Digital Markets, Competition and Consumers Bill

Lord Mendoza Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Lord Mendoza (Con)]

My Lords, it is a great joy to follow the outstanding words of the noble Baroness, Lady Kidron. I should declare that I am the chairman of Historic England and a member of the board of the Ashmolean Museum. Like everybody else, I support much of the intention of the Bill, but I shall confine myself narrowly to the topic that has been raised multiple times on the charities point by my noble friend Lord Vaizey.

I take my noble friend Lord Kamall’s point that perhaps not all charities operate their processes with the most benign of intentions, but I think we have to be careful about placing additional regulation on charities, which are already regulated by the Charity Commission. I want to talk about this in special relation to the heritage sector, because so many organisations in that sector use the annual subscription method to fund memberships—it is incredibly important. Looking at Clause 252, the noble and learned Lord, Lord Etherton, read out some of the definitions of what a subscription contract is, but it is clear that when charities sell such subscriptions and memberships they are providing goods and services. Sometimes it is free entry to places, sometimes it is parking, sometimes it is digital content or magazines, but they are supplying stuff.

They also look not unlike things that could be defined as subscription traps: they involve auto-renewal and people having to make a conscious effort to cancel, but they are an important part of the operating models of charities. For example—if I can add some colour— the noble Baroness, Lady Bennett of Manor Castle, mentioned her favourite charity, English Heritage. The English Heritage Trust was established just in 2016 under its new name and in its new incarnation as a subsidiary of Historic England. It is a charity, and it holds the licence to care for and look after the national heritage collection—our stuff, if you like: 400 sites, dozens of museums, 1 million objects, from Dover Castle up to Hadrian’s Wall and including Stonehenge. I looked at the accounts, and its revenue is £130 million a year. Of that, £48 million—almost 40%—is membership income. If you fiddle with that, it could be very significant. If it makes a surplus, it all goes back into the restoration, maintenance and improvement of the national heritage collection.

Many noble Lords have raised the issue of gift aid, and there is a threat to that. As we have heard, HMRC treats these kinds of subscriptions as donations. However, if there is a repayment option in a donation, it no longer qualifies for gift aid. Again, that is a really big number. For example, the National Trust’s revenue last year was £682 million, which is very significant. Of that, £276 million—again, about 40%—was memberships and, of that, £47 million related to gift aid, so it is a non- trivial part of the operating models of a lot of these heritage organisations. As my noble friend Lord Vaizey said, that applies to all sorts of others, such as Kew Gardens or my own museum, the Ashmolean.

I hope that we can find a way in Committee, subject to my noble friend Lord Kamall’s point, of either working on the definition of a subscription contract or, as the noble and learned Lord, Lord Etherton, said, adding charities to the “Excluded contracts” provisions in Clause 253 and Schedule 20. I hope my noble friend the Minister finds a way of coming back to us with an answer on this question, because it is so important to the operating model of so many heritage organisations, museums and theatres up and down the country. It is a non-trivial point.

Digital Markets, Competition and Consumers Bill

Lord Mendoza Excerpts

Committee stage
Monday 5th February 2024 Grand Committee

Moved by

[Lord Mendoza]

149: Schedule 20, page 369, line 38, at end insert—
“14 Membership subscriptions which qualify as gifts to charity in accordance with the provisions of the Income Tax Act 2007, Part 8, Chapter 2 (gift aid).”Member's explanatory statement
This amendment would list charity membership subscriptions which qualify for Gift Aid as an excluded contract pursuant to Clause 253 and Schedule 20 (Excluded Contracts) of the Bill.

[Lord Mendoza (Con)]

My Lords, in moving Amendment 149, I declare my interest as the chairman of Historic England, which also has oversight of English Heritage, which looks after our national heritage collection.

The subject of this amendment was raised by many noble Lords—probably at least a dozen—at Second Reading: the treatment of automatically-renewing membership subscriptions for charities. These subscriptions are vital and a brilliant example of how commercial many of our charities, both large and small, have become in the way they augment their operating models with a regular membership subscription, which can be paid by direct debit monthly or annually. I know that we have all received all sorts of advice from large charities such as the National Trust, Kew, Tate, English Heritage, the Royal Horticultural Society, the RSPB, the Royal British Legion and so on. We can tell how important it is to them.

These membership subscriptions are treated as donations, but they come with membership benefits such as magazines, newsletters and free parking. I have just looked at the Natural History Museum, where you get free or discounted entry into its silent discos. All sorts of things are provided but, as noble Lords know, under the Income Tax Act the subscriptions are treated by HMRC as donations. They are eligible for gift aid—this is the key thing—provided that the payment is not subject to any condition as to repayment. That is what you would expect; if you give £100 to a charity, you do not expect to be able to ask for it back again next month. If it is a donation it is clearly not refundable, but noble Lords can see that there is a lack of clarity here.

I mentioned some of the numbers at Second Reading because they are significant. The National Trust is getting on for somewhere between 5.5 million and 6 million members—I cannot get a precise number. That is not that far short of the membership of the TUC, to give noble Lords some idea of the scale and extraordinary success of that organisation. Its membership subscription income is nearly £230 million, of which £47 million relates to the gift aid rebate. Similarly, English Heritage, the organisation that looks after the national heritage collection, as I said, has an income of £130 million, and membership subscription is its largest source of revenue at £48 million. Other organisations are similar. Tate, which I have just looked up, has £16 million in membership subscription income. The RSPB has £46 million in subscription income.

This amendment tries to place this kind of specific membership subscription income, which is narrowly defined as

“gifts to charity in accordance with … the Income Tax Act”,

to try to get them included in Schedule 20, on page 369 of the Bill ,as a category of excluded contract. I know that my noble friend’s department has done a lot of work on this with Treasury and HMRC officials, so I look forward to hearing whether there is any further update on how they might deal with this situation. The Minister has also expressed his assurance that there is certainly no desire in the Bill to somehow limit the application of gift aid to these charitable subscriptions, so it will be important to do this. The proposed amendment is simple and clear, but I will wait to hear what he says.

We must remember that these charities operate mostly on a break-even budget and their budgets are very hard to balance. They try to balance it across their operating model, looking at not just these membership subscriptions but admissions, fundraising and commercial ventures. They would find it very hard to withstand a sudden withdrawal of the ability to claim back these significant amounts of contribution through the gift aid process, so I look forward to some reassurance from my noble friend.

--- Later in debate ---

[Lord Offord of Garvel (Con)]

I thank noble Lords for their contributions. I can confirm that we will come back before Report. The objective is to get a solution for this issue and to have a satisfactory outcome, so that we avoid carnage in the other place.

[Lord Mendoza (Con)]

My Lords, I am so grateful for the support of noble Lords. The range of experience and advice we have had in this Room is admirable. It is incredible and so helpful that we have the chairman of the Fundraising Regulator right here. I am grateful for the comments of the noble Lord, Lord Harris, and the interjection of my noble friend Lord Vaizey. I had the same thought.

[Lord Vaizey of Didcot (Con)]

On a point of information, every time I make a speech where I am sycophantic about noble Lords, I end up in Private Eye. I hope my noble friend is aware of that.

[Lord Mendoza (Con)]

I hope that results. I am grateful to the noble Baroness, Lady Young, for her intervention. Of course, she is right: people contribute to charities because they care deeply about the charity’s mission. Although, as she said, there is no transactional element, if you go on the website of the Natural History Museum or the Tate and to “Buy a membership”, they will clearly list all the benefits that you get, so there is an element of transaction to it. I wanted to bring that out, so that it is clear to the Treasury and HMRC when they concoct whatever regulations they are concocting that we make sure that gift aid is still claimable and that these membership subscriptions still count as a donation to support the charity’s mission. It may be that some charities describe their membership differently from others. I have not checked the Woodland Trust’s website; it may well be completely different from that of a museum or the National Trust.

I am grateful for the support of my noble friend Lady Harding, who could not have been clearer in her request to my noble friend the Minister. I am also grateful to the noble Lord, Lord Clement-Jones, for supporting this amendment and contributing his remarks.

To add to the last point that was made about the simplicity of our amendment, we are trying to exclude charities not completely but just from this narrow point of gift aid, which was carefully defined at great length in the Income Tax Act 2007. We are trying to exclude just this one thing. Perhaps my noble friend the Minister will be able to go back to HMRC or the Treasury to see whether they can find some way of supporting this amendment. It seems clear and simple, without introducing a whole set of other complexities.

I am grateful to my noble friend the Minister for giving me the opportunity to talk with the Secretary of State today. I certainly received reassurances from her and, as I say, that should bring some comfort to the Room. I am grateful to noble Lords for this debate. I beg leave to withdraw the amendment.

Amendment 149 withdrawn.

Digital Markets, Competition and Consumers Bill

Lord Mendoza Excerpts

Report stage
Wednesday 13th March 2024 Lords Chamber

Finally, I am sure noble Lords will be pleased to hear that, further to assurances provided in Committee, the Government have decided that the subscription contract measures will come into force no earlier than spring 2026. This will guarantee that businesses have sufficient time to adapt their operations, while ensuring that consumers benefit from the protections in a reasonable timeframe. I hope these amendments demonstrate that the Government have listened to concerns expressed across the House and in Committee, and that noble Lords agree that they will provide businesses the assurance they have been seeking. I beg to move.

[Lord Mendoza (Con)]

My Lords, Amendment 126 is in my name. I declare my interests as set out in the register, particularly as chairman of Historic England, which also has oversight of English Heritage. I want to talk about the very narrow point the amendment tries to cover, which is the specific treatment of contracts relating to charity membership subscriptions. I am sure that many in this House have purses and wallets bulging with membership cards for museums and wonderful organisations such as the National Trust, English Heritage, the Woodland Trust, and so on, and this issue is causing great concern across the charity sector. I am sure many noble Lords’ inboxes have been filled with briefings and pleas from charities. The point is a very narrow one: according to the Income Tax Act 2007, if a subscription is refundable, it will become no longer eligible for gift aid, which is a very large number for charities up and down the land.

I have been grateful over the last weeks for the assiduous attention of my noble friend the Minister and the Bill team. I am also grateful to organisations we have probably all heard from, such as the NCVO, the National Trust and English Heritage, for helping with the background on this. I was even more impressed, as my noble friend the Minister has set out, that the issue was directly referred to with its own lines in the Budget, and that the Treasury has committed to amending gift aid legislation by SI before this part of the Bill comes into force.

As the Minister has said previously, there is no intention to change the status quo on the eligibility of gift aid on these membership subscription contracts. However, I will make three points. No specific changes are being proposed for the provisions in the Bill so there will be a contradiction, before it is sorted out, between this primary legislation and the Income Tax Act 2007, which creates uncertainty. I know it creates uncertainty because we talk to charities, and they need security and confidence and the ability to plan and budget their operations. I know that the noble Lord, Lord Clement-Jones, has put a lot of work into this and I look forward to hearing him present his mechanism for the timing of how this might be helped.

In a way, despite the lines in the Budget, the Government’s amendments have conferred only a general power on the Treasury to make secondary legislation: there is no statutory commitment to get around to actually doing so before these measures come into force. This raises a risk that the provisions of the Bill could be enacted by this or a future Parliament without the issue actually being resolved. The Government’s amendments do not address the concerns raised regarding the application of consumer protections to charity memberships, which are treated as donations for tax purposes. We are certainly not asking for charities to be exempted from consumer protections, and I agree with my noble friend the Minister that many parts of a charity’s operations should not be—its shops, restaurants, cafés, and so on.

However, it cannot be right that we apply a cooling-off period to a form of charitable donation in the same way that you would to a TV subscription service. If I put £5 in the tin for the Royal British Legion, I do not expect to be able to claim it back the following week, saying “I made a mistake”. Membership subscriptions are accepted as donations under the Income Tax Act, and have been for a long time; donations are not refundable, so how can you have a cooling-off period? You have circular contradiction going on. Naturally, I prefer that these contracts might be protected by the amendment as I have set it out; it simply puts this very specific narrow bit of a charity’s operation—membership subscription contracts—into Schedule 21. I am very grateful to the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones of Whitchurch, for helping get these points across.

Charities are concerned, and perhaps while the Government are in a giving vein during the Third Reading of the Bill, they might reconsider putting in this very small amendment, which would provide huge relief for charities, and the certainty and reassurance they need, because they do such incredible work right across the country, and they are deeply concerned.

[Lord Lucas (Con)]

My Lords, I will speak briefly to Amendment 127 in this group. I do not hold, in any particular way, to my choice of wording, but I am fairly sure the Government’s choice of wording is not right. We all receive a huge quantity of emails; we do not want multiplicity—we want effectiveness—and to demand that these emails come separately is a mistake. I hope the Government will see this as an opportunity to rationalise and reduce the size of my inbox and everybody else’s inbox. If we allow more than one thing to be in the message, then the prominent message must be the statutory one. To have it in the subject line and in the first sentence, so that it comes up in the summary when you look at what the email is about, would be a better way of putting it than my amendment, but I am sure the Government can improve on that.