Class 4 National Insurance Contributions

Rebecca Long Bailey Excerpts

Wednesday 15th March 2017 Commons Chamber

[Mr Speaker]

Extremely germane? Well, there is a Dutch auction in relevance taking place here.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

On a point of order, Mr Speaker.

[Mr Speaker]

I am going to take the hon. Member for Salford and Eccles (Rebecca Long Bailey), who is speaking from the Front Bench, first, and I shall save the other Members for the delectation of the House.

[Rebecca Long Bailey]

In response to questions, the Chancellor stated that I had confirmed, with reference to the National Insurance Contributions (Rate Ceilings) Bill, that this discharged the Tories’ national insurance manifesto pledge. For the benefit of the record, I stated that it was part of their wider pledge to cap income tax, VAT and national insurance contributions. On Second Reading, I stated that it was part of the Government’s policy to cap national insurance contributions for this Parliament and went on to state:

“If they are going to legislate for every pre-election promise, surely they should apply that to every manifesto pledge. They are certainly not doing that.”—[Official Report, 27 October 2015; Vol. 601, c. 19.]

Interestingly—

[Mr Speaker]

Order. I am sorry, but I cannot have a lengthy dilation. That is not appropriate. If the hon. Lady has something specifically for me, which she can encapsulate in a short sentence of no more than 20 words, I will treat of it.

[Rebecca Long Bailey]

I respectfully request that the Chancellor retracts the comments he made earlier on that very question. They are factually incorrect.

[Mr Speaker]

The hon. Lady has made her request. The Chancellor can respond, but he is not procedurally obliged to do so. If the right hon. Gentleman wants to respond briefly, he may.

Oral Answers to Questions

Rebecca Long Bailey Excerpts

Tuesday 28th February 2017 Commons Chamber

[Mr Hammond]

Our banking system in the United Kingdom ensures that our banks are safe, and is tackling the “too big to fail” culture. We have a high level of confidence in our banking system. The reserve ratios of our banks are improving consistently, and we do not want to do anything that would undermine them.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

Thank you, Mr Speaker, for allowing me to join my former team today to discuss this important issue.

As we have heard, the FSB has found that more than a third of small businesses will see an significant increase in business rates, whereas the big four supermarkets may see a 5.9% reduction. Crucially, more than 55% of those small businesses plan to reduce, postpone or cancel further investment. If the Chancellor is serious about productivity, will he tell us what additional transitional relief he will provide for businesses that are facing a cliff edge?

[Mr Hammond]

The hon. Lady is only repeating what I have already acknowledged. Many very small businesses will see big increases because they are coming out of small business rates relief and facing the full rates regime for the first time. We understand the stress that they will experience at that point, and we will be considering how best to deal with those that are worst affected by the phenomenon.

Charter for Budget Responsibility

Rebecca Long Bailey Excerpts

Tuesday 24th January 2017 Commons Chamber

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

The credibility of the Government’s fiscal plan as outlined in the charter for Budget responsibility has been called into question time and again. Labour opposed the Government’s amended charter in 2015 as it epitomised the Government’s austerity agenda and refusal to intervene and invest in our nation’s future. Today, this Chancellor is seeking Parliament’s approval to break with his predecessor’s fiscal targets and amend the charter.

Is that good news? Has the Chancellor accepted the policy advice of the IMF, the OECD, the CBI and the TUC that austerity is not a credible economic model and that the Government’s role is to support investment? Well, no, sadly, he has not. The amendments to the rules that we are considering today still commit to the Government’s austerity agenda, which has forced misery on the most vulnerable people in Britain. It also fails to allow the investment necessary for future growth and prosperity.

As my right hon. Friend the shadow Chancellor outlined earlier, it is encouraging that the previous surplus target for 2020 has been ditched—the Government now seek to balance the books at some point in the next Parliament—but, crucially, capital and current spending are still lumped together and subject to the framework, so the Government’s ability to make large-scale investments is significantly constrained. That is quite the opposite of Labour’s fiscal position, which has been outlined today: £250 billion of direct Government investment, with a further £250 billion mobilised, with private sector support, through a national investment bank and a network of regional development banks. The Government’s own infrastructure pipeline lists £500 billion-worth of projects—that is the scale of investment deemed necessary by organisations such as the CBI simply to put us on a level footing with other industrial countries around the world.

We know that the rules in the charter simply do not work effectively, and so do the Government, but, rather than put in place a new fiscal rule that would provide the structure needed to rebuild and transform our economy as we prepare for Brexit, the Chancellor has chosen to cut off the oxygen needed to create a fertile environment for business. It is time he realised that we must forge a new economic destiny that ensures that Britain has a prestigious place at the world’s table, rather than simply threatening to turn us into a tax haven.

We need to rebuild those communities that have been left behind for far too long. If anything should have woken the Government up, Brexit should. It was those communities up and down Britain that had been starved of investment for decades that were angry, and they were right to be angry. They had endured nearly seven wasted years in which investment had been allocated on almost a lottery basis; an economy in which the Government promised £5,000 of investment per head in London but just £413 per head in the north-east; an economy in which local authorities had lost £18 billion of Government funding in real terms between 2010 and 2015, with the poorest bearing the brunt; an economy in which the Government slashed the budgets of vital services such as social care and then asked local areas to find the money themselves through council tax increases.

But, we are told, it is all part of a bigger plan, so let us assess whether the strategy has actually worked. We were told that, if we pulled together and dealt with the sting of austerity for a while, things would improve. So, is the deficit at zero? Have we slashed the national debt? Well, no. As we have heard today, the Government have, to date, added more than £700 billion to the national debt. We have an economy driven by consumer spending, not trade and exports. Even the Bank of England has voiced concerns about the sustainability of the model going forward, because much of that spending is fuelled by extremely worrying levels of household debt—debt that is incurred by people who simply cannot make ends meet.

We have what the Bank calls a “lost decade” of earnings, with wages having stagnated to the extent that most non-retired families have less money now than they did before the financial crash, according to the Office for National Statistics. We have heard that productivity growth has stagnated. German workers produce the same in four days as UK workers produce in five—I am pleased that the Chancellor brought that up in his contribution. They had a Government who invested in industry; sadly, we do not.

All that is not the soundtrack of a Government who are jostling to make us one of the world’s leading economies post-Brexit. They have carved us out a future based on low investment, low productivity, low wages and skeleton public services. I am a northern MP, as Members can tell by my accent, and I can recall the Conservative Government of the 1980s stripping away industry from northern towns and cities. Our communities suffered immeasurable damage. The Government back then simply allowed our northern towns and cities to enter into a state of managed decline. What we see today in the amended charter is no better than that managed decline, which is why we will not be approving it today.

Oral Answers to Questions

Rebecca Long Bailey Excerpts

Tuesday 17th January 2017 Commons Chamber

[Mr Hammond]

That is not a matter for the Government, because, as my hon. Friend knows very well, interest rates are a matter for the Monetary Policy Committee of the Bank of England, and it is up to the Governor and individual members of the Monetary Policy Committee to signal as they see fit.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

TUC analysis published last week showed that unsecured household debt is at a record high. Even the Bank of England voiced concern yesterday that the UK was relying on consumer spending rather than exports and investment to boost growth, which bodes poorly for the future. Does the Chancellor acknowledge that such high levels of household debt are indicative of the fact that the Government’s economic strategy simply is not working, especially for most families who are now struggling to get by on their incomes alone?

[Mr Hammond]

No, I do not accept that at all. What I do accept is that the extraordinary performance of the UK economy over the last six months, which has defied many predictions, has been largely driven by consumer behaviour. As I just set out in my response to the hon. Member for Eltham (Clive Efford), the savings ratio has declined, so consumers are feeling confident, and they have been spending money rather than saving it over the last six months.

[Rebecca Long Bailey]

I invite the Chancellor to meet struggling families in my constituency and, indeed, across the rest of Britain. Even the Office for National Statistics reported on 10 January that non-retired households have less money on average than before the economic crash. Chronic low pay, lack of opportunity and Government cuts to support mean that they are desperately trying to find ways to make ends meet on a monthly basis using debt. Will the Chancellor therefore confirm what protection he will offer these families should inflation rise significantly as a result of the pound’s weakness since Brexit and, indeed, in the light of the Bank of England’s suggestion yesterday that interest rates could go up?

[Mr Hammond]

The hon. Lady is right, of course, that the declining value of sterling will have an impact on inflation, and we have to take that into account as it feeds through the economy. The OBR signalled in its autumn statement report how it expects that to occur. At the time of the Budget on 8 March, we will get new reports from the OBR in the light of currency movements since the autumn statement, and I will report to the House again then.

Equality: Autumn Statement

Rebecca Long Bailey Excerpts

Wednesday 14th December 2016 Commons Chamber

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

I thank my hon. Friend the Member for Rotherham (Sarah Champion) for championing this issue so well today. I also thank all of today’s fantastic speakers. We have heard from my hon. Friends the Members for Lancaster and Fleetwood (Cat Smith), for Swansea East (Carolyn Harris), for Birmingham, Yardley (Jess Phillips), for Heywood and Middleton (Liz McInnes) and for Croydon North (Mr Reed), from the hon. Members for Glasgow Central (Alison Thewliss), for Monmouth (David T. C. Davies), for Fareham (Suella Fernandes), for Central Ayrshire (Dr Whitford) and for Aberdeen North (Kirsty Blackman), and from the hon. and learned Member for South East Cambridgeshire (Lucy Frazer). We heard from them on a range of issues, from the gross injustice faced by the WASPI women, the disability work gap, the productivity gap and the benefit cap to the universal credit cuts, paternity rights and the fact that austerity and cuts have ultimately fallen largely on the shoulders of women over recent years.

Last month’s autumn statement was an opportunity for the new Chancellor to signal a change of direction and repair some of the damage caused by six years of Conservative failure. Indeed, we were told that our cumulative deficit would be £122 billion by 2021, a far cry from the eradication of the deficit that we were promised by 2015. We have seen six wasted years, in which the deficit has spiralled, debt has spiralled and productivity, which drives our economy, has hit rock bottom; six years of pernicious cuts and schemes aimed at dismantling and marketising our public services, which are now teetering on the edge of a cliff; six years in which the wealthiest enjoyed tax giveaways, while the most vulnerable saw their incomes savagely cut.

How did women fare in all this? I was quietly optimistic before the statement, given that we have a female Prime Minister after all, and she waxed lyrical in the days preceding the statement that the Government would help the so-called just about managing. Sadly, nothing could have been further from the truth. As we have heard, the autumn statement ensures that 86% of cuts will still come from women. There was nothing for those dubbed “just about managing”, no reversal of universal credit cuts, no reversal of cuts to employment and support allowance, nothing for our NHS and not even a mention of social care. The figures are even more depressing. Analysis by the Institute for Fiscal Studies shows that real wages will not recover to 2008 levels even by 2021. This is unprecedented in modern British history, and that is before we even start looking at the gender pay gap.

The statement was sadly noteworthy more for what it was missing than what it achieved, but perhaps most disappointing was the Chancellor’s failure to address the disproportionate impact of the past six years on women. He had his chance. For example, Labour made it clear that we would support him should he fully reverse cuts to universal credit, yet he chose not to and announced a meagre change to the taper rate, which will do little to mitigate the effect of the wider cuts, which disproportionately affect women.

The House of Commons Library helpfully modelled the effects of the changes on different family situations. A lone parent on the national living wage with one child is set to experience a net loss of £2,600 in 2020-21, even with the reduced taper rate. Of course, that is a desperate situation for any family, but further analysis shows, interestingly, that single female adults make up 88% of total single adults in receipt of the child and/or working tax credits that form part of the new universal credit bundle.

Not only did the statement fail to address the discrepancy in the impact of tax and benefit changes, but the systematic failure to properly fund our public services impacts on women more than men. For example, the social care sector is in crisis. In fact, it is not just in crisis; it is on the brink of collapse, which in turn puts even greater pressure on our already creaking NHS. Yet the autumn statement did not provide a single penny. Not only is this situation untenable for all in need of care, but the chronic underfunding excessively impacts on women. Women are the main recipients of social care services and constitute the majority of both paid and unpaid carers. About 80% of all jobs in adult social care are held by women, and let us be honest: the majority of them are not very well paid.

The Government seem to be suggesting that allowing local authorities to raise council tax will address the situation, but we on the Labour Benches know that such a solution creates severe geographical discrepancies and will go nowhere near plugging the gap. In fact, in my constituency of Salford and Eccles it will not even touch the sides of what we need to fund our social care system.

I began by saying that the autumn statement was an opportunity for the new Chancellor to change direction. Sadly he missed that chance, but the Minister today has another chance to correct the gender imbalance that the economic policies of the last six years have created. We need to address the fact that tonight, in my constituency, some women are going to struggle to put themselves to bed because they have no access to social care, or indeed they might be the unpaid carers putting their loved ones to bed. Women will stay on late at work—just to counteract the entrenched gender stereotype in our dog-eat-dog job market—often working longer and harder than their male counterparts for far less pay. Some mothers who have been hit by the pernicious cuts of the last six years will struggle to feed their children and themselves. All these women will dream of a future for their daughter—a future that takes them away from the desperation and shattered ambition that has seeped into society over the past six years.

The Government talk a lot about aspiration, and we have heard some of their words today. Their words, however, are hollow, and the clock has, frankly, been turned back on gender equality over the last six wasted years, with an economic plan that has failed Britain and failed women.

Multiannual Financial Framework

Rebecca Long Bailey Excerpts

Wednesday 7th December 2016 General Committees

[The Chair]

We now move to questions, which we have until 10 am to consider. I remind Members that questions should be brief and that this time is for questions; there is an opportunity for debate when we have finished questions.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

It is a pleasure to serve under your chairmanship today, Mr Hanson, and indeed to serve opposite the Minister, in my first European Committee. I have a few brief questions. I will put the first three together, because they are all on a similar theme, and it will give the Minister adequate time to respond.

First, as the Minister has said, revised proposals were put forward at the European Council meeting of 15 November. However, as far as I am aware, full details of the revised proposals are not publicly available. Can he outline exactly what has been removed from or revised in the documents, other than that which he has referred to already? Indeed, does he have a date by which the revised proposals will be available?

Secondly, as far as I am aware, the proposals include a doubling of funds for the flexibility instrument and emergency aid reserve, and a new EU crisis reserve. However, the Minister has stated that there will be no new special instruments. Will the crisis reserve fund therefore not go ahead, and, if not, how does the Commission plan to deal with any unforeseen needs in the next four years?

Lastly in this suite of questions, the Minister’s letter to the European Scrutiny Committee said that the commitments proposals for special instruments have been reduced from €3.4 billion to €129 million per annum. Clearly, that is a colossal change of direction, not a minor tweak, so can he confirm exactly what funding will be allocated to which special instruments?

[Mr Gauke]

I thank the hon. Lady for her questions, and I welcome her to her first debate in a European Committee; I confess that this is not my first. It is good to see her in her place.

First, the hon. Lady asked how the proposals have changed since the initial Commission documents. I refer her back to the points I outlined in my opening remarks, but let me be clear: to begin with, top-ups or spending increases to lower priority budget headings have now been financed largely with reallocations, instead of using unallocated margins. We obviously welcome that. Secondly, the proposals for increasing special instruments capacity have been reduced from around €4 billion to €150 million per annum, with increases in just two special instruments. The new special instrument has been dropped, and I will come back to that in a moment. Caps on underspends that can be carried forward have only been raised marginally. Some ability to reshuffle funds between special instruments has been retained.

I will make two observations in respect of where we have got to following the work undertaken by the presidency on these proposals. First, from the perspective of a member state advocating budgetary restraint, this is clearly a move in the right direction. I have attended the negotiations on annual budgets for the past three years, and the dynamic is striking: the Parliament generally calls for a relaxation of controls; the Council of Ministers, although it contains a range of views, generally takes a more budgetary disciplinarian approach; and the Commission tries to broker a position. It is clear that the presidency proposals supported our view pretty strongly.

Secondly, as I said earlier, we believe that there should be greater scope for flexibility to respond to particular needs. In that context, it is better that that is funded by reallocations as much as possible; it should not come back to member states for more money. Again, we welcome the approach that has been set out. The crisis fund has been dropped because of a consensus that it is not required.

The hon. Lady’s third question was about special instruments. No changes have been made to the MFF ceilings. Proposals for placing special instrument repayments above ceilings were dropped early on. The emergency aid reserve increase was reduced from €220 million to €20 million per annum. The flex instrument increase was reduced from €530 million to €130 million per annum, and, as I say, the crisis reserve was dropped.

The hon. Lady asked when the full details would be released. I have outlined the main important areas, and it is now a question of reaching a conclusion on the mid-term review. I am not sure that I can update her about the date at this point.

[Rebecca Long Bailey]

In the written statement on 18 November, the Government confirmed that the UK had in fact abstained on the revised MFF proposals. Given that the documents before us would increase spending on great projects such as the youth employment initiative and Horizon 2020, can the Minister explain the rationale for abstaining and the reasons for the Council’s expediting this matter?

Finally, the documents state that the negotiations for the next MFF will begin next year. The remainder of the current MFF takes us up to 2020, by which time we may have been out of the EU for up to a year, according to the Government’s current timetable. Will the Minister confirm what role the UK will play in negotiating the next MFF? What will happen to our allocation of funding for the remainder of this framework if we have severed ties before 2020?

[Mr Gauke]

On the mid-term review, as I have explained, the current proposal ensures that the payment ceilings that we signed up to over this seven-year deal are preserved. Therefore, we would not be looking to oppose the proposed mid-term review. The proposals are essentially neutral, with respect to what we would expect to pay over the MFF period, but we recognise that some commitments and functioning are likely to outlast our membership. On that basis, we took the view that the most appropriate approach for us to take is to abstain. We think that is the most constructive approach in the circumstances.

The hon. Lady asked what our approach to the future MFF will be. She may be familiar with the answer. This will play into our negotiations for Brexit. In those circumstances, the point at which the negotiations will start for the next MFF will be in 2018. We can assume that we will be in the middle of Brexit negotiations at that point, and our role in the next MFF will also be discussed in those negotiations; I think that the two are linked.

On the hon. Lady’s point about why the mid-term review was expedited, the presidency was keen to make progress and show that the budget proposals could be delivered quickly. That is something we welcome. Sometimes these matters can drag on for some time, but where it is possible to make quicker progress, we should do so. I hope that that is helpful.

--- Later in debate ---

[Rebecca Long Bailey]

As we have already discussed, we are here to debate the proposed changes to the current multiannual financial framework. As I am sure we all know, the framework was adopted in December 2014 and allows the European Union to spend up to €960 billion or 1% of EU GNI in commitments and €908 billion or 0.95% of EU GNI in payments between 2014 and 2020.

The framework divides EU spending into five broad categories: smart and inclusive growth, representing 47% of commitments; sustainable growth and natural resources, representing 39%; security and citizenship, which represents 2%; and global Europe and administration, both 6% of the total budget. As we know, it was agreed that the Commission would review the framework by the end of 2016. The documents before us lay out the Commission’s conclusions and proposals for revision as a result of that review. The Commission’s assessment was that the MFF has proven flexible in its ability to respond to unforeseen challenges, such as the refugee crisis, but it acknowledged that greater tools may be needed to ensure flexibility for the remainder of this framework and to redirect funds into priority areas. The Commission therefore suggested in the documents a package of financial proposals, which would total £11 billion of additional funding in 2017 to 2020, while still staying within the agreed 2014 spending ceilings. The additional funding would be found by reallocation from other areas. In addition to that financial package, the Commission proposed substantial changes to the financial regulation of EU funds.

The proposals would provide greater funding for really important initiatives, such as the youth employment initiative, and €400 million for Horizon 2020, which the Opposition wholeheartedly support. They would also increase the EU’s ability to respond to unforeseen crises by doubling funding for the flexibility instrument and emergency aid reserve, and by creating a new European Union crisis reserve.

The proposals are all well and good, but as we know they have since been superseded by an agreement made at the Council on 15 November. This agreement appears to contain significant changes to the proposals. As we have heard, however, the new proposals are unavailable for public scrutiny, and the Minister is unable to provide a date. I am concerned—as I am sure other hon. Members are—that there seems to be little merit in scrutinising the documents when we do not know which parts of them are still relevant and which elements have been discarded. We have only the points that the Minister made. His letter suggests that the current proposal is considerably more limited in scope than what is presented in these documents.

As the 19th report of the European Scrutiny Committee outlines, the commitment proposals for special instruments have been reduced from around €4 billion to €150 million a year, and there are no new special instruments. That is a substantial change. I appreciate that it is not entirely the Minister’s fault, and I note that he said the process moved faster than expected.

Turning to a wider issue with the multiannual financial framework, as I briefly mentioned earlier, we are discussing EU funding until 2020, by which time we will have left the European Union. The Government have so far given no guidance on whether we will still receive our allocation of the funding once we have severed ties or whether they will make up the shortfall if we do not. Regions across the country need confirmation now about whether the funding on which they rely will be available as planned until 2020, and about what plans will be in place to support them when EU funding ceases.

It is also important to know whether we will have any influence or place in the agreement of the next framework, which is due to begin next year. What happens, for example, if our eventual deal includes paying into the EU, as was alluded to in the media over the weekend, without having a say in how EU funds are allocated? I am concerned that the Government have not indicated a long-term strategy for the Brexit negotiations, or for mitigating the negative effects when we leave. Therefore, they have a lot of work to do to convince me and my constituents that that is not the case. However, I am glad that they will make a start today by accepting Labour’s Opposition motion, which will be debated on the Floor of the House this afternoon.

In conclusion, the Opposition will not oppose the motion before the Committee, but I want to put on the record our concern that the Government have agreed to revised proposals for the MFF before due scrutiny by the House was possible.

Oral Answers to Questions

Rebecca Long Bailey Excerpts

Tuesday 29th November 2016 Commons Chamber

[Mr Hammond]

This is year four of Small Business Saturday, and the campaign continues to get bigger each year. Small businesses and entrepreneurs are the backbone of the British economy. The Government will continue to support Small Business Saturday this year with events across the country. I encourage right hon. and hon. Members in all parts of the House to be in touch with their local enterprise partnerships and their local branch of the Federation of Small Businesses to find out what is going on locally and to get out there and support it.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

Last week, we saw the accumulation of six wasted years of failed economic policies supported by both the Chancellor and the Prime Minister. Following last week’s autumn statement and the publication of the Office for Budget Responsibility forecasts, can the Chancellor confirm how much worse off a pensioner on the state pension will be by 2019-20 as a result of the OBR’s downgrades to wage forecasts?

[Mr Hammond]

I am slightly mystified by the hon. Lady’s question, because the downgrades to wage forecasts will not be the driver of the circumstances of a pensioner on the state pension, given that we have introduced a triple lock that guarantees pensioners an increase in line with inflation, in line with earnings, or 2.5% as a minimum. However, I am happy to look at the specific question and to write to the hon. Lady with a calculation.

[Rebecca Long Bailey]

Let me inform the House that the forecast is this: a pensioner on the state pension will be £429 worse off by 2019-20, with only the triple lock preventing an even worse decline. After claiming in the autumn statement that the triple lock will now be subject to review, will the Chancellor end the uncertainty and worry he has caused older people and join me in committing to preserve the triple lock throughout the lifetime of the next Parliament?

[Mr Hammond]

Well, this was worth waiting for: we have a firm commitment by the Opposition to run the triple lock through the lifetime of the next Parliament. I wonder whether the hon. Lady knows how much money she has just spent, without knowing the fiscal circumstances the country will face. What we have said, and the only responsible thing to say, is that all the commitments we have made for the duration of this Parliament we will review at the spending review before the end of the Parliament, and we will decide then which ones we can afford to renew and which ones are appropriate to renew. I think this tells us everything we need to know about the Opposition: three and a half years out, they are willing to spray around commitments without any idea of what it is going to cost them.

Small Charitable Donations and Childcare Payments Bill

Rebecca Long Bailey Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 15th November 2016 Commons Chamber

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

With this it will be convenient to discuss the following:

New clause 2— Review of operation of gift aid matching rule—

‘(1) The Small Charitable Donations Act 2012 is amended as follows.

(2) After section 16, insert the following—

“16A Review of operation of gift aid matching rule

(1) The Chancellor of the Exchequer shall, no later than the end of the 2017-18 tax year, undertake a review of the operation of the gift aid matching rule.

(2) As part of the review of under subsection (1), the Chancellor of the Exchequer shall consult charities and other organisations that he considers relevant about—

(a) the role of the gift aid matching rule in preventing fraud and abuse, and

(b) the appropriateness of the Treasury exercising its order-making powers under section 14(2).

(3) A report of the review undertaken in accordance with this section must be laid before each House of Parliament by the Chancellor of the Exchequer.

(4) In this section, “the gift aid matching rule” has the same meaning as in section 14(3).”

This new clause requires the Chancellor of the Exchequer to review the gift aid matching rule and to consult charities and other organisations on the appropriateness of exercising the Treasury’s powers to amend or abolish that rule which limits the amount of top-up payments to which a charity is entitled by reference to the amount of gifts made to the charity in respect of which it has made successful gift aid exemption claims.

New clause 3—Regulations on local branches and groups—

‘(1) The Small Charitable Donations Act 2012 is amended as set out in subsections (2) and (3).

(2) After section 5(1) (general provisions on meaning of “connected”), insert—

“(1A) This section is subject to the provisions of regulations made under section 5A (regulations on local branches and groups).”

(3) After section 5, insert the following—

“5A Regulations on local branches and groups

(1) The Treasury shall by regulations prescribe organisations in which local or regional branches or groups may not be considered to be connected for the purposes of sections 4 and 5.

(2) The Treasury shall publish the first set of draft regulations made under subsection (1) no later than 31 October 2017.

(3) Before publishing draft regulations under this section, the Treasury shall consult—

(a) the Scout Association;

(b) the Guide Association;

(c) the Combined Cadet Force Association; and

(d) such other organisations as appear to the Treasury to be relevant.”

This new clause requires the Treasury to identify organisations with local or regional branch or group structures in order that those local and regional branches or groups can be separately eligible under the scheme, and to consult certain organisations about the regulations in draft.

New clause 4—Abolition of Gift Aid donations threshold—

‘(1) The Chancellor of the Exchequer must carry out an assessment of the impact on charities and Community Amateur Sports Clubs of amending the Gift Aid Small Donations Scheme so as to remove the 10% Gift Aid donations threshold that must be met in order to access the Gift Aid Small Donations Scheme, including an assessment of the differential impact on different sizes of charities and Community Amateur Sports Clubs concerned.

(2) The Chancellor of the Exchequer must lay a report of the assessment before the House of Commons within six months of the passing of this Act.”

Charities and CASCs must give gift aid exemption claims on donations received in order to make a claim under the Gift Aid Small Donations Scheme. The total gift aid donations must be at least 10% of the amount of the small donations on which top-up payments are claimed. This new clause would require the Chancellor to assess the impact of abolishing this requirement.

[Rebecca Long Bailey]

New clause 1 would require Her Majesty’s Revenue and Customs to publish in each tax year a report detailing the number of penalties imposed under the Small Charitable Donations Act 2012 and the circumstances giving rise to the imposition of such penalties; HMRC’s assessment of the extent to which charities have been established or have operated for the primary purpose of securing benefits from the small donations scheme; and an assessment of the evidence available on the role of the gift aid matching rule in preventing fraud and abuse. New clause 2 would require the Government to conduct a review of the operation of the gift aid matching rule, which is the rule that the total gift aid donations operation for a charity must be 10% or more of the amount of small donations on which top-up payments are made. The new clause stipulates that the Chancellor should consult charities and other relevant organisations about the role of the matching rule in preventing fraud and abuse, and the appropriateness of exercising the Treasury’s powers to amend or abolish the rule. New clause 4, which was tabled by the Scottish National party, would also require the Chancellor to assess the impact of abolishing the matching requirement.

During the Bill’s passage through the House, we have had extensive debates about the matching requirement—rightly so, because it is the biggest issue affecting the efficacy of the scheme, according to the charities that use it. The sector thinks broadly that the requirement is arbitrary and is a significant barrier to charities being eligible for the scheme. A consultation with members of the National Council for Voluntary Organisations showed that it is the most significant barrier to access for smaller organisations. The survey found that 50% of respondents with an income under £10,000 wanted the removal or reduction of the matching requirement.

Ahead of Second Reading, the NCVO argued that the Government have presented no evidence to demonstrate the extent to which the matching requirement is a necessary mechanism to prevent fraud and error, or that the matching ratio of 1:10 is the minimum necessary to achieve this objective. Despite considerable debate on this matter, we have got all the way to Report and the Government have still failed to provide any evidence that the matching requirement works. I would welcome the Minister’s comments on that today.

New clause 2 would force the Government to produce evidence in the form of a review and report on the operation of the gift aid matching rule, and whether it should be changed or removed entirely. New clause 4 would require a similar review, so we will be happy to support that measure. I would rather not have to press our new clauses 1 and 2 to a Division unless we have to. They call for a review of something that the charity sector says is hindering the scheme. I hope for some movement from the Minister on the issue today, but if the SNP’s new clause is pressed to a Division, we will support it wholeheartedly, as it reflects many of the principles that we have outlined in new clauses 1 and 2.

I am sure that the Minister will repeat her argument that the matching requirement is necessary to prevent fraud. I agree that we need measures to safeguard against such abuses. The Charity Commission has provided figures showing the extent of fraud in the charity sector. In 2014-15, 417 serious incidents involving fraud and/or theft or the misapplication of funds were reported by charities to the commission, and 255 operational compliance cases were completed. As Members are aware, just last week the commission announced in a press release that it was investigating the charity Our Local Heroes Foundation. According to the commission, it had received information about a proposed disposal of land owned by the charity, concerns regarding the founder of the charity receiving significant personal benefit through the charity, and a complaint that the charity was receiving only 20% of funds raised through a fundraising company.

This is just one case, but it is a sad example of charities being used as vehicles for tax avoidance and fraud. It is therefore incumbent on us to make it as hard as possible to abuse charitable status. That is why we have tabled new clause 1, which would require a review of the prevention of fraud and abuse in the small donations scheme. As I said, the review would need to address the number of penalties imposed under the Small Charitable Donations Act 2012 and the circumstances giving rise to the imposition of such penalties. It should include Her Majesty’s Revenue and Customs’ assessment of the extent to which charities have been established or have operated for the primary purpose of securing benefits from the small donations scheme, and HMRC’s assessment of the evidence available on the role of the gift aid matching rule in preventing fraud and abuse.

The Government’s guidance on the scheme explains that if a charity or community amateur sports club

“incurs a penalty in respect of an incorrect Gift Aid claim or GASDS”—

gift aid small donations scheme—

“claim, it won’t be eligible for the scheme both for the tax year in which the incorrect claim was made and in the following tax year.”

I would argue that the link between gift aid and the scheme is stronger than the matching requirement. Charities claiming gift aid can still be, and indeed have been, fraudulent organisations, so simply having a monetary link to the gift aid is not enough. This provision—that if a gift aid claim is wrong, a charity cannot claim through the scheme for that tax year and the following tax year—seems to be a stronger safeguard against fraudulent organisations than the matching requirement. Things might be more complex than that, but a review would clearly be beneficial, because we could assess where the matching requirement actually works effectively. In that way, the Government and the charities sector would be able to see clearly which anti-fraud measures were most effective.

New clause 3 deals with a different matter. Members and the Minister will remember that we made the case in Committee that certain groups—the girl guides, the scouts, and the Army, Navy and Air Force cadet groups—were not able to get the full benefit of the small donations scheme. That was after feedback from the respective charities’ representatives that, because of the structure of the groups, they were able to make only one claim for the entirety of the group, even though individual groups within them fund themselves.

The Minister responded that the measure proposed in Committee was unnecessary because the Bill allowed for what it proposed. She neatly illustrated why she would reject it—because, at the time, it carved out a few selected charities—but we want provisions to benefit a broad range of charities, some of which were not named in the original new clause tabled in Committee.

New clause 3 attempts to address the Minister’s points by allowing the Treasury to make regulations to exempt certain organisations from the connected charities rules. The Government would have to consult the Scout Association, the Guide Association and the Combined Cadet Force Association, in particular, before publishing those regulations. The Minister said she would reflect on the points raised in Committee, so I hope that she will accept the new clause today. It would not carve out a few selected charities, but give the Government the power to consult organisations that are mistakenly affected by the connected charities rules. It would, therefore, make the scheme run more smoothly, which is, after all, the point of the Bill.

I hope that the Minister has listened carefully to the rationale behind the new clauses and recognises that we are genuinely trying to achieve the same end: to make the gift aid small donations scheme work as well as possible for as many charities as possible. I hope that the new clauses will be accepted. We will not press new clauses 1 and 2 to a vote, but we will divide the House on new clause 3, and we will support new clause 4 should the SNP choose to press it to a Division.

[Susan Elan Jones (Clwyd South) (Lab)]

I speak in support of the points made by our shadow Minister about new clauses 1 and 2, which deal practically with the issue of fraud and put the onus very simply on HMRC to establish the extent of the problem. The difficulty facing the voluntary sector is that even with the £15 million of additional support in the Bill, the gift aid small donations scheme will distribute roughly £40 million, which is only about a third of the £115 million that was, according to Government opinion, projected to be distributed next year. This scheme could and should be growing. It is important because it helps and develops the smallest charities, and that must continue.

--- Later in debate ---

[Jane Ellison]

I will say a little about that. As other hon. Members have said, there was movement on this during the passage of the original legislation. The figure is reasonable and strikes a sensible balance. A ratio of 1:10 is an easy one for those administering this to remember. If hon. Members accept that the matching rule is sensible in principle, I am prepared to say that it is something we would anyway keep under review in the normal course of events. The civil society Minister and I were saying to each other on the Front Bench a moment ago that, given hon. Members’ interest in this, we will keep an eye on it in particular and draw it out in the ongoing dialogue that we naturally have with charities. However, I cannot accept that removing it entirely is a good idea. These things are kept under constant review, and both the Treasury and the civil society parts of Government have a very good relationship with the charities sector, so we will have plenty of opportunities to continue to have such a dialogue with charities and to understand where this comes in. In a few moments, I will say a little more to demonstrate that it is not the barrier that some hon. Members have suggested it is.

Let me turn to new clauses 2 and 4. New clause 2 is a request for a review of the matching rule in consultation with the charity sector. As I have said, the Government have already undertaken a full review of all aspects of the gift aid small donations scheme, including the matching rule, and the Bill is a result of that review. However, I will always be happy to keep an eye on this issue. The Government’s review was comprehensive and open, and it was carried out in full consultation with the charities sector and, indeed, with anyone with an interest in the scheme or in charity tax reliefs more generally. Some hon. Members will recall that, as I have said, back in 2012, the Government committed to reviewing the operation of the scheme after three years, so the Government have made good on that promise.

We recognise how important the scheme and the promised review were to charities. We listened to the sector, and that is why we announced in the autumn statement last year that we would bring forward the review of the scheme to December 2015. To inform the review, HMRC published a call for evidence in December, seeking charities’ views about the operation of the scheme, including its eligibility rules and processes. The call for evidence asked five questions about the scheme’s eligibility criteria, including two questions specifically about the gift aid matching requirement. The call for evidence closed on 2 March. HMRC received 197 responses from charities, representative bodies and other interested parties. The Government reviewed all the submissions and published a response on 20 April.

In the responses document, which is available on the Government’s website, we explain that the vast majority of—indeed, almost all—the respondents to the call for evidence did not identify the matching rule as a major barrier to accessing the scheme. The Government recognise that many of the responses reflected the experience of charities already successfully using the scheme and may not therefore be representative of the sector as a whole. We take that point, so HMRC has supplemented the data provided by charities with an analysis of its own data. As I explained in Committee, the data showed that 92% of charities claiming gift aid for the tax year 2014-15 claimed on donations of £500 or more, entitling them to the maximum small donations allowance at that time of £5,000. HMRC’s analysis also showed that 98% of charities claiming gift aid in 2014-15 claimed sufficient amounts to receive a small donations allowance of at least £1,000.

The Government also considered data produced by the charity sector. A survey carried out by the National Council for Voluntary Organisations, the Charity Finance Group, the Institute of Fundraising, the Small Charities Coalition and the Association of Independent Museums found that just 5% of respondents claimed no gift aid at all, and only 10% did not feel that their charity claimed enough gift aid to make the small donations scheme worthwhile.

Following the call for evidence, HMRC published a further consultation on reform options on 20 April, which was yet another opportunity for stakeholders to put forward reform ideas for consideration. That consultation closed on 1 July this year. It received 46 responses. Again, interestingly, the matching rule was not raised as an issue by the vast majority of respondents.

Quite simply, none of the available data, whether produced by the Government or the sector itself, support the assertion that the gift aid matching rule is a significant barrier to accessing the small donations scheme. The Government have already collected data on the matching rule, carried out a full objective review of the whole scheme and consulted the charity sector. That is why we believe that repeating the consultation process again, so soon after the last consultation, would not produce a different outcome, and why, therefore, I urge the hon. Member for Salford and Eccles not to press new clause 2 to a Division.

As I have said, given the clear interest in the House, we will continue to take a keen interest in this matter, and will listen to the views of the charity sector. The civil society Minister and I are already talking about how we can do more to publicise some aspects of the scheme, and in particular how to get those that do not take advantage of the small donations scheme at the moment to do so. There is a charities day on 16 November, about which we will say a little more later; that will be an opportunity to say and do more to promote the scheme to that small minority not already using it.

I appreciate that in tabling new clause 4 the hon. Members for Aberdeen North and for Kirkcaldy and Cowdenbeath (Roger Mullin) are seeking to understand the differential impact that abolishing the matching rule would have on charities of different sizes. I have already set out why we do not support the removal of the gift aid matching rule, but I have to tell Opposition Members that it is simply not possible to provide them with the level of analysis that they are seeking. Although HMRC holds data on charitable tax reliefs, it quite rightly collects and retains only those data that are necessary to support its function of administering gift aid and other reliefs. Size and turnover are not relevant for gift aid purposes; HMRC therefore does not routinely collect data on the size or types of charities claiming gift aid or small donations top-ups.

As I explained in Committee, HMRC is transparent with the data it holds, and publishes a national statistics package every year that provides a wealth of information about the take-up and use of charitable tax reliefs, including the gift aid small donations scheme. Hon. Members may also be interested to know that HMRC makes many of its datasets, including those relating to charitable reliefs, available—suitably anonymised, of course—to academics and other individuals who approach it with a suitable research proposal. I can tell the House that a number of organisations have recently made use of HMRC’s charities data for research purposes. That is a good example of open government and open data being put to good use.

I hope I have reassured the hon. Member for Aberdeen North that where HMRC possesses data, those data are transparent and, where appropriate, open to outside scrutiny. New clause 4 is not appropriate, because it would require, in legislation, the Government to do something that we simply cannot do. On that basis, I hope the hon. Lady will consider not pressing the new clause to a Division.

Let me turn finally to new clause 3. As I have explained in previous debates, the connected charities rules are intended to protect the gift aid small donations scheme from abuse. They work in conjunction with the community buildings rules to deliver fair and broadly equal outcomes for charities structured in different ways. Without the connected charities rules, larger charities would be faced with a perverse incentive to splinter into artificial groups of smaller charities to increase their entitlement to small donations allowances. New clause 3 would grant the Treasury the power to exempt specific named charities from the connected charities rules. It would also require the Treasury to publish draft regulations, following consultation with the scouts, the guides and others.

The new clause is unnecessary. As we have heard, the Government have just concluded a full and open review of all aspects of the gift aid small donations scheme. That review included the gift aid matching rule and the connected charities rules. In that very open consultation, many representations included the scouts and other uniformed groups. The Government listened to the representations from the uniformed groups. They told us that they welcomed the gift aid small donations scheme, but were unable to benefit fully from the current community buildings rules because most of their fundraising, as Members will know, takes place outside in their local community. The Bill will therefore relax the community buildings rules to allow donations collected outside the building to be counted for community buildings purposes. As discussed on Second Reading and in Committee, this will help bob-a-job work and so on that is done outside the scout hut or other building.

The intention is to allow groups such as the scouts to benefit more fully from the scheme without the need to specifically exclude them from the connected charities provision. We debated a similar amendment in Committee and had a thorough and thoughtful debate on the implications of the Bill for the youth groups in question. The shadow Chief Secretary raised a number of good points and I undertook to reflect on them and look at them more closely. Having done so, I confirm to the House that a scout hut is an eligible community building and there is no requirement for the building to be rented out or for access to be granted to other community groups. That means that the scouts and other similar uniformed groups will benefit from the changes contained in the Bill. Whether it is bag-packing at the local supermarket or bucket collections at the local fete, donations in the local community will count for the small donations scheme. The Bill’s provisions already deliver the outcome Opposition Members seek. I therefore suggest that new clause 3 is unnecessary and I hope the hon. Lady will withdraw it.

[Rebecca Long Bailey]

With the leave of the House, I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 3

Regulations on local branches and groups

‘(1) The Small Charitable Donations Act 2012 is amended as set out in subsections (2) and (3).

(2) After section 5(1) (general provisions on meaning of “connected”), insert—

“(1A) This section is subject to the provisions of regulations made under section 5A (regulations on local branches and groups).”

(3) After section 5, insert the following—

“5A Regulations on local branches and groups

(1) The Treasury shall by regulations prescribe organisations in which local or regional branches or groups may not be considered to be connected for the purposes of sections 4 and 5.

(2) The Treasury shall publish the first set of draft regulations made under subsection (1) no later than 31 October 2017.

(3) Before publishing draft regulations under this section, the Treasury shall consult—

(a) the Scout Association;

(b) the Guide Association;

(c) the Combined Cadet Force Association; and

(d) such other organisations as appear to the Treasury to be relevant.”—(Rebecca Long Bailey.)

This new clause requires the Treasury to identify organisations with local or regional branch or group structures in order that those local and regional branches or groups can be separately eligible under the scheme, and to consult certain organisations about the regulations in draft.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

--- Later in debate ---

Meaning of "Small Donation"

[Rebecca Long Bailey]

I beg to move amendment 1, page 2, leave out lines 1 to 6 and insert—

“(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.

[Madam Deputy Speaker (Natascha Engel)]

With this it will be convenient to discuss amendment 2, page 2, line 6, at end insert—

“or

(c) by a comparable method prescribed by the Treasury by regulations.”

This amendment would give the Treasury a power to prescribe by regulations other methods of payment comparable to contactless payment in the future.

[Rebecca Long Bailey]

Opposition amendments 1 and 2 relate to the types of payment eligible for the gift aid small donations scheme. Amendment 1 would extend the range of payment methods to include cheques and electronic communications—that is, texts. The Bill itself extends the methods to include contactless payments. Amendment 2 would give the Treasury powers to prescribe by regulations other methods of payment comparable to contactless payments in the future. I will keep my remarks on these two amendments relatively brief as we had an extensive debate on this issue in Committee, although I did not push it to a vote.

Currently, cash donations under £20 are considered eligible for the scheme. The Bill brings contactless payments into the scheme, and we support that measure. However, the charity sector has said that it would be more beneficial for other types of payment, particularly cheques, to be eligible as well. When this was discussed in Committee, the Minister said that amending the Bill in such a way was

“contrary to the stated policy intention of the scheme.”––[Official Report, Small Charitable Donations and Childcare Payments Public Bill Committee, 18 October 2016; c. 10.]

I want to take this opportunity to disagree.

The intention of the scheme is to allow charities to get a gift aid-style top-up on donations made in situations where it is infeasible, but not impossible, to get a gift aid declaration. I would argue that donations made by text are a prime example of such a situation. The Minister has said that receiving gift aid declarations on donations via SMS is a straightforward process: the donor simply needs to reply to a follow-up text message giving their name and address and confirming that they are a taxpayer. It might be straightforward, but people tend to be wary of disclosing personal information. I certainly would not feel comfortable sending my address and other details to an unknown number.

The hon. Member for Amber Valley (Nigel Mills) helpfully alerted us to paragraph 1.8 of the Treasury consultation “Gift Aid and Digital Giving”. I am sure that the Minister has had time to check it out, but I can remind her that the document states:

“Individual donations online or by text are often small. In these cases for the donor it may not seem worthwhile to go to the trouble of filling out a Gift Aid declaration for a small additional amount to go to the recipient charity.”

It is therefore clear that getting a gift aid declaration via text is not as straightforward as the Minister would have us believe.

Similar situations can arise with cheques, as detailed in Committee by my hon. Friend the Member for Redcar (Anna Turley). Elderly people in particular often send cheques in the post, making it impossible for charities to track them down and get a gift aid declaration—it is probably not worth it if it is a small amount. Amendment 1 would simply allow such donations to be eligible for the scheme. I hope the Minister will offer some movement on this area as I simply cannot see the logic in saying that extending payments in that way would somehow encourage charities to move away from traditional gift aid claims.

Amendment 2 would allow the Treasury to make regulations to tweak the legislation to allow types of payments similar to contactless payment to come under the scope of the scheme. It was argued in Committee that technology is moving forward at an incredibly fast pace and that next year people might be using a new type of card or gadget to donate to charity. The Opposition are convinced by that line of reasoning and the amendment would simply give the Government the power to make changes to allow Oyster cards, for example, to come within the scope of the legislation without having to create a brand-new Bill. It is not often the Opposition’s desire to give the Government more powers, but it would be worthwhile in this scenario.

In conclusion, the Opposition strongly support the move to include contactless payment, but we do not see the logic in singling it out when the sector is saying that other payment methods would provide a greater boost to the scheme. I look forward to the Minister’s response. I will be pushing amendment 1 to a vote should she not see fit to accept it.

[Jane Ellison]

As we have just heard, amendment 1 would extend the gift aid small donations scheme to include donations made via cheque, online or SMS. Amendment 2 would give the Treasury the power to amend the Small Charitable Donations Act 2012 through secondary legislation to include other unspecified methods of payment in future. As the shadow Minister said, we debated this area in some detail both on Second Reading and in Committee, so I am afraid that I will be making many of the same points.

When I opened the Second Reading debate, I told the House that it is a Government priority to maximise the gift aid claimed by charities on eligible donations. It is worth reflecting on that because during the Bill’s passage through the House we have quite rightly focused on the gift aid small donations scheme, but the scheme—important though it is—forms just one part of the package of generous tax reliefs the Government use to support our charity sector. Gift aid was worth over £1.3 billion to the charity sector last year—a significant amount—but we want to see gift aid claimed on even more eligible donations, and we want charities to claim gift aid because it is a much more beneficial scheme and has many advantages for charities over the longer term. The shadow Minister said that she was not seeking to undermine gift aid, but it is worth reminding ourselves that it is the more beneficial scheme, so we want to encourage people to take it up.

One reason is that gift aid is not capped—relief can be claimed on individual donations worth hundreds or thousands of pounds. There is no annual limit—charities can claim on as many eligible donations as they are able to solicit. The act of obtaining a gift aid declaration provides charities with the opportunity to build a relationship with their donors, leading to a more sustainable and resilient funding stream.

--- Later in debate ---

[Rebecca Long Bailey]

Hon. Members will be pleased to hear that I will keep my comments very brief in this stage in the proceedings. The Small Charitable Donations and Childcare Payments Bill as a whole makes positive changes to the gift aid small donations scheme and very minor changes to the tax-free childcare scheme.

The Opposition have welcomed the Government’s aim throughout the passage of the Bill to make sure that the gift aid small donations scheme is more accessible and to encourage charities to take part. The scheme has not been as successful as the Government had hoped, and the Bill certainly makes changes to improve that situation. In particular, the abolition of the two-year eligibility rule and the two-in-four years claims rule will open up the scheme to new charities, while bringing contactless payments into the definition of a small payment will bring the scheme into line with how donations can be made in the modern day.

However, as the Minister is aware, the Opposition think the Bill could have gone further, as do representatives of the charity sector. Indeed, the Charity Finance Group has said that the Government were “locking in future failure” by not introducing wider reforms. We have tried to improve the Bill after receiving feedback from the sector. Along with SNP Members, we have tried to address the key issue coming out of the feedback, which is the matching requirement. Our amendments in Committee and on Report would have forced the Government to conduct a specific review of the rule and of how the scheme fits within the framework of anti-fraud measures in the scheme. Unfortunately, the Government have not made any movement on this issue, which is a barrier to entry to the scheme, according to charity representatives. However, I note the comments that the Minister made earlier, and I look forward to receiving any further updates from her on this matter in due course.

We have also tried to widen the payment methods eligible for the scheme beyond cash and contactless payments. Our amendments would have included cheques and donations via text and online. Again, unfortunately, the Government have not seen fit to work with us on this part of the Bill, simply using flawed logic, as it were, to prevent the changes that the charity sector wants from happening. I hope that the Minister will reflect on the comments made during the passage of the Bill, and consider whether amendments can be made in due course to make the use of cheques and, in particular, of text messages more accessible to the gift aid sector.

Finally, we have tried to address what appeared to be a flaw in the original legislation, preventing the scouts, guides and cadet groups from gaining the full benefits of the scheme. For the benefit of hon. Members who are not aware of the issue, the connected charities rule means that the scouts, guides and cadet groups are each treated as one charity, despite the fact that local groups are individual and self-financing, and that means only one top-up payment can be received. As I highlighted when we discussed this amendment in the Public Bill Committee, the Charity Finance Group has suggested that such treatment means they receive only 17p per individual group a year.

The Minister had a few issues with our amendment, as drafted, and we listened to her concerns and modified it to reflect them. I particularly appreciate the comments she has made in relation to scout groups and their bases. However, she will recognise that the comments made in Committee related to the need for the scope of our amendment to go further to include groups beyond the scouts and girl guides. I hope she will consider that very carefully and see whether she can put in place any future amendments or provisions to deal with any other groups in a similar position that are not, as it were, mopped up by the Bill.

To conclude, perhaps once the Government have reviewed the scheme’s effectiveness in the light of the changes the Bill makes we may have an opportunity to come back to some of those changes, as I have said. Overall, however, the Opposition support the Bill and its aims. I hope it will succeed in making the small donations scheme more accessible and in supporting smaller and new charities. I look forward to an update on the impact of the revised legislation in due course.

Concentrix

Rebecca Long Bailey Excerpts

Wednesday 26th October 2016 Commons Chamber

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

I beg to move,

That this House notes that Concentrix has not fully met the performance standards set out in its contract with the HM Revenue and Customs to correct tax credit claims, and welcomes the announcement that the services performed by Concentrix will be brought back in-house to HMRC next year; and calls on the Government to conduct a comprehensive investigation into the performance of Concentrix under its contract with HMRC, which includes a consideration of the potential effect on other HMRC services, take urgent action to compensate people who have erroneously had tax credits withdrawn by the company, and in doing so mitigate any adverse effect or reduction in service for claimants.

The topic of today’s first Opposition day debate affects every single hon. Member’s constituency. I have received many case studies from Labour Members, and I thank them for their hard work on this issue. I welcome the comments in the amendment tabled by Scottish National party Members; I am very pleased that we are on the same page on this issue. We have heard how constituents of Conservative Members have been affected by this scandal too. My own inbox and postbag have seen a surge in the number of anxious and distressed families needing my help after their tax credits have been stopped. I put on record my thanks to my right hon. Friend the Member for Slough (Fiona Mactaggart) and my hon. Friend the Member for Sheffield, Heeley (Louise Haigh), and to the Chairs of the Public Accounts Committee, the Work and Pensions Committee and the Treasury Committee, for their hard work in shining the spotlight on this very serious issue.

I am sure that Members will assist the Minister by illustrating their own cases, but I will begin by outlining a shocking yet typical case study brought to my attention recently. The lady in question is a single parent with three children and a job, although at the time of her exchanges with Concentrix she had just had a baby and was on maternity leave. This lady had been accused on two separate occasions of living with an undisclosed partner. On both occasions, she had never met the person. The first time, she was accused of living with a man who turned out to be the former tenant of the housing association flat that she now lives in. This was sorted out fairly easily. We can imagine her shock, though, when only months later she received another letter accusing her of living with another undisclosed partner. When she phoned Concentrix, she was told that she was living with a woman of whom she had never heard. The lady pointed out that there was absolutely no truth in that allegation and sent all the requested documentation, by recorded delivery, to Concentrix. She received no response. She gave birth to her third child two weeks later.

When the claimant phoned Concentrix, she was told that the documents that she had sent were not on the system, and she then received a letter cancelling her tax credits. That left her with only maternity allowance to live on and a demand to repay £4,100.

The lady in question obtained replacement documentation, after Concentrix appeared to have lost the originals, and sent a request for mandatory reconsideration, again by recorded delivery, to Concentrix. By this time, she was running very short of money and contacted her Member of Parliament for help. When the parliamentary office investigated the matter, it was told that there was a backlog of mandatory reconsiderations, so it could take six weeks for the case to be looked at.

By this time, the lady in question had been waiting for three months for a resolution to her case—that is three months in complete stress and turmoil, on the breadline, when she should have been enjoying those precious early moments of her child’s life.

[Peter Kyle (Hove) (Lab)]

I am grateful to my hon. Friend for giving way so early on. I was contacted not long ago by a woman in a similar situation. Her tax credits were cut because Concentrix accused her of having a lesbian relationship with her sister. It took her coming to me as her Member of Parliament and calling Concentrix myself before it started to believe the truth. Is it not absurd that it takes a direct intervention from a Member of Parliament before this ridiculous company takes these people seriously?

[Rebecca Long Bailey]

I thank my hon. Friend for his comments. The term, “It beggars belief” springs to mind. Unfortunately, his case is not an isolated one.

After much chasing, it was eventually confirmed that the lady had no connection to this mystery woman. She was paid all the money she was owed, and the demand to repay the £4,100 was withdrawn.

[Clive Efford (Eltham) (Lab)]

We all have examples of constituents with similar stories, but the Government are showing a complete lack of urgency. People are left destitute by these decisions, for no good reason. We want to hear the Government say that they are going to put in extra resources to expedite investigations so that these people are paid and compensated, if necessary at the expense of Concentrix.

[Rebecca Long Bailey]

I could not agree more. The case to which I have referred is not an isolated one. According to the Government’s own figures, the company has considered about 667,000 cases, of which 103,000 have been amended. That means that 15% of investigations have wrongly pursued perfectly legitimate tax credit claimants, and they are simply the ones who have had the strength to come forward and present themselves, including to their MPs, as we have heard.

[Maria Eagle (Garston and Halewood) (Lab)]

In every single one of the Concentrix cases that has been taken up by my office so far and that has been resolved, the payment has been put back in place. In other words, they have been 100% wrong. What does my hon. Friend think that the Government ought to do about that?

[Rebecca Long Bailey]

I think that the cases we have seen so far are the tip of the iceberg. The Government have a responsibility to ensure that all cases are adequately investigated, and that no one has fallen through the cracks and not presented themselves either to their MP or directly to Concentrix.

[Hywel Williams (Arfon) (PC)]

I have spoken in previous debates about Capita’s failures in delaying the payment of disability benefits to some of our most vulnerable people. It seems to me that the only difference this time is the name of the corporation involved. Is not the fundamental issue that private profit-making companies are failing to deliver critical Government services?

[Rebecca Long Bailey]

The hon. Gentleman makes an interesting point. I will come on in due course to the issue of the contract and how it is delivered, because there needs to be a wider investigation and discussion about that.

In 2014-15, there were no appeals against a decision. In 2015-16, there were 365, and from April to August 2016, there were 176. A similar spike is clear in the number of mandatory reconsiderations, which more than quadrupled between 2014-15 and 2015-16. It is even more shocking that that number almost quadrupled again in the period up to mid-August.

[Christina Rees (Neath) (Lab/Co-op)]

Does my hon. Friend agree that the Government should commit to an official investigation into Concentrix’s conduct since it was awarded the contract in 2014, so that we know how what she has described was allowed to happen?

[Rebecca Long Bailey]

I completely agree with my hon. Friend. It is hard to believe that the number of fraudulent tax credit claimants suddenly increased so dramatically in those two years. What is clear, however, is that there is an ever-growing evidence base suggesting that Concentrix has been unfairly and unjustly stopping people’s tax credits, leaving them in financial difficulty, along with the anxiety that that causes.

I am pleased that the Government have accepted that the contract was not working. Indeed, they were forced to concede that point in an answer to a parliamentary question asked by my hon. Friend the Member for Sheffield, Heeley early last month. The response revealed:

“Since mid-October 2015 there has been 120 instances where Concentrix has not fully met the performance standards set out in the contract out of a total of 1625.”

Following mounting pressure from Opposition Members, the Government announced that they would not renew the Concentrix contract when it ends in May, and that they would redeploy 150 members of Her Majesty’s Revenue and Customs to clear the backlog of cases.

[Louise Haigh (Sheffield, Heeley) (Lab)]

My hon. Friend is making a powerful case. Is she aware that it was not actually until October last year that the Government started monitoring the performance of Concentrix, as was revealed to me in a parliamentary answer just a couple of weeks ago? That shows exactly why they have removed the contract now, because before that they did not even know whether Concentrix was performing the service standards laid out in it.

[Rebecca Long Bailey]

My hon. Friend makes a fantastic point. A whole section of my speech is devoted to particular clauses in the contract that may or may not have been enforced by HMRC and the Government. I will come on to that in due course.

Labour welcomed the announcement that 150 members of staff would be redeployed and that the contract would not be renewed, but we still had serious concerns that Concentrix would continue to handle cases and that the Government had not stated that they would bring the operation back in-house. Following further pressure from Labour and the Public and Commercial Services Union, the Government backed down and PCS confirmed last week that the operation will, indeed, be brought back in-house, with Concentrix staff in Belfast being transferred to HMRC.

We of course welcomed that action, but it does not even begin to address the wider issues. How did this situation arise? When did the Government first become aware of it? What action did they take? How will they ensure that it does not occur again? Most importantly, when and how will the victims be compensated? Media reports were surfacing as far back as 2015 in relation to erroneous tax credit decisions pursuant to the contract, and, as I have outlined, the figures indicated an unusual spike in appeals. The red flags were there and they should have been acted on.

I would like to direct the Minister to the contract between HMRC and Concentrix, which provided a number of tools that the Government had at their fingertips. Section I3.1 of the contract provides that where HMRC is concerned with the delivery of service, it can investigate. Was HMRC concerned, and if so, when? If the Minister cannot answer just yet, I will, to help her to pinpoint the information, illustrate further machinery in the contract that would have helped the Government and HMRC to find out about any problems pretty swiftly. Section E7.1 and schedule D provide for reviews of the contract’s effectiveness. Schedule D4.1 states that “prior to…Go Live”, HMRC would work with Concentrix to establish and agree a “robust Governance Framework” including contract management, communications, quality and assurance, payment risk management, performance management, change control and, most importantly, reporting. Will the Minister confirm the details of that “robust Governance Framework” for the benefit of the House?

If the Minister cannot do so, I can reassure her that fall-back options were still available. Schedule D12.1 states that HMRC would have full access to individual cases and, further, that Concentrix was under an obligation to let HMRC observe its working methods. Pursuant to that provision, were individual cases reviewed by HMRC, and did HMRC investigate the methods used by Concentrix? If so, how often did that happen and what were the findings of those investigations? It is clear that the Government had the tools that they needed to monitor service delivery, but perhaps they simply did not use them. The Minister will confirm in due course.

If the Government had found failings after exhausting the quite reasonable dispute process in the contract, they could have exercised the break clause found at section G3 by giving only three months’ notice. Will the Minister confirm whether and when that was considered, and tell us the outcome of that consideration? If, however, her answer to all my contractual questions is, “I don’t know,” I would ask whether she is really sure that HMRC had the capacity to monitor the contract effectively. She will be interested to know that PCS is due to publish a report on HMRC shortly, which suggests that

“the department is at breaking point…staff are hugely demoralised, 25% want to leave the department immediately or within a year and the department scores below average in all of the measures on the Civil Service’s annual staff survey.”

The report does not paint a happy picture.

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

My hon. Friend is making a forensic case. Behind these facts and figures are very real human cases of people, particularly women and single mothers, who are being absolutely hammered by Concentrix. I have constituents who are going hungry, and whose children are going hungry, because of the incompetence of Concentrix. That is what we need the Minister to answer about.

[Rebecca Long Bailey]

My hon. Friend makes a powerful point; he is 100% correct. This is not simply a case of rapping Concentrix on the back of the hand. These contractual failings have caused real human suffering, and the Government need to address them urgently.

[Richard Arkless (Dumfries and Galloway) (SNP)]

Is the hon. Lady aware of the spikes in such claims that she talks about arising in the week before conference recess and in the days following, when Concentrix was stripped of the contract? We all know what is happening here: drilling down into the contract to avoid exit penalties. Will the Government shed any light on that?

[Rebecca Long Bailey]

I hope that the Minister will address the hon. Gentleman’s question in her speech because we all want to hear the answer.

Several provisions in the contract relate to payment by delivery. The head of the National Audit Office stated in June 2015:

“While its supporters argue that, by its nature, Payment by Results offers value for money, these contracts are hard to get right, which generates risk and cost for commissioners…the increased risk and cost may be justified, but this requires credible evidence. Without such evidence, commissioners may be using this mechanism in circumstances to which it is ill-suited, to the detriment of value for money.”

Under schedule A6.1 of the contract, HMRC required Concentrix to deliver, over the duration of the contract, some £1.03 billion in savings in annually managed expenditure. I appreciate that the contract used estimates to forecast potential savings, but given the model, how could anyone have been certain about the position without a crystal ball? In answer to parliamentary questions, it was revealed that total savings in annual managed expenditure were £2.3 million in 2014-15, £122.3 million in 2015-16, and £159.5 million in 2016-17, to mid-August 2016.

[Yvonne Fovargue (Makerfield) (Lab)]

Does my hon. Friend agree that these savings were made by my constituents facing a similar situation—100% of them have had their benefits paid back—going to food banks for the first time in their lives? The place-based team in Platt Bridge has seen a spike of some 50 families going to them because of problems with their tax credits.

[Rebecca Long Bailey]

My hon. Friend’s intervention highlights the human impact of these contractual failings. My constituents have asked me for the addresses of food banks and whether parcels could be delivered to them because they were too ashamed to be seen as struggling by their communities. To put people in such situations is an absolute disgrace.

Total savings of £284.1 million have been made since the commencement of the contract in November 2014. Anyone can see that the leap from £2.3 million in 2014 to £159.5 million by mid-August 2016 is excessive. Does the Minister therefore believe that there was simply a massive increase in fraud in the system, or does she agree that the contract was granted in the absence of a firm evidence base to justify the risks associated with an agreement based on payment by results?

As I said, there is a human impact and a human cost; it is not simply a case of slapping Concentrix on the back of the hand and saying, “Let’s all move on.” We are talking about the Government’s duty to preserve justice being abandoned as a result of the profit motive established by the contract. The risks were real human risks—families being forced into destitution, anguish and despair, with all the associated pressures on an individual’s mental health.

Earlier this year, the Social Security Advisory Committee noted that the payment model could create a conflict of interest. It recommended that the National Audit Office should examine the contract to ensure that it included appropriate safeguards to preserve justice for the claimant. At that stage, there was no investigation, but the Labour party has since written to the NAO and received the following response:

“My team has carried out some preliminary work to look into the issues. Their view is that the contract between HMRC and Concentrix merits further investigation.”

I am pleased that the NAO will investigate, but the Government must carry out a full and transparent inquiry of their own. Our motion calls on the Government to conduct a comprehensive investigation into the performance of Concentrix and HMRC’s contract with the company, in terms of both the adequacy of enforcing all the contractual terms, and the suitability of a payment-by-results model for delivering such a service. I would add that the NAO confirmed last year that the Government’s payment-by-results schemes accounted for at least £15 billion of public spending. It has stated that neither the Cabinet Office nor the Treasury monitors how payment by results operates across government.

[Kate Green (Stretford and Urmston) (Lab)]

My hon. Friend is making a detailed case about the defects of the contract, including in relation to payment by results. Does she agree that the problems with that model were exacerbated by the fact that when people had a problem with their tax credits being withdrawn, they had to complain to Concentrix—they had to go back to the decision maker—and there was, naturally, no financial incentive for Concentrix to unwind a wrong decision?

[Rebecca Long Bailey]

My hon. Friend is right. Sadly, however, when many people tried to complain to Concentrix, all they received was a dull engaged tone, so they did not get very far.

Will the Minister assure the House that she will go beyond the scope of the motion and investigate such contracts more widely? She should consider putting measures before the House that will prevent the incorrect application of payment by results. I fear that Concentrix is just the tip of the iceberg.

[Chris Law (Dundee West) (SNP)]

I have just looked at how far back payment by results goes. Will new Labour, or old new Labour, take some responsibility—payment by results was introduced in the English NHS in 2003-04—and condemn it roundly in the Chamber today?

--- Later in debate ---

[Rebecca Long Bailey]

We can all learn lessons by reviewing the handling of payment-by-results contracts. I hope that the Minister will consider those experiences when she conducts a review of the delivery of such contracts.

[Kevin Foster (Torbay) (Con)]

Will the hon. Lady give way?

[Sammy Wilson (East Antrim) (DUP)]

Will the hon. Lady give way?

[Rebecca Long Bailey]

No. I have one paragraph left before I finish.

I want to conclude by speaking about the victims of these terrible systematic failures. They did not deserve to face the hardship they have endured, and they must be adequately compensated for their losses. Will the Minister confirm that they will be compensated? On what basis will they be compensated, and what is the timeframe for that action? Will she confirm that, in addressing the problem and bringing services back into HMRC, she will mitigate any adverse effect on or reduction in service for complainants? I ask her to keep an eye out for the PCS report because it is a real eye-opener. I know that the Minister has experienced terrible cases on her own doorstep. She has seen the effects at first hand and seems to be very empathetic. As such, will she issue an apology on behalf of her Government for the distress and hardship that has been caused? That is the very least our constituents deserve.

--- Later in debate ---

[Jane Ellison]

If the hon. Lady will forgive me, I will write to her on that. As commercial discussions are ongoing it would be best to write on something as detailed as that, and I am happy to do so.

[Rebecca Long Bailey]

I thank the Minister for giving way, as I know time is precious. I appreciate that she cannot divulge the terms of the ongoing negotiations for the termination of the contract, but will she commit to coming back to the House to make a statement as soon as those terms are finalised? Will she provide the information that she can obtain—for example, when the dispute process was first examined and the outcome of that process? We are at the very end of a contractual process, and simply want to know what the timeline was.

[Jane Ellison]

Again, those are matters I will return to, in part because there will be a number of examinations of this situation—the National Audit Office has already talked about the work it will do. I will come on to that.

Oral Answers to Questions

Rebecca Long Bailey Excerpts

Tuesday 25th October 2016 Commons Chamber

[Mr Gauke]

I look forward to examining the case for dualling the A64 and the benefit that would provide to manufacturing industry.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

Last month, the Chancellor proudly dismissed his predecessor’s plans to cut corporation tax to 15%. This week, however, we hear of plans hatched by senior Government figures to cut corporation tax as low as 10% as part of a so-called Brexit nuclear option, despite the fact that both the British Chambers of Commerce and the Institute of Directors have stated that cutting corporation tax would not be at the top of their wishlist. Will the Minister put an end to his Government’s reign of chaos and confirm his long-term position on corporation tax, so that businesses have the stability they deserve?

[Mr Gauke]

I am not sure whether I would use the phrase “reign of chaos” if I was a Labour Front Bencher. Let me be very clear. The UK Government have rightly reduced corporation tax from 28% to 20%. We have legislated for it to go down to 17%. If there are any further announcements they will be at a fiscal event, whether an autumn statement or a Budget.

[Rebecca Long Bailey]

I am afraid that the Government chaos we have seen on corporation tax is sadly replicated on investment. The Chancellor promised to tear up his predecessor’s Budget and develop an industrial strategy, before denying he was planning a spending splurge. A recent Ipsos MORI poll showed that almost two thirds of Britons agree that the country is not doing enough to meet its infrastructure needs, and the Opposition agree. Will the Minister end his Government’s chaotic record on investment and confirm how much he plans to invest in infrastructure, on what, and where he will get the money from?

[Mr Gauke]

On the subject of corporation tax, I point out that it was not that many months ago that on one day the shadow Chancellor condemned the reduction to 17% while in Committee the Labour party voted for it. I will be clear that it is no good coming forward with incredible plans to spend £500 billion on infrastructure without any idea of how those plans will be paid for. The Chancellor will make a statement on 23 November on our policy on this issue. The Labour party really needs to change track if it is to have some credibility.