Small Charitable Donations and Childcare Payments Bill

Lord Shinkwin Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords & Report stage (Hansard): House of Lords
Monday 12th December 2016 Lords Chamber

[Lord Shinkwin (Con)]

My Lords, I also welcome this Bill, particularly its emphasis on flexibility and simplicity, as already outlined by my noble friend the Minister. I will confine my remarks to small charitable donations and, in particular, the ways in which the Bill could benefit smaller charities. I am acutely aware that many of the charities I had the privilege of working for before I entered your Lordships’ House—such as Cancer Research UK, Macmillan Cancer Support and the Royal British Legion—are household names. They have to work hard to raise funds, but perhaps not as hard as smaller, community-based charities. There are more than 163,000 charities in the UK, 92% of the public believe that charities play an essential or very important role in society, and two-thirds of us have donated to a charity in the past year—yet when it comes to donations received to fund the vital work of charities, the picture is mixed.

Overall, charitable donations have remained consistent over the past decade. This is proof that the public continue to be generous in their support for the causes that they care about. Indeed, Britain is ranked as the most generous country in Europe. That is the good news. But this also hides a worrying trend: smaller charities are receiving a lower proportion of charitable donations than they did only six years ago. According to the Lloyds Bank Foundation and NCVO’s Navigating Change report, donation income had fallen across the board for small charities by 10% for those with an income under £100,000. It is therefore very important that we look at ways in which smaller charities in particular might be helped in their fundraising efforts.

The gift aid small donations scheme, brought in by the coalition Government, is undoubtedly very welcome and very well intended—and, as noble Lords have already heard, it is making a difference. Indeed, it is the sort of scheme that should bring significant benefit to smaller charities—those that need it most. It has been widely praised and supported by charities, and I know that the sector commends the Government for introducing it. But the sector also believes that the scheme has yet to fulfil its potential.

The fact is that it is not working as well as it could. In particular, smaller charities are struggling to access the scheme. Only one-quarter—21,300—of the 84,000 charities that the Government originally forecast would be using the scheme by now are actually doing so. I appreciate that this is acknowledged in the intention behind the Bill being debated today, which looks to simplify and extend the scheme. I also know that it is welcomed by the sector, yet it would like the Bill to go further.

Those in the sector tell me that there remain significant obstacles to smaller charities accessing the scheme, particularly around what has already been mentioned as the matching rule or requirement. We know that the matching rule is a serious obstacle to smaller charities accessing the scheme because, when they were surveyed by charity bodies including the Institute of Fundraising, the NCVO, the Small Charities Coalition, the Association of Independent Museums and the Charities Finance Group, 50% of the smallest charities that responded wanted to see the matching requirement reduced or removed. These organisations make up the majority of the charity sector and should be the focus of our support. If the smallest charities are struggling to access the scheme because of this requirement, surely that runs counter to a key and welcome objective of the changes to the scheme that we are debating today: to ensure that the scheme operates as effectively and flexibly for the greatest number of charities.

I understand from the previous stages of the Bill that the main objection to removing the matching rule altogether is that it is considered a safeguard against the potential fraudulent use of the scheme because it provides an audit trail, and because the matching requirement is important to act as an incentive to induce charities that currently are not using gift aid to start doing so. However, removing the matching rule would still mean that charities go through the process of registering with HMRC to use the scheme and to register with gift aid. By this, I mean that a charity would still register with the Government’s Charities Online website; it would still register with the gift aid online registration process; and it would still make claims under the gift aid small donations scheme through the same government website. So why does HMRC appear to believe that such assurances are insufficient to monitor those claiming and to deter potential fraudulent activity? What evidence has been put forward by HMRC of the ineffectiveness of these measures from a fraud perspective? If the scheme is significantly undershooting its proposed targets, could we not be looking pragmatically at how to ensure that the scheme achieves its full potential?

This Friday marks the Government’s Local Charities Day initiative, when we all celebrate the wonderful contribution that smaller local charities play in our communities and our country. The Bill that we are discussing today is very welcome because it is intended partly to benefit those very organisations by simplifying the gift aid small donations scheme. What a wonderful further cause for celebration it would be if the Government could commit to considering new ways to improve this important scheme, including by amending the matching requirement.