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Mr. Eric Forth (Bromley and Chislehurst) (Con): Further to that point of order, Mr. Speaker.
Mr. Speaker: Well, let me answer both points, and perhaps that will help the right hon. Gentleman. I am on the record as saying that I want Ministers to come to the House, but I need help from Members of the House, particularly on the Front Benches. No application was made for an urgent question today. That does not mean to say that I would have granted an urgent question, but at least I would have had a mechanism before me to require the Minister concerned to come before the House. I lay down that matter; I know that Monday is a day when people are a bit slower and are not so quick off the mark, but that is the way to do things.
Mr. Forth: You will recall, Mr. Speaker, as I do, that when this matter came up last week, the Leader of the House wriggled and evaded in his usual way by saying that Ministers were obliged to come to the House only when a new matter was being raised. He wrongly claimed that if it was an existing matter, they had no such obligation, in spite of your rulings. The matter that is being raised now is patently a new one, but Ministers are still apparently evading their responsibilities. It really is time that this issue was sorted out once and for all and that ministerial evasion was stamped on, preferably by you.
Mr. Speaker:
I did not notice that the Leader of the House was wriggling at that particular time, but he was quite right: new matters are different from matters that are already the policy of the Government. As I said, those on the Front Bench in particular can take note of these things.
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Orders of the Day
Finance Bill
(Clauses 11, 18, 40, 43, 44 and 69 and Schedule 8)
[Sylvia Heal in the Chair]
That the Order in which proceedings in the Committee of the whole House on the Finance Bill are to be taken shall be Clauses 11, 18 and 40, Schedule 8, Clauses 43, 44 and 69.—[Mr. Ivan Lewis.]
3.35 pm
Mr. Mark Francois (Rayleigh) (Con): I beg to move amendment No. 36, page 11, line 40, at end insert—
'(h) interactive experiments with an educational purpose.'.
The First Deputy Chairman of Ways and Means (Sylvia Heal): With this it will be convenient to discuss the following amendments:
No. 35, in clause 11, page 12, line 1, leave out 'one year' and insert 'three months'.
No. 1, page 12, line 8, after 'family', insert
'or of that person and an accompanying group of no more than twenty individuals.'.
Mr. Francois: It is a pleasure to open the batting for the Opposition this afternoon on the first clause of the Finance Bill to be considered in Committee of the whole House.
Several changes have taken place at the Treasury since the general election, so with your leave, Mrs. Heal, I shall begin with a few quick courtesies. In his absence, I welcome the new the Chief Secretary to the Treasury, the right hon. Member for Kilmarnock and Loudoun (Mr. Browne), who is now the other Browne—Browne minimus—at the Treasury. I congratulate the hon. Member for Wentworth (John Healey) on his promotion from Economic Secretary to Financial Secretary and wish him luck, but not too much luck, in his new role. Finally, I congratulate the hon. Member for Bury, South (Mr. Lewis) on his joining the Treasury as the new Economic Secretary. He will be my direct opposite number, and I look forward to shadowing him in what I hope will be a constructive spirit.
Amendment No. 35 seeks to reduce the specified period in proposed new subsection 5H from one year to three months. Amendment No. 36 seeks to expand the range of charities that may claim gift aid on their admissions under subsection 5G to include those facilities which have
In addition, my hon. Friend the Member for Wimbledon (Stephen Hammond) is a new hon. Member, but he has had the gumption to propose his own amendment to the Finance Bill, which augurs well for the future. I look forward to hearing what he has to say, and I will seek to respond to his amendment in my winding-up speech.
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On a procedural point, as clause 11 deals with changes to the tax treatment of gift aid in relation to a number of charities, in the interests of transparency, I declare an interest as a member of English Heritage, the Natural Trust and the Essex Wildlife Trust. With specific regard to amendment No. 36, I also declare an interest as a member of the friends of the Royal Air Force Air Defence Radar museum at Neatishead in Norfolk.
The concept of gift aid, which is at the heart of clause 11, was introduced by John Major when he was Chancellor back in 1990. Since then, it has helped to generate billions of pounds of tax-efficient donations to charity. Gift aid has been through a variety of changes since then, which, the Committee will be pleased to hear, I do not propose to apprise in detail now.
This afternoon's debate directly relates to a specific measure in the Finance Act 2000 that had the stated aim of encouraging new donations to charity. To cut a long story short, those changes to section 25 of the Finance Act 1990 permitted charities specifically involved in the conservation of heritage property or the conservation of wildlife to begin to reclaim gift aid on admission charges to their premises. In that context, it is important to note that that outcome was not the Government's stated intention, but a number of charities sought to take advantage of it with the subsequent agreement of the Inland Revenue, which is an important point. Indeed, paragraph 3.12 of the Government's own regulatory impact assessment to accompany the proposed changes to the gift aid regime states:
"Changes to the Gift Aid rules in Finance Act 2000 mean that heritage and conservation charities are acting within the terms of the law by seeking donations that give a right to free day admission. This has become established practice, and guidance produced by the Inland Revenue confirms it is within the terms of the existing Gift Aid legislation."
It is important to establish at the outset that what the Government propose to change has become established practice over the past few years, and that the Inland Revenue fully acknowledges that.
That brings me to the cost of these measures. In the debate on Second Reading, it was notable that when Ministers were pressed for the estimated cost of making the changes—that is, the amount of money that, in their view, the Revenue was losing, and that they wished to make up by amending the gift aid regime—they were noticeably reluctant to give that figure on the Floor of the House. However, if one looks into the detail of the regulatory impact assessment, as I have, it is clear that on several occasions the Government estimate that the amount of revenue in effect forgone by the Treasury is approximately £10 million. All public money is important—I would not deny that—but the Government are bringing in a change that will have a very significant effect on the charities and museums sector, particularly small and independent museums, and they must acknowledge that although there is not a vast amount of public money at stake here, it will necessarily have an important effect on the institutions in question.
Following the Government's decision in December 2001 to grant free admission to 50 or so Government-funded national museums and galleries, many charities that do not receive subsidies took advantage of the gift aid provisions to allow them to continue to compete
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with neighbouring attractions, entry to which had become free to the viewing public. Thus the situation post-2000, which pertains today, has helped to maintain something of a level playing field between subsidised and unsubsidised charities and museums, even though the Government admit in their RIA that that was not originally their intention. Again, this particularly affects smaller independent museums which are highly reliant on admission fees as a source of their income.
The reasoning behind the Government's proposals was, as they stated as far back as the pre-Budget report 2003, that gift aid had become, in the words of the Paymaster General, "a loophole", and that the facility was therefore to be withdrawn, even though the Inland Revenue had admitted to the museums and charities sector that it was perfectly within its rights in using it. Perhaps not surprisingly, that rapidly led to the Government getting into trouble with the charitable sector. Under a considerable amount of fire, not all of it very charitable, the Government began to back away and encouraged the consultation on the proposed changes. They came back with a modified scheme, which was presaged in pre-Budget report 2004 and is now contained in the Bill.
The proposals do not abolish the ability of charities to claim gift aid on admissions—we concede that—but rather reform it, with conditions and, in fairness, in order to allow additional institutions to qualify to claim gift aid, albeit on the revised basis. Those new conditions are addressed by amendment No. 35. New subsection (5H) sets either of two conditions by which institutions can continue to claim gift aid. In essence, they can do so either by charging an additional 10 per cent. on the admission fee for those people who wish their payment to be reclaimed as gift aid by the institution that they are visiting, or by granting a right of free admission for a year in return for an admission fee being reclaimed for gift aid. However, having contacted a considerable number of institutions over the past week, it is clear that implementing the changes presents several very practical difficulties.
3.45 pm
First, there is a problem with the additional 10 per cent. provision. For example, several visitors who do not mind gift-aiding their current admissions fee may, to put it bluntly, be reluctant to do so if they realise that it will subsequently cost them extra to visit the attraction that they have come to see. One can imagine a family group being unwilling to pay, for example, an extra pound for each member simply to help the institution when they have come to visit the attraction itself.
In addition, there is the problem of staff at the ticket desk having to explain the difference to each group of visitors as they attempt to pass through. I presume that the staff would be encouraged by the charity's directors or trustees to try to persuade as many people as possible to sign up. That might sound easy in theory but it could be difficult in practice for the ticketing staff, especially on a hot summer's day, with long queues waiting to get in, perhaps many containing impatient children, who have already pestered their parents senseless.
There is also the additional cost for modified tills and accounting systems, compared with the relative simplicity of the current system, whereby visitors pay
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their money, fill in a gift aid declaration and go in. The Government's regulatory impact assessment assumes a 70 per cent. take-up of the facility but several institutions that my office contacted in the past week were especially sceptical about the matter.
For example, Mr. Alan Bentley, the director of the Brontë Parsonage museum, points out in a letter:
"I think it is very unlikely that we will be able to continue to use the scheme in the way that we do now as I do not think that many of our visitors will give the extra 10% and the need to allow 12 months entry undermines our membership benefits and so will need careful marketing to our members. Membership of the society is the lifeblood of the organization."
Mr. Keith Merrin, director of Bede's World in Jarrow, makes a similar point in a letter. He states:
"Our main concern about the changes to the scheme are that once again they will disadvantage independent museums such as ours who already exist in an environment that seems unfairly weighted against us. Bede's World does not receive any funding from DCMS nor is it part of the Renaissance in the Regions scheme which benefits many of the large local authority run museums in the region. As a result, the museum is reliant on charging admissions to visitors. The ability to reclaim Gift Aid seems to be one of the few areas of the funding system that favours a museum such as ours."
He goes on to provide some specific criticisms of the proposals. He states:
"We believe that the suggested changes to the scheme will significantly reduce our income from this source for two reasons:
1. The simplicity of the scheme and therefore its popularity with visitors as it stands lies in the fact that taxpayers are being given a very straightforward proposition (that is to pay the same amount as they would have done but make it as a donation). The suggestion that in future they will be asked to pay a further 10% would, I believe, have a detrimental effect on the take-up and therefore our income."
"The museum already operates a season ticket scheme through our Friends association at a charge roughly double the admission price. As such the suggestion of giving annual membership for the price of a single admission would have a serious impact on this scheme and overall reduce our annual income.
In summary, we do not feel the changes to the scheme as suggested would be of benefit to the museum and would favour a recognition that the scheme as it currently works is in fact of great benefit to museums like ours who in turn provide a huge service to the communities and economy of the country without the need for large amounts of public funding."
That appears to me to be a reasonable presentation of the case.
In case the Economic Secretary has missed the point, Frances Snowden, who is the development assistant at the Abbot Hall art gallery in Kendal, puts it in another way in an e-mail. She states:
that is, the 10 per cent. option—
"requires that reception staff explain this complex system, and ask if the visitor is willing to provide a donation of 10% greater than the entrance fee. However well presented the case, all signs point to this being entirely unworkable, and the vast majority of visitors will not be willing to pay this premium on the entrance charge. The immediate loss to the Trust of Gift Aid money, based on this year's income, will be £53,000. For comparison, this equates to the trust's entire budgets for exhibitions at both Abbot Hall and Blackwell."
So that we can understand what is at risk, she goes on to say:
"The Education Department of the Trust provides inspiring workshops and free visits for children from all over Cumbria and from North Lancashire. This year, thousands of children have benefited from their work, and the Trust has taken on a new member of staff. Once again, this programme, at the heart of what the Trust aims to do, will be seriously threatened by a drop in expected income."
To contribute to the debate, the industry established the Attractions Gift Aid Liaison Group, the AGALG, and I understand that it has had a dialogue with the Minister over this issue for some time. At the risk of embarrassing him, the reports from the group are that the Minister has conducted the negotiations in a civil manner and has attempted to take on board some of the points that the group has been making. I am not seeking to make an overly partisan point.
I have, however, spoken to the chairman of the group, Mr. Ken Robinson, who was keen to stress that he is not anxious to be involved in partisan politics. He said that the group had reservations about the practical applicability of this option. He sent an e-mail, which reads:
"The assumption has been made in the Regulatory Impact Assessment that a 70 per cent. take-up by donors . . . would mean that there would be no net loss caused by these changes. It is the general opinion of potentially eligible Attractions that this level will not be achieved on the proposed future terms, and would only be possible at many Attractions if additional benefits can be persuasively offered."
Overall, among the institutions which my office has contacted over the past week, there was comparatively little enthusiasm for the additional 10 per cent. option, if I can give it that name.
I move on to the option of free admission for one year. It, too, presents a number of difficulties, to which I have referred in several of the extracts that I have shared with the House. The principal problem is that many charities that qualify use annual admission as an important part of their membership campaigns. Being able to achieve the same benefits simply by visiting the institution once would, in effect, tend to undermine that approach.
Helen Toolan, the museum curator of the Murton Park museums—a group of museums headquartered in York—had the following to say:
"By continuing with Gift Aid in its new guise visitors who participated in the scheme would then be allowed free entry to the museum for the coming year, this is an impossible situation, which would mean the loss of substantial income for the museum that it currently has from its admissions. If Gift Aid were to change, it would mean two things: firstly, smaller museums would not be able to afford to participate in the scheme because of the increased cost to the visitor in admissions and secondly a loss of much needed income that Gift Aid currently provides."
Diane Perkins, the director of Gainsborough's House museum in Sudbury, has the following to say:
"In direct response to (5H) . . . To give the right of admission for the whole year for £3.50 would dramatically affect our income—many people repeat visit during the year to see our changing exhibitions and attend events. It is most unlikely that visitors would choose to give an extra 10 per cent. just so that the charity can reclaim the tax. It would also be very difficult to explain and complicated to administer."
"Having been already adversely affected by the change in VAT Cultural Exemption rules in June 2004 which will cost the charity about £10,000 over the next two years, we are dismayed at this
- second tax change within 10 months. Rather than Government's tax changes helping small charities to exist, they are actually causing considerable financial difficulties, which will result in reduced performance and services to the public through no fault of the organisation."
I think that the director is seeking to make an entirely reasonable point.
Amendment No. 35 seeks to reduce the amount of time for which the charity would have to allow free admission down to three months. This would be better because it would provide some sanction over the current situation, but it would not undermine the attraction of annual membership, which so many small and independent charities have assured us is extremely important to their revenue stream.
That point is also supported by the Association of Independent Museums, which, I believe, has also been involved in dialogue with the Minister. Bill Ferris, AIM's chairman, says:
"Many charity museums have effective and well developed annual memberships (friends) schemes. A reduction to 3 months in the eligibility period would prevent conflict with the existing schemes."
I would therefore ask the Minister, who has already spent considerable time on this matter, to consider seriously amendment No. 35. It allows some modification of the scheme to protect revenue, which we understand that the Revenue was seeking to do all along, but not to the point at which the annual visiting rights included in many memberships packages, on which independent museums rely, are undermined. It is also important to remember that such museums are competing daily with other larger museums, regional or national, which effectively receive considerable subsidies and to which potential visitors can go for free.
In the six months or so during which I have shadowed the Minister, he has normally played a pretty straight bat. Therefore, if he can assure me that the Government will consider the matter again, and come back with something new on Report, I assure him that I will not press the matter further today. If he is unable to offer any concession, however, or even the prospect of a concession on Report, we might have to test the will of the Committee in the Lobby. I have done my best to present that case, and I hope that he will give it a fair hearing on behalf of all the independent museums and charities that are clearly concerned about the matter.
Amendment No. 36 relates to the types of charities and institutions that might in future qualify for gift aid on admissions charges on the revised basis. I should explain to the Minister and the Committee that we have tabled this amendment to try to elicit the Government's thinking on a specific matter, including the reasons why they came up with their list, and I hope that he will appreciate that when he replies. The list of those bodies in subsection (5G) is expanded beyond the original two categories, which I mentioned in my opening remarks, to include: buildings, grounds or other land, plants, animals, works of art—but specifically not performances—artefacts, and property of a scientific nature. We welcome that in principle, but it would be helpful to have some idea of the anticipated cost of the measure, at least in broad terms. In the regulatory impact assessment, the Government gave their anticipated cost of the 10 per cent. provision for charities. We would
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now like to know what the Government think that widening the list will cost them. The RIA suggested that it would be broadly revenue-neutral, and we would like to know whether the Government hold to that view. As we had no figure on Second Reading, it would be helpful if the Government provided at least some figure in Committee this afternoon.
We would also like some clarification on the status of voluntary donations with regard to clause 11. Our understanding is that the provisions in the Bill will not apply to voluntary donations, and for the avoidance of doubt, we are not seeking to ensure that they do. To take one example, many cathedrals do not charge visitors a formal entrance fee but have a collection box with a notice encouraging visitors to chip in a certain amount. Clearly, that is a voluntary donation, and clarification that the new more complicated rules will not apply to them would be welcome. I am sure that Ministers do not wish to provoke divine wrath with their measures, so perhaps they could reassure all of us on that point.
In addition, some information on the operation of the proposed definitions would be useful, not least to those who operate museums that might qualify. A number of people who might have seen the provisions in the Bill, and the list of supposed new categories, will be wondering whether they might qualify. Perhaps the Minister could comment on how the Government intend to advise museums of their status, one way or the other, and to promulgate information so that potentially qualifying museums might have a chance to find out whether they will be able to take advantage. To give just one specific example—this is why I declared the fourth interest—would military museums, which are not historic buildings in their own right but which display military memorabilia, be covered under the heading of displaying artefacts?
4 pm
In amendment No. 36, we seek to widen the proposed list further by including
Our definition of such facilities would be museums that have invested in interactive displays aimed specifically at the education of their visitors rather than being there simply for their amusement. A theme park, for instance, would not qualify on that basis, but a local history museum that had produced an interactive display representing local conditions through the ages would.
It would be helpful to know more of the Government's thinking on all that, and to know how museums that think they might qualify could go about obtaining a definitive decision. The proposals are not currently due to come into force until April 2006, so there is time, but it would help those in the sector who read the report of this debate to have a clearer understanding of where they can go for a workable definition. I look forward to what the Minister has to say. I also look forward to hearing from my hon. Friend the Member for Wimbledon, and indeed from other Members.
During our consultations over the past week or so, we have found some museums and charities that were unaware of the proposed changes, despite the obvious work of the representative groups. That in itself is slightly worrying: there is a risk that some smaller
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museums whose representatives may not read the Finance Bill with the alacrity of other people in the country will be caught short. As the revenue is important to them, that would be a shame. I hope that the Government will deal with the matter, if they are determined to press ahead.
I ask the Minister to give serious consideration to, in particular, amendment No. 35. It allows the Government to achieve what they want to achieve, in part, but it also hopefully removes the threat to the viability of some smaller independent museums that do not rely on Government or regional subsidy to remain in business, unlike museums that are effectively free at the point of use.
With that genuine plea to the Minister, I shall end my speech. I shall listen carefully to what others have to say.
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