Charities (Donations)

Jim Sheridan Excerpts

Tuesday 8th January 2013 Westminster Hall

[John Robertson]

I am sorry, but the hon. Gentleman did not come to me before the debate, so I will not give way.

People want to give, but they simply cannot afford to give as much as they used to. The problem is reaching breaking point. With the recent child benefit reductions and welfare reform at the forefront of hundreds of thousands of people’s minds, charities are being stretched in two directions. For many families, the reduction in income will mean they simply cannot afford to give as much as they used to, leading to reduced budgets for charities. We recently had a debate in the Chamber on food banks, which are classic examples of the strain facing charities during the financial crisis. For example, in the last year, the Trussell Trust almost doubled the number of food banks it oversees from 149 to 293. The BBC recently ran a report about a mother who is a full-time carer to one of her children and is relying on that charity for emergency food parcels. Her words echoed those of many people throughout the country:

“I choose between whether to pay my electricity company...or feed my kids”.

I am sure that the Minister is aware that I often criticise energy companies for their selfishness when raising their prices, and that should be addressed, but we can help to ease the burden in the face of corporate greed by making it easier for charities, such as the Trussell Trust, to secure donations. Similarly, the homelessness charity, Shelter, has seen an 80% increase in demand for homelessness services in the last three years. Additional funding is needed immediately to support its work, and as we enter the coldest part of the year more will be needed.

Elderly people—I have many in my constituency—are also struggling with cuts and rising living costs. In Glasgow, there are now more senior citizens than 16-year-olds. That is a growing trend, and the growing proportion of elderly people will put more strain on our resources. Charities such as the excellent Glasgow Old People’s Welfare Association face rising demands on their resources and rely heavily on increased donations. We must support their work so that they can support elderly people. Demand on such charities will only increase as people start to feel the pinch of years of austerity policies.

Last week, there were reports that a triple dip recession is feared, so 2013 will be a difficult year for many. More and more people will turn to charities for support in their time of need. The Margaret Carey Foundation says:

“Were the charity sector to go into steep decline, the state would have to step in or…just stand by and watch people suffer as a consequence of not having a support system.”

Due to the enormity of Government cuts, I fear it would be the latter. Supporting our charities is an absolute priority, but 20% say they fear they may close this year. We must do something urgently to secure their financing structures.

Unlike many businesses, charities do not have the luxury of reserves to cover income shortfalls, and this year will be a breaking point. The Charities Aid Foundation reports a £300 million deficit in the funds of more than 90% of small and medium-sized charities, and those not facing closure will reduce services.

A key aspect of harnessing donations is to make them more secure and effective, especially with the 20% drop in the last year. It is increasingly difficult to get the other 80%. Cystic Fibrosis Dream Holidays says:

“It is becoming more and more difficult to raise the funds we need. We seem to be doing twice the work to raise half the income!”

The Refugee Youth Project, a charity that provides support to young people who have fled to the UK, relies heavily on donations. Some significant costs on charities are not covered by project budgets, so they desperately need unrestricted funding, primarily from donations, to stay alive. Funding from donations is also used to develop research and to pilot new initiatives with young people, allowing the charity to grow and to increase its effectiveness. Project budgets may be financed by Government grants, but that is no good if the backbone of the charity is not supported by donations.

Many charities also rely on the selling of unwanted goods in shops around the country, but Age UK has noted a 20% drop in doorstep donations of unwanted goods, and I am worried that that will only increase as the world moves to online shopping. Online marketplaces, such as Amazon, make it easier and quicker to sell unwanted items, and that is increasing. The British people are finding that they cannot get such books, CDs and other items in charity shops, and the number of those shops will decline. Comic Relief and Sport Relief are doing an excellent job, but we cannot rely all the time on the money that they are raising. It is easier for them to do so, but the lifeline and money that are needed are not there. The fact that charities now have to consider UK problems as a more pressing priority means that international charities will get less, so there will be a reduction in money to developing countries. Donations from UK residents are dropping, and I suggest that, if that trend continues, donations to charities that distribute in the UK will be given priority by donors. That is shown by the food banks that we discussed earlier.

Some things must be done. I was privileged to chair the Committee that considered the Small Charitable Donations Bill, which aimed to make gift aid simpler. However, in the face of such a crisis, that is simply not enough. Charities employ the most successful fundraisers and they are very good at what they do, but a few steps from Government could make a huge difference to the amount they receive. Over £750 million of gift aid goes unclaimed each year. It is clear that more needs to be done to get that to those who need it most.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

That is a significant amount of money—£750 million unclaimed. Do my hon. Friend or the Minister have any idea where that money is and how it can be accessed by charities, including a number of charities on my own patch? Erskine, which looks after disabled service personnel, would very much welcome access to that kind of money.

[John Robertson]

My hon. Friend is absolutely right. The Erskine hospital fund is greatly supported by many companies, as well as many people in the Glasgow area, but it may find that it does not get the funding that it has had in the past. Perhaps the Minister could answer what happens to that £750 million. Please do not tell me, Minister, that it goes back to the Treasury, when people really need it and we can direct it to some of those charities, rather than giving it to the Chancellor of the Exchequer.

We desperately need to modernise an outdated system. The fact that people fill in a gift aid form each and every time they donate is ridiculous. We could have a central database of gift aid donors, which would allow charities to claim it much more easily. They could check their donor quickly and easily against the system, so that they would not need to rely on people making extra effort each and every time they donate.

We also need an awareness campaign on the gift aid scheme. Many people do not use gift aid, because they simply do not know it exists. An awareness campaign could encourage thousands of people to take that extra step and allow gift aid, which is a great benefit to charities, at no additional cost to the donor. If charities were able to claim gift aid on doorstep donations, we could also mitigate the crisis with our charity shops. Charities may see donations decreasing, but that step from Government could see smaller amounts of donations go further. Following the reduction in donations, Age UK has seen a real-terms reduction in potential income of £750,000. Payroll giving—whereby money is taken out of employees’ pay packets—is also massively underused. Only 2% of employees use it, and yet giving £10 could cost them as little as £5. We need to push that further, and education is needed.

We also need to help charity donations to move into the new millennium. Many small charities cannot benefit from text donations due to high—actual or perceived— set-up costs. However, a key issue is that Apple, for example, does not allow direct donations from applications on smart phones. That is ridiculous. It would be simple to donate. The Government have been looking publicly into the issue since around 2011, so why has nothing been done?

We also need the Government to act on data about donating habits. We know that older people donate more. Why, and how can we harness that? We know that younger people donate less. How can we target them specifically? Are the Government scrutinising that data? We welcome the Innovation in Giving Fund, which will give rise to the use of new technologies targeting that group, but we need to ensure that any innovations are available to smaller charities as well.

As our move towards new technologies may reduce the role of our charity shop culture, we need to look at how we can move it online. It seems that the rise of e-books, for example, is a huge blow to the second-hand book trade. With Amazon taking a huge profit from that technology—while paying no corporation tax, it must be stressed—here is a chance for it to play a role in facilitating a charity book culture online. Could Kindle users donate their old books to a charity marketplace, and could they be resold with donations shared between Amazon and chosen charities? Could the same work be done with music? We owe it to Britain’s charities to look into how such a scheme might work, and how else online shopping could be used to benefit our voluntary organisations. We also need a way for people to identify how their donations are distributed and what percentage actually gets to the people who are being targeted.

There is some concern that a small minority of charities are not reputable. We believe that it is necessary to encourage people to trust the majority of charities that truly help people. Therefore, I would like to see a central portal where we can see how reputable they are and how donations are spent.

Finally, we need to protect our smaller charities. They are often disadvantaged through a lack of expertise in fundraising techniques. We need a system of sharing that knowledge. The Government should work together with charities of all sizes to provide training on fundraising techniques and on the ways in which they can reach the full potential of each donation given. There is also a role for business to play in training, and employees should be encouraged to donate their time to smaller charities to help them to modernise fundraising systems.

We are facing a crisis in the economy and a knock-on crisis in the charity sector. People want to donate, but I do not believe that they know the full potential of what they can do. Charities provide a vital service that we cannot do without, and we need to tackle the problems now before it is too late. I call on the Government to set to work on a comprehensive strategy to save our charities.

--- Later in debate ---

[Miss Smith]

My hon. Friend makes a fascinating point, and I am always very interested to hear his ideas, some of which I have time to debate at length with him in this Chamber. I shall ensure that that idea goes where it can be well considered.

In answer to the point made by the hon. Member for Glasgow North West, the instigator of the debate, I think that the most important way to help smaller charities is to reduce the costs and burdens associated with what the state can provide to charities. That includes what we did in Budget 2011, which made it clear that we intend to make it easier for charities to claim gift aid by introducing a new IT system that will allow charities to claim gift aid online and through, as I mentioned, the gift aid small donations scheme, which will allow charities of all shapes and sizes—we hope that it will be of particular benefit to small local charities—to claim top-up payments equivalent to gift aid on small cash donations of up to £5,000 a year, without the need to have gift aid declarations from donors. That scheme should commence in April of this year, and as I mentioned, it is expected that it will increase the amounts received by charities by about £100 million a year. It is my sincere hope that it will be put to very good use by smaller charities as well as others.

[Jim Sheridan]

Can the Minister confirm whether the figure of £750 million is correct and, if it is correct, how small charities in particular access it?

[Miss Smith]

If the hon. Gentleman will forgive me, I shall have to write to him on the figures because I did not catch the one that he was referring to. I will ensure that he gets the correct Minister’s response to the figure given. He does give me the opportunity to answer a question that was posed earlier: what happens to unclaimed gift aid? I think that both he and the hon. Member for Glasgow North West mentioned a £750 million figure in that regard. If they will forgive me for making a particularly political point at this stage, it is important to note that there is no such thing as a Treasury coffer that just sits there. There is no such thing as the Chancellor wishing to stockpile. There is every such thing as public spending, and if money that is within the public finances is not spent on one thing, it is spent on another. That is a very important point to note. I could also note plenty of other things that past Governments failed to do with public spending, such as control it properly, but I think that what is most helpful in this debate is to come back to the reasons why gift aid may be unclaimed. I want to return to that because I think that it is the constructive area for us to debate. We need to ensure that everyone who has a reasonable business claiming gift aid can do so easily, without costs and burdens.

I want to go on to payroll giving. The Cabinet Office, the Treasury and Her Majesty’s Revenue and Customs will come together to produce a joint consultation document on payroll giving in due course. I hope that that reassures the hon. Member for Glasgow North West on some of his points. We are further supporting giving at the top end by ensuring that people who donate at least 10% of their estate to charity will be eligible for a reduction in their inheritance tax bill from 40% to 36%. That is an incentive to help giving as well.

The hon. Gentleman suggested a number of other ideas to increase giving, and I am grateful for them. We will look at many of them; we will constantly look at this issue. We are making £10 million available to the Innovation in Giving fund. Many of the schemes use technology to further their aims. That fund will be delivered by NESTA—the National Endowment for Science, Technology and the Arts. In England only, I should note, the fund will find and support the growth of the most promising ideas with potential to create a step change in giving. That is something that we can all welcome.

In addition, the Institute of Fundraising, which is one of Government’s strategic partners, provides training and guidance to small organisations on fundraising issues. We are also doing much to support the giving of time and wider community action, such as through the National Citizen Service, which gives young people the chance to do voluntary activities, meet new people and put something back into their communities. We are supporting Join In, to encourage people to volunteer and get involved in local sports clubs.

We are also supporting the sector to find other forms of income. We launched Big Society Capital with up to £600 million. That is the world’s first social investment institution. We have provided support with a wider package of social investment measures. In addition, the Cabinet Office recently published guidance entitled “Making it easier for civil society to work with the state”, which brings together the range of reforms across the Government and the wider public sector. That is aimed at making it easier to set up and run a charity. Part of that is that charities and social enterprises should be able to shape and deliver public services.

We are doing much to support charities to work better, including finding sources of income, through the £30 million Transforming Local Infrastructure fund, to help 74 local support organisations to improve their performance in supporting front-line organisations locally. We have looked at the bureaucracy that frustrates charities and adds to their costs and expenses. We are making good progress in implementing the recommendations on red tape that Lord Hodgson made in 2011 and are undertaking a red tape challenge for the civil society sector.

I should like to make one brief point on the international aspect, which the hon. Gentleman’s comments very interestingly turned to. I am sure that he would welcome, in both the coalition agreement early on and yesterday’s mid-term review, the reinforcement of this country’s aim to give 0.7% of our GDP to development aid. That is an important way to fulfil the aspiration that his speech articulated, and we should not forget it.

The Government recognise that charities face a challenging time in the current economic conditions. We will continue to work with the sector to help them.

Question put and agreed to.