Sarah Owen
Main Page: Sarah Owen (Labour - Luton North)Department Debates - View all Sarah Owen's debates with the HM Treasury
Finance (No.2) Bill (First sitting)
Sarah Owen Excerpts(3 years, 8 months ago)
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Jesse Norman
I thank the hon. Gentleman for his questions, to which I shall respond when I have described how the clause works.
Clause 20 extends the operation of social investment tax relief for two years, until 5 April 2023. This will continue the availability of income tax relief and capital gains tax reliefs for investors who make investments in qualifying social enterprises. This measure ensures that the Government will continue to support social enterprises in the UK that are seeking patient capital for growth.
SITR encourages investment in social enterprises by offering income tax and capital gains tax reliefs to individual investors who subscribe for new shares, or make a new debt investment, in qualifying enterprises. Between 2014 and 2018-19, 110 social enterprises used SITR to raise £11.2 million in investment—a much lower engagement than originally anticipated. In line with commitments made when SITR was expanded in 2016, the Government conducted a review of the scheme last year, including through a call for evidence. Following the review, the Government now propose to extend SITR’s sunset clause from April 2021 to April 2023.
Sarah Owen (Luton North) (Lab)
Research from Social Enterprise UK indicates that about one in five social enterprises may use the tax relief to help access capital in the wake of covid-19, but that 40% are unlikely to do so in the next two years. We need to give investors time to raise and deploy capital, which could take up to two years, assuming that they started immediately once the extension had been announced. Would not a further extension show the support for entrepreneurs, social enterprises and charities that we need right now to get our communities back on their feet?
Jesse Norman
I thank the hon. Lady for her intervention. She will be aware that this relief has been in place since 2014-15. It is unfortunate, therefore, that it has not been taken up more widely. There was a considerable period following its introduction, with the tremendous backing and support of the social enterprise sector, in which it was not taken up. It is important that those who call for its extension ask themselves why it was not taken up. The Government certainly attempted with great enthusiasm to press the case wherever possible. The truth of the matter is that many people invest in and support social enterprises by charitable giving rather than through investment, so the use of a deduction does not appear to be particularly attractive to them.
One wishes it were otherwise. I have worked in social enterprises in different ways since the 1980s and I feel very passionately about their importance, but, to take a parallel example, charities received £1.4 billion in gift aid in 2019-20. Since 2014-15, a total of £11 million has been raised through SITR—a tiny fraction. The amount of relief granted is a fraction of that. This is a relief that we are extending in order to try to support the sector to the extent that we can, but there needs to be a much more fundamental reconsideration. I have invited stakeholders in the sector, at length, to step forward and help us to think about whether a new approach may be valuable and interesting. I thank the hon. Lady for her comments.
Given the balance between SITR’s performance and the desire to continue support for social enterprises, a two-year extension seems to provide an appropriate timeframe for the scheme to continue to support the social enterprise sector while also providing a reasonable period over which to monitor its effectiveness. The changes made by clause 20 would extend the operation of SITR by two years at, I am afraid, negligible cost to the Exchequer. I wish that the cost were higher, because it would show that the relief was being more widely used.