“(a) in the heading after “small”, delete “cash payment” and insert “donation”
(b) in sub-paragraph (1) omit the words “in cash”;
(c) after that sub-paragraph insert—
“(1A) The gift must be made—
(b) by cheque;
(c) by electronic communication; or
(d) by a contactless payment.”
(d) in sub-paragraph (3) after the definition of “cash” insert—
““cheque” means a written order instructing a bank to pay upon its presentation to the person designated in it, or the to the person possessing it, a certain sum of money from the account of the person who draws it;
“electronic communication” means a payment made via the internet or text message;””.
This amendment would extend the range of methods by which payments can be made under the Gift Aid Small Donations Scheme.
Clause 2 amends the types of donations eligible under the small donations scheme to include those made by contactless payment. Only cash payments under £20 are currently considered eligible donations. The Opposition support the clause but we question why contactless payments have been singled out in that way.
Amendment 1 would widen the scheme to include donations by text, by cheque or via the internet. A survey carried out by the Charity Finance Group for the National Council for Voluntary Organisations, the Institute of Fundraising and the Small Charities Coalition found that only 36% of the 340 charities surveyed wanted contactless payments to be included in the scheme. It also found that cheques were the method favoured for inclusion: more than 75% of respondents wanted them to be included. Half wanted text donations and two thirds wanted one-off online donations to be eligible. The amendment, which would include all those methods, is supported by the organisations mentioned and by the Charity Tax Group.
The Government’s likely response is that the methods do not need to be included in the scheme because a gift aid declaration can be provided, but the same logic applies to a bucket collection of cash donations: the fundraiser holding the bucket would simply need to hand over a pen and a piece of paper and—voilà—they have a gift aid declaration. However, the point is that it is difficult, albeit not impossible, to get the declaration. Most people send a donation via text in a spur-of-the-moment decision. A follow-up text is then required to ascertain whether the donation is eligible for gift aid, and most people are not as responsive as we would like, so it makes sense to include donations via text in the scheme. As for cheques, I understand that someone who is able to sign a cheque is probably able to sign a gift aid declaration at the same time, but 75% of charities surveyed said that including cheques would increase the efficacy of the scheme for them, so I would be interested to hear the Minister’s reasons for not doing so.
Amendments 2 and 3 would include SMS or text messages in the scheme. For the same reasons that I have already outlined, we see the logic in tabling them and we support them. I hope the Minister will accept our amendment or explain more fully her reasons for not accepting it, but I will not press it to a vote.
We support the amendments. As has been stated, a number of charitable organisations have got together and have come back with a really comprehensive survey that says that charities are hugely in favour of such an approach.
The gift aid small donations scheme is a really good Government initiative that has done part of the job it was set up for, but we can see from the number of people making a claim that it has probably not done as well as was intended—it has not quite reached the number of claims that were expected. That is partly because the way the world works has changed: people are giving through other methods. I rarely put money in a bucket, but I quite regularly make text donations or online donations, and I am as guilty as anyone of not following up with that second text with my name and address for the gift aid. In a world that is moving forward, we need to consider that.
I understand the Government’s reluctance to take on cheques, but it has been really clear from the groups that have come forward, particularly church groups, that they receive an awful lot of their funding from small cheques. It would be much better for them if they were able to claim for cheques under the gift aid small donations scheme. Although that may seem almost a backward step, we need to ensure that the gift aid small donations scheme works as best it can, particularly for small charities that do not have the staff—the people power—to fill in all the forms, which is still a requirement. Widening the gift aid small donations scheme would make it better, particularly for small charities.
It is a pleasure to speak in this debate. I spoke on a similar clause four years ago when this Bill first went through Committee; I think that the hon. Member for Clwyd South was here as well. Looking back, many of the Members who served back then appear to have moved on to far greater things than I have, so they will not be repeating this debate.
It is worth looking back at the debate four years ago, when the topic was whether restricting the measures to cash was appropriate and whether we should include different technologies or different means of giving impulse donations for which getting a gift aid declaration is hard, in order to achieve the objectives of the scheme. The current scheme is worthy. It is meant to give a level of support equivalent to gift aid to small donations, in order to give hard-pressed charities extra money. It is regrettable that four years into the scheme, the amounts claimed are much lower than we thought. Ideas to help charities claim and achieve the £100 million that Government thought this would originally cost are to be welcomed.
Four years ago, I was perhaps a bit prescient on this point; I even referred to contactless payments in that debate. I thought that the world might move on, that cash would become less common and that we would all find different ways of donating, whether by making contactless payments on terminals or by clicking buttons in an app. The Bill risked becoming out of date quickly if we were not careful. I suggested at that point that perhaps the Government should take the power in the Bill to amend by statutory instrument the definition of “cash or cash equivalent” in that situation, so we could keep up to speed with technology and not have to keep coming back every few years to primary legislation to fix it.
Here we are four years on, trying to fix contactless payments. That is quite right, and I will happily support it. We have even included Android Pay and Apple Pay, again quite sensibly, but we cannot predict where we will be in four years’ time. How will impulse donations be made? Will it still be by text message, by app, by cash in a bucket or contactless payments, or will we have found some new technology, perhaps fingerprint swipe? It is hard to imagine where we will be in four years’ time. If we are to keep the Bill as effective as we want it to be, why not have that power available so that the Government can say quickly, “Let’s make a tweak here, and allow this to fall within the scheme”?
My hon. Friend is making lucid points with which I agree fully, but he recommends that Ministers could make a change through statutory instrument. Would he perhaps consider allowing them to make the change without a statutory instrument, maybe by short consultation or even ministerial decision? That would be liberalisation.
My hon. Friend is being quite generous as a Back Bencher, offering the Government more power than they want to take. I suppose that there would be spending issues if the Government generously expanded some new and risky technology and that Parliament might want to scrutinise that. I would prefer, in my perfectionist world, some order that undergoes parliamentary scrutiny, but I concede the argument he is putting forward.
The then Minister four years ago, who is now the Secretary of State for Communities and Local Government, Sajid Javid, was called a “dinosaur” for rejecting the Labour amendments. I am hoping that this Minister will not be called something like that today, given the liberalising approach that she is taking. The then Minister was not keen to accept the amendments, which were meant to apply to cash in order to help people who do bucket collections and so on, where one cannot get a gift aid declaration, as it is an impulse donation and people are not inclined to stop and give those details.
My argument for amendments 2 and 3 is that an SMS message is also an impulse donation. We see adverts on the TV where it says to text a number with “YES” or “FIVE”. If I do that, I do not provide them with any more information. It is a small, impulse donation. The evidence that we have from the various charity groups is that people do not make a gift aid declaration after doing that.
If we cannot tempt the Minister to accept amendments 1, 2 or 3, perhaps she will think on Report whether she can take the power to allow new ways of donating to be included in future, so that she can gradually evolve the scheme and put the extra money into achieving the objectives that we all share. Especially at this time of year, when British Legion volunteers will all be out doing great work shaking their buckets to collect cash, we want the scheme to be as effective as possible. I fear that, by being too restrictive on how donations qualify, we will not give more money to charities, as we all really want to.
It is a pleasure to follow the hon. Member for Amber Valley and other colleagues. It was a great joy to be here in 2012 when the first Bill on small charitable donations appeared. It is lovely to see that contactless donations have made it into this Bill. I am speaking in favour of amendments 1, 2 and 3 because it is important that we expand the methods available.
The recent briefing from the main charitable organisations—the Charity Finance Group, the Institute of Fundraising, the National Council for Voluntary Organisations and the Small Charities Coalition—has made it clear that, although the scheme has been welcome, it is not reaching the number of charities that it could. The briefing said:
“Only one quarter”
“of the charities that could have used the scheme”
—it puts that number at 84,000—
“are using it.”
Clearly, we need to do everything we can to support the development of the scheme, particularly with a new generation of donors, and to encourage and to support the new philanthropists who may be giving by text donation or in other forms.
At the Bill Committee last time around, I was intrigued by a great debate initiated by Mark Durkan. It was possible to include euros in the scheme at the time, although it was not possible to include contactless donations. I am glad that the situation regarding contactless payments has been remedied, but I cannot see the sense in saying that, in one of our great abbeys, churches or cultural buildings, the euro, dollar, yen or whatever may be included in the scheme, but not a simple, humble cheque written in sterling. To me, that does not make any sense. I hope that the Minister considers that point.
Another related point is that this scheme works rather well for churches—I presume it also works well for other faith groups—because many small churches are part of larger denominations. Often the denomination, the diocese or whatever is registered in terms of gift aid. My slight fear, and why I think we need to look at how we can enhance and expand the scheme, is about whether we have the same reach for other small charities, because with a small church or perhaps another small faith group, the registering—the formal bit, the gift aid stuff—has already been sorted out at a higher, larger level. I question whether the scheme always has the same reach for some of the smaller charities in other sectors.
I welcome the positive move on contactless donations but hope, in the same spirit, that the Minister can extend the scope of the proposals, as my hon. Friend the Member for Salford and Eccles and other hon. Members have suggested. It would be truly dreadful if we had to wait another four years to come back to the issue and to thank the Government for including these methods in the scheme.
I thank colleagues for that debate; some points were made by veterans of the previous Bill Committee and I will try to respond to them.
Clause 2 is about amending the meaning of “small charitable donation”. Amendment 1 would extend the gift aid small donations scheme to include donations made by cheque, online or by SMS. Amendments 2 and 3 would extend the scheme to include SMS donations.
The scheme was introduced to address a specific problem. That is at the heart of the debate. It is intended to allow charities and community amateur sports clubs to claim a gift aid-style top-up payment when it is not practical or feasible to collect a gift aid declaration, such as with street collections. It is not simply a lighter-touch alternative to gift aid. I think this is probably at the heart of our debate. The scheme exists to provide a similar outcome in situations where charities cannot realistically obtain a gift aid declaration, but the Government are clear that, if a charity can get a gift aid declaration and claim gift aid, it should do so. There are obvious reasons for that, as colleagues will appreciate. For example, there is no cap on gift aid, whereas there is on this scheme. For that reason, the Small Charitable Donations Act 2012 restricted the scope of the gift aid small donations scheme to small donations in cash—coins and notes. Although I understand entirely the motivation behind the amendments, they are actually contrary to the stated policy intention of the scheme.
I am struggling to understand why the way in which money is donated matters, given that there is a cap on the amount that can be donated anyway. I do not understand why whether a donation is made in cash or by contactless affects the integrity of the purpose of what we are trying to do.
We are keen to extend the scheme to cover contactless as well as cash payments, but as those who were here in 2012 will know, the scheme augments what we expect charities to raise through gift aid donations and covers means such as bucket collections that it is just not feasible to do gift aid on. The scheme is capped. We actually want charities to claim as much as possible under gift aid, which is not capped and allows them to form a long-term relationship with donors, as many of us probably know from charities that we give to. From the simple point of view of a charity, a wholesale switch to claiming through this scheme rather than gift aid would move it away from such long-term relationships and limit what it could claim. The scheme is meant to be a complement to gift aid, not an alternative or a lighter-touch version of it, and it would be to many charities’ disbenefit if that were the case.
As I explained on Second Reading, the small donations scheme was never intended to cover methods of donations for which well-established and well-used processes for claiming gift aid already exist, such as donations made by SMS or online. It may help if I explain in a bit more detail the processes for claiming gift aid on electronic donations. As the Minister for Civil Society, the Under-Secretary of State for Culture, Media and Sport, my hon. Friend Mr Wilson, outlined on Second Reading, there is a simple and well-established process that allows charities to solicit gift aid declarations from donors who make SMS donations. I take the point that the hon. Member for Aberdeen North made about the way people respond to that, but it is a pretty straightforward and well-established process none the less. The donor sends a short code word to a six-digit number—for example, “Dog” to 606060—to donate a set amount through their phone bill. A reply is then sent to the donor thanking them for their donation and asking them for their name, house number and postcode and confirmation that they are a UK taxpayer. Once the donor provides that information, the charity can claim gift aid.
I think that is a straightforward process, and I hope that hon. Members would agree that, in circumstances such as that, where a donor provides a charity with a ready means of making direct contact—their mobile phone number—it is feasible for the charity to solicit a gift aid declaration, and indeed many charities regularly do so.
Does the Minister not recognise that people generally see text messages as the same kind of thing as putting money in a bucket? They do not want to hang around or have to give their name and address. The two things are really parallel.
I have been stressing the point that this scheme was intended to work where it is not practical to establish such a relationship—where someone is passing in the street, is in a rush or whatever, and throws something into a bucket. That is not the same as an SMS donation. Yes, the motivation for an SMS donation might be quite instantaneous—perhaps someone has seen an advert or a documentary, or there is an appeal on the television, or whatever—but in terms of someone’s ability to respond to the gift aid query that follows, the relationship has been established, because they have given their mobile phone number. That is not comparable with a person rushing past someone with a bucket outside the supermarket and throwing something in, where that person is already on their way and cannot be pulled back to fill in a form.
Of course. If my hon. Friend will let me, I will go through the process for claiming gift aid. I have talked about how that can be done via SMS, but let me talk about how it is done online and how it can be made even easier. Online donations require donors to take the time to enter their name and payment details. The only additional information needed for a gift aid declaration is an address. Donors are then encouraged to tick a simple box to add gift aid at the point of donation. Most of us would agree that in those circumstances it is entirely practical for a charity to ask a donor to complete a gift aid declaration. Many fundraising websites have invested substantial effort in making the process for adding gift aid as simple and straightforward as possible. I am sure it will continue to get even more simple and straightforward; we have all seen the astonishing simplification of the online charitable giving world over the past few years, and we have every reason to think that it will continue to progress.
The Government want to make it even easier for donors to add gift aid to donations made through digital channels; indeed, we recently published consultation draft regulations intended to achieve that. Work is already taking place on gift aid and to make it simpler to make an online donation.
Has the Minister had a chance to look at the consultation issued by the Treasury in 2013 on ways of improving gift aid donation? At paragraph 1.8 it set out all the reasons why there was such difficulty in getting a gift aid donation on an SMS donation, and it was looking to consult on ways to improve the situation. The Treasury view seems to have hardened since that consultation, which recognised the difficulties, but the fundamental issues that it raised—getting someone to pay to send a second text message and to type in details on their screen while they are out and about—have proven very hard to tackle, and the take-up has been nothing like as high as for other methods of donation.
I understand my hon. Friend’s point, but I think it relates to how we can make giving under the gift aid scheme even easier; I do not think it is as germane to the issue of how to improve the small charitable donations complement to gift aid. However, I hope what I have to say about contactless will be closer to what he wants to hear. I confess that my familiarity with paragraph 1.8 of the document he mentions is not as great as his own, but I will familiarise myself with it when I get back to the Treasury.
As I said, draft regulations about making gift aid donations through digital channels easier are out for consultation; I am sure Members will have a look at them. As for contactless donations, Members may ask how they differ from other forms of electronic donation. The difference is, quite simply, speed. On Second Reading, the Minister for Civil Society used the example of commuters passing through the ticket barriers of a tube station to demonstrate just how quick contactless technology is—we are all familiar with the Oyster scheme, for example. That speed of transaction means that donations collected using dedicated contactless collection terminals have a lot of the same practical issues as bucket collections. Individuals can donate as they pass by a fundraiser without having to stop and talk—it is almost instantaneous. Fundraisers therefore do not have the opportunity to engage donors and solicit gift aid declarations. That is not the case with other methods of electronic donation, as I have explained. A lot of work is going on, as the Minister for Civil Society said in the debate. Big charities are already showing significant advances in technology: their terminals replicate the simple cash payment as nearly as we can imagine, and we expect to see them in use pretty quickly—they are already being trialled.
As for cheques, I understand that they remain a popular method of payment, particularly among older people, but writing a cheque is not an instant process. The payer needs to write the date, the payee’s name and the payment value, both in words and numerals, and then sign it. Our contention is that, if a donor has the time to stop and write a cheque, it is not unreasonable to suggest that he or she also complete a gift aid declaration. We are all familiar with those small envelopes with the simple form on them; they have only a fraction of the number of items to fill in that a cheque has. Moreover, by writing a cheque the donor is already providing some of their details to the charity, so the additional information needed for a declaration is relatively small. We believe that it is entirely feasible to obtain a gift aid declaration in those circumstances.
Perhaps I can suggest a scenario that may help the Minister. If an elderly person in their home sees something on television for a charity and they then sign a cheque and put it in the post, with no details about how to contact them on it, how does the charity get back to that person?
I understand the point, but I am not entirely clear how adding cheques to the scheme would help. I want to stress that, if we make changes that encourage charities to switch to claiming under this scheme, essentially moving away from trying to claim under gift aid, that will severely limit—cap—the amount they can claim and it will also prevent them from forging a relationship with the donor. I accept that there might be circumstances, like that one, in which claiming under gift aid might be more difficult, but the answer is not to include cheques in the scheme. The scheme has always been about trying to replicate the instantaneous cash-collection type of situation.
I am still a bit confused. I appreciate the point about trying to keep people focused on gift aid as the preferred means of donation, but the whole purpose of the Bill—its raison d’être—is to ensure that the scheme
“operates effectively and flexibly for the greatest number of charities and Community Amateur Sports Clubs”,
and we have heard that only a quarter of the charities that could use the scheme are doing so at the moment. Surely, therefore, we should be encouraging more charities to use it, rather than pushing them towards gift aid only. This scheme is much more accessible and more suited to small and locally based charities.
We want the charities to use both methods, and there is evidence that many do. The scheme was always envisaged as a complement to gift aid, so it is not an either/or.
I totally accept that there is always more to be done in getting charities to claim gift aid. In the Second Reading debate, the Minister for Civil Society talked about the charities day that is coming up and I mentioned that HMRC has an outreach team, which has already delivered more than 600 sessions with charities, talking about how they can make the most of what is on offer. Of course we want to see donations maximised. It is true, as my hon. Friend the Member for Amber Valley said, that we have not yet reached the point we wanted to, but the Bill takes us a good way in the right direction.
We do not want to incentivise a switch to this scheme from gift aid. In any case, there is a matching requirement, so any charity would have to do gift aid to access this scheme. We will perhaps debate that matching requirement later. It is important. We mentioned it briefly in terms of the assurance process.
The Government’s position has always been clear. The scheme was introduced to provide a payment similar to gift aid when charities cannot obtain a gift aid declaration. If a charity can claim gift aid, it should do so, because that is more beneficial to them in the long term, for the reasons I have touched on. Robust processes exist to allow charities to claim gift aid on electronic donations and the Government will shortly introduce legislation to make doing that even easier. I hope, therefore, that Members will not press their amendments to a vote.
This is just a technical question. Does the definition of contactless include Oyster cards? Donations can be made using an Oyster card, by registering to pay a penny a journey, and unused funds can be donated to various charities around London. Would that fall within the definition of contactless or has it accidently been excluded?
We believe that the definition of contactless payment is wide enough to cover most likely developments but I am more than happy to look into that further before the next stage of the Bill.
Clause 2 amends, as we have discussed, the meaning of “small charitable donation”, enabling charities to claim top-up payments on donations received using contactless technology. Confirmation comes, as if by magic, for my hon. Friend: can the definition include Oyster cards? Yes it can.
As my hon. Friend knows, because he was one of the people discussing it, the matter was raised during the passage of the 2012 Bill. The gift aid small donations scheme was devised only four years ago, when contactless payment technology was in its relative infancy. At the time, the Government promised to look at the issue again during our three-year review of the scheme, and that is what we have done. I hope that the answer I have just given about Oyster cards shows that we are trying to future proof that aspect of it, as my hon. Friend predicted we would need to do.
The changes made by the clause reflect the fact that there is a clear trend away from cash transactions generally in society. They are declining, while contactless payments are increasing. We accept that, unlike other methods, such as cheques, text messages and online giving, which require donors to stop and actively engage with their chosen charity, contactless donations share many of the same limitations. People can just tap to donate and walk away without stopping to fill in a gift aid declaration. Indeed, in some of the situations in which we find bucket collections, it is almost impossible to stop and give a gift aid declaration. Contactless technology could be extended to augment bucket collections in busy tube stations—I imagine we would be less than popular if charities cause great queues to form in busy tube stations—so it is easy to envisage situations in which this measure would be useful. Accordingly, clause 2 amends the scheme, allowing charities to claim top-up payments on contactless donations of £20 or less.
Although the take-up of contactless technology among charities is relatively low, we have had feedback from the sector and have seen demonstrations suggesting that the cost of the technology is likely to decrease. Therefore, we anticipate that the take-up will increase. It is important, as the new technology develops—it is developing at a fast rate—and as the charity sector innovates, that the legislation continues to reflect the realities of the way charities are fundraising.
Clause 2 will allow charities to claim top-up payments on donations made using credit and debit cards, as well as services such as Apple Pay and Android Pay. The scheme will therefore become more flexible, and the charity sector will have more opportunities to claim top-ups on small donations of £20 or less. Including that measure in the scheme will not impose any significant extra burdens on charities that choose to use the technology. Charities will not be compelled to use contactless payments if they do not wish to do so.
Clause 2 will without doubt future proof the gift aid small donations scheme, as was discussed in 2012. It will ensure that charities continue to benefit in years to come as contactless technology expands. I commend the clause to the Committee.
I welcome the Minister’s comments. From the contributions from Members on both sides of the Committee, it is clear that there is an issue in relation to some charities being able to avail themselves of the gift aid scheme for the donations. If the Minister will not accept these amendments, will she consider launching a Government review of the gift aid scheme as a whole within the next six months to address the issues that have been raised today?
I reiterate the comments I have already made. This is about how we make this scheme, which was always designed to be a complement to gift aid, work. We are separately consulting on some changes to regulations around gift aid, which are designed to make it easier. We are seeing an evolution in the way people are able to donate. The question is whether the amendments are suitable for this scheme, which was always meant to deal with the issue of cash or cash-like transactions—instantaneous donations, bucket collections and donations from people walking by in the street.
I am unpersuaded that a review in six months’ time would add anything to the information we have before us today. It goes without saying that all these things remain under constant review, and this small donations scheme is no exception. It is kept under review in the Treasury—the Treasury keeps charity and tax law under review—and the team there has regular meetings with key stakeholders. The Minister for Civil Society also has extremely regular contact with stakeholders, and I look forward to having contact with charities on charity taxation.
I hope to persuade the hon. Lady that there are already data out there. HMRC publishes a national statistics package every year, which contains an absolute wealth of data, including on the total amount claimed under the gift aid small donations scheme. That is a transparent approach and it allows interested parties to monitor constantly the take-up and the effectiveness of charitable tax reliefs. Of course there is more to do to encourage charities to take up such measures, but the answer lies more in the things I mentioned—the outreach I talked about and the work being done by the Minister for Civil Society—than in some of the changes that have been proposed today.
I appreciate the fact that the Government have consulted on the gift aid small donations scheme and received a variety of responses. Does the Minister not feel that charities and charitable organisations have largely spoken with one voice in calling for the methods under the scheme to be increased, at least a bit? I understand that things are under review, but do the Government not accept that it might be better to listen to people on this matter? I acknowledge that they have listened with regard to some of the other things they are doing.
Picking up on the hon. Lady’s last point, the Government have listened. There is always a bit of scepticism in politics—I think we have all felt it—on whether things change as a result of consultations, but the consultation in question was really open. We consulted and asked for ideas and, as a result the responses we received, made further liberalisations in the regime. I think that we have listened and that I have given good reasons why we do not want to go in the proposed direction for this scheme because of the nature of what it was designed to do. We are looking to future proof it for contactless payments.
On gift aid more generally, as I said, changes are already being proposed and there is a lot more we can do to increase charitable take-up. I am unpersuaded that the issues being advanced in this debate are the ones that will aid take-up without having unforeseen consequences. Perhaps we will debate those issues later in our discussions of other clauses.
I have a quick question about texts. The Minister spoke about the issue being people engaging with a chosen charity, but I am not sure that it is. For example, one might give to an appeal for a dog that appeared on the television, but the charity might be a wider animal charity. The donor might be drawn to a very specific appeal, not to wider support for the charity. As donors, consumers and even voters are much more fluid in their loyalties, can the Minister not see a case for the support running with the donation, not necessarily the institution it is going to?
I understand entirely the point being made, but that takes us into issues relating to the motivation and behaviour of people as they give to charity. I think that relates more to the gift aid scheme itself than to the scheme at hand.