Small Charitable Donations Bill

Jeremy Lefroy Excerpts

Tuesday 4th September 2012 Commons Chamber

[Jeremy Lefroy (Stafford) (Con)]

It is an honour to follow the hon. Member for Clwyd South (Susan Elan Jones). I welcome this Bill. Many hon. Members have looked forward to it for a long time, and I congratulate the Government on introducing it. The importance of improving tax benefits for charities has had cross-party consensus in the House for many years, from the introduction of gift aid in 1990 and its improvement under the previous Government, to this Bill—an honourable thread of legislation.

This Bill is long overdue and will hugely benefit smaller charities in all our constituencies. This morning I was with a group from the Rotary club of Stafford Castle. They do a lot of collecting in the town centre and would benefit from the Bill and, like many volunteers, they give up huge amounts of time to collect donations. Research shows that around 50% of all charitable donations in the UK are made in cash, against 29% by direct debit and the rest by cheque or card. The Bill will make a welcome contribution to those charities, adding 25% to the value of donations.

The Bill is important for two reasons. First, it is important for small charities, as other hon. Members have made clear, but secondly, it is important because it concerns donations from those in lower income groups, who until now have not really been recognised. At the moment, a person must be an income tax payer in order to claim gift aid. With the welcome increase in the income tax threshold for the 20% rate, fewer people will be taxpayers, and hence fewer people will be able to reclaim gift aid. As we search for equality in many areas, it is important to have equality among donors. Those who do not pay income tax should have the same right as those who pay it to have income tax on their donations reclaimed by charities.

Last year, the Centre for Charitable Giving and Philanthropy found in its report, “How generous is the UK?”, that

“donor households towards the lower end of the expenditure distribution tend to give away more of their money to charity”

than those at the upper end. Donors at the lower end of the income scale donate something like 3% of their income, and those at the upper end 1%. At the moment, however, donations to charity made by those on lower incomes do not receive tax back.

Figures from 2009-10 showed that tax was reclaimed through gift aid on 40% of all charitable donations in the UK. There is, however, a huge gap between large and small donations because 73% of larger donations of more than £100, which come mainly from wealthier donors, use gift aid to boost the impact of their donation, while only 20% of donations under £10 claimed gift aid.

This Bill will make a great difference not only to small charities but to the way in which those who give regularly and faithfully view their donations, which they will see recognised by the state through the return of tax relief.

On the meat of the Bill, many hon. Members have spoken of the need to simplify the measures, which I echo. I shall not go into great detail, but I urge hon. Members in Committee to look at the limit of £20, which seems arbitrary. I would be interested to know from the Minister where the limit came from. Why not £25 or £50? It is important that we do not impose unnecessary bureaucracy in the Bill and make people afraid. We do not want people thinking, “I will not claim gift aid because I am not sure whether people have put more than £20 in this bucket and I do not want to break the law.” We should look at that problem. Clearly, we must strike the right balance between simplicity and the prevention of fraud, but I get the impression that we are perhaps erring slightly too much on the side of the prevention of fraud as opposed to the side of the simplicity that all hon. Members want.

Another question is this: how can we encourage those fine national organisations that rely so much on street collections for the bulk of their income? I am thinking of the Royal British Legion and the poppy day appeal. Such organisations might be registered as one charity and do not have community buildings in each borough or district of the country. Is there a way for them to register individually, but not as individual charities, which would involve too much paperwork and bureaucracy? Perhaps such organisations could be entitled to claim up to £5,000 in each collection district. In my area of Stafford borough, the Royal British Legion is immensely proud of the fact that it increases the amount it collects every year, even in a recession. Almost all of what it collects is taken on the streets, in cash. It would be excellent if the Royal British Legion could see the result of that in the tax brought back from donations made in the district.

Finally, on schools, I regret to say that young men between the ages of 16 and 24 are the least likely segment of society to donate to charitable causes—just 31% donated to a charity in 2009-10. All hon. Members have schools in their constituencies that raise a lot of money for charities and it is great thing to encourage young people to do. Charity committees in schools are excellent, and we need to look at how we can encourage them to become eligible for tax relief on small donations, and particularly small cash donations. We should bear in mind that committees are often set up for only one year—one group of people in the lower sixth or fifth form will set up a committee for a specific purpose—so it will be difficult for them to meet the three-year requirement. Perhaps we could examine in Committee how we can encourage schools to benefit from the Bill.

I repeat my congratulations to the Minister and the Government on this excellent Bill, which will doubtless bring a lot of additional, much-needed income to many of our local charities. However, I urge hon. Members not to forget the important fact that it will for the first time recognise the small donations from millions of people throughout the country who put something in the bucket week in, week out.