Small Charitable Donations and Childcare Payments Bill

Jane Ellison Excerpts

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”.

[James Morris (Halesowen and Rowley Regis) (Con)]

Small charities in my constituency include the Leasowes walled garden project, which is part of the Halesowen Abbey Trust—a small organisation dependent on small donations. What plans does the Minister have to communicate to those small charities the benefits of the scheme that she is outlining?

[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.

[Nigel Mills (Amber Valley) (Con)]

I welcome that decision by the Government. I should say, as I tabled an amendment to the original Bill to suggest exactly that future proofing, that I am glad that the Government have got there, perhaps a few years later than they might have done. However, is it really fair to end up with a different treatment if I swipe my phone cleverly at some terminal rather than if I happen to text the number that comes up on my screen? My sense is that I would not be willing to give details of my address through my mobile phone provider, so can we not be a little more generous and allow text donations in that situation?

[Jane Ellison]

Text messages can, as my hon. Friend knows, be gift aided, so we do not expect problems in that regard, but the Under-Secretary of State for Culture, Media and Sport, my hon. Friend the Member for Reading East (Mr Wilson), will seek to respond more fully on those points at the end of the debate.

The final change proposed in the Bill is simplifying the rules on the top-ups that charities can receive on donations that they receive in their community buildings. Those rules were designed to ensure fairness and parity of treatment for charities structured in different ways. Without those rules, some charities are entitled to hundreds of thousands of pounds more than others simply because of differences in their historical structures. The gift aid small donations scheme is particularly well used by local churches. That was made clear by the Archbishops Council, which recently noted that in 2014 parishes could claim record levels of gift aid, with a significant part of the increase arising from the use of the gift aid small donations scheme. We want churches to continue to benefit from the valuable extra income provided by the small donations scheme, but it is important that the scheme continues to deliver the policy intention of providing fair and equal outcomes regardless of structure. The Bill will therefore address an anomaly in the original legislation.

[Martin Docherty-Hughes (West Dunbartonshire) (SNP)]

I support the Bill, and I am grateful to the Minister for her explanation, but does she accept that the majority of charities, especially in my constituency, are small and rely solely for governance on volunteers? There has been a reduction in volunteer numbers across the United Kingdom. For many the Bill does not go far enough in promoting equal access to fundraising opportunities for charities that do not rely on staff.

[Jane Ellison]

Perhaps that is something that we can look at in more detail in Committee.

These are important simplifications. Throughout the consultation, we received supportive comments from charities, as demonstrated in the quote I gave earlier. There are always additional asks, and we would all want to be open to ideas about how we can further support charities. However, we think that the measures that we have introduced in the Bill are important next steps to make it easier for charities of all sizes.

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

There is a lot of merit in the Bill, which reaches out to ensure that smaller charities benefit from the scheme. Does my hon. Friend recognise that many smaller charities do not even know that the scheme exists, so part of the challenge that we face is communicating with them properly so that they know that the scheme will be a lot less complex and that they can benefit from it? What measures will she put in place to ensure that that happens?

[Jane Ellison]

I have already mentioned HMRC’s outreach work, which I will certainly be encouraging. More promotional opportunities are planned, and I know that the Minister for Civil Society will say more about that at the end of the debate. It is a fair point and we want to make it easier, but obviously there are people who just do not know about this and still perceive barriers, so everything we can do to challenge that is welcome. We are extremely keen to hear thoughts from across the House on how we can do that, so we are always listening. I am very happy to put those suggestions to HMRC, and I know that my ministerial colleague will be happy to consider that in his Department as well.

Let me clarify the anomaly and how we are addressing it. The anomaly in the original legislation allows some charities to claim more than others, based only on how they are structured. The Government welcome the supportive and constructive approach adopted by the Church of England, the Roman Catholic Church and other religious groups during the recent consultation on the change.

The Bill also considerably relaxes the rules on where charities can receive donations that are still eligible for the gift aid small donations scheme. Currently, the scheme’s so-called community buildings rules mean that charities can claim top-up payments only on donations received during charitable activities that take place within the community building. However, we know that many local charities, although based in community buildings, carry out most of their activities in the local community, away from the building itself, which means they are unable to benefit fully from the small donations scheme. The Bill therefore relaxes the rules to allow charities based in community buildings to claim top-up payments on donations received outside the building but within the local community area. Colleagues will be delighted to know that, among the many small, local civil society groups, the scouts and guides, the air and sea cadets and other local uniformed groups, in particular, will benefit significantly from this change and will be able to receive the support they deserve for the vital work they carry out in our communities.

Taken together, this package of reforms has the potential to provide a real boost to many charities, particularly the up to 9,000 new charities that apply for recognition by HMRC each year. Based on provisional estimates, these changes are expected to benefit charities by £15 million a year, a significant increase that underlines the Government’s commitment to supporting a greater number of charities and a greater number of donations. The final figures will be certified by the independent Office for Budget Responsibility as part of this year’s autumn statement.

So far I have talked about the changes that will further support our charities. Let me turn briefly to the tax-free childcare aspects of the Bill, which will help us ensure that it is easier for hard-pressed parents to receive the support they need. In the previous Parliament we legislated to introduce tax-free childcare. That will provide up to £2,000 of Government support for childcare costs per child a year, which parents can use with any childcare provider they choose. The idea is that they can simply apply online to open an account for each child, and that for every £8 a parent pays in, we will pay in an additional £2. The system will be trialled later this year and then gradually rolled out to parents from early next year.

During our user testing of the system to date, we have found a couple of minor technical issues that we need to resolve in order to make it as straightforward as possible for parents. The Bill therefore makes two minor technical amendments to ensure that the scheme operates as intended. The first technical change relates to the duty of parents to confirm that they remain eligible to receive tax-free childcare each quarter. The Bill will allow greater flexibility over when parents are asked to make this confirmation. It will mean that once a quarter parents can confirm their eligibility for all their children at the same time, rather than having to do it separately for each child if they registered them at different times.

The second technical change will mean that parents can use a standard online form if they want to query a decision. That will make the process much more straightforward and convenient. We still want to ensure that everyone can ask for a review, so anyone who would struggle to get online will still be able to raise their queries in other ways.

[Mark Durkan (Foyle) (SDLP)]

Can the Minister confirm that what she has said is that credits will be available for each child, and that there will not be a two-child limit, as is proposed for working families tax credits? Can she compare the regime that will be offered under this Bill, which has shown great consideration to parents, with what would be the case for families on working families tax credits?

[Jane Ellison]

I might have to come back to the hon. Gentleman on the latter point about the comparison, because it is not really within the scope of the Bill. I can confirm that we are proposing only two changes—everything else is unchanged from the original legislation, and we are not proposing that there should be any other changes in the Bill.

As I said at the outset, the changes made through the Bill are relatively minor and technical, but they are important, whether they are making it easier for more of our charities to claim extra funding to support the fantastic work they do up and down the land in our constituencies, or whether they are making sure that hard-working parents can access tax-free childcare in the most simple and efficient way possible when it is introduced. The Small Charitable Donations and Childcare Payments Bill delivers against both those objectives, and I therefore commend it to the House.

--- 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.

Small Charitable Donations and Childcare Payments Bill

Jane Ellison Excerpts

Committee Debate: House of Commons
Tuesday 18th October 2016 Public Bill Committees

[The Chair]

Before we begin, I have a few preliminary announcements. Members may, if they wish, remove their jackets; I see some have already done so. I remind Members that no refreshments other than the water provided may be consumed during Committee meetings. Will all Members ensure that their mobile phones, pagers and iPads are off or turned to silent?

Not everyone is familiar with the procedure of a Public Bill Committee, so it might help if I briefly explain how we will proceed. The Committee will first be asked to consider the programme motion on the amendment paper, for which debate is limited to half an hour. We will then proceed to a motion to report any written evidence. We will then begin line-by-line consideration of the Bill.

The selection list for today’s sitting is available in the room. It shows how the clauses, amendments and new clauses have been grouped together for debate. Where a group includes the words “clause stand part”, that means Members should make any remarks they wish to make about the content of the clause during the course of the debate. Clause stand part debates begin with the Chair proposing the question that the clause stand part of the Bill. There is no need for the Minister or any other Member to move that a clause stand part of the Bill. A Member may speak more than once, depending on the subject under discussion.

Ordered,

That—

(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 18 October) meet at 2.00 pm on Tuesday 18 October;

(2) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Tuesday 18 October.—(Jane Ellison.)

Resolved,

That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Jane Ellison.)

Clause 1

Meaning of “eligible charity”

Question proposed, That the clause stand part of the Bill.

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

It is a pleasure to serve under your chairmanship, Mrs Moon. I am grateful to all Members for being here to examine the Bill in detail and to many Members for their participation in the good and constructive debate we had on Second Reading. I welcomed the Opposition’s pledge to support the principles of the Bill, and I hope that today we can submit the Bill to further constructive scrutiny.

I will give a little bit of general background information before specifically addressing clause 1. The Bill makes a number of amendments to the Small Charitable Donations Act 2012. I know there are Members present who served on the Committee responsible for considering that Bill. The changes will ensure that the gift aid small donations scheme operates effectively and flexibly for a greater number of charities and community amateur sports clubs. The Bill also makes minor and technical changes to the tax-free childcare scheme, to improve parents’ experience.

The reforms to the gift aid small donations scheme are intended to simplify and increase access to it, particularly for new and small charities. We heard more about that on Second Reading. That will be achieved by removing a number of eligibility criteria to allow more small and new charities to benefit sooner, which I will discuss in a moment; reforming the community buildings rules to allow more charities to benefit from the important work they carry out in their local communities; simplifying the rule specifying the total top-up payment that charities and CASCs are entitled to claim, which will ensure fairness and parity of treatment between charities that carry out similar activities but are structured in different ways; and future proofing the scheme by allowing contactless donations to be eligible for top-up payments.

Clause 1 substantially simplifies the gift aid small donations scheme by removing two of the existing eligibility requirements, enabling smaller and new charities to access top-up payments much sooner. A number of charities have voiced support for that. Currently, 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. However, the Government are keen to encourage take-up of the scheme, particularly among small and newer charities. Removing the two-year registration requirement will help to achieve that by allowing the up to 9,000 new charities that apply for recognition by Her Majesty’s Revenue and Customs each year to receive top-up payments as soon as that recognition is granted.

During the Government’s review of the small donations scheme, we heard about the difficulties faced by small charities making irregular or intermittent gift aid claims. The Government therefore consulted on relaxing the gift aid history requirement to only one year, rather than two. However, after listening to the views of the sector, we decided to go even further. Clause 1 removes the two-in-four-year gift aid history requirement entirely, which is a significant simplification for charities. The reforms are a good thing and have been widely welcomed by the charity sector.

The Charity Tax Group commented that relaxing the gift aid history requirement

“will hopefully widen access to the scheme, particularly among smaller charities.”

The Charity Finance Group said:

“The Bill is scrapping these rules and this means that more charities will be eligible and will reduce complexity.”

The removal of the two-year rule and the gift aid history requirement is a meaningful and significant simplification of the gift aid small donations scheme. It will make the scheme more accessible to smaller and new charities. I hope that the clause stands part of the Bill.

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

It is a pleasure for me, too, to serve under your chairmanship, Mrs Moon.

As the Minister outlined, clause 1 amends the meaning of “eligible charity” for the purposes of the gift aid small donations scheme, removing the requirement for a charity to have been registered for at least two full tax years before it can access the scheme. The provision also removes the two-in-four-year claims rule, which dictates that a charity must have made a successful gift aid claim in at least two of the previous four tax years with no more than two years’ gap between claims. Those measures will simplify the scheme and allow newly formed charities to access the Government top-up payment.

I am pleased that the Government have taken heed of responses to their consultation on reform to the scheme and scrapped the two-in-four-year claims rule fully. The initial proposal was to replace the rule with the requirement that charities must have made a successful gift aid claim only in the previous tax year. I understand that respondents felt that that could disqualify some charities that are currently eligible for the scheme but did not claim gift aid in the previous tax year for a variety of reasons. In the light of that change, the measures are welcomed by the Opposition and the industry. We are happy to support them. However, I have one concern on which I hope the Minister can provide some reassurance.

The requirement for a charity to have been registered for two years is arguably a way of ensuring that charities are not set up for the purposes of claiming a top-up from the Government illegitimately. The Opposition have tabled a new clause about anti-fraud measures, which we will debate later, so I will not digress too much. However it would be helpful if the Minister would assure me that the Government have carried out an assessment of whether removing the two-year rule poses an increased risk of fraud. Other than that small but important point, the Opposition are happy to support the clause.

[Jane Ellison]

I thank the Opposition Front-Bench spokesperson for those points, for her support and for her specific question. By removing the two-year rule, we want the scheme to be more flexible and generous, but we want to ensure that there are some safeguards.

We debated the balance between flexibility, generosity and safeguarding charities on Second Reading. That is why, as the Government made clear in the original impact assessment, the lack of evidence that a cash donation has been made makes the gift aid small donations scheme vulnerable to fraud. We must continue to protect against that but—as we will come to later—that is one of the reasons why the Government are retaining the gift aid matching requirement, which provides sufficient protection while getting the light-touch regulatory balance right. I will say more about that later. I hope that my response is sufficient and that the clause stands part of the Bill.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Meaning of “small donation”

[Rebecca Long Bailey]

I beg to move amendment 1, in clause 2, page 2, line 1, 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.

--- Later in debate ---

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

It is a pleasure to follow the hon. Member for Amber Valley and other colleagues. It was a great joy to be here in 2012 when the first Bill on small charitable donations appeared. It is lovely to see that contactless donations have made it into this Bill. I am speaking in favour of amendments 1, 2 and 3 because it is important that we expand the methods available.

The recent briefing from the main charitable organisations—the Charity Finance Group, the Institute of Fundraising, the National Council for Voluntary Organisations and the Small Charities Coalition—has made it clear that, although the scheme has been welcome, it is not reaching the number of charities that it could. The briefing said:

“Only one quarter”

—or 21,300—

“of the charities that could have used the scheme”

—it puts that number at 84,000—

“are using it.”

Clearly, we need to do everything we can to support the development of the scheme, particularly with a new generation of donors, and to encourage and to support the new philanthropists who may be giving by text donation or in other forms.

At the Bill Committee last time around, I was intrigued by a great debate initiated by the hon. Member for Foyle (Mark Durkan). It was possible to include euros in the scheme at the time, although it was not possible to include contactless donations. I am glad that the situation regarding contactless payments has been remedied, but I cannot see the sense in saying that, in one of our great abbeys, churches or cultural buildings, the euro, dollar, yen or whatever may be included in the scheme, but not a simple, humble cheque written in sterling. To me, that does not make any sense. I hope that the Minister considers that point.

Another related point is that this scheme works rather well for churches—I presume it also works well for other faith groups—because many small churches are part of larger denominations. Often the denomination, the diocese or whatever is registered in terms of gift aid. My slight fear, and why I think we need to look at how we can enhance and expand the scheme, is about whether we have the same reach for other small charities, because with a small church or perhaps another small faith group, the registering—the formal bit, the gift aid stuff—has already been sorted out at a higher, larger level. I question whether the scheme always has the same reach for some of the smaller charities in other sectors.

I welcome the positive move on contactless donations but hope, in the same spirit, that the Minister can extend the scope of the proposals, as my hon. Friend the Member for Salford and Eccles and other hon. Members have suggested. It would be truly dreadful if we had to wait another four years to come back to the issue and to thank the Government for including these methods in the scheme.

[Jane Ellison]

I thank colleagues for that debate; some points were made by veterans of the previous Bill Committee and I will try to respond to them.

Clause 2 is about amending the meaning of “small charitable donation”. Amendment 1 would extend the gift aid small donations scheme to include donations made by cheque, online or by SMS. Amendments 2 and 3 would extend the scheme to include SMS donations.

The scheme was introduced to address a specific problem. That is at the heart of the debate. It is intended to allow charities and community amateur sports clubs to claim a gift aid-style top-up payment when it is not practical or feasible to collect a gift aid declaration, such as with street collections. It is not simply a lighter-touch alternative to gift aid. I think this is probably at the heart of our debate. The scheme exists to provide a similar outcome in situations where charities cannot realistically obtain a gift aid declaration, but the Government are clear that, if a charity can get a gift aid declaration and claim gift aid, it should do so. There are obvious reasons for that, as colleagues will appreciate. For example, there is no cap on gift aid, whereas there is on this scheme. For that reason, the Small Charitable Donations Act 2012 restricted the scope of the gift aid small donations scheme to small donations in cash—coins and notes. Although I understand entirely the motivation behind the amendments, they are actually contrary to the stated policy intention of the scheme.

[Anna Turley (Redcar) (Lab/Co-op)]

I am struggling to understand why the way in which money is donated matters, given that there is a cap on the amount that can be donated anyway. I do not understand why whether a donation is made in cash or by contactless affects the integrity of the purpose of what we are trying to do.

[Jane Ellison]

We are keen to extend the scheme to cover contactless as well as cash payments, but as those who were here in 2012 will know, the scheme augments what we expect charities to raise through gift aid donations and covers means such as bucket collections that it is just not feasible to do gift aid on. The scheme is capped. We actually want charities to claim as much as possible under gift aid, which is not capped and allows them to form a long-term relationship with donors, as many of us probably know from charities that we give to. From the simple point of view of a charity, a wholesale switch to claiming through this scheme rather than gift aid would move it away from such long-term relationships and limit what it could claim. The scheme is meant to be a complement to gift aid, not an alternative or a lighter-touch version of it, and it would be to many charities’ disbenefit if that were the case.

As I explained on Second Reading, the small donations scheme was never intended to cover methods of donations for which well-established and well-used processes for claiming gift aid already exist, such as donations made by SMS or online. It may help if I explain in a bit more detail the processes for claiming gift aid on electronic donations. As the Minister for Civil Society, the Under-Secretary of State for Culture, Media and Sport, my hon. Friend the Member for Reading East (Mr Wilson), outlined on Second Reading, there is a simple and well-established process that allows charities to solicit gift aid declarations from donors who make SMS donations. I take the point that the hon. Member for Aberdeen North made about the way people respond to that, but it is a pretty straightforward and well-established process none the less. The donor sends a short code word to a six-digit number—for example, “Dog” to 606060—to donate a set amount through their phone bill. A reply is then sent to the donor thanking them for their donation and asking them for their name, house number and postcode and confirmation that they are a UK taxpayer. Once the donor provides that information, the charity can claim gift aid.

I think that is a straightforward process, and I hope that hon. Members would agree that, in circumstances such as that, where a donor provides a charity with a ready means of making direct contact—their mobile phone number—it is feasible for the charity to solicit a gift aid declaration, and indeed many charities regularly do so.

[Kirsty Blackman]

Does the Minister not recognise that people generally see text messages as the same kind of thing as putting money in a bucket? They do not want to hang around or have to give their name and address. The two things are really parallel.

[Jane Ellison]

I have been stressing the point that this scheme was intended to work where it is not practical to establish such a relationship—where someone is passing in the street, is in a rush or whatever, and throws something into a bucket. That is not the same as an SMS donation. Yes, the motivation for an SMS donation might be quite instantaneous—perhaps someone has seen an advert or a documentary, or there is an appeal on the television, or whatever—but in terms of someone’s ability to respond to the gift aid query that follows, the relationship has been established, because they have given their mobile phone number. That is not comparable with a person rushing past someone with a bucket outside the supermarket and throwing something in, where that person is already on their way and cannot be pulled back to fill in a form.

[David Warburton (Somerton and Frome) (Con)]

Given that the Government have not included SMS or internet donations in the Bill, can the Minister tell us what the Government are doing to help the charities that benefit more from those kinds of donations?

--- Later in debate ---

[Jane Ellison]

Of course. If my hon. Friend will let me, I will go through the process for claiming gift aid. I have talked about how that can be done via SMS, but let me talk about how it is done online and how it can be made even easier. Online donations require donors to take the time to enter their name and payment details. The only additional information needed for a gift aid declaration is an address. Donors are then encouraged to tick a simple box to add gift aid at the point of donation. Most of us would agree that in those circumstances it is entirely practical for a charity to ask a donor to complete a gift aid declaration. Many fundraising websites have invested substantial effort in making the process for adding gift aid as simple and straightforward as possible. I am sure it will continue to get even more simple and straightforward; we have all seen the astonishing simplification of the online charitable giving world over the past few years, and we have every reason to think that it will continue to progress.

The Government want to make it even easier for donors to add gift aid to donations made through digital channels; indeed, we recently published consultation draft regulations intended to achieve that. Work is already taking place on gift aid and to make it simpler to make an online donation.

[Nigel Mills]

Has the Minister had a chance to look at the consultation issued by the Treasury in 2013 on ways of improving gift aid donation? At paragraph 1.8 it set out all the reasons why there was such difficulty in getting a gift aid donation on an SMS donation, and it was looking to consult on ways to improve the situation. The Treasury view seems to have hardened since that consultation, which recognised the difficulties, but the fundamental issues that it raised—getting someone to pay to send a second text message and to type in details on their screen while they are out and about—have proven very hard to tackle, and the take-up has been nothing like as high as for other methods of donation.

[Jane Ellison]

I understand my hon. Friend’s point, but I think it relates to how we can make giving under the gift aid scheme even easier; I do not think it is as germane to the issue of how to improve the small charitable donations complement to gift aid. However, I hope what I have to say about contactless will be closer to what he wants to hear. I confess that my familiarity with paragraph 1.8 of the document he mentions is not as great as his own, but I will familiarise myself with it when I get back to the Treasury.

As I said, draft regulations about making gift aid donations through digital channels easier are out for consultation; I am sure Members will have a look at them. As for contactless donations, Members may ask how they differ from other forms of electronic donation. The difference is, quite simply, speed. On Second Reading, the Minister for Civil Society used the example of commuters passing through the ticket barriers of a tube station to demonstrate just how quick contactless technology is—we are all familiar with the Oyster scheme, for example. That speed of transaction means that donations collected using dedicated contactless collection terminals have a lot of the same practical issues as bucket collections. Individuals can donate as they pass by a fundraiser without having to stop and talk—it is almost instantaneous. Fundraisers therefore do not have the opportunity to engage donors and solicit gift aid declarations. That is not the case with other methods of electronic donation, as I have explained. A lot of work is going on, as the Minister for Civil Society said in the debate. Big charities are already showing significant advances in technology: their terminals replicate the simple cash payment as nearly as we can imagine, and we expect to see them in use pretty quickly—they are already being trialled.

As for cheques, I understand that they remain a popular method of payment, particularly among older people, but writing a cheque is not an instant process. The payer needs to write the date, the payee’s name and the payment value, both in words and numerals, and then sign it. Our contention is that, if a donor has the time to stop and write a cheque, it is not unreasonable to suggest that he or she also complete a gift aid declaration. We are all familiar with those small envelopes with the simple form on them; they have only a fraction of the number of items to fill in that a cheque has. Moreover, by writing a cheque the donor is already providing some of their details to the charity, so the additional information needed for a declaration is relatively small. We believe that it is entirely feasible to obtain a gift aid declaration in those circumstances.

[Alison Thewliss (Glasgow Central) (SNP)]

Perhaps I can suggest a scenario that may help the Minister. If an elderly person in their home sees something on television for a charity and they then sign a cheque and put it in the post, with no details about how to contact them on it, how does the charity get back to that person?

[Jane Ellison]

I understand the point, but I am not entirely clear how adding cheques to the scheme would help. I want to stress that, if we make changes that encourage charities to switch to claiming under this scheme, essentially moving away from trying to claim under gift aid, that will severely limit—cap—the amount they can claim and it will also prevent them from forging a relationship with the donor. I accept that there might be circumstances, like that one, in which claiming under gift aid might be more difficult, but the answer is not to include cheques in the scheme. The scheme has always been about trying to replicate the instantaneous cash-collection type of situation.

[Anna Turley]

I am still a bit confused. I appreciate the point about trying to keep people focused on gift aid as the preferred means of donation, but the whole purpose of the Bill—its raison d’être—is to ensure that the scheme

“operates effectively and flexibly for the greatest number of charities and Community Amateur Sports Clubs”,

and we have heard that only a quarter of the charities that could use the scheme are doing so at the moment. Surely, therefore, we should be encouraging more charities to use it, rather than pushing them towards gift aid only. This scheme is much more accessible and more suited to small and locally based charities.

[Jane Ellison]

We want the charities to use both methods, and there is evidence that many do. The scheme was always envisaged as a complement to gift aid, so it is not an either/or.

I totally accept that there is always more to be done in getting charities to claim gift aid. In the Second Reading debate, the Minister for Civil Society talked about the charities day that is coming up and I mentioned that HMRC has an outreach team, which has already delivered more than 600 sessions with charities, talking about how they can make the most of what is on offer. Of course we want to see donations maximised. It is true, as my hon. Friend the Member for Amber Valley said, that we have not yet reached the point we wanted to, but the Bill takes us a good way in the right direction.

We do not want to incentivise a switch to this scheme from gift aid. In any case, there is a matching requirement, so any charity would have to do gift aid to access this scheme. We will perhaps debate that matching requirement later. It is important. We mentioned it briefly in terms of the assurance process.

The Government’s position has always been clear. The scheme was introduced to provide a payment similar to gift aid when charities cannot obtain a gift aid declaration. If a charity can claim gift aid, it should do so, because that is more beneficial to them in the long term, for the reasons I have touched on. Robust processes exist to allow charities to claim gift aid on electronic donations and the Government will shortly introduce legislation to make doing that even easier. I hope, therefore, that Members will not press their amendments to a vote.

[Nigel Mills]

This is just a technical question. Does the definition of contactless include Oyster cards? Donations can be made using an Oyster card, by registering to pay a penny a journey, and unused funds can be donated to various charities around London. Would that fall within the definition of contactless or has it accidently been excluded?

[Jane Ellison]

We believe that the definition of contactless payment is wide enough to cover most likely developments but I am more than happy to look into that further before the next stage of the Bill.

Clause 2 amends, as we have discussed, the meaning of “small charitable donation”, enabling charities to claim top-up payments on donations received using contactless technology. Confirmation comes, as if by magic, for my hon. Friend: can the definition include Oyster cards? Yes it can.

As my hon. Friend knows, because he was one of the people discussing it, the matter was raised during the passage of the 2012 Bill. The gift aid small donations scheme was devised only four years ago, when contactless payment technology was in its relative infancy. At the time, the Government promised to look at the issue again during our three-year review of the scheme, and that is what we have done. I hope that the answer I have just given about Oyster cards shows that we are trying to future proof that aspect of it, as my hon. Friend predicted we would need to do.

The changes made by the clause reflect the fact that there is a clear trend away from cash transactions generally in society. They are declining, while contactless payments are increasing. We accept that, unlike other methods, such as cheques, text messages and online giving, which require donors to stop and actively engage with their chosen charity, contactless donations share many of the same limitations. People can just tap to donate and walk away without stopping to fill in a gift aid declaration. Indeed, in some of the situations in which we find bucket collections, it is almost impossible to stop and give a gift aid declaration. Contactless technology could be extended to augment bucket collections in busy tube stations—I imagine we would be less than popular if charities cause great queues to form in busy tube stations—so it is easy to envisage situations in which this measure would be useful. Accordingly, clause 2 amends the scheme, allowing charities to claim top-up payments on contactless donations of £20 or less.

Although the take-up of contactless technology among charities is relatively low, we have had feedback from the sector and have seen demonstrations suggesting that the cost of the technology is likely to decrease. Therefore, we anticipate that the take-up will increase. It is important, as the new technology develops—it is developing at a fast rate—and as the charity sector innovates, that the legislation continues to reflect the realities of the way charities are fundraising.

Clause 2 will allow charities to claim top-up payments on donations made using credit and debit cards, as well as services such as Apple Pay and Android Pay. The scheme will therefore become more flexible, and the charity sector will have more opportunities to claim top-ups on small donations of £20 or less. Including that measure in the scheme will not impose any significant extra burdens on charities that choose to use the technology. Charities will not be compelled to use contactless payments if they do not wish to do so.

Clause 2 will without doubt future proof the gift aid small donations scheme, as was discussed in 2012. It will ensure that charities continue to benefit in years to come as contactless technology expands. I commend the clause to the Committee.

[Rebecca Long Bailey]

I welcome the Minister’s comments. From the contributions from Members on both sides of the Committee, it is clear that there is an issue in relation to some charities being able to avail themselves of the gift aid scheme for the donations. If the Minister will not accept these amendments, will she consider launching a Government review of the gift aid scheme as a whole within the next six months to address the issues that have been raised today?

[Jane Ellison]

I reiterate the comments I have already made. This is about how we make this scheme, which was always designed to be a complement to gift aid, work. We are separately consulting on some changes to regulations around gift aid, which are designed to make it easier. We are seeing an evolution in the way people are able to donate. The question is whether the amendments are suitable for this scheme, which was always meant to deal with the issue of cash or cash-like transactions—instantaneous donations, bucket collections and donations from people walking by in the street.

I am unpersuaded that a review in six months’ time would add anything to the information we have before us today. It goes without saying that all these things remain under constant review, and this small donations scheme is no exception. It is kept under review in the Treasury—the Treasury keeps charity and tax law under review—and the team there has regular meetings with key stakeholders. The Minister for Civil Society also has extremely regular contact with stakeholders, and I look forward to having contact with charities on charity taxation.

I hope to persuade the hon. Lady that there are already data out there. HMRC publishes a national statistics package every year, which contains an absolute wealth of data, including on the total amount claimed under the gift aid small donations scheme. That is a transparent approach and it allows interested parties to monitor constantly the take-up and the effectiveness of charitable tax reliefs. Of course there is more to do to encourage charities to take up such measures, but the answer lies more in the things I mentioned—the outreach I talked about and the work being done by the Minister for Civil Society—than in some of the changes that have been proposed today.

[Kirsty Blackman]

I appreciate the fact that the Government have consulted on the gift aid small donations scheme and received a variety of responses. Does the Minister not feel that charities and charitable organisations have largely spoken with one voice in calling for the methods under the scheme to be increased, at least a bit? I understand that things are under review, but do the Government not accept that it might be better to listen to people on this matter? I acknowledge that they have listened with regard to some of the other things they are doing.

[Jane Ellison]

Picking up on the hon. Lady’s last point, the Government have listened. There is always a bit of scepticism in politics—I think we have all felt it—on whether things change as a result of consultations, but the consultation in question was really open. We consulted and asked for ideas and, as a result the responses we received, made further liberalisations in the regime. I think that we have listened and that I have given good reasons why we do not want to go in the proposed direction for this scheme because of the nature of what it was designed to do. We are looking to future proof it for contactless payments.

On gift aid more generally, as I said, changes are already being proposed and there is a lot more we can do to increase charitable take-up. I am unpersuaded that the issues being advanced in this debate are the ones that will aid take-up without having unforeseen consequences. Perhaps we will debate those issues later in our discussions of other clauses.

[Susan Elan Jones]

I have a quick question about texts. The Minister spoke about the issue being people engaging with a chosen charity, but I am not sure that it is. For example, one might give to an appeal for a dog that appeared on the television, but the charity might be a wider animal charity. The donor might be drawn to a very specific appeal, not to wider support for the charity. As donors, consumers and even voters are much more fluid in their loyalties, can the Minister not see a case for the support running with the donation, not necessarily the institution it is going to?

[Jane Ellison]

I understand entirely the point being made, but that takes us into issues relating to the motivation and behaviour of people as they give to charity. I think that relates more to the gift aid scheme itself than to the scheme at hand.

--- Later in debate ---

[The Chair]

With this it will be convenient to discuss clause 4 stand part.

[Jane Ellison]

Clause 3 will simplify the small donations scheme, making it easier for charities to operate while ensuring that the scheme delivers its original policy intention. It is about issues relating to community buildings. The clause also makes certain of the community building rules requirements more flexible, to give more charities the opportunity to benefit from the scheme. Clause 4 ensures that, for “connected charities” running charitable activities in community buildings, the rules retain the flexibility to claim top-up payments under the gift aid small donations scheme in the way that best suits their circumstances.

To explain the background, when the gift aid small donations scheme was introduced in 2013, the core principle was that each charity should be entitled to one allowance to top up their gift aid claims in circumstances in which asking a donor to complete a gift aid declaration was really not practical. As we have just discussed, that might be during a bucket collection or church service. The intention was also, most definitely, that the rules should operate as equitably as possible and not give manifestly unfair results when similar charities doing similar things in a similar way just happen to be organised differently. For example, the rules treat “connected charities” as if they are one charity for the purposes of the gift aid small donations scheme. It might help if I explain that, put simply, broadly charities are connected when they are controlled by the same people and have similar objectives. In that way, a charity is entitled to one allowance. For example, the head office and the regional offices could together register as one single charity, or each office or local branch could register separately. I am sure that everyone agrees that that is a fair and necessary rule.

Charities that regularly carry out charitable work in local communities are able to claim community buildings allowances in addition to the one core or main allowance. We want to ensure that, where a charity has a presence and is engaged in valuable charitable activities in our communities, such as in a church or village hall, it may claim a top-up allowance in respect of the local donations. Again, I do not think that anyone would argue that that was unfair. However, we have come to realise that the rules as cast do not always give the outcome that the Government want, or deliver on the intent of the scheme.

Some charities are able to claim many more allowances than others simply by virtue of the way in which they are structured, which is different, even though they might be carrying out similar activities in a similar way to the others. That disparity is acknowledged by the overwhelming majority of charities that can benefit from double allowances, as is the need to rectify the problem to restore the original policy intent.

The changes made by clause 3 will therefore make it clear that charities may claim one allowance, currently set at £8,000, or a community buildings allowance for each community building, with a maximum allowance for each building being £8,000. For example, therefore, a charity with three community buildings will, assuming that it has collected enough donations, be able to claim a top-up on £8,000 in respect of each of those community buildings. It will not, however, be able to collect an additional allowance in respect of any donations collected by its head office. That change will remove the scope for some charities to be able to double-claim allowances.

In making the change, we are adopting the approach that many respondents to the consultation suggested both as a way to ensure equity of treatment, and as a simplification of the scheme. In addition to simplifying the operation of the rules, the clause also makes the community buildings rules much more flexible and generous. At the moment, only donations actually made in the community building while charitable activities are being carried out count towards the community buildings allowance—that is, the amount of donations on which top-up payments may be claimed.

The Government, however, recognise—as I am sure we all do—that many charities carry out charitable activities in a community building, but collect donations to fund that valuable work outside the building itself, such as in collection tins in the local area. One hon. Member at least was taken back to his bob-a-job days with the scouts by our debate, but that is a perfectly good illustration of what we are talking about.

--- Later in debate ---

[Rebecca Long Bailey]

I shall try to keep my comments brief. Clauses 3 and 4 relate to the community buildings rule. Additional top-up payments may be made to those charities that meet and collect small cash donations in a community building. Every charity is entitled to an £8,000 a year allowance. Charities that carry out charitable activities in one or more community buildings can claim additional top-up payments of £8,000 per building subject to certain criteria. As the stewardship comprehensive guide to the scheme explains:

“A community building is a building, or part of a building, to which the public or a section of the public have access at some or all of the time.

So, a building which is kept locked other than at the times that Sunday services are held will qualify, provided that the public have access to it when it is open for public worship. Equally, if a church rents space in a local community centre on a Sunday morning, for the purpose of Christian worship, provided that the public have access to it, the use by the church on a Sunday will mean that the parts of the community centre used exclusively by the church will qualify as a community building.”

The community building is eligible if the charity carries out charitable activities on six or more occasions in the tax year with a group of at least 10 people. Clauses 3 and 4 would make a series of changes to the rules governing community buildings. Clause 3 would allow a charity to claim up to £8,000 from small donations raised anywhere, or up to £8,000 from donations collected from each community building it has. In the latter case, donations would include those made in person in the local authority area in which the community building is situated. Clause 4 affects the rules for connected charities making claims under the scheme where one or more of the charities run charitable activities in a community building. The House of Commons Library briefing paper summarised the change, stating that a group of charities will be entitled to claim

“up to £8,000 small donations made in the local authority area in which each community building is located.”

Alternatively it would be able claim

“up to £8,000 small donations made anywhere in the UK.”

As the first would generally be more beneficial, that would be the default option. The Opposition are very happy to support these changes to the rules governing community buildings. However, the Charity Tax Group has raised one point. It has called for a review of the requirement for there to be at least six events a year in a community building, and that they must be attended by at least 10 people. The group said that the rule is “arbitrary” and “impractical” for many charities, especially those in isolated community buildings or that have peaks in use, for example. Could the Minister use this opportunity to address the Charity Tax Group’s concerns about that rule? Other than that point I have no further comments.

[Jane Ellison]

The issue is really about the balance that we are trying to achieve. It is about trying to ensure that we keep a light touch in terms of what we ask of people claiming under the scheme. We feel that a reasonable balance is struck by the requirement that charities must carry on their charitable activities six times a year and, as the hon. Lady said, to be attended by at least 10 people. Most charities that are regularly active in most communities should be able to meet the requirements. It is not so generous that it is easy to contrive to meet it, and this is the issue. There will be other opportunities, in our debate on the Bill, to talk about striking that balance, but it is important to remember that protecting our precious charities means ensuring that we do not allow the rules to be so easily circumvented that abuse is widespread and that charities and the sector attract criticism for it.

We feel that this is a reasonable balance to strike. It is a light-touch requirement, but it is important to ensure that people do not contrive to work around it.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.

Clause 5

Childcare payments

Question proposed, That the clause stand part of the Bill.

[Jane Ellison]

We now change tack slightly. The second issue addressed by the Bill is childcare payments. Clause 5 will make a number of minor, technical amendments to the Childcare Payments Act 2014, which introduced a new Government scheme to provide tax-free childcare. We had a broader debate about childcare on Second Reading, but I make it clear to the Committee that these are technical amendments to ensure that the scheme works for the benefit of parents who claim financial support for their childcare costs. I will first explain how the tax-free childcare scheme will work and then explain the changes and why they are needed.

Tax-free childcare will support working parents and help with the costs of childcare, enabling them to go out to work or to work more. Parents will be able to set up a childcare account online, deposit money into their account and receive a 20% top-up from the Government to pay their childcare providers. For every £8 a parent pays towards their childcare costs through the account, the Government will provide a top-up of £2. Parents will be able to receive up to £2,000 of support towards childcare costs of up to £10,000 per child per year, up to the age of 12. That support will be doubled for parents of disabled children, who are entitled to up to £4,000 top-up on childcare costs of up to £20,000 per year, up to the age of 17.

Tax-free childcare is digital by default. Parents first apply for and then use their childcare account online, although non-digital routes will of course be provided for those unable to use the default digital form. HMRC will check a parent’s eligibility for tax-free childcare. Parents will then be able to open and pay into a childcare account for each of their children, and the Government will top up the account. Parents can then use their childcare account to pay for a regulated childcare provider.

We are ensuring that childcare accounts are as simple as possible for parents to operate, because we do not want to add to their burdens. Once HMRC has confirmed that a parent is eligible, the parent is entitled to use the scheme for a three-month entitlement period. Each quarter, parents must confirm their circumstances and that they still meet the eligibility requirements, with a quick online declaration for all their children at the same time. Tax-free childcare will be trialled with more than 1,000 parents later this year and gradually rolled out from early next year.

[James Heappey (Wells) (Con)]

I speak as a father. My wife and I take advantage of exactly this scheme. Digitising the process once the employer has put it in place is very helpful, but will the Minister look at digitising the process that the employer follows to get the childcare vouchers registered initially? Most employers are still using the paper mechanism for that, which delays the system somewhat.

[Jane Ellison]

I note my hon. Friend’s point and will ensure that it is looked at. It relates to a different aspect of the childcare provision that the Government provides, but he neatly illustrates the point that we do not want the process for getting support for childcare to be onerous. Tax-child childcare, which is designed to be digital by default, is a move forward.

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

Will the Minister set out what conversations she is having with colleagues in the Department for Education about ensuring adequate places for children? She may be aware that the Public Accounts Committee has raised concerns about the number of childcare places available to parents. It is all good and well to put schemes in place to help parents, but we need to make sure that there are places for children to take up.

[Jane Ellison]

Although not directly germane to the Bill, I am happy to draw the hon. Lady’s remarks to the attention of colleagues in the Department for Education. I suspect that they have already noted the PAC’s reports—I think most of us as Ministers would take great note—but I will of course ensure that they see the point she has made.

To reassure the Committee, HMRC has been user-testing its systems with parents with regard to tax-free childcare. Over 400 parents have been consulted so far. That allows HMRC to improve the services it offers to parents. As a result of that user testing, the first change that the Bill proposes relates to the quarterly reconfirmation process. HMRC has the power to change the length and entitlement period to make parents’ online journey as simple as possible. At the moment, they can change the standard three-month period by up to one month, so entitlement periods of between two and four months can be set. The one-month rule does not allow reconfirmation dates for all of a parent’s children to always be aligned—for example, where a parent applies for a childcare account for an additional child at a later date, or if a new household is formed. If the application is made in the middle month of their existing entitlement period, then alignment for reconfirmation is not possible.

Let me give the Committee an example. Helen is returning to work after maternity leave for her second child, Jenny. She already has a childcare account for her first child, Iain. Her current entitlement period for Iain runs from January to March. She is returning to work on 15 February. Whether the first entitlement period for Jenny is shortened to two months or lengthened to four months, it will not align with that for Iain. Therefore Helen is faced with two online reconfirmation journeys a quarter instead of only one. This amendment to the Childcare Payments Act will allow entitlement periods to be varied to between one month and five months. That will allow HMRC to always give parents such as Helen a single reconfirmation for all her children.

I am taking the second and third changes made to the Childcare Payments Act by this clause together as they are very similar in nature. Both allow HMRC to set out what online forms parents should use when querying HMRC decisions. The first does this for ordinary review requests; the second does it for requests made outside the normal time limits. Parents can query any HMRC decision that adversely affects them, for instance a decision that they are not eligible or a decision to impose a penalty on them. If they remain unhappy after the review they can appeal to an independent tribunal. As I have set out, tax-free childcare is a digital-by-default system. Parents apply to open childcare accounts, and then use those accounts, via online forms set out by HMRC for that purpose.

These amendments give HMRC the power to specify in regulations the online forms to be used by parents when requesting a review of any HMRC decisions. That will allow tax-free childcare to be consistently digital by default across the full service. Regulations under these powers will provide the same safeguards for those unable to interact digitally with HMRC as in-scheme regulations. The safeguards allow those unable to interact digitally to get the same service through other means, which is important. The safeguards are in regulation 22 of the Childcare Payments Regulations 2015.

In conclusion, these are minor, technical amendments to the Childcare Payments Act 2014 that will allow HMRC to improve parents’ experience and the consistency of tax-free childcare. I therefore urge the Committee to accept that the clause should stand part of the Bill.

[Rebecca Long Bailey]

I will keep my comments brief. Clause 5 relates to the Government’s tax-free childcare scheme and makes minor changes to the Childcare Payments Act 2014, which is the legislative basis for the scheme. First, it would allow HMRC to vary the entitlement period in certain cases by two months rather than one, as currently stated in the legislation. The entitlement period refers to the period of time after which parents must confirm that they still meet the eligibility criteria. Typically this must be done quarterly; however, HMRC can vary that in certain cases. Clause 5 changes this variable amount to two months, to

“enable alignment of eligibility periods for additional children when parents already have another child in the scheme.”

We certainly welcome these proposals.

The other change relates to parents who want to apply for a review of a decision made by HMRC that affects them, or who wish to do so outside the usual time limits. Normally that must be done within 30 days of being notified of the decision, although that timeframe can be extended. The clause also allows regulations to be made to specify the form and manner of such applications. I believe that the Government’s intention is to allow such applications to be made digitally, but perhaps the Minister will confirm that.

These are technical changes, and the Opposition do not oppose them. However, we have significant concerns about the tax-free childcare scheme more broadly. I will not say more about that now as we are debating the finer points of the Bill, but we will perhaps revisit that at a later stage.

[Jane Ellison]

I will of course draw the hon. Lady’s wider comments about childcare to the attention of the relevant Ministers.

[Kirsty Blackman]

I feel that as someone who is likely to be using the tax-free childcare scheme for eight or nine years, it is sensible for me to make some comments. The current childcare voucher scheme is quite cumbersome—particularly given the paper methods that are used—and difficult for people to access, so I am pleased that the Government have listened to comments about the need to change how parents can access the scheme and ensure that there is consistency. I am pleased that the Government have piloted online access and listened to parents about making changes to that.

I have a couple of questions. First, I would like to check that the Minister is committed to ensuring that during the scheme’s roll-out, which I understand will happen next year, it is kept under constant review and feedback from parents is looked at. A relatively small group of 400 or 1,000 parents may not cover all the circumstances that we might see once the scheme is completely rolled out, so it would be useful if the Government were to continue in listening mode, and I would very much appreciate that assurance.

My other question relates to the conversations about the scheme with the Scottish Government. At the SNP conference at the weekend, announcements were made about changes that the SNP Government will make to some of the ways in which parents in Scotland can access childcare. What discussions have the UK Government had with the Scottish Government about how this Government’s new tax-free childcare scheme will link into the Scottish Government’s consultations on and proposed changes to the types of childcare that parents can access with their free hours? The Scottish Government are looking at making changes to the flexibility of the free hours that are provided to parents in Scotland and the settings that parents can access with that childcare provision. How will that scheme in Scotland link to the tax-free childcare scheme? Have the UK Government had any conversations yet about that with the Scottish Government? If not, will they commit to doing so?

[Jane Ellison]

I thank the hon. Lady for her comments. Of course we want the tax-free childcare scheme to work for parents. It is designed to make their lives easier, and that must be central to the way we approach the roll-out, which will be gradual, robust and extensively trialled with a variety of parents, to ensure that we replicate as many different circumstances as possible, as she said.

On the hon. Lady’s second point, we always deal with issues that relate to the devolved Administrations as appropriate. I will look at her broader point about how different childcare policies interact, but I do not think that that is directly relevant to the clause. In general terms, I reassure her that we are always assiduous in ensuring that where there are issues of interaction with the devolved Administrations that pertain to Bills, those are sorted out at official level ahead of proceedings such as these.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Extent

Question proposed, That the clause stand part of the Bill.

[Jane Ellison]

Clause 6 provides that the Bill extends to England, Wales, Scotland and Northern Ireland. Both the gift aid small donations scheme and the tax-free childcare scheme apply to the UK as a whole. The Small Charitable Donations Act 2012 included a provision to make the gift aid small donations scheme an excepted matter for the purposes of the Northern Ireland devolution settlement. A legislative consent motion was approved by the Northern Ireland Assembly in November 2012, providing consent for the UK Parliament to amend schedule 2 to the Northern Ireland Act 1998, to make the scheme an excepted matter. No legislative consent motion is required from the Northern Ireland Assembly.

Following a legislative consent debate in 2014, schedule 2 of the Northern Ireland Act 1998 was amended to make the childcare payments scheme an excepted matter for the purposes of the Northern Ireland devolution settlement, so the scheme applies in Northern Ireland in the same way as in the rest of the UK. No legislative consent motion is required from the Northern Ireland Assembly.

The Childcare Payments Act 2014 at section 74 defines the extent as England and Wales, Scotland and Northern Ireland. In the view of the UK Government the provisions of the Bill are not within the legislative competence of the Scottish Parliament or the National Assembly for Wales, so that no legislative consent motions are required.

Question put and agreed to.

Clause 6 ordered to stand part of the Bill.

Clause 7

Commencement

Question proposed, That the clause stand part of the Bill.

[Jane Ellison]

The clause simply provides that the changes to the gift aid small donations scheme will take effect from 6 April 2017. This will allow charities to benefit from the changes at the earliest opportunity. Changes to the tax-free childcare scheme will take effect two months after the Bill receives Royal Assent.

Question put and agreed to.

Clause 7 ordered to stand part of the Bill.

Clause 8

Saving and transitional provision

Question proposed, That the clause stand part of the Bill.

[Jane Ellison]

Clause 8 makes minor technical changes to ensure that a charity that has merged with another before 6 April 2017 does not inadvertently lose an opportunity to claim top-up payments for an earlier tax year as a consequence of the removal of two of the eligibility criteria from that date.

I explained earlier that the Bill makes changes to the eligibility criteria for claiming top-up payments under the small donations scheme. I explained that currently charities must have a gift aid history before they can claim under that scheme; in other words, they must have made a successful claim in two out of the previous four tax years.

Currently, if a new charity has taken over the activities of one or more charities, it may apply to HMRC for the gift aid history of the old charity to be taken into account for the purposes of the small donations scheme. If certain criteria are met—the old and new charities having similar purposes, for example—HMRC will issue a certificate that allows the new charity to claim top-up allowances on the strength of the old charity’s gift aid history. In other words, those rules ensure that when a new charity takes over an old charity it is not automatically denied access to the gift aid small donations scheme because it cannot meet the eligibility requirements.

As Members have heard, the Bill will abolish the two-in-four eligibility criterion and the need for new charities to have a successful gift aid history, so the merger rules will largely become redundant from 6 April next year. However, a charity may have taken over the activities of an old charity before April 2017 and want to take advantage of the merger rules to claim top-up payments under the scheme for an earlier tax year.

The changes made in clause 8 therefore retain the merger rules in their current form for cases in which a charity has taken over the activities of another, or more than one other, before 6 April 2017. The time limits for making an application to HMRC for the merger provisions to apply mean that a merger could take place before 6 April 2017, but either the charity has not made its application before that date or the charity has made its application but it has not yet been accepted by HMRC. The transitional provisions included in the clause will ensure that applications may still be made by a charity, and accepted by HMRC, in respect of mergers before 6 April next year.

The practical implications of the clause are obviously time-limited, because they apply only to mergers pre-April 2017. Nevertheless, without the clause, some charities that merged before that date may unexpectedly lose their entitlement to top-up payments.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9 ordered to stand part of the Bill.

New Clause 1

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.”—(Kirsty Blackman.)

Charities and CASCs must make 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. The new clause would require the Chancellor to assess the impact of abolishing this requirement.

Brought up, and read the First time.

--- Later in debate ---

[Rebecca Long Bailey]

New clauses 1 and 2 both get to the most important issue for the charity sector: the so-called matching requirement. The requirement is that to make a claim under the small donations scheme, a charity must receive a certain amount of gift aid donations in the same tax year. The total of eligible donations on which a charity can claim a top-up payment is restricted to an amount between equal and 10 times the net donations on which gift aid is claimed for the year.

New clause 1 would require the Government to carry out a review of the impact of abolishing the matching requirement within six months of the passing of the Bill, and Labour’s new clause 2 would require the Government to conduct a review into the efficacy of anti-fraud measures designed to regulate the gift aid small donations scheme, with particular reference to the matching requirement. On Second Reading, the Minister said that the requirement 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 best can do that.”—[Official Report, 11 October 2016; Vol. 615, c. 215.]

However, as far as I am aware, she did not produce any evidence that the matching requirement is an effective anti-fraud measure.

As we have heard, the sector says that the requirement is a huge barrier for many small charities. They would like it to be significantly reformed, if not scrapped entirely. For instance, the Churches’ Legislation Advisory Service has suggested extending the requirement to 20:1. Given the Government’s reasons for not proposing any amendments to the requirement, the Opposition think that we should simply have a chance to see the evidence that the requirement works.

We agree, of course, that preventing fraud in the scheme is of paramount importance, but if the measure is simply adding a layer of red tape and is not effective, the Government should review it. The Charity Finance Group has highlighted the fact that only 275 reports of suspicious activity were shared between HMRC and charity regulators in 2015, which represents a rate of one suspicious activity per 500 charities. The group considers that to be a sign that fraud in the scheme is not of a high enough level to justify the effects of the matching requirement. That might well be the case, or it could be that the requirement is an effective caveat to the scheme, but we would only know that if there was a publicly available assessment of the effectiveness of all the measures in the scheme designed to combat fraud and of where the requirement sits within that. I can see no reason why the Government would not want to carry out such an assessment, and I hope that the Minister will accept our new clause 2, or work with us to table a Government amendment on Report that deals with any issues or concerns with our wording.

Finally, I would welcome the Minister’s comments in response to evidence produced by the Charity Finance Group, which welcomes the intention behind our new clause but believes that the Government should focus on increasing punishments for those who commit abuse and providing more opportunity for charities to report on suspicious organisations.

[Jane Ellison]

As the hon. Member for Aberdeen North said, new clause 1 would require the Chancellor to lay before the House an assessment of the impact of removing the gift aid matching requirement within six months of the passing of this Act. New clause 2 would require the Chancellor to publish an assessment of the efficacy of the scheme’s anti-fraud provisions in the same period.

I should start by saying that I welcome the cross-party consensus on the importance of protecting the gift aid small donations scheme, and charitable tax reliefs more generally, from abuse. Indeed, I completely agree with the shadow Minister, the hon. Member for Salford and Eccles, who said on Second Reading:

“We must make sure that any loosening of the rules for access to Government grants or tax reliefs does not provide a further incentive for tax avoiders, albeit a small minority, to set up a charity.”—[Official Report, 11 October 2016; Vol. 615, c. 220.]

She was exactly right to draw our attention to that. The Government also agree with the hon. Member for Bootle (Peter Dowd), who said during his closing remarks on Second Reading that

“it is vital that sufficient safeguards are in place to prevent fraud when Government funding or tax breaks are provided, as in this case, to the charity sector. I think that sentiment would get cross-party support.”––[Official Report, 11 October 2016; Vol. 615, c. 247.]

Indeed, I think that sentiment does have cross-party support.

Let me say a little about fraud in the charity sector, which is relevant to the new clause. None of us likes to contemplate it or talk about it, but sadly it exists. As the Under-Secretary of State for Culture, Media and Sport, my hon. Friend the Member for Reading East (Mr Wilson), said on Second Reading,

“it is an unfortunate fact that unscrupulous individuals seek to exploit charitable status for criminal purposes.”––[Official Report, 11 October 2016; Vol. 615, c. 250.]

It might shock colleagues to hear that the “Annual Fraud Indictor 2016” document produced by Experian, PKF Littlejohn and the University of Portsmouth’s Centre for Counter Fraud Studies estimates that fraud costs the charity sector about £1.9 billion each year. The report also states:

“Fraudsters are fast, inventive, adaptable and willing to quickly exploit new opportunities.”

I am sure hon. Members will therefore agree that it is vital the Government make sure that any initiatives, no matter how well intentioned, have suitable safeguards in place to limit opportunities for abuse, particularly when those initiatives involve spending public money. Indeed, both the hon. Member for Salford and Eccles and the hon. Member for Bootle made exactly that point on Second Reading.

The gift aid matching requirement provides a deterrent for those who would seek to exploit the small donations scheme. A number of hon. Members have raised concerns about the matching requirement; we have heard them again today. A few hon. Members, including the shadow Minister and the hon. Member for Clwyd South, cited a survey by the National Council for Voluntary Organisations and others that suggested that the matching rule acts as a barrier to claiming from the gift aid small donations scheme, with 50% of respondents with an income under £10,000 wanting the matching rule to be removed or reduced. However, it is worth drawing the Committee’s attention to the fact that the same survey also found that only 5% of respondents claimed no gift aid at all, and just 10% felt that they did not claim enough gift aid to make claiming top-up payments worthwhile. Similarly, the Government’s own assessment found 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, which at that time was £5,000. That is interesting evidence that for the vast bulk of charities, the matching rule is not a barrier.

[Anna Turley]

I would put the burden of evidence and proof back on the Minister. This provision has existed for three years now. Does she have any evidence of its benefit or usefulness, either in promoting the use of gift aid or in reducing fraud? If there is none, then given the clear objection from the sector, I really do not see any benefit to it whatever.

[Jane Ellison]

First, I would argue that the matching rule has become more relevant because of the provisions in the Bill to simplify the scheme, for example the end of the two-in-four rule. Secondly, I have been sat here musing as I have listened to Members making their points about the need for me to prove that the rules are necessary. I cannot see how that can be done without first relaxing them and then having to report to the House that there had been large amounts of fraud, public money had been wasted and so on. In other words, the only way to prove it is to prove a negative.

--- Later in debate ---

[Susan Elan Jones]

I am a bit concerned, because when we were here a few years ago the example we cited was the Cup Trust, where there was wide-scale evidence of fraud. We asked whether it was registered for gift aid and the answer was yes. I am concerned about linkage.

I appreciate that we are looking at is a review to do with gift aid six months after the Act comes into law, but in view of the changes made last time when we were told initially it had to be same for same—we ended up with something vastly different and vastly better—will the Minister look at those arguments? Even if the Government’s view is that there has to be some sort of matching, it need not necessarily be set at the current level. That is our big concern.

[Jane Ellison]

Two arguments are being advanced. One is that there should be no matching requirement at all. I am afraid I reject that for the reasons I have given, and I will try to provide more evidence. I understand the point that the hon. Member for Clwyd South makes and I understand that there was movement during the passage of the previous Bill with regard to the ratios. With all of these things it is sometimes about trying to strike a reasonable balance, and I think 1:10 is a reasonable number. It is an easy number from an administrative point of view and it keeps matters much more straightforward for the charities in question. I am glad however that she supports the principle that there should be a matching rule to avoid fraud. I will say a bit more about why we think that is important.

The Government’s own assessment found that 92% of charities claiming gift aid for the tax year 2014-15 claimed on donations of £500 or more. That would have allowed them to claim the maximum small donations top-up allowance, which at the time was £5,000.

It is worth adding that while the 8% of charities claiming on less than £500 of donations would not have benefited from the maximum small donations allowance because of how the matching rule operates, the vast majority would have been entitled to a proportion of that allowance. In fact, 98% of charities claiming gift aid in 2014-15 claimed sufficient amounts to receive a small donations allowance of at least £1,000. I submit to the Committee that with 98% of charities claiming enough to get an allowance of at least £1,000, the rules are not proving a barrier; they are being used and people are managing quite well with them. The figures do not support the assertion that the matching rule is a major barrier. Indeed, I think most people would say that it strikes the balance of reasonableness.

As I have said, the Bill is a simplification measure—it removes the two-year registration requirement and the gift aid history requirement—and leaves only the matching rule as the link between the gift aid small donations scheme and the wider gift aid scheme. The Government have always been clear that a link to gift aid is necessary to allow HMRC to carry out effective compliance activity. I ask hon. Members on both sides of the Committee to support that principle.

[Steve Double (St Austell and Newquay) (Con)]

Does the Minister agree, in response to the concerns raised by the SNP spokesman, that the Government have done an awful lot to simplify the gift aid claiming process for charities? I speak as someone who has been involved in operating gift aid claims for charities for many years. The process now is incredibly simple in its online form, so it is not the burden that perhaps it was in the past.

[Jane Ellison]

I think that is right, and I thank my hon. Friend for that intervention. We are really trying to make this as simple and straightforward as possible, but we need some safeguards. That is why the matching rule is important. I would suggest that requiring HMRC to publish a detailed analysis of compliance activities and the efficacy of anti-abuse rules could be unhelpful. I would hate us inadvertently to provide a roadmap for fraudsters. If there was a requirement to publish that information, it would provide valuable information to that dishonest minority whom the Government are trying to root out.

I would like to reassure the Committee that HMRC works with charity regulators to ensure that charities are properly regulated, the abuse of charities is properly and robustly dealt with, and the tax reliefs claimed are used for charitable purposes. If a charity is suspected of fraud, HMRC will share that information with the Charity Commission, which can consider further action, including removal from the charities register. We have made it easier to report fraud. I hope that it goes without saying that all tax policy remains under constant review, and this scheme is no exception. The Government will of course continue to monitor the effectiveness of the small donations scheme, as they do with all charitable tax relief.

We are very keen to make sure that the good name of all those charities that do wonderful work at international, national and local level is not abused. I will give the Committee just one example. In May this year, three individuals were jailed for a total of 22 years for defrauding HMRC of £5 million in fictitious gift aid claims. I am afraid that there are more examples of large sums of money where that is true. Those people are out there and, as the report I cited earlier pointed out, they are very quick to spot loopholes, however well intentioned.

HMRC publishes a comprehensive national statistics package, to which I alluded earlier, which allows anyone to scrutinise the efficacy of the Government’s support for charities. However, requiring in legislation that the Government publish separate assessments within six months of the passage of the Bill is both arbitrary and unnecessary and, for the reasons I explained, in the case of one of the reviews it is likely to be impossible to prove what it seeks to prove. I therefore urge hon. Members not to press their new clauses to a vote.

[Kirsty Blackman]

Regarding the new clause that I tabled, I have asked the Government to undertake an assessment of the differential impact on charities of different sizes. As I have tried to make clear, both on Second Reading and today, my concern is particularly about the very smallest charities, some of which find that this is a barrier. I am slightly bothered by some of the conversation both today and on Second Reading. Perhaps I am naive, but I do not think that charities generally set out to defraud the Government. That is pretty unusual, and it bothers me how much of this conversation has been slanted towards concern about issues relating to fraud. I appreciate that some people try to commit fraud, but they are a small minority. It is only in relation to the largest amounts of money that we should be particularly concerned about that.

[Jane Ellison]

I want to clarify my remarks, which were principally centred on the fact that there are people out there who are fraudsters and who would seek to exploit loopholes in charity law and in gift aid rules. My comments were not focused so much on charities themselves being defrauders, although there have been one or two examples of this. Predominantly, this is about people exploiting charity law and the reliefs available in the same way that they exploit other loopholes.

[Kirsty Blackman]

I am really grateful for that clarification. I was concerned about the tone of some of the conversation that had been taking place. In relation to the new clause that I have tabled, I am asking the Chancellor of the Exchequer to look at the differential impact on different charities of removing the 10% matching requirement. The Government have made it clear, and it has been suggested by charities, that this could be changed to a different level of matching requirement.

The Government have accepted that this is a relatively arbitrary figure. It is good because it is a nice round number, but that is not necessarily helpful, particularly for the smallest of charities. I would very much appreciate it if the Government would consider accepting new clause 1, which looks at an assessment, and which would help those very small charities which most need this matching requirement to be removed.

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

--- Later in debate ---

[Rebecca Long Bailey]

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

[Jane Ellison]

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

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

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

--- Later in debate ---

[Jane Ellison]

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

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

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

[Rebecca Long Bailey]

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

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

[Jane Ellison]

I am happy to reflect on the points made.

[Rebecca Long Bailey]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Bill to be reported, without amendment.

Small Charitable Donations and Childcare Payments Bill

Jane Ellison Excerpts

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

[Kirsty Blackman (Aberdeen North) (SNP)]

I rise to speak to new clause 4, which stands in my name and that of my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin), although I shall touch on the other new clauses in the group.

New clause 1, which would require HMRC to present an annual report, is reasonable and sensible. I was surprised by the amount of discussion we had in Committee and elsewhere about the possibility of charities using such a scheme for fraudulent purposes. Perhaps I was being naive as that had not crossed my mind a great deal, but apparently people are genuinely concerned about it. If the Government were to take on board Labour’s proposal in new clause 1, it would help to allay the fears of the general public about how charities are acting. I think that only a very small minority of charities are set up to act fraudulently, and the publication of such information would help to ensure that the public are aware of that.

New clause 2, not dissimilarly from a number of measures that we discussed in Committee, deals with the matching requirement. I will come on to that later. I understand why Labour Members have tabled new clause 3, which addresses local organisations that, unfortunately, are caught by some aspects of the way in which the Bill is written. I appreciate that that is an issue, so my colleagues and I will support Labour Members if they press it to a vote.

New clause 4 relates to the matching requirement and the associated threshold. When the first draft of the Bill was introduced in the previous Parliament, the Government supported a different matching requirement from what was eventually approved. During the consideration of that Bill, they also changed the proposals on the matching requirement so that they could edit it in the future, if necessary. That was a result of pressure by charities and organisations that had raised concerns about the arbitrary nature of the level that was chosen for the matching requirement.

I appreciate that the Government have moved on this in the past, but charities are now asking them to move further. As the hon. Member for Salford and Eccles (Rebecca Long Bailey) said, the National Council for Voluntary Organisations, the Charity Finance Group, the Institute of Fundraising and the Small Charities Coalition produced a paper saying that it was vital that the matching requirement was changed or removed. That is why we have brought the proposal before the House. Although we discussed this in Committee, we still feel that the Government need to look at it, while appreciating that they have the power to do so outwith this Bill.

If the Government do not accept the new clause, I would very much appreciate it if they considered the proposal in the future. This is not just about the SNP; our proposal is widely supported, including by the Labour party and by charities across the UK such as the Churches Legislation Advisory Service and the Charity Tax Group. If fears can be allayed about fraud, in particular, it would be reasonable for the Government to take some steps towards change. I do not want to talk for long, but I would appreciate it if the Government would seriously consider taking up this proposal. If they do not agree to the new clause, I hope that they will at least commit to looking at it at some point in the future.

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

I appreciate the spirit in which the new clauses have been spoken to, because we are all here for one purpose, which is to make sure that the Bill works as well as possible for the benefit of as many charities as possible. In responding to this short debate, I will try to offer evidence of the reasons why we cannot, or do not think that it is right to, accept the new clauses.

New clause 1 would require Her Majesty’s Revenue and Customs to publish every year an analysis of the number of penalties imposed; the circumstances giving rise to the imposition of those penalties; an assessment of the number of charities set up with the primary purpose of accessing the small donations scheme; and an assessment of the efficacy of the matching rule in preventing fraud. That relates to the general debate that we have had throughout the Bill’s progress about how we prevent fraud and a minority of people from exploiting the rules.

New clause 2 would require the Chancellor to undertake a review of the matching rule—the same is true, as we have just heard, of new clause 4—in consultation with the charity sector, and to lay a copy of the report by the end of the 2017-18 tax year.

New clause 3 seeks a power to prescribe by regulations an exemption for certain charities from the connected charities provision. The shadow Minister, the hon. Member for Salford and Eccles (Rebecca Long Bailey), is right to say that we debated that proposal in Committee and that I undertook to reflect on it. I will tell her where I have got to shortly. The new clause would require the Treasury to consult the scouts, guides, military cadet groups and other organisations before publishing draft regulations on or before 31 October 2017.

[Mr Jim Cunningham (Coventry South) (Lab)]

On consultation, the Minister has mentioned the scouts and a number of other organisations, but has she considered consulting the Brethren? I am sure that she will recall that, during the last Parliament, the Brethren lost its charity status for a while and there was a large number of debates on it.

[Jane Ellison]

Obviously, I was not in this post at the time, but I recall someone in my constituency drawing my attention to that. As I will come on to say, the consultation process leading up to the Bill was exhaustive, but I also hope to reassure the House that the ongoing consultation with people who have an interest in the issue is significant on the part of HMRC and the departmental team led by the Under-Secretary of State for Culture, Media and Sport, my hon. Friend the Member for Reading East (Mr Wilson), who has responsibility for civil society. It is fair to say that we have a good, constructive and ongoing dialogue with the charity sector and those affected by the provisions, but I acknowledge that there was a slightly different concern in relation to the group mentioned by the hon. Gentleman.

New clause 4 proposes that an assessment be put before the House within six months of the passing of the Bill, and it centres on the gift aid matching requirement and its impact on charities of different sizes. We debated similar amendments in Committee and, although I accepted that they were well intended, I decided that they were unnecessary, so it will probably not surprise the hon. Member for Salford and Eccles and the hon. Member for Aberdeen North (Kirsty Blackman), who spoke on behalf of the SNP, that I will make some of the same points again today, but I hope to build on what I said in Committee.

New clause 1 concerns fraud—a vital issue that we have discussed a number of times and that we take very seriously. I am grateful to Opposition Members for giving us the opportunity to return to this important subject. I welcome, as I did in Committee, the fact that we have a cross-party consensus on protecting the gift aid small donations scheme from fraudulent attack. Opposition Members have raised on several occasions the efficacy of the matching scheme as a deterrent against fraud, and they asked us on Second Reading and in Committee to prove that the matching rule prevents fraud. At each stage, particularly in the debate on the matter in Committee, I drew the House’s attention to a few examples of the shocking abuses of charitable status that have resulted in criminal convictions this year alone. Sadly, I have a reasonably extensive list of quite recent events, but I sense that I do not need to persuade people that fraud does happen in a minority of cases.

I am not sure exactly what further evidence Opposition Members would like me to provide. As I said in Committee, the Government are, in essence, being asked to prove a negative. That is a risky proposition, and I will illustrate why. If the suggestion is that the Government should adopt a wait-and-see approach, remove all the protections and then attempt to close the loopholes when fraudulent attacks take place, I cannot agree that that is the right approach. Opening up the scheme to abuse would be irresponsible, could waste a large amount of public money and—probably most importantly—could cause untold damage to the reputation of our fantastic charity sector. I cannot recommend that course of action to the House.

To be clear, we know that the majority of charities are honest. They are run by dedicated and trustworthy people—the sort of people whom we all know in our constituencies. For the fraudsters, however, nothing is sacred. It is a sad fact that if they are presented with an opportunity, they do not hesitate to exploit it. I gave examples on Second Reading and in Committee of fraudulent activity seen by HMRC, and I am sorry to say that, as I have mentioned, further examples are easily provided. It is not just HMRC and the Treasury that recognise that fraud in the charity sector is a problem; there is wide acknowledgment in the sector that fraud is a costly issue, particularly because of the reputational damage it causes. Some Members may be aware that last month saw Charity Fraud Awareness Week and the launch of a new “Charities against fraud” website, which is a joint initiative between the Charity Commission and the Fraud Advisory Panel to help trustees and volunteers to recognise the risks and take action to prevent fraud in charities.

There is also recognition from charity umbrella bodies that charity fraud can be incredibly damaging. The Charity Finance Group noted in its guide “Countering Fraud”, which was published during Fraud Awareness Week:

“Fraud is a problem that can affect any charity from the very large to the very small. Falling victim to fraud can undermine a charity’s reputation, damage donor confidence and reduce a charity’s ability to help its beneficiaries. On occasion fraud has even led to the forced closure of a charity.”

The Government will not tolerate the abuse of charitable status, for the reasons so eloquently expressed by the Charity Finance Group. The Government will continue to take action to tackle and disrupt the dishonest minority who attempt such fraud.

I am simply not convinced that it would be helpful to publish an annual report detailing the compliance activity that HMRC has undertaken. Indeed, I fear that doing so could have the unintended consequence of assisting the very people whom HMRC is attempting to weed out. HMRC’s operational performance in this and every other respect is, quite rightly, the subject of independent scrutiny by the National Audit Office and Parliament, through the Treasury Committee and the Public Accounts Committee. For that reason, I believe that new clause 1 is unnecessary, and I hope that the hon. Member for Salford and Eccles might consider withdrawing it.

[Kirsty Blackman]

None of us has suggested, at any stage of the proceedings on the Bill, removing all the anti-fraud measures. In fact, we were quite clear and measured in everything that we moved; it was about an assessment. New clause 1 is about responding to our concerns about the actual level of fraud and providing us with the relevant information to enable us to have a much more knowledgeable debate next time the matter comes up—specifically around the level, the percentage and the money that is involved—rather than about removing the measure entirely.

[Jane Ellison]

I understand that point, but my real concern is that the matching rule is the only remaining condition on this particular scheme. Obviously, there are other aspects to wider gift aid, but on the scheme that is the subject of this Bill, we are down to a simple last remaining condition that we believe helps to avoid the scheme being exploited fraudulently. I just do not accept the premise that it is sensible to remove it, to see what happens and then to come back to Parliament and say, “We removed it and, as we thought, it was exploited, so now we have to close that loophole again, but in the meantime we have lost public money and, more importantly, charities have lost their reputations.”

[Susan Elan Jones]

I accept that the Minister may want to keep the matching rule to some extent, but what is so sacred about 1:10?

[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 ---

[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.

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mr Rob Wilson)]

Exactly.

[Jane Ellison]

As the Minister for civil society indicates from a sedentary position, that is absolutely key to the long-term health of many charities.

We fully accept that there are situations in which, with the best will in the world, charity fundraisers cannot stop donors to ask them to complete a gift aid declaration. The gift aid small donations scheme is therefore intended to be used for those small, low-value, spur of the moment donations when contact between donor and charity is fleeting and it is not practical or feasible to solicit a gift aid declaration. Those will primarily be the small cash donations that the small donations scheme was originally designed to cover, but we also accept, following discussions with the sector, that this should also apply to contactless donations. However, the Government are not persuaded that this is the case with other methods of donations such as those made by text, online or by cheque, and I set out reasons for that on Second Reading and in Committee.

--- Later in debate ---

[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.

--- Later in debate ---

[Jane Ellison]

My hon. Friend makes a fair point. Learning, perhaps, from the time when the predecessor Bill was before the House, we have tried to look ahead, consult widely, and future-proof this Bill against forms of payment that are not yet widely used. It is sensible to try to provide a definition of those, rather than leaving the Bill overly vague. We have done a sound job of future-proofing the Bill as much as is reasonably possible.

I fully accept that at some future stage, perhaps some years from now, a new donation method could be developed which would not be covered by the current definition. We cannot know whether that future method might have implications for other parts of the Bill. That is why I am nervous about writing a woolly definition into the Bill. If and when there is a new donation method not foreseen or covered by the Bill, it is important that the Government come before the House with primary legislation, explain their decision and allow Parliament to scrutinise the proposed changes properly. As this Bill has proceeded relatively uncontroversially through the House, it would be hard to argue that the scrutiny of it and the attention that it has allowed us to focus on the scheme and on gift aid more widely have not been a good thing. The Bill demonstrates that we keep matters under review and that, when there is a case for change, we come back before Parliament and engage in a full and proper debate.

Gift aid is hugely beneficial for charities and we want as many charities as possible to benefit from gift aid on the eligible donations that they receive. I have given an undertaking that the Treasury will work with the Minister for civil society to publicise the charities day on 16 December and to look more widely at what we can do to make sure that take-up continues to grow. The small donations scheme is a separate scheme intended to bridge the gap caused by small, fleeting donations. It is not a replacement for or an alternative to gift aid, and if charities can obtain a gift aid declaration, they should do so because it is in their best interests, for reasons that I have touched on.

This Bill will improve the gift aid small donations scheme. Separately the Government are taking action to improve the wider scheme, and I hope that that action will address a number of the concerns raised in the debate by hon. Members. The small donations scheme is not the right vehicle to bring about the changes that have been suggested and that the shadow Minister is seeking. I hope that, having heard these reassurances, she will withdraw her amendments.

Question put, That the amendment be made.

--- Later in debate ---

[Jane Ellison]

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

It is a pleasure to move the Bill’s Third Reading. I thank all right hon. and hon. Members who have taken the time to scrutinise and engage with the Bill so constructively during its passage through this House. It is a short and technical Bill, but it is nevertheless important and it delivers real benefits to our vibrant charity sector and for working families.

I am very pleased that during its passage through this House, the Bill has received broad cross-party support and provided an opportunity for Members on both sides of the House to highlight and champion the wonderful work that local charities do right across the country. On Second Reading, we heard from the hon. Member for Aberdeen North (Kirsty Blackman) about the volunteers in her constituency shovelling snow to keep the pavements clear in winter. My hon. Friend the Member for Rochford and Southend East (James Duddridge) spoke of the work done by a charity in his constituency to help people living with HIV/AIDS. We heard about the work of animal welfare charities, including Waggy Tails Rescue in Mid Dorset and North Poole, and of course I took the opportunity to mention Battersea Dogs and Cats home in my constituency.

It is not just charities that will benefit from the reforms to the gift aid small donations scheme. As several hon. Members pointed out, community amateur sports clubs will also be able to access top-up payments sooner, and we heard examples of local sports clubs in Taunton Deane, Chippenham and Congleton that could benefit. The small donations scheme is a good thing for charities. It allows them to claim a gift aid-style top-up payment of 25p in the pound when it is not practical or feasible to obtain a gift aid declaration from a donor.

The Small Charitable Donations and Childcare Payments Bill will make it even easier for charities to access those top-up payments by removing entirely two of the existing eligibility criteria. The Bill will also simplify and clarify the rules, ensuring that the scheme remains fair and delivers broad parity of treatment for charities structured in different ways. We are reforming the community buildings rules to make the scheme much more generous for local charities that operate out of community buildings. I sought to reassure the shadow Chief Secretary to the Treasury, the hon. Member for Salford and Eccles (Rebecca Long Bailey) about organisations such as scouts and guides by confirming the eligibility in their case. In Committee and again on Report the Opposition Front-Bench team tabled probing amendments on that point and others, and we have had a couple of thorough debates. I reiterate what I said earlier to the House: a scout hut is an eligible community building, so scouts and other uniformed groups will benefit from the changes in the Bill. I hope that all Members here will join me in supporting this enabling reform. We have heard from some Members about their yesteryears in the scouts, and anything that helps scouts to continue with “bob a job” and all their other community fundraising schemes can only be a good thing.

We are also taking action through this Bill to future-proof the gift aid small donations scheme by extending eligibility to contactless donations, so that charities can continue to benefit from the scheme for many years to come. The message that the Bill sends is clear: the Government want a strong, vibrant and resilient charity sector and we will do all we can to support it through the tax system.

In addition to celebrating the work of our charities and sports clubs, the Bill’s passage through the House provoked an important wider debate about the threats that the sector faces, and particularly the importance of a robust regulatory regime to protect the reputation of charities from the dishonest minority who seek to abuse charitable status. It is not necessarily a pleasant issue to have to contemplate, but we have had an important debate. It is good that we are continually pushed to think about how we can protect our charities further. The sector is one of our great assets. It is very important, and we need to do all we can to protect it. I have argued consistently that the Bill strikes the right balance between simplifying the gift aid small donations scheme, making it easier for charities to claim top-up payments and protecting the Exchequer from abuse and charities from reputational damage.

During the Bill’s passage through this House, hon. and right hon. Members have expressed some concern about take-up of the gift aid small donations scheme. As my hon. Friend the Member for Reading East (Mr Wilson), the civil society Minister, told the House on Second Reading, last year 21,300 charities benefited from the small donations scheme, claiming a total of £26 million of Government support. That is a lot of charities, but we accept that it is fewer than forecast. That is why we are simplifying the scheme by removing two of the main eligibility criteria and relaxing the community buildings rules.

I can also tell the House today that once the new rules take effect, HMRC will undertake a broad communications exercise to promote greater awareness of the gift aid small donations scheme. I have also asked what targeted activity can be undertaken. I encourage charity sector bodies and representative groups to work with the Treasury and HMRC to make the reformed scheme a success. I thank them and the officials concerned for the constructive approach that they take and the work that is done to bring this legislation to the House.

Let me say a quick word about the tax-free childcare portion of the Bill, which makes a small number of minor and technical, but important, amendments to the tax-free childcare scheme. That fact has not limited the interest shown in the scheme during the debates, and tax-free childcare continues to enjoy cross-party support. A number of speakers have looked forward to being able to use the scheme for their own children, and such a prospect draws ever closer as the scheme is set to commence next year.

For many, this will be the first time they will be able to access Government support with childcare costs as tax-free childcare will be available to all working parents, regardless of whether they are employed or self-employed. HMRC is about to begin inviting parents to test the new service in trials. As in bringing forward these changes, HMRC will again listen to parents to ensure that it provides the best possible service. The responses made in the Bill, with the minor and technical changes, will help HMRC to ensure that it is quick and easy for working parents to access the support they need with their childcare costs.

The Small Charitable Donations and Childcare Payments Bill is a short and, it is fair to say, uncontroversial, yet important Bill. Its passage through the House has seen thoughtful and constructive challenge that has allowed us to debate a number of important principles, as well as to praise some of the vital charities that are forces for good in our communities and our wider society. The Bill is therefore a positive Bill. We are making life easier for small charities and for working parents, and I commend it to the House.