Small Charitable Donations and Childcare Payments Bill

Jim Cunningham Excerpts

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

[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.