Small Charitable Donations and Childcare Payments Bill

Kevin Foster Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 11th October 2016 Commons Chamber

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

It is a great pleasure to follow my hon. Friend the Member for North East Hampshire (Mr Jayawardena), who made some excellent points with his customary eloquence. I agree with what he said.

Today’s debate gives me an opportunity to showcase one or two examples of charitable works in Dorset that go particularly well. I will start by mentioning Wimborne rotary club and its yearly Great Santa fun run. Picture, Madam Deputy Speaker, 100 men, women and children running around the local point-to-point course dressed up as Father Christmas the week before Christmas. It sounds fun and of course it is. Gone are the heady days when we aimed to win the competition—merely completing the course is a prize in itself these days. Each year, the run raises several thousand pounds for charities and good causes.

Back in 2013, when the Small Charitable Donations Act came into force, my wife was the parish church treasurer and gift aid administrator, so I know how welcome were the changes that simplified and reduced bureaucracy, as people no longer had to fill out complicated forms to secure gift aid on gifts of £20 or less.

[Kevin Foster (Torbay) (Con)]

My hon. Friend is giving an excellent speech. Does he agree that the key point to remember is that churches are not just places of worship on a Sunday but living, breathing parts of the community? For example, the Living Room initiative at St Mary Magdalene church in my constituency provides tea, coffee and bacon sandwiches for many people who have nowhere else to go.

[Michael Tomlinson]

I could not agree more with my hon. Friend, who makes an excellent point. The Bill will help all groups—not just church groups, but many others—in reclaiming gift aid and slimming down bureaucracy. I warmly welcome the Bill’s aim of further reducing bureaucracy by, for example, getting rid of the two-year rule. That will help new charities enormously and will encourage those thinking of setting up charities to do so.

--- Later in debate ---

[Chris Green]

Absolutely; I agree entirely. I was just thinking about the fantastic work done, often in hazardous conditions, by the Bolton Mountain Rescue Team. It is not just the team itself that raises money. Rotary clubs and other organisations raise a lot money for them, too. Civic society is so important. We ought not always rely on central or local government to do everything for us. We ought to look to civic society for many important things in our daily lives. By celebrating, recognising and communicating that as widely as possible, we provide the opportunity for more people to hear about such work and get involved in these organisations. Recently, I worked a shift in the local Bolton Hospice Macmillan Cancer Support shop. Little did I realise how much time and effort goes into running the small charity shops on our high streets. A fantastic amount of effort and organisation goes into them. The relationship between the volunteers and professionals is also fantastic. Professionals in charities are able to provide continuity and a political edge.

[Kevin Foster]

My hon. Friend talks about how charities are supported by volunteers and professionals working together. The Torbay Community Development Trust supports a number of small charities by providing an administration hub. The Bill will reduce administration, but there will still be a need for this kind of support so that volunteers can get on with the job that they want to do.

[Chris Green]

I agree entirely. That support network is often vital and it really sustains people. People who run charities can think they are in a uniquely difficult place, so it makes it so much easier if they can share ideas and overcome problems. Colleagues have talked about the importance of communication and awareness. Local media have a key role in communicating these changes. I am looking forward to a “Wearing it Pink” event for breast cancer awareness, which will take place on a week on Friday. I have been assured that there will be a pink buffet with pink marshmallows and pink drinks. I just haven’t decided what to wear. If hon. Members have any ideas, please let me know. I am sure the whole House would like to wish them well.

The Bill will allow charities to claim gift aid from contactless payments of £20 or less. This respects the modern way in which people now pay and donate to charities. The scheme is not a replacement for gift aid itself. It is important that gifts are made in person to retain the local link, as required by the scheme. It is important, too, to recognise that £20 is a reasonable amount of money. It is not excessive. I think that for most people £20 will be seen as a reasonable small donation. Keeping in mind the sense of a country that works for everyone, I am more than happy to support the Bill.

[Peter Dowd (Bootle) (Lab)]

May I begin by thanking all hon. Members who have made such valuable contributions to today’s debate? There were 11, alongside interventions, starting with the right hon. Member for Meriden (Dame Caroline Spelman), who talked about her involvement in the setting up of charities and the challenge she had in worshipping at the same time as filling out an envelope. She also talked about the demographic discrimination in relation to cheques and the need for them to be included in these proposals.

The hon. Member for Aberdeen North (Kirsty Blackman) welcomed the measures, but again raised the plurality of methods of giving and the challenges faced by smaller charities, which these proposals do not assist with. The hon. Member for Rochford and Southend East (James Duddridge) managed to get his wife, his mother-in-law and a shovel into his speech, which was an achievement, but importantly he also raised the issues of cheques, SMS messages and people’s ability to get their money into the charitable system through a plurality of methods of giving.

My hon. Friend the Member for Clwyd South (Susan Elan Jones) talked about the importance of supporting charities and the improvements that the Bill may bring and, again, raised the question of cheques as a way forward. The hon. Member for Taunton Deane (Rebecca Pow), who is not in the Chamber, referred to the bucket shaking that she does regularly and applauded those who go out collecting for various charities. She also welcomed the simplification introduced by these proposals.

The hon. Member for Foyle (Mark Durkan) also talked about the flexibility of methods of giving that are not in the Bill. He, too, pushed that issue. The hon. Member for Congleton (Fiona Bruce) also talked about the need for cheques and the ability of older people to participate by giving cheques. The hon. Member for Somerton and Frome (David Warburton), worshiping in his church, welcomed the simplification and the spontaneity in giving, as did the hon. Member for North East Hampshire (Mr Jayawardena), who again had a challenge: could the church get a contactless machine up the aisle at the same time as worshiping? That seems to have been a theme today. The hon. Member for Mid Dorset and North Poole (Michael Tomlinson) talked about the Great Santa fun run raising thousands of pounds and, touching everyone’s heart, the Waggy Tails Rescue dog re-homing charity.

We on the Labour Benches want to thank the charitable sector for all the remarkable work it does for all the communities we represent. Without its valuable role, many services in our communities would simply not exist, so the Opposition are broadly supportive of the content of the Bill. As such, I will keep my closing comments fairly brief. My hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) has already made reference to our concern that loosening the eligibility criteria could increase the risk of fraud. That is important. The fact that a charity would not need to be registered for two years raises the question of whether just about anyone could set up a charity and relatively easily receive £2,000 of taxpayers’ money. That is an important point, so does the Minister have any figures on the amount of fraud that has taken place in the gift aid small donations scheme thus far?

The question of the risk of fraud is extremely important, given the inadequacy of the regulation of charity taxation. We hear about Government funds being mismanaged in elements of the charity sector or about charities being set up merely for the purpose of tax avoidance.

[Kevin Foster]

Does the shadow Minister agree that the call should be to ensure that the appropriate due diligence must be undertaken in new charity registrations, in particular by the Charity Commission, before a charity registration number is issued? I take on board his point about potential fraud via this scheme, but of course any charity being registered can start collecting and we need the public to have that confidence.

[Peter Dowd]

I completely understand that. At the end of the day, the process has to be sufficiently robust to ensure that fraud does not exist.

In that regard, the Charity Commission has identified the estimated levels of abuse, mismanagement, fraud and money laundering in charities today, in a succession of reports entitled “Tackling abuse and mismanagement”. It has identified an increase in the incidence of fraud in relation to charities, and a range of cases in which the commission gave evidence in criminal prosecutions, including against trustees who stole £350,000 from a charity for the relief of the people of Afghanistan, which is shocking. The number of compliance cases brought by the commission almost quadrupled between 2012 and 2013, demonstrating both that the commission needs our support and that we ought not be complacent. In that light, when proposed legislative changes come before the House, it is incumbent on us all to be vigilant. I do not want to rain on the party, but we need to be vigilant.

The problem is not just straightforward crime. There is something worrying in our corporate and tax-avoidance cultures that see charities as a means of making money. In recent years, a prime example is the Cup Trust, about which the Public Accounts Committee produced a damning report in 2013, while there was a judgment in the High Court earlier this year about the same issue. The report summarised:

“Despite its declared charitable aims, it is clear that the Trust was set up as a tax avoidance scheme by people known to be in the business of tax avoidance.”

In the meantime, the Cup Trust has claimed gift aid of £46 million. Regrettably, such tax-avoidance schemes are not isolated. As Professor Alastair Hudson, an expert on these matters, put it:

“There is something about the ‘goodness’ associated with charities, which made people reluctant to investigate or to criticise them.”

It is worth noting that when Northern Rock collapsed in 2007, it came to light for the first time that the bank had created a corporate structure known as “Granite”. This included what has been explained by academic commentators as a discretionary trust involving a small charity in South Shields among its beneficiaries. It appears that the charity was named without its knowledge. Moreover, it appears that the only purpose of this structure was to be “tax-efficient”. The presence of the charity in the structure appears to have been unconnected to working “for the public benefit”. We cannot be complacent about the law on charities, while that sort of activity is considered to be an ordinary part of corporate life. While tax avoidance is legal, it is, as Lord Denning said, “not yet a virtue.”

Of the 164,000 charities in the UK, a large number still do not lodge accounts with the regulators. It is difficult to know whether they are moribund, carrying on work “for the public benefit”, or being used for other less charitable purposes, so to speak. That does charities no good at all—and we need to protect them. Even the highest-profile charities such as Kids Company can be sources of mismanagement and bad financial practice.

Notwithstanding the best intentions of these proposals —namely, the loosening of eligibility criteria—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.

That said, and as I indicated earlier, we are broadly supportive of the measures contained in the Small Charitable Donations and Childcare Payments Bill and we will not oppose it on Second Reading. We will, however, seek to improve the Bill in Committee next week, and I hope that the Government will support us in that.

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

I think you will agree, Mr Speaker, that this has been an entertaining and enlightening debate. Speaking as the Minister with responsibility for civil society, it is always encouraging to hear right hon. and hon. Members share examples of the excellent work they see being done by charities throughout the country.

I would like to thank those who spoke in the debate: my hon. Friends the Members for Bolton West (Chris Green), for North East Hampshire (Mr Jayawardena), for Somerton and Frome (David Warburton) and for Mid Dorset and North Poole (Michael Tomlinson); the hon. Member for Clwyd South (Susan Elan Jones); my hon. Friends the Members for Rochford and Southend East (James Duddridge) and for Congleton (Fiona Bruce); the hon. Member for Foyle (Mark Durkan); my right hon. Friend the Member for Meriden (Dame Caroline Spelman) and my hon. Friend the Member for Taunton Deane (Rebecca Pow). I am also grateful for the Front-Bench contributions. We can be extraordinarily proud of our strong and diverse charity sector. That is why building an environment in which a modern and resilient charity sector can thrive remains a priority for this Government.

The Government already provide significant support to our charity sector. They do so through generous tax reliefs and grants to support good causes, but also through contracts and payments for services. Indeed, the National Council for Voluntary Organisations reports that in 2013-14 the charity sector received £15 billion from Government bodies, with 81% coming from contracts and fees.

The Government have developed the world’s leading social investment market to support charities and social enterprises. We have established Big Society Capital, and are in the process of providing it with £600 million of start-up capital in partnership with the UK’s banks. We have set up the Access Foundation with more than £50 million to allow access to the social investment market, and we have introduced social investment tax relief, which is set to unlock nearly half a billion pounds’ worth of investment over the next five years.

As my hon. Friend the Financial Secretary said in her opening speech, the Government support charities and donors through a substantial package of tax reliefs, worth more than £5 billion last year. Almost £1.8 billion of that comes in the form of business rate relief on charities’ premises. A further £300 million is provided in VAT relief, and £280 million is received from relief on stamp duty land tax. In addition, donors are encouraged to give more to good causes through tax relief on gifts and bequests, and that is worth nearly £1.5 billion every year.

[Kevin Foster]

The Minister mentions the benefit to charities of what are effectively business rate exemptions. Has he had a chance to look into the possible impact on the figure he mentions of the revaluation that has just been announced, which will take effect on 1 April next year?