the Government effectively attacking philanthropy in the United Kingdom. Indeed, we heard senior figures rolled out, not so much to defend the policy as to try to explain it and indicate a softening of their position and perhaps a rethink. That, of course, was against the backdrop of former Prime Ministers opposing the policy. Huge amounts of Back-Benchers from all of the main political parties at Westminster indicated their opposition to this move, as did more than 3,000 individuals and charities throughout the United Kingdom.
I believe the decision to be misjudged for two reasons: one of them financial, the other political. The Hudson Institute index of global philanthropy, which counts private donations to overseas charities, shows how generous we in the United Kingdom are. On average, British citizens donate four times as much as Germans, seven times more than Italians and nine times as much as Spaniards. Fund-raising programmes on television, such as ‘Sport Relief’, ‘Comic Relief’ and ‘Children in Need’, show us the huge generosity of the British public when it comes to charitable giving. As Mr Weir said in his opening remarks, they give to the tune of £11 billion annually and huge sums of that come from a small pool of donors — the wealthiest in our society.
I believe it is a misjudgement for the Government to suggest that the wealthiest in our society are giving to charities because of tax reasons. It is wrong to say that. As Mr Bradley said, many individuals choose to give huge sums because they have been touched by a charity or because members of their family have had an illness for which they have received help from one charity or another. I think that that is the primary reason for many people to give; it is not that they will, necessarily, benefit individually. Indeed, the difference between collecting money through the tax system and individuals giving money and getting tax incentives for doing so is that the individual rather than Government can decide how and where their money is spent.
That leads me to the subject of the political difficulty with this proposal. How can the Conservative Prime Minister or Chancellor argue that this is compatible with their notion of the big society? David Cameron launched the Conservative manifesto two years ago this month. At that launch, he said that big government was not the answer to problems, whereas people outside government, such as charities, are the answer to many problems. The concept that voluntary and charity groups can deliver many of the services that government has traditionally delivered, and do so more cost-effectively, is right behind the big society, and I think that there is much merit in it. Large donors — large charitable givers — should be at the heart of big society and should not be those whom the Government tries to attack.
We have to ask why this is happening. It has happened because Conservatives are so worried about being labelled as the party for the rich that they have had to try to close what many have argued is the loophole of the rich using charitable giving to reduce their tax. However, as Members have pointed out, 45% of charitable donations come from only 7% of donors. That corresponds with other countries. The highest rates of charitable donations come where the wealthiest are given tax incentives to do it — the United States is another example — whereas, in countries where the rich are taxed to the highest degree, charitable donations are much lower.
I suggest that it is not particularly wise to suggest that we label as tax dodgers the individuals who are counted on and relied on by charities to ensure that they can deliver their services to communities and those most in need. The Government have made a mistake in doing that. As Members also said, if the Government are concerned that individuals are giving to what they have labelled as dodgy or illegitimate charities, action needs to be taken to ensure that that is not the case. The Charity Commission for Northern Ireland has done a lot of good work to ensure that all registered charities are legitimate, and that is the position that the Government should take. They need to remove this threat of a cap. If they do not, they will have a policy that is not popular. It is not a simplification of the tax system; it is not small government; it is certainly not big society; and it is not common sense.
Michael Copeland (UUP)
The 19th century novelist Dudley Warner once said:
“It is one of the most beautiful compensations of this life that no one can sincerely try to help another without helping himself.”
The irony of that statement should not be lost on the House. Although the words remain the same, the situation they have been applied to has changed the sentiment.
Let me begin by stating that my party believes that the coalition Government are absolutely right to seek to cut the colossal sums that some of the wealthiest people in the United Kingdom seek to offset against tax. Figures released by the Treasury last Monday prove that the rates of tax avoidance are far higher than it has previously been willing to admit. Indeed, some of the wealthiest, who pay no more than 10% tax, are taxed at a lower rate than their secretaries are.
No one doubts the dire circumstances in which the Labour Government left the nation’s coffers and the seemingly near-impossible task of balancing the books. In 2010, the coalition Government inherited a record deficit from the previous Labour Government in 2010. In March, the UK Government borrowed more than £18 billion, which is more than it takes to run everything in Northern Ireland for a year. The total borrowings for the 2011-12 fiscal year came in at just below £126 billion and have added to the total debt of £1·0225 trillion. The fact that hundreds of millions of pounds of income tax is avoided each year by people using seemingly legal loopholes does not help matters.
The clergyman Robert South once said:
“If there be any truer measure of a man than by what he does, it must be by what he gives.”
Wealth is not there to feed our egos, but to feed the hungry and to help people help themselves. Giving to charity may be altruistic or self-interested, and it may or may not do good. However, the present system draws in taxpayers’ money in the absence of such accountability.
Without doubt, the Chancellor has a duty to control and oversee tax reliefs. Offshoring money in tax havens, offsetting contrived business debts, converting income to capital gains via private equity and scores of other sleight of hand methods need to be controlled and, where possible, stopped. However, by including charitable donations, the coalition Government have taken a sledgehammer to crack a walnut. In the way in which only they can, they have taken a good proposal and turned it into something that could have a devastating impact on organisations that seek to do good. When combined with the so-called pasty tax and the granny tax, that measure demonstrates that the Budget may have been devised in an environment that is seemingly detached from reality and the difficulties experienced by ordinary people.
The proposal to cap the amount of tax relief that people can receive on charitable donations at £50,000 has the potential to significantly reduce charitable income, particularly for some of the largest and, therefore, best-established charities, including those that deal with issues such as cancer and ex-forces organisations. It could also have a devastating impact on our beleaguered university funding system, which has shouldered its fair share of the reduction in the deficit. That would deliver yet another kick in the face to the aspirations and opportunities of our young people, who are being asked to pay for past fiscal irresponsibilities to which they were not party. The measure also has the effect of potentially demoralising genuine philanthropists by branding them as tax dodgers. Some of the donors who signed a protest letter against the Budget are entirely selfless, shy, retiring and generous and are ready to support unpopular and radical causes with no conceivable payback.
The coalition Government have, quite rightly, moved to take the least well-off in society out of the tax system by raising personal allowances. Yet, at the same time, they are taking away from them, by significantly limiting the resources that charities will have at their disposal.
The Tory Party MP Zac Goldsmith perhaps summed up the reaction to the measure perfectly when he said that if Ministers did not produce a:
“more intelligent measure which deals with the loopholes”,
they would be remembered as the Government that “destroyed the charities sector” .
Simon Hamilton (DUP)
I am happy to make the winding-up speech on this debate, which was proposed by Mr Weir and to which my colleague Mr Ross was a signatory. It is right that, during a fairly brief debate, the Assembly has had the opportunity to put forward its concerns about this attack on charitable giving, which we share with many in Northern Ireland and across the United Kingdom. It is only right that we have had that opportunity and that we can reflect those concerns.
A constant theme throughout the debate has been the real generosity across the United Kingdom. Mr Weir put a tag on that when he said that £11 billion has been raised by charities in the United Kingdom alone. That is a colossal amount of money that is given each and every year to charities across our country. Within that cohort, the Northern Ireland people are exceptionally generous. Mr Ross pointed out that for events like Sport Relief, Comic Relief and Children in Need, every year you see that the tally that is raised in Northern Ireland far exceeds our population share in the United Kingdom. So, you see that our people are exceptionally generous.
A colleague, another member of my party who is here, told me a story one time about how he was acting as a treasurer for a committee that was raising money in his church. His church was allied to a church in Kent, England, in the leafy suburbs of London. It is known as the stockbroker belt and is somewhere you would think there was a lot of money. He said that the donations in the envelopes that came from the people from Northern Ireland far exceeded those from the people from that place in Kent. That is fairly anecdotal evidence that people in Northern Ireland are exceptionally generous, but we can see it backed up by the money raised for events like Children in Need.
As others have mentioned, the closing of this loophole will probably not affect a lot of small, local and perhaps even church-based charities in Northern Ireland. Indeed, there may not be that many people in Northern Ireland who are going to be hit by the closure of this loophole. Many would like to be in the position where they could give away £50,000 or 25% of their income, but the reality in Northern Ireland is that there probably is not the degree of wealth to do that. However, we have seen, experienced and benefitted from philanthropists, to put a collective noun on the people involved. Perhaps that has been more through the big global or UK-wide charities, where we see some benefit here for people in Northern Ireland directly.
Mr Copeland mentioned universities, and I think of the late Allen McClay, whose generosity allowed a new school of pharmacy to be built at Queen’s. There has also been a new investment in libraries, and we saw Mr O’Reilly donating to the brand new library at Queen’s. So, we have seen the level of philanthropy that can make a real difference, particularly in our universities and our colleges.
Others have quoted the fact that some 45% of money given to charity comes from 7% of donors, which shows the extent to which we are dependent on philanthropists for charitable donations. The fact that around eight or nine out of 10 philanthropists are saying that they are going to reconsider the amounts that they are giving because of the closure of the loophole should fill us all with some dread about what the impact will be, whether it is on universities, cancer charities or charities for ex-servicemen, which Mr Copeland also mentioned.
The closure of the loophole could not come at a worse time for charities. Even in these difficult times, £11 billion has been raised in the UK over the past year. However, that number is under attack simply as a consequence of the downturn that we are in, because people are questioning everything that they are doing and everything that they are spending money on, including charities. So, this could not come, as Mr Cree said, at a worse time for charities in the United Kingdom.
This measure seems to be somewhat contrary, as Mr Ross pointed out, to the Government’s flagship policy of growing a big society. We want charities to step into the breach and do more. Everybody in this House will subscribe to the argument that charities can often deliver public services that we are responsible for in the Assembly better because they have much better contacts in the community and a much better grasp of the subject than any institution or organisation that government can create. The Government have pushed the policy of a big society verbally, but a lot of the things that they have been doing have been contrary to it. There is no greater contradiction than the closing of this loophole or tax relief.
As Mr Bradley pointed out in his comments, the work that charities are doing is saving government in the United Kingdom and government in Northern Ireland money. It is exceptionally difficult to quantify the contribution that charities make day in and day out by saving us money through the services that they deliver and the support that they give.
So, the measure not only seems contrary to the Government’s flagship policy of a big society, but it seems to be attacking their own interests, in that we are quite probably going to see a lot of charities that deliver services across the United Kingdom coming to government, whether that is central government or local government, and saying, “We have had a reduction in the money that we bring in through charitable giving, in part because of the closure of this tax relief loophole, and we now need support from government.” Therefore, it becomes a vicious circle rather than a virtuous one.
Judith Cochrane and others mentioned a perception about some of those who give to charity, and I think that everybody would accept that not everyone gives money for altruistic reasons. Some give to charities that are in their business’s interest, and others give for reasons of corporate social responsibility, perhaps to take away from the bad look of some of their company’s activities and make it look good by giving a lot of money to charity. Frankly, I do not care where the money comes from or for what reason, as long as it continues to come in large volumes.
There is a perception, cultivated by Her Majesty’s Government’s spokesmen, particularly those in the Treasury, that a lot of people dodge tax and give money to false charities or charities that are in their personal interest. If that is the case and the reason for closing the loophole, the loophole should be closed. As Mr Copeland said, a sledgehammer should not be taken to crack the nut. If the problem is that people are giving money to false charities, shut down those false charities, but do not attack all charities, including the good ones doing excellent work across our country.
A major problem with the policy is that the Government are trotting out as an excuse for it that people are exploiting a loophole by giving to false charities. It may be legitimate to want to close that loophole, but they should not remove people’s ability to get tax relief on charitable donations. I appreciate that the Government have a laser-like focus on deficit reduction, at the expense of all other arguments that might be put forward. Given that they have to reduce the debt that they inherited, that is fine. However, whether it is the pasty tax, the granny tax or now shutting down charitable donations, they just do not seem to care what they target to achieve that objective. We hear stories that these ideas have been sitting in the Treasury for, in some cases, decades and are being brought out to the current Chancellor, who slavishly adopts them because they suit his purpose of trying to reducing the deficit at breakneck speed.
Closing a loophole in the tax system is no bad thing. I do not think that anybody here wants people to be exploiting tax loopholes for their own ends. There is no argument for that. An annual cat-and-mouse game takes place: highly paid lawyers and accountants versus HMRC. Every year, that is corrected by a Finance Bill, only for those highly paid lawyers and accountants to find another loophole to exploit. The process goes on and on. By all means, the Government should close all those loopholes, but the message from everyone in the House is that tax relief on charitable giving is altogether different. Although the Government’s aim might be to target the small percentage who give to so-called false charities, the result will be that millions suffer. The message going out loud and clear from the Assembly to Her Majesty’s Treasury and Government is that we appreciate the work that charities do. Everybody here is grateful for what they do across Northern Ireland each and every day. We do not want that good work, which helps and supports what we in government are trying to do, to be curtailed by the closing of a tax loophole.
I am pleased to have been able to make the winding-up speech and grateful for the support from all parties in the Chamber who contributed. I thank everybody for their contribution and hope, as other Members said, that the Treasury will hear our voice added to the thousands on thousands of others asking it to think again, because its proposal will be hugely detrimental to the charities doing such good work across the United Kingdom.
Question put and agreed to.
Resolved:
That this Assembly expresses concern at the proposals by the chancellor of the exchequer is the government's chief financial..." class="glossary">Chancellor of the Exchequer to limit tax relief on large charitable donations; believes that this could have a devastating impact on charities; and calls on Her Majesty’s Government to abandon this approach.