Small Charitable Donations and Childcare Payments Bill

Debate between James Duddridge and Jane Ellison

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

[James Duddridge (Rochford and Southend East) (Con)]

I was about to rise to congratulate the Minister, as this seems like a really good initiative, but why apply this for only just that tax year? Given that someone is able to donate to an organisation and do it within a tax year, why not roll this over into future tax years to extend this provision? Perhaps I am being uncharitable to her, as this is a good provision, but it could be even better.

[Jane Ellison]

I strongly suspect that there are technical reasons why that would be difficult, but I am happy to take my hon. Friend’s suggestion away, look at it and respond properly to him. In the spirit of simplification, he seeks to make it ever easier to make these donations. As a result of the way Her Majesty’s Revenue and Customs operates—within tax years—I could foresee difficulties with this approach, but I will look at it and write to him with a bit more detail.

There are more things we can do to make things easier for charities, and the Government are constantly looking at ways of achieving that—we have just heard another suggestion from my hon. Friend. I am pleased to tell the House that we have a very good track record of simplifying gift aid processes for charities. For example, in 2013 we introduced Charities Online to help charities to claim gift aid even faster, and 95% of charities now use this service. Instead of having to fill in paper forms and post them back to HMRC, charities can claim their repayments online and have them paid directly into their bank account. Under the old paper system it could take up to three working weeks for charities to receive their repayments, whereas most claims are now paid within five working days. I am sure hon. Members would agree that that is a welcome boost for charities. Just last year, HMRC introduced a new, shorter model gift aid declaration to make it easier for donors to understand their obligations under the scheme, and it worked in close collaboration with the Charity Retail Association to simplify and clarify the Government’s guidance on the retail gift aid scheme. Earlier this summer, the Treasury published a consultation exploring ways of simplifying the gift aid donor benefits rules, and we looked carefully at the responses received before publishing a response.

Of course, we will keep looking for ways to simplify and improve gift aid, but these are questions about the wider gift aid scheme, not the gift aid small donations scheme. My hon. Friend might be pleased to note that one reason I foresaw difficulties with his proposal is that people’s tax status can change from year to year—for example, when they move from work into retirement—and this would make things difficult. I hope that that response is helpful, but I will follow up with him in more detail.

Amendment 2 would grant the Treasury the power to amend the Small Charitable Donations Act 2012 in the future in the event that new donation technology develops. Members who were present at the original Bill discussion reminded us in Committee that they had made points about future-proofing the scheme in terms of technology at that time. My hon. Friend the Member for Amber Valley and the hon. Member for Clwyd South (Susan Elan Jones) are nodding. It is an interesting point, which we have debated.

The Government have consulted fully on the changes to the scheme, and as part of the consultation that we have just undertaken, the extensive nature of which I outlined earlier, HMRC officials went out and met charities and other groups to discuss contactless donations and other technological developments. They considered methods of donation that are not currently in use but might be in the pipeline. I understand that there was no suggestion from the stakeholders that there are other imminent technological developments in the pipeline that would be suitable for the small donations scheme. In any event, we have deliberately drafted the definition of “contactless payment” quite widely.

As I explained to my hon. Friend the Member for Amber Valley in Committee, the definition in the Bill would cover donations from, for example, Oyster cards, as the shadow Minister mentioned, or other smart cards. It would also cover new payment services similar to Apple Pay and Android Pay. We believe that the definition in the Bill is sufficient to cover most of the technological developments that we are likely to see in the reasonably foreseeable future.

[James Duddridge]

My hon. Friend will not be surprised that I expressed some degree of sympathy with amendment 2, given that I raised some of these points. I am reassured about the extension of contactless payments, particularly to Oyster cards, as was mentioned from the Opposition Front Bench. However, I do not support the amendment because of its wording. It refers to “comparable method”. The shadow Minister used the word “similar”, and my hon. Friend the Minister used the term “unspecified”. That is all unclear. There will be further technological changes and we will probably look back and say, “Wasn’t there a formulation that we could have used to include this new technology?” The wording of the amendment is not satisfactory and unfortunately I cannot offer a suggestion to improve it.

Small Charitable Donations and Childcare Payments Bill

Debate between James Duddridge and Jane Ellison

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 11th October 2016 Commons Chamber

[The Financial Secretary to the Treasury (Jane Ellison)]

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

I obviously welcome the number of colleagues who have remained in the Chamber after the important debate that has just happened. I am sure that they will contribute to the debate on this important and, I hope, uncontroversial topic, as we set out to give further support to our fantastic charity sector. Although the Bill proposes relatively minor changes, they are really important none the less, because they can further the practical support that we give to our outstanding charities sector in this country, and the childcare payments provisions will help families with childcare. I shall take both aspects in turn and start with the measures to help the UK’s charity sector.

I am sure that I speak for everyone in the House when I say that I am enormously proud of the fantastic work done by charitable organisations in this country. Obviously, as the Member for Battersea, I might be forgiven for pausing to make special mention of just one of those charities: the fantastic animal charity, the Battersea Dogs and Cats Home—one of the most famous animal charities in the world, let alone in this country, which finds new homes for more than 8,000 animals every year. Indeed, the Treasury has been a beneficiary of its efforts recently, with the appointment of the new chief mouser, Gladstone the cat, which managed to make me only the second new arrival from Battersea to the Treasury over the summer.

Right across this country and our constituencies, we see charities of all shapes and sizes right at the heart of our communities, whether large charities working here in the UK and across the world, researching cures for diseases or running relief efforts for those who suffer from conflict or crisis—obviously, Haiti is in our minds at the moment, and the House has just debated Syria, where so many charities are doing such brave and important work—or the smaller, more specialised charities run by just a handful of dedicated volunteers. We want to give them all the support that they deserve.

Last year alone, we provided more than £5 billion to help our charities to do more of that brilliant work. Of course, one of the biggest ways that we give them that additional revenue is through gift aid, which was worth about £1.3 billion last year. We want as many charities as possible to benefit from that, but as things stand, it is not always practical or feasible for charities to claim it. If people are out there, collecting money with a bucket, for example, they can hardly ask someone to fill in a gift aid declaration form, alongside giving a handful of small change. That is why, as many colleagues who were here during the last Parliament will remember, we introduced the gift aid small donations scheme in 2013, to allow charities and community amateur sports clubs to claim a gift aid-style top-up payment on donations received in circumstances where it is difficult or burdensome to obtain a gift aid declaration.

It is important to point out that that scheme is not a replacement for gift aid. Where charities can obtain a gift aid declaration, they should do so. Unlike gift aid, which is a tax relief linked to donors’ tax contributions, the gift aid small donations scheme is a public spending measure, under which the Government pay a top-up of 25p for every pound of eligible donations received, regardless of the donor’s tax status. This scheme was designed to complement gift aid. When we introduced the scheme, we promised that we would review how it was working after three years, and we have done so. It is therefore a pleasure, as a result of that review, to introduce three measures in the Bill that will make further improvements to the scheme.

[James Duddridge (Rochford and Southend East) (Con)]

I thank my hon. Friend for giving way before going into more detail. I fully appreciate the need for extra simplicity. Would not a bold step be to assume that all charitable donations are subject to tax relief overall? I appreciate that that cannot be done straightaway because enormous sums are involved, but could that be the trajectory that the Government take ultimately to make the tax treatment of charities incredibly simple indeed?

[Jane Ellison]

My hon. Friend is right to suggest that we are seeking as much simplicity as we can get, but I will perhaps come on to and tease out during the debate why we want to ensure that that simplicity and light touch goes alongside a degree of assurance. Finding that balance is perhaps one of the areas where a range of views will be expressed. We are keen to have a degree of assurance about the claims made and the public money given to charities.

On the consultation that took place, it might help colleagues to know that John Low, the chief executive of the Charities Aid Foundation, has said:

“The inclusion of a Small Charitable Donations Bill could be good news for charities, particularly for smaller organisations which have often struggled to unlock the benefits of Gift Aid. This provides a real opportunity to simplify the scheme”—

that is the point made by my hon. Friend the Member for Rochford and Southend East (James Duddridge)—

“and make it fit for the 21st century”.

[Jane Ellison]

My hon. Friend might be interested to know that Her Majesty’s Revenue and Customs has a team that goes out promoting these schemes. I was really impressed to read that since 2014 it had given more than 600 presentations to charities of all sorts of sizes, up and down the country, but he is right to say that we can always do more. I really hope that as a result of the Bill and this debate, colleagues will feel that they, too, can play an important role in telling charities in their area the good news that the scheme just got easier. Obviously, we all have a lot of contact with smaller charities in particular, and we get to know them over the years in which we represent them.

The changes are the result of months of consultation and constructive discussion with the charity sector. I thank the hundreds of charities, representative bodies and other organisations that worked with HMRC to make this review work.

Let me turn to the first of our proposed changes. The Bill will make an important change to the criteria for eligibility for the gift aid small donations scheme. Currently, to be eligible, a charity must have been registered for at least two full tax years, and have claimed gift aid in at least two of the previous four tax years, without a gap of longer than a year; obviously, that is around the assurance process. The Bill removes both those criteria, allowing newer and smaller charities to access the scheme sooner. As we all know, for a charity, those early years are important. The change will provide a welcome financial boost when it is most needed. This is a substantial simplification of the scheme; the only remaining eligibility criterion that charities and community amateur sports clubs will need to meet is the gift aid matching requirement, under which charities must claim £1 of full gift aid for every £10 claimed under the small donations scheme.

There are two reasons why we feel it is necessary to retain this rule. The first is to incentivise charities to engage with the full gift aid scheme, which will provide them with even greater income over the longer term. The second is to protect from fraud the small donations scheme, which has substantially fewer record-keeping requirements than gift aid—an important factor that was looked at when the scheme was first designed back in 2012. It is by retaining the rule that donations under the scheme must be matched with gift aid donations that we can best do that. We are simplifying the rules on eligibility as far as possible to allow as many charities as we can to benefit, while protecting the integrity of the scheme.

[James Duddridge]

While I fully support the point that the Minister makes, I can conceive of a time when it is decided in a review that that link is not the correct one. Will the Minister consider adding a clause in Committee that would allow us to take out that requirement without going through the cumbersome primary legislative process in this House again? That would effectively allow her successors to make a slightly different decision in future, without having to come back to the House.

[Jane Ellison]

Clearly, all the points that colleagues make on Second Reading will be carefully considered and debated again in Committee. I understand my hon. Friend’s direction of thinking, but perhaps that will be discussed further in Committee.

The second important change enabled by the Bill is the future proofing of the small donations scheme to ensure that charities that use modern, innovative ways to collect money such as contactless donations will still be able to benefit. The small donations scheme was never intended to cover other methods of donation such as direct debit, online and text messaging, for which well-established and well-used processes for claiming gift aid exist. That remains the case, but we recognise that cash transactions have declined as new, innovative payment technologies have become more prevalent. We believe that the gift aid small donations scheme should keep pace with these amazing modern techniques.

Contactless donations collected using dedicated charity collection terminals share many of the same practical problems as bucket collections. Transactions are instant, and there is little opportunity for fundraisers to engage with donors to solicit a gift aid declaration. The Bill will therefore extend the scheme so that donations made using contactless technology will be eligible for top-up payments.

--- Later in debate ---

[James Duddridge]

I am sorry, Mr Deputy Speaker. I in no way meant to challenge your ruling, but I did want to deal with the issue of SMS messages. I have absolute confidence in these two excellent Ministers, and I look forward to what will be said today. I shall go into a fair amount of detail about different payment methods later, but at this juncture, suffice it to say that SMS messages are absolutely right for this purpose. As many people have pointed out, people do not necessarily want to give all their details. There is also a demographic issue. My mother-in-law would be very happy to text a £5 donation, but if you ask her to use a smart phone or contactless payments, she thinks you are speaking a different language. It is discriminatory not to enable her to donate by text.

As for the point about the scouting movement—my eldest is going up to the scouts, and they collect—I understand that it will be included, but I hope that the specialists on the Front Bench will clarify the position. Earlier in the debate the changes involving buildings were welcomed. It will still be possible to collect money outside a building rather than inside.

[Jane Ellison]

rose—

[James Duddridge]

One of our excellent Ministers leaps to her feet.

[Jane Ellison]

I hope I can reassure my hon. Friend and, indeed, the whole House that this is a very positive measure for bob-a-job schemes up and down the country. I am sure that scouts and other uniformed youth groups will welcome it.

[James Duddridge]

The Minister takes me back to my own bob-a-job days in the Scouts. There was the Whip thinking that bob-a-job was something that one did on the Back Benches in order to progress in the future.