Sajid Javid
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(12 years ago)
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The Economic Secretary to the Treasury (Sajid Javid)
I will start by reflecting on the Bill’s constructive Committee stage, and I thank the Opposition for their continuing support. I also thank the hon. Members for Edinburgh East (Sheila Gilmore), for Clwyd South (Susan Elan Jones), for Banff and Buchan (Dr Whiteford), for West Dunbartonshire (Gemma Doyle) and for Foyle (Mark Durkan) for their contributions to today’s debate. I will try to answer as many of the issues raised as I can.
Proceedings in Committee, and now on Report, have provided an excellent challenge to and scrutiny of the Bill—as they should have done—and I hope it is clear from the amendments that they have tabled that the Government have listened to hon. Members from across the House. The amendments in this group cover mainly the eligibility conditions for charities that wish to claim under the small donations scheme. New clauses 1 and 2 would have a wider effect, as they require HMRC to publish certain details about the scheme as a whole. Amendment 21 would require HMRC to publish details of the connected charities and community buildings rules. Government amendments 28 and 29 are minor and technical and simply change the Government Department to which powers in clauses 7 and 8 are given.
In Committee we debated a variant of new clause 1 and the same text of new clause 2. I opposed the measures then, and I am afraid I shall oppose them again today, as I will amendment 21. As I explained in Committee, we need neither the new clauses nor amendment 21. We are already doing much of what they ask and it would not be a good use of civil servants’ time to duplicate that work.
Let me start with the annual report. As I said in Committee, HMRC publishes national statistics on the cost of various charitable tax reliefs three times each year. Once the gift aid small donations scheme is up and running, HMRC will include details of that in those national statistics. HMRC does not separately identify gift aid claims by types of organisation, regions of the UK, or their regulators. Those details are not published for gift aid claims and it would not be a good use of HMRC’s time to produce such information for this scheme.
HMRC does not collect information on whether a charity is exempt or excepted. Charities would have to provide that extra information, and HMRC would need to change its IT system to cater for that. Again, that cannot be a good use of resources for either charities or HMRC. HMRC does not publish details of fraud rates in particular schemes or tax reliefs, as that would be tantamount to advertising them to fraudsters. I therefore cannot commit to publishing such information. All information that HMRC can reasonably publish will be published, and interested Members will be able to find all relevant information on its website.
New clause 2 would require a review of the scheme two years after the Act comes into force. As I said in Committee, the Government are committed to a review of the scheme three years after it has started. That will allow enough time for the scheme to get up and running, and for charities to learn about it and get used to claiming. Any less time than that, and the review would not be representative of the scheme. A two-year review would be premature, but it would be wrong to think that no one will look at the scheme for three years. HMRC engages with charities every day through its helpline, outreach and audit teams. It will listen to what charities are saying and look for ways to improve the scheme.
HMRC’s charity tax forum has been discussing this scheme since it was announced in March 2011. The forum will share experiences of the scheme as it beds down, and identify areas for improvement. HMRC keeps all guidance under review and makes changes as necessary so that any issues raised can be responded to without having to wait for three years to pass.
Amendment 21 would require the Treasury to carry out a separate review of the scheme in relation to the community buildings and connected charities rules. As they currently stand, the community buildings and connected charities rules will affect only a few charities. For the vast majority who take advantage of the scheme, such rules will be irrelevant and can be ignored. Most charities are not connected with other charities, and do not operate within community buildings or collect more than £5,000 in small cash donations.
We will debate later more Opposition amendments on the community buildings and connected charities rules. The amendments would extend those rules—and their complexities—to a far larger number of charities. Whatever the outcome of that debate, I do not believe that amendment 21 is necessary. I have already said that we will review the scheme after three years, and that review will be wide ranging and look at all aspects of the scheme. It seems unnecessary and wasteful to hold another review 12 months earlier to look at just a small part of the scheme; it would be better to review everything at the same time.
The hon. Member for Harrow West (Mr Thomas) spent two Committee sittings setting out his concerns about HMRC, which he doubted would have enough resources to administer the scheme—if we go ahead with all these reviews and reports, he may well be right. I do not feel that the new clauses or amendment 21 are a necessary or effective use of public resources, and I therefore ask the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) not to press them.
New clause 3 was tabled by the hon. Member for Foyle, and amendments 32 and 33 by the hon. Member for Banff and Buchan. They are designed to support new and smaller charities and to mitigate the effects of a three-year eligibility period. I hope that hon. Members have noted the amendments that I tabled on eligibility requirements, and that my proposal to drop the eligibility period to two years goes some way to allaying their concerns.
We debated new clause 3 at length in Committee, but I am afraid the concerns that I raised still apply. HMRC would be expected to gather information from other agencies to check the credibility of small charities. That would place a significant administrative burden on it to verify each and every charity that applied through that route. HMRC would be required to make subjective judgments about whether a charity was in or out, and would be constantly at risk of a legal challenge to its decisions. The scheme would be impractical in operational terms and I ask the hon. Member for Foyle to consider not pursuing the new clause.
Mark Durkan
The Minister suggests that under the new clause, HMRC would have to check with all sorts of other agencies, but the measure clearly states that HMRC can provide for a scheme to which charities may apply. It would be up to the charities to produce and submit the verifying information. It would not be HMRC’s duty to verify information with other charity regulators or anybody else; it would be up to the charity making the claim to produce the necessary evidence as laid down in the scheme.
Sajid Javid
I thank the hon. Gentleman for that point. He sat on the Public Bill Committee and will understand from those debates—probably more than most Members in the Chamber today—the eligibility requirements. I know that he welcomes some of the Government amendments, but the remaining eligibility requirements provide a degree of protection for the public purse, so that charities that make claims and use the benefits introduced by this Bill are those that HMRC has good reason to believe are using the measure in the right way, and there is protection against fraud. I have looked closely at his new clause, which he has tabled with the best of intentions, but it is not a change that we can afford to make at the moment.
I turn to amendments 32 and 33, tabled by the hon. Member for Banff and Buchan. Again, I am afraid I cannot support them. They would allow certain charities— those with an annual income below £25,000 and those set up for specific projects and events, such as she described—to claim top-up payments from the time when they were established without meeting any other eligibility requirements. I sympathise with the intention behind the amendments, but they would cost a lot of money—tens of millions of pounds.
Most small charities starting up have an annual income well below £25,000, and those set up in reaction to events such as disasters would also qualify for payments under the amendments, so nearly every new charity would qualify immediately. As I said, I sympathise with the intentions behind the amendments, but it is essential to have some eligibility requirements, otherwise the scheme will be wide open to fraudsters and the cost to the public purse will rocket.
Dr Whiteford
The charities in question would be registered with charity regulators on both sides of the border, and those are surely the bodies that decide whether their purposes are charitable. What benefit will the Bill bring to people raising money for a one-off or fixed-term good cause?
Sajid Javid
The Bill is intended to complement gift aid, because the Government received many representations from charities that when they received cash donations, such as in bucket collections, they were unable to take the information necessary for gift aid, such as whether the individual was a taxpayer and their name, address and other information. The scheme is intended to address that. One-off charities, including those set up in response to a disaster, are worthy causes but do not fit into how we intend the scheme to complement gift aid.
To answer the last part of the hon. Lady’s question, if a charity is created in response to a particular event or disaster, there is nothing to prevent it from registering for gift aid immediately and taking advantage of the gift aid provisions that already exist. If it stayed in existence for a number of years and therefore met the new eligibility criteria, it could also take advantage of what is available under the Bill. For the reasons that I have given, although she introduced her amendments with the best of intentions, I ask her kindly to consider not pressing them.
Amendments 8 to 16 would abolish the three-year start-up period and allow charities that have made a gift aid claim in the previous year to claim under the scheme. The maximum donations that could be claimed on would be £2,000, instead of £5,000. Proposals for a reduced rate for new charities have been put forward several times, and I am afraid that I cannot support them. Reducing the eligibility period to a year or less would increase costs, which would include a lot of costs caused by fraud. Requiring just one gift aid claim would leave the scheme open to unacceptable abuse.
The amendments would also make the scheme very complicated for some charities. Charities would need to know which other charities connected with them had claimed, and at which rate, because the rules would be different depending on those factors. The Government have listened to all the concerns that have been expressed about the eligibility rules, and we have put forward our own proposals. Our amendments are safe and affordable, and they will minimise complexity. I therefore ask Opposition Members not to press amendments 8 to 16.
I turn to the amendments that I have tabled on eligibility. Amendments 24 to 27 will reduce the eligibility period for the scheme to two years, and amendment 31 will introduce a power to enable us to amend the criteria in future if necessary. The eligibility criteria have been a key issue raised by the charity sector throughout the development of the scheme, and by Members in our earlier debates. The sector has welcomed the amendments since I tabled them last week, and I hope that hon. Members will support them, too.
Nigel Mills (Amber Valley) (Con)
Can my hon. Friend explain the logic of why amendment 31 will take away the Government’s power to amend the provision requiring a gift aid payment in a previous year, yet amendment 30, which we will come to later, will give them the power not to require any matching gift aid amount in the next year? The impact will be that a charity can make a claim without having any gift aid claims in the current year, but will have to have claimed at least a pound in the previous year. Is it not slightly perverse to table amendments with those two opposite intentions?
Sajid Javid
I believe that they fit together, and I hope that the purpose of the Government amendments will become clear.
Concerns were raised that the eligibility criteria in the Bill were too restrictive, that too many charities that did not already claim gift aid would be put off the scheme because it would take too long to become eligible, and that some short-lived charities would never reach eligibility. Balanced against those concerns is the fact that the Government have always been concerned to protect the scheme against fraud. I have looked again at where the balance lies between accessing the scheme and protecting it from people who would try to exploit and abuse it, and I have concluded that we can reduce the eligibility period to two years without undermining the integrity of the scheme. Eligibility for the scheme is defined by reference to successful gift aid claims made by a charity in the past, and I now propose that the minimum period should be set at two years.
I shall explain in more detail what our amendments will do. Four factors will determine the eligibility of a charity or community amateur sports club for the scheme, as set out in clause 2. The first is the start-up period—the number of complete tax years for which a charity must have been established before it becomes eligible for the scheme. We are reducing that period from three years to two years, so a charity or CASC will now be able to access the scheme a year earlier than was originally set out. The second and third elements are that a charity has to have made claims in two of the previous four years, and that there is a gap of no more than two complete tax years between the claims. The amendments will ensure that HMRC is guaranteed to see a minimum level of claiming activity by the charity or CASC in question, so that it can get to know that organisation and understand its ability to claim gift aid correctly.
The fourth element is the impact of a penalty on eligibility. If a charity receives a penalty, it will be excluded from the scheme for the tax year in which it makes the claim and the following tax year. Originally, the charity would have been excluded for the following two years, but amendment 26 means that the exclusion will be for only one year following the year of the claim.
That all adds up to a significantly more accessible scheme for new charities that have not claimed gift aid before, but we do not know exactly how the scheme will operate in practice. As I have said, we will review it after three years, when we might find that fraud rates are much higher or much lower than expected, so it is sensible to build flexibility into the Bill to amend the eligibility criteria in future. Many charities have asked the Government to do that. That power will enable us to vary the elements of the eligibility criteria up or down, depending on the evidence that we see on how the scheme operates and its susceptibility to fraud.
Those four elements interact with each other, and with the matching criteria, to provide safeguards for the scheme. We want to build the maximum flexibility into the Bill by allowing each of those periods to be reduced, increased, removed or reinstated. Any use of that power would be through the affirmative procedure, so it would be consulted on and subject to debate in the House. However, we do not want flexibility to undermine the integrity of the scheme or its important link with gift aid, so the requirement for a charity to make a minimum number of gift aid claims over a set number of years will always remain.
I now turn to the last set of amendments in this group. Since the Public Bill Committee, we have reassessed the distribution of powers to make secondary legislation in the Bill, some of which are conferred on the Treasury and some on HMRC. Broadly speaking, a power that changes the nature of the scheme in some way should be exercised by the Treasury. A power given to HMRC should be to allow the collection and management functions to be carried out correctly. The powers in the Bill are currently inconsistent with that approach, so we are introducing amendments 28 and 29 to change the powers in clauses 7 and 8. Those relate to running charitable activities in a community building and the definition of a community building. The powers are currently assigned to HMRC, but we now think it would be more appropriate to assign them to the Treasury. That is because they could be used to make significant changes to what is in or outside the scope of the rules. I hope that that helps explain why we have tabled those amendments.
I come now to my conclusion, Mr Deputy Speaker. [Hon. Members: “Hear, hear.”] The conclusion is very popular. I do not consider that there is any need for statutory reviews of the scheme at 24 months, and neither is there a need to require HMRC to publish certain data. There will be a full review of the scheme after three years, and HMRC will be publishing what data it has three times a year. New clauses 1 and 2, and amendment 21, would be wasteful and would require duplication of resource for no good reason. I therefore ask the hon. Member for Kilmarnock and Loudoun not to press those to a Division, just as I ask other hon. Members not to press new clause 3, amendments 32 and 33, and amendments 8 to 16.
I hope that hon. Members are comforted by the Government amendments that will reduce the three-year eligibility rules to two years. I am introducing a set of amendments that do what many charities and hon. Members have asked us to do, which is reduce the barriers to entry for this scheme and cut the eligibility period. I accept that some hon. Members wanted me to go further, but that would leave the scheme too exposed to fraud. These amendments represent an important concession by the Government, and I call on hon. Members from both sides of the House to support them. I am also introducing two technical amendments, Nos. 28 and 29. I commend the Government amendments to the House.
Cathy Jamieson
I will not take up much time. [Hon. Members: “Hear, hear.”] It is always great to be popular. The Minister has gone some way towards addressing the concerns we raised in the Public Bill Committee, but I feel it is important that we press new clause 1 to a Division.
Question put, That the clause be read a Second time.
Sajid Javid
We have had a constructive and lively debate so far. I welcome the comments of the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) and, in particular, her decision not to press her amendments. I also welcome the comments of my hon. Friend the Member for Amber Valley (Nigel Mills) and his decision not to press his amendment. He has recognised that Government amendment 23 will reduce the matching rate by 10%, which is even more generous than the reduction proposed in his amendment. I cannot promise him that this generosity will continue into next week—we will have to wait and see what happens then—but he does tempt me.
I will say a few words about why the Government have brought forward these amendments. Although some hon. Members wanted to remove the matching rate altogether in Committee, I understand that they accept that the Government have listened and that a 10% rate is much more generous than what was offered when the Bill was first introduced.
Let me say explain why we have this matching provision. HMRC sees even the 10% rate as an act against gift aid fraud. Unfortunately, there are unscrupulous individuals who want to misuse charitable tax reliefs. They defraud the taxpayer and undermine the good name of the charitable sector, so we must be in a position to protect the taxpayer and the charitable sector. The lack of records also means that HMRC would have less evidence when a charity is claiming correctly under the scheme if there was no kind of matching principle. Gift aid is the closest proxy we can use to help ensure compliance under the new scheme, and the matching requirements will significantly increase protection against fraud and abuse.
Government amendment 30 introduces a wide-ranging power that will allow us to reduce or increase the matching rate. It will allow us to remove the matching provision entirely or reinstate it at a later date if it is removed. Removing the matching provisions altogether would remove the need for charities to claim a set proportion of their small donations claim in gift aid in that year. Even so, charities would always need to claim some gift aid in each year to ensure that they can claim under the scheme. That is because of the provision in clause 1(1)(b). That helps to retain the important link between this scheme and gift aid.
Any use of that power would be through the draft affirmative procedure, so it would be consulted on and subject to a debate in this House. That power means that the matching rule is fully flexible. We have no intention of using the power in the near future, but it will be there if we need it. It is something that many charities have asked us to introduce, so I am pleased that we have been able to do so. I believe that the Government’s approach is better than some of the other amendments that have been tabled, as has been recognised in the comments we have heard.
We debated the community buildings rules in some detail in Committee so, unless hon. Members have questions, I do not propose to go into much detail now, but I would like to remind Members that the purpose of those rules is to recognise that not all charities are structured in the same way. There are charities that, because of the way they were set up or for other reasons, effectively operate as branches of a master charity. We want to ensure that the proposals are as fair as possible and that branches of a bigger charity are effectively treated as individual charities and have their own £5,000 limit. The purpose of the community buildings rules was not to give more than £5,000 by allowing charities to have multiple claims, and I believe that the changes we are making to the Bill will achieve that effectively.
I again warmly welcome the support the House has shown for the Government amendments and thank the hon. Member for Kilmarnock and Loudoun for looking at them carefully and not pressing her amendments. I commend amendments 23 and 30 to the House.
Cathy Jamieson
I beg to ask leave to withdraw the amendment.
Amendment 4, by leave, withdrawn.
Amendment made: 23, page 2, line 1, leave out ‘double’ and insert ‘10 times’—(Sajid Javid.).
This amendment changes the gift aid “matching” rate from 2:1 to 10:1. In other words, to make a claim in respect of £5,000 of small donations, a charity would need to make successful gift aid claims in respect of £500 of donations, rather than £2,500.
Clause 2
Meaning of “eligible charity”
Amendments made: 24, page 2, line 12, leave out ‘3 of the previous 7’ and insert ‘2 of the previous 4’.
This amendment, and amendments 25 to 27, change the criteria for determining a charity’s eligibility for the small donations scheme. Under this amendment, the charity must have made successful gift aid claims in 2 out of the previous 4 tax years, rather than 3 out of the previous 7.
Amendment 25, page 2, line 16, leave out ‘3’ and insert ‘2’.
Under clause 2(2), earlier gift aid claims are ignored for the purpose of the eligibility rules where a charity doesn’t claim for 3 consecutive tax years. This amendment reduces that period to 2 consecutive tax years.
Amendment 26, page 2, line 22, leave out ‘2 tax years’ and insert ‘tax year’.
This amendment reduces the period for which a charity is not eligible where a penalty is imposed on the charity. Under the amendment, the period will be the tax year the claim was made and the next tax year (rather than that year and the next 2 tax years).
Amendment 27, page 2, line 26, leave out ‘3’ and insert ‘2’.—(Sajid Javid.)
This amendment reduces the “start-up period” for a charity to the first period of 2 (rather than 3) consecutive tax years during which it is at all times a charity.
Clause 7
Meaning of “running charitable activities in a community building” etc
Amendment made: 28, page 5, line 24, leave out ‘HMRC’ and insert ‘The Treasury’.—(Sajid Javid.)
This amendment makes the Treasury, rather than HMRC, responsible for making orders under clause 7(3).
Clause 8
Meaning of “community building”
Amendment made: 29, page 6, line 4, leave out ‘HMRC’ and insert ‘The Treasury’.—(Sajid Javid.)
This amendment makes the Treasury, rather than HMRC, responsible for making orders under clause 8(5).
Clause 14
Power to alter specified amount etc
Amendments made: 30, page 11, line 5, at end insert—
‘(1A) The Treasury may by order amend this Act for the purpose of—
(a) amending the gift aid matching rule;
(b) abolishing that rule;
(c) reinstating that rule (if previously abolished), with or without amendment.
(1B) In subsection (1A) “the gift aid matching rule” means the rule that limits the amount of top-up payments to which a charity is entitled by reference to the amount of gifts made to the charity in respect of which it has made successful gift aid exemption claims.’.
This amendment gives the Treasury power by order to amend the gift aid matching rule (see clause 1(3), (4)(a) and (5)), to abolish the rule or to reinstate it. The order would be made by statutory instrument subject to draft affirmative procedure in this House (clause 17).
Amendment 31, page 11, line 5, at end insert—
‘(1C) The Treasury may by order amend section 2 (meaning of “eligible charity”).
(1D) Section 2, as amended by an order under subsection (1C), must as a minimum include a condition requiring the making of a successful gift aid exemption claim in a previous tax year.’.—(Sajid Javid.)
This amendment gives the Treasury power by order to alter the eligibility rules in clause 2. But the altered rules must include a condition requiring the making of previous gift aid claims. The order would be made by statutory instrument subject to draft affirmative procedure in this House (clause 17).
Schedule 1
Meaning of “small donation”: conditions
Cathy Jamieson
Many of us who served on the Bill Committee or listened to the Second Reading debate and have heard the representations made by the charitable sector have a degree of sympathy with the comments made by the hon. Members for Banff and Buchan (Dr Whiteford) and the for Amber Valley (Nigel Mills), particularly in relation to ensuring that the Bill does not become out of date before it gets under way.
The hon. Lady made some powerful arguments. Indeed, her case is reflected in our amendment 22, which relates to some of the difficulties involved in getting information from those who have made donations by means other than cheques, such as JustTextGiving, or—this issue was raised a number of times in Committee—if they have placed a cheque on a plate or in a collection box at an event such as a funeral.
We had hoped that the Minister would give an indication—he may well do so—that he would at least be minded to consider this proposal at some point in the future. I understand that there may be technical reasons against that at present and that the Cabinet Office is engaged in ongoing work on the different methods of making donations and on following up on gift aid. Although I support the principles of amendment 34 and want action to be taken—that is why we have tabled our own amendment on the issue—I understand that there may be some difficulties. It would be odd, however, if the Minister said that at no point would he consider moving in the direction suggested, particularly when the Cabinet Office is engaged in those schemes.
I hope that the Minister will be able to comfort us by saying that he will consider the proposal at some stage. I also hope that the order-making powers that the Government will adopt under the Bill could, if necessary, be utilised at some stage to extend the way in which donations can be made. It seemed odd during Committee that, while someone can donate using whatever currency they choose, donations by electronic means do not count.
I look forward to hearing what the Minister has to say. I hope that he will take account of the persuasive case that has been made and that he will take a further look at the proposals in the amendments tabled by the hon. Lady and in my amendment 22.
Sajid Javid
I thank the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) for her comments, and I also thank the hon. Member for Banff and Buchan (Dr Whiteford) and my hon. Friend the Member for Amber Valley (Nigel Mills) for their contributions. I will try to respond to their points, which they made very well.
The amendments would do slightly different things, but, in general, they all seek to broaden the gift aid small donations scheme to include not only cash donations but donations in the form of electronic payments. Amendment 2 seeks to do that by introducing a power to allow the Treasury, by order, to broaden the scheme, whereas amendment 22 and the group of amendments 34 to 37 seek to expand the scope of the scheme immediately. I thank my hon. Friend for his original amendment on the issue and for all his contributions on this particular topic in Committee.
It might be worth reminding Members of the scheme’s primary objective, which is to provide a gift aid-style top-up payment when it is difficult or unduly burdensome to collect a gift aid declaration from the donor. The most obvious examples are when a charity is making a street collection or when a religious group is passing around a collection plate during a service. In such situations it would be difficult to ask everybody who makes a contribution to fill out a gift aid declaration form. They would have to stop, confirm they were a UK taxpayer and then fill in a form with their name, address and other details. I think we would all agree that that would be unrealistic for a donation of just a few pounds. As a result, charities are missing out on potential gift aid on such donations. That is exactly why the gift aid small donations scheme is being introduced—that is what it is designed to tackle. It will fill the gap in gift aid for donations for which it is difficult or unduly burdensome to collect the necessary paperwork.
Giving by using digital technology means that the donor is already providing some or all of their details to the charity. If any extra information is needed to make a gift aid declaration, it will be relatively small. When a charity has an ongoing relationship with a donor, they should use gift aid, if at all possible. Compared with a bucket collection on a busy street, it is considerably less burdensome to ask someone to provide their details if they are donating through a website or a text message. It is easy to use gift aid when making a donation through a website and it is also possible to attach gift aid donations to a text message.
I want to sound a note of caution about complexity. Text messages and internet donations can be made from anywhere in the world, but I hope Members will agree that the UK Government should not make a top-up payment on donations made from outside the UK unless there is firm evidence that the donor is a UK taxpayer or resident. Introducing other forms of giving to the small donations scheme would make it more complicated. In order to make a top-up payment on UK donations only, charities would need to keep records of the donation’s origin. That is comparatively straightforward when rattling a tin on a UK high street, but it would become much more burdensome, if not impossible, for some charities if donations were made through texts and website visits from around the world.
Hon. Members mentioned the possibility of making the gift aid system easier via text giving. The hon. Member for Kilmarnock and Loudoun will be aware that the Government are in discussions with a number of charities and their representative organisations about how we can do just that. The discussions are going very well and have been constructive. The Government are open to the possibility that, eventually, we might have to pass legislation to make the gift aid system easier and we are working with charities to try to achieve that.
It is possible that new forms of electronic giving will be developed in the future that are completely anonymous. Indeed, my hon. Friend mentioned the possibility of using Oyster cards, which are anonymous. It is very early at this stage, however, to understand what technology might come along in a few years’ time, so it would be difficult to set out the circumstances in which the power he proposed could be used. Without complete knowledge of Oyster cards or other developing technologies for giving, it is difficult to know whether they would fall under the scheme’s scope and rationale. It is, therefore, possible that the power could never be used.
I understand my hon. Friend’s concerns and he has made some important points, so I want a review of the forms of giving to be undertaken when we review the scheme after its first three years. If people are able to make completely anonymous electronic donations, we shall look again at whether the scope of the scheme should be extended. That is the Government’s commitment.
It is harder for charities to collect gift aid declarations in the street or at a religious meeting than through other channels. That is why the focus of the scheme is on cash donations. I accept that things may change, so I am committing the Government to review the situation after three years. I therefore ask hon. Members not to press their amendments to a Division.
Dr Whiteford
Madam Deputy Speaker, I am sure that you will be as pleased as other Members to hear that I do not intend to detain the House for long.
We have heard a few contributions on this group of amendments. The hon. Member for Amber Valley (Nigel Mills) was on the same page as me in looking to the future and in considering ways of giving that are already developing in the charitable sector. The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) alluded to some of the technical challenges that the proposals might meet and pressed the Minister on amendment 22, which she tabled.
I have listened carefully to the Minister and heard his commitment to review the forms of giving after three years. I am sorry that he did not go further, but I do not intend to press the amendment on the basis that there will be an opportunity for the “Chip-in” pilot scheme to be evaluated. I suspect that the technology will have moved far beyond that by the time of the review. I urge him to recognise the technological advances in giving that have already taken place.
Making a £1 text donation is like throwing a pound in a bucket. That is how we will give in the future. It will provide a better way for charities to create an audit trail. We do not know whether the people who give to someone who is shaking a bucket are taxpayers. Many of them may not be for one reason or another, whether they be pensioners or overseas students. In the same way, people making text donations may or may not be taxpayers, but I am sure that it is not beyond the wit of humanity to work out where the phones are or where the numbers are registered. Just as we are allowing this scheme to work in a proportionate way for cash donations that are collected in a bucket, we should respect the spirit of the Bill for contactless payments.
I look forward to the review in three years and hope that the Minister will take those points on board. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Third Reading
Sajid Javid
I beg to move, That the Bill be now read the Third time.
It is a pleasure to move the Third Reading of the Bill. It has been many months in development through consultation, drafting and a fair amount of discussion in Parliament. In a way, I am sad to say goodbye as it heads off to another place, subject of course to Members’ support for its Third Reading.
I am sure that everyone will agree that the Bill leaves the Commons in good shape. We have considered a lot of amendments and the Government have introduced amendments where we have agreed that there was room for improvement. Not only have we introduced the amendments that Members have accepted today on reducing the eligibility period to two years and lowering the matching rate to 10%, but we were active in Committee as well. We have listened to the concerns of charities and Members, and have brought forward a number of amendments to reflect them.
I am pleased that the Bill has reached this stage and that we are able to move towards the introduction of the gift aid small donations scheme, for which the Bill provides the legislative framework. The scheme was announced as part of a significant package of measures in Budget 2011 to encourage charitable giving and philanthropy by donors from all walks of life, from the largest donors to those who give small amounts to charity bucket collections.
The gift aid small donations scheme is at the heart of that package. Its purpose is to enable charities and community amateur sports clubs to claim a gift aid-style payment on small donations of up to £20, for which it is often difficult to obtain a gift aid declaration. Eligible charities and CASCs will be able to claim top-up payments on up to £5,000 of small donations each year. The scheme does not require individual donors to complete a gift aid declaration, nor does it require the charity or CASC to collect and provide the donor’s details with their repayment claim, as under gift aid. The aim of the scheme is to complement gift aid, not to replace it. It is for donations for which a gift aid declaration is too difficult to collect.
Tax reliefs for charities and charitable giving are an important source of income for charities, totalling more than £3 billion a year. Gift aid is the single largest relief and is worth more than £1 billion a year to charities. We estimate that the gift aid small donations scheme could result in additional Government funding of about £100 million a year for charities and CASCs. That represents a significant boost in income for the sector and will be especially valuable to smaller charities.
We have worked closely with the charitable sector to try to get the scheme right. Concerns have been raised on the details of the Bill, and we have debated those points throughout the Bill’s different parliamentary stages. In developing the scheme, we have had to ensure that it operates as fairly as possible, but we have also had to ensure that it remains affordable and protected against fraud. We want the money to go to real charities that do good work, and not to fraudsters and others who would try to abuse the scheme.
That is why we have introduced safeguards—the community buildings rule is one such feature of the Bill. We want to ensure that charities that do similar work at a local level but have different historical structures get allowances under the scheme that are not hundreds or even thousands of times different from one another. That is why we have introduced the community buildings rule. The charity sector has raised concerns about the complexity of the rule. It is true that, to obtain a simple result, we have needed to introduce detailed rules, but I am sure hon. Members will agree that that is preferable to disadvantaging some charities just because of how they have been set up.
In conclusion, the Bill represents a potentially significant new opportunity for charities and CASCs. When it is up and running, it will give them a new stream of income and provide £100 million of new funding to the sector. It therefore represents an important part of our strategy to support charitable giving across the board.
I thank the Opposition and Members on both sides of the House for their support of the Bill, and for the constructive way in which they have scrutinised it. Together, we have improved the Bill. I hope hon. Members join in me in supporting this important new scheme and I commend the Bill to the House.