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New Clause 3 - Complementary Gift Aid for small donations to small charities

Part of Small Charitable Donations Bill – in a Public Bill Committee at 4:30 pm on 30th October 2012.

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Photo of Mark Durkan Mark Durkan Shadow SDLP Spokesperson (International Development), Shadow SDLP Spokesperson (Work and Pensions), Shadow SDLP Spokesperson (Foreign and Commonwealth Affairs), Shadow SDLP Spokesperson (Home Affairs), Shadow SDLP Spokesperson (Justice), Shadow SDLP Spokesperson (Treasury) 4:30 pm, 30th October 2012

I thank the hon. Gentleman for that point. The Committee received written as well as oral evidence that reflects that many small charities do not  qualify for this scheme, may not qualify in its first year or two, and may find it testing to qualify at a later date. I will go into the reasons why some charities might find it harder to go down the gift aid route as a way of qualifying for the top-up benefits.

Earlier in our discussions, I said that the Government had produced a scheme for supplementary gift aid for those charities that use or will use the gift aid system. What I am trying to do with new clause 3 is effectively offer a complementary gift aid scheme that could be available to small charities that do not meet the eligibility criteria for the Government’s supplementary gift aid scheme. That would ensure that smaller charities can get the same benefits from the complementary gift aid scheme as larger charities using the gift aid scheme. It would also help some newer charities, not least charities that are formed in response to particular events, such as natural disasters, tragedies or the impact of serious crime on a community. We all know of many charities that are formed in those circumstances. It seems odd that we as parliamentarians should determine that such charities be excluded from a fairly modest top-up payment scheme with a maximum of £1,250 to complement £5,000 of donations.

I have posited before in Committee that, as well as the Government’s route 1 option, as provided for in the Bill, we may need to develop a route 2 option through which smaller charities not working gift aid qualify. That is essentially what I am trying to do with new clause 3. I know that it will take time for such a scheme to be worked up and that is why the new clause provides for a later commencement date. The complementary scheme for donations to smaller charities would not come in until 2014, because HMRC would want to be protected against fraud or abuse if it were to make payments of this nature to smaller charities that did not fulfil the gift aid criteria, for the reasons that the Minister emphasised. That is why new clause 3 indicates that, in developing such a scheme, HMRC could

“stipulate the supporting verification it may require from relevant agencies or authorities or designated persons in respect of any claims for complementary Gift Aid”.

We have referred from time to time to the fact that there are different charity regulators in different parts of the UK and the new clause refers to them. Given that many charities collect money on the basis of licences issued by the police, the police could indicate verification by saying, “Yes, we licensed that collection for this small local charity. We can confirm that that was the money that was collected.” It might be a role for the police and crime commissioners that are to be elected. I am not sure what they are going to do, looking on from Northern Ireland, but they might provide a useful point of liaison between the function of police licences and something that is then being administered on behalf of central Government. They could certify that the collections had taken place.

Often, when charities are set up in response to particular dramatic events in a community, local authority figures, whether the mayor or the chief executive, are used as trustees so that people are more widely reassured. Those are the sort of people who could be used as validators or verifiers for HMRC. Under the new clause, HMRC would also have the power to indicate that certain professional classes, for example, accountants, might be able to verify. The Committee’s attention was drawn to  the fact that there is the defunct self-assessment giving scheme, and some of the logic and rubrics of that could well be used in this situation.

If the Government have conceived a scheme that is effectively a lean-to on the gift aid system and are absolutely minded to use it as their route 1 for most charities and for supporting giving by getting some money back from the taxman, because they want to ensure that they can build on the intelligence, understanding and rapport that HMRC has with charities on gift aid and because they do not want to set up a completely separate scheme from that which those charities would be using, it should not be beyond their ken to develop a route 2 option.

I do not pretend that all the details that I have—and certainly not the details that I do not have—on new clause 3 make this the perfect scheme by any means, and I have no doubt that a schedule and so on would be needed to go with it. I know that some Government Members are concerned that perhaps more charities should be included and eligible in future, and I hope that they will accept that there is merit in at least keeping open the option that there should also be a route 2.

I have ensured that the terms on which I have offered the new clause do not include any conflict with connected charities issues. Although I have reservations about the clauses on connected charities, I would not want any jiggery-pokery to enable people to apply under one scheme as a way of getting round the connected charities provisions that are stipulated elsewhere.

Equally, the new clause makes it clear that the amount of money involved would be the same as the small donations limit, which is currently £20. It would be the same for my scheme and, similarly, for the overall cap of £5,000, so £1,250 would be the maximum sum given.

There would be no conflict, and it would be a way of extending the logic and the benefit of the measure to other charities. The later commencement date would provide time for the inevitable work on the detail. That would include consultation with the devolved authorities, the charity regulators, perhaps some relevant Departments in the devolved Administrations, and other agents.

I do not repeat the problem of the matching principle, because there are some problems we would certainly not want to extend, but I took great heart from the Minister’s indication that that is one area that he is most minded to consider revising. The new clause would be free of some of the complications because the charities involved would not necessarily be caught up in all the difficulties that arise with community buildings.

Many hon. Members believe that this is a good scheme, so why would a few charities, in a few years, want to use a route 1 or route 2 way to obtain complementary gift aid, as opposed to every charity taking the gift aid route and then the top-up that the Government offer in the Bill? Many charities are convinced from experience and anecdote from others that the gift aid scheme is hard and not worth while, and will resist opting into the scheme as a way of trying to get the top-ups. If they have not used gift aid so far for what it can offer them, the suggestion that they would use it just as a way of getting top-ups is not convincing.

Some charities with a particular profile, or that fundraise in a particular way, such as those that rely on involving young people and schoolchildren and people going out and shaking tins or doing street collections, will not be particularly interested in asking people to fill in gift aid forms and to make the necessary declarations. The way in which some charities do their business is a reason why some of them do not do gift aid.

Some charities want to leave room for others, and to respect their different ambits. Many charities in my constituency are clear about going out and raising the money they need without intruding on the space or interests of other charities that may be more developed and established, and have a strong gift aid dimension to their fundraising. Charities can avoid apparent competition with one another and can complement one another by having different fundraising profiles, which are then reflected in whether it is feasible for them to rely heavily on gift aid.

In addition, as we heard in evidence sessions, some people are very resistant to making gift aid declarations, not least when it comes to smaller donations, because they feel a bit embarrassed about filling in a declaration for what might appear to someone else to be a small amount of money. Other people are reluctant to fill in gift aid declarations, because they suspect that that will be used by charities to target them with all sorts of postal requests, lots of books of raffle tickets and so on or that their details will be passed on to other charities. Many people have their own aversion to making gift aid declarations. Charities will have their own reasons for perhaps not wanting to invest a lot in the gift aid route. It may be that individuals are comfortable with giving donations and not having to make gift aid declarations, and that that is part of their relationship with particular charities. I think that that should be accommodated in the future. This is meant to be a Bill about the big society. It is a Bill on the principle of small donations, but it should extend to small charities as well.

I know that the hon. Member for Banbury cannot be with us this afternoon, but he has reminded us several times during our proceedings that the Church of England is very content with what the Bill does for it. I have no doubt that the Catholic Church, because of some of the particular issues that have been sorted out, not least in relation to community buildings and so on, will be very pleased about what the Bill does for it as well. However, I am sure that both those Churches, as part of their pastoral outlook, would have some concern or regard for the many other charities that their members participate in and support, and that other people who are not members of any Church might support very actively as well. There are many other smaller charities that are left out.

It is not enough for us to pick our charity or charitable interest and say that it is okay with the Bill. That is like what the old Tennent’s advert used to say: “I’m okay. I’ve got mine.” Yes, many Churches are okay; they have got theirs. Some of the bigger charities qualify immediately—from day one—for this scheme. That is no big effort for them. I think that we should try to see how, learning from this scheme and without doing injury to the scheme that the Government have carefully put together, we can open up the Bill to other charities. The Minister has resisted many Opposition amendments because he thinks they would open up all sorts of fraud issues or abuses, but this new clause offers a different  way from the previous Opposition amendments of opening up the logic and benefits of the Bill to other charities. I therefore ask the Minister and other Government Members to consider it.

I know that the Minister will not be able to agree to the proposal today. Before any Government Members become concerned, I assure them that I am simply speaking to the merits of this new clause today. I will not be pressing it to a vote. I would not subject hon. Members to the difficulty of voting against a measure that I think many of them in their hearts support, and that I hope we can all look forward to supporting in the future. If that is not possible in the course of our proceedings, perhaps it can be part of the first review that the Minister has promised us.