Clause 72

Charities Bill [Lords] – in a Public Bill Committee at 1:15 pm on 13 July 2006.

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Report on operation of this Act

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I beg to move amendment No. 156, in clause 72, page 77, line 20, at end insert—

‘(Z1) The Secretary of State must, one year after the year in which this Act is passed and each year subsequently, make a statement to the House of Commons, which must address the following matters—

(a) the number of registered charities in England and Wales, and an indication of whether this number has risen or fallen since the previous statement,

(b) the number of organisations which have failed to obtain or retain charitable status under sections 2 or 3 of this Act in that year, and why they have failed,

(c) the total value of Gift Aid and other special tax provisions for registered charities in that year,

(d) the total net cost of Value Added Tax to registered charities in that year, and

(e) the number and value of central government contracts placed with registered charities in that year.’.

The amendment is straightforward and I hope that it will command widespread support and sympathy in the Committee—

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

The Minister may not realise the opportunity that he is missing with this amendment.

The clause obliges the Minister to report on the operation of the Act not later than in five years’ time, but some of the conditions and changes to charity law that we have been discussing, may have immediate implications for charities and change the way in which charity registration happens. They might also change and even challenge the effectiveness of the Charity Commission. It is therefore important that we have an annual review of the sector’s operation.

The implications for the sector are wider than simply the provisions in the clauses that we have discussed in  this Committee. The relationship between the Government and the private and voluntary sectors in terms of the delivery of services and public policy objectives is a legitimate subject for regular review. Review does take place, but on a piecemeal basis, together with occasional debates on volunteering in Westminster Hall and ministerial speeches on particular projects. It would therefore be valuable to have a well rounded and concentrated report each year. The members of the Committee are extremely well informed on the third sector, but we may be in a minority among our colleagues in terms of a real knowledge of the way in which the sector is operating.

As I have said in the amendment, reviewing the changes in the number of registered charities—whether that number is rising or falling—may reveal trends resulting from the changes to charity registration in the Bill. The number of organisations that have failed to attain or to retain charitable status is clearly relevant to the changed arrangements in relation to the new heads of charity and the public benefit test. There are differing views on the public benefit test—whether it represents a continuation of the status quo, as the Government believe, or operates tighter guidance, as I would wish, or offers a privileged position to private schools, as the hon. Member for Isle of Wight and his colleagues would prefer. Those matters should be discussed and any legitimate concerns about the operation of the public benefit test could then be revealed sooner rather than later.

We could discuss the total value of gift aid and other special tax provisions for charities in that year. That would provide an opportunity for the Parliamentary Secretary to parade the extraordinary generosity of Government towards charities in the form of the various tax breaks and concessions that it offers to them. However, in fairness, the report should also include the total net cost of value added tax to registered charities. The amount that it costs the many charities that are not able to recover VAT because they do not sell anything is a matter of concern in the sector. That is, in effect, a tax on charities, which those of us who are sympathetic to the third sector ought to be lobbying our respective Treasury teams to tackle through amended policies. The review that I propose would offer an opportunity for the issue to be discussed in Parliament in a cool-headed, rational and well informed way.

Finally, a report on the number and value of central Government contracts placed with registered charities in the relevant year would help to illustrate the developing relationship between charity, the private sector and the Government.

The amendment is balanced and reasonable, and would introduce a welcome opportunity for Parliament to discuss the values and development of the third sector in a well informed way.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office) 1:30, 13 July 2006

If I were giving star ratings to the hon. Gentleman’s amendments, amendment No. 72 would be low down the list—indeed, I am not sure that it would receive more than one star. Let me explain why.

The matters set out in paragraphs (a) and (b) of proposed new subsection (Z1) are for the Charity Commission, which will have to provide an annual report to Parliament. Paragraphs (c), (d) and (e) have only tangential relevance to the Bill. However many important claims I would make for the Bill, I would not claim that it will have a huge impact on the operation of gift aid, the total net cost of value added tax or the number and value of central Government contracts, although that is not to say that some of the other things that are being done will not affect them. All Departments produce an annual report, which will certainly cover issues such as those that the hon. Gentleman has raised.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

If the Minister were to give an assurance that his Department’s annual report will cover all the subjects in the amendment, I would happily withdraw it.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

I will not do that, but I shall give the hon. Gentleman the assurance that we will attempt to cover the issues that he raises, while of course respecting the fact that tax—as I am sure even the Liberal Democrats know—is a matter for Her Majesty’s Treasury. I would not want to trespass upon that territory, but I am sure that the more general issues affecting the charitable sector will be covered in the annual report.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

While the Minister is dealing gently and fairly with the hon. Member for Cheltenham, could he tell the Committee what kind of person he might have in mind to commence the review? Also, given that the clause says that the review should start within five years of the passing of the legislation, roughly how long does the Minister think the review might take?

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

I believe that the review is to be conducted by central Government. That is the commitment made in the Bill. If the hon. Gentleman is proposing himself a potential reviewer, I am sure that he will be considered by the relevant Minister at the time. No doubt the hon. Gentleman has important qualifications in that respect.

Peter Bottomleyrose—

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

I was going to say that I hoped that the hon. Gentleman would be satisfied with that, but I should have known better.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

If it was intended that central Government conduct the review, the Bill would make that plain, but subsection (1) states:

“The Secretary of State must, before the end of the period of five years beginning with the day on which this Act is passed, appoint a person to review generally the operation of this Act.”

I am not saying that Minister ought to know five years in advance the name of the person who might be appointed, but perhaps on Report he can give an illustrative example of how that appointment might take place and say whether the report should be completed within one or two years.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I am grateful to the Minister for his comments, from which I take some comfort. If he is going to attempt to address the relative benefits of the various tax breaks and the tax cost of irrecoverable VAT in his annual report, as I think he undertook to do—

Edward Milibandindicated dissent.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

Well, he said that he would attempt to cover those issues. I am sure that his hon. Friends in the Treasury would look kindly on his addressing at least the impact of the tax implications of VAT on sector, but if that is not possible, perhaps he could encourage the Chancellor to do so another time. Under those circumstances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 72 ordered to stand part of the Bill.