Small Charitable Donations and Childcare Payments Bill

Debate between Jane Ellison and Rebecca Long Bailey

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

[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.

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[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.

Concentrix

Debate between Jane Ellison and Rebecca Long Bailey

Wednesday 26th October 2016 Commons Chamber

[Jane Ellison]

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

[Rebecca Long Bailey]

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

[Jane Ellison]

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

Small Charitable Donations and Childcare Payments Bill

Debate between Jane Ellison and Rebecca Long Bailey

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

[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 ---

[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.

--- 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.

--- Later in debate ---

[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.

--- 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.

--- 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.

Savings (Government Contributions) Bill

Debate between Jane Ellison and Rebecca Long Bailey

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 17th October 2016 Commons Chamber

[Rebecca Long Bailey]

Indeed. Products need to be explained as simply as possible and there needs to be a commitment from the Government that there will be an adequate advertising campaign to avoid any ambiguity about a product. I shall shortly come on to some of my concerns about the specific products to which the Bill refers.

It is important to examine the fact that those who live in more deprived areas or areas that do not have access to a healthy range of high street financial services are often more financially excluded, having limited access to reasonable lending facilities. This in turn leads many to rely on extremely high interest lending facilities such as payday lenders, which are often the only lending facility available. In many cases, that initiates a cycle of debt and sucks any possible savings surplus out of the monthly pay packet. It cannot be lost on the Minster that for some time now food banks have been reporting surges in the number of people in full-time employment who are accessing them. This in itself may suggest that many people have no spare cash to live on day to day, let alone to save.

These problems bring me to the Opposition’s main problem with the Help to Save scheme that the Bill introduces. We wholeheartedly support moves to encourage saving for a rainy day, but in many cases the idea that those on universal credit and working tax credit have a spare £50 at the end of the month is extremely optimistic. People can barely make ends meet, as the Government found out last year when there was a cross-party backlash after they tried to take thousands of pounds from the recipients of much-needed tax credits. The transition to universal credit will arguably leave people in an even worse position.

[Jane Ellison]

rose—

[Rebecca Long Bailey]

I will pre-empt the Minister’s reply that Help to Save is incredibly similar to the saving gateway scheme that was piloted by the previous Labour Government.

[Jane Ellison]

I do not wish to interrupt the hon. Lady, but it is important to make the point that this is about people saving up to £50. It must not be suggested that everyone must save £50. The figure is up to £50, and that can be a very small amount. I would just like to make that clear.

[Rebecca Long Bailey]

I thank the Minister for clarifying that point, but I think that some people would struggle to save even £5 a month, let alone £50.

Let me go back to the point I was trying to make about Labour’s scheme. We did introduce a similar scheme, but it is important to note that we had not spent the previous six years eroding the disposable income of the people whom it targeted. Help to Save might well look good on paper in terms of helping those on low incomes to save, but I must warn the Minister that, given the long-term effect of Government cuts and wider austerity measures, it will not have the desired impact in many cases. The cuts the Government are making to universal credit alone will cost 2.5 million families up to £1,600 a year, according to the Institute for Fiscal Studies. Where will these families find even £1 a month, or up to £50 a month, to put into this savings scheme?

It appears that the Government are not expecting the measure to put rocket boosters, as it were, under savings by those on low incomes. Their costing for the policy is £70 million in 2020-21. Some 3.5 million people will be eligible for the scheme, so if my and the IFS’s calculations are correct, that works out as a Government bonus of £20 per eligible individual in 2020-21.

I was very excited to read the Government’s impact assessment in the past few hours. However, the Minister should note that it arrived at only 1 pm today, and while I am pleased that it arrived at all, she will appreciate that it is really not acceptable to provide such information at the 11th hour if the Government wish to be transparent and capable of being effectively held to account. None the less, I was interested to see that the Government’s expected take-up rate was 500,000 people in the first two years. I will be grateful if she explains the rationale behind that figure. For example, are specific groups more likely to save than others?

Tax Credits: Concentrix

Debate between Jane Ellison and Rebecca Long Bailey

Wednesday 14th September 2016 Commons Chamber

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

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on Concentrix’s activities in relation to tax credit investigations made on behalf of Her Majesty’s Revenue and Customs.

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

I want to be very clear: the Government recognise the importance of tax credits to individuals and families. We all recognise that it is important for this support to reach the people who really need it. That is why HMRC works hard to check that it is making the correct payments, and to tackle any fraudulent claims. We must acknowledge that error and fraud exist in the system, and should be addressed to ensure taxpayers’ money is spent correctly. As part of this work, HMRC engaged Synnex-Concentrix Ltd in 2014 to help check people’s eligibility. As a result, almost £300 million of incorrect payments have been avoided.

I want to reassure the House on two key points. First, Concentrix has been paid only for making the right decisions; it has not received payment for taking someone’s money away wrongly. Secondly, Concentrix has not been allowed to engage in fishing expeditions or to pick on vulnerable claimants at random. Where there has been evidence to suggest a claim might not be correct, Concentrix has written to claimants to seek further information and confirm their eligibility. I realise—I know this as a constituency Member myself—that it can be stressful for someone to receive such a letter, but it is right that we investigate the full picture, with contributions from claimants themselves, to ensure we make the right payments. That is why both Concentrix and HMRC, where it does the same work, always send a letter and give claimants 30 days to provide information before taking any further action. It is important that people do indeed respond, and that they get in touch if they are struggling to respond to any of the questions.

Despite the best efforts of the staff manning the phones, Concentrix, with the high volume of calls in recent weeks, has not been providing the high levels of customer service that the public expect and which are required in its contract. HMRC has therefore given notice that this contract will not be renewed beyond its end date in May 2017. HMRC is also no longer passing new cases to Concentrix, but is instead working with it as a matter of urgency to improve the service it provides to claimants and to resolve outstanding cases. I can confirm to the House that 150 HMRC staff have been redeployed with immediate effect to help it to resolve any issues people are having with their claims as quickly as possible.

I realise that colleagues on both sides of the House are concerned to get difficult cases resolved and to assist vulnerable constituents appropriately. In addition to the extra resources I have mentioned, I have arranged a drop-in for Members in Room B, 1 Parliament Street between 9.30 and 11 am tomorrow, at which HMRC officials will be available to offer guidance to colleagues, should that be helpful.

[Rebecca Long Bailey]

I thank the Minister for her reply. Many hon. Members on both sides of the House have been contacted, as she has been, by distressed and anxious constituents—often hard-working individuals who have had their tax credits cut unfairly, in many cases pushing them into extreme hardship. Although Labour Members certainly welcome the fact that HMRC has finally taken action by announcing that the Concentrix contract will not be renewed, it is most regrettable that the Government undertook such action only when events were dramatically exposed by the media and, indeed, by my hon. Friend the Member for Sheffield, Heeley (Louise Haigh) and my right hon. Friend the Member for Birkenhead (Frank Field).

It remains the case that Synnex-Concentrix will be carrying out these services for another eight months. There is therefore a risk that, without radical amendments to the contract itself, service failures will continue. Of most concern is the fact that the payment model arguably creates a conflict of interest, as has been noted by the Social Security Advisory Committee. Will the Minister therefore confirm what arrangements she will make urgently to revise the contract to preserve justice for the claimants?

As the Minister stated, I understand that HMRC will redeploy 150 staff so that claimants can get through to advisers and resolve their claims. Will she confirm how the Government will monitor that? Will the Government now commit to an official investigation into Concentrix’s conduct since it was awarded the contract in 2014, so that we can determine how this situation was allowed to arise? Finally, has she given any consideration to the real prospect of bringing this service back in-house?

[Jane Ellison]

I will try to answer those questions, but it is worth commenting that this Government, and indeed their predecessors, inherited a very complicated system. In the long term, the right answer is to replace tax credits, as is our intention, because we were bequeathed an unnecessarily complex system. However, we must make the system work while it is in operation, and that is now the focus of our activities.

On HMRC’s decision about the contract, I want to reassure the House that monitoring has taken place regularly throughout the contract. Indeed, HMRC has worked closely with Concentrix. It is the case that, as has been documented, performance has not been good in recent weeks. That has clearly been noted, and we are now taking action on it.

On the contract going forward, as I mentioned in my response to the urgent question, Concentrix will focus on resolving outstanding claims, not opening new ones. In other words, it will deal with those already open in an orderly and appropriate manner. HMRC is putting in additional resource. In particular, I have asked it to focus on the difficult cases—there have been some high-profile examples in recent days—to ensure that we resolve them as quickly as possible so that all our vulnerable constituents are helped and supported.

That is the key focus as we go forward. There is no need to go into inquiries and so on. We have a contract that is monitored on a regular basis. It will not be renewed when it comes to an end in May next year. The focus for all of us in the coming days and weeks—and for me and for HMRC in particular—is on making sure that the outstanding cases are resolved, especially those of the most vulnerable, and that people have the money to which they are correctly entitled.

Finance Bill

Debate between Jane Ellison and Rebecca Long Bailey

Tuesday 6th September 2016 Commons Chamber

[Jane Ellison]

That point has been made repeatedly. Contributions from those critical of the policy often miss the way in which measures interact. We are trying to create a climate that encourages investment. A number of international studies have indicated that low rates of CGT support equity investment in firms and promote higher-quality investment in start-ups. That is an important source of innovation and growth. The evidence is there. The measures are part of a package that is trying to create a climate that makes our country attractive to invest in and enables domestic investors to invest in company growth. At the same time, as we have stressed and as other measures in the Bill stress, taxes must be fair and must be paid; the hon. Gentleman took part in a good debate last night about some of those measures.

A number of external bodies have expressed support for clause 82—that also goes to the hon. Gentleman’s point. The CBI and the Institute of Economic Affairs have both welcomed the cuts as a means of encouraging entrepreneurship and growth, and, as I have said, there is a body of evidence, not least internationally, to indicate that lower rates support equity investment in firms and promote higher-quality investment in start-ups. Again, I welcome the support of and international perspective given by my hon. Friend the Member for Richmond (Yorks) on this subject.

The changes made by clause 82 are about encouraging investment where we want businesses to expand. As I have said, they are very much a part of a general pro-business agenda, but we have also been clear that we want fair and competitive taxes and that taxes must be paid. We addressed that in a good debate last night, when there was a good degree of cross-party consensus.

The hon. Member for Salford and Eccles (Rebecca Long Bailey) mentioned the geographical distribution of the CGT cut. HMRC publishes national statistics on CGT each year that include a breakdown of its payers by geographical distribution, so there is transparency on that. It is also worth saying that it has been estimated that up to 130,000 individuals will pay lower taxes as a direct result of these changes to CGT, including 50,000 basic rate taxpayers.

The hon. Member for Feltham and Heston (Seema Malhotra) made a typically thoughtful speech, not just on CGT but on her general thoughts on tax reliefs and how we review them, as well as on tax simplification. Again, I felt that she did not perhaps entirely address the interaction between the various measures—they cannot be seen in isolation. The other issues she mentioned are hugely important; for example, the investment in skills, but I did not think she was fair about what the Government have done on that agenda, which has resulted in record levels of apprenticeships. She is right to say that there are other issues such as that one, but these measures are part of a general package and are not the whole picture.

Amendments 175 and 176 were also tabled by the Opposition. In the 2016 Budget we announced the introduction of investors’ relief, benefiting long-term investors in unlisted companies. As has been explained, the amendments seek to end that new relief after a period of six years, with the option of an additional 12-month extension if agreed by both Houses, and ask the Chancellor to lay a review of the operation of the relief before both Houses.

The amendments are unnecessary as the Government keep all tax policy under review in line with normal tax policy making practice. The hon. Member for Aberdeen North (Kirsty Blackman) again, I thought, did not really give credit to the interaction of different measures nor to the wider point that, given that the Government are bringing the measures forward to stimulate economic growth, there is absolutely no incentive for us not to keep a very close eye on them and review them at regular intervals. We do so all the time because we want measures to work—we want our measures to stimulate economic activity, and we do not in any way want them not to work. Indeed, there are a number of measures in the Bill to correct things that have been done in the past, where we feel that an improvement could make something work better.

We feel that there would be limited merit in conducting a review within six years as the first data on the uptake of the relief in its first year of operation will not be available to HMRC until 2021. Amendments 175 and 176 are neither needed nor useful, and we ask the Opposition not to press them to a vote.

New clause 14, again tabled by the Opposition, proposes that the Chancellor publish, within six months of the passing of the Bill, a report of the Treasury’s assessment of the value for money provided by entrepreneurs’ relief. As I have just said, the Government keep all tax policy under review because we want it to do what we have set out as the intention behind it, namely to stimulate economic activity and to make investment in business attractive to people. That review includes entrepreneurs’ relief, as demonstrated by recent action taken to ensure that the relief is effective, well targeted and not open to abuse. We will continue to act, where appropriate.

My predecessor as Financial Secretary has already informed the House of this, but it is worth reiterating, as it is germane to this point, that HMRC officials have commissioned an in-depth survey of taxpayers’ reasons for using entrepreneurs’ relief and its effects on behaviour. We expect the results of that survey, which will be published at some point in 2017, to inform future changes to the relief. I hope that that gives Members some comfort that the relief is being looked at very closely.

In our wider debate, some general points were made about the Budget being tilted towards the south-east of England. A number of points could be made in rebuttal, not least the debate we had last night, which touched on support for the oil and gas sector in Scotland. More generally, some interesting points were made about having a simpler tax system. In the next part of our debate on the Bill, there will be an opportunity to discuss the Office of Tax Simplification, but as this point came up during the current debate it is worth noting that the Bill puts the OTS on a statutory footing. Around half of the OTS’s 400 or so recommendations to date have already been taken on board. I again take on board the point made by my right hon. Friend the Member for Cities of London and Westminster (Mark Field). I feel sure that this a topic that we will return to over the coming months and years.

I thank all Members who have spoken in the debate.

[Rebecca Long Bailey]

I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

Clause 82

Reduction in rate of capital gains tax

Amendment proposed: 174, page 167, line 40, leave out clause 82.—(Rebecca Long Bailey.)

Finance Bill

Debate between Jane Ellison and Rebecca Long Bailey

Monday 5th September 2016 Commons Chamber

[Rebecca Long Bailey]

I am conscious that we are trying to make progress, so I am afraid that I will not take any interventions.

As was said earlier, the Chief Secretary to the Treasury stated during the debate in the Public Bill Committee:

“I am optimistic that we will have the measure in place by 1 April 2017; I am happy to put that on the record.”

He also stated that

“the Government have an open mind as to whether we would accept the amendment on Report, when we hope to have greater clarity. We are confident that by 1 April there should be no reason why the measure is not in place. It is possible that the Government will come forward with our own amendment, but we may well simply accept amendment 5.”––[Official Report, Finance Public Bill Committee, 7 July 2016; c. 146.]

As has been noted, my hon. Friend has indeed tabled such an amendment again, and a second amendment that would allow the Government even more flexibility by providing an extra year. The hon. Member for Christchurch (Mr Chope) made some very important points, and tabled another amendment setting a deadline of the start of the next calendar year. The Minister therefore has a vast array of options—more than the Government did in Committee—so I hope she will not disappoint my hon. Friend and, for that matter, the rest of the House.

A related issue has been raised a number of times with the Minister, but I am not convinced it has been fully addressed, so I would be grateful if she provided further clarification. There is concern that the full benefits of the zero-rating of sanitary products will not be passed on to women, and that some retailers will simply seek larger profit margins. When the rate of VAT was reduced to 5%, the Government said they would monitor whether the benefits were passed on to consumers. I asked the Minister in the Public Bill Committee to provide more information about whether this assessment ever occurred, and if so, what the data showed. Will she provide an answer? My hon. Friend has of course taken the initiative in negotiating directly with some retailers, who have committed to passing on the cut in full, but some smaller retailers may not do the same. What steps will the Government take to ensure that women will benefit from this change, not the pockets of retailers?

Finally, my hon. Friend has also tabled new clause 4, which would require the Chancellor to carry out an assessment of the revenue raised from VAT on women’s sanitary products since 1 January 2001, when the then Labour Government introduced the lower rate of VAT, and to lay before Parliament a report of that assessment within 12 months of the Act coming in to force. It must include an estimate of the total revenue raised since January 2001, and provide information about government policy relating to this revenue. As my hon. Friend has explained, that would address future funding for women’s organisations that benefited from the tampon tax fund set up by the previous Chancellor when pressure was originally brought to bear over the issue. We hope that the Minister can give us some reassurances that those services will receive the secure long-term funding they deserve. Should my hon. Friend divide the House, we will support the new clause.

I urge the Minister to accept at least one of my hon. Friend’s amendments and to bring to a conclusion the campaign against the tampon tax, an outcome that will owe much to the hard and determined work of my hon. Friend, along with the women who have fought for it outside this place. Finally, I place on the record my support for the comments made by SNP Members on maternity products, another area that I urge the Minister to look into.

[Jane Ellison]

I rise in 2016 to resume a debate that I first started with some college friends in 1986; I did not think then that this subject would end up being debated across the Chamber of the House of Commons, but I am glad that we are doing so.

The issue of VAT on women’s sanitary products—the tampon tax—has inspired a great deal of interest, as the speeches in this debate and the interest from our constituents have demonstrated. I will try to explain the Government’s approach and the amendment that we have tabled, and to give the Opposition some comfort on some of the questions they have asked, because there really is not very much between us on this issue and we want to try to make progress.

The Bill as it stands includes provisions to apply a zero rate of VAT to women’s sanitary products, with the intention being to do so as soon as possible. The Government strongly support doing so. We agree with the argument put forward by many hon. Members, including the hon. Member for Dewsbury (Paula Sherriff), that VAT should not be applied at the current 5% reduced rate. We have a shared objective of achieving that goal as quickly as we can, in a manner that is legal and proper—I will come back to that—and that, in our new changed circumstances after the referendum vote, will not have a negative impact on our negotiations over the UK’s exit from the European Union.

Achieving that shared goal in a legal manner before we leave the EU requires a change in EU legislation. That must follow a proposal from the Commission and the unanimous agreement of all member states. We have been actively pursuing that, and have made progress, which some Members have alluded to. The former Prime Minister secured the unanimous agreement of all EU Heads of State and Government that the rules must change at the Council in March. Prior to the referendum we received assurances from the Commission that it would publish a legislative proposal for us at the earliest opportunity and definitely before the end of this year. When the Government introduced the Finance Bill, they expected to be able to apply the zero rate soon after Royal Assent.

The referendum result changes the circumstances—my right hon. Friend the Chief Secretary to the Treasury explained in Committee that the result affected the prospects for rapid implementation. However, I reassure those Members who have tabled amendments and all other hon. Members that we will not rest on the issue. The Government will continue to push for the proposal to be brought forward and agreed to as soon as possible. However, until we leave the EU we need the legislative change to introduce zero-rating; until we have it, fixing a date risks contravening EU law at a time when we are entering critical negotiations with the EU about our future.

Turning to those negotiations, the Prime Minister has been very clear that our rights and obligations remain in place until we leave the European Union. That is important: at this time it would be against the UK’s interests and the interests of all our constituents and of the businesses and universities in our constituencies to go into conflict with our legal obligations. We would risk jeopardising our negotiating position by pre-empting EU legislation on sanitary products. We would also risk the UK’s rights in other areas where we expect other EU member states and the Commission to respect their obligations to us. As the Secretary of State for Exiting the EU said in his statement earlier, we must act in good faith towards our European partners. That is why the Government have proposed an alternative amendment that delivers on the intentions of the hon. Member for Dewsbury but ensures consistency with EU law. I hope that that reassures the House that we will give effect to the provisions in the Bill and commence zero-rating. We are pledging to continue to seek the powers to do so, but to put zero-rating into effect at the first moment when it is consistent with our legal duties.

The shadow Financial Secretary is concerned about the vagueness of that phrase. The Interpretation Act 1978 and schedule 1 to the European Communities Act 1972—I am sure it is everyone’s bedside reading—give exact meaning to the phrase “EU obligation”, which is our obligations under EU law. We are clear about that and we want that commitment in the Bill. That is a major step forward for the hon. Member for Dewsbury and everyone who has campaigned for zero-rating. The amendment commits the Government to commence by 1 April 2017 unless it is unlawful to do so. If on that date it is unlawful, there is a duty on the Government to commence at the first point when we can do so legally. That is the strongest commitment we can give, and one that I am happy to give today. I urge all hon. Members to support it.

On the amendments tabled by the hon. Member for Dewsbury and my hon. Friend the Member for Christchurch (Mr Chope), I have tried to offer them and other hon. Members reassurance that the Government and I want the tampon tax removed as soon as possible. We will keep up our engagement in Europe to secure that, but, equally, hon. Members will understand that the Government must act in accordance with the law. Until we leave the EU, that includes our obligations, as I have said. Those obligations prevent us from removing the tax at the moment. We are trying to change it, but we cannot be certain of the timetable, because such legislation has to be agreed by all 28 member states.

For that reason, we must oppose the amendments—they would set in UK law a fixed latest date for zero-rating—but I stress again that there is no great difference between our intention and that of Opposition Members. We all want the tax ended as soon as possible. I hope that will happen by 1 April 2017 and I am even more hopeful that it will happen by 1 April 2018, but it cannot be guaranteed. The Government’s amendment will ensure that zero-rating starts domestically at the first opportunity consistent with our legal obligations.

I ask Members to look at what we are saying and to realise how close together we are. I also urge them not to be irresponsible in supporting something that will bring us into breach of our obligations. The duty in the amendments proposed by the hon. Member for Dewsbury would impose a requirement on the Government to act illegally. We would be in breach of articles 1 and 110 of the principal VAT directive. Whatever Members’ views are of what the directive requires—we are making progress towards changing it—I would be surprised if members of Her Majesty’s official Opposition, or indeed any Member of the House, thought we could disregard it at such a crucial juncture, when the disregarding of the Commission’s and other nations’ obligations towards us could be significantly against the UK’s national interest. I again quote my right hon. Friend the Secretary of State for Exiting the European Union from earlier today, when he said:

“Until we leave the European Union, we must respect the laws and the obligations”

of membership. I agree with him.

I have every sympathy with the hon. Member for Dewsbury—[Interruption.] I should say that I have every sympathy with the amendments. I think she hinted that, if we do not have the legal change we need by 2018, the Government might have to introduce other measures. Our amendment solves the problem of having to revisit a law we have passed that we know might be illegal by April 2018. I suggest that that is not the most sensible way to legislate. The Government’s amendment achieves the same thing but keeps us within our legal obligations.

The other amendment tabled by the hon. Member for Dewsbury calls for a report on the revenue accrued from VAT on women’s sanitary products since 2001 and the tampon tax fund. I am very happy to reaffirm the Government’s commitment to the fund. As I have said, we are taking all actions available to stop charging this VAT as soon as possible, but until that can be achieved the revenue it raises will be put into the tampon tax fund and directed to women’s health and support charities. So far, the £15 million a year fund has supported 25 charities, including many that are well known to us in this House: The Eve Appeal, SafeLives, Women’s Aid and the Haven. I am sure many of us will be “wearing it pink” next week. We will think then of the wonderful charities—I am very familiar with them from my previous role as Public Health Minister—that are benefiting. Funding has also been allocated to Comic Relief and Rosa—again, a charity I know very well—to disburse over the coming year to a range of grassroots women’s organisations, many of which have been championed so ably by Members across the House, in particular by some Labour Members.