Standing Committee E
Thursday 21 May 1998
(Afternoon)
[Mr. John Butterfill in the Chair]
(Except clauses 1, 7, 10, 11, 25, 27, 30, 75, 119 and 147)
4.30 pm
Mr. John Burnett (Torridge and West Devon): On a point of order, Mr. Butterfill. Looking at the names associated with amendment No. 125, I find myself in unusual company. Perhaps you could make it clear to whoever publishes the amendment paper that I did not table the amendment and I am not party to it. I do not know how my name got there. I am trying to lend a bit of tone to what would otherwise be a vulgar affair.
The Chairman: I am sorry if the hon. Gentleman has been embarrassed. I shall have the matter investigated and, if necessary, have the record corrected.
Clause 47
Gifts in kind for relief in poor countries
Question proposed, [this day], That the clause stand part of the Bill.
Question again proposed.
Mr. Michael Fallon (Sevenoaks): Amendment No. 125 concerns the film industry, where it is rare for someone to want to remove his name from the credits.
In your absence this morning, Mr. Butterfill, we dealt with two specific aspects of clause 27 the definition of educational establishment and the list of recipient countries. I apologise to the Economic Secretary for the number of general points that I want to raise with her. If she cannot respond to them today, perhaps she will write to me.
First, the clause introduces a differential tax arrangement for charities. We are distinguishing between charities at home and their operations overseas. I suspect that that will lead us into some difficulty. What does she think about that and how does the clause fit in with the conclusions of the charity law review?
Secondly, what criteria will be used to judge the success or failure of the scheme? It is important that it is benchmarked in some way. The Chancellor's hopes are set out in his press release, but the criteria are important.
Thirdly, what is the starting date? I understood that the scheme was to start on 1 April. Perhaps some of the donations can be backdated because that is the start of the tax year. I am sure that the Economic Secretary will appreciate that the scheme has a relatively short shelf-life. It is, I think, due to finish on 31 December 2000 which gives charities only two and a half years. Can the end date be stretched beyond the millennium to the end of the financial year 31 March 2001, 4 April 2001 or whatever. That might make it easier for a charity's fiscal year.
Mr. Edward Davey (Kingston and Surbiton): The hon. Gentleman is concerned about the length of the extension to the gift aid scheme. I hope that his hon. Friends will support my amendment to clause 48.
Mr. Fallon: The hon. Gentleman will discover the answer to that question when we reach clause 48.
As the scheme has a relatively limited shelf-life, it is important to get it up and running as quickly as possible. Will gifts through the scheme begin on 1 April or from Royal Assent? The first designated day will probably not be until after Royal Assent. If the Chancellor wanted the scheme to begin on 1 April, there may be a case for stretching it a few months into 2001. Fourthly, has the Economic Secretary considered how the scheme might be more widely promoted? Those charities that are aware of it welcome it, but has she other steps in mind to advertise it and ensure that it is sufficiently well known?
Fifthly, the Government want funding to be transferred directly to educational establishments in reply to amendment No. 129, the Economic Secretary said "directly and quickly" so why must gifts be channelled only through charities? Could they not be given directly to educational establishments? The definition of charities is fairly loose. Would it include, for example, non-governmental organisations and United Nations agencies? Is it a particularly British definition of charities, or is it the intention, as with "educational establishment" to leave the wording sufficiently loose to avoid donors being tied down?
Sixthly I apologise for the length of the list I am puzzled by subsection (2). Why is the donor restricted to active trade or manufacture in the article to be donated before relief may be claimed? That may simply be a read-across from other legislation covering charitable giving. I remember from my experience as an education Minister that when we tried to define educational gifts in the context of attracting relief, we defined them in that way, but I wonder whether that should apply in the Bill. Why should not someone be able to make a gift, whether or not they are involved in manufacturing it?
Seventhly, under subsection (4)(b), if a donor receives any benefit he is taxed on it. That puzzles me. Would the amount of benefit have to be substantial and what is the purpose of taxing the donor?
Eighthly, I wonder whether the Economic Secretary accepts the point made to me by a number of charities about the paperchase involved. Perhaps she has some proposals for simplifying the procedure. The clause requires the charity to provide notification. The individual making the payment will have to certify what he is doing, and the charity will then have to undertake the necessary paperwork to reclaim the tax. That seems to be a complicated paperchase and perhaps there is some way in which the procedure could be simplified.
None of these points are intended to be in any way critical or churlish and I emphasise that we welcome the proposal. We understand that it has been widely and warmly welcomed across the charity world and we need to ensure that it is swift, effective and relatively simple to operate. The Economic Secretary may be able to[Mr. Fallon]
reassure me as successfully as she reassured the Committee this morning.
Mr. Philip Hammond (Runnymede and Weybridge): I support everything that my hon. Friend said and I rise to emphasise his point about the institution or unit defined in the clause as the recipient of the gift. Clause 47(1)(a) states:
"any article falling within subsection (2) below is given to a charity".
It is not clear whether that refers to a charity in the United Kingdom, a registered charity, or a charity falling within the common law definition. If the provision applies only to charities in the United Kingdom, it would be helpful to know whether there will be any further definition of the type of charity that will be eligible. If charities that are not United Kingdom-based, but operate within countries defined as eligible, are included I can see very good reasons why they should be further definition will be required to avoid abuse.
Many third-world countries, as I learned from direct experience in an African country, have no charity legislation as such. The definition of a charity in such countries depends on a common law interpretation and some activities of some bodies operating as charities there would not, I suspect, be acceptable to Her Majesty's Government for the purposes stipulated in clause 47. It would therefore be helpful if the Economic Secretary could clarify that matter when dealing with the point raised by my hon. Friend the Member for Sevenoaks (Mr. Fallon) about non-governmental agencies, especially United Nations agencies, which may be direct recipients of such donations.
[Mr. Don Touhig in the Chair]
The Economic Secretary to the Treasury (Mrs. Helen Liddell): I think that I am slighly out of synch with the hon. Member for Sevenoaks in the number of questions that he asked. I think that I counted nine questions, but he said that he asked eight. If I introduce any unnecessary ambiguities, I shall seek to correct them, if not today then certainly in writing.
Before I begin, I would like to thank the hon. Member for Sevenoaks for his positive attitude to the clause. To put it in context, the clause is a specific recognition of the millennium and provides an opportunity for people and companies to contribute to the millennium in a way that benefits those who are much less fortunate than we are.
My right hon. Friend the Chancellor's main concern in this respect is to increase literacy and the provision of education in the world's poorest countries. Under the Mauritius mandate, which he announced last autumn, we made it clear that we were committed to reducing poverty and debt in highly indebted poor countries and those countries experiencing specific difficulties. The clause aims to enable business to show its support for education and is linked to clause 48, which provides wider opportunities to give the kind of assistance that such countries require.
Tax relief is already available to businesses giving used plant or machinery to schools or colleges in the United Kingdom. I am sure that many of us know of instances of local companies donating equipment to schools and colleges in our constituencies. A major computer manufacturer with a base close to where I live has been generous in the assistance that it has given to schools. The clause extends the tax relief provision to similar donations to educational projects in the poorest countries, the purpose of which is to give children a better start in life. We will mark the millennium in our contributions as individuals, as companies and as a country.
The hon. Gentleman has referred to the fact that the clause creates a differential rate of tax for charities. We are currently engaged in a review of the taxation of charities, and it would be inappropriate given the significance of the millennium to delay the introduction of such a provision until that review was completed. I cannot tell the hon. Gentleman what stage we have reached in charities review it would be inappropriate to do so as it is not completed but he asked what criteria would be used to judge whether the provision was a success. The Government will have to monitor that to ensure that it proves effective and to obtain feedback from the charities involved.
[Mr. John Butterfill in the Chair]
In response to the point made by the hon. Member for Runnymede and Weybridge, those are UK-registered charities. We must be specific; it is no help being wide ranging and missing the point of what we are trying to do. The idea came up in a discussion with major UK-registered charities at a reception in No. 11 Downing Street in December last year. Indeed, the churches were also involved in that.
The hon. Gentleman mentioned the start date; it cannot start until the Bill has received Royal Assent, but that gives us an opportunity to fine-tune the mechanics. It will operate for a period of two and a half years. We have to set a date because we could talk indefinitely. We are all aware of the debate about what is the exact date of the millennium, which is beginning to assume the proportions of how many angels can dance on the head of a needle.
4.45pm
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