Digital Markets, Competition and Consumers Bill

Lord Vaizey of Didcot Excerpts

Committee stage
Monday 5th February 2024 Grand Committee

[Lord Harris of Haringey (Lab)]

My Lords, first, I should apologise to the Committee that this is my first involvement in the Bill. Secondly, I declare my interest as chair of the Fundraising Regulator, which overseas and regulates charitable fundraising. I want to say how important the amendment moved by the noble Lord, Lord Mendoza, is. The number of charities that are potentially affected by this is enormous.

I am quite clear that this is an accidental consequence of what the Government are trying to do in the Bill. It was never aimed at undermining the financial position of charities but the reality is that, because of the rules that exist on the way in which gift aid operates, it would have that effect. It would mean that you would be entitled, as a consumer, to change your mind suddenly. Okay, I believe that people can change their mind, but most people who enter into subscriptions do so on the basis that they have made that decision and want to give money to the charity concerned.

The problem arising is that the HMRC rules would not allow gift aid to be paid on any contribution where there was such an opportunity to return in that way. The whole purpose of a charitable donation is that you have given it to the charity concerned not because you are looking to get a series of benefits back but because you are making a donation. That is why gift aid is allowed. This was an unintentional consequence of what is otherwise a series of sensible protections for consumers. I hope that, when he responds, the Minister will make it clear either that he can accept his noble friend Lord Mendoza’s amendment or that this loophole will be closed.

[Lord Vaizey of Didcot (Con)]

My Lords, I support the amendment of the noble Lord, Lord Mendoza, as well and declare my interest as a trustee of Tate. Everything that has been said is absolutely accurate. This is one of those situations where we are all on the same page, in the sense that I think the Government recognise that this is an issue that needs some clarity. It is certainly not their intention at all to put charities in a position where they will lose access to gift aid based on subscriptions or donations that are given to them on a regular basis by the people who support them.

The noble Lord, Lord Mendoza, indicated that many charities depend on membership subscriptions; that is the vernacular used when you join an organisation such as the National Trust or take out a membership with Tate. Certainly, by my now being poacher turned gamekeeper, as it were, and being on the board of a large museum, I see at first hand just how important subscriptions are to Tate. They are a really important revenue generator; we are very successful in securing memberships. They are a way forward for a lot of our national charities to engage a wide community who may not be able physically to visit the museum or organisation. People who live abroad can also potentially become members, although I appreciate that they would not necessarily be able to give gift aid in that respect. This is a huge way forward and it would be a retrograde step if charities found themselves in a difficult situation.

I gather that the Government have made it absolutely clear that, if you take out a subscription and receive nothing in return, that will to all intents and purposes be an annual or monthly donation on which gift aid can be claimed. However, as the noble Lord, Lord Mendoza, indicated, a lot of ancillary benefits now come with membership as a way of attracting people to take it. Obviously, in the case of museums, that might be free entry to their paid exhibitions and a regular magazine. I was unaware until the noble Lord rose that silent discos are now part of the mix—although I gather that the Natural History Museum calls them dino discos, which makes them even more attractive and means that I will leave this Committee and immediately take out a subscription.

The reason that the amendment has been put forward is to provide clarity in the simplest way. Charities are exempt from VAT and can claim gift aid. This does not provide a Trojan horse, where a private company says “Okay, the way to get around the welcome consumer protections that the Government are bringing in is to claim that we are a charity”. Charities have to go through a lot of hoops to become a charity, so exempting them from Schedule 20 would provide exactly the clarity that is needed.

As I say, we are here to listen to the Government because we know that they recognise that this is—I was going to say “a problem”—an issue. The Government are therefore in a great position to tell us what their thinking is as this is a discussion between those of us who have concerns and the Government who recognise those concerns and want to allay them with either their own amendment or clarity from the Minister.

[Baroness Young of Old Scone (Lab)]

My Lords, I regret my inability to be present at Second Reading. I support Amendment 149 from the perspective of having been chief executive of two membership charities—the RSPB and Diabetes UK—and my current experience as chair of the Woodland Trust. All three of these charities, and many others about which noble Lords have heard tonight, rely significantly on membership subscriptions and the associated gift aid for their important works. There are big numbers of people involved. As noble Lords heard, the RSPB has more than 1 million members and the Woodland Trust is hotly pursuing it and increasing its membership.

However, I take a slightly different perspective from that of the noble Lord, Lord Mendoza, because it is important to understand that the relationship of membership charities with their members is not transactional. It is not about saying, “You give us this money and we will give you these services”. It is not like that at all. There are ancillary things that members get, but I would not have thought that there are many cases of people giving money to these charities simply in return for the services that they might receive. It is more of a relationship of trust, in which members become part of the charity’s family. The membership donation is unconditional and unrestricted. The member says, “I trust you, as an organisation, to continue to do good things with my money, as you have demonstrated in the past”.

As noble Lords have heard, eligibility for gift aid means that membership subscriptions cannot be cancelled, although they might not be renewed if members fall out with the organisation. The risk is that that very different non-transactional relationship is swept up with the idea of subscription contracts and that, somewhere along the line, these charities lose their valuable gift aid. I am sure that the Minister will assure the Committee that that is not intended but, as much as I trust his assurances, it would be safer if Amendment 149 were agreed and added to Schedule 20 to the Bill.

--- Later in debate ---

[Lord Vaizey of Didcot (Con)]

On that point, if the Minister is saying that charities should not be exempt from the law, of course we all agree. If an employee of a charity is treated badly, they are perfectly entitled to take the charity to court and get compensation. The key point here is that membership subscriptions have been able to have gift aid claimed on them and HMRC has made it clear that gift aid is claimable. Now that charity subscriptions are being brought actively within the scope of the Bill by not being exempted, gift aid will be removed by HMRC as a result.

It would be different if we were starting from a position where charities had never been able to claim gift aid and had, in effect, been offering commercial subscriptions. In the same way, when you go into a shop at Tate and buy something that is defective, you have all the consumer protections available to you. You are not giving a gift aid donation when you buy a mug at Tate; you are buying a mug and if it falls on your cat’s head when you get home, you will be able to sue Tate. That is fine, but subscriptions are clearly gift-aidable donations which are now being actively brought within the scope of this Bill.

[Lord Harris of Haringey (Lab)]

My Lords, the Minister said that he would come back on Report, but it would be helpful if he would come back before Report so that all noble Lords can consider how he does so and table amendments accordingly.

[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.