‘(1) The Treasury must, within 24 months of the Act coming into force and annually thereafter, prepare a report on the Gift Aid Small Donations Scheme (GASDS) and lay it before the House of Commons.
(2) Each such report must provide details of—
(a) the number of charities benefiting from the GASDS in—
(iv) Northern Ireland;
(b) the number of charities benefiting from the GASDS that are—
(i) registered with the Charity Commission, Office of the Scottish Charity Regulator, or the Charity Commission for Northern Ireland, as appropriate;
(ii) exempt charities;
(iii) excepted charities;
(c) total expenditure on the GASDS; and
(d) the level of identified fraudulent claims in the GASDS.’.—(Cathy Jamieson.)
Brought up, and read the First time.
With this it will be convenient to discuss the following:
New clause 2—Post-legislative review—
‘The Government shall, within 24 months of this Act coming into force, undertake a review of the operation and administration of the Gift Aid Small Donations Scheme and lay a report of the review before the House of Commons.’.
New clause 3—Complementary gift aid for small donations to small charities—
‘(1) Smaller charities, community amateur sports clubs or recently established charities, which do not meet the eligibility criteria in section (1) shall be eligible to apply to HM Revenue and Customs for complementary gift aid for small donations.
(2) “Small donations” for the purposes of complementary gift aid shall be as provided for in section 3 and the Schedule.
(3) That maximum donations limit for complementary gift aid shall be £5,000.
(4) The “connected charities” conditions in sections 4 and 5 shall also apply for charities making claims for complementary gift aid for small donations.
(a) HM Revenue and Customs may stipulate the supporting verification it may require from relevant agencies or authorities or designated persons in respect of any claims for complementary gift aid for small donations to small charities;
(b) such agencies, authorities or designated persons may include charity commissions, local government officers, police or police and crime commissioners, members of relevant professional bodies or others designated by devolved administrations in agreement with HM Revenue and Customs for these purposes.
(6) This section shall come into force on
This would provide for a separate scheme of supporting payments from HM Revenue and Customs, in the spirit of gift aid, to smaller or newer charities including those formed in response to a particular event.
Amendment 9, in clause 1, page 2, line 7, leave out subsection (6) and insert—
‘(6) The “specified amount” for a charity for a tax year is (subject to section 2(1))—
(a) £5,000 for a charity eligible for the full specified amount; or
(b) £2,000 for a charity eligible for the reduced specified amount.’.
This amendment is consequential on amendment 8.
Amendment 8, in clause 2, page 2, line 11, leave out subsection (1) and insert—
‘(1) A charity is an eligible charity for a tax year if—
(a) it has made a successful gift aid exemption claim in at least three of the previous seven years. In such cases, a charity will be eligible for the full specified amount; or
(b) it has made successful gift aid exemption claim in the previous year. In such cases, a charity will be eligible for the reduced specified amount.
This amendment introduces a probationary period for charities that do not have the claims history required in subsection (1)(a) of this clause. It allows them to benefit from a reduced specified amount until a claims history has been established. This also removes the requirement for a start-up period.
Government amendment 24.
Amendment 32, page 2, line 14, at end insert ‘or
(c) the charity is a “small charity”;
(d) the charity has been established for a specific event or project which has concluded.’.
This amendment extends the meaning of eligible charity to small charities and those established for specific events or projects.
Government amendments 25 and 26.
Amendment 10, page 2, line 26, leave out paragraph (a).
This amendment is consequential on amendment 8.
Government amendment 27.
Amendment 11, in clause 4, page 3, line 9, leave out paragraph (b) and insert—
‘(b) are eligible for the same rate of specified amount (subject to section 2(1)) for the tax year.’.
This amendment is consequential on amendment 8.
Amendment 12, page 3, line 15, leave out paragraph (a) and insert—
‘(a) the specified amount (subject to section 2(1)), divided by’.
This amendment is consequential on amendment 8.
Amendment 13, in clause 6, page 4, line 41, leave out paragraph (b) and insert—
‘(b) if less, the specified amount (subject to section 2(1))’.
This amendment is consequential on amendment 8.
Amendment 14, page 4, line 45, leave out paragraph (b) and insert—
‘(b) if less, the specified amount (subject to section 2(1))’.
This amendment is consequential on amendment 8.
Government amendments 28 and 29.
Amendment 15, in clause 9, page 6, line 20, leave out paragraph (a) and insert—
‘(a) two or more charities (“connected eligible charities”) are connected with one another in a tax year and are charities eligible for the same rate of the specified amount (subject to section 2(1)) for the tax year, and’.
This amendment is consequential on amendment 8.
Amendment 16, page 6, line 37, leave out paragraph (b) and insert—
‘(b) if less, the specified amount (subject to section 2(1))’.
This amendment is consequential on amendment 8.
Amendment 21, page 7, line 10, at end add—
‘(8) The Treasury must, within 24 months of this Act coming into force, prepare a report assessing the impact of—
(a) the connected charities provisions; and
(b) the community buildings provisions on the ability of charities to benefit from the Gift Aid Small Donations Scheme and lay it before the House of Commons.’.
Government amendment 31.
Amendment 33, in clause 18, page 12, line 20, at end insert—
‘“small charity” means a charity whose gross income for a tax year is no more than £25,000.’.
This amendment defines a small charity as one whose gross income for a tax year is no more than £25,000. This figure is consistent with that given for lower-income charities in the Charities Act 2011 and the Office of the Scottish Charity Regulator’s Routine Monitoring Policy.
I look forward to further interesting debates on the proposals—we had interesting debates both on Second Reading and in Committee. This large group includes significant proposals, although a number are consequential on acceptance of the main amendments.
We discussed a number of the significant proposals on Second Reading and in Committee. They follow a pattern. I thank the Minister—it might be one of the few times I do so—for listening to some, but not all, of the concerns raised in Committee. At the time, it was not always clear that he would introduce amendments or deal with other things, but I thank him for listening. Crucially for the charities, if not for the Opposition, he has responded to points that the charitable sector raised with us.
Today we have once again heard concerns from the wider charity sector about the reported deficit of more than £300 million in 2011, which it has brought to public attention. That shows the current difficulty of getting donations and income into charities while at the same time they are facing increased burdens on the services they provide—not that the sector sees its services as burdens. Hopefully, more charities will benefit from the Bill now than would have benefited from it when we debated it in pre-legislative scrutiny, on Second Reading and in Committee.
We had long debates in Committee on some clauses and amendments. I am sure the House will be relieved to know that I have no wish to repeat them verbatim—that would be unhelpful—but it is worth noting that the same issues came up in Committee time and again, which suggested that further work needed to be done to amend the Bill. We also need to continue to scrutinise what the Bill will do in the light of subsequent amendments.
There is an extensive list of proposals in the group, and I want to refer to a number of them. It would be wise of me to put on record that we have tabled new clauses 1 and 2 because they would deal with a number of concerns that the Opposition and the charity sector have raised throughout the Bill’s progress. Perhaps the Government have acknowledged—in their amendments in Committee and on Report—that the original Bill was not drafted as tightly as it might have been, or in a way that ensured as much fairness and equity as possible.
It is therefore right and proper that we return to the issue of formally reviewing the Bill after a two-year period. The Minister said many times in Committee that he was willing to look again at the measures and acknowledged that he wished to amend the Bill—we will discuss that later. However, when the Chancellor first announced the scheme, he said he wanted it to deliver
“gift aid on the contents of the collecting tin and the street bucket”—[Hansard, 23 March 2011; Vol. 525, c. 962.]
He also pledged that the reforms would be “bureaucracy-lite”. That theme has run throughout our discussions.
The Bill will doubtless benefit a number of charities and community amateur sports clubs, which is welcome, but the Government need to reassure charities that they are committed to making the Bill the best it can be. Given that many of the concerns that have been outlined will not result in changes to the Bill before Royal Assent, we can know how well the scheme is performing in practice only if there is a formal review. In any event, it would be good practice to review legislation after a period of its operation. That theme ran through a number of proposals that the Opposition tabled in Committee.
The Minister will note that we are trying in new clauses 1 and 2 to add extra detail to the report that we originally asked for in Committee. Let me say a few words about why a detailed report is so important. I do not want to go through all the arguments again, but we heard in Committee that anywhere between a third and a fifth of charities would benefit as a result of both the strict eligibility criteria and the community buildings and connected charities provisions, which we have debated extensively at various stages. The corollary to that is that a significant number of charities will be unable to benefit. The scheme could therefore be divisive, favouring some types of charities over others. That theme also ran through the debate.
Attempting to solve one problem often produced unintended consequences and difficulties—I am thinking of our debates on churches, and on large versus small charities—and that is why we ask in the new clauses for a breakdown and a review that gives more detail. That is important. New clause 1 mentions registered charities, exempt and excepted charities, and charities in different regions. That would mean that we can fully understand the impact of the scheme once it is in operation and redress any inequalities as soon as possible.
We spoke extensively in Committee about the complexity of the Bill. As we heard, it is estimated that 160 pages of guidance on Her Majesty’s Revenue and Customs website will be needed to explain it. There are 80 pages on registering for gift aid, so perhaps we can agree that the Bill is more complex than we would like it to be. Not just the Opposition and the charity sector understood that and raised such particulars; the Minister, in the sixth sitting of the Bill Committee on
“I readily admit that this part of the Bill is complex and that we do not know exactly how it will work until it comes into practice.”––[Official Report, Small Charitable Donations Public Bill Committee,
In another Committee sitting, he said that
“the very nature of trying to capture issues such as connectivity—whether it is here where we are dealing with charity, or in other laws where we are dealing with trusts—is complex.”
He has also said that:
“Clearly HMRC is like any organisation; mistakes can always be found.”––[Official Report, Small Charitable Donations Public Bill Committee,
I make those points simply to reinforce the rationale for building into the process a formal review, because of the nature and complexity of the Bill and the amount of guidance that will be required. At one point in Committee, I said that if a charity had £1 for every word of guidance needed, there would be a fairly significant donation to good causes. It is important that the Bill requires a formal review, so that we can understand the provisions and ensure that we keep tabs on the costs of the scheme.
In the Minister’s deliberations in Committee, he often spoke of having to be a good guardian of the public purse. I would have thought that it would therefore be only right and proper for the Government to commit formally to reviewing the costs of the scheme after an appropriate period—reviewing the spending, because the Minister said that as many charities as were eligible would be able to take part in the scheme, and to ensure that the money was equitably distributed, identifying any problems in the regions of the different nations that make up the UK.
There are a number of concerns about the data on which we begin the process. The Minister was good enough to write to the Opposition to answer a number of the questions we raised in advance of the debate. He mentions in his letter amending the matching rate; amending the eligibility period to two years; introducing a power to amend the eligibility criteria in future; and changing the powers in some of the clauses. He goes on to give some information about organisations that can claim gift aid but are not covered by Charity Commission data. He gives figures, and that is helpful, although—as is often the case in these scenarios—the answers to questions immediately prompt a series of other questions. Some of the responses that we have subsequently had from the charity sector suggest confusion in some areas, and I hope that the Minister will be able to clear that up. He could also help us to establish that baseline from which the success or otherwise of the scheme could be judged in the future.
For example, in the Minister’s letter he suggests that 60% of the organisations claiming gift aid in 2009-10 were registered charities. I am not entirely sure what that 60% represents. Was that 60% of the 68,357 charities to which gift aid repayments were made in 2009-10? That figure comes from HMRC’s own release. If that is the case, it would suggest that just over 41,000 registered charities were claiming gift aid in that year, which of course means that some 40% of the total were claiming other types. It would be helpful if the Minister could clarify the point and reassure us.
The Minister also indicates in his letter that HMRC does not hold data on the number of charities making gift aid claims. That is a bit confusing because HMRC has been able to provide some statistics and figures, so it seems that it does hold some underlying data, if perhaps not all of the data that we have sought. It would be helpful to have some clarity on that point. Does HMRC not hold up-to-date data on the number of registered charities or have we somehow misunderstood the Minister’s letter? If so, the charitable sector is saying that it too could have misunderstood, and that does not bode well for good communications.
It would be helpful if we were able to ensure that we have such provision in the Bill. As we know, Ministers come and Ministers go. This Minister is relatively new in post and it is good to see that he is still here to reap the benefits and take the plaudits when the Bill passes—as it no doubt will—but another Minister may come along in due course who may not have paid quite so much attention to the Bill and perhaps has not fully appreciated the amount of attention to detail from this Minister and the commitments that he made in Committee. For that reason, it would be helpful to have something on the face of the Bill, as outlined in new clauses 1 and 2.
I fully appreciate the fact that the Minister has tabled some amendments, to which he will speak in due course. Depending on what he has to say, those amendments may make some of the amendments that we have tabled superfluous or redundant, but it is important to place on record our reasons for tabling them.
A whole series of consequential amendments flow from amendments 8 and 9, which provide for a sort of probationary period for charities before they qualify. The Minister will no doubt already be thinking that his amendments on the claims history would give more benefits to some charities than our amendments. That may well be the case, but the counter-argument would be that under our amendments charities would be able to benefit sooner.
The Minister will also remember that in Committee we tabled several amendments pushing him to reconsider various aspects of clause 2. We did that because the sector essentially felt that the three-year history of successful gift aid claims and the requirement that charities must have been in existence for at least three complete tax years before they could benefit from the scheme were overly onerous and out of proportion to any risk of fraud. The Government have tabled some amendments in this area and I take that as a sign that they have listened to our concerns and taken steps in the right direction.
Is it the hon. Lady’s understanding that Government amendment 31, which seems to allow some flexibility for subsequent changes of the rules, nevertheless—according to the explanatory statement in the notes—insists that previous gift aid claims have to have been made, which of course may well preclude large numbers of the very small charities that the Minister presumably wants to help? Therefore it will still work against the interests of some of the smallest charities, and I am personally very disappointed that an amendment with more flexibility has not been tabled.
I thank the hon. Gentleman for making that powerful point, and we will come back to it later when we discuss other amendments. Whatever happens, I would hope that the Minister sees the point that the hon. Gentleman raises as a reason for ensuring that, at the very least, a review clause is built into the Bill. We would want to know whether a continuing number of small charities continued to be unable to access the scheme and gain benefits. Indeed, at some stage we will discuss the whole question of charities set up in response to particular circumstances—for very worthy causes—that may not be able to benefit at all from the scheme because the need will have been met and they will have moved on by the point at which they become eligible even to apply.
The idea behind the scheme is to boost the income of small groups that rely on bucket donations, and the hon. Gentleman has pointed out very succinctly that there are many such groups which simply will not be able to take advantage of the scheme, including those which do not have the resources to apply for gift aid or are just starting out. Our amendments seek to help those charities by removing the requirement for the start-up period and instead introducing a qualification period. We had some debate on this in Committee and our amendment would allow charities—new or established —without that claims history of gift aid to claim for a reduced amount of £2,000 after one year of claims history and then to claim for the full £5,000 once they had built up a three-year history.
As we have already heard, there are concerns that the Government’s requirements will be a significant barrier to participation for many charities that have not previously registered. They will also exclude organisations to which even an additional £500 would make a huge difference in income. Instead, it would tend to favour the bigger, more established organisations that may have the finance and fundraising departments to make gift aid claims. Many of the smaller, ineligible charities will already have been registered with the official regulator for three years. They will have had to submit accounts and pass the fit and proper person test, which is pretty robust. For some charities, their major fundraising may be from non-eligible sources, such as donations from trusts, events and charity shops, and they will not have been able to claim gift aid for the required three years even if they have significant income from small donations through collections which would be eligible for this scheme. For trustworthy established charities to be forced to wait a number of years before making claims reduces the incentives for registering.
The sector gave us a couple of examples. I will not go into all the detail, but one example was Wansbeck CVS, which has just set up a small grants fund in memory of a community development worker. It is designed to give small grants to local charities, but it had not been previously registered for gift aid. Under the current proposals, only donations received years after it registers for gift aid will be eligible. That is one of the examples of possible problems we were given.
We suggested that introducing a qualification period would go some way towards allowing charities that stand to benefit most from the scheme to be able to claim a reduced amount of £2,000 after only one year. That would at least allow them to cover their administration costs for claiming, while giving them an incentive to fundraise further and claim for standard gift aid. We tabled the amendments to try to provide a way forward that would balance the risk of fraud, identified by the Minister in Committee, with the ability to give a boost to the scheme for charities that need all the help they can get in tough times.
Amendments 17, 18, 19 and 20 relate to community buildings, on which points have been raised consistently during this process. The Minister will recall that in
Committee we tabled a number of amendments to try to change the community buildings provisions substantially. We believe that they are seriously flawed and unfair to charities that would find themselves disadvantaged and unable to benefit. Many in the sector were disappointed that the Government did not give any ground, and I am disappointed that they have not used the opportunity of the Report stage to reconsider, as the Minister has done on other matters.
I suspect that the Minister will not move on these provisions, but if we cannot have a wholesale change to the Bill at this stage, I hope that the Government will at least be persuaded to look again at one particular aspect of the community buildings provisions. Clause 6(3) defines the community building amount as
“the sum of the small donations that are made to the charity in the community building in the tax year by group members while it is running charitable activities in the building”.
Even before Second Reading, that point was raised consistently as one that had the potential to cause difficulty for some organisations. In an attempt to solve the problem in relation to churches—the Minister rightly and understandably wanted to find a solution—we have a scenario in which it will be very difficult for other charities to take advantage of this part of the scheme, and that will potentially cause more problems than it solves. As we have heard previously—it is worth reiterating the point—clause 6(6) goes on to define a group member as:
“a member of the group of people with whom the charity is carrying out the activity”.
We heard a number of examples relating to that point, most vividly from my hon. Friend Mr Mudie, who spoke about a potential scenario with regard to a charitable group involving Alzheimer’s patients and asked whether it would only be those within the group who were able to make donations.
We have an issue with the principle here. We are concerned that for a great number of charities the beneficiary and the donor groups are likely to be two separate constituencies of people, and we do not want that to become a discriminating factor in whether charities can access the scheme. Indeed, it seems to us to be the exception rather than the rule that funds would be raised during the course of charitable activities by those benefitting from them. If we set aside churches and the collection plate, there are many scenarios where it would be entirely inappropriate for the bucket to be passed around the 10 or more members sitting there while the charitable activity was being undertaken. For example, during counselling work or work that provides activities for young people, or in which young people are involved, that would simply not be sensible.
The nature of fundraising is highly dependent on the type of activity and an organisation’s beneficiary group. The requirement in question would disadvantage the types of charities in respect of which it would not be appropriate or possible to raise funds in this way. Notwithstanding the debates we had in Committee, we still have concerns about whether such provision will go against the benefit principle of gift aid where gift aid is not available and where a donor receives personal benefit. In Committee, the Minister was at pains to say that that was not the case. However, we still have some concerns about the wording in the Bill, so this is another area where it would be important to have some review and some consideration about whether the Bill will work as it is intended to.
I will not repeat what was said in all the debates, but in Committee we heard that it would be difficult for such charities as Victim Support and the Alzheimer’s Society to benefit from these schemes, which is why we have tabled these amendments. Once again, the charitable sector—most recently the Charity Finance Group, the National Council for Voluntary Organisations, the Institute of Fundraising and the Charities Aid Foundation—has stressed that point. Such organisations are concerned that the only donations that will count will be those made within a community building. Although some changes have been made, there are concerns about whom the provision would actually apply to, because the people participating, not including staff or volunteers, might be vulnerable people.
I appreciate that I am speaking at some length, but we have a number of important and significant amendments. In my notes, my shorthand for amendment 21 is that it is a review amendment. It may seem that all Opposition Members talk about is review, review, review, but I hope that I have begun to lay out exactly why we feel that the provision to review is important. Although we have tabled an amendment that focuses on the part of the community building provisions I have just been talking about, however, I do not want the Minister to think that we have given up on all the concerns we had on other aspects of the community building provisions.
From our debates in Committee, the Minister will recall our concerns about clause 7. The clause states that charities must run their charitable activities “in a community building” for them to be eligible for top-up payments. We had a wide-ranging discussion about whether charitable activities could be run from community buildings, whether they had to be in community buildings and the relationship between the organisation setting up and those participating. The Bromsgrove scouts became a touchstone—how the provision would effect the Bromsgrove scouts became the main discussion point. We also heard from charities such as the Royal National lifeboat Institution, which runs its charitable activities—this has been mentioned on a number of occasions—at sea, and a large number of charities that run their activities in the community, such as Victim Support and the Alzheimer’s Society. They often hold their counselling sessions or work in homes or in other community spaces, and we heard concerns that those organisations should not lose out.
We also raised concerns in Committee about clause 8, which specifically excludes from the scheme properties used for residential purposes, limiting the ability of care homes and hospices to access it. In Committee, the Minister stated that patients in hospices would still be registered at their homes, as he understood it, for the purposes of the Bill. People go to a hospice at a sad stage in their life, but to all intents and purposes their home is elsewhere and therefore should not count as a residence. He gave us some assurances on the care home sector, but there are still some concerns.
I gave the example of organisations providing residential provision for young people possibly for 52 weeks of the year. To all intents and purposes, such provision might form young people’s home for a time. There remain concerns in that area. The sector is also concerned that this approach might be a bit short-sighted, failing to take into account not only the ageing population and possible changes in hospices’ and care homes’ functions but the possibility, notwithstanding the best will of the Minister, that the legislation might exclude people from benefiting.
In addition to the community buildings provisions, clauses 4 and 5 aim to prevent charities from fragmenting so as to be eligible for more money under the scheme. Clause 5 defines the meaning of “connected charities” and stipulates that they are deemed to be “connected” if
“at least half of the trustees of one of the charities are…trustees of the other charity,…persons who are connected with persons who are trustees of the other charity, or…a combination of both.”
Once again, the Committee discussed at length how in small communities volunteers often sit on the boards of several local charities. The concern is that, although their work might not be connected, the charities could be deemed to be connected for the purposes of the Bill and, therefore, not eligible for the full top-up payments. Even more problematic was the possibility of charities being deemed connected if a man sits on one board, and his wife or sister sits on another.
Clause 5(7) states that
“a charity is not to be regarded as connected with another charity at a time for the purposes of subsection (1) unless, at that time, the purposes and activities of the charities are the same or substantially similar.”
Our concern is that, in trying to create fairness in one area, the Government might—in the community buildings and connected charities clauses—have created areas of inequity between the different charitable causes. The reason for amendment 21, on providing for a review of the community buildings provisions, is to take account of these concerns. They have been consistently raised and have not gone away, notwithstanding the Minister’s best efforts in tabling further amendments.
Government amendment 28, on the definition of running charitable activities in a community building, shifts from HMRC to the Treasury the power to change the number of people who must be present during a charitable activity. Likewise, Government amendment 29 shifts from HMRC to the Treasury the power to decide whether a building qualifies as a community building. I will be interested to hear why the Minister has tabled those amendments at this stage. He will recall our extensive discussions on this subject in Committee. We probably spent longer on whether HMRC was the correct agency of government to deal with the Bill’s operation than on any other issue. I would be interested, therefore, to hear why he thinks this is important now. Are they technical amendments or does he accept that it would not be right for HMRC to deal with certain of these issues? It would be helpful if he could enlighten us.
Amendments 32 and 33 relate to small charities. I have already touched on the concerns regarding small charities and what I described as pop-up charities—those that deal with a particular need which might not intend to be around for many years and which quickly move to collect substantial amounts of money. Dr Whiteford will speak to her amendments in due course, and will want to say more about her rationale then. Whether the Minister accepts them or not, however, they touch on another reason why the review clauses are important: they would enable us to review the scheme’s operation, taking into consideration organisations that might be able to benefit but which have been excluded because of how the scheme has been constructed and because of the sheer complexity of the application process for gift aid—there are 80 pages on gift aid and 160 pages of guidance—that organisations must go through to be absolutely certain that they are eligible.
I look forward to hearing the Minister’s response. I stress again that we want the Bill to pass. The reason for the amendments and our consistency on where we think the Bill still requires amendment even at this late stage is that we are relying on the charitable sector to tell us what works and what might be a problem. As I said at the outset, we recognise that the Minister has listened and—to be fair—in some instances introduced further amendments, but I press the case again. He has been good enough to recognise some of the areas in the Bill that need improvement, and he would gain favour with the whole House and the charitable sector if he could recognise the remaining areas that could be further improved and, even at this late stage, accept some of the amendments. That would make the Bill even better. The review clauses would allow us to revisit areas that I suspect will cause charities the most difficulty. We want people to benefit, not lose out, from these measures, so I hope that he will accept at least some of our amendments.
It is a privilege to speak in this debate. As hon. Members present at the time will know, we had some good, positive and, indeed, consensual discussions in Committee. Labour Members are keen to see the Bill passed, because we recognise that much of it is an extension of what previous Labour Governments did. That is why we want to get it 100% right. Things such as the compact for the voluntary sector and the immense growth and development of gift aid happened on Labour’s watch, and we are keen to see that trend continue in the Bill.
Certain groups will rightly be especially pleased with the Bill. It is fair to say that the dioceses, Churches and faith groups welcome the Bill, as do we, and it is right that we support those groups and the tremendous work they do in communities across the country. A range of other charitable groups will also benefit.
I am pleased with certain changes in the matching principle: I am not a betting person, but, on this occasion, 10:1 is clearly better than 2:1. Nevertheless, we are asking the Minister to listen to the voice of the national charities’ voluntary organisation, the Institute of Fundraising, as well as the Charities Aid Foundation and other groups, which are saying, “If you are prepared to improve the Bill in certain ways, as you have been, please think again about having the link with gift aid, if we really want charities, including those not currently claiming gift aid, to benefit.” I urge the Minister to have at least a little think about that. He and the Government have gone some way towards accepting some of the changes that those groups wanted. Let us get it 100% right. I urge him to consider those other changes too.
I want to look at the issue of reviewing the legislation, about which my hon. Friend Cathy Jamieson spoke with great eloquence. We know that many things in the Bill will work, but if the development of community and voluntary sector groups over the last 10 to 20 years is anything to go by, we know too that fundraising has changed dramatically. What worked yesterday will not work today, and what will work tomorrow will probably not have worked today. It will change over time. That is why we ask the Minister to consider having a review.
Mention has been made about the way donations are made, and I am confident that more mention will be made of it. What interests me is that if one made a £10 cash donation, there could be benefits under this Bill, but not if the same donation were made on a mobile phone or with a bank card. As someone from generation X—I have not actually checked, but I think I am—that strikes me as a little odd, but let us think about the new donors we want to cultivate in generation Y, as I think it is called. If we are to build a new philanthropic culture that encourages younger and newer donors, we must at least be open on that point. I urge the Minister to look carefully at that provision, which I know has already been mentioned by my hon. Friend the Member for Kilmarnock and Loudoun, and I know it will be mentioned later. I urge him to reconsider and to support the concept of an ongoing review so that future charities Ministers and other Ministers can look at this legislation and say, “Let us make it work for today’s generation.”
Let me begin by declaring an interest. Until relatively recently I was a trustee of two charities registered in Scotland and I remain a trustee of the Parliament Choir, which also has charitable status.
I acknowledge the progress made on the Bill in Committee and the steps people have made across the House to come up with constructive solutions to the acknowledged weaknesses of the legislation in its original form. I hope the Minister will take on board some of this evening’s amendments, not least the two in my name in this group—amendment 32 and the consequential amendment 33. My amendments are designed to provide a mechanism to allow smaller and project-specific charities to benefit from gift aid top-up payments without having to have made a successful gift aid exemption claim in three of the last seven years, or two of the last four—I am conscious that the Government have tabled an amendment to improve that part of the legislation. For the sake of clarity and simplicity, I propose that a “small charity” be defined as one with a gross annual income of £25,000 or less. As with other amendments in the group, the aim is to bring more small charities within the ambit of the legislation, which is a shared aim across the House this evening.
The reason I urge the Government to look closely at my amendments is simply that smaller charities often do not benefit from gift aid, and in some cases do not even register for it. The very charities that this Bill is intended to benefit are among those that are least likely to be registered for gift aid or to have claimed it regularly even when they are. As the proposals stand, an eligible charity has to have been registered with Her Majesty’s Revenue and Customs for a minimum of three years, made a gift aid claim in three of the past seven years, and not had a penalty imposed in making a gift aid claim. We know that around 100,000 organisations are registered with HMRC for gift aid, but only 65,000 claim each year, which is a significant gap. They include not just general charities, but excepted charities, such as churches, exempt charities, such as museums and foundation schools, and community amateur sports clubs. At the moment, many small charities are not registered with HMRC and do not have a three-year track record of making gift aid claims, which particularly affects charities run solely by volunteers—those that do not have professional staff, including fundraisers, or the time and resources that other, more professionalised charities do. Such charities are often involved in the very projects that attract the largest active community involvement and support, which in my view are exactly the sorts of activities that we should use the Bill to incentivise in our civil society.
Notwithstanding the proposal to decrease the three-year registration period, any time limit will mean that charities engaged in short-term or fixed-term fundraising will have little incentive to register for gift aid with a view to taking part in the new scheme. Whether it is fundraising to replace the windows in a listed community building or raising funds for special equipment for a disabled youngster, any one-off projects raising relatively modest sums of money over a short period will find it difficult and unduly cumbersome to benefit from the scheme. Even the Government amendments this evening will not meet the needs of short-term appeals. Indeed, charities that receive only cash donations and do not fundraise in other ways will have no opportunity to claim gift aid even if they would like to.
Although I fully accept that any definition of a “small charity” will be to some extent arbitrary, I want to explain to the House why I have suggested £25,000 as an income level and assure Members that I did not just pluck that number out of the air. It is already the threshold that the Office of the Scottish Charity Regulator uses for the treatment of smaller charities in reporting and monitoring. There is a recognition that reporting and monitoring need to be commensurate with the size of an organisation, and the burden of compliance needs to be proportionate too. Charities with an income below £25,000 per annum have to submit an annual return, but do not have to submit the supplementary monitoring returns and annual accounts required by larger organisations.
Similarly, in England and Wales, the Charities Act 2011 contains numerous mentions of “lower-income charities”, which are for the most part—but not exclusively—defined as having a gross income of £25,000 or lower. That definition is used to determine the requirements for auditing and annual reporting—for instance, in part 8 of the 2011 Act, which deals with charity accounts, reports and returns. As the registration of charities has not commenced in Northern Ireland, the situation is somewhat different there, but there are nevertheless distinctions drawn between very large and smaller charitable organisations. As the greatest risk that needs to be managed in this Bill is the potential for fraud, defining a “small charity” in a way that is consistent with the accountability practices and processes already in use by charity regulators would be a useful step forward.
Before I conclude, I want to pick up a point that Cathy Jamieson made about connected charities. As someone who represents a rural constituency, I absolutely concur with what was said earlier. In rural communities, the trustees of the local village hall will often be drawn from the trustees of the various groups that use it. There is every likelihood that the same people or their spouses will appear on the Kirk session, and they might well be on the school-parent council too. Therefore, the cohesiveness of those small communities—where some people are extremely active in a range of activities and where a lot of entertainment is very much home grown and home run—will potentially be affected. I urge the Minister to look carefully at how the Bill’s important safeguards will play out in remote rural communities, where such cohesiveness is still very much part of the fabric of daily life.
To put this debate in context, 60% of all charities active in Scotland—around 14,000—have a gross annual income of less than £25,000, with almost 9,000 having an income of under £5,000 a year, more than 2,000 whose income is between £5,000 and £10,000, and just over 3,000 with a gross annual income of between £10,000 and £25,000. Those smaller charities represent a disproportionate number of charitable organisations, with 47% of all charities in Scotland—almost half—having a gross income of less than £10,000 a year. Published information from the Charity Commission shows a similar picture in England. In June 2010, there were 73,000 registered charities in England and Wales with an income of less than £10,000, representing 45% of the sector. Given those proportions, it is incumbent on all of us to look at how we can strengthen the Bill for the smallest charities and ensure that they are able to benefit from the legislation, as was originally intended. According to the National Audit Office, 67% of the charities across the UK generate only 1.4% of charitable income. Let us bear it in mind that the Bill is supposed to support those smaller charities. I urge the Government to look carefully at the amendments tabled by Members on the Opposition Benches, including amendment 32.
Charities are facing challenging circumstances, with falling financial support from the Government and falling regular donations as a result of the squeeze on people’s spending. This is a tough environment for any charity to work in. Furthermore, the reliance on the charitable and voluntary sector is increasing, as we are seeing from the number of food banks that are springing up and the greater reliance on homelessness services.
We owe it to charities to help them out when we can, and I must admit that the Chancellor’s announcement of these proposals was one of the few parts of the Budget that I welcomed. Now that we have had a chance to look at the details, however, we see that there are still some outstanding issues. We will of course support the Bill on Third Reading, but I still have concerns about accessibility for many of the charities that could benefit most from it.
Offering charities the chance to take advantage of a gift aid top-up is of course welcome. My constituency is facing a number of serious challenges, but we are fortunate to have a thriving charitable and voluntary sector that does much good work throughout the area. I am thinking of the small charities run by a handful of local volunteers, such Home from Home in Dumbarton, and the Clydebank Asbestos Group, which has a very wide reach but relies on a small team of dedicated volunteers, as well as the slightly larger ones with some staff, such as Y Sort-It in Clydebank. They all contribute so much, working alongside the services offered by the local authorities to help with a range of issues.
As I am sure other Members will recognise, it is often many of the smaller charities which are getting by on tiny incomes that help so much with the provision of local services. Many of them do not have steady income streams or the time and manpower—or, often, the womanpower—to administer complex donation rules. They rely on simple methods of fundraising, such as bring-and-buy sales and collecting donations in buckets on the street. Those small activities all add up.
I am sure that, like me, many of those smaller charities will be pleased with the effect that the proposals could have on their incomes. They remain concerned, however, about the restrictions that could make them ineligible. The Government need to ensure that the rules will work for charities and not against them. As my hon. Friend Cathy Jamieson has comprehensively set out, we need the Bill to help charities out, not to add to the burden of bureaucracy.
Bureaucracy can be a headache for small charities. Compliance with the rules is essential—they are there for a reason—but they can pose real difficulties, particularly for the smaller charities. A Treasury spokesperson said the Government’s proposals were intended to reduce the administrative burden on charities, but I am not sure that that is what they will do. It is possible that the bigger charities, not the smaller ones, will benefit.
The Government’s amendments are helpful; they are heading in the right direction. The original proposals could have resulted in the smallest charities losing out the most, because placing so many conditions on the new top-up would have made it difficult for those charities to take advantage of the scheme. I am pleased that the Government seem to have recognised the problem with the three-year criterion, and that they are moving towards a two-year period instead. That will widen the benefits to include more charities. However, the proposals will still favour the larger charities that have a history of gift aid claims over the smaller ones that rely on bucket donations.
Similarly, the Government’s amendments do not properly reflect the needs of newly established charities, which will naturally not have any history of gift aid claims. Dr Whiteford said that her amendment would acknowledge the fact that, although many charities are proactive in their work, there are those that react to events. A charity might be set up to react to a natural disaster, for example; another might be set up in memory of a loved one. Newly established charities often receive a significant proportion of their donations at the very beginning, and their donations might subsequently tail off. Under the current proposals, they would not be able to claim top-up payments related to those important initial donations.
Our amendments are intended to help those small and new charities by removing the lengthy start-up period and replacing it with a probationary period. That would provide a real benefit. It would allow all charities without a claims history, whether new or established, to benefit from the top-up scheme while keeping the protections in place. It is important to have protections against fraud, but I believe that our proposed probationary period would be sufficient in that regard. I therefore encourage Members to support our amendments.
We need to ensure that we get the scheme right. The Government’s own “Giving” White Paper, published last year, made it clear that they wanted to work more with business and charities to make it “easier and more compelling” for people to give time and money, and so make the change that they want to see. Our amendments would make it much easier for the Government to meet their aims.
New clauses 1 and 2 would ensure a proper review of the impact of the measures on access to the scheme. The charity and voluntary sector deserves to have the rules properly reviewed, with a report being laid before Parliament so that all Members can see how accessible the scheme is. I hope that, in the spirit of openness and transparency that the Government say they are in favour of, all Members will consider supporting the new clauses.
The simple principle of giving charities the extra bit of help that is contained in the Bill is very much welcome, but the proposals could and should go further. As the Bill stands, thousands of small charities could lose out. Our amendments would take a few steps towards giving charities that extra support, and I hope that Members will support them.
As other hon. Members have already said, many practical concerns and suggestions were aired and shared by members of the four parties represented when we discussed the Bill in the Public Bill Committee. It is important that we use the Report stage to return to a number of those issues. I do not intend to rehearse all the arguments that were made in Committee. This is not the time for “Here are our best bits” or for simply making our pitches again. However, it is important to reflect on the fact that the Minister indicated that he was listening to some of the points that were made in Committee, even if he refuted many of the others. That is reflected in some of the Government amendments that he will no doubt speak to later. I welcome the fact that further progress has been made, just as I welcome the fact that, in Committee, the Minister tabled an amendment to clause 2 as a direct response to an issue that I had raised on Second Reading. I appreciate his doing that.
There is still a basic problem with the Bill. The original Budget promise made by the Chancellor of the Exchequer was widely welcomed across the House, and certainly in the charity sector. People expected something along the lines of what they thought had been promised—that the equivalent of gift aid would be available, with certain conditions, to charities, without them having to fulfil all the gift aid criteria and the necessary processes attached to them.
As I said, that was widely welcomed, but the Government then produced a scheme that was absolutely dependent on gift aid; gift aid was the qualifying prerequisite. Even with the Government amendments so far and the further Government amendments tabled for debate today, the provisions are still locked into the requirement that gift aid is the prerequisite for qualifying for these top-up payments.
In the Public Bill Committee, the Opposition Front-Bench team tabled various amendments aimed at trying to ensure that the scheme was not based on gift aid and not run by Her Majesty’s Revenue and Customs. I did not necessarily sympathise with those amendments. I could see the point of saying that if a scheme operates in the spirit of gift aid, the payments would be made by HMRC. However, I do not accept that the practice or use of gift aid by a charity should be the only way in which it should benefit from the sort of measure that I believe all hon. Members would want to see. That is why I have tabled new clause 3, a variant on provisions I proposed in Committee.
The point of the new clause is to provide a route 2 option to allow smaller charities or newer charities to benefit from the same capacity that the Bill confers on larger and more established charities. It is about creating a second scheme whereby HMRC would be able to support charities and top up their donations to exactly the same limits and levels as would be available to the other charities; there would be no differentiation. However, these charities would not be caught by the obligation to have claimed gift aid in the previous three years—or the previous two years as proposed now, or eventually only one year if a review amendment is passed, and the review amendment locks in the fact that there has to be at least a previous tax year in which gift aid was claimed.
New clause 3 is aimed at saying, “Let’s have a second scheme.” If the scheme provided is one of complementary gift aid where HMRC will complement all the gift aid payments with the other top-up payment, there should also be a supplementary top-up payment scheme for the smaller charities that do not use gift aid—and they might have their own reasons for not using it. Small local charities may depend on cash donations and may rely on school students to carry out a lot of their collections. In those situations, people are not going to register gift aid details. Many charities say that people avoid giving gift aid details nowadays, simply because they are afraid that it will generate an awful lot of demands through the post for all sorts of other donations if their details are passed on. It is not necessarily that people do not want to give gift aid; they sometimes do not think the amount involved is worth giving out their details for, or they are not sure what else that could lead to. Let us understand why many charities do not use gift aid nowadays and may not want to rely on or use it much in the future. When we are legislating for a scheme such as this, we need to realise that we are legislating as far as possible for all charities.
Other hon. Members have made the point that many charities are created in response to particular events in a community. Those events could be a tragedy; they could have had a serious criminal impact on a community or the families within it; they could involve the impact of a natural disaster. Only this weekend, we saw the serious impact of flooding in many places. Are we really saying that we want to make sure that bona fide charities set up in response to such circumstances are the bodies that we specifically want to exclude from the scheme? Are we deliberately and specifically as legislators saying that they should not benefit from this sort of scheme? I think that as MPs we should be trying to ensure that such charities do benefit. In future, many of us may well write to Treasury and other Ministers on behalf of those charities, asking for some extra statutory basis to be found to allow a particular charity to benefit. That is why I commend new clause 3 as one way of meeting Members’ concerns.
If the Government fear extending the scheme to all charities because they will not be able properly to oversee, regulate, manage or verify it, we have to find a way of allowing the Government to cater for the other charities while ensuring that the scheme remains proofed against fraud. That is why new clause 3 provides that it is for HMRC to specify what other validation and verification it would need from these smaller and newer charities. It also allows HMRC to indicate which agencies can be involved, whether it be registered members of a particular professional body such as accountants or local authority figures. When charities are set up in response to particular events, it is often a mayor or a council chief executive who gets involved. The new clause also provides that in specifying who can be used to verify the charity’s details, HMRC will liaise with the relevant devolved authorities, charity regulators and charity commissioners. It might even rely on the police, because many of the small local charities that gather money in bucket collections do so on the basis of having secured a police licence or police approval, so why not join the dots and allow the police to be involved? Perhaps this is something for the police and crime commissioners to do, as nobody is quite sure what else they are going to do. They could be made part of the chain of communication and verification.
New clause 3 is an attempt to help the Government extend the benefits of the Bill to even more charities than will qualify for and receive benefits under the current provisions. It is intended to reflect some of the issues raised by hon. Members on Second Reading and again in Committee.
Will the Minister explain why there should not be two different routes of provision for charities, according to their scale, their size and their circumstances? He seemed to suggest in Committee that this would be a dangerous and difficult thing to do, but we often see the Treasury legislating and regulating differently in other areas according to size and scale. In the Financial Services Bill, for example, which is still stuck in the other place, the Government provide for different panels in respect of the whole matter of financial conduct. There is a markets practitioner panel and a small business panel, taking account of the fact that different people involved in financial services are operating on a different scale of business. There will also be the consumer panel. So there is differentiation, as there also is in respect of prudential regulation, financial conduct and so forth. If all those differences could be taken into account in the financial services industry, it seems strange that the Government say it is impossible for them to take account of working, practical, natural differences relating to the scale and circumstances of charities.
Similarly, credit unions also come under financial regulation, and the Treasury is quite happy to base its regulation of credit unions on version 1 and version 2 credit unions. Versions 1 and 2 have different criteria and they quality for different benefits according to different capacities. I see no reason why there should not be a version 1 and a version 2 scheme for small charitable donations top-up payments. That is essentially what new clause 3 offers.
Being a member of a Public Bill Committee, particularly a Back-Bench member, can be a soul-destroying experience. It often seems to Opposition Members—under all Governments, I am sure; I do not intend to suggest otherwise—that what happens is this: the Committee debates the amendments that we have tabled, the Government generally oppose them, in some instances there is a vote, the Opposition generally lose the vote unless the Government have been uncommonly careless in losing some of their members somewhere in the building, and we move on to the next debate. However, that is probably not what the public think is involved in the scrutiny of a Bill in Committee.
When I became a member of the Committee, I wrote in my local newsletter that I was quite excited about it. Because the Bill did not appear to me to have created huge party political dividing lines, I believed that we would have the sort of opportunity for scrutiny that does not always arise. Unfortunately, however, there came a time when I began to feel that that was not the case, and that, for all my hopes that we would be open with one another about what was right and wrong with the Bill, we were merely engaging in those traditional Committee procedures. I was therefore extremely pleased to observe that the Minister, who had given little away in Committee, had tabled Government amendments on Report. That, I think, shows that he listened to what was said in Committee, and subsequently thought about difficulties that had been created during the drafting of the Bill but had not really been intended by legislators.
We must surely acknowledge that returning the time for which a charity must have existed before it can even claim under the scheme to two years, as the Government amendment proposes, would be an improvement, although our new clause takes a rather different approach. At least the amendment recognises that charities, particularly new charities, need a great deal of help. However, part of the problem with the Bill has been the fact that it is so strongly hitched to the gift aid mechanism.
It was assumed that small charities that could not obtain money through gift aid should be helped by means of the mechanism that already existed. That created a huge extra obstacle race. In fact, there will still be an obstacle race even if the Government amendments are accepted. The charity must be registered, it must have existed for a certain number of years—for the three years originally proposed, or for two—and it must be registered for gift aid. For all the reasons that have already been given, that can be quite a cumbersome process, particularly for small organisations that are entirely run by volunteers.
The whole apparatus of gift aid is quite complex, and the original mechanism involved a fairly lengthy process. It seemed to us in Committee that very small charities in particular were being expected to jump through a huge number of hoops to make their claims. Ironically, it appeared that they would be faced with far more obstacles than larger organisations which were claiming substantial amounts of gift aid, and that a scheme that had been intended to benefit small organisations was unduly elaborate.
It appears that the Government intend to retain the link with the gift aid arrangements, but I hope that there is still space for our proposals. New clause 3, for example, suggests a way of removing some of the complexity from the system to allow start-ups of small and sometimes fairly short-term charities. It is a good idea to enable people to set up charities for a particular purpose and perhaps to close them down once they have had a dab at what they need to do. Perhaps we are rather too inclined to keep organisations going just for the sake of keeping them going, rather than saying, “It has done its job, and we can wind it up.” Sometimes that is the appropriate thing to do.
I am pleased that the Government have tabled their important amendments, but I hope that, even at this stage, the Minister will be prepared to look kindly on the proposals presented from various parts of the Opposition Benches, including the new clauses proposing a review. It is often said of reviews, particularly by Governments, that it is unnecessary to demand them because they will take place in any event: because part of a Government’s activity is constantly to review what they are doing. That should indeed be the case, and one hopes that it is, but in reality there are many competing pressures. Many things have to be done, and time moves on.
When a Bill such as this goes on to the statute book, at one level it is done and dusted, and it is pushed aside. Civil servants, and indeed Ministers—even Ministers in the same Government, although not necessarily—may not return to it regularly unless required to do so. Rather than waiting for a problem to arise, and for organisations to campaign for a review because the present system is not working, we should create a clear mechanism that cannot just survive the Government who produced the legislation, but survive future Governments.
Various concerns have been expressed, particularly by those who need to make the legislation work, namely the charities themselves. They are doubtful about whether the Bill will deliver what has been promised. The Government have suggested that some of those concerns may be exaggerated, that many charities that apply for gift aid will find the process easier than they had thought, and that we should not be so depressing as to put off charities in our constituencies. Indeed, the Minister has encouraged us all to organise our own publicity, and to arrange events encouraging charities to apply. That is all very worthy, but if the concerns that have been expressed have some foundation, the best way of establishing the facts will be a process of regular review and report. I do not think that it is enough for Ministers to say, “It will be all right, because somewhere in the system reviews will be taking place anyway.” We could all come up with examples of circumstances in which reviews do not happen until something goes wrong, or a big campaign has to be organised to put pressure on a future Government.
I hope that, now that the Minister has shown his willingness to move on the Bill, we shall see some further movement tonight.
I will start by reflecting on the Bill’s constructive Committee stage, and I thank the Opposition for their continuing support. I also thank the hon. Members for Edinburgh East (Sheila Gilmore), for Clwyd South (Susan Elan Jones), for Banff and Buchan (Dr Whiteford), for West Dunbartonshire (Gemma Doyle) and for Foyle (Mark Durkan) for their contributions to today’s debate. I will try to answer as many of the issues raised as I can.
Proceedings in Committee, and now on Report, have provided an excellent challenge to and scrutiny of the legislation—as they should have done—and I hope it is clear from the amendments that they have tabled that the Government have listened to hon. Members from across the House. The amendments in this group cover mainly the eligibility conditions for charities that wish to claim under the small donations scheme. New clauses 1 and 2 would have a wider effect, as they require HMRC to publish certain details about the scheme as a whole. Amendment 21 would require HMRC to publish details of the connected charities and community buildings rules. Government amendments 28 and 29 are minor and technical and simply change the Government Department to which powers in clauses 7 and 8 are given.
In Committee we debated a variant of new clause 1 and the same text of new clause 2. I opposed the measures then, and I am afraid I shall oppose them again today, as I will amendment 21. As I explained in Committee, we need neither the new clauses nor amendment 21. We are already doing much of what they ask and it would not be a good use of civil servants’ time to duplicate that work.
Let me start with the annual report. As I said in Committee, HMRC publishes national statistics on the cost of various charitable tax reliefs three times each year. Once the gift aid small donations scheme is up and running, HMRC will include details of that in those national statistics. HMRC does not separately identify gift aid claims by types of organisation, regions of the UK, or their regulators. Those details are not published for gift aid claims and it would not be a good use of HMRC’s time to produce such information for this scheme.
HMRC does not collect information on whether a charity is exempt or excepted. Charities would have to provide that extra information, and HMRC would need to change its IT system to cater for that. Again, that cannot be a good use of resources for either charities or HMRC. HMRC does not publish details of fraud rates in particular schemes or tax reliefs, as that would be tantamount to advertising them to fraudsters. I therefore cannot commit to publishing such information. All information that HMRC can reasonably publish will be published, and interested Members will be able to find all relevant information on its website.
New clause 2 would require a review of the scheme two years after the Act comes into force. As I said in Committee, the Government are committed to a review of the scheme three years after it has started. That will allow enough time for the scheme to get up and running, and for charities to learn about it and get used to claiming. Any less time than that, and the review would not be representative of the scheme. A two-year review would be premature, but it would be wrong to think that no one will look at the scheme for three years. HMRC engages with charities every day through its helpline, outreach and audit teams. It will listen to what charities are saying and look for ways to improve the scheme.
HMRC’s charity tax forum has been discussing this scheme since it was announced in March 2011. The forum will share experiences of the scheme as it beds down, and identify areas for improvement. HMRC keeps all guidance under review and makes changes as necessary so that any issues raised can be responded to without having to wait for three years to pass.
Amendment 21 would require the Treasury to carry out a separate review of the scheme in relation to the community buildings and connected charities rules. As they currently stand, the community buildings and connected charities rules will affect only a few charities. For the vast majority who take advantage of the scheme, such rules will be irrelevant and can be ignored. Most charities are not connected with other charities, and do not operate within community buildings or collect more than £5,000 in small cash donations.
We will debate later more Opposition amendments on the community buildings and connected charities rules. The amendments would extend those rules—and their complexities—to a far larger number of charities. Whatever the outcome of that debate, I do not believe that amendment 21 is necessary. I have already said that we will review the scheme after three years, and that review will be wide-ranging and look at all aspects of the scheme. It seems unnecessary and wasteful to hold another review 12 months earlier to look at just a small part of the scheme; it would be better to review everything at the same time.
Mr Thomas spent two Committee sittings setting out his concerns about HMRC, which he doubted would have enough resources to administer the scheme—if we go ahead with all these reviews and reports, he may well be right. I do not feel that the new clauses or amendment 21 are a necessary or effective use of public resources, and I therefore ask Cathy Jamieson not to press them.
New clause 3 was tabled by the hon. Member for Foyle, and amendments 32 and 33 by the hon. Member for Banff and Buchan. They are designed to support new and smaller charities and to mitigate the effects of a three-year eligibility period. I hope that hon. Members have noted the amendments that I tabled on eligibility requirements, and that my proposal to drop the eligibility period to two years goes some way to allaying their concerns.
We debated new clause 3 at length in Committee, but I am afraid the concerns that I raised still apply. HMRC would be expected to gather information from other agencies to check the credibility of small charities. That would place a significant administrative burden on it to verify each and every charity that applied through that route. HMRC would be required to make subjective judgments about whether a charity was in or out, and would be constantly at risk of a legal challenge to its decisions. The scheme would be impractical in operational terms and I ask the hon. Member for Foyle to consider not pursuing the new clause.
The Minister suggests that under the new clause, HMRC would have to check with all sorts of other agencies, but the measure clearly states that HMRC can provide for a scheme to which charities may apply. It would be up to the charities to produce and submit the verifying information. It would not be HMRC’s duty to verify information with other charity regulators or anybody else; it would be up to the charity making the claim to produce the necessary evidence as laid down in the scheme.
I thank the hon. Gentleman for that point. He sat on the Public Bill Committee and will understand from those debates—probably more than most Members in the Chamber today—the eligibility requirements. I know that he welcomes some of the
Government amendments, but the remaining eligibility requirements provide a degree of protection for the public purse, so that charities that make claims and use the benefits introduced by this Bill are those that HMRC has good reason to believe are using the measure in the right way, and there is protection against fraud. I have looked closely at his new clause, which he has tabled with the best of intentions, but it is not a change that we can afford to make at the moment.
I turn to amendments 32 and 33, tabled by the hon. Member for Banff and Buchan. Again, I am afraid I cannot support them. They would allow certain charities— those with an annual income below £25,000 and those set up for specific projects and events, such as she described—to claim top-up payments from the time when they were established without meeting any other eligibility requirements. I sympathise with the intention behind the amendments, but they would cost a lot of money—tens of millions of pounds.
Most small charities starting up have an annual income well below £25,000, and those set up in reaction to events such as disasters would also qualify for payments under the amendments, so nearly every new charity would qualify immediately. As I said, I sympathise with the intentions behind the amendments, but it is essential to have some eligibility requirements, otherwise the scheme will be wide open to fraudsters and the cost to the public purse will rocket.
The charities in question would be registered with charity regulators on both sides of the border, and those are surely the bodies that decide whether their purposes are charitable. What benefit will the Bill bring to people raising money for a one-off or fixed-term good cause?
The Bill is intended to complement gift aid, because the Government received many representations from charities that when they received cash donations, such as in bucket collections, they were unable to take the information necessary for gift aid, such as whether the individual was a taxpayer and their name, address and other information. The scheme is intended to address that. One-off charities, including those set up in response to a disaster, are worthy causes but do not fit into how we intend the scheme to complement gift aid.
To answer the last part of the hon. Lady’s question, if a charity is created in response to a particular event or disaster, there is nothing to prevent it from registering for gift aid immediately and taking advantage of the gift aid provisions that already exist. If it stayed in existence for a number of years and therefore met the new eligibility criteria, it could also take advantage of what is available under the Bill. For the reasons that I have given, although she introduced her amendments with the best of intentions, I ask her kindly to consider not pressing them.
Amendments 8 to 16 would abolish the three-year start-up period and allow charities that have made a gift aid claim in the previous year to claim under the scheme. The maximum donations that could be claimed on would be £2,000, instead of £5,000. Proposals for a reduced rate for new charities have been put forward several times, and I am afraid that I cannot support them. Reducing the eligibility period to a year or less would increase costs, which would include a lot of costs caused by fraud. Requiring just one gift aid claim would leave the scheme open to unacceptable abuse.
The amendments would also make the scheme very complicated for some charities. Charities would need to know which other charities connected with them had claimed, and at which rate, because the rules would be different depending on those factors. The Government have listened to all the concerns that have been expressed about the eligibility rules, and we have put forward our own proposals. Our amendments are safe and affordable, and they will minimise complexity. I therefore ask Opposition Members not to press amendments 8 to 16.
I turn to the amendments that I have tabled on eligibility. Amendments 24 to 27 will reduce the eligibility period for the scheme to two years, and amendment 31 will introduce a power to enable us to amend the criteria in future if necessary. The eligibility criteria have been a key issue raised by the charity sector throughout the development of the scheme, and by Members in our earlier debates. The sector has welcomed the amendments since I tabled them last week, and I hope that hon. Members will support them, too.
Can my hon. Friend explain the logic of why amendment 31 will take away the Government’s power to amend the provision requiring a gift aid payment in a previous year, yet amendment 30, which we will come to later, will give them the power not to require any matching gift aid amount in the next year? The impact will be that a charity can make a claim without having any gift aid claims in the current year, but will have to have claimed at least a pound in the previous year. Is it not slightly perverse to table amendments with those two opposite intentions?
I believe that they fit together, and I hope that the purpose of the Government amendments will become clear.
Concerns were raised that the eligibility criteria in the Bill were too restrictive, that too many charities that did not already claim gift aid would be put off the scheme because it would take too long to become eligible, and that some short-lived charities would never reach eligibility. Balanced against those concerns is the fact that the Government have always been concerned to protect the scheme against fraud. I have looked again at where the balance lies between accessing the scheme and protecting it from people who would try to exploit and abuse it, and I have concluded that we can reduce the eligibility period to two years without undermining the integrity of the scheme. Eligibility for the scheme is defined by reference to successful gift aid claims made by a charity in the past, and I now propose that the minimum period should be set at two years.
I shall explain in more detail what our amendments will do. Four factors will determine the eligibility of a charity or community amateur sports club for the scheme, as set out in clause 2. The first is the start-up period—the number of complete tax years for which a charity must have been established before it becomes eligible for the scheme. We are reducing that period from three years to two years, so a charity or CASC will now be able to access the scheme a year earlier than was originally set out. The second and third elements are that a charity has to have made claims in two of the previous four years, and that there is a gap of no more than two complete tax years between the claims. The amendments will ensure that HMRC is guaranteed to see a minimum level of claiming activity by the charity or CASC in question, so that it can get to know that organisation and understand its ability to claim gift aid correctly.
The fourth element is the impact of a penalty on eligibility. If a charity receives a penalty, it will be excluded from the scheme for the tax year in which it makes the claim and the following tax year. Originally, the charity would have been excluded for the following two years, but amendment 26 means that the exclusion will be for only one year following the year of the claim.
That all adds up to a significantly more accessible scheme for new charities that have not claimed gift aid before, but we do not know exactly how the scheme will operate in practice. As I have said, we will review it after three years, when we might find that fraud rates are much higher or much lower than expected, so it is sensible to build flexibility into the Bill to amend the eligibility criteria in future. Many charities have asked the Government to do that. That power will enable us to vary the elements of the eligibility criteria up or down, depending on the evidence that we see on how the scheme operates and its susceptibility to fraud.
Those four elements interact with each other, and with the matching criteria, to provide safeguards for the scheme. We want to build the maximum flexibility into the Bill by allowing each of those periods to be reduced, increased, removed or reinstated. Any use of that power would be through the affirmative procedure, so it would be consulted on and subject to debate in the House. However, we do not want flexibility to undermine the integrity of the scheme or its important link with gift aid, so the requirement for a charity to make a minimum number of gift aid claims over a set number of years will always remain.
I now turn to the last set of amendments in this group. Since the Public Bill Committee, we have reassessed the distribution of powers to make secondary legislation in the Bill, some of which are conferred on the Treasury and some on HMRC. Broadly speaking, a power that changes the nature of the scheme in some way should be exercised by the Treasury. A power given to HMRC should be to allow the collection and management functions to be carried out correctly. The powers in the Bill are currently inconsistent with that approach, so we are introducing amendments 28 and 29 to change the powers in clauses 7 and 8. Those relate to running charitable activities in a community building and the definition of a community building. The powers are currently assigned to HMRC, but we now think it would be more appropriate to assign them to the Treasury. That is because they could be used to make significant changes to what is in or outside the scope of the rules. I hope that that helps explain why we have tabled those amendments.
I come now to my conclusion, Mr Deputy Speaker. [Hon. Members: “Hear, hear.”] The conclusion is very popular. I do not consider that there is any need for statutory reviews of the scheme at 24 months, and neither is there a need to require HMRC to publish certain data. There will be a full review of the scheme after three years, and HMRC will be publishing what data it has three times a year. New clauses 1 and 2, and amendment 21, would be wasteful and would require duplication of resource for no good reason. I therefore ask the hon. Member for Kilmarnock and Loudoun not to press those to a Division, just as I ask other hon. Members not to press new clause 3, amendments 32 and 33, and amendments 8 to 16.
I hope that hon. Members are comforted by the Government amendments that will reduce the three-year eligibility rules to two years. I am introducing a set of amendments that do what many charities and hon. Members have asked us to do, which is reduce the barriers to entry for this scheme and cut the eligibility period. I accept that some hon. Members wanted me to go further, but that would leave the scheme too exposed to fraud. These amendments represent an important concession by the Government, and I call on hon. Members from both sides of the House to support them. I am also introducing two technical amendments, Nos. 28 and 29. I commend the Government amendments to the House.