This amendment is consequential on amendment 27.
Amendment 29, in clause 7, page 4, leave out lines 24 to 42 and insert—
7 Meaning of “running charitable activities from a community building” etc
(1) For the purposes of this Act a charity “runs” charitable activities from a community building in a tax year if the activity is of a kind that the charity makes available to the public or a section of the public.’.
This amendment is consequential on amendment 27 and also seeks to amend the meaning of ‘running charitable activities from a community building’ by removing from it the requirement that 10 or more people must be present in a community building on six or more occasions.
Amendment 30, in clause 8, page 5, leave out lines 5 to 8 and insert—
‘(1) In this Act “community building”—
(a) means a building (such as a village hall, town hall or place of worship), or those parts of it, to which the public or a section of the public have access at some or all times, or
(b) for charities that do not run their charitable activities in a community building, a building (such as an office), or those parts of it, from which a charity runs its charitable activities, but’.
It is a pleasure to have you back in the Chair for this afternoon’s sitting, Mr Robertson. I hope that we will be able to make decent progress. We are coming to areas of the Bill about which concerns have been raised. As my hon. Friend the Member for Leeds East mentioned earlier, we are now climbing out of the foothills and into the mountain. How far up that mountain we get this afternoon will depend on how many issues members of the Committee wish to raise. We have already had significant debate on areas where the sector wished to see improvements in the Bill. I stress again that we want the Bill to proceed. As I have indicated before, we want to see it come out of Committee in better shape than it came in.
Amendment 27 and consequential amendments 28, 29 and 30 link to further amendments that will be considered in clause 7. I do not want to get ahead of myself, but I want to make some points relevant to clause 7 so that I do not need to repeat them later. Different organisations have asked questions about how the clauses on community buildings will impact on them and how the proposals will work in practice. A range of groups and charities are involved in community buildings. They run their organisations and provide services from community buildings, and they will want clarity.
Only this lunchtime I received information via one of my local newspapers that the local authority in my own area intends to change from running premises itself to allowing charities to own community buildings to try to reduce costs. While cost saving is of course to be welcomed, I did note that the council mentioned cost savings in relation to VAT and other taxes, so perhaps that is something that members of the Committee would want to consider before roundly cheering it.
Some organisations not only will share some connected individuals, as we have already discussed this morning, but may now have to look at how they operate if the changes are approved and implemented.
I want to make reference to some of the comments made during the public reading stage of the Bill. I have made some critical comments in relation to that process—not about the principle of having a public reading stage and inviting people to comment, which is something that I very much welcome, but about how difficult it was for some people to participate. When we have a public reading stage, we are duty-bound to consider the comments made during that process. The report on the Bill, which came out as a result of the public reading stage and the evidence that was collected and submitted, states in the summary:
“Clauses 6 and 7 are linked and respondents cross-referred their comments across these, and across a number of subsections...The comments focused not on specific provisions within the Bill but rather on a broader perception that the community building rules are overly complex and are clearly designed to benefit churches.”
We heard this morning how the churches believe that the proposed changes are helpful to them, but Labour Members have expressed concern that in solving that particular problem, there are potential knock-on consequences for smaller charities. The report continued:
“Respondents argued that, whilst the rules help provide a fair outcome between these types of charities that have different structures, it means that they are advantaged over other charitable causes who have local groups that do not have the same characteristics and so will not be able to qualify.”
Collections taken during charitable activities were a particular issue. I know that the Government want to make some changes to the rules on that. They mean that charities whose beneficiaries come from different constituencies from their donors will not necessarily be able to claim the top-up payments. I am sure that we will have further discussion about that on clause 7. It is important to stress, Mr Robertson—lest you think that I am straying on to clause 7 now—that the issue relates to clauses 6 to 9 of the Bill. People have seen connections between the clauses. They have considered the detail, and made comments about it, but generally they think that overall there are problems with those clauses.
The Government’s response to the comments in the report makes it plain that in their view the principle rationale for the community buildings rule is to fulfil the original intention of the scheme that each eligible charity should be entitled to a top-up payment on a maximum of £5,000 of small donations. As we have heard, in some situations, without the special provisions that the Government are making, the £5,000 per charity limit would lead to significant unfairness, because similar charitable organisations have chosen to structure themselves differently. Again, we recognise and understand the issues with some churches.
The Government decided that such a marked difference was unfair. That is stated in the report and it is understandable, but they then decided to define in law what a local group or charity looked like. As I said on Second Reading, the problem is that what makes sense to parliamentary draftsmen when they are getting something on paper is not always the way things operate in the real world and does not take into account the way charitable organisations structure themselves, where, how and how often they meet or how their collections may link in with other activities. I recognise that Members on both sides of the House have a lot of experience as volunteers with charities, perhaps through serving on boards, and also have heard from their local charitable organisations.
There are problems with clause 6, and the specified amount for charities that run charitable activities in community buildings, and with clause 7, which gives the definition of what is meant by the term “running charitable activities”, which we will come to later.
I want to consider some of the comments from individual charities and organisations in the evidence-taking sittings. Cath Lee, the chief executive of the Small Charities Coalition, recognised that efforts had been made to consult the sector, but also made the point that many small charities do not generally have the capacity to respond, and did not respond. We have had quite a bit of debate on that. The issue is that many small charities and organisations may not yet be fully apprised of the changes that are about to come in.
Mr Ian Clark, who has been referred to in debates on earlier clauses, pointed out that charities choose the type of structure most appropriate to their needs. He also pointed out that he sees
“no a priori reason why the government should want to give an extra benefit to one particular type of charity structure that does not appear in the rest of charity legislation. So fundamentally I see no reason for sections 6 to 9 ‘Community Buildings’ being included in the Bill at all. … As it stands the Community Buildings provisions are likely to create as many anomalies as they cure. Why are buildings where one-to-one or small group counselling take place excluded? Why is a donation in a street collection allowed, but not one inside a shop, supermarket or pub? Why are charity groups that meet in ordinary homes or residential homes (eg nursing homes) excluded? …
As is evident from the Bill and HMRC’s Explanatory Notes, the CB sections already occupy a disproportionate amount of the scheme, whilst the CB device does not even directly address the underlying problem of local branches.”
I make those points because it is important to understand the complexity of this part of the Bill and the problems that different charitable organisations and those directly involved have identified. It is our job to assess whether the proposals address those problems. We will hear from the Minister on that later.
I accept that the shadow Minister is trying to make things less complicated, but the amendment basically states that small donations would be identified by the purposes of the building, rather than by the building. It is relatively straightforward if you have 10 buildings and you have got a box in each building and you can track each box and how much is in each box, but if you have to identify the purposes, you have to have 10 boxes in each building and each one has to be counted separately so that you know the purposes of the donations. Does this amendment not increase the complications?
I appreciate what the hon. Member for Birmingham, Yardley said and it leads me on to why we tabled these amendments. We do not necessarily believe that we have the wording absolutely correct to help clarify the situation. I have no doubt that the Minister, as the hon. Gentleman has, will come back with a whole range of reasons why the Committee should not accept the amendment, but the alternative to acting positively to improve the Bill and raising these issues would be simply to table an amendment to delete clauses 6 to 9. That would be a bit like saying “if we want to go there, we would not start here”.
In an effort to be genuinely helpful and improve the Bill, we felt that it was important to probe, to raise some issues and to table amendments that would give us that opportunity, because we may see anomalies where certain types of charitable activity would qualify if they took place within a community building, but would not qualify if they took place outside a community building. We want to ensure that all the donations given for the benefit of the charity or its charitable purposes qualify in that way.
We have had other comments on these clauses. David Tyler, the chief executive of the National Federation of Community Organisations, said:
“In many communities, different community groups find it more efficient to share a single building, legal structure (often a community association) and charity number. They may also retain their individual identities for operating purposes and donations can be targeted to the individual groups. As it stands, the Bill may restrict the amounts available to groups that operate in this way.”
Natasha Parker, a consultant and charity trustee, said,
“The implementation of this scheme has totally been set up to meet the needs of churches and the needs and set-up of other charities have been ignored.”
As I said earlier, while I have no wish to unpick the work that has been done on the churches—I can understand why the Government have done it—the knock-on and unintended consequence of it appears to be the creation of greater complexity for those small charities and organisations that do not have the same resources as some of the larger charities and churches may have to manoeuvre their way through the maze of different activities. Natasha Parker also said:
“It is not just this clause, but throughout that the scheme seems to have been set up for church collections”.
“to restrict the range of charities that could benefit... If, for example, the charity in question were to raise its funds at one event and deliver its activities at another, this would prevent the funds raised from benefiting”.
He added that
“this is without the added complication of where the activity happens.”
He cited the example of the voluntary work done by his wife as a telephone support counsellor as being no less charitable when done from her home as when done from a charity’s office or in a community building. Charities and other organisations have been telling us about those problems, which we want to probe through these amendments.
I have already referred to Mr Ian Clark. At the opening of his submission, he pointed out:
“The Bill is complex, more than twice as long as the original Gift Aid legislation, but for only 10% of the financial benefit to charities.”
That again illustrates that, with the best will in the world, the bureaucracy in relation to community buildings will cause more problems than has been suggested. As I have said, his suggestion was entirely to remove clauses 6 to 9 on community buildings or to re-write the clauses in terms of “local charity branches”. I am sure that the Minister understands that the complete removal of those clauses would not help the charities that we want to see benefit, so we did not think it would be correct to table an amendment to remove those provisions while not replacing them with something positive.
I again have to tell the Minister that, as in the public reading stage, charities and voluntary sector organisations raised such concerns from the outset. I appreciate that he cannot turn back the clock and re-do the whole process of the consultation about, and the drafting of, the Bill. However, I hope that anything arising from the public reading stage and the involvement of the sector in how the process was organised will be closely looked at in relation to future Bills and future work of such a nature. That would ensure that organisations do not simply make written submissions but are given face-to-face meetings and are genuinely involved in an attempt to solve problems before there is a draft Bill or a Public Bill Committee. As it is, we are left to imagine what different scenarios and solutions there might be, when we could have done more of that work earlier. That links to my comments about guidance, which I hope in future will be developed alongside a Bill going through Committee so that we can feed into the process of drafting it.
Several commentators have asked for clauses 6 to 9 to be removed or substantially redrafted. One commented that the concepts around community buildings would create additional complexity and cause great confusion for small local charities, which might be dissuaded from participating in the scheme. It continues:
“The community buildings concepts appear to have been designed to meet the needs of specific charities”— we have already mentioned churches, scout groups and those with unusual structures—
“and these…could be managed in simpler ways. In trying to create ‘fairness’ in some areas it has not just created complexity but it has also created unfairness between different charitable causes.”
One helpful comment made during the process was that, during the passage of the Bill, we will have to try to improve what we have at the moment, but whether or not a solution can be worked on in the short term, at some point we will have to consider it further in the light of wider charity legislation. However, that is not relevant to these amendments or the Bill.
One suggestion was that, rather than entirely new legislation and complex regulations on community buildings, it might be easier if HMRC published a list of national and regional bodies with centralised structures that were allowed to claim for each established local branch. For example, for Roman Catholic dioceses, the Salvation Army, the National Trust, the scouts and various other organisations, there might be a simpler way.
The other issue that was raised was that the concepts of connected charities and community buildings might cause difficulties for smaller organisations, because some of the clauses are thought to be ambiguous and it is possible that branches or offices of some large charities could be classed as “community buildings” so would be eligible for additional top-ups, with the large charities being able to claim much larger amounts of money; that is not really in the spirit of the policy.
I know that a number of my colleagues want to make particular points about charities and other organisations in their own areas; there are some suggestions about how this Bill will affect such groups. Before I move on to summarise the amendments and allow colleagues to speak, I want to refer back to the Second Reading debate. I think it was the hon. Member for Stafford who asked a question about organisations that rely on street collections. The Royal British Legion, which organises the poppy day appeal, and other organisations may have a combination of community buildings, local branches, street collections and other things. Of course we want to see those organisations benefit—particularly this week, when the poppy campaign is launched—and not have all their time caught up in particularly difficult and complex arrangements, rather than in delivering the service they want to deliver.
Let me return briefly to the amendments. I appreciate that the Government have also tabled amendments to the clause. As I have said, it has not been easy to find a way to amend what is perhaps the most complex or convoluted—depending on how people want to look at it—section of the Bill. I must say that at various stages I was tempted, although I did not give in to the temptation, to ask for those clauses simply to be removed all together and start again.
We have tabled a series of amendments that would have the effect of defining the community building amount on the basis of what the donation is to be used for, in other words for the charitable activity run by that charity, and not necessarily in terms of where it was made, for example in a community building itself. If the amendment is accepted, the idea is that a donation could be made anywhere outside the actual community building, but if the charity had the community building it would allow it to tie in the amounts of money that are donated rather than simply the definition of the physical place in which the donation was made.
Amendment 29 seeks to remove from the Government’s definition of running charitable activities from a community building the requirement that 10 or more people must be present on six or more occasions. We may have the opportunity to discuss that amendment in more detail at a later date, but it is important that we try to make the connections between clauses 6, 7, 8 and 9, because they all fall within that particular section of the Bill.
We have also tabled amendment 30, which is consequential on amendment 29 but would clarify the position where charities do not run their services in a building to which the public have access but instead deliver them outside the building. We hoped to probe the issues with services such as meals on wheels.
I said that I did not wish to take up too much time talking about these amendments. There are a number of amendments to other clauses that I wish to speak to in more detail later. On that basis, I ask the Minister to respond to the points that I have made and to understand that we are trying to ensure that these points are raised. As I have said, I am sure that he is going to tell us that there are all sorts of technical reasons why these amendments would not help. I look forward to hearing him say what will help and how he intends to fix the problems that we have identified.
I welcome you back to the chair, Mr Robertson. Amendments 27, 28, 29 and 30 would fundamentally change the community buildings rule in a number of ways. First, donations would not need to be collected while charitable activities are taking place. Secondly, there would be no minimum number of people carrying out the charitable activities in a community building. Finally, charities that do not run their services from a community building would be able to claim under the community buildings rules. The effect would be to allow small donations collected from anywhere to qualify towards the community buildings amount. The only condition would be that the donations funded the charitable activities or services provided to at least one person from a community building.
For policy, practical and technical reasons, I will be asking the hon. Member for Kilmarnock and Loudoun to withdraw amendment 27. Later, we will discuss amendment 12, which would enable residential properties to qualify as community buildings and which, together with the amendments we are debating, might add hundreds of millions of pounds a year to the cost of the scheme. I am sure that that is not the hon. Lady’s intention; if it is, I am sure she will not hesitate to explain how she would fund the additional cost.
I will start by explaining the policy reasons why I cannot support the amendments. By setting out the original rationale for the scheme, I hope to answer many of the concerns that have been raised about clause 6. The purpose of the small donations scheme is to enable charities to claim top-up payments on up to £5,000 of donations. As I and other Ministers have explained, that limit would have disadvantaged some charities. If we had done nothing about the problem, they would have been eligible for hundreds or thousands of times less than other charities that did similar things but were structured differently. We could have left the affected charities to set up thousands of new charities and provided some sort of carve-out for them in the connected charities rules, but that would have been wrong. It would have gone completely against our aim of making the scheme as simple as possible for charities to administer, and thousands of new charities would have increased the administrative burden on HMRC for no good reason. I doubt that Opposition Members or the charity sector would have been happy with such outcomes.
The community buildings rules aim to reduce the worst unfairness that would have resulted from the limit of £5,000 per charity, while restricting the overall cost of the scheme to an amount that the public purse can afford. We accept that some charities will not be able to benefit from the community buildings rules, but they will still be entitled to the central amount of £5,000 of donations as long as they are not connected with other charities. We have had to draw a line somewhere, and in setting the limit at £5,000 per charity we think we have drawn it in a reasonable place that will deliver the broad underlying policy objective.
As we have discussed before, because this is a new idea and no previous Government have tried to do anything similar, we cannot be sure how many charities will be affected. We certainly cannot be sure how many charities would be affected by the amendments if they were agreed to, but we think that the scheme would cost hundreds of millions of pounds more. My speech will help to flesh out how we have reached that conclusion.
All independent charities will be able to claim payments on up to £5,000 of donations collected anywhere in the UK. Many charities have income below £5,000 so they will not need to bother with the community buildings rules at all, because the £5,000 headline limit is enough for them. The only charities that might be concerned with the community buildings rules are charities that are connected with others, which will have access to only a portion of the main £5,000 allowance. Charities that collect more than £5,000 in small donations each year may also want to access the community buildings element of the scheme. We will discuss later the Government amendments, but the community buildings rules we propose would allow eligible charities to collect donations during charitable activities in a community building while those activities are taking place—that is, provided that at least 10 qualifying people are present.
The rules therefore target charities where groups of people from the community come together to carry out charitable activities and where small donations may be collected at the same time. The rule is not designed to give an extra £5,000 allowance to every charity that operates out of a building or has a local branch for each of those buildings or branches. The money collected can be used for any charitable purpose of the charity. For example, a charity running educational activities can use the donations to fund charitable activities in other parts of the country or even overseas.
The hon. Member for Kilmarnock and Loudoun suggested that multiple charities operating out of a single building might be disadvantaged. I hope I can allay that concern by saying that any number of charities can operate out of a single building. For example, in a local village hall a local women’s institute might meet one day, followed the next day by a community amateur dramatics group and the next by a medical support group. Each of those groups could potentially claim as long as they met the other eligible criteria under the community buildings allowance. I hope that is a helpful clarification.
The Minister may want to reflect on his example of the women’s institute, many of which are incorporated as industrial and provident societies rather than as charities. If they are community benefit industrial and provident societies perhaps they are covered, but perhaps they are not. We look forward to discussing this issue with him in a separate amendment that we have tabled. I offer him a cautionary note in his use of women’s institutes, given the way that, in my experience, they often choose to incorporate themselves.
I thank the hon. Gentleman for that intervention. He may well be right. Certain women’s institute groups may not be constituted as charities. It is an opportunity for me to clarify that the groups benefiting from the Bill would have to meet the qualifications.
I want to pick up on one of the points the Minister made about charities that advance education. Following a parliamentary question that I tabled, I was informed by the Charity Commission that more than 84,000 registered charities in England and Wales are classified as advancing education. I was interested to know how many of those would be schools and what the implications would be, but it was unable to give me that information. Can the Minister tell us how many of those 84,000 will be caught by the community buildings regulations?
The short answer is I cannot tell the hon. Lady which ones qualify. This is very particular to the structure of each charity. It is hard to know offhand how each of those 84,000 is structured.
The Charity Commission has also informed me that the Department for Education’s academies programme has so far created more than 2,300 new, publicly funded independent schools. It explains that the charities that run the schools are exempt from registration regulation by the commission, with the Department for Education being the principal regulator for the purposes of charities. Some academy trusts run more than one school, so the number of charities is obviously less than the number of schools. Have there been any discussions with the Department for Education of any of Bill’s implications for charitable activities in those schools?
Just to make it clear, I have not been personally involved in any discussions relating to the hon. Lady’s issue, but that is not the same thing as saying that it has not been factored in. Again, I hope she appreciates, given the number of charities involved and so on, that it is difficult to factor in how charities will use the Bill’s proposals. There is always an element of estimation.
I absolutely appreciate what the Minister is saying, and I am sure that he will find out whether such discussions have taken place. I recall from a previous debate, however, my hon. Friend the Member for Harrow West mentioning the amount of support that charities would require in order to enable them to take part in the scheme, so I would assume that if these schools and organisations are eligible, the Minister would want them to benefit from the top-up scheme and he or his officials would therefore not only be giving them the information, but also ensuring that that cost was factored into the overall costs allocated by the Government to the project.
The hon. Lady makes a good point. Regarding educational charities, the hon. Member for Harrow West raised at a previous sitting the issue of schools—both state and private. We want schools, whether represented by parent teacher associations or other educational charities, to benefit fully from the Bill. Obviously, there is only a certain type of school that would want to take advantage of the community buildings rules. They might not apply to many, but every school that has charitable status will have that £5,000 limit before it even has to look at community buildings rules.
Amendment 27 would require any donations collected to be used on running the charitable activities that are run from the community building.
I know that the Minister would not want inadvertently to mislead the House, so may I just gently point out that the schools in my example, which contrasts Eton with schools that have PTAs, will not be able to benefit from the Bill? The 84% that are not registered for gift aid will not be able to benefit, and that is one of the great unfairnesses of the scheme.
The hon. Gentleman mentions Eton again, but he could mention Harrow, with which I understand he is quite familiar. I assume that it has similar charitable activities and status to Eton, so I wonder why he keeps mentioning Eton when he should pick a school that he is more familiar with. He points out that many PTAs are not currently registered with gift aid. In a previous sitting I pointed out that HMRC has recognised that and has tried to get more educational charities—PTAs, schools or otherwise—to take advantage of the generosity of the gift aid scheme. I think that over time more will be able to take advantage of the scheme.
I want to clarify whether the Minister is saying that the many thousands of schools that have converted to academy status and are now publicly funded in the independent sector can register as charities and qualify under the gift aid scheme. I am not sure whether the Treasury has budgeted for that. We are talking about thousands of schools.
That is not what I am saying. I am saying that some schools—state schools, as academies are; state comprehensives, such as the school I went to; or schools such as Harrow, which the hon. Member for Harrow West energetically represents in Parliament—can be a charity in their own right or have a charitable arm and so forth. To the extent that schools are a charity in themselves or have a charitable arm or link, they are able to benefit from gift aid at the moment. If they meet the other eligible criteria, they can benefit from the terms of the Bill.
Let me be clear: I am a proud representative of all the schools in my constituency, including Harrow. The pupils and staff have noticed the difference in the quality of political representation that they have had—a dramatic improvement since 1997. My point is not to seek to do down our public schools, but to raise up the opportunities for state schools with PTAs that are not currently eligible under the terms of the scheme. It is one of the huge divisions that the Minister is seeking to define that is at the heart of the unnecessary complexity in the Bill.
That is not a division that I seek to defend. The hon. Gentleman knows that. However, I absolutely agree that, as parliamentarians, we should encourage schools and educational charities to take advantage of the generous reliefs that are available.
I seek some further clarification. I hope the Minister will forgive me for coming from the Scottish education system, which is somewhat different. I seek to clarify what he said in response to a question from me and from my hon. Friend the Member for North West Durham about which of the academy schools would be eligible. The information that I have from the Charity Commission—just to repeat—points out that more than 2,300 new publicly funded independent schools have been created, and are run by academy trusts. Is the Minister saying that all those schools would be eligible? He seemed to imply to my hon. Friend the Member for North West Durham that the ones that had converted from state to academy would not necessarily be eligible. I seek to clarify that and have the actual truth on the record, so that I understand it.
They are state schools and they are entirely state funded, just as the state comprehensive is state funded, albeit through its local education authority. I am not saying that every academy is a charity. For each school, the situation is different, whether they are academies or Church schools, or schools that one might think of as being in the private sector—private schools that are registered as charities. I am merely saying that to the extent that an academy is a charity and meets the other criteria in the Bill, there will be nothing to stop them taking advantage of the provisions in the Bill.
I am sorry to prolong this, but it is important. I refer again to the letter I received from the Charity Commission. It makes the point that the charities that run these schools—the academy trusts—are exempt from registration. Therefore it is important to get that relationship clarified in terms of what the Department for Education does here and what the Minister intends to do. Is he saying that while the schools may not be eligible themselves, the trusts would be?
To be absolutely clear, the letter from the Charity Commission states:
“In addition, the Department for Education’s academies programme has so far created over 2,300 new, publicly funded independent schools.”
That clarifies my hon. Friend’s point. The letter continues:
“The charities that run these schools, Academy Trusts, are exempt from registration and regulation by the Commission; DfE is the principal regulator for the purposes of charity law. Some Academy Trusts run more than one school, so the number of charities is less than the number of schools.”
I was seeking to find out whether individual schools would qualify or the trusts. That was all.
My understanding is that the majority of academy schools are charities. Academy schools, as I said earlier, are state schools, in the sense that they are funded by the state. The difference would be that an academy gets funding directly from the Department for Education and state schools are funded by their local authority. Whether the school becomes a charity and what status it has is defined in the Charities Act 2006. It has to meet the requirements of charitable status, which include being for a wholly charitable purpose and for the public benefit. I hope the hon. Lady understands that the debate is not about how certain schools and institutions achieve charitable status. My point is that if an entity, be it a school, has achieved charitable status and it meets the other terms of the Bill, it can benefit.
Rather than prolong the discussion any further, as obviously the Minister will want to consult the Department for Education, it would be helpful to get clarity on the number of schools and of academy trusts. I do not raise that to make mischief or be awkward. It is a genuine attempt to find out the range of organisations. We have heard from my hon. Friend the Member for Harrow West that Eton could benefit. I simply want to pick up the point that the Minister has made several times about ensuring that every possible organisation benefits. I simply wanted to understand that better. If the Minister would undertake to give us that information when it is available, that would be helpful.
The hon. Lady referred to a letter from the Charity Commission. If she would like to share that letter with me later, I would be happy to take that on board too and try to answer her questions.
Amendment 27 would require any donations collected to be used on running the charitable activities that are run from a community building. That means that donations collected in a church service could be used to fund the repair of the church steeple but not to fund a food bank charity organised in the village hall or the building of a school in Africa. That is very restrictive, and I am sure that the Opposition would not intentionally support such a parochial approach.
Amendment 29 would remove the need for a quorum of beneficiaries to form a group in order for a building to be a community building, so any building used by a charity for charitable purposes in which the public may be involved would qualify as a community building. Amendment 30 would remove the requirement for the charitable activities to be carried out in the community building, which would mean that a charity that delivered its services to a single member of the public in their home could treat the charity’s local administrative office as a community building.
Hon. Members have eloquently expressed their concerns about the administrative burdens that the new scheme might place on charities, but here they are inventing new record-keeping requirements. Charities would have to prove that the donations they collected were used to fund the specific charitable activities that were run from a specific community building. I can well imagine the future complaints of hon. Members and charities about the administrative burden that that had placed on charities.
Increasing the number of community buildings by including any building to which a single member of the public has access will increase the costs of the community building rules massively. As a result, we would have to revisit and reduce, perhaps significantly, the maximum amount of £5,000 per charity to keep the cost of the scheme within its current envelope. I am sure that charities would not welcome that, and I am sure it is not the Opposition’s intention.
Amendment 28 would remove the definition of “remaining amount” from clause 6, which tells charities that meet the community building rules how much they can claim in total. The remaining amount is, in fact, the £5,000 headline amount of small donations on which any charity can claim. Unfortunately, the amendment would remove that definition, so who knows what the remaining amount that is referred to in subsection (2)— which the Opposition do not suggest should be amended—might possibly be? How will a charity with a community building know whether it can claim on more than just donations used to fund charitable activities from a community building?
In summary, the amendments are not practical; in many places they would not work; and where they might work, they would require charities to keep massive amounts of records. The amendments would turn the policy objective behind the community building rules on its head. We designed the rules as a limited concession to help smooth out some of the worst discrepancies that the £5,000 limit on small donations would cause, but the amendments would make community buildings the rule rather than the exception for most charities. That would make understanding the rules far more complex for many charities, and it would increase their administrative burdens. The cost of the scheme would increase significantly, so we would have to reduce from £5,000 the maximum amount of small donations on which charities can claim top-up payments.
Large charities that are currently limited to the £5,000 maximum would be able to show that they have thousands upon thousands of community buildings providing services to individual members of the public, which would result in a massive shift of payments under the scheme from small charities to the largest ones. The only way in which we could control those costs would be to cut the headline £5,000 limit for all charities. That would hit the smallest charities hardest, which I do not believe is an outcome that anyone, including the hon. Member for Kilmarnock and Loudoun, is trying to achieve.
I am sure that the purpose behind the amendments is well intentioned, but their impact has not been properly thought through, so I urge the hon. Lady not to press them.
I thank the Minister for the information that he has given us during the debate. As I said at the outset, we were aware that there were difficulties with the amendments. We found it difficult to find a way of amending and simplifying what was already a fairly convoluted set of clauses. It was important, however, that we had that discussion and it was also important that we were able to get on record the concerns of those charities and organisations that felt that clauses 6 to 9 should be completely deleted and redrawn in some other way, perhaps through new clauses or an entirely different scheme.
I do not intend to press the amendments to a vote and I do not intend to take up time going over points that I have already made. I am sure that neither you, Mr Robertson, nor members of the Committee would welcome my doing that. I have to express some concern, however, about some of the Minister’s comments in his winding-up speech. He seemed to suggest that the £5,000 limit people could look to in relation to community buildings would have to be reduced if the overall cost of the scheme grew. I am willing to take an intervention from the Minister if I misheard that, but it links back to the points that we have consistently made during our discussions in Committee: we do not have a proper estimate of how much the scheme will cost, we have not seen the workings, and we have not seen the basis on which the costings are made. During the course of the discussion of these amendments, we have remained unclear, yet again, about whether 2,300 schools or other organisations will be brought into the scheme. The Minister does not appear to want to clarify, so I take it that if more people join the scheme around the community buildings provisions, that limit could be reduced.
I am happy to issue clarifications where I can. The hon. Lady’s amendments, for the reasons that I have tried to articulate, would mean that the cost of the scheme could rise dramatically if nothing else was done, because many more charities would be able to access the community building rules—perhaps thousands. She knows that the intention of the community building rules is to deal with an unfairness that was clear from day one in relation to how certain charities are organised. One of the examples that came up in the evidence session was how, for example, the Church of England is constituted versus how the Roman Catholic Church is constituted in this country, and such differences could have led to unfairness. Given that the Government have attached a specific spending envelope, which we have discussed many times, to this scheme, it is prudent to have cost control. I am sure that she agrees. If these amendments were agreed, it would inevitably mean, because more charities would try to claim, that the £5,000 limit would have to change downwards.
The hon. Lady also asked about how many charities might access the scheme and the total cost of the scheme.
Thank you, Mr Robertson, and thank you to the Minister for giving part of the answer. We may want to return to the issue. My intention in tabling the amendments was not to expand the scheme to an unsustainable point; it was to probe issues around unfairness—the very point that the Minister raised. The amendments, by solving the problem identified at an early stage by the churches and some of the other organisations in relation to their structures, would ensure that we do not put in place a scheme around community buildings that causes problems for other charitable organisations, particularly smaller charities. To be fair, I think the Minister understands that, but I remain concerned about the costing.
On the one hand, we all appear to agree that we want every possible charity to take up the opportunities offered by the Bill in ensuring that they get the top-up payments, but on the other, I understand the Minister to be saying that there is an overall cost envelope, so if one thing increases, something else may have to reduce. That is the first time that we have heard that in Committee and we may need to probe that further. I am sure I will have the opportunity to do that when the Minister moves amendments later. I beg to ask leave to withdraw the amendment.
Government amendments 4, 5 and 6 are intended to restrict the donations collected in respect of community buildings to those donations that are collected in the course of the charitable activities carried out in a community building. We have already debated community buildings, but it is worth repeating the policy objective behind the community building rules before I move on to explain why the Government have tabled these amendments.
The purpose of the small donations scheme is to enable charities to claim top-up payments of up to £5,000 of small donations each year. As I explained earlier, however, that limit would have disadvantaged some charities. They could have been eligible for hundreds or thousands of times less than other charities doing similar things, simply because of the way that they are structured. The community building rules are therefore aimed at reducing the worst unfairness that the maximum £5,000 donations per charity rule would have brought. At the same time, the aim is to keep the overall costs of the scheme to an amount that the public purse can afford.
We listened to the concerns that were expressed on Second Reading by a number of hon. Members. Some raised concerns about the potential unfairness to some charities that use commercial buildings, which are currently excluded from the community building rules. Some charities are offered the use of rooms in hotels or offices for their charitable activities, for example. We accepted that the community building rules could be loosened to allow certain commercial buildings to qualify as community buildings, and we have tabled amendments 11 and 12 to do just that, and we will be debate them in due course.
However, those amendments cannot stand alone. Extending the community building rules to commercial buildings will inevitably increase the cost of the scheme. We need to balance the increased costs of loosening the rules, so amendments 4, 5 and 6 ensure that only those donations collected from group members during the charitable activities qualify as small donations under the community building rules. I understand the keenness of charities to be able to access top-up payments on more than £5,000 of donations, but the community building rules are deliberately framed narrowly. They aim to smooth out the worst unfairness of the basic rule that each charity will be entitled to payments on up to £5,000 of small donations.
In layman’s terms, so that small charities actually understand the ground rules, the community building arrangements have been introduced in the Bill to suit, for example, churches that are at a disadvantage because of their different structures. It is not aimed at helping smaller charities. The processes in this part of the Bill are designed to prevent small charities from taking advantage of the second £5,000. It is a fraud in terms of holding out the chance to a small charity of actually ever attaining that £1,250 by raising the additional £5,000.
The hon. Gentleman has said a lot in our sittings with which I agree, but if he will allow me, I will have to disagree with him wholeheartedly on this occasion. He is right in one respect, in that Churches are one of the groups most affected by community building rules, so if the rules did not exist, it is fair to say that the Church of England, for example, would have a huge issue with that. In trying to answer his question, it is best to explain why the Church of England would have such an issue. The Church of England, by contrast with the Roman Catholic Church, is often structured as a small number of registered charities in each parish, for example; the Roman Catholic Church is structured differently, as what we might call a branch network. To correct myself, therefore, in the context of Churches the Roman Catholic Church would be the one to benefit most from the community buildings rule. However, one should not think of each of those branches of the Roman Catholic Church as not being small charities, because in their own village or community the local parishioners would view them as—
I thank the Minister for allowing me to intervene because it might save the Committee some time. I totally accept the basis for the changes in terms of the Churches. That is not an issue; I think they do the job well. In the same part of the Bill, however, there is an allusion to small charities being able to gain, but that is an illusion. The Minister may drop the Church part of the explanation, but can he tell the Committee who is actually able to contribute a donation that counts as part of the sum for getting the community building £5,000?
The Member’s explanatory statement for amendment 6 suggests that the donations have to be
“collected from persons with whom the charity is carrying out the charitable activity.”
In other words, if 10 Alzheimer’s patients were in a room being looked after and encouraged, they would be the only people in the room who could contribute to the charity. In the explanatory notes for the Bill, that point is made exactly with reference to a medical charity, the phrase being:
“from attendees during the meetings.”
Can the Minister clarify that?
Okay. I will answer that question now. The contributions made by any group member carrying on the charitable activity will count towards the £5,000 limit. A group must include at least 10 people who are beneficiaries of the charity when carrying out the activity, as discussed, but donations from any other people present will count as small donations under the scheme.
The Minister will agree that, according to the Bill documents, if other than the recipients of the charitable activity make a donation it is not counted for the community building part of the scheme, it is used as the other part—the other £5,000.
To clarify, if a charity is using this part of the Bill—the community building rules—and assuming it meets the other criteria of at least 10 people being present in the community building when the charitable activity and the collection are taking place, then there will be 10 people who are beneficiaries, but the donations of anyone else who is present and making contributions count towards the £5,000 limit.
“for the purposes of clause 6 unless they are collected from persons with whom the charity is carrying out the charitable activity.”
In other words, the poor gentleman or lady with Alzheimer’s who is the recipient of the charitable activity is the only person who can make a donation.
The position is as follows. When the donations are collected there must be at least 10 qualifying people there—these are beneficiaries of the charity. If there are another five, six, 10 people who are making donations—who are not the people, to use the hon. Gentleman’s example, suffering from Alzheimer’s—those donations will count. The 10 people rule concerns the beneficiaries who must be present in that community building.
My hon. Friend the Member for Leeds East has got to the nub of this problem. It is not entirely clear to me who else would be there other than the beneficiaries. There is also a danger that this conflicts with the HMRC guidance on benefits received by donors, particularly section 3.26.3, which states:
“A benefit is ‘associated with a donation’ if it is received by the donor or a connected person in consequence of making the donation. In other words, there has to be some connection between the fact that the donor has made a donation and the benefit being received.”
If the people with whom the charitable activity is being carried out are also the donors, is there a problem under the terms of the HMRC guidance?
I do not think there is a problem. The hon. Lady will know that even with the gift aid system, the system that complements this scheme, it is possible for a charity to give a limited amount of benefit to someone who is making a gift aid donation. I do not believe it conflicts with this.
Perhaps the Minister can receive confirmation from elsewhere that, in terms of the £5,000 relating to the community building, persons other than those who are in receipt of the charitable activity can make a donation and that that will count as part of that sum. Does a staff donation count? Does a public donation count or does that siphon sideways into the other £5,000 which is not the community building fund? Who can make a donation? What class of people other than the recipients can make a donation that counts?
During the charitable activity in the community building there need to be at least 10 people present who are beneficiaries of the charitable activity. If that condition is met, notwithstanding other provisions of the Bill, donations made by anyone else present will count. I hope that is clear.
Cathy Jamieson rose—
That was timely. Perhaps I will start off with the point on which the exchanges between the Minister and my hon. Friend ended. One of the issues raised during the public reading stage, on Second Reading and in the evidence session was who the recipients of the charitable activity would be and who could make those donations. My hon. Friend outlined exactly what the problem would be in many circumstances. There could be many groups and organisations that are perhaps supporting vulnerable members of the community. My hon. Friend suggested it could be an Alzheimer's group, a carers’ organisation or a group supporting vulnerable children. I am sure we could all identify possible groups. I certainly hope that we have moved away from the days when charitable works were something done to other people by the great and the good, who gathered around, made donations and did good works. I therefore appreciate the point about the recipients—the 10 members or whoever—being present, but I am still not entirely clear who else will make up the numbers in putting donations into boxes in relation to the types of charitable activities carried out in the real world.
There may be circumstances in which 10 members of an Alzheimer’s group are in a community building where other charitable work is being done and other people are present. However, for many charitable organisations that support people, that will not necessarily be appropriate, so they may not be able to benefit, which again highlights the nub of the problem with this set of clauses.
We have attempted to solve the problem involving the Churches, and the Minister has provided much information about why the provision is necessary. None of us is saying that that is not how it should be done. Indeed, we welcome it and say, “Good work and well done” to the Churches for securing it and the benefits arising from it. However, we are concerned that the provision will make it more difficult for many charities that support the most vulnerable people to take advantage of the scheme. That does not seem to meet the fairness test, or to deal with the unfairness that the Minister mentioned.
Particular concerns need to be addressed, and I know that some of my hon. Friends want to refer to organisations and problems in their communities, so I will not speak further until they have had an opportunity to do so.
I want clarification about the amendments, particularly in relation to charities running charitable activities in a community building. In the evidence sessions, concerns were raised about the problems that might be caused for a wide range of charities. Several organisations were mentioned, including the Alzheimer’s Association and the Red Cross, that have community buildings and offer support and services, but do not necessarily raise funds while running activities and have donors and beneficiaries who are quite separate.
The provision will undoubtedly benefit a wide range of organisations. In particular, I appreciate that the Churches will do well—perhaps I should declare that I am a practising Catholic, and that I am therefore pleased that the Roman Catholic Church will benefit—but others will apparently be excluded. Will the Minister please therefore clarify what is meant by
“charities running charitable activities in community buildings”,
and will he provide practical examples of that?
Many beneficiaries of charity are not in a position to make donations, and it would be inappropriate to ask them to do so. I accept that the issue is about the figure of 10 people—we have already discussed who the others would be—but the circumstances in which charities fundraise while carrying out charitable activities are limited. The very nature of fundraising is highly dependent on the types of activities and organisations. For many if not most charities, beneficiary and donor groups are likely to be two separate constituencies, and that should not be a discriminating factor in whether a charity can access the scheme.
In the evidence sessions, we heard that, although the scheme will support large charities and the Churches, it is most likely to disadvantage small charities and groups that work with the most vulnerable and disadvantaged people. I am thinking particularly of charities such as the People’s Kitchen in Newcastle, which fundraises with one constituent group but provides food in community buildings to a quite separate group. It would be inappropriate for the charity to charge or to ask for donations from those it is helping, so it appears to be the kind of charity and vulnerable group that could not access the scheme. Having heard the Chancellor’s original reference to the scheme in the Budget, I cannot believe that he intended to exclude such groups.
I have some sympathy with the Minister and I can understand his frustrations. I have been in his position, not in Parliament but in other circumstances. He is introducing a scheme that will provide tax relief for charities, and instead of being grateful for what is being offered and shutting up, we appear to be carping and harassing him constantly, like Oliver Twist asking for more. However, the good intentions of the Bill may have been lost in the drafting, and it has become less about delivering good works than about preventing fraud, so I am not sure that we have got the balance right. Even if the prime purpose were to prevent fraud, I cannot understand how the Government amendments would help.
I have a number of questions. Does the Minister accept that elements of the Bill could lead to the exclusion of smaller charities that support vulnerable and disadvantaged people? I know that he said that he does not know how many charities would be excluded or affected, but I think he really ought to find out. It would appear that the People’s Kitchen in Newcastle will not benefit from the scheme but the King’s school, an independent school that is run by a charitable trust and has recently become an academy—the Department for Education has wiped out the school’s £2 million debt—would benefit. It is important for the Minister to find out who and how many would not benefit. Does he recognise that not all independent groups are linked with a building, and that in supporting and helping some charities the Bill would exclude others? Was that the intention, or was it simply an unfortunate consequence of the drafting?
Before I call Mr Mudie, I will say that I know there is a bit of overlapping with other clauses, but I do not expect repetition in debates on those other clauses.
Now that some time has passed, I simply want to ask the Minister to explain the explanatory note. The church issue has been dealt with, but the Bill goes on to provide hope to small charities that they can get £1,250 if they collect £5,000 from tins, and that if they collect £5,000 from their activities in the community building they can get another £1,250. Will the Minister be absolutely clear as to how they can raise the second £5,000 in a community building so that they can benefit by £1,250?
I would like to put on record the fact that Government amendments 4, 5 and 6 will prevent small donations collected in community buildings from counting towards the community building amount. In other words, donations will not qualify for the second £5,000, for the purposes of clause 6, unless they are collected from persons with whom the charity is carrying out the charitable activity. I am just a layman, and that is layman’s language. If we take the minimum criteria of 10 people meeting on six occasions to raise £5,000, how much would each individual—they do not have to be the same people each time—have to pay? Amendment 7 will prevent a charity from asking those people for a donation or an entry fee as they come through the door. Once they are inside, if they want to benefit the charity that is helping them, they seem to have to pay a vast amount of money. I may be misreading the explanatory notes—I am just a layman—but we need an explanation because it seems that only recipients of the charity can contribute, which seems to spell out that small charities cannot succeed.
To be fair, the Minister made it clear that the amendments in the first group that we discussed after the lunch break were designed primarily—he may dispute that word—for religious bodies; for when people come to church with plenty of money and put it in the plate. They were not designed to allow small charities to take advantage of the provision because that would be too financially difficult for the Government—just an open cheque. It would be better to spell that out so that people do not even dream.
Unlike other amendments that we have tabled, this group tightens rather than loosens the community buildings rules. We have tried to be as generous as possible on relaxing those rules, and I will explain in a later debate how we are doing that. As we are loosening some of the rules, we must be careful not to increase the cost of the scheme considerably, so to counterbalance some of the amendments that we will come to, I have tabled the group before us.
The hon. Member for North West Durham asked some good and fair questions. To make sure that it is absolutely clear, I want to point out that there is a limit of £5,000 on donations for every single charity, so the vast majority will not come into contact with the community buildings rule, and those that do—we have heard examples today—will be structured in a particular way.
I mention that because the hon. Lady gave a couple of examples from her constituency. Those charities may already be at or under the £5,000 limit in terms of small donations—we are talking about the small donations element, and they may benefit from gift aid and so on—and that limit may be adequate for them. It applies to every charity, whether its activities are in a house, a community building in the high street or wherever. The community buildings rules are relevant only for certain charities that are structured in a particular way. I urge the hon. Lady to bear it in mind that some of the issues she is concerned about might not be relevant to some of the charities she has in mind, although I cannot be sure of that because I do not know enough about the individual charities.
The hon. Lady asked for further clarity, which was fair, and I will provide it by way of examples. That may at the same time help me to answer the question asked by the hon. Member for Leeds East, who touched on a similar point. The hon. Lady asked about the definition of charitable activities, and I will give an example that might illustrate that.
A few months ago, I went to speak to an important annual gathering in a community building organised by a charity, the Macular Disease Society—the hon. Lady may be familiar with it—which has a local group in my constituency. The gathering was in a local town hall, and some of the people in the room were, sadly, suffering from that disease to various degrees. Some of the people were direct beneficiaries of that charity’s excellent work, but a number of people were there who, like myself, do not suffer from that disease. They might have pushed a wheelchair for someone or might have been helping to make someone a cup of tea, but they were not beneficiaries of that charity.
Money was raised on that day. I made a small contribution, along with virtually everyone who attended. I am fortunate enough not to have that ailment, but under the rules that we are considering, such donations, from people who are not directly suffering from that disease—this happened before the Bill but it counts as a hypothetical example—would count as long as at least 10 people who were beneficiaries of that charity were attending. More than 10 such people were at the event that I attended. What activities were there? There was a video about the disease, both for people who did not know much about it and for people suffering from the disease, letting them know how they can help themselves and how their partners can help them. There were exhibitions of glasses to help people with reading, driving and other things. Self-help leaflets were available and medical experts were on hand to help explain how to live with the disease. Charitable activity was taking place. I hope that that real-life example goes some way to explaining how I see the Bill working.
Let me provide another example to illustrate this important issue. I mentioned it to officials to ensure that even I understood correctly. WaterAid is an excellent charity that I am sure many hon. Members know about. It is fair to say that the key aim of that charity is to help supply clean water in countries outside the UK, in Asia and particularly in Africa. One could say, “If that group meets in a community building, clearly it is not building wells and things in some part of Durham” and that would be right. But even in that example, at the meeting the group would not be engaged purely in fund-raising activity. The charity’s aim is not just to build wells but to educate people about what is going on in Africa in terms of the need for clean water, and so forth. The group would be engaged in activity that met its charitable charter, educating people who have gathered about the need for clean water and spreading word about its cause. People taking part in education, watching videos, listening to speeches, and so forth, are taking part in charitable activity. That is just an example. Each case will be different, but such activities can count, too.
If, instead of simply making food, delivering it and feeding people in a community building or on the street, The People’s Kitchen was also providing them with education, such as advice on how to keep themselves warm—many of them are homeless and living outside—or on what kinds of food they should be eating, would donations collected there qualify under the scheme?
My reading of the Bill is that that is so, as long as charitable activity is taking place when the group is meeting in a community building, including education about one of its aims. The aims of every charity are included in its charter. To take the hon. Lady’s example, if one of the charity’s aims is to help people with food—getting food to vulnerable people who need it—and another aim is to educate people, including donors, about the need for and importance of doing that and the benefits it brings, that should qualify. That is my view.
Each case is different. A lot of eligibility criteria need to be met. I do not want to say that every charity will almost certainly always qualify, but I hope that my answer has helped to clarify her concern.
I appreciate that the Minister is trying to be helpful by explaining the circumstances in which groups would be eligible, but does he accept that even the examples that he has given do not cover some of the organisations that raised concerns? For example, if a charity supports vulnerable children and the young people meet in a community building, it would be inappropriate to have a range of other activities going on while the recipients of the charitable activity were present. People were concerned that such an organisation would lose out as a result of the measure.
Even in the example that the hon. Lady has given, that organisation, as long as it is a charity, would have its £5,000 limit. If I understood her correctly, I think she is saying that when the organisation is actually engaging in part of the charitable activity—a meeting of vulnerable children in the community building—that would count. The point is that it is not a fundraising meeting. They are not getting together to fundraise. It is a pure delivery of the charity activity, but if that charity is fundraising, it can take advantage of its £5,000 limit.
Remember that it is a £5,000 limit per charity. It is important to note that many charities will not have to come into contact with the community building rule. For the way in which most charities are constituted and the way in which they collect, the £5,000 limit may be enough. Also, for example, if they have bucket collections in the high street—clearly that is not charitable activity, but it is an important way of fundraising—that counts, because it is not coming into contact with the community building rule.
I know it will concern some charities—I have heard the points that hon. Members have made—but we need to control the overall costs of the scheme. I therefore commend the amendments to the Committee.
See Member’s explanatory statement for amendment 6.
Amendment6, in clause 6, page 4, line 21, at end insert—
‘( ) “Group member”, in relation to a charitable activity run by a charity in a community building, means a member of the group of people with whom the charity is carrying out the activity.’. —(Sajid Javid.)