Scouts, Guides and Army, Navy and Air Force Cadet Branches to be exempted from connected charities rule

Small Charitable Donations and Childcare Payments Bill – in a Public Bill Committee at 11:00 am on 18th October 2016.

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‘(1) Section 5 of the Small Charitable Donations Act 2012 is amended as follows.

(2) After subsection (5), insert—

“(5A) For the purposes of this Act, local Scout Groups, Guide Groups, Army, Navy and Air Force Cadet groups are not considered to be connected.”’—(

This new clause would ensure that local Scout Groups, Guide Groups and Army, Navy and Air Force Cadet Branches are able to claim under the Gift Aid Small Donations Scheme individually, rather than being considered as part of single national charities for the purposes of the Scheme.

Brought up, and read the First time.

Photo of Rebecca Long-Bailey Rebecca Long-Bailey Shadow Chief Secretary to the Treasury, Member, Labour Party National Executive Committee

I beg to move, That the clause be read a Second time. New clause 3 would ensure that local scout groups, guide groups and Army, Navy and Air Force cadet branches are able to claim individually under the gift aid small donations scheme, rather than being considered as part of a single national charity for the purposes of the scheme.

We have received representations on behalf of those groups arguing that the current treatment under the scheme is unfair. Under the connected charities rules, those organisations are considered to be one charity. However, local organisations fund-raise independently and are independent from one another financially. The Charity Finance Group has suggested that the amount of top-up received by individual scout groups in particular equates to about 17p a year. The new clause would simply allow individual groups to make individual claims through the scheme.

According to the sector, that would improve take-up of the scheme and ensure that small local organisations, which were intended to benefit, are able to do so. I appreciate that there are probably many other organisations with comparable structures that would benefit from similar changes. New clause 3 is more of a probing amendment to try and tease out from the Government why they do not want to reform the scheme in such a way. Perhaps we can return to this issue in more detail on Report. I would welcome any moves by the Minister to review the position and propose an amendment on Report that would catch all similar organisations with comparable structures.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

I dropped off my kids at beavers and cubs; and one of them is going to scouts. In this amendment, would the division apply to the 2nd Thorpe Bay unit, or would it apply to each constituent part, whether beavers, scouts, cubs, guides and so on?

Photo of Rebecca Long-Bailey Rebecca Long-Bailey Shadow Chief Secretary to the Treasury, Member, Labour Party National Executive Committee

The hon. Gentleman makes a very good point, and that is why I would welcome a review by the Minister of the proposal in the new clause. We need to catch more than what is simply on paper at the moment; the provision needs to go beyond the scope of local scout groups, for example. There are many other organisations that would benefit from being included individually in the ways I have proposed and I welcome comments on this point by the Minister. I also point Members to a note that they received this morning from the Charity Finance Group, which makes some helpful suggestions on this very point.

Photo of Jane Ellison Jane Ellison The Financial Secretary to the Treasury

The new clause is designed to exempt scouts, guides and military cadet groups from the connected charities provisions of this Bill. We believe the new clause is not necessary.

The connected charities rules are intended to protect the gift aid small donations scheme from abuse and they work in conjunction with the community building rules to deliver fair and broadly equal outcomes for charities structured in different ways.

Without the connected charities rules, large charities would have a perverse incentive to splinter into groups of smaller charities to increase their entitlement to small donations allowances. I am sure none of us would want that to happen. However, it is important to make it clear that while connected charities are entitled only to a single shared £8,000 small donations allowance, they are still entitled to an £8,000 allowance for each of their community buildings.

The Government want the gift aid small donations scheme to be more flexible and more generous so that it can benefit a greater number of charities and donations. During the review of the scheme, we listened and HMRC became aware that the current rules did not deliver the desired outcome in certain circumstances. We received representations from local scout and cadet groups explaining that, while they welcomed the scheme and were entitled to a £8,000 small donations allowance under the community buildings rules, they were unable to take full advantage of it because most of their collections take place out in the local community—packing bags at local supermarkets, for example.

We listened and took this seriously, which is why the Bill will relax substantially the community buildings rules to allow charities to benefit from donations received outside their community building. As I said on Second Reading last week,

“among the many small, local civil society groups, the scouts and guides, the air and sea cadets and other local uniformed groups, in particular, will benefit significantly from this change and will be able to receive the support they deserve for the vital work they carry out in our communities”.—[Official Report, Small Charitable Donations and Childcare Payments Bill Committee, 11 October 2016; c. 217.]

Photo of Anna Turley Anna Turley Labour/Co-operative, Redcar 11:15 am, 18th October 2016

I think this is a really important provision that deserves greater explanation from the Government. It goes much more widely, as my hon. Friend the Member for Salford and Eccles said. It should seek to include organisations, such as Age UK or Mind, which have much more devolved operational structures. For example, on the back of the loss of the steelworks in Redcar and Cleveland, the number of referrals to Redcar and Cleveland Mind went up by 93%. That charity relies almost entirely on its own local fundraising. That is an exact example of where the charity ought to be able to have a lot more freedom to raise money and keep its gift aid donations locally, rather than having to be part of a national structure. I implore the Minister to take this away and explore it much more widely.

Photo of Jane Ellison Jane Ellison The Financial Secretary to the Treasury

I am fairly certain that the hon. Lady’s example will benefit from the Bill. At the moment, that is a good example of where a charity probably does not do fundraising in its premises, if it has a local office. If it fundraises in the local area through quizzes or events or whatever, it will now be entitled to claim against its community building for any activity in the local area. I will obviously double-check, but I think exactly that charity will benefit from the provisions in the Bill, for the very reasons the hon. Lady gives: they are people who have a base, but it is not usually the place where they fundraise. By contrast, when the original debate took place, the focus was on churches and cash donations within church buildings.

As I said at the outset, the new clause is unnecessary because the provisions in the Bill allow for what it proposes. The hon. Lady has neatly illustrated why we would reject it: it carves out a few selected charities, but we want the provisions to benefit a very broad range of charities, some of which are not named in the new clause.

Clause 3 achieves what Opposition Members are seeking to achieve but in a fairer way. It does not carve out a few selected charities, wonderful though they are, to benefit, but looks at how churches and other connected groups can claim more against their activities in a local area. The new clause is unnecessary and I hope that the hon. Lady will withdraw it.

Photo of Rebecca Long-Bailey Rebecca Long-Bailey Shadow Chief Secretary to the Treasury, Member, Labour Party National Executive Committee

I thank the Minister for her comments. Before we complete today’s proceedings, I would like to draw her attention to comments made by the Charity Finance Group this morning. It stated that “Scouts and so on often cannot claim under community building rules, because buildings have to be open to the public or a section of the public, some or all of the time. Their huts or barracks are often closed and unless they open up their buildings to the public during their activities or rent out part of their building for community activities, they will not benefit from this rule.”

To address that and deal with some of the issues we have just discussed, the Charity Finance Group has made a suggestion that HMRC could develop regulations and criteria to define local groups for the purposes of the Act, as it has done with other aspects of the gift aid regulations. Would the Minister give serious consideration to that proposal?

Photo of Jane Ellison Jane Ellison The Financial Secretary to the Treasury

I am happy to reflect on the points made.

Clause, by leave, withdrawn.

Bill to be reported, without amendment.

Committee rose.

Written evidence to be reported to the House

SCDB 01 Charities Aid Foundation

SCDB 02 Churches’ Legislation Advisory Service

SCDB 03 Charity Tax Group