Clause 5

Part of National Insurance Contributions Bill – in a Public Bill Committee at 4:45 pm on 7th December 2010.

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Photo of David Gauke David Gauke The Exchequer Secretary 4:45 pm, 7th December 2010

I am grateful to the hon. Gentleman for tabling this amendment.

New charities in qualifying areas are eligible for the holiday if carrying on a trade, vocation or business. Amendment 9 would extend eligibility to new non-trading charities in qualifying areas. That would not support our objective of encouraging new entrepreneurs to set up in business in areas with a high proportion of public sector employment.

The Government value the contribution that charities make to society, and they preside over £3 billion-worth of support for charities each year. We have heard one example from my hon. Friend the Member for Watford, gift aid, which is very substantial and is worth £1 billion a year to charities. There are various other reliefs and exemptions. To extend the policy to charities would complicate the scheme and would impose additional administrative costs. Any ensuing benefit is likely to be limited since we estimate that relatively few non-trading charities employing staff are likely to be set up over the holiday period. That point, again, was made by my hon. Friend the Member for Watford. We expect the costs to be relatively modest—I am clear with the Committee about that—but that is not the objective of the scheme. We help charities in other ways.

We recognise the valuable contributions made by charities, but we do not think that extending the NICs holiday is the best way to achieve our objective. The policy is focused on promoting enterprise. Adding complexity to the scheme by extending it to non-trading organisations would provide little benefit to charities, and we do not believe that it would be a sensible option. There are other, better things that we can do to help charities.

One point that I should make is that charities are employers, and they will, therefore, benefit from the increase in the employers’ national insurance contribution threshold. As we discussed this morning, we will do that for 2011-12. That is an example of the Government reducing the tax burden on charities from the position that we inherited.