Amendment proposed (18 October): 16, in clause 1, page 1, line 3, leave out ‘from HMRC’.—[Mr Thomas.]

To delete the requirement that the scheme can only be run by HMRC.

Question again proposed, That the amendment be made.

I remind the Committee that with this we are discussing the following:

Amendment 17, in clause 11, page 6, line 28, leave out subsection (1).

To delete the requirement that the scheme can only be run by HMRC.

Amendment 24, in clause 11, page 6, line 29, after ‘HMRC’, insert ‘, the Charity Commission or any other government department.’.

Similar to purpose of amendment 17—to explore why only HMRC and not alternative bodies should administer what is a small grants scheme.

Amendment 25, in clause 11, page 7, line 5, at end insert—

‘(f) make provision in relation to the government department or organisation with direct oversight of and responsibility for the top-up payments scheme.’.

Similar to purpose of amendment 17—to explore why only HMRC and not alternative bodies should administer what is a small grants scheme.

It is a pleasure, Mr Turner, to serve again on a Committee under your chairmanship. We had an excellent debate on amendments 16, 17, 24 and 25. My hon. Friend the Member for Leeds East gave a particularly helpful speech on the challenges facing Her Majesty’s Revenue and Customs. My hon. Friend the Member for Edinburgh East gave a particularly considered speech exploring some of the problems, and on the Minister’s decision to link the small grants scheme to implementation by HMRC. The hon. Member for Birmingham, Yardley, who is not in his place today, gave a somewhat bombastic speech, but did so with charm, and perhaps that is why all hon. Members, particularly Opposition Members, view him with affection. The hon. Member for Stafford gave a more temperate and considered speech revealing concern about other parts of the Bill, if not the  Government’s position on amendments 16, 17, 24 and 25. We then heard from the Minister, and I will come to some of his comments.

Reports over the weekend have re-emphasised some concerns felt by Opposition Members about HMRC being tasked with this Bill. Some suggested that eBay should have paid some £51 million in corporation tax, but HMRC, perhaps because of legislation or because of lack of staff, has not secured such payment, and that is one of a number of examples of concern outside the House, as well as inside, about poor levels of tax collection.

Does my hon. Friend agree that there has also been concern over the weekend about HMRC and its ability to deal with the higher rate charges for child benefit? It is not clear at the moment whether the Government are on track for that to be done correctly.

My hon. Friend makes a good point. At my surgery on Friday I saw a constituent who has been waiting some time for clarity from HMRC about their entitlement to some of the remaining tax credits. I promised her I would write to the Minister, and I look forward to receiving his reply to pass on to my constituent.

I return to the reports over the weekend about eBay. They suggest that the problems of fraud in the charity sector, on which coalition Members dwelled at length in their interventions and contributions, pale into insignificance in comparison with tax avoidance that seems to be legal. That suggests that the Minister, when dwelling on the need for such high hurdles to prevent fraud in the charity sector, is engaging on what some might say is fiddling while Rome burns—a touch of the Neros.

Nevertheless, the Minister made some interesting arguments about HMRC’s continued control of the scheme. Opposition Members took particular note of the reforms on gift aid and the use of online systems. We will reflect further on what he said, and at this stage I do not intend to divide the Committee. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 13, in clause 1, page 1, line 5, leave out paragraph (b).

To delete the requirement that charities must be claiming Gift Aid before they can be eligible for a payment under this scheme.

With this it will be convenient to discuss the following:

Amendment 15, in clause 1, page 1, line 19, leave out subsection (4).

To remove the requirement for matching standard Gift Aid donations.

Amendment 14, in clause 1, page 2, line 1, leave out subsection (5).

To delete the requirement that charities must be claiming Gift Aid before they can be eligible for a payment under this scheme.

Perhaps it is worth explaining for the benefit of the Committee and those who read our debates that amendments 13 and 14 seek to explore the issues around the need to be registered for gift aid to access what is, after all, a small grants scheme. Amendment 15 seeks to explore the Government’s motives  for including the requirement to match gift aid donations in relation to deciding how much money under the small grants scheme each charity should receive. It is not clear at this stage why eligibility under the small grants scheme has to be linked to whether a charity can claim gift aid. I say that in the context of Ministers having claimed that this scheme was designed to help those charities that could not access, or were not accessing, gift aid in the first place. It is also far from clear at the moment why the payment to a charity under this scheme has to be limited by the amount of the gift aid claim; and why the sum that is granted to a charity depends on what donations it receives that are eligible to be counted towards its gift aid sum. Our contention is that such a measure will inevitably penalise the smallest charities, and that should be a concern to all members of the Committee, not just those on the Opposition Benches.

You will recall, Mr Turner, that we had a bit of an exchange about gift aid and whether Opposition Members were willing to give credit to the John Major Administration for introducing it. Looking back, I think it is fair to say that that Administration did not do a great deal of good for our country, but the lottery and gift aid were two measures of which Conservative Members can be proud. We supported the introduction of gift aid, and I hope that Government Members will, like the hon. Member for Stafford, be generous in their praise for my right hon. Friend the previous Prime Minister, who sought to expand the reach and success of the scheme. He brought in a series of reforms so that by 2010-11 the amount that was registrable under gift aid had risen to some £4.91 billion, securing for charities across the country a pay-out by HMRC of approximately £1.08 billion. Indeed, the latest figures suggest even greater success. Some £5.23 billion was registrable for gift aid in 2011-12 and £1 billion was paid out by HMRC to charities. By any definition, that is a success, of which all three main parties in the House can be justifiably proud, given the difference that it is making to charities. I welcome the further reforms that we touched on, such as making it easier to claim gift aid online, to which the Minister alluded. It is a cross-party measure that will make a difference and benefit charities.

However, it is worth remembering that, as the National Council for Voluntary Organisations made clear in their evidence 10 days ago, of the 163,000 or so charities in this country, just 65,000—about a third—claim gift aid back, according to the latest figures. That means that two thirds of charities—at first glance, just under 100,000 charities—do not receive anything under the gift aid scheme. Surely, that should be of concern to all Members as, inevitably, it means that charities that could benefit from the scheme do not benefit in the way in which perhaps Ministers originally intended—Ministers certainly allowed a number of small charities to think that they would benefit from it.

It is worth going back to some of the other evidence that we heard in Committee, and I ask Members who have copies of Hansard to turn to column 44, where the question was posed to representatives from the National Trust, RNLI and WaveLength. David Warrellow, the National Trust representative, when talking about the small grants scheme, said:

“I do not think that it has to be linked to gift aid necessarily.”

Tim Leech, from WaveLength, said “I would echo that.” Mr Spivey, from the RNLI, made it clear that he agreed with Mr Warrellow’s broad points, and said that HMRC should be given

“a bit more leeway to work with charities”.

He went on to say:

“The more detail you put in” to a scheme of this nature,

“the more difficult it will be…why keep overlaying it with difficulties?”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 44, Q71.]

As he said, why keep increasing the hurdles that charities will have to jump over to access the small grants scheme?

It was not just those three witnesses who expressed concerns about the difficulty in accessing the scheme, and the link with gift aid. We heard also from Caron Bradshaw of the Charity Finance Group. She highlighted the problem of linking eligibility for the scheme to claiming gift aid. She said that

“the eligibility criteria will rule out the very charities that I think this was intended to reach out to in the first place—those very small, local groups that currently do not comply with, or make use of, the gift aid scheme.”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 47, Q77]

Peter Lewis, chief executive of the Institute of Fundraising, suggested that the anti-fraud measures—implicitly, the gift aid-linking requirement is one such measure—were too stringent. He went on to make the striking point—as did my hon. Friend the Member for Clwyd South on numerous occasions in her interventions—of comparison with Awards for All. He said:

“there are far lower fraud risks in relation to Awards for All than there are in relation to this scheme.”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 48, Q78.]

In Awards for All, charities can claim up to 10 times more than Ministers allow to be claimed under this scheme. Peter Lewis pointed out the need to be much more proportionate about the access criteria—remember, up to just £1,250 can be claimed under this scheme. If schemes such as Awards for All do not require hurdles such as registration for gift aid, why does this Treasury small grants scheme—that is what it is—need such criteria?

The chief executive of the Charities Aid Foundation, John Low, wondered aloud before the Committee why Ministers think the gift aid registration anti-fraud requirement is essential. He wondered whether it was because

“HMRC and the Treasury do not trust the Charity Commission to regulate charities sufficiently strongly and feel they have a need to impose their own measures on something that is not tax relief, but is public spending.”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 48, Q78.]

At first glance, that suggestion might appear rather cynical, but it would be useful to hear a little more from the Minister on the relationship between the Charity Commission and the Treasury. Does he think that relations between HMRC and the Charity Commission are quite as joined-up as they might be? The scheme, certainly in the minds of many in the charity sector, suggests that HMRC, and, implicitly, Treasury Ministers, do not have confidence in the Charity Commission, which would clearly be hugely concerning. Will the Minister explain  why such a restrictive measure is needed? It would be extremely helpful to know his opinion of the Charity Commission.

Let me try to present the choice before the Committee on the amendments in stark terms—I recognise that this could be provocative to Government Members. We know, from a bit of online research, that that famous public school, Eton, is a registered charity, and, indeed, that it is registered for gift aid. Newton Farm parent teacher association, Friends of Newton Farm, which is based in my constituency, is not registered for gift aid. Here we have, on the one hand, a school that is a charity, which is potentially able to benefit from the scheme, and on the other hand, a charity serving a state school, which cannot benefit from the scheme. I pose it in those stark terms not because I want to open a debate about public schools—indeed, I am fortunate to have Harrow public school in my constituency. I think that Harrow is immeasurably better as a public school than Eton. I do not know whether that is because it has better political representation, but certainly the head teacher at Harrow is better than the head teacher at Eton, and the results and facilities are better at Harrow. However, I recognise that Eton is the public school with which Government Members will be comfortable and familiar. It is a charity and registered for gift aid, but small charities such as PTAs, including the one that supports Newton Farm school in my constituency, will not be able to benefit from the Bill. That is a stark example of the unfairness—the requirement to be registered for gift aid to claim up to £1,250—that amendments 13 and 14 seek to remedy.

I use the example of Newton Farm because last year it was the best performing school in the country. It had the highest average point scores in English and maths standard assessment tests. Of the pupils who took the test, 90% gained level 5, one level higher than expected for their age. Ofsted rates the school as “outstanding”, and thinks that the head teacher is “inspirational”, but it would appear that Treasury Ministers do not think that its PTA should benefit from the small grants scheme. It is incumbent on the Economic Secretary to explain why Eton should potentially benefit from the scheme, while PTAs, such as the one serving the best school in the country, will not.

Conservative Members may think that Pinner Park first and middle schools, which I attended, and where, again, the PTA is not registered for gift aid and therefore will not benefit from the scheme, arguably had an even more challenging bunch of pupils some 15 or 20 years ago. It surely deserves to benefit from this charitable small grants scheme. In his winding-up speech, will the Minister explain why this requirement, which is so divisive—between big charities and small charities, between charities registered for gift aid and those that are not—is necessary when such stringent conditions are not needed for other small grants schemes?

It is perhaps worth dwelling on the examples of the Friends of Newton Farm, or the Pinner Park first and middle schools PTAs, because they are not one-offs. There are roughly 19,000 PTAs across the country, but only 16% are registered for gift aid. It is quite likely that,  in the constituency of the hon. Member for Banbury, there are PTAs doing immensely important work that are not registered for gift aid and therefore not able to benefit from this scheme. Given that only 16% of PTAs are registered for gift aid, it is possible that there are schools with PTAs that will not be able to benefit from this scheme in the constituency of the hon. Member for Chelsea and Fulham. The hon. Member for Brentford and Isleworth potentially has schools in her constituency with PTAs that are not registered for gift aid. Why should Eton be able to benefit from this Treasury small grants scheme, while those PTAs not registered for gift aid in her constituency will not?

I was waiting for the hon. Gentleman to come on to Stafford, but he has not quite got round to the nicer part of the country, up north of Birmingham. As Members of Parliament, could we not do some work by writing to all the PTAs in our constituencies, even now, before the scheme comes in, to recommend that they look at registering for gift aid? That would benefit them, of course, not simply in terms of the Bill, but because they could suggest that their tax-paying members contribute through a gift aid scheme, and hence raise more money for their schools.

That is an excellent idea, and Members may well want to do that. Perhaps it is incumbent on HMRC, with the guidance of the Economic Secretary to the Treasury, to write to all parent-teacher associations to explain how and why they may want to register for gift aid.

In my conversations with PTA-UK, the parent body for PTAs, representatives explained to me some of the reasons why PTAs do not register for gift aid. It might be worth the hon. Member for Stafford checking with PTAs in his constituency to see whether they experience the same problems that PTA-UK described to me. It noted the big churn in PTA members and the fact that PTAs have no paid staff to support their charitable work, instead relying heavily on volunteers. Given the other restrictions in the scheme’s design, there is concern that even if PTAs did register for gift aid, the amount of money that they would be able to claim under the scheme would be disproportionate to the effort of trying to register.

Does my hon. Friend recognise that if MPs wrote to parent-teacher associations as the hon. Member for Stafford advises, the PTAs would be able to receive payments only from well into the next Parliament?

My hon. Friend makes an extremely good point. That is the even more restrictive part of the eligibility criteria, which we will come on to.

PTA-UK also pointed out to me that much of the income that PTAs secure cannot be registered for gift aid purposes—income derived from the school discos they organise in schools in the constituency of the hon. Member for Stafford, from summer fairs, or indeed from the buying and selling of Christmas cards produced by students in schools. If he bears in mind the huge amount of guidance that is required to be read by a  charity that wants to register for gift aid in the first instance, perhaps it will be easier for the hon. Gentleman to understand why so many PTAs are not registered at the moment. Although I agree that we need to do more to encourage PTAs to explore the possibilities of gift aid registration to obtain the benefits from gift aid, surely this part of the Bill is not required to enable small charities to access what is relatively a small amount of money.

Does my hon. Friend agree that the stark contrast is exemplified by information contained on the Eton website, which not only encourages people to give by gift aid, but has a gift aid calculator and information for higher rate taxpayers? It also encourages people to donate shares: it explains the tax incentives and has a stockbroker on hand to advise on how to maximise that—something I suspect most PTAs do not have.

My hon. Friend emphasises the divisiveness of this requirement of the Bill. I do not want to get into a debate about the merits of public schools. Harrow public school is in my constituency and I take pride in the achievements of that school’s young people in the same way that I take pride in the achievements of those who go to Newton Farm or Pinner Park school. However, my hon. Friend’s underlines the contrast between charities that have substantial capacity to benefit from the scheme—those that can rely on a stockbroker or can turn to clear sources of advice—and those smaller charities that do not have the same degree of support. They will be penalised and denied access to the scheme as my hon. Friend the Member for Foyle said, for at least three years.

I realise that the hon. Gentleman has the best intentions in highlighting the issues, but it is tremendously important to state that the scheme has been welcomed by the sector. While we scrutinise the scheme, we should be careful also to encourage people to take up the options that are available and, if they have not registered for gift aid, we should encourage them to do so.

I have worked in the charity sector for much of my career. It is incredibly important that we motivate charities to register. Eton is clearly an example of best practice and it has the resources and dedicated fundraisers, but in our communities we also have action groups, such as Community Action in Portsmouth, that perform those same functions to enable small charities to access the schemes and cut down on the legwork. We ought to be encouraging organisations to do that and giving credit to those support and capacity-building organisations in our constituencies.

I agree and I disagree with the hon. Lady—I apologise if I sound a little like a Liberal Democrat. I agree absolutely with her that we should do more both individually and through the good efforts of HMRC to encourage charities that are not registered with gift aid to register, but I disagree with her because surely it is incumbent on members of the Committee to scrutinise the Bill in detail and, where there are obvious problems, to encourage the Minister to use the time between the end of Committee stage and Report to  table amendments to make the eligibility criteria to gain access to what is, after all, a small grants scheme much fairer.

However much as we might all praise the examples set by local capacity organisations, be it the Portsmouth voluntary action scheme, Croydon Voluntary Action, whose representatives I met yesterday, or other regional voluntary infrastructure bodies, I suggest to the hon. Lady that we have to recognise the fairly telling message from the statistics on those who benefit from gift aid at the moment. Only a third of charities are currently registered for gift aid, so although we surely need to do more to encourage them to register, we must also explore the unfairness in the Bill and encourage the Minister or indeed other Committee members to table amendments to put the position right.

The hon. Gentleman says a third of charities are registered and previously mentioned a figure of 65,000 charities. It is interesting that, on Second Reading, it was stated that 100,000 charities have actually claimed gift aid in the past four years and that research shows that another 80,000 might take it up as a result of the change in the legislation.

That does not equate with the message that we received from the National Council for Voluntary Organisations and others in our evidence sittings. I agree that we should all travel optimistically, but I think that we should listen to people with far more expertise than we have, who have genuine concerns about the many charities that will miss out as a result of way in which the Bill has been designed, in particular the requirement to be linked to gift aid.

I realise that the hon. Gentleman has a job to do in scrutinising the Bill, but it would give me some comfort if he undertook, when, hopefully, these measures come to pass, to encourage parent-teacher associations and other small charities in his constituency to make use of the gift aid scheme. They are able to do so and I do not believe that it would involve a tremendous amount of work for them, especially with the capacity-building organisations on hand.

If it would tempt the hon. Lady to vote with the Opposition on the amendments, I would be happy to give her an assurance that I will, both in my constituency and in the Front-Bench role that I am fortunate to hold, do what I can to encourage charities to register for gift aid. I come back to the reason why we tabled the amendment and suggest that, if the Minister is determined to dig his heels in, she uses her good influence on her Whip to encourage the Government to produce fairer eligibility criteria between Committee stage and Report.

The Churches were mentioned in a previous sitting. I doubt that anyone would disagree that one of the reasons why such a high proportion of churches are eligible for gift aid is that pretty much every diocese in the country has a stewardship adviser or stewardship officer. I would be a bit alarmed, however, if every local authority around the country employed someone whose role is basically  to get schools into gift aid. We know what schools are, so would it not be better if they could all simply benefit from the scheme?

Also, on Second Reading, the hon. Member for Stafford made the point that school committees of pupils are often set up for only one year. Such groups would also be excluded from the scheme. If we all want smaller charities and PTAs to benefit, surely we should make the administrative simplifications proposed in the amendments?

My hon. Friend makes a good point. She underlines that many small charities lack the capacity to benefit from the Bill either immediately or, in many cases, for a minimum of three years, even if we are all successful in persuading every parent teacher association to sign up to gift aid in the next 12 months.

It is worth dwelling on what PTAs do and why 84% of them will therefore be disappointed that they cannot benefit from the scheme. PTAs raise about £8,000 per school on average; obviously, some raise substantially more. Collectively, they put about £110 million back into our schools, helping to finance such things as playground redevelopment, school trips and equipment that the Government cannot pay for, including iPads. It seems unreasonable that some PTAs might be able to access the Government’s small grants scheme to do more in those three areas, among others, but that others cannot. I urge the Minister to consider sympathetically the need to introduce different criteria that would deal with the Treasury’s concerns about fraud, but which would be fairer in ensuring that the small charities we are all motivated to help can benefit from the scheme.

It is worth underlining that the scheme was originally intended to help charities that do not claim gift aid, but it will now penalise those very charities by denying them access to the scheme for at least three years.

The hon. Gentleman will correct me if I am wrong—or the Minister will do so at the end of this debate—but I understood that the scheme was designed to complement the claiming of gift aid by charities that also receive cash donations in such small amounts that, for whatever reason, donors cannot be asked to provide their details. Effectively, the scheme is therefore a top-up on gift aid claims.

That is how the scheme is now being sold, but it is not what many small charities were led to believe. The Minister still has to answer the question why there is one rule for some charities and a different rule for smaller charities, much of whose income will not be registrable for gift aid purposes. We will come on to the concerns about the matching requirement later. Why is there one rule for some charities and another rule for others?

Does my hon. Friend agree that Government Members appear to be talking about a rather different proposition from the one that was originally understood? They seem to see the Bill as one to encourage people to take up gift aid  rather than to enable small donations to receive assistance from the taxpayer in the same or an analogous way. It was not my understanding that the Bill was intended simply to enable more people to take up gift aid.

My hon. Friend is right. It is even more important in these austere times to get right the eligibility criteria for one of the few large sums of money that remains for small charities to claim from the Government. There is even less reason for the Committee to tolerate a requirement that divides the charity sector between those whom Ministers think deserving because they have claimed gift aid, and those whom they do not think deserving because they have not claimed gift aid.

On the drafting of the criteria, it will perhaps be helpful to draw the Committee’s attention to the plight of Scout groups, some of which will miss out on support under the scheme. Some 70% of scout groups in England are registered for gift aid. In Scotland, the figure is 52%. I asked the Scout Association what proportion of scout groups in Bromsgrove were registered for gift aid, and it suggested that only 58.5% were, which is pretty low when compared with other districts. It is incumbent on the Minister to explain to the House and, through Hansard, to his constituents why some Scout groups in his constituency will be eligible for support under the scheme and why some 40% will not be eligible. Indeed, as my hon. Friend the Member for Foyle pointed out, even if they do register for gift aid, as the hon. Member for Stafford said in response to the letter that the Economic Secretary will send out to Scout bodies and PTAs in his constituency, they will not benefit under the scheme for another three years.

We were fortunate to benefit from the presence of the hon. Member for Banbury in the morning sitting last Thursday, but not in the afternoon.

I would have been in like Flynn had a vote been called, but as a whole quarter of the Committee’s proceedings was taken up without the hon. Gentleman dividing the Committee, Hansard does not show my presence or my potential presence. However, I am really enjoying his contribution this morning

I reassure the hon. Gentleman that I was not attacking him for not being present, but merely expressing disappointment that he was not here on Thursday afternoon. Being the diligent servant of the House that he is, he will have read the debates that we had on Thursday and Tuesday and will have gone back to the Banbury Sea Scouts, of which I believe he is president, to check that they are registered for gift aid and will have presumably been reassured that they are. However, if Banbury is a little like the rest of the country in terms of Scout groups registered for gift aid, some 30% of Scout groups there are potentially not registered. Being the one nation Conservative that he has in the past professed to be, he will want to ask the Minister—if not in public, then in private—why there is one rule for the Scout groups in Banbury that are registered and one rule for the others that are not. As the vice-chair of the all-party Scout group—I am privileged to share that role with hon. Members from each of the other two main parties—and as a former Scout myself, I want all Scout groups potentially to benefit from this  scheme. Why cannot the Minister design a scheme that allows all Scout groups to benefit from the outset, rather than having to go through the process of claiming gift aid and then waiting three years to benefit?

As a Guide ambassador, I would like to see Guides and Brownies registered. Can the hon. Gentleman confirm that there is nothing to stop other Scout groups or PTAs registering for gift aid? It is not as though we on the Government side are declaring some second-class charitable organisation. They have every option of registering and benefiting from these new arrangements when they come into force.

With respect to the hon. Lady, it is a question of whether they have the capacity to do so and whether, proportionally, it is worth making them jump through such hoops to register for gift aid as making them read the 60 pages of guidance or the 80 pages on the website if they do not want to and if they believe that their sources of income would not be registrable for gift aid purposes. The amount of money they would get is so small that it would not be worth the effort in comparison with all the other things that we expect volunteers to do.

From my knowledge of the Guiding movement, I can say that it is a highly professional organisation, with a great deal of expertise that I am sure is placed at the disposal of local groups. I am confident that they would be able to obtain the necessary professional advice and assistance to make a claim, should they wish to do so.

Perhaps the hon. Lady will intervene again and tell me whether 100% of Guide groups and Brownie packs are registered for gift aid. The Committee deserves to know. If she supports the Government’s position in this clause, she is effectively saying to those Guide groups and Brownie packs that are not registered for gift aid that they might be able to access the scheme, but unlike the registered group down the road, they will have to wait for three years before they can access the money. That is hardly fair.

The hon. Gentleman was making the point that groups did not have the capacity or expertise to register, but I believe they do have that expertise at their disposal. I am hopeful that, as a result of this legislation, many more will register.

I am sure that many do have the capacity, but the question is whether they decide, in the balance of all the things that they have to do as Guiders or Brownie pack leaders or Scout masters, that it is in their interest to do so. Can the hon. Lady and the Minister tell me why, given the variety of tasks that we expect volunteers in Scout, Guide, Brownie and Cubs packs and troops to do, we are creating this extra hurdle for those bodies that are not registered to jump over to access, in the best-case scenario, £1,250?

My hon. Friend is setting out the problems with the Bill, because it disqualifies so many small charities from something that we all thought was  going to be promised. This was meant to be a big society Bill, but we are being told that the big society does not extend to smaller charities. Is there not a “let them eat cake” quality to some of the interventions by Government Members?

If my hon. Friend will forgive me, I have tried to maintain a consensual tone in the Committee’s deliberations in order to attract one or two Government Members who are particularly committed to small charities to supporting my position, because they may also have concerns about the Bill. I may be making some progress with the hon. Member for Portsmouth North. The hon. Member for Stafford hinted at some concerns last week. I can see that I will have to work quite a bit harder with the hon. Member for Congleton, but I intend to do just that. I will try to convince her to come over to the Opposition’s viewpoint on this question.

The hon. Gentleman is making the case well, and I have some sympathy with him. Is it such a bad thing, however, if the Bill encourages more schools, Scout groups or other small community charities to up their fundraising, register for gift aid and engage more people in their communities? Surely that would be a good outcome. In connection with the schools that the hon. Gentleman mentioned, I commend to him, and suggest that he seeks out, an organisation called Future First, of which I have just become a trustee. It seeks to replicate in state schools the fundraising and network building that the public schools he mentioned are so good at.

Of course, it would be great if as a result of reading our deliberations in Hansard, charities rushed to sign up for gift aid. There are, surely, other ways of ensuring that more charities register for gift aid without requiring them to jump through the hoops that the Bill creates before they can access the small grants scheme. I pay tribute to the hon. Gentleman for taking up the trusteeship of Future First, and I wish the organisation every success. I feel that I may be making progress, because I have secured a little bit of sympathy from the Liberal Democrats, from the hon. Member for Portsmouth North and from the hon. Member for Stafford. It is only on the right of the Conservative party that I have more work still to do.

We have not so far considered the challenges that many community amateur sports clubs will face over eligibility for the Treasury small grants scheme, particularly as a result of the requirement to be registered for gift aid that amendment 13 seeks to remove. Ian Clark, whom my hon. Friend the Member for Leeds East mentioned on Thursday, is an adviser to the Sport and Recreation Alliance, which represents community amateur sports clubs. It is worth remembering that Mr Clark is a member of HMRC’s charity tax forum and he advised the Treasury on the Bill, although it is clear from the complexity of the Bill, and the evidence that he gave through the Sport and Recreation Alliance, that he was not listened to.

Mr Clark pointed out that each donation for gift aid purposes requires a written declaration by the donor, and that such declarations are difficult to obtain for  most small, ad hoc cash donations. He went on to say that reputable annual surveys showed that the most regular way in which donors support charities is through small cash donations, which are the most difficult kind of donation to obtain signed gift aid declarations for. Small cash donations—from street collections, door-to-door collections or collecting boxes in shops or pubs—cannot be declared for gift aid, and many organisations that rely on such sources of income have tried hard to capture declarations so that they can be registered for gift aid, but without much success.

That comes back to the capacity point that the hon. Member for Congleton wanted me to dwell on. If someone had tried so hard and failed to get more of their donations registered for gift aid, it might put them off trying to persuade similar charities in their area to register.

Many charities also say that they find that the time and the costs of administering gift aid—this is Mr Clark’s point—outweigh the benefits. Let us remember the 60 printed pages of guidance, the 80 web pages and the minimum, I suspect, 20 pages more of guidance that the Minister will publish by the end of year about access to the scheme. Potentially there are 100 pages of guidance to register for this scheme. The priority for someone running a community or amateur sports clubs will be the 10 football teams of young people that he has to ensure are on the pitch on Saturday, not trying to register for gift aid.

There are other fundraising methods that community and amateur sports clubs and many small charities engage in that are not eligible for ordinary gift aid. I am sure there is not a member of the Committee who has not gone along to a charity jumble sale. There are probably not many members of the Committee who have not gone along to hear a charity choir. I think of the Harrow Apollo male choir, who are fantastic performers. Even fewer Members of the whole House will not have put money into a charity raffle. Small cash donations in door-to-door collections and money raised through jumble sales, concerts or raffles are not eligible for ordinary gift aid. So why would a community or amateur sports club necessarily put as its top priority registering for gift aid to get access to the relatively small amounts of money that it could get under this small grant scheme?

The views of many of the leading representatives of the charity sector were clear to us, probably before the Committee began its deliberations. Sir Stuart Etherington, the chief executive officer of the National Council for Voluntary Organisations, said:

“Even for those of us who spend a lot of time looking at Gift Aid, some of the restrictions are hugely complex to understand, and we fear this will be a barrier to charities taking part in the scheme.”

So the CEO of the biggest representative body for small charities in the voluntary sector is damning in his assessment of the requirement for this small grant scheme to be registered for gift aid.

On Thursday, we had the chance to consider the impact of the Bill on hospital radio stations. Members who were particularly diligent will remember that 40% of hospital radio stations that are registered as charities with the Charity Commission are not registered for gift  aid. They are all run by volunteers. The Hospital Broadcasting Association does not believe that any hospital radio station around the country has any paid staff—anyone with time to fill in gift aid forms. Many do not receive sufficient donations to justify the administrative burden of registering for gift aid and of making claims on a regular basis. The Hospital Broadcasting Association emphasised to me, and tells us in its submission, that the majority of its funding comes from tin shakes, from bag-packing at supermarkets, from applications to the Big Lottery Fund’s Awards for All scheme or from charitable trusts. As a result, the majority of that fundraising is not eligible for gift aid claims.

I was lucky enough to volunteer at the excellent Radio Northwick Park when I was 16 and 17—not that long ago, Mr Turner, as you will recognise—which is just one example of the huge amount of good that hospital radio stations do around the country. Radio Nightingale at Rotherham general hospital is not registered for gift aid. It has been going since 1978, and there is no suggestion that massive fraud is being committed, so why is it not eligible? Chichester hospital radio is also apparently not registered for gift aid. It has been running since 1972. It would clearly be good were HMRC willing to spend some time with Radio Nightingale and Chichester hospital radio to explore why they have not registered for gift aid and to walk them through the website and the 80 pages of guidance to enable them to claim for gift aid, as the hon. Members for Stafford and for Congleton both hinted should happen.

We return, however, to the basic unfairness at the heart of this measure. Why should charities that have not registered for gift aid, which are doing a perfectly good job in serving their communities, not get access to what is, after all, a small grants scheme offering, at best, £1,250 when other similar charities, perhaps very close by, have registered and can potentially get access to the scheme? As my hon. Friend the Member for Foyle said earlier, even if Radio Nightingale and Chichester hospital radio registered for gift aid tomorrow, it would be a minimum of three years before they had the chance to get access to the £1,250. The same would be the case even if £5,000 of their income qualified under the rules in the Bill, which is highly unlikely given what we know from the Hospital Broadcasting Association. Given how much the availability of funding to the charity sector has been reduced, it is incumbent on the Minister to design a scheme that can benefit those small charities that are hurting most as a result of the loss of state funding. The Opposition believe that the link to gift aid will exclude far too many worthy charities from the scheme.

As I have alluded to, it seems that the gift aid requirement appears in the Bill as an anti-fraud initiative. We know from a freedom of information request by the Hospital Broadcasting Association that was answered in July 2012 and is mentioned in its evidence, that the rate of fraud in gift aid is around 1%. It is still absolutely important to have dedicated resources cracking down on that fraud, and we welcome the conviction for gift aid fraud alluded to by the head of the charity section of HMRC in his evidence. However, the level of gift aid fraud in the charity sector is not costing the Treasury anything like the level of revenues that eBay is alleged to have avoided, so it is important to keep the threat of fraud in perspective.

I suspect that the real reason why the link to gift aid is in the Bill is down to the cost of the scheme. Ministers made grand claims about how many charities would benefit. Indeed, in his contribution on the previous set of amendments, the Minister claimed that there was an unlimited pot for charities to draw on as a result of the scheme. I suggest to the Minister that that simply is not credible, given the scale of restrictive clauses in the Bill.

One wonders therefore whether the requirement to be registered for gift aid is intended to curb expenditure under the scheme. It is a comparatively less than transparent way of capping expenditure, and unfortunately it creates an entirely arbitrary set of deserving and undeserving charities. The only logical explanation for having to jump through the gift aid hoop to get access to the small grants scheme is the cap on the amount of money that the Treasury has to pay out under that scheme.

Amendment 15, which is linked to amendments 13 and 14, would delete the matching requirement in subsection (4). Perhaps I can pose the example of a small charity that provides support for disabled adults in the local community: the staff team work on a part-time basis; the majority of the charity’s work is performed by volunteers; and they have secured some statutory funding and a grant from a trust, but also cash collected by volunteers in collection buckets. The charity will struggle to benefit from the scheme as it stands. Because of the matching requirement, it stands to gain only a small amount, even if some of its income can be included towards the £5,000 figure. Given its limited staff and volunteer time, why would it want to wade through all the extra guidance that the Minister is going to publish, and the 60 or 80 pages of existing guidance, to secure what would be a relatively small amount of money under the scheme?

It might help if I bring my example to life with a couple of real examples. Last year, Winchester hospital radio had donations totalling £197.95 that were eligible for gift aid, so it was able to reclaim £49.48. It held a bucket collection at the local Sainsbury, which raised £450.93, so it would have been able to raise only about £99 under the scheme because of the matching requirement. Thanks to the kind generosity of the operatic society and the Theatre Royal in Winchester, it will be holding a collection as people leave the society’s performance of “The Merry Widow”. With good fortune, it hopes to raise close to £1,000, but it would still receive only about £99 under the scheme, because of the matching requirement in subsection (4). That is nowhere near the £1,250 that the Minister has said is the maximum.

Roch Valley radio is a charity based at a hospital in Bury. It got just £100 in small donations. It is registered for gift aid. Let us assume that it fulfils all the other criteria that the Minister has written into the Bill. It stands to secure just £50 under the scheme. The impact of the matching rule means that many charities will not be able to access anything like what Ministers had originally suggested they might, or indeed that which many charities had perhaps hoped, given the difficult funding times that they are in.

It is worth turning to the evidence from the policy manager from NCVO last Tuesday. She said that the matching rule, along with the three-year track record, presented the most difficulty for charities in accessing  the full £1,250 under the scheme. Cath Lee, the chief executive of the Small Charities Coalition talked about the types of charities that would find it particularly difficult to benefit in full from the scheme. The first are start-up charities, because it would be a huge challenge for them to develop, to register for gift aid and to keep going to the stage where they met the three-year eligibility criterion. The second are those charities that do not already use the gift aid system because it is it is not easy to apply gift aid to their main sources of income. The third group that would struggle to benefit are those that just lack the capacity to engage with the gift aid system.

Does my hon. Friend agree that perhaps the most concerning aspect of this Bill as it stands—we very much hope it will be amended—is the matching principle? Under the scheme it is tougher than with many other statutory funders. Many statutory funders who adopt the matching principle will, for instance, take into account the hours of volunteers. Many voluntary sector organisations are concerned that a lot of smaller charities and many others will not benefit fully from the scheme simply because of the matching criterion.

My hon. Friend is right. The matching requirement is one of the big concerns of the charity sector, as is the three-year rule, which we will come on to in clause 2. The community buildings provision is hugely worrying for many charities.

The NCVO in its evidence pointed out that some 25,000 charities claimed gift aid of less than £1,000 a year. Of those it estimates that about half will be claiming less than £625 a year. So at the moment they have no chance of getting the full £1,250 under the scheme. At the moment only a third of charities would potentially qualify because they are registered for gift aid. Here is further evidence that an even smaller number of charities would benefit from the Bill because they do not currently claim gift aid of £625 or more, perhaps because of the way their income streams are currently organised.

When the Chancellor announced the scheme in his 2011 Budget, to great fanfare, he said that 100,000 charities would benefit. He said:

“Do the right thing for a charity, and the Government will do the right thing for you. It is a big help for the big society.”—[Official Report, 23 March 2011; Vol. 525, c. 962.]

That was a point that my hon. Friend the Member for Foyle emphasised in his intervention. The evidence to the Committee tells us that the Government will not do the right thing for people in a parent teacher association who do the right thing for pupils in their school, because they will not necessarily be eligible under the scheme. The Government will not do the right thing for those who do the right thing in their community and are part of the management of Guide or Scout groups, Beaver packs or Brownies, because unless they are registered for gift aid they will not be eligible for help under this scheme.

If someone is part of a successful hospital radio station, of one of the 40% that are not registered for gift aid, the Government will not necessarily do the right thing for them under the scheme, regardless of the huge difference they make to the quality of the patient experience. On this side of the House, we are used to the Chancellor  being wrong about or over-hyping the likely success of his measures, but this seems to be a particularly graphic example of the difference between what the Government say, and the practice, when one gets to look at the detail.

First, does the hon. Gentleman not accept that there has to be some form of protection for the public, through a robust scheme, so that they can be confident that when they give small amounts of cash that cash will be properly collected and administered?

Secondly, is it not true that the Government have listened to the charity sector’s concerns? The original proposal was a 100% match of gift aid and the charity cash collection, and the Government have reduced that to 50%. A charity that claims a high proportion of cash through small donations will still be able to make a claim under the current proposals, and they would not otherwise be able to. The Government have gone a long way towards counterbalancing the need to protect against fraud with the need to gain the confidence of the public, and they have given as much opportunity as possible for small local charities to claim benefit from cash donations.

I would not want to push the hon. Lady even further away from our side’s position, just at the moment when I was hoping that my success with her colleagues might be opening her heart a little. I absolutely concede her two points. Of course we want to do what is proportionate and reasonable, and which helps to crack down on the risk of fraud, but there are other ways to do that, some of which we explored in the debate last Thursday. I do not want to go back down that road, but I encourage the hon. Lady to dwell a little on the train back to Congleton on the contributions that a number of Members made in that debate.

I accept that the Government have moved a little. I hope that the hon. Lady will use her influence with the Minister, as one of the 2010 intake of apparently “difficult” Conservative Back Benchers, to persuade him, if he is going to dig his heels in today, to use the time between Committee and Report to show more flexibility and ensure that more small charities can benefit.

The last set of examples that I would like to use to highlight the unfairness of the matching requirement in particular come from the Churches Conservation Trust. The trust has pointed out how the churches and communities it supports will be significantly disadvantaged as a result of the Bill. The hon. Member for Banbury was particularly delighted that the Church of England was happy with the Bill, and as someone whose partner is an enthusiast for the Church of England, I too am delighted that it is happy. Unfortunately, however, the Churches Conservation Trust, which keeps up the repair and maintenance of many former Church of England churches, has pointed out that the Bill will potentially make its work a bit harder than it had hoped it would when the scheme was first announced.

The trust does an excellent job in protecting more than 340 historic churches and keeping them open for future generations. In 2011-12, it had a total income of £183,998 from wall safe donations—from the safes in the walls of churches, into which people pop money when they are out for a walk, perhaps—but it points out  that only £10,681 of that income was accompanied by a gift aid envelope. It can claim, therefore, only 5.8% of that wall safe income stream through gift aid.

The Churches Conservation Trust is a single charity and, as a single charity, it can benefit from this legislation like any other charity that is registered for gift aid. What exactly is the hon. Gentleman saying the Government should do in respect of the trust as a single charity—that every wall donation box should be treated separately for the purpose of the Bill?

I am grateful to the hon. Gentleman for his intervention. I am only halfway through the example, so please bear with me, but I hope to show him that because a significant part of the Churches Conservation Trust’s income—to help pay for the upkeep of churches—comes from wall safe donations, it is not so much the registration for gift aid that is the issue; but that the matching principle, which amendment 15 draws attention to, potentially precludes the trust from benefiting as much as it might regarding the upkeep of particular churches.

The Bill is entitled the Small Charitable Donations Bill, but at what level does the hon. Gentleman consider that “small” ceases to be small? Each year, the trust receives millions of pounds from the Church Commissioners, and my ears bleed as I listen to their submissions for more money. At what point is the hon. Gentleman suggesting that “small” should cease to be small? One can never keep a good Labour shadow Minister down in wanting the public purse to spend more money, but what does he think the limit for any single charity to receive should be?

With respect, in my opening remarks, right at the beginning of our discussions on Thursday, I made it clear that we do not seek to increase the level of funding that the Government have set aside for the scheme, but when small charities can potentially access £1,250 under the scheme, we should surely make it a little easier for all charities to benefit from it. I gently suggest to the hon. Gentleman that those churches and church communities that the Churches Conservation Trust tries to help may in the longer term be better off without the Bill’s matching clause.

The absolutely last point to make on this set of amendments is to contrast the work of Lord Hodgson—at the Cabinet Office’s request—to strip away red tape for charities, with the experience that charities now face with the Treasury under this scheme. Ministers are injecting a whole new layer of red tape for charities that want to claim £1,250. Community buildings are a particularly powerful example, but the registration for gift aid and the matching requirement will limit also, in dramatic ways, the ability of most charities to access the scheme and to benefit to the full £1,250. That is the crucial thing.

I hope that Government Members will be sympathetic to those concerns and will use their influence with the Minister to encourage the design of a fairer set of criteria.

I will be brief. I support the amendment. My questions to the Minister will relate to a small community charity with which I am involved.

My first official duty as the new MP for North West Durham was to attend the funeral of Sapper Daryn Roy, a young man who died in Afghanistan in late April 2010. He came from the village of Dipton in my constituency, and, as one would imagine, his death hit the village very hard. Following the funeral, I kept in touch with Daryn’s family, and together we decided to raise money to establish a memorial in the village, as there was no focus for villagers to mark their grief and to commemorate his memory.

I am told that there was a war memorial in Dipton, but it was removed some time in the 1970s for safekeeping when a new community centre was built, and unfortunately no one knows where it was removed to. As soon as people in the village knew that we were looking for the memorial, they got in touch to tell me how angry they and the families were that the memorial had been removed in the first place and that there was nothing to commemorate the young men—they were men in those days—who died in previous conflicts. The memorial and the fund have become important not only for Daryn’s family, but for the families of all the young men of Dipton who died fighting for their country in two world wars and every conflict since.

Most of the money will be raised from small charitable donations given by individuals through cheques or bucket collections at events. There will be some larger donations—the local YMCA in Consett kicked off the fund with a £1,000 cheque because all the staff knew Daryn and he was well known within the YMCA generally from his participation in sporting events—but most of the money will come in £1 and 50p coins collected by individuals in a village that is in one of the most deprived parts of the country.

When 1 heard the Chancellor’s announcement in the Budget, I thought that the Dipton memorial fund was exactly the kind of charity that the Government intended to benefit. I think that was the intention, but I suspect that once civil servants in the Treasury got hold of this and wrapped it in legal language, some aspects became much harder for small charities such as the Dipton memorial fund, which will not meet the conditions. The charity could register for gift aid or become connected to a charity that is registered for gift aid, but it would not get anything back for more than three years. This charity will not be in operation for three years; we expect it to raise the money to build the memorial and that the memorial to be in place well within three years. So the charity is clearly not going to qualify.

I cannot believe that was the Government’s intention. I think the Government made it very clear that it was that type of small, local community charity that supports very worthy causes that would benefit from the Bill. Even if the Treasury and the Minister cannot support the amendment, surely he can go away and consider a Government amendment with a form of words that will include such charities, which I think was the Government’s original intention.

If you will allow, Mr Turner, in speaking to the amendments I will discuss the context within which we are asking organisations to operate in  order to benefit from the scheme. For the most part, they will first have to register as a charity, with some exceptions, such as community sports clubs, which will have to go through other mechanisms. They will then have to register for gift aid and have to be in existence as a charity for three years. In addition, having overcome those hurdles, they will have to make gift aid applications for at least three years in the past seven. On top of all that, there is a cap on donations—it is not an open-ended scheme. It is not something by which people can make large claims. There is a cap on individual donations of £20 and a cap on the total amount that can be claimed of £1,250. Some organisations will receive even less than that because the sum will be related to the amount of gift aid claims that have been made that year, so if they have not reached the necessary total, they will be claiming even less than £1,250. Although some of the smaller organisations that have been referred to could well register for gift aid and make their claims, they could still be in a position where the amount that they could claim back through the scheme would be limited.

My hon. Friend the Member for Harrow West spoke about organisations such as PTAs in a lot of schools. A fairly small primary school, for example, might not have a large parent body in any event, let alone a parent body that attracts moderate donations that would attract gift aid. Many of the parents might not, in fact, be taxpayers.

Does my hon. Friend accept that one of the problems facing PTAs in some parts of the country, including the excellent Newton Farm PTA, is that the majority of parents at a school might not speak English as their first language, so in language terms even accessing the information to understand how to go through the gift aid process could be a challenge.

I can see why, in certain respects, that could be a serious consideration.

It is entirely possible that an organisation that has gone through all the hoops and managed to satisfy all the requirements will put in a gift aid claim for as little as £50, enabling it to claim only £100 under the small donations scheme, even if it had collected substantially more through various activities, such as can collections, school fairs and so on, in which money is collected in relatively small sums but which throughout a year might amount to a considerable sum. Government Members have rightly said that it is important to encourage people to give and to build up donations, but even though such organisations will have done that and put considerable effort into so doing, they will discover at the end of the year that the amount they can claim back under the scheme is extremely small—much less than the maximum of £1,250—simply because they have not received many donations on which a gift aid declaration was obtained. That might be because such small organisations are unable undertake different activities because of the organisational work involved, or the fact that that is not how they receive their donations.

I do not think it was the scheme’s intention that people in that situation should not get the benefit, even if they have collected money in various ways and made the effort that Members have said is so important. Organisations should be encouraged to raise money for  themselves and not depend on money from elsewhere, but many of the organisations that we are discussing, including youth groups such as the Scouts, Guides and many others—I have a woodcraft folk group in my constituency that would be in a similar position; it is a small group, but an enthusiastic set of people are involved—will probably, even if they go through all the hurdles I have described, find that the amount they can claim is small anyway.

We must ask ourselves whether all the conditions are absolutely necessary. In drawing up the Bill, we have got to the point where complication has been laid upon complication and it becomes extremely difficult to step back and say, “Hold on a minute. Is this exactly what we intended?” I am slightly disappointed that Members, particularly Government Members, feel obliged to defend all the detailed terms of the Bill just because that is how it is drafted.

When I first agreed to sit on this Committee, started reading the material and listened to the witnesses last week, a lot of people said, “What are you doing at the moment?” I told them, “I’m about to sit on this Bill Committee”, and I told them what it was about. Although I have been a Member of this House for only two and a half years, I have managed to serve on a number of Bill Committees. I said to quite a few people, both at home and down here, “Unusually, I think this might actually be a Bill whose terms we can scrutinise in an open way, and we may actually make some helpful changes.” I am still hopeful that that might be the case, and that people will not dig in and say that it is Government against Opposition.

This is not about spending a lot more money, for example, which is the usual reason given for not accepting Opposition amendments on various issues. We are not suggesting that the donation cap should be raised, and we are not asking the Government to spend more money; we are suggesting that the scheme might be asking small charities to spend an unusual amount of time and effort in order to get very little. We should be thinking about their time, effort and money.

A lot goes into running such organisations, and as we know, many people do not necessarily appreciate that. We have all been at committee meetings and other such meetings where people come along and say brightly, “Why don’t you do this, that or the next thing?” and the committee members look pained, because they have been working extremely hard to keep the whole organisation going and working up applications, and somebody has come along with a bright idea. Usually, of course, they co-opt that person on to the committee, but they might not be keen to do so. The amount of work already done by volunteers on management committees for such organisations is onerous, and it is one reason why people sometimes cannot come forward. It is not just about coming to meetings once a month; it is about doing everything that needs to be done in between.

The Bill makes constant reference to fraud. It is important to be proportionate. We are not dealing—in my view, at least—with a scheme that will give people huge opportunities to commit significant fraud, although I do not condone any fraud. To make a lot of money fraudulently under the scheme, one would have to set up numerous organisations in order to make claims, as well as satisfying all the other conditions. I urge Government Members to think carefully about that. Do we need all these conditions? Do we need one built on the other?  Even if they still feel that registration for gift aid is an important part of the scheme, why do we have the matching requirement? Some organisations will not be able to get many gift aid declarations from their supporters because of the nature of their work or their fundraising, so even if they have collected the requisite sum in donations they will get much less than the maximum amount. Is that really what we want to achieve?

We will debate yet another condition in the next clause—the requirement for a charity to have made a gift aid application in three of the previous seven years—but we are currently dealing with two requirements: the requirement to register for gift aid, and the matching requirement. We should be asking whether we really need both of those, and whether we are making the process unduly difficult for no good reason and exaggerating the risk of fraud.

It would be comparatively easy for an organisation to register as a charity and register for gift aid, after which it could immediately begin to claim amounts considerably larger than those at stake in the top-up scheme. It would not need to wait three years to do so, it would not be required to have made claims in three years out of the previous seven and there would be no cap on the amount that it could claim. The argument is that that is easier to check, because people have to fill in their name and address and sign the declaration to prove that they are a UK taxpayer. However, as we have heard in evidence—the representative from HMRC mentioned this—there are opportunities for fraud within the system. People have attempted, sometimes successfully and sometimes not, to make fraudulent gift aid claims. In such cases, although the sums involved are potentially much larger, there are far fewer obstacles involved in making claims.

If the difference is simply that the system can be policed through applications, I suggest that that will not happen in every case. I am sure that checks and monitoring are carried out, but there is huge potential for people to set up organisations and immediately make claims for more substantial amounts of money than those involved in top-up payments. I urge the Government to consider carefully that they risk setting up a system in which people have to jump through many hoops, only to find that they can claim no more than £100 or £200. If that happens, the scheme will not achieve its desired aims.

I submit that the scheme was intended not simply to top up gift aid for organisations that are already involved with it, but to close the acknowledged gap between smaller organisations that often cannot get additional taxpayer support because they depend heavily on small cash donations, and larger organisations that usually can get such support. Many of the organisations that people had in mind initially will get very little out of the Bill, even when we have gone to all the trouble of debating it. I still hope that the Government might support at least some of our amendments and reduce the burden on what are mainly very small organisations.

May I say what a pleasure it is to serve under your chairmanship, Mr Turner?

Amendments 13 to 15 are designed to remove the requirement for the amount of small donations on which a claim is made under the scheme to be matched  by gift aid claims on donations of at least half the amount—in other words, that for every £10 of small donations on which a payment is claimed, the charity must claim at least £5 of donations under the current gift aid scheme. As hon. Members are aware, the matching provision has been introduced to help Her Majesty’s Revenue and Customs protect against fraud, as I will explain in detail.

Will the Minister accept at the outset that the inclusion in the Bill of the link to gift aid means that a whole series of small charities will miss out?

I will address the impact of the provisions in a moment.

I know that the provisions that we discussed during the previous debate and the matching requirements that we are now talking about are some of the least popular features of the scheme, and I know that some charities will be restricted in the amount they can claim under the small donations scheme because they do not receive enough donations under gift aid. Charities and their representative bodies, as well as hon. Members, have told us that the provisions are disproportionate in relation to the level of fraud that will be found in the scheme. The anti-fraud provisions are probably the greatest area of contention in the Bill, and what we have heard today backs that up. This is the first debate on fraud in Committee and I doubt it will be the last, so it is worth setting out in detail the issues we need to consider.

Why do we have the anti-fraud provisions? It is quite natural that charities should dislike the matching rule and question whether HMRC’s concerns are proportionate. The people in charities and their representative groups that we come across in our daily life, and those we heard from during our evidence session on Tuesday, are all concerned about genuine charities. Quite reasonably, they want to get on with their charitable work and maximise their income, and not be burdened with too much administration. We would not expect them to come across much fraud in their experience—why should they?—but, whether we like it or not, the generous tax reliefs that are on offer to charities, particularly through the gift aid scheme, are a very attractive target for those who do not have charitable motives and want to exploit the system for their own gain.

The hon. Member for North West Durham referred to a very worthy cause in her constituency. She spoke eloquently about a serviceman who made the ultimate sacrifice for our country, and about the need for a memorial in the local community to commemorate not only what he did but what others have done. That is a very worthy cause, and no member of the Committee would question it. She rightly pointed out that, under the matching requirement and some of the other provisions, it is unlikely that such a charitable cause could benefit from the small donations scheme. However, I hope that, as I go through the arguments, she will accept why we need the provisions.

The intention is not to exclude worthy causes such as the one the hon. Lady highlighted, but to separate genuine causes from those that people would unfortunately take advantage of if the Bill was too relaxed and did not deal with fraud. Whether we like it or not, there are people who are determined to use legislation for ill means rather than for its real intention.

I accept that the provisions are included in the Bill with the best of intentions and motives. However, given that 84% of parent teacher associations are not claiming gift aid and will not therefore benefit from the scheme, does the Minister not recognise that it is incumbent on him to recognise the reality of the situation facing those small charities, and to try to come up with a fairer set of eligibility criteria?

Let me address the hon. Gentleman’s point. I noted that he mentioned parent teacher associations several times. First, HMRC rightly does not make a judgment—whether under the current gift aid system, or the system the Bill would create—about what is or is not a charity. That would be the wrong place for the judgment to be made. The judgment is made under the Charities Acts, and the Charities Act 2006 in particular, which I assume the hon. Gentleman supported. Whether parent teacher associations are charities is determined by that Act. When they are charities, many parent teacher associations are already in the gift aid scheme, as he conceded, although he rightly pointed out that the majority are not. It may well be that many of them can join the gift aid scheme, but have thus far, for whatever reason, failed to do so.

The majority of parent teacher associations are registered charities already, but only 16% are registered for gift aid. The Minister may say that HMRC does not decide what is a good charity for the benefits of the small grants scheme, but putting the Treasury’s eligibility criteria into the Bill means that the Treasury implicitly chooses which charities are good, and can therefore benefit under the scheme, and which are not good, and therefore cannot benefit. The Minister surely accepts that point.

In the Bill, we do not make any value judgment about whether charities are good or bad. All charities that meet the requirements of the Charities Act are, in my opinion, good charities.

Why cannot they benefit from the Bill?

The hon. Gentleman asks why they cannot, therefore, benefit from the Bill. A great number of charities can benefit from the Bill, but the eligibility criteria that we have put in place are designed to prevent fraud on a scale that would be unacceptable to the public purse.

The matching criteria, as the hon. Member for Congleton stated, have been changed. I did not quite understand why they were set at the level that they were in the first place, but, rather like Pythagoras’s theorem, I presumed there was something in it somewhere. If it was not necessary at that level to combat fraud, why is it necessary at this level, or, indeed, at any level? Does the Minister accept what Mr Edwards said when he gave evidence—that HMRC’s job is to detect fraud? When I asked Mr Edwards whether the specific charity to which he referred was registered with gift aid, he basically said, “Yes, of course it was.” Is not the reality  that the link between the matching criteria and fraud is negligible? In fact—though I hesitate to say it—it is practically not there at all.

The matching criteria are an important principle in dealing with fraud, and I will explain that in more detail.

Before the Minister moves on from that point, I wonder whether I have understood him correctly. I heard him say that it is not HMRC’s job to decide whether a charity is a good charity—someone else has to make that decision. I therefore cannot understand why, if the Charity Commission has decided that a charity is fit for purpose, HMRC cannot simply accept that decision.

Because HMRC’s job is to fight fraud and protect the public purse.

I would like to return to the welcome I gave to the reduction to 50% from 100% of gift aided donations being matched to cash donations, which is laudable. Given that we have heard evidence recently, in particular the witness evidence in the earlier hearing, and at the risk of debunking the initial impression I gave to the hon. Member for Harrow West about the tenderness of my heart, will the Minister consider whether there is any scope for a further reduction, which would, of course, be marvellous news for thousands of charities across the country?

I thank my hon. Friend for her intervention. The matching principle is important for dealing with fraud. As my hon. Friend pointed out, she has raised the issue of the percentage of matching with me before. The Government have already reduced that percentage from their original intention. I say to my hon. Friend that I am minded to look at that again. The most important thing is the principle itself, and combating fraud. I am happy to look again at the percentage of matching to see if any further action can be taken to make things easier for some charities.

Still on fraud, can the Minister tell us whether there is any evidence to suggest that newly set up charities are more likely to be involved in fraudulent activity than well-established charities?

If the hon. Lady will allow me, I have a lot more to say about how the principle helps protect against fraud. Perhaps I will answer her question as I make progress.

HMRC sees the whole range of compliance behaviours among charities, from the vast majority of charities, which are compliant and honest, to a small but corrosive minority that are deliberately non-compliant and are fraudsters. HMRC has to perform a balancing act to make sure its compliant customers can access the tax reliefs to which they are entitled as easily as possible while protecting the public purse against fraud. For very good reasons, HMRC does not disclose full details of the fraud it encounters, or the methods it uses to counteract fraud; disclosing that information would be tantamount to advertising how to beat the system.

The Minister surely accepts the evidence of the freedom of information request to HMRC. From that, we can see that HMRC estimated that about 1% of claims under gift aid were fraudulent. That would conceivably equate to about £10 million under this scheme; eBay is being accused of avoiding corporation tax of fives times that amount, but we have not heard Ministers jumping up and down over the weekend, or indeed yesterday or today, suggesting that they are going to put in place a whole bunch of new measures to sort that out. Does that not suggest, again, that the Minister needs to be extremely careful and proportionate about implying that there is huge fraud in the charity sector, when all the evidence shows that, beyond that 1%, there is not?

The hon. Gentleman raises the issue of tax avoidance, and has mentioned a specific company. No doubt other companies are being mentioned in the press. First, where tax avoidance is being practised, that is clearly happening within the rules that were put in place during the hon. Gentleman’s time in government. A far more important point is that this Government have dedicated a huge amount of resources to closing tax loopholes and to dealing with tax evasion; the more important point is what we are actually doing, including the Government’s commitment to look at general tax avoidance legislation. I do not believe that that action was contemplated during the hon. Gentleman’s time in government.

The fact is that HMRC sees and deals with significant levels of gift aid fraud. HMRC has stopped over £10 million of fraudulent gift aid claims in each of the last couple of years, but clearly the total amount of fraud in the system will be higher than that. It would not be possible to stop all gift aid fraud without swamping the gift aid process with expensive compliance resource and making the administrative burden on charities unbearable. All that can be said is that the minimum amount of fraud in gift aid is currently estimated to be around £10 million each year.

Charities complain about the administrative burden of gift aid as it is. We want to help reduce that burden as much as we possibly can. HMRC is introducing a new online system for charities to claim gift aid from next year. That service will make claiming easier and charities will get faster repayments. However, gift aid still depends on the donor providing a gift aid declaration. That declaration ensures gift aid is a tax relief, but it is also an essential tool for HMRC to check a charity’s compliance with gift aid.

The hon. Member for Edinburgh East made several comments. One of her key points was her description of the small donations scheme as too complicated. To take advantage of this scheme, a small charity can receive donations of up to £5,000 in cash, bank them and fill in a simple form, and HMRC will make a top-up payment directly into the charity’s bank account. It is a simple process—probably the simplest that can be designed, taking into account anti-fraud provisions. HMRC will also publish detailed guidance on how to use the scheme. It will be slightly more complicated for charities that use the connected charities rule, for obvious reasons, but even in cases where they are using community buildings rules or some of the other rules under the Bill, it will  hopefully be a one-off process. Once the charity has dealt with it in its first year, it can keep relying on the same claim procedure it used in the past.

I understand what the Minister is saying about the end result of making a claim, and that this will be simple because the charity will simply have to prove its donations, but my point was about the number of hurdles that people have to overcome before they can ever get to that point.

The hon. Lady has noted that what she calls hurdles are some of the necessary requirements that need to be in place to combat fraud. The new scheme gets rid of the need to collect a gift aid declaration. That will ease the burden on charities significantly, which is the primary objective of the scheme. However, together with the fact that the scheme is cash based, it means that HMRC will have virtually no hard information on which to check whether a claim under the scheme is correct. HMRC will make payments under the scheme virtually on demand. If there were no links to gift aid, the scheme would be based on the pure trust that the charity and the people acting on its behalf are honest and capable of administering the system correctly.

The Minister has already suggested that, with those charities currently claiming gift aid, there is an estimated £10 million of fraud, so how will the provision be a deterrent?

If deterrents were not in place today, the number would be far larger than £10 million.

How do we know?

I think it is obvious. If the hon. Lady is asking about the relationship between the amount of fraud and anti-fraud measures, clearly if there were no anti-fraud measures, the amount of fraud would be higher. Remember, £10 million is the minimum amount that HMRC knows about. Clearly, there will be some fraud that cannot be caught or is harder to find.

Just to support the point of my hon. Friend the Member for Clwyd South, why do we not go back to the example of the Awards for All scheme, where the figure that can be claimed under it is ten times higher than the maximum envisaged under this scheme and where the level of fraud is no higher than that to which the Minister has alluded? Charities are not required to register for gift aid to access the Awards for All programme, so why is it required for this small grants scheme?

As we have discussed before, Awards for All is a grant-making scheme.

This is a grant-making scheme.

No, Awards for All is a grant-making scheme that is entirely subjective. The small grants scheme is an objective scheme. As long as a charity meets the eligibility criteria, there is rightly no cap on  the number of charities that can take part in this scheme. It is therefore an objective scheme and the comparison is completely inaccurate. Different ways would be needed to combat fraud.

We know that there is at least £10 million fraud in gift aid and, as there are fewer controls under the new scheme, it is obvious that it will come under attack. Multiple charities and multiple community buildings mean that the potential top-up payments could easily reach tens and hundreds of thousands of pounds. Without safeguards, that level of risk to the public purse is simply not acceptable. The eligibility provisions, which we will debate later, will help HMRC assure itself that the charity, at the time it becomes eligible for the scheme, is likely, although not guaranteed, to be trustworthy. However, personnel can change, fraudsters can lie low, and, just because a charity appears to be trustworthy at a particular time, that does not mean that it will always remain trustworthy. HMRC needs some way of checking whether a charity remains compliant after it becomes eligible to make claims on small donations. The charity’s conduct when administering gift aid is the closest proxy for HMRC to be able to reassure itself that a charity is continuing to comply with the rules of the new scheme.

The original consultation in March proposed a matching ratio of 1:1 small donations to gift aid donations. The Government listened to concerns raised at the consultation, and the Bill specifies a matching ratio of 2:1 small donations to gift aid donations. However, eliminating the matching provision altogether, as the amendments intend, would increase the cost of the scheme.

Ah!

The Opposition spokesman says, “Ah!” from a sedentary position. I note that in response to a question earlier today from my hon. Friend the Member for Banbury, the hon. Member for Harrow West—he can correct me if he wishes—said, “I am not seeking to increase the amount of money the Government have set aside for this scheme.” Does he wish to intervene?

The Minister quotes me absolutely accurately. We are not seeking to increase the amount of money under the scheme, but we are seeking to get fairer access to the funding that is on offer under the scheme, hence the reason for the allowance.

The hon. Gentleman will accept by now that his amendment, because of fraud and other reasons, would increase the amount of money spent on this scheme?

I seek clarification. I understand that, in response to a question from the hon. Member for Congleton, the Minister said that he was minded to look again at some of these issues. What would be the impact on the cost of the scheme, and what does he have in mind?

I am attached to the principle of matching, because it is necessary to deal with the risk of fraud and to combat it where it occurs. The ratio itself is something  that I am minded to look at again. If there were changes to the ratio, I would consider carefully whether the estimates would make much of a difference to the battle against fraud. I will look at that carefully.

The Minister is being very generous with his time and I am grateful. I am intrigued. He mentions that Awards for All operates under subjective criteria. This scheme operates under objective criteria. Yet he speaks of a set sum of money. After hearing what he says, if we are not successful—I very much hope that we are—in changing his mind on the matching criteria, his place in history will be assured in the voluntary sector, at least. If we are not successful, let us suppose that every one of us then goes out to every charitable group we know in the country and says, “Please register for gift aid, and, what is more, the Minister has said that there are objective criteria”, every charity would be able to come into this scheme. Is that correct?

I thank the hon. Lady for her kind words. There is no cap on the number of charities that can benefit from this scheme. They have to meet the eligibility criteria, but as long as a charity meets that criteria it can take advantage of this scheme. She says that every hon. Member could go out and encourage charities to take advantage of this scheme, or the gift aid scheme. That is quite right, and we all should. In fact, in January, I am holding a charity funding day in my constituency, in Bromsgrove. A number of groups have been invited, and they are going to explain to charities how they can take advantage of both Government and non-Government schemes—both grants and tax relief schemes. I would encourage the hon. Lady to do the same.

The hon. Member for Harrow West talked about PTAs. I think there were some in his constituency that were claiming gift aid, and he said that some scout groups are not claiming and others are. I would also encourage him to hold a charity funding day in his constituency. Maybe he already has, but if he has not, and wants to know how it is done, he is very welcome to come to Bromsgrove in January to observe for himself.

It is an extremely tempting invitation to go to Bromsgrove. I could look in on the young people in Rubery, who the Minister is not supporting, but to discuss that would be to digress. At his open day in Bromsgrove, will officials from HMRC be present to answer any detailed questions the charities have? If so, will he offer the same facility to Opposition Members who may want to take him up on his suggestion?

I have not secured exactly who is attending on that day. I may well invite HMRC, but if I do, it will be in my capacity as a constituency MP, and I am sure that whatever level of support they would give to me they would make available to the hon. Gentleman as well, were he to follow my example and hold a charity funding day. If he did come to Bromsgrove, he would also have time to see the new £5 million youth facility in Longbridge.

We have had a useful debate on these principles and the reality of fraud in the system, and I am sure that we will revisit some of these issues.

The Minister has said that to alter the qualifying criteria in the way that the amendments suggest would add to the cost of the scheme. Is that not an admission that the criteria in the Bill specifically preclude a number of charities, thereby denying them the benefits and, of course, containing the cost of the scheme for Government?

This Government make no secret that when a new scheme is put in place, it comes straight from the public purse. As the hon. Gentleman knows, this is not a tax relief scheme; it is a top-up scheme that complements the gift aid system, so we have to be very mindful about the cost to the public purse. That is good practice for the Government, and it is important that we maintain it. Changing the eligibility criteria would lead to changes in the costings for the programme, but part of that, as we have discussed today, would clearly be an increase in fraud.

I very much welcome the Minister saying that he is willing to look again at the matching criteria, but could he be more specific as to why he thinks that element of the Bill will cause a difference to the amount of fraud? We are dealing with organisations that have relatively low levels of gift aid-type donations, but they still have to establish that they have brought in the donations they say they have. I am puzzled as to why that in particular is seen as a fraud element, as opposed to, for example, people having to register in the first place and meet all the other requirements.

The hon. Lady asks a good question. The matching principle is there, alongside other criteria, because it ensures that there is an ongoing relationship between the charity concerned and HMRC with regard to gift aid. The gift aid process is more vigorous in terms of providing checks and the chance for HMRC to look at the audit trail of gift aid claims and so forth, if it so wished. It gives HMRC comfort that, if claims were then made by that charity under the provisions in the Small Charitable Donations Bill, there would be a check against fraud. That is the reason for the matching principle. Separate to that is the percentage of matching that is required, which under the Bill is a ratio of 50%, as the hon. Lady knows. I am minded to consider that again. I should like to be satisfied that a change in that ratio favouring charities would not have any significant impact on the fraud element of the matching principle.

We all want to support charities as much as we possibly can, but as legislators we also have a duty to protect the public purse. Removing the matching provisions would lead to increased fraud at an unacceptable cost to the public purse. I ask the hon. Gentleman to withdraw his amendment.

As the Minister said, we have had an interesting debate. I am tempted by his offer for me to visit his constituency and sit at the top table of the charity event that he plans. Having had the chance to visit one part of his constituency in April last year and  help secure the election of a Labour team of councillors in that area, I am tempted to take up his offer. However, I worry for the Minister at that event, because although I would want instinctively to speak up for him, one Member of Parliament to another, unless he changes the next set of eligibility criteria that we are likely to discuss, he will have to explain to all the local charities that he is trying to persuade to sign up to gift aid why, even if they do go through all the hoops that he wants them to go through and read the 80 pages of website guidance, and so on, they still cannot get any money under the scheme for three years.

The Minister has not explained why he thinks it tolerable to maintain the essential unfairness under these eligibility criteria. Why is it reasonable that the larger well-established charities, such as Eton, which has considerable capacity to support gift aid and claims—it is registered for gift aid and has been meeting its requirements for some time—should benefit from this small grant scheme, presumably securing £1,250 a year on an ongoing basis? The Parent Teacher Association simply does not have the capacity to complete the gift aid process and fill gift aid forms, and the other forms that are implicit, even if they are online, because of all the other pressures on that small charity. Will the Minister say why is that fair? We did not hear about that.

Leaving the requirement to claim gift aid in the Bill will be divisive: it divides the larger charities from smaller ones and divides start-up charities from well-established charities and means that charities that do not already use the gift aid system will not benefit, and, as I said, charities without the capacity to go through the form-filling process will not benefit from the scheme. Although it is reasonable for the Minister to say that HMRC does not make a judgment as to what constitute a good charity—I hope that I quote him correctly—he fails to accept that he is implicitly determining, as a Minister, what counts as a good charity for the purposes of accessing this scheme and what constitutes a charity that is not good and therefore cannot access the funding.

I listened with interest to the Minister’s exchange with the hon. Member for Congleton. I apologise for suggesting that she was hard-hearted and unreasonable. I do not think that I used those words, but if I gave that impression it was in error. I hope that other Government Committee members follow her trenchant example on the amendments that we will discuss later.

In the light of the Minister’s offer to reconsider the scale of the matching required, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.