Examination of Witnesses

Small Charitable Donations Bill – in a Public Bill Committee at 8:59 am on 16th October 2012.

Alert me about debates like this

Jeremy Jacobs, Kevin Russell and John Preston gave evidence.

Q 1

Photo of John Robertson John Robertson Labour, Glasgow North West

We will now hear evidence from representatives of the United Synagogue, Stewardship and the Church of England. Will you please introduce yourselves to the Committee for the record?

Jeremy Jacobs: I am Jeremy Jacobs, and I am the chief executive of the United Synagogue.

Kevin Russell: I am Kevin Russell, technical director of the charity Stewardship.

John Preston: I am John Preston, national stewardship officer for the Church of England.

Photo of John Robertson John Robertson Labour, Glasgow North West

Thank you for coming. Before we take the first question, I remind all Members that questions should be limited to matters within the scope of the Bill and that we must stick strictly to the timings in the programme order that the Committee has agreed. I do not want to interrupt Members or witnesses mid-sentence, but if I need to do so, I will.

Q 2

Photo of Gareth Thomas Gareth Thomas Shadow Minister (Cabinet Office), Party Chair, Co-operative Party

Good morning, gentlemen. I direct this question mainly at Mr Jacobs and Mr Preston, although I do not want to preclude you from coming in on it too, Mr Russell. Do any of your member organisations have problems claiming gift aid, or does every synagogue and every Church of England church claim the maximum amount?

Jeremy Jacobs: We have a pretty good coverage of claims through the United Synagogue. We have approximately 50 synagogues within the United Synagogue, which make up about 11% or 12% of the total synagogues in the UK, and if you include the associated synagogues that come under the authority of the Chief Rabbi, that makes up about another 70 or 80, so we cover about 30% of the community. We get gift aid recovery of about 55% of the total claim that we could make, so we claim over half of what is potentially available. That said, there is a large proportion of people who will not sign a gift aid declaration for reasons that are perfectly legitimate in their eyes. For example, senior citizens find it very difficult to complete forms, and others find it intrusive in terms of Government involvement. Therefore, we find that, however much we try—and we do have a pretty effective system in trying to recover gift aid—many people simply will not sign.

John Preston: We have about 16,000 churches and 12,500 parishes. Since 2000, when the restriction on the size of gift aid donations was removed, we have worked really hard. Currently, we get about £450 million given through those 16,000 churches. Every parish is a separate charity, and therefore gift aid has to be processed and administered locally.

The money splits into two. Two thirds of it is regular giving, and we have worked really hard and managed to get gift aid declarations on just under 90% of that. However, the other third is one-off contributions, mainly during services, but also on gift days or other occasions—perhaps also through tourists putting money in a wall safe, or whatever. On average, we would be able to get gift aid on about 27% of that, but that splits into two. On a gift day, when church members might be making a more sizable commitment, they are much more likely to sign for gift aid, but during the classic church collection, where a bag or plate is whizzing along a pew while people are singing hymns, people just find it too difficult and complicated to sign a gift aid declaration.

We have about 25 million individual donations a year of, say, £2 or less, but we can get gift aid on only about 4% of those. So, although we have worked incredibly hard and got gift aid on about two thirds of our giving in total, and on nearly 90% of regular donations, we have struggled with these one-off, small donations. We have tried putting gift aid envelopes on pews, we have tried putting pens on pews and we have tried giving people time before services, but we have just found it really, really hard.

Jeremy Jacobs: May I make a further point that comes to mind from that? One thing that the Jewish community has particular trouble with is that the majority of occasions when people attend synagogue are on a Sabbath or a festival, and in the Orthodox community, you cannot sign anything. Therefore, to be able to follow that particular route is, frankly, impossible.

Kevin Russell: May I comment on the non-conformist side of the church? We represent cross-denominations, but perhaps the non-conformist side is missing from the  responses given so far. The gift aid take-up can be quite variable, from well organised churches where it may reach 70% of gift-aidable income, to other churches—particularly some of the ethnic minority churches—where it would be much, much lower. So far as we can ascertain, that is down to a general feeling of people not wanting to get involved with Her Majesty’s Revenue and Customs, or with any form of government or authority.

Q 3

Photo of Gareth Thomas Gareth Thomas Shadow Minister (Cabinet Office), Party Chair, Co-operative Party

How would you amend the Bill to make it better, if you could? That question is for all three of you.

Kevin Russell: Personally, I think that the key areas we would like to see focus on are the matching provisions, the three-year registration period, and, perhaps to a lesser extent, the need for successful gift aid claims in three years out of the last seven. There are other points that are perhaps less major.

Jeremy Jacobs: From my perspective, the worry I have is about the bureaucracy that could, theoretically, flow from this, and the potential over-zealousness of an HMRC inspection. We realise that the £20 cap is there for a reason; I am not convinced that it is a good reason. Personally, bearing it in mind that the impact on HMRC is limited to tax on £5,000, I do not really appreciate why the cap should be limited to £20. I believe that there is absolutely no reason why it should not be more than that, and it sounds to me as though it will almost be impossible to monitor.

For example, if we take the church plate, or, in the synagogue, a charitable box which we have during the week—so the cap will impact on us because we will have the potential for a claim—how on earth will we know whether somebody has put in a £20 note and a £10 note? We will not know. Will HMRC put in restrictions to say, “Have you systems in place?” It will be impossible to monitor. So my first concern is the bureaucracy of it, and the bureaucratic potential to this, for such a relatively small sum.

The other thing is the question of cash and the fact that it is limited to cash. I find it in many respects astonishing that Government are encouraging people to flow through a black economy kind of environment. It seems to me that that is counter-intuitive, and that actually we should be encouraging people to give money by cheque or credit card, rather than the reverse.

Q 4

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

A basic question: will the burden of administering the scheme be proportionate to the benefits? Will it be a worthwhile exercise, or is it really too much hassle?

John Preston: For me, that would be my major concern. While I welcome the amendments that the Government have already tabled—we can go into the details of community buildings and connected charities, or whatever—it seems to me that the key for this scheme is to retain sufficient confidence in the safeguards so that the scheme can be easy to administer locally. We already invest about 200,000 hours of volunteer time in administering gift aid. As it currently stands, I think that this scheme will save us some time and money, perhaps by reducing the number of small gift aid envelopes we are getting with £2 in them. However, I would be concerned if too many of the safeguards were taken away such that HMRC felt it necessary to increase the  administrative procedures for operating the scheme. Thus far, I understand that HMRC has indicated that it would like to keep those as simple as possible, which seems to me to be absolutely vital if the benefit of the scheme is to be proportional to the administration.

Q 5

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

What you are saying is that it is not necessarily stuff in the Bill; it is a question of how HMRC handles it. Referring specifically to the Bill, is there something we can simplify—to make it easier—or is it really just a question of how HMRC takes it?

John Preston: As I understand it, some of the stuff in the Bill is there to provide the Government and HMRC with the appropriate safeguards that they feel are necessary to be able to operate the light-touch scheme. Yes, it would be lovely to remove any link to gift aid matching, or to remove the size of a minimum donation, but if the price of removing those was an increase in the administrative complexity of the scheme locally, I do not think that my parishes would be too keen.

Q 6

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

So, basically, it might be around the right balance?

John Preston: I think from our perspective it probably is.

Kevin Russell: My thought here is that once the scheme is in place and people have experienced it, they will say, “What was all the fuss about?” Yes, the community buildings rules are complex. I see that being dealt with by guidance from HMRC and from the sector, and, within the sector, from the denominations. I understand that HMRC will be willing to review the guidance given from our side to make sure that it is robust. In terms of the actual mechanisms, I would hope—I know that this is not a matter for the Bill itself—that, operationally, if there were a matching rule in the eventual Act, the test of matching would be built into the online claim through a validation process so that charities would not need to worry overly about whether they have claimed the right amount.

Jeremy Jacobs: From my perspective, I think that the balance is about right. I can understand exactly why HMRC wants to make sure that charities that can claim are legitimate charities, so I support that. My biggest concern, I suspect, is the failure automatically to increase the level of the cap of £5,000. That is therefore at the whim of Government and it could be down, up or never. As time goes on, that will become more and more relevant to charities, and that concerns me.

John Preston: May I make just one more point to build on Kevin’s contribution? We have already looked at what our guidance would look like for this Bill. Although the Bill is complex, I am confident that the guidance for parishes need not be, such that I think that it can probably fit on one sheet of paper. Some of the complexity of the Bill gets simplified when you start to interpret it for a particular sector.

Q 7

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury)

Thank you very much to everyone for coming along this morning and giving evidence.

May I probe a couple of points in slightly more detail so that I am absolutely clear about your views? I want to probe the point about the matching amounts, because there seems to be a slight nuancing there. In an ideal  world—correct me if I have misunderstood this—you would not want to see the matching provision, but you recognise that is a price that has to be paid. I would like to understand if I have that correct.

Kevin Russell: In an ideal world, yes, we would like to see matching dropped from the Bill. Other witnesses might well make the same comment. We recognise that safeguards against fraud are needed and, personally, I am content to live with that. I would like to see an increased ratio. The reason for that is not so much the churches themselves, but church-based community charities—new start charities, for example—which rely predominantly on small cash donations and do not have the gift aid capacity. They are also going to have to wait three years, which is another point entirely.

I recognise that there is a cost to increasing that ratio, so I wonder whether it is possible to increase the ratio for very small charities. For example, for those that do not have to submit an annual return to the Charity Commission, you could set it at a level of income of £25,000. Yes, that would bring in legislative effort, if not complexity—I recognise that—but I think that that is a price worth paying.

Q 8

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury)

May I probe the issue about £20 being the definition of a small cash donation? What is your view on that? Has it been set at the correct level, or should it be different?

John Preston: For me, £20 or less is a small donation. Once it goes much beyond that, I think it is quite reasonable to expect somebody to take a moment to complete a gift aid declaration, particularly if that person is a higher rate taxpayer and has the opportunity to claim relief. If they are just putting in a small donation and have no audit trail, they lose that supporting evidence. We would not want to move away from gift aid, and regular and committed giving, because that is really important for us, not only as an expression of faith, but as an expression of commitment to charities. We want to encourage other charities to build up a base of regular supporters who are able to sustain the work of the charity over a longer period, rather than relying solely on individual, small moments of generosity.

Q 9

Ca thy Jamieson:

May I ask a question on a slightly different topic? I think the community buildings rules were mentioned, and I know that the Government have now tabled an amendment. There was criticism at the beginning that the rules were horrifically complicated and very difficult to understand, and that they would need, potentially, far more than a single page of guidance. Do you think that the Government’s amendment answers all those criticisms, or are there other things that the Government could do, or other amendments that could be made to the Bill, to assist?

John Preston: I am sure it will not answer every possible criticism. For the Church of England, it answers a particular issue about where two plots of land that are owned by the same person are adjacent. If the vicarage happened to be next door to the church, all of a sudden it was not a community building, whereas if the vicarage was over the road, it was. That seemed counter-intuitive. Now, with the amendment, the Bill clarifies that if the community building is distinct, it stands as a community building, which is clearly very helpful.

Kevin Russell: I agree that the proposed Government amendments are very helpful, particularly in relation to rent of commercial premises, which was one of the areas that I was particularly concerned about. Another that concerned me was staff, officers and trustees who effectively wear two hats when they are at church—both in their role and as a beneficiary. I would push back on whether the community buildings rules will, in practice, be complex. Provided that the sector guidance—I am thinking of the denominational guidance—is specific to the denomination, that it covers different aspects that apply to the denomination, that it can be condensed down and that it is easy to understand, in layman’s language—this is why I am keen that the sector contributes to it—I think it will work out very well in practice. No church treasurer, or at least very few church treasurers, are going to say, “I need to look at the legislation,” which I accept is very complex.

John Preston: One more benefit for us with the amendments to the community buildings provision is the removal of the requirement to separate out trustees. Routinely, Sunday by Sunday, in every church, we count how many people we have. The removal of the requirement means that we can use our historical records and we do not have to look round the church and try to identify who is on the PCC to count them in a separate class. It would only affect the very smallest of churches anyway. The vast majority are well over that regularly, but it is another help and simplification.

Jeremy Jacobs: May I make a point from the United Synagogue perspective? We slightly smiled when we saw the limit of 10 people because, for those of you who know, our services have to have a minyan, which is 10 people, so we wondered whether this was specifically aimed at us, but I am sure it was not.

Of course, for those communities where they actually struggle to get a minyan, this could become a problem. We were very concerned when the legislation originally talked about volunteers and trustees. That seems to have been resolved, but it nevertheless continues to give us cause for concern because most of our communities’ volunteers often are people who are working for the community. So it was an issue.

I just wanted to get back to the £20 question you raised because there is obviously a slight difference of opinion here. I am not convinced, by the way, that gift aid is the main reason why people are committed to charities. I think it is an addendum; I believe that one can create a relationship with a charity which is not based upon that. We work very hard to ensure that we provide community services and, if you like, the big society, one nation—all this terminology we are coming across. That is done through a variety of means and gift aid is not one.

The other point concerns higher rate taxpayers. They have a far greater incentive to engage with the gift aid process than basic rate taxpayers, because they receive back the benefit. So I do not think there is a likelihood that a limit will impact on higher rate taxpayers. That is not to say that they will not bother with the gift aid process; I just do not think that is the case at all.

Q 10

Photo of Tony Baldry Tony Baldry The Second Church Estates Commissioner

Mr Preston, you are the national stewardship and resources officer of the Church of England.

John Preston: That is right.

Photo of Tony Baldry Tony Baldry The Second Church Estates Commissioner

Am I right in thinking that the Church of England strongly welcomes this Bill?

John Preston: Yes, it does.

Q 11

Photo of Tony Baldry Tony Baldry The Second Church Estates Commissioner

Have you made an estimate of how much you think parishes up and down the country are going to benefit by the small donations scheme?

John Preston: Our estimate is between £13 million and £15 million in total, which of course is a large number of multiples of the £1,250. For me, one of the real strengths of the Bill is that it directs the support to the smallest parishes, where it will make the biggest difference. It is in the smallest communities where small numbers of people are keeping their church going where this will be very helpful.

Q 12

Photo of Tony Baldry Tony Baldry The Second Church Estates Commissioner

Given the amendments that the Minister has tabled, are there any further amendments to this Bill that the Church of England is looking for?

John Preston: As it stands for ourselves, we are now very content. As I said earlier, the important thing for us is that the scheme is able to retain operational simplicity. We recognise that others within the sector may still have some aspirations, but for us, this seems to work very well.

Q 13

Photo of Tony Baldry Tony Baldry The Second Church Estates Commissioner

The Church of England is content now with this Bill as it stands, and you consider that it needs no further amendment?

John Preston: From our perspective, we consider that it needs no further amendment.

Q 14

Photo of Tony Baldry Tony Baldry The Second Church Estates Commissioner

The Minister dealt with the question of the definition of community buildings by the amendments he has tabled. Could I ask you about the proposed definition of connected charities? Is that appropriate in your view? Do you have any comments you want to make on connected charities?

John Preston: For the Church of England, parochial church councils are in a strange position in that they are bodies corporate rather than trusts. Therefore, for us, the definition of connected charities was relatively straightforward. However, we were concerned that individual members could find themselves to be connected with other charities by a single trustee in common. Where charities have taken trust deeds or the equivalent from the Charity Commission website, the purposes will be similar because they will have just taken the same model, and it will be down to local judgment as to whether the activities would be similar. Therefore, we welcome the tightening in the amendment so that the definition of charities that are connected effectively talks about control, rather than happening to have an individual who is a trustee of more than one charity. We greatly welcome that, because it seemed to us almost impossible to trace individual trustees; especially where, if A and B are connected and B and C are connected, then A and C are connected, which requires B to report back to A and C. This is particularly the case for charities which are excepted, such as scout groups, parishes or other religious charities. We greatly welcome this. We feel it makes the provision considerably more in line with what we would expect to see: connecting charities that really are connected if effective control is shared between the two.

Q 15

Photo of Tony Baldry Tony Baldry The Second Church Estates Commissioner

So in effect, the recent amendments that the Government tabled have responded to any lingering or outstanding concerns that you had about the Bill?

John Preston: Yes, they do.

Q 16

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

Have you or any of the organisations that you represent made any analysis of the impact of taking people out of tax through raising the individual tax allowance—the basic tax allowance—given that often the people at the lower end of the income scale are some of the most generous contributors?

Kevin Russell: I have not made a specific assessment of that, but the point you make is right.

John Preston: We have made a small assessment. For us, the difficulty is that some individuals, particularly the elderly, may not be as closely aware of their taxable situation. The analysis has shown that there is a real need to communicate with people, check that they are still a taxpayer and for them to notify us as soon as they cease to be a taxpayer. We will try to do that on an annual basis. For a group of churchgoers, the effect is significant. While their giving is more generous in terms of the proportion of their income, it tends to be a slightly lower cash amount, but in terms of gift aid, it would probably cost us something like £3 million or £4 million a year.

Jeremy Jacobs: We have not done any such analysis, but it goes back to my initial point: so many people do not sign gift aid forms at all, because of their concerns. Much of that is because they do not think they pay tax, when actually in many cases, they do.

Q 17

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

Would you agree with an analysis of this Bill that, for the first time, it brings some equality in the treatment of taxpayers and non-taxpayers in respect of their charitable donations?

Jeremy Jacobs: Yes, I have to say I am very encouraged by the process. I am not sure that everybody in my sector will agree, but personally I am. The idea that basic rate taxpayers and non-taxpayers should be dealt with in exactly the same way, as far as the charitable or third sector is concerned, is a positive move and I welcome it.

Q 18

Photo of Susan Elan Jones Susan Elan Jones Opposition Whip (Commons)

Mr Jacobs has already answered this question, but may I ask Mr Russell and Mr Preston whether they know what percentage of their churches actually claim gift aid? The reason I ask is in terms of the requirement of three years of gift aid. Clearly, there are some very positive aspects of the Bill, but my fear is that, while some of the larger and more organised churches will benefit—and many others too—because of concerns about fraud, we could be in a position that little St John’s church down the road with 12 members, many of whom do not pay tax, will not benefit at all. I am interested in your answer.

John Preston: I had thought that all our churches claimed gift aid, but we discovered one the other day that asked what gift aid was. Our studies show that there are at least 99%, but there may be a small handful that may not claim gift aid if nobody in the church is a regular taxpayer. We are confident that the figure is at least 99%.

Kevin Russell: As regards the churches that we serve, we see their accounts because we provide an independent examination service, akin to a charity audit. We provide mortgage loans, so we see their accounts from that perspective, and other services. So I can answer anecdotally, and I think it would reflect what Mr Preston said, that gift aid is probably claimed by around 99% of churches. However, my concern would be with the community charities that are motivated by and connected to the churches, where the gift aid claims would be much lower and some charities do not claim at all. I am also concerned, incidentally, with start-up charities. One of the things that we see, particularly in a non-conformist church, is something called church planting, where a church will move members to a new area. They will start a new church under the umbrella, if you like, of the mother church and at some point down the line they will become independent. This three-year qualification period would be a disincentive for them to go independent and grow their own wings and develop, because there is immediately at least a £3,750 disincentive. Because they are at present claiming under the gift aid of a mother church, there is no incentive for them to do that independently. In fact, it can be four years, because, on my reading of the Bill, there have to be three complete tax years. So if a church or a community charity becomes a tax charity earlier in the tax year, that could be the best part of a four-year period. I do not think that anyone has raised that point so far.

Q 19

Photo of Gareth Thomas Gareth Thomas Shadow Minister (Cabinet Office), Party Chair, Co-operative Party

I wonder, Mr Preston, what conversations you have had with the Churches Preservation Trust? I suppose that it would have a similar concern to the point about church planting, where a former church has potentially been brought back into use, either as a church or for other forms of community activity. Yet the three-year rule could, for example, preclude it from benefiting from this Bill as it is drafted.

John Preston: I have not had specific conversations in relation to this scheme with the Churches Preservation Trust. I am trying to think whether that is possible, given the structure of the charity. That could be an issue for churches that were to transfer.

Photo of Gareth Thomas Gareth Thomas Shadow Minister (Cabinet Office), Party Chair, Co-operative Party

Have your three organisations received funding from other Government bodies? What has your experience been of that?

Jeremy Jacobs: We have had relatively little funding. I cannot really give you a fair answer on that.

Kevin Russell: Stewardship is itself a service organisation for churches and Christian charities. We run gift aid accounts, so 99.9% of our income is gift-aided. We are not typical in that sense and we do not rely on any Government funding at all.

John Preston: The Church of England in its various forms and guises attracts a number of pots. The two main ones will be gift aid and the listed places of worship grant scheme for reclaiming VAT. There would also be applications for grant funding through the Heritage Lottery Fund.

Q 20

Photo of Mark Durkan Mark Durkan Shadow SDLP Spokesperson (International Development), Shadow SDLP Spokesperson (Work and Pensions), Shadow SDLP Spokesperson (Foreign and Commonwealth Affairs), Shadow SDLP Spokesperson (Home Affairs), Shadow SDLP Spokesperson (Justice), Shadow SDLP Spokesperson (Treasury)

As you have all said, churches by their nature have a very strong relationship. It is membership-based giving that you are generating;  therefore you are able to have very high levels of gift aid participation. Mr Preston, you have said that you do not see the need for any other amendments to the Bill. However, is there not an element of, “Well, okay, I have got mine, because the Bill particularly suits churches”? It is very good as a “Small Church Donations Bill”. In terms of the broader pastoral interests of the church, is it as good as a Small Charitable Donations Bill?

John Preston: Thank you. The specific question I was responding to was on behalf of the Church of England for the parishes of the Church of England. Yes, the Bill as it currently stands fits us very well. I understand that for the smaller community groups, particularly those that are starting up, there is the challenge of the three years. I am also a trustee of a separate trust. We have worked hard to avoid being dependent on small, one-off donations, and to establish regular supporters, so that we can do some projecting into the future. It seems to me that there is both, and in the longer term there is a balance between regular donations attracting gift aid and small, one-off donations. The two therefore seem to go together, whatever charity you are, albeit that there may be a little difficulty over the early years and starting up.

Q 21

Photo of Mark Durkan Mark Durkan Shadow SDLP Spokesperson (International Development), Shadow SDLP Spokesperson (Work and Pensions), Shadow SDLP Spokesperson (Foreign and Commonwealth Affairs), Shadow SDLP Spokesperson (Home Affairs), Shadow SDLP Spokesperson (Justice), Shadow SDLP Spokesperson (Treasury)

Following what you said, Mr Preston, about not wanting to encourage one-off donations, there are obviously occasions where you will seek one-off donations, where one-off donations will be motivated by the public. Again, those who are in pastoral roles in communities will often be involved in situations where one-off funds are created in response to a single event. It might be a tragic criminal event, as we have seen recently, that impacts on a community, where there is not just a local response, but a national response where people want to give something to show support. It may be in response to a natural disaster. It is very naturally motivated giving that takes place then, and the funds created often have pastoral figures as their patrons as a way of giving assurance that it is not a scam and so on. Is it right that that sort of giving should be specifically precluded from benefiting from the provisions of the Bill?

John Preston: In the kind of instance that you relate, there is a case. You could argue that if the scope of the Bill could be extended to cover those particular one-off donations, that would be helpful. I will clarify my earlier point. For ongoing charities, they need both. It is not that they do not want one-off donations, but they want regular funding that they can rely on as well. Going back to my earlier comment, it would be great to extend the Bill, but for me, one of the key provisions must be that we do not lose operational simplicity. We do not want to have to add significantly to our 200,000 hours of volunteer time to operate this. The benefit is hugely helpful, but it is only £1,250 per parish and there is a limit on how many hours you would want to invest to fundraise that.

Jeremy Jacobs: The point you make is excellent. Given the limit and the restrictions in the Bill on the maximum amount, my original point about the cheque and credit card item would perhaps cover those one-off donations. I still have not been convinced by the arguments that I have seen that it should be limited to coins and notes. Just to come back on an earlier point, we receive a few Government funds in respect of places of worship.  I hope that that corrects that impression. We receive a little bit, but it is a relatively small amount of our total income.

Kevin Russell: Picking up on the point that you came in on about whether it is a Bill on small church donations or small charitable donations, I said at the outset that I am concerned about matching and the three-year registration period. One of the concerns I have with the three-year registration period is that it is a major disincentive to charities to start doing gift aid for the first time, because there is such a long tail before they benefit. One of the opportunities of this Bill is to encourage charities to start gift aiding, partly because there is a matching ratio there and partly because I can see it being marketed that if you get a pound of gift aid, you effectively at the current matching ratio get 75p back. You get your 25p of gift aid, but you also open up 50p of small donations. I think there is a win to be had there.

I know that it has been proposed previously and rejected, but there should be a transitional period whereby in those first three years there is an opportunity for there to be a lower limit than the £5,000. For example, year one might be zero while the Revenue does its checks to ensure that the right kinds of characters are involved in the claims, but year two could be £2,000 and year three could be £4,000 on the basis that there are successful gift aid claims in each of those years and that the charities have gone through the fit and proper persons procedure. That would provide an opportunity and an incentive for the charity to ratchet up its gift aid over those three years and that would be very welcome.

Picking up on whether we are satisfied with the Bill as it is, it seems that the changes in legal form requiring that the old charity is dissolved may be problematic, because there are reasons in charity law why you would not want to dissolve the old charity immediately. That is something that I would like the Committee to consider.

On connected charities, it was asked earlier whether the Government amendment addresses the points there. It is a very complex provision and I would like to go away and put a cold towel around my head and re-examine that, but one point that sticks out for me is that the amendment provides that:

“The Treasury may by order amend this Act”.

I would prefer to see that the Revenue may by order determine that charities are or are not connected, so that sensibility rules.

Q 22

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury)

I hear what all members of the panel are saying about simplicity and ensuring that bureaucracy does not overtake absolutely everything. On Second Reading, we heard from Ministers that the top-up payments, as they described them, were essentially not actually a form of tax relief. Given that it is estimated that some £100 million will potentially come into the sector as a result of the top-up payments, is HMRC the best arm of government to be administering the scheme, or are there other ways to run the scheme?

Kevin Russell: That is an interesting thought, and I am not sure of the reasoning behind the question. It does seem sensible to me insofar as the R68—the gift aid claim form that, all being well, is going online next April—will provide a very simple mechanism for the small donations top-ups to be administered. For that reason, I am content for the Revenue to administer it, but I am open to other suggestions.

John Preston: Again, thinking about the process of claiming, every parish currently has its HMRC gift aid claims number and those that are required to register with the Charity Commission have already done so, so having to register with a third organisation and to fulfil a third claims procedure seems to be potentially cumbersome. As I understand it, the intention simply to add a line at the bottom of the claims form so that there is transparency as to who the organisation is and the gift aid that they are already claiming and the opportunity to make a simple claim with just one line on the bottom of the form sounds really helpful.

Jeremy Jacobs: I have one further comment on that, which is that the idea that it is linked to tax is a positive one. What worries me is the idea that this will be potentially seen as a grant provided by Government or by way of public expenditure, rather than a reallocation of tax. If we are moving into that realm, which is therefore at the whim of Government in terms of who they should give an allocation of public expenditure to, that slightly concerns me.

Q 23

Photo of Mary Macleod Mary Macleod Conservative, Brentford and Isleworth

When you were going through the details of the Bill, I am sure that you went out to relevant parties, churches and synagogues to get a response and their thoughts on this. Did they give you any additional feedback on the Bill? What was their general feeling in terms of how they would benefit from it?

John Preston: For me, I have gone through some fairly wide consultation, but it has necessarily been through my interpretation of the Bill. I have provided some guidance as to what the Bill effectively does. For most of our parishes, if they saw the raw text of the Bill, they would be very scared indeed. Essentially, their concerns and anxieties have been largely addressed in the amendments put forward in relation to the connectedness of a vicarage potentially disqualifying a church as a community building, and the idea that a single trustee in common could suddenly make two different charities connected. Those were the overwhelming pieces of feedback. From our parish’s perspective it seemed natural for them that this fitted alongside gift aid and was claimed through gift aid.

Jeremy Jacobs: I have spoken to one or two people about community. I am a community person myself, so I think I can answer that. There was a general lack of interest. Why? Because the Jewish community receives very little by way of cash donations. As I explained, that is partly because of the structure and the religious aspect to this. It is perhaps partly because the community has more people involved in the general economy. I do not know. Whatever it was, there was a feeling that it did not impact on them particularly. We do not have the plate going round, although we do have a charity box. There was not a great deal of enthusiasm because they did not feel that it was going to impact them significantly. If that is changed, to go back to the business that is not cash but goes into all forms of payment, that might have raised their interest significantly.

Kevin Russell: I have done one or two training sessions on the proposals. What came out is general ignorance of this measure coming into force. Therefore, besides good, clear guidance, there is a role for strong promotion of the scheme among the charity sector. Many questions came back from those sessions: what if this and what if  that? Again, that comes back to good, clear guidance because I think most of those questions could be answered through guidance.

Q 24

Photo of Mark Durkan Mark Durkan Shadow SDLP Spokesperson (International Development), Shadow SDLP Spokesperson (Work and Pensions), Shadow SDLP Spokesperson (Foreign and Commonwealth Affairs), Shadow SDLP Spokesperson (Home Affairs), Shadow SDLP Spokesperson (Justice), Shadow SDLP Spokesperson (Treasury)

To go back to connected charities and the issue of possible one-off funds in response to particular dramatic events, do you see any issues arising there? Often those one-off funds end up being in the care of a particular church figure or church premises. Do you see any difficulties there?

Kevin Russell: One of the problems I have seen with connected charities would be, as Mr Preston said earlier, that A and B are trustees of one charity and B and C of another, and C and D of another, and you then get a chain of connections. That is very real in church communities, because within a given church you will probably have three or four families who are very prominent within that church. Those same people will be involved in community charities of the sort you describe. That is why I would very much like to see a Revenue power to say, “We didn’t really mean those charities at the end of the chain to be connected.”

Q 25

Photo of Gareth Thomas Gareth Thomas Shadow Minister (Cabinet Office), Party Chair, Co-operative Party

If one of the Government’s objectives was to ensure that as many church charities as possible were going to benefit from the Bill, why not devolve responsibility for the administration of these grants to the Church of England directly in your case, and to the Jewish community to your organisation, Mr Jacobs, and other church organisations, Mr Russell, to you?

Kevin Russell: One of the groups of churches that we serve consists of those that do not have a denominational structure or resource. They can be quite disparate so it is hard to imagine how that would work, without setting up a series of supervisory bodies of some description, which would add to complexity.

Jeremy Jacobs: I find that question fascinating because we have had to grapple with precisely that type of question for many years. The United Synagogue is an organisation that has effectively a single charity with 50 or 60 synagogues that go round it. There is a flow of funds into the centre and then reallocation out again. This is part of the process that we go through. The trouble and challenge that we have is that we know that the individual community understand their community best. Therefore to start to reallocate funds from the centre back down to whomever the centre feels is most appropriate can be counter-productive—it is actually a double-edged sword.

John Preston: It also seems to me that this is not particularly about giving grants to every community charity; the Bill is to enable gift aid to reach the parts that other methods of gift aid cannot reach. Therefore it is a way of extending the reach of gift aid to those donations for which people do not find it worthwhile. There is a definite feeling, for some people, that they do not want to put their name to only giving £1.50—it feels embarrassing or stingy or whatever—yet, for us, 25 million lots of £1.50 or £2 are hugely significant for the Church. Therefore, retaining its link with gift aid, retaining its ability to reach the parts that classic gift aid cannot reach, would, for us, be a real strength.

Q 26

Photo of Gareth Thomas Gareth Thomas Shadow Minister (Cabinet Office), Party Chair, Co-operative Party

Let me just confirm—you expect every one of your members to benefit from this scheme?

John Preston: I expect that every one of our parishes will benefit and that the vast majority—well over 90%, probably over 95% with the change in the matching criteria—will be able to claim the full amount.

Jeremy Jacobs: I think that pretty much every synagogue will benefit from this, albeit some will not benefit to the maximum amount, because of the size of their communities. Effectively, there is a potential overall loss to the United Synagogue, in that if we have 50 communities, I doubt that we will receive 50 times £1,250, because probably 20% of the communities will not receive the maximum in those small donations, particularly, as I repeat, as it is limited to cash.

Kevin Russell: I would expect pretty much all of the churches we serve to benefit. Community charities may or may not.

Q 27

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury)

Mr Russell, let me take you back to your comment about the training you have done and the issues potentially raised for guidance. You talked about the “what if” questions that people had brought to you. Will you briefly give us the top five “what ifs” that have to be addressed in guidance? What are people most worried about?

Kevin Russell: I think that the Government amendment on community buildings has addressed one of the issues around buildings connected to other buildings. There is some misunderstanding around whether a charity’s cake sale or jumble sale will qualify—again, guidance can easily deal with that. A question has incidentally arisen from the Government amendment in my mind: I went to a church last Friday because a leading worship artiste was singing there, and we had to pay £5, but it was definitely not a concert but a worship session. During the evening a charity appeal was made for providing water to Africa. I think that the Government amendment, because I paid to go to that event, will knock out the small donations that were collected for the African water projects. I do not think that that is what is intended. Those are the sorts of detailed questions that came out of the training. I think that all of them could be dealt with by guidance rather than by any amendment to the Bill.

Q 28

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

I have one slightly technical question, which I would like to know whether you have considered. At funerals, donations are often made to various local charities, particularly local hospices or even smaller charities, and often donations are split between two or three different causes. Do you see a problem if, for instance, the church that collected those cash donations on behalf of local charities were then to bank them and provide the charities with a cheque for the donations, rather than physically giving a third of the cash to each? Could that be a problem?

Jeremy Jacobs: From our perspective, absolutely not. We do this on a fairly regular basis, and the charities that receive it are perfectly happy with that, as are the donors. From our perspective, managing the cash through a bank account is absolutely the right way and the most effective way of ensuring control and security.

Q 29

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

My question is whether you would see a problem in terms of the legislation, with the charity receiving the money in the form of a cheque or a bank transfer from the church.

Jeremy Jacobs: I had not considered that as an issue, but maybe it is.

Kevin Russell: It is a very technical question, because it is determined by whether the recipient of that cash gift is the church or the ultimate charity. If it is the latter, then the ultimate charity has not received a cash donation within the legislation. If it is the church, I think it has.

Q 30

Photo of Mary Macleod Mary Macleod Conservative, Brentford and Isleworth

Mr Jacobs and Mr Russell, I think you are both accountants, and often accountants like complexity, but everyone has talked about operational simplicity within this. Can you expand on whether there is anything you would like to feed back to HMRC, or as part of the Bill, on simplicity? Mr Preston, you are in marketing. What can we do to make this as simple as possible, in order to get churches, synagogues and organisations engaged?

Jeremy Jacobs: HMRC has a predilection among some of its inspectors to be perhaps over-zealous, on occasions. If there is a clear request back to HMRC to say, “You are doing your due diligence on charities, and you have effective controls within the draft legislation to ensure that only those legitimate charities are making the relevant claim,” that should be good enough for HMRC to trust our charities and not to have too heavy a hand on us, keeping the bureaucracy and over-zealousness to a minimum.

Kevin Russell: I anticipate that the majority of churches won’t hear from the Revenue from one year to the next, having made claims under this scheme, so it is down to operational simplicity. My understanding is that at the moment they will simply have to complete a box on the R68 form that says, “We have received cash donations of this amount,” and the payment will come back. I have made some suggestions for amendments that may mean that there needs to be another box or two on the R68 if that were carried through, but I do not anticipate that that will be complex. It only comes down to if the Revenue wish to open an inquiry on an aspect of this, and if they have grounds for inquiry, the charity will have to take the course with that.

John Preston: For me, for communicating with parishes, I am confident, even with a fairly complex Bill, that we can communicate simply and clearly. As far as marketing to individuals is concerned, it is not something I have given a great deal of thought to, but I think there is a very simple and quite empowering message that says, for example, on a wall safe for tourists, “This church is able to claim an additional £1,250 if we are able to receive £5,000 of small cash donations” or something along those lines, which hopefully will motivate and encourage people to make those small donations. I for one, if I am not able to give through gift aid, partly through a professional interest, am slightly less likely to give.

Photo of John Robertson John Robertson Labour, Glasgow North West

That brings us to the end of the allotted time for these witnesses. May I thank them on behalf of the Committee? Thank you very much.

Let me say to members of the Committee, supplementary questions are fine; you do not need to ask me if you want to ask one. It is the same as evidence sessions in a Select Committee. If I think you are taking too long, I will move on to something else.