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New Clause 1 — Annual Report

Part of Small Charitable Donations Bill – in the House of Commons at 6:15 pm on 26th November 2012.

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Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury) 6:15 pm, 26th November 2012

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.