I welcome you to the Chair this morning, Mr. Illsley. Last year, we discussed in some detail the application of gift aid to museums and properties that give to their supporters free or discounted access to their facilities. This year, we find ourselves discussing the application of gift aid to charities that give their donors other benefits in recognition of their support.

Gift aid was introduced by the then Chancellor John Major in his 1990 Budget to encourage gifts to charities. It has been successful. According to a recent written answer from the Secretary, Cabinet Office, the hon. Member for Doncaster, North (Edward Miliband), it is worth £750 million per annum to the approximately 300,000 charities in the United Kingdom. The clause is designed further to encourage charitable giving by allowing charities to increase the benefits that they give to their supporters while remaining in the gift aid scheme.

HMRC’s guidance on gift aid includes the following explanation:

“A benefit is: any item or service provided by the charity or a third party to the donor or a person connected with the donor in consequence of making of the donation.”

The guidance goes on to give generic examples of a theatrical charity giving its supporters a ticket discount, and a medical charity giving its supporters a magazine, a pen and even a dinner for two. In essence, those charities wish to give to their supporters incentives to continue their support. Under clause 59(1)(a), the allowed fringe benefit to the donor as a result of his gift to charity will increase from 2.5 per cent. to 5 per cent. of the value of the donation. That will mean that someone who gives £10,000 will be able to receive a £500 incentive, instead of the original £250, without jeopardising gift aid status.

In its reaction to the Budget, the law firm Harbottle and Lewis explained:

“It is often difficult to quantify a benefit received by a donor from a charity so the increased limit will give charities more room for manoeuvre without jeopardising the availability of Gift Aid.”

Clearly, we welcome that. The Chartered Institute of Taxation has also welcomed the changes. According to its evaluation, they might be of particular help to amateur sports clubs. It has a query about thresholds, however, which I should like to raise with the Economic Secretary. The institute has highlighted the fact that although the upper limit has been extended, that extension applies only to those who donate £1,000 or more a year. For donations below £1,000, the limit remains at 2.5 per cent. As the CIOT has pointed out:

“It seems strange that only some of the limits, originally set in 1990, have been altered, and that smaller donors are still subject to 1990 values. The effect of the proposed change will be to allow a donor who makes a donation of £1,001 to receive a benefit of £50.05 yet a donor who makes a donation of £1,000 may only receive a benefit of £25.”

That seems strange indeed. That bias against small donors seems to echo the bias against small companies in the Budget. I should therefore be interested to hear the Economic Secretary’s rationale for the decision to raise the higher bracket but leave the basic threshold unchanged.

There is also a practical point on the operation of gift aid. The Royal Aeronautical Society has written to me with a suggestion. The letter came from its chief executive, Keith Mans. As I am sure you will recall, Mr. Illsley, he is also a former Member of this place. His letter highlights the problem of gift aid donations as they relate to second-hand goods and charity shops. To summarise the problem succinctly, if an individual donates a gift to a charity shop, the charity can claim gift aid on the article only after it has been sold and after it has subsequently contacted the donor to ask if the donor is happy for gift aid to apply.

Mr. Mans comments:

“In practice, of course, it is almost impossible to do this as it would mean that when any article is sold the donor has to be contacted.”

His suggested solution is quite straightforward. He says:

“My suggestion is this rule is modified so that there is a presumption at the time the goods are donated (provided that at that point the donor signs a gift aid form) that when the goods are sold the donor wishes the proceeds of the sale to remain with the charity and not to be returned to the donor.

This would mean in practice that, provided an inventory is kept by the Charity Shop of the names of the donors and the goods they have donated, it would be a simple matter when articles are sold, for gift aid to be claimed back.

In my view, this does not constitute a change in the law but is simply a re-interpretation of the rules, to ensure that the original intention of the Treasury to allow the recovery of gift aid, on articles donated to Charities, can be done in a practical way.”

I look forward to hearing the Minister’s response to that suggestion in his winding-up remarks.