Session 2010-11
Publications on the internet









Evidence heard in Public

Questions 117 - 224



This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.


The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the Public Administration Committee

on Wednesday 16 February 2011

Members present:

Mr Bernard Jenkin (Chair)

Nick de Bois

Charlie Elphicke

Paul Flynn

Robert Halfon

David Heyes

Kelvin Hopkins

Greg Mulholland

Lindsay Roy

Witnesses: Justine Greening MP, Economic Secretary, HM Treasury, and Nick Hurd MP, Minister for Civil Society, Cabinet Office, gave evidence.

Q117 Chair: Welcome to our two witnesses. Could you identify yourselves for the record, please?

Mr Hurd: I am the Minister for Civil Society, Nick Hurd.

Justine Greening: I am Justine Greening, Economic Secretary to the Treasury.

Chair: Thank you both very much for coming today. It is very much appreciated. The session was originally provoked by the publication of the "Funding the Future" report by the National Council of Voluntary Services, which first raised the concern about how the voluntary sector will cope in the present era of public expenditure restraint. That debate and the debate about the Big Society have taken off in the intervening period, so this is a very topical session. We will ask you questions about the Big Society as well.

I would just like to add that we do understand that, as a Treasury Minister, you’re somewhat constrained as we approach the Budget in what you can say, but we are very grateful to you for being here to engage in the debate. Though we accept there will be qualifications to what you say, but we hope that you will be free to give your personal views on some of these matters.

Q118 Robert Halfon: Good morning. There are a lot of definitions out there of the Big Society, and the words "social capital" and "community" are used quite a bit. What is your definition of community?

Mr Hurd: It is where we live, where we share space and, often, where we work together-networks of people.

Q119 Robert Halfon: When we talk about social capital, what is meant by that? What is strengthening social capital?

Mr Hurd: Bridges of trust between people.

Q120 Robert Halfon: If you had to give a doorstep definition of the Big Society, what would that be?

Mr Hurd: For me, it is about transferring real power to our constituents.

Q121 Robert Halfon: What about the people power element of it? Can you expand on that a bit?

Mr Hurd: The question is, why? You’ve asked for a snapshot but, as you know, the concept is much more complex and doesn’t lend itself to the snappy soundbite-it’s bigger than that. What the Government and the Prime Minister argue passionately is that if we are going to get serious about tackling the deeply entrenched social challenges that the country faces, which are massively expensive, not only in financial terms, but, more importantly, in human terms, we have to be honest and realise that big government failed and we need a different solution. It is a journey and it will not happen overnight, but we are working towards a much more effective partnership among a more open and realistic Government, a more socially responsible business community, a resilient and independent civil society, and us-as active citizens in communities who genuinely feel that the Government are on their side and want to encourage and support them, rather than, "Computer says no."

Q122 Robert Halfon: As far as the strength of the social capital is concerned, what are the Big Society measures?

Mr Hurd: Let me start from an important premise: it is absolutely vital that the Big Society opportunity-the transfer and decentralisation of power, the form of public services, and everything we are doing to encourage and support people who want to get more involved-is available to everyone.

I think that members of the Committee will recognise that we have very different types of communities in Britain. I am lucky enough to represent a relatively affluent part of the country, where the social capital is rich and communities are well organised. With a bit of retuning, I think that they can seize the opportunities that will be presented, but we recognise that there are other communities in the country where that is less obvious. There may well be social capital, but it is less visible. There may be less of a tradition of self-help and self-reliance.

The Government is very clear that we need to be proactive in trying to support those communities and unlock the capacity in them to seize the opportunities. In direct answer to your question, that is the focus of the programmes that we are running on community organisers and our new neighbourhood grant fund, which is about putting small amounts of money into the hands of neighbourhood groups to help them to implement their own plans. There is also the work that our colleagues at DCLG are doing on the Sustainable Communities Act, in which I have a strong personal interest, and on encouraging communities to come forward to say, "We want to do this, but this is getting in our way, can you take it away?" That is increasingly what the DCLG is being retooled to offer communities.

Q123 Robert Halfon: Do you agree with what has been described, which is that the Big Society is about incentivising social entrepreneurs as much as Governments have tried to incentivise economic entrepreneurs? If so, how are those social entrepreneurs meant to be incentivised?

Mr Hurd: Again, I think that the premise is right. The context is that we all know that we are living through an extremely challenging time, because there is less money around and we need to find different ways of doing things. There is virtually no organisation in the country that is not rethinking what it does, why it exists or thinking about better ways of doing things.

In this country, we are extraordinarily lucky to have a group of people, or a network of people, who you can call social entrepreneurs. Such people get up in the morning, thinking about taking risks to try to find different ways of helping people, and they need more support. We are giving priority to trying to give them easier access to capital-patient capital, which is money that will back them for a period of time, so it is not just about scrambling around for grants here and there. It is about patient capital that will back them and it is also about advice on how they use that capital most efficiently. That is at the heart of our strategy to grow the social investment market, which we published this week, and that’s at the heart of the Big Society Bank project.

Q124 Robert Halfon: Some people say that one reason why it has been hard for the Big Society definition to catch on is that there has been a lot of confusion, and that there are so many people in government and around it who are responsible. As well as yourself, there is Francis Maude, Oliver Letwin and Lord Wei, and there are the new Big Society ambassadors, and the Big Society Network. There is a lot of confusion about who is actually in charge. Should there not be one person in the Cabinet who is a kind of Big Society enforcer and who has real power to implement the Big Society, and to help implement it across government?

Mr Hurd: I have reservations about that, because it plays to the misconception that this is just a Government programme, and that this is something top-down that is being imposed. Actually, for this to succeed, it is about the human response at grass-roots level.

On the role of Government, the Big Society is cross-departmental, and the Prime Minister has made it clear that this is not just a Cabinet Office responsibility. It is for every Department to be thinking about what it is doing to transfer power and engage citizens. There are lots of Big Society Ministers, and believe it or not, we have a Big Society inter-ministerial group, with 14 or 15 people sitting around the table. In terms of the co-ordination function that you might expect, the Cabinet Office has a lead role to play. As far as ambassadors are concerned, as you say, it can be a difficult thing to get across. In some way, it’s a new message from Government; it’s not what we’re used to hearing, and we feel that we need more people out there telling the story.

Q125 Robert Halfon: Part of the problem is that you get slightly different definitions from each person. Whenever the news interviews a person responsible for the Big Society-whether ambassadors, Lord Wei or whoever-each person gives a slightly different definition of what it is, which doesn’t help.

Chair: The Prime Minister is in charge.

Mr Hurd: Yes, the Prime Minister was in charge, the last time I looked.

Q126 Lindsay Roy: Good morning. Why do you think that the Mayor of London has apparently described the Big Society initiative as a pile of piffle1?

Mr Hurd: I have absolutely no idea whether he said that, but if he did, I disagree. Again, I look at it through the prism of my constituency. I think we have barely tapped the potential of what could be achieved if Government, business, the voluntary and community sector, and people in the community who have things to contribute are engaged together more. We have barely scratched the surface, so I do not call that opportunity piffle. Nor do I describe as piffle the huge amount of work that is going on across Government to try to enable communities and to transfer this power. Some of that hasn’t been visible, but a massive amount of work is ongoing across Government, so this isn’t piffle. It also goes with the grain of what people want, which is to have their voices more respected and to have more influence over what is really important to them. They want to feel better connected in communities and to feel part of something bigger. None of that sounds like piffle to me.

Q127 Lindsay Roy: On Monday the Prime Minister felt it necessary to relaunch the initiative. What have we learned that is new to help facilitate our understanding and indeed, the impact?

Mr Hurd: At the very least, the public saw a Prime Minister who burnt with conviction on this issue. That hasn’t always been the case, and he is absolutely determined to continue down the path of giving our constituents real power. It will become more evident as, if you like, action follows the words about what that actually means. You know, everyone here knows as well as I do, that Greg Clark is sitting in Committee taking the Localism Bill through clause by clause. This is real legislation enabling and transferring real power. As people begin to understand that more, to touch it more and to see more activity on the ground-this isn’t going to happen overnight, Mr Roy, I think you know as well as I do-people will begin to get it more. What they heard at the beginning of this week was the Prime Minister absolutely committed to giving them more power.

Q128 Lindsay Roy: There are few who would argue with the mission statement. I think that the difficulty is that people find it challenging to see how that would translate into effective practice and implementation on the ground. Do you have further advice to us about how that’s going to happen-a coherent strategy?
Mr Hurd: In terms of what Government are doing-we must never lose sight of the fact that it isn’t about Government alone. The picture I was trying to paint was about a much more effective partnership between the various elements in society. But in terms of, if you like, what people expect now, what are Government doing about this? The Prime Minister has made it very clear that this isn’t a case of the Government just stepping back and expecting thousands of flowers to bloom. We have an extremely big role to play.
There are three strands of Government action. The first is about transferring real power-that has already started in terms of information. Every MP now knows the power of transparency. Information is a huge power tool, and whether it is crime maps or information about local authority chief executive salaries, more information is going out into the public domain. I think people are spotting that. In terms of new rights and opportunities at community level to get things done and take things over, if that’s what people want, again, the Localism Bill is the specific, complex, big piece of legislation, but I think people are beginning to tune into that now. That is the first strand-transferring real power to communities.

The second strand is about public service reform. Again, I think that people are beginning to sense what’s driving that: the desire to open the public service markets and get the citizen engaged more, liberate people in the front line. Various elements are coming out now: support for mutuals and social enterprises within the public services. I have visited one-it’s real. I’ve looked into the eyes of two nurses who have done this, and you can sense that something very different and very important has happened. They feel completely liberated. You get a sense of the potential here. People are increasingly aware of the right to set up new free schools. That could be very ambitious and scary for some people, but 250-odd groups have already signed up to try to do that. People are aware of the transfer of power to GPs-that’s all about bringing those decisions closer to patients. Again, as that becomes clearer, people will begin to understand what community budgets, what personalised budgets are. This is the whole direction of travel.

Chair: Minister, you’ve given us some very full answers. We’re going to have to move a little bit faster.

Mr Hurd: I’m sorry.

Chair: I thought it was important that you should have that freedom to start with.

Q129 Lindsay Roy: This is not completely laissez-faire, though. It requires careful and considered co-ordination, would you agree?

Mr Hurd: It requires careful co-ordination; it requires recognition that Government has a role to play in helping citizens respond to these opportunities.

Q130 Lindsay Roy: And inspirational leadership at political level and through to our communities?

Mr Hurd: I think that inspirational leadership was on display this week. It is certainly there and I don’t think it is going away.

Q131 Chair: Isn’t part of the problem with communicating this idea, that in fact it is a very old idea, and it’s an idea that already exists and a very strong tradition in our society? It is almost as though the Prime Minister was doing a bit of "motherhood and apple pie", and stating the obvious, though perhaps the obvious has become a bit squeezed out by big government. Do you think that is a fair description?

Mr Hurd: Let me put it in this way. We’re not inventing something here. The idea of giving power to the people is one of the oldest political slogans in history. I think the difference here is that we are absolutely serious about it. But nor is it just about encouraging people to get involved in traditional volunteering. You would be entirely right, Mr Chairman, in pointing out the fact that across the country there are networks in place of people doing extraordinary things to help people and improve lives and communities. The Prime Minister has made it quite clear that we need to recognise and value that. It’s about building on that. But it is more than that-what I was trying to get across is that we want to get people involved in more than that, involved in really trying to shape the decisions that influence the future of the community, such as getting involved more in the planning process. We want to get people more involved in shaping-and yes, even delivering-public services. That’s the change. That’s where I think it’s bigger and more radical than just encouraging volunteering, however valuable that is.

Chair: Before we move on, three very brief questions. Mr Mulholland.

Q132 Greg Mulholland: Very briefly, Nick, you have said that you are trying to get away from this "computer says no" idea, and a lot of the discussion today will be about the funding concerns and whether the Big Society will deliver. However, a lot of the Big Society can be delivered without the Government spending a penny. The planning system currently says no to local communities, so why on earth have the Government backtracked on the commitment in both the Liberal Democrat and Conservative manifestos to give communities a real say over the planning system by abandoning the third party right of appeal?

Mr Hurd: It is not my specific policy area, but if you had Greg Clark here, he would launch into a passionate exposition of his determination to get neighbourhoods and communities involved in the planning process. Indeed, that is a large part of the Localism Bill, in terms of trying to encourage and enable neighbourhoods to develop their own plans, which then need to sit within local authority frameworks and suchlike. I know from my own constituency that one of the biggest frustrations in the community comes from the difficulty of getting voices heard or getting involved in the planning process. It feels like decisions are taken too far away from the community, and that is what Greg Clark is trying to change.

Q133 Greg Mulholland: I have a debate this afternoon specifically about pubs in the planning process. Do you share my disappointment that the Localism Bill as drafted will do nothing to stop pubs being demolished-or turned into a Tesco for example-with no planning permission needed and therefore no consultation with the community whatsoever? Could I discuss that with you so that we can put some pressure on Greg and the team?

Chair: Briefly.

Mr Hurd: I am very happy to have that discussion. All I would say is that the Sustainable Communities Act 2007 and that process is a mechanism to allow local communities to continue to press that agenda, if they want to.

Q134 Charlie Elphicke: The whole discussion about the Big Society seems to be thrusting policy downwards. Is it not the essence of the Big Society that no one cares about my backyard more than I do? For example, in my own constituency we have a Big Society project to take over the port of Dover.

Mr Hurd: I’ve heard of it.

Q135 Charlie Elphicke: Is it not important that we say to communities, "You come up with the ideas; we will let 1,000 flowers grow," and emphasise that it should be more bottom up and that the grassroots should bring forward these ideas and be encouraged?

Mr Hurd: Yes, that is the thrust of the message, and it’s quite a big culture change, but I strongly believe that there are people and leaders in communities who will respond to this opportunity. That is what we are trying to reach. I use the example of our neighbourhood grants programme: if you want to get something done in your neighbourhood, here’s access to a pot of money that will enable you to get that done, start a journey of pulling the community together, and think about more community action.

Chair: Forgive me, but I think the word "yes" would have done.

Q136 Robert Halfon: One of the problems we’ve had has been with the voluntary sector, and I’m not just talking about it being upset about the cuts and so on, which is expected given the current economic climate. Do you think it might be a good idea-I don’t know if you’re doing this already-to have, with every domestic piece of legislation, an impact assessment on the Big Society to look at its impact on communities and the voluntary sector? That would be a way to bring the charities and voluntary sector on board.

Mr Hurd: I can take that back to the Cabinet Office to think about. I’m trying to get across that there is a strong effort to try to co-ordinate Government Departments so that they think about their policies through this prism.

Q137 Paul Flynn: We are starting on a journey where 1,000 flowers will bloom. Is this Mao Tse-tung with sprayed-on rhetoric?

Mr Hurd: All I’ve tried to convey is that this is about quite a big culture change, and we have to manage expectations-

Q138 Paul Flynn: No it’s not. Every idea that you’ve come up with has been put forward by Governments over the last 40 years, at least. I’ve yet to hear anything new.

Mr Hurd: I think I was trying to make the point that lots of Governments have talked about this, but we are determined to try to deliver.

Q139 Paul Flynn: Do you really think that someone like you-the son of a Cabinet Minister who represents leafy suburbs-could come down to constituencies that many of us represent, where the parents’ generation lost their jobs in the coal and steel industries, and where the younger generation is being sacked because of the cuts, and tell them that they will be liberated by being allowed to work for nothing?

Mr Hurd: No, that is not what I am saying.

Q140 Paul Flynn: That’s what the reality is though, isn’t it?

Mr Hurd: This isn’t about Ministers; this is about what people in those communities feel they want to do for themselves to help each other, and it is sending a signal to them that, actually, the Government is on your side.

Q141 Paul Flynn: I’ve been here under six Prime Ministers and they’ve all had strange ideas at some times-this one is very reminiscent of John Major’s cones hotline. It was ridiculed by his colleagues in the same way as you can hardly talk to one of your representatives over a pint of sarsaparilla without them sneering at this idea of a Big Society. Isn’t it about time that someone told Emperor Cameron that his idea has got no clothes?

Mr Hurd: No, and he will tell them that he is absolutely committed to this. I think you’re underestimating the interest at community level-

Paul Flynn: All you’ve got to offer is-

Chair: Let the Minister answer, please.

Mr Hurd: I think you’re underestimating the interest at community level for more space and freedom to get involved and get things done.

Q142 Paul Flynn: We’ve all seen brilliant politicians in our lifetimes who have produced rhetoric and convinced audiences that black is white and that truth is lies. We could give a long list of them. Tony Blair was the last one. He took us into war on the basis of what we know-with absolute certainty this morning, as the newspapers are telling us-was a lie. Your leader produced a bit more rhetoric this week. He was certainly impassioned. He was strong and convincing, but that is it-it’s a veneer; it’s a nothing. We’re getting a number of stale ideas, many of them worthy, and you’ve put them together into a little package and tried to sell it, but the result has been public ridicule.

Mr Hurd: The Localism Bill is not a veneer. The increased amount of information in the public realm is not a veneer. The public service reform White Paper, when it comes out next month, will not be a veneer. The Big Society Bank is not a veneer. This is serious. These are words being backed up by action.

Q143 Chair: Moving on, isn’t the difficulty that the rejuvenation of this old idea is coinciding with very severe pressures on the public sector? In particular, after a period of very rapid expansion of funding for charities from the Government-such that I believe 52% of charitable income comes directly or indirectly from Government these days, and that has risen very sharply-that is now going to be very substantially cut back. We have got a very large number of major charities who feel that the Big Society rhetoric is a cover for what they feel is an attack on their existence by the reduction in funding.

Mr Hurd: A question?

Chair: A question.

Mr Hurd: Obviously, that voice is being heard. If I may correct a statistic, the latest information I saw is that the sector receives about 36% of its income from the state. Either way, the basic premise is right; that is where the growth in income has been for the sector. In response, we should never forget that the vast majority of organisations in the voluntary sector do what they do with no money from the state. Most of our constituents might be quite surprised that the sector receives around £13 billion a year of taxpayers’ money-that’s before gift aid. And you’re right, Chair, that that is going to reduce. We do not have, and no one has, a hard number on what the scale of that reduction is going to be, but it is quite clear-we have always been upfront in saying this-that the sector cannot be immune from this process as the scale of the challenge is too great. What we are trying to do at the Cabinet Office and the Office for Civil Society is to play our part in trying to help the sector manage through this very painful period of transition. There is a lot of detail that we can go into, but the biggest element is the £100 million Transition Fund-taxpayers’ money-on the table.

Q144 Chair: We will come to that later. Economic Secretary, could you talk about the Government’s spending priorities? I imagine a great many of the public who depend on the funding that charities get from the state would feel, for example, that the funding for the charitable sector should be protected, perhaps at the expense of overseas aid, which is being protected and dramatically increased, or indeed of a very large net contribution to the European Union, which is being increased by 217% over the planned period at the same time as charitable funding is being cut. How do you justify these spending priorities?

Justine Greening: First, the commitment to overseas aid is actually to meet the 0.7% of GDP target so, of course, unless we get the economy back on track, overseas aid won’t be able to increase, but we think that’s an important commitment that we made prior to the election.

Q145 Chair: But overseas aid is clearly more important than funding for these charities in the Government’s view?

Justine Greening: There is significant support for charities from the Government, not least through the tax system, which I am sure we’ll come to shortly. As Nick Hurd said, we put in place a £100 million Transition Fund because we know that, for some charities, these are particularly challenging times, and we want to help those involved at the local level in providing services. We have also put in place national citizen service pilots. We have community organisers and a Communities First fund. There is a range of support for charities, not least outside the tax system.

I completely agree with you about the EU budget, and the Government are working as hard as they can to secure a reduction in that over the short, medium and long term.

Q146 Chair: The Government agreed it, and there is going to be a very large increase in the net contribution to the EU. I should imagine that if the Big Society had a vote on the matter, they would rather fund Sure Start, community transport schemes and social enterprises in the inner cities than a bloated EU budget. Are the Government doing enough about that?

Justine Greening: I am sure that many voters will share my utter dismay and frustration at the last Government’s decision to give away part of the abatement, which is now costing us approximately £2 billion a year. That is one of the main reasons why our EU budget contributions are going up. Like many people in Britain, I find the deal that was done by Tony Blair as Prime Minister totally unacceptable.

Q147 Kelvin Hopkins: I agree entirely. If the Government were serious about it, could we not just give notice to the European Union that we were going to go back to the previous arrangement and reduce our contribution to what it was before Blair did his giveaway?

Justine Greening: At the risk of straying off the topic, under legal arrangements with the EU, we clearly can’t simply not pay the money. I assure you, Kelvin, that, as you know, we are working very hard to achieve a number of things: first, to reduce the EU budget; secondly, to see it spent on things that add value; and, thirdly, to protect the abatement.

Chair: I think that we should move on.

Q148 Kelvin Hopkins: I have a simple question. What research evidence is there that consumers-our voters-want to have services delivered by charities and volunteers rather than by publicly elected bodies and professionals? Are they not like me? I want to pay my taxes to local authorities and central Government and get them to provide good services as they are democratically accountable.

Justine Greening: What is important is giving people the choice. I am sure that Nick Hurd will have some views on this, but whether you talk to charities or to local authorities-or indeed to the people whom they all serve-people want choice. Often, they find that they prefer getting their services delivered by local charities. Again, I am sure that Nick Hurd will have more information on this, but if you look at other countries that have already gone down this path-places such as Australia-they have challenged whether they can get charities and non-government organisations more involved in providing services. In fact, now that Australia has gone down this road, I am pretty sure that one of the largest providers of adult social services is the Salvation Army.

Q149 Kelvin Hopkins: The Salvation Army was invented in the 19th century to deal with appalling poverty and the public services were invented to bring in a professional and accountable system. Again, there is a problem of accountability with the voluntary sector.

When local authorities do not measure up, the MP gets on to them and you can get the newspapers on to them-and we don’t vote for them next time round. It is the same with the Government. If a local voluntary body or a charity fails to provide, the national reaction is that the Government have to do something. People inevitably turn to the state when the private or voluntary sectors fail. Should we not accept that the modern age is an age of professionally provided services that are accountable democratically?

Justine Greening: We should be aiming for services that actually work for people on the ground. Local authorities are increasingly-and rightly-looking at how they can commission them in a way that works better for their local taxpayer. There is still the accountability, but there is more of an ability for them to structure their services at the local level to work for people. If, for whatever reason, people feel more comfortable with their services being delivered by the charitable sector-perhaps it already has expertise in dealing with particular people within the community-it should be able to get on with that.

Mr Hurd: When it comes to the really tough stuff-getting the long-term unemployed back into jobs, getting people off drugs or keeping people out of jail-the evidence is beginning to build that the really valuable work is being done by charities and social enterprise. Why not try to create the space so that they can compete in the market? It is about not just giving people choice, but giving value to the taxpayer.

Q150 Kelvin Hopkins: If you are talking about choices, you are coming back to my original question. What research has been done to ask whether people want that, or want good, professionally provided public services that are paid for out of general taxation and free at the point of need?

Justine Greening: Ultimately, as has already been said, people have their voice at the ballot box. If they are unhappy with their services, they will get a group of councillors that gets them better services.

Q151 Nick de Bois: I would like to build on that. I apologise if I sound like I’m rambling. I will try not to, but I want to give the background to my question, which is addressed to you, Mr Hurd. One of the most common phrases that I have come across over many years, particularly over the past five years, has been people in the public sector saying, "I could run this better and more efficiently and get better outcomes." The Big Society concept will allow people to be free to do just that.

I passionately support that. Government can pull levers to put that opportunity in place. I accept that the public must have the confidence and do the take-up. However, I am worried about one thing. What can you do to ensure that officials, who for years have been under the command and control of the public services and who have delivered everything through the public services, trust the public, sometimes with money? That can be at local authority level and Government level. We are trying to overturn years of institutional behaviour. How long will it take and do you think that you can facilitate that through all aspects of government, local and national?

Mr Hurd: It is a challenge. It is a culture change. We have things that we can do. The Localism Bill contains a right to challenge existing provision, which is important. You are right to pinpoint the human dimension to this, which is why we are, through the Office for Civil Society, investing in the training of commissioners and a partnership improvement programme, which is about bringing together commissioners and civil society providers to try to develop better mutual understanding and break down some of those barriers that exist, in the name of wanting to facilitate more choice and competition and trying to create the conditions whereby the tax payer, who uses the public services, gets a better result.

Q152 Nick de Bois: One more question linked to the funding. I am beginning to sense that there is almost a sense of powerlessness over stopping local authorities effectively choosing to cut some of the voluntary services. There are obviously powers from the centre. It seems that we have to champion that argument locally. Is that also a reflection of local government being reluctant to let go of the chains of control and command? Do you feel powerless and that you cannot do more?

Mr Hurd: You’re right to highlight a problem; this is about local choices. It is a mixed picture. I have colleagues bringing in their sector on an almost daily basis and it is a very mixed picture. Some local authorities take a much more constructive approach to this. They recognise that they have to do things in different ways and want to work with the voluntary and community sectors. Others are pulling up the drawbridge and protecting their empire, if I can put it that way, and making quite brutal cuts without any consultation. So it is a mixed picture. Apart from the Transition Fund, we can require local authorities to be transparent about this process-that was announced last Friday-so that people can begin to compare and contrast activity. The Prime Minister has sent a clear steer about wanting them to look at opportunities to make efficiencies and savings before making those cuts and many local authorities, like my own at Hillingdon, have done exactly that. It is about celebrating best practice and investing in that partnership programme that I talked about. So we do not feel totally powerless, but ultimately these are local authority decisions and they have to be free to make them.

Q153 Chair: That demonstrates the paradox at the heart of this. You are trying to localise and let go and then you have to tell the local authority what to do because they are not giving away enough freedom or decentralising themselves enough. How do you reconcile that?

Mr Hurd: This is awkward territory but the bottom line is that they are accountable to their communities. It is their decision.

Q154 Chair: Do you think the Civil Service has the necessary skill set to do this fourth skill of working with voluntary organisations? We know of exceptional people who work in the inner cities or communities but they are the exception in the public service rather than the rule because we do not generally train civil servants to undertake that kind of role.

Mr Hurd: You are right. This is about a culture change which cannot be turned round overnight but we are trying to encourage this. We will be announcing plans to encourage civil servants to do more community work and civic service.

Q155 Chair: Is there a programme for training the thousands of public servants who will be necessary to help deliver this culture change? What training is taking place?

Mr Hurd: A lot civil servants are doing a lot of work in their communities right now. We should recognise that. What you will be hearing are plans to encourage that further. We are investing in training of commissioners and a lot of it is about leadership at Department level. I mentioned DCLG before; they want to re-tune that Department to be less subservient to Ministers and more about providing help and support to communities.

Chair: It is about training and leadership.

Q156 Charlie Elphicke: Touching on the issue of the amount of public money charities have got, over the last decade the whole idea of charities walking the walk, rattling the tin, raising voluntary donations and dealing with need got lost in the desire to grab as much Government money as possible, advertise, campaign-publicly educate is the phrase that comes to mind-and pay their chief executives in many cases £150,000 or more.

Nevertheless, the adjustment, while correct, making the charities go back to walking the walk rather than talking about help and need, is going to be a difficult challenge for many charities. How much of a safety net will the Transition Fund be to help voluntary bodies that are now working to cover the funding gap?

Mr Hurd: It’s £100 million. We are looking at whether there are any opportunities to top that up but there is very little money in the system. It was designed to get money out as quickly as possible to organisations that are extremely dependent on public income but have aspirations to deliver more public services. We therefore had to set strict criteria for it. We had 1,700 applications and £170 million of demand against the £100 million and the Big Lottery Fund are processing those. We announced yesterday the first recipients of it. But the fund is designed to try to help those organisations to get out of a hole as long as they have a plan. It is about trying to manage a transition.

Q157 Charlie Elphicke: Following on from that, you’ve strict eligibility criteria. You have a deadline which passes before many of these charities know whether they are going to get money from the local authority and they are also in a situation where they will lose 3p in the pound donated by gift aid from the end of March. Do you think it might have been more helpful to leave it later and have more flexible criteria, or is this the way it has to be?

Mr Hurd: Our instinct was to try to make money available as quickly as possible with the minimum amount of bureaucracy attached to it. We also wanted to make money available in the current financial year; we had to move quickly to do that. So of the £100 million, £10 million is allocated for this financial year and £90 million for next. We decided to run one process so that we could provide this opportunity as quickly as possible.

Q158 Chair: Aren’t we in danger of tempting people to believe what cannot be delivered, which is that the Big Society will somehow replace the withdrawal of public funding from much of the charitable sector? The quantums are just completely different and the time frames are completely different. The Transition Fund is a mild amelioration of some of the problems that charities will face, but it cannot possibly compensate for the loss of income that they will suffer.

Mr Hurd: It’s not going to compensate fully, and we have always been quite clear that we can’t protect every single charity and voluntary group from a reduction in public expenditure, because the scale of the reduction that we need to make is so great. We have always been quite up front about that. We are absolutely committed to trying to find some public money to help the most vulnerable organisations manage a transition. I am absolutely sure that that was the right thing to do. Resources were limited, and we had to set some quite strict criteria.

Q159 Robert Halfon: Isn’t the purpose of the Big Society to support those really at the grass roots? Isn’t the criterion that you have set for the Transition Fund a little high? I think that it is from £50,000 upwards on the turnover of the charity. Many small, grass-roots charities, which do loads of great things in their communities-but don’t have public affairs budgets, don’t do political campaigning and don’t spend money on all sorts of things that bigger charities do-are going to suffer. Could you not have set the criterion lower, at £20,000, to make it more amenable to grass-roots charities?

Mr Hurd: The thing is we had to set some limits, and that was the limit that we chose. The data show that it is above that level that dependency on state income grows. We had to make a tough choice on where to set the threshold, because resources were limited.

Q160 Paul Flynn: What will happen if the European Commission doesn’t approve of the Big Society Bank?

Mr Hurd: We are not currently working with that scenario. We have no reason to expect that.

Q161 Paul Flynn: You may not, but it is a possibility.

Mr Hurd: As I say, we are absolutely not contemplating that scenario.

Q162 Paul Flynn: You could be walking off a precipice, and you are deciding not to notice that there is a precipice there.

Mr Hurd: In which case, we will have the £200 million that has been committed by the largest UK banks. That’s on the table. It is permanent capital and it is there. But, as I have said, we are working on the assumption that we will not have a problem with the EU. It’s just that we don’t know quite how long that will take.

Q163 Paul Flynn: What sort of social enterprise will it favour? Have you any clear idea of how it will borrow, and on what interest rates?

Mr Hurd: For your information, we published a strategy document.

Q164 Paul Flynn: If you don’t know, please say.

Mr Hurd: It’s not a question of not knowing. I am just trying to signpost you to a document that sets out the strategy for the bank, and which will answer a lot of detailed questions for the Committee.

The bank is designed to make it easier for social ventures to access capital, whether they are charities with trading arms, social enterprises or social firms, but it will invest. It’s not in the grant-making business; it will invest on the basis of some economic return. In order to grow the market that it is trying to grow-social investment, and money that’s prepared to blend financial return with social impact-it has to be able to invest for the long term, and it has to be able to take differentiated risk.

Q165 Paul Flynn: Will it pay a dividend? Will it take in loans?

Mr Hurd: No. It will be a wholesaler, because that is what is enshrined in legislation, and that is what the market, after extensive consultation, wants. It will invest through specialist social finance intermediaries in the market, making it easier for them to access capital-

Q166 Paul Flynn: If you don’t know how it’s going to work, what gives you any faith that charities will be able to afford to borrow from it?

Mr Hurd: I do know how it is going to work. I have pointed out a very well-thought-through and worked-through strategy document that explains a complex proposition in a great deal of detail. It’s not just about charities borrowing; it’s about social enterprises accessing capital.

Q167 Paul Flynn: Will it back those enterprises that are entirely social in their aims, or those that have a business or entrepreneurial nature and are likely to be profitable?

Mr Hurd: I would expect it to be able to invest across a spectrum of risk.

Q168 Paul Flynn: You expect, but you don’t know.

Mr Hurd: Let me explain. This bank will be independent of the Government, and with a locked-in social mission, but its mission is to grow the social investment market. It will exist to try to fill in the market gaps. That means that it will take risks that the current private sector is not prepared to take. It is not there to duplicate or compete with private capital that is deployed at the moment. It is there to try to fill a gap, which is to help social entrepreneurs to access capital. Whether that be in the form of loans, bonds, equity or quasi-equity, across the spectrum it is going to have as much flexibility as possible. That is why it is important for it to be independent of Government.

Q169 Paul Flynn: The Government have taken £5 billion from charities. How could this piddling amount possibly compensate for that loss?

Mr Hurd: Please give me any science behind that £5 billion.

Q170 Paul Flynn: It’s the figure that is generally quoted. I would be happy to write to you-

Mr Hurd: It’s a totally speculative number, not based on any evidence at all.

Q171 Paul Flynn: It’s one that has been quoted to us by people who are in the business of charities. If it is not £5 billion, what is it? Is it £4.9 billion? What is your figure? How much income are you taking from charities in direct Government cuts and from local authorities?

Mr Hurd: You will know that a lot of these decisions have not been communicated. Some of them have not even been taken; they are under discussion. What I am trying to say-

Q172 Paul Flynn: If you’re disputing my figure-

Mr Hurd: What I’m trying to say is that no one has a real number. Will it be more than £100 million? Yes, of course it will, but no one has a definitive number. The Big Society Bank is a very big opportunity. We expect it to have around £600 million of capital to be able to support the social entrepreneurs that Mr Halfon was talking about. It’s not a replacement for grants; it’s about trying to build a third pillar of funding for the sector which is social finance. It is an opportunity to connect social entrepreneurs with mainstream capital sitting in mainstream financial institutions; at the moment, they are not connected at all. There is a small eco-system of intermediaries that is trying to make this connection work, structuring products that deliver social impact and a financial return. That is what we want to encourage and grow, without overstating it; it is a small market.

Q173 Chair: Is there a paper on this that would help us understand how the Big Society Bank is going to work? There are still quite a lot of unanswered questions.

Mr Hurd: We published it on Monday, and it is available on the Cabinet Office website. I’m happy to leave a copy or send you whatever number of copies you would like.

Chair: We may have supplementary questions on that. Mr Flynn, do you have a final question?

Q174 Paul Flynn: Clearly, you are refusing to anticipate any problems with this bank. You haven’t answered any of the questions raised by people when that paper was published about how it is going to work. It is clearly a half-baked idea where you decided to ignore the possibility of the European Commission turning it down.

Mr Hurd: Mr Flynn, you haven’t read the document, so you can’t tell me that I haven’t anticipated the answers.

Q175 Chair: Can I pursue that last question, because there is a decision to be made? When do you expect the EU to make that decision?

Mr Hurd: We can’t be absolutely sure about that, but our working assumption is about six months.

Q176 Paul Flynn: Can I get a figure from the Minister? He has disagreed with the £5 billion figure. What is the figure?

Mr Hurd: I’ve told you that no one knows for sure today, because a lot of these decisions have not been taken, let alone communicated. It is not possible to have a definitive number.

Q177 Paul Flynn: Isn’t the most convincing evidence you have to offer this morning that the merit of the Big Society has resulted from the experience you had when you were staring into the eyes of nurses? Many of us have had interesting experiences staring into the eyes of beautiful women. Is this the way you reach your conclusions?

Mr Hurd: I genuinely don’t understand the question. All I am trying to convey is that I looked into the eyes of two people who were absolutely committed to what they were doing, who, because they were freed up to deliver what they were doing in a different setting, in a social enterprise, felt absolutely great. You could feel the change. I just left with that feeling, and I would like more people to have that opportunity.

Q178 Robert Halfon: Going back to transitional funds, I am still concerned that they are going to support a charity Tesco’s as opposed to the charity corner shops. Such fat-cat charities have loads of money already. Is the bank designed to help those smaller grass-roots charities that don’t have political lobbies or access to Whitehall and people like you, as the bigger charities do, so that they will have real access to funds? I am talking about small charities that may have tiny budgets-that funding will make a huge difference-such as, dare I say it, the Balsall Heath Forum and other organisations.

Mr Hurd: Please let’s not lose sight of the community first programme, which is about small grants to local communities, backed up by a matched endowment scheme of, I think, £50 million of capital to try to stimulate local endowments. That is all about getting small grants to local communities. I want the bank to be accessible to social entrepreneurs of all shapes and sizes. However, its decisions will be driven by the quality of the investment proposals put to it and structured by specialist intermediaries in this area. They exist and they are working. The document is full of real-life examples of people structuring investment opportunities that will be applicable to small organisations as well. The bank has not been given a steer in terms of small versus large. It is about the quality of the investment proposition.

Q179 Robert Halfon: I don’t want it to be hijacked by the bigger charities that are better at lobbying.

Mr Hurd: I understand that point.

Q180 Robert Halfon: You talked about the Big Lottery Fund. Would it not be a real part of the Big Society to let people, when they bought their lottery ticket, have some say on the money that went to their local community-so that they could choose when they bought a ticket?

Mr Hurd: That is an interesting idea. The Committee should be aware that departmental sponsorship of the Big Lottery Fund is being transferred to the Cabinet Office. We will shortly publish a consultation document on the future policy direction for the Big Lottery Fund, which has not been reviewed for some time. That will be an opportunity for the sector and interested parties to take a view on the priorities of the Big Lottery Fund.

Q181 Chair: Moving on, could you tell us when you expect to appoint a chief executive of the Big Society Bank?

Mr Hurd: We have announced that we are being advised by Sir Ronald Cohen-a name that might be familiar to you-and Nick O’Donohoe, who was head of global research at J.P. Morgan, on setting up the bank, and they will be coming up with proposals for its leadership.

Q182 Chair: When?

Mr Hurd: Soon.

Q183 Chair: Days, weeks or months?

Mr Hurd: In terms of leadership, I would expect that to be weeks.

Q184 Chair: Moving back to the role that we expect charities to play in the provision of public services, is it the policy of the Government that charities should expect to be paid less than commercial organisations for delivering public services?

Mr Hurd: No.

Q185 Chair: Is that not how charities win contracts-by bidding less?

Mr Hurd: It depends on your definition of value. As far as I am concerned, commissioners should be free to assess them on cost and potential impact. I don’t think there should be a presupposition in that process that charities necessarily have to be cheaper. It is a competitive marketplace. They often are cheaper, but that does not have to be the presupposition.

Q186 Chair: What do you say to charities that say that the Government are trying to replace state funding with charitable giving?

Mr Hurd: The coalition Government have a stated commitment to try to make it easier for charities and social enterprise to participate in public services. We would like to make it easier for those organisations to compete, for reasons that we have stated. Alongside that, we have to underpin the long-term resilience and independence of the sector. That is why we are putting a lot of effort into thinking about how we can encourage people to give more time and money in the Giving Green Paper, which will go into the White Paper. That is why we are investing so much time and effort in setting up the Big Society Bank as a source of independent capital for the sector. Those things move together in parallel.

Chair: Let’s talk about the Giving Green Paper. Mr Halfon?

Q187 Robert Halfon: What is the role of Government in supporting individual charitable giving? How would you define the role?

Justine Greening: As you will be aware, tax is one of the ways in which we already support charitable giving, and one of the ways we support charities. Alongside the US, we have one of the most generous tax systems in the world. We gave about £3.2 billion last year.

Q188 Robert Halfon: That is still dwarfed by comparison with the US. US philanthropy is huge compared to ours.

Justine Greening: That’s an interesting point. If you look at the world charitable giving index, a higher proportion of UK people give to charity than in the US. I think you are right: one of the things we would like to do is encourage philanthropy. That is something that the Cabinet Office and the Department for Culture, Media and Sport are interested in.

Q189 Robert Halfon: Many charities, particularly bigger ones, are not clear in their accounts on how much they spend on administration, public affairs and corporate affairs. Do you think that tax relief and gift aid should be increased for charities that do more front-line activities, and restricted for those that spend most of their time campaigning? Do you think that there should be a requirement for charities to be absolutely transparent in their accounts-I am talking about bigger charities-and about where their money is spent?

Justine Greening: I understand the premise of your question. The way in which we have structured a lot of our tax relief to support charitable giving is at the donor level. What gift aid does is match up with a donation from an individual. It is their choice where they want to make their donation, and gift aid follows that.

I completely agree that the more transparency charities can give on where they spend their money the better-and probably the better for them, in terms of their being able to get donations from people in the future. I would have thought that most people would want to see the money that they are giving to charities go to the front-line cause which that charity is meant to support, rather than on administration.

Chair: I think Mr Roy has a question on gift aid.

Q190 Lindsay Roy: Voluntary sector groups are rightly disappointed by the lack of urgency on reform of gift aid. Is that on the radar? Is it in your plans for electronic filing?

Justine Greening: You’ll be pleased to hear, Lindsay, that over the course of last year, we had in place a group of people from all parts of the charity sector, called the Gift Aid Forum. One of the challenges is that it is very broad-you go from small, grass-roots charities to huge multinational organisations, such as charities for the arts world. They have completely different profiles of donors and support. We got them all together and ran a Gift Aid Forum over a period of months. They produced a report at the end of last year, which was very helpful. They did not propose wholesale reform of gift aid, but talked about how we could improve the bureaucracy, because there is a huge amount of paperwork. We are now taking forward a number of their proposals. For example, we are going to bring forward intelligent forms, which people can fill in online. It will hopefully mean that they will get the calculation right. It will be faster for HMRC, and I think we should have a by-product of helping us minimise fraud. You are right to flag that up as an issue. It is something that we have looked at, and we are going to make sure that we get some improvements.

Q191 Lindsay Roy: So, Justine, it’s on the radar. How quickly are we likely to see that implemented?

Justine Greening: We are already working on the intelligent forms. We have already responded to the gift aid report-I think it was right at the end of last year-so we are getting on with implementing the outcomes of that Gift Aid Forum report.

Q192 Lindsay Roy: So in time for the next financial year, or the year after?

Justine Greening: I am pretty sure that we are working on the intelligent forms over the course of this financial year for next year, but I will confirm that for the Committee. Like every department, HMRC has a very constrained resource budget, but I can assure you that we have put resources into improving gift aid.

Lindsay Roy: Thanks. That’s a very helpful clarification.

Q193 Chair: It’s pretty horrific-£8 for HMRC to process a gift aid claim. It has to be made much simpler.

Justine Greening: I couldn’t agree more. I signed off that parliamentary question myself and was similarly horrified to see the amount. It is one of the reasons why we were right to get on the case with the Gift Aid Forum to look at how we can generally streamline bureaucracy. I should be clear that the main driver for this is to reduce bureaucracy for charities, but I think you’re right: their bureaucracy ends up becoming HMRC bureaucracy. Hopefully, generally streamlining the system can be a win all round.

Q194 Chair: There must be quite a few gift aid donations that are sub-optimal, at that cost.

Justine Greening: Yes. A few donations will have been made that are less than £8 but, as you can imagine, the overwhelming majority of them are more. We always need to decouple what we want to achieve with gift aid from the processing. Hopefully, through the Gift Aid Forum and the helpful report that it produced for us, we can now start to take forward measures to make sure that we have a way more streamlined and less bureaucratic system by which to administer it, going forward.

Q195 Chair: The United States is way ahead of us. We have a good record on charitable giving in this country, but a substantially higher proportion of income is given by people in the United States. There is no doubt that tax relief is the main driver for charitable giving in the United States. What can we learn from the United States?

Justine Greening: They have a more developed philanthropic strand to their society. Arguably, it goes back to the days of Rockefeller. It is cultural, so it is not just tax relief. I talk to people who run museums; they know how the museum system works in the States and they know how the museum system works in the UK. They say that, if you want to be on the scene, as it were, in New York, it is really expected that you would have made big donations to key New York institutions, some of which would be art institutions, but others would be broader charitable institutions. I do not think that we yet have that culture in the UK, and it would be good if we could move towards it.

Q196 Chair: But it is horse and cart, is it not? If the tax incentives were right and, indeed, if taxes on high earners were less punitive, there would be more charitable giving in this country. There will not be a culture of charitable giving if people feel that they are being punished by the tax system.

Justine Greening: Overall, there are a number of different aspects, one of which is getting the economy back on track. If people have more money in their pocket, however much they earn, hopefully they will be in a better position to support charities. In terms of the tax system, obviously in the run-up to the Budget, it is probably not easy for me to talk about tax in relation to charitable giving, but if we look at how the US system works, it has a number of different tools that it uses to incentivise major donors. Some of the tools are quite complex. One of the advantages of the UK system is that, for all of the complexity or bureaucracy around gift aid, for the individual concerned it is very easy. All they have to do is fill in a little form.

In the States, yes, there is an awful lot of tax relief at the high end. On the other hand, with that comes a huge amount of paperwork and huge complexity of the tax system for those donors to navigate.

Q197 Chair: We had a witness before us a couple of weeks ago, Mr Hughes-Hallett of the Marie Curie Cancer Care charity. He pointed out that there are some really tiresome obstacles, for example, in the way of people gifting their houses before they die or gifting the pictures hanging on their walls, without having to be punished through capital gains tax. Are those the sorts of things that you are looking at? They are not in your Green Paper?

Justine Greening: Interestingly, there is a particular reason why tax did not feature in the Green Paper. It is because the Treasury does tax. If we were bringing forward tax measures in relation to education, we would not announce the broader education policy. Clearly, tax is something that the Treasury does. I have to say that, when I went back over the evidence that had been given by Tom Hughes-Hallett, he said that CGT was payable on gifts of work of art, but not gifts of shares. That is actually not correct. If you gift a work of art to charity, it is actually exempt from capital gains tax. Perhaps it will be helpful for him to read that in the transcript of my statement.

Q198 Chair: I am sure he will, but what about being able to gift your home before you die, as opposed to-

Paul Flynn: After you die.

Chair: Yes. We want to create incentives for people to transfer their assets to the charitable sector, rather than to the Government.

Justine Greening: You are right. We do have some incentives for people to give after they die. Of course, you are now getting me into the territory of what the Treasury might or might not want to do in the future.

Chair: We are very encouraged that you read Mr Hughes-Hallett’s evidence, and perhaps you will take some of those points away with you.

Q199 Charlie Elphicke: On taxation, I used to do tax structuring for charities before I was elected, and many members of the Committee may not realise what happens. A charity has a business trading arm. It makes a profit. It is a business, and it gift-aids up to the top charity. There is no difference, in that function, between that charity and Capita, when it comes to providing local government type services on a contracted-out basis. There is no difference whatsoever, except that they gift-aid it up to the top charity. However, that is not an abuse. Nevertheless, that top charity often spends excessive amounts on administrative and office expenses and does not actually use that money to deal with the need that there is. Would the Economic Secretary consider a mechanism of clawback of tax relief from the gift aid in relation to all administrative and overhead expenses, in order to encourage charities to be lean and fit and to focus on help at the grass-roots level?

Paul Flynn: Very good question.

Justine Greening: That’s an interesting point. In a sense, you are asking how prescriptive the Government should be. There are two basic ways in which we can get financial support to charities. One is to have a scheme like gift aid, which has been incredibly successful. Last year, I think its value was some £900 million for charities. The money then follows the donation, which has an advantage in that people get to decide where they want it to go. The alternative is the grant system, where we simply give money and then, perhaps, the man in Whitehall can better decide whether he thinks charities are run well. I think we probably have the right balance, but I take your interesting comment on board.

Q200 Greg Mulholland: Turning to the issue of charities and VAT, which several colleagues in both Houses and I have raised over the past few months, the Charity Tax Group has pointed out that charities now face 10 times the amount of tax legislation that they did 10 years ago. I want, however, specifically to focus on the VAT issue as it relates to the delivery of public services, because part of the Government’s thrust of thinking with the Big Society, which is an ideological thing in this case, is to say that we actually want certain organisations that may be better placed to deliver those public services to do that, rather than them being delivered by public bodies in the traditional way. Yet that model, which is an ideological model for public services, simply does not add up if you say that those charities and voluntary organisations will not get the same VAT relief on non-business supplies that, for example, the NHS currently can. That potentially leads to the conclusion that the reason why you are doing this is that if you shift these public services to be delivered by charities and voluntary organisations, it’s a big fundraiser for the Treasury. Is that why you’re really doing it?

Justine Greening: Greg, I don’t know how you managed to become so sceptical about Government policy, having been here for six years.

Greg Mulholland: We’re all sceptics on this Committee, Justine. That’s our job.

Justine Greening: To respond to your question, first of all, you mentioned the NHS, and the NHS only recovers about 20% of its VAT costs. I think you’re right to point out the difference that some charities face. Of course, in part, a huge amount of what they do is already VAT-exempt, and, of course, the other aspect of this is that the VAT status, for example, of local authorities and the NHS ends up getting taken into account when we make their funding settlements in the first place. As the landscape around public service delivery changes, and as charities get more involved, it is a fair point that we have to make sure that there is a level playing field. That is one of the reasons why we are consulting about how we can look at this whole issue of VAT and shared services and back-office services, which is something that charities do raise a lot.

First of all, this shift around public services and charities getting involved is not at all to do with raising more VAT; it is about letting charities be part of provision in a way that they have wanted for many years, but they have often felt thwarted by bureaucracy and a lack of freedom. On the second, broader point, you’re right to say that we want to make sure that charities can compete, but as Nick Hurd has often said, while local authorities do of course increasingly look at cost, quality is a key issue for them, too.

Q201 Greg Mulholland: Thanks for that. People would think it quite perverse that this transfer of public services would lead to a new revenue stream for the Treasury, and that’s something that needs to be addressed.

You talk about a level playing field, and I just want to quote from a parliamentary answer in the Commons by your colleague, the Exchequer Secretary. He says: "nor would it be fair to reimburse those charities which are in competition with other service providers", which suggests that there should be a level playing field. That’s a flawed statement, because the whole point of this argument is that there isn’t currently a level playing field, and I have to reiterate that the figure that the NHS can claim on non-business supplies is 57% of VAT. That can’t be claimed by charities such as Sue Ryder, which runs the Wheatfields hospice in my constituency. It already delivers front-line NHS health care and is being asked to do more, which is very positive. So he is actually wrong in that point of view.

There is something deeply worrying about that statement, because the Exchequer Secretary is saying that it wouldn’t be fair to reimburse charities that are in competition with other service providers, presumably meaning private sector providers. Private sector organisations are funded by their own profits; charitable organisations are funded by donations. In the case of the hospice movement, more than £1 million a day is raised by people doing all sorts of things, and without that it would not survive. It’s a very worrying statement, and surely it is right that those organisations that are dependent on public funding in the Big Society model should get, at the very least, the same tax rate as the NHS, for exactly the same services. They should be treated in a different way from private sector organisations.

Justine Greening: I think that what the Exchequer Secretary was referring to there was this issue of fiscal neutrality, and of course you’ve talked about that. There is an EU framework within which VAT gets administered, and that necessarily means that there are limitations on charging different VAT rates to different providers that are providing effectively the same services. In many respects, charities get a number of exemptions. For example, there is a zero rating on the cost of advertising, and clearly if you were running a private company you would say, "We have to pay VAT on our advertising, so why don’t charities?"

I reassure you that a lot of tax relief does go through, not just to people who have donated money by gift aid but directly to charities; for example, they pay significantly reduced business rates. Last year, £3.2 billion went through directly to support charities, either through the donations people made, or through reducing their cost base or giving them relief on various areas of VAT. We are absolutely keen to make sure that we use the tax system to support charities and charitable giving, and I think that most tax experts would recognise that alongside the US-we’ve talked about the US and we obviously look at it to see where it is doing better-the UK would be held up as a good example of a tax system that supports charities, and we want to make sure that we continue to do that. In fact, as I was saying to Lindsay earlier, we want to look at what we can do with key taxes such as gift aid, to make them work more effectively.

Q202 Greg Mulholland: I appreciate that there are tax breaks, but that doesn’t deal with the question of these organisations being asked to deliver public services that are currently being provided in a public way, and that needs to be addressed.

Justine Greening: They’re not being asked to do that.

Q203 Greg Mulholland: No, but the thrust of the Big Society is that the Government are saying, and I agree-some colleagues might not-that organisations such as Sue Ryder that are specialists are probably better placed to deliver. However, they need to be given the environment in which to do so. The Government are prepared to look at this issue when it appears to suit their ideological leanings. I refer, of course, to the announcement of the £275 million tax exemption that they have decided to find for the ideological and controversial academy schools initiative. Again, there will be very different views, even around this table, about whether that is a good thing for education. How can the Government possibly give a tax break of that amount for a model of a school-which will be competing with other forms of schools, including public sector schools-when they cannot do the same for the hospice movement? That movement delivers end-of-life, front-line care for people who are suffering and dying from conditions such as cancer, motor neurone disease, and all the other awful terminal diseases. To some people, that seems an extraordinary set of priorities and even a little bit appalling. Is that not something that you are concerned about?

Justine Greening: I have to say that I don’t agree with you at all. I think that this Government is really determined to support charities through the tax system. We all know, from our constituencies and from charities that we no doubt support on a personal level, the wonderful work that they do. We know about the volunteering that people add into that. We have an amazing country in many respects-people give a lot of money, the percentage of which is comparable with other countries. They give a huge amount of time as well.

The Government provides an awful lot of support through the tax system to support all those charities, including fantastic ones like Sue Ryder and Marie Curie, which we heard from earlier. We get them into the Treasury, which is one of the reasons why, having done the Gift Aid Forum, which we found a very useful process, we wanted to continue that conversation. So we now have a Charities Tax Forum that can look more broadly at the charity tax system to see what we can do to help it. I appreciate your frustration about that particular example, but I reassure you, Greg, that we are doing our level best to see how we can make sure that the tax system works for charities.

We are necessarily constrained, because, as a Government, we have come into office at a time when it has probably never been harder to find any more money for any aspect of Government policy. We have picked up a record deficit that is costing us £120 million a day-that is money that most people would much prefer to see go to fantastic things such as supporting charities through the tax system, or public services. We are not in the position to do that. Nevertheless, we still want to ensure that we make the tax system work effectively in supporting not only charitable giving, but tax relief to charities directly.

Chair: That was a very full answer.

Q204 Greg Mulholland: Justine, you said that you did not agree with me, then you entirely evaded the content of my question. May I be clear? Charities don’t want charity-that is what you are suggesting and that would be difficult in the current climate; they want a level playing field. I have a meeting with David to discuss that, but I am sorry to say that the Government will have to look at it or, simply, they will not be able to deliver the Big Society vision. If we could have a chat, too, I would appreciate it.

Justine Greening: I would be delighted. Indeed, I have had that discussion with charities who have come into the Treasury.

Q205 Greg Mulholland: I also point out that I do not think that there would be many people in this room who would donate to academy schools, so I am not sure that you have dealt with that analogy. There is lots of good fundraising, but I am not sure that that is an example of it.

Justine Greening: That may be your particular preference and, of course, different people want to support different institutions. I know that down the road from me in Battersea, parents are determined and very keen to set up an academy school because they think that it could be excellent for the education in their area, so they may well want to support it.

The whole point about charitable giving and what we have tried to support through things such as gift aid is that people get to make their own choices and it is not dictated by politicians in Westminster, who may feel that they know best.

Q206 Paul Flynn: Volunteering. The previous Government had a year of volunteering-that was Labour’s Big Society. In that year I tabled a written question to every Minister asking them what they would do to volunteer in that year. Now that we have passed year zero and are on the long march, we have seen the fine example of Lord Wei, who is leading by example, rather than just exhortation, by announcing originally that he was going to give three days a week to volunteering. How many days a week will you two give?

Justine Greening: A week?

Paul Flynn: Yes. A week is what he said.

Justine Greening: In terms of what I do in my local community, I am a school governor at Hotham primary school. I was delighted to agree to be-having been asked-a school governor at Elliot, which is a secondary school in Putney. I am also a patron of Wandsworth Arts Society. Like many MPs, I spend an awful lot of time doing my best to support local organisations across the board, whether it is going down to the Lennox estate over the summer to support their Help for Heroes fundraiser and so on.

Q207 Paul Flynn: We’re all in that position, as Members of Parliament. Are there specific days that you can say are allocated for volunteering? That was the point that Labour was making on the Big Society.

Chair: Most of us would consider politics to be a vocational, volunteering profession.

Justine Greening: What I would say, Paul, is that volunteering is important. Although I know that all of us MPs have busy lives, even now, I am still trying to do more and more in my local community.

Q208 Paul Flynn: I just question whether you see it as a leadership role. I could tell you the answers that I had from the previous Government, which were rather different from yours.

Q209 Chair: Why do you think that volunteering in this country appears to be so much less than in many other countries?

Mr Hurd: If the point that Paul is making is about the importance of leadership, I totally agree with that. My reply would be very similar to Justine’s.

Q210 Paul Flynn: You won’t be giving specific days?

Mr Hurd: I give a lot of time, beyond being a very busy Member of Parliament, spending every day helping people.

Q211 Paul Flynn: Could we look at the expectations that you are asking of other people, for example, with this National Citizen Service? I have looked at what it is supposed to do. It is supposed to play an important role in building social cohesion, by creating new connections between young people. Young people are very skilled at building new connections between other young people.

Justine Greening: You seem very sniffy about volunteering, if you don’t mind me saying so, Paul.

Paul Flynn: Let me go into this-

Chair: Let her answer the question.

Q212 Paul Flynn: I haven’t asked a question yet. You are going to build new connections between young people. Young people are very skilled at forging connections with other young people. It is called the mating instinct. They do not need this. Why on earth do you regard this as an objective to be pursued? Is this not just pious drivel? How can you expect young people to give up a year working for nothing, when you are not prepared to give up a day working for nothing?

Mr Hurd: I wish you could meet the young adults that went through the pilots this summer, because if you had, Paul, you would have heard them address that exact point. They said that one of the reasons why they absolutely loved the experience that was offered to them was that it was a chance for them to meet people that they would not otherwise have met. What they value is coming together.

Q213 Paul Flynn: Where were the pilots?

Mr Hurd: They were in London, mostly in west London. Hammersmith was a particular focus. Some 600 young people took part.

Q214 Chair: Is there a note that you can send us on that, because we are running rather short of time? It would be very useful.

Mr Hurd: Absolutely.

Q215 Robert Halfon: Do you think that some of the attacks on the Big Society have been politically motivated? When Elisabeth Hoodless did this, little mention was made of the fact that she was a long-standing member of the Labour party, for example. She was presented as one particular voice. Or do you think that it is a mixed bag?

Mr Hurd: I do not want to get drawn on that, because I have a great deal of respect for Dame Elisabeth. She was reflecting a great deal of anxiety, frustration and insecurity, because we have to face the fact that people out there feel the risk of losing things. People don’t like losing things. We have to respect that and I do not want to get drawn into any accusations that these were politically motivated.

Q216 David Heyes: I want to pick up a point from the Giving Green Paper, which we skated over earlier. There is mention in here of the role that the honours system can play in encouraging philanthropy and recognising philanthropic acts.

Chair: I’m bound to say that a letter from the Minister would not do it for me.

Mr Hurd: It wouldn’t do it for me.

Q217 David Heyes: I wouldn’t be impressed by that either, I must admit. I wonder whether you ought to be looking at doing some more to encourage this. The point is made in the Green Paper that there is a limit on the number of honours that can be awarded. As I understand it, there is no specific category in the honours system for philanthropy. Is that something that we need to encourage an expansion of? Possibly we could do so at the expense of reducing the honours that seem to go to-well, let’s pick on civil servants and other time-servers.

Chair: And politicians.

David Heyes: And politicians. Indeed.

Mr Hurd: Yes. Let’s recognise and value the givers much more than we do as a country. Of course, some people, like the person who is the biggest giver in my constituency, do not want any recognition at all and we should respect that. However, the answer to the general proposition-"Can we do more to point to giving, to recognise giving and to thank people for their giving?"-is, "Yes, absolutely", and there are various mechanisms to do that.

Q218 Kelvin Hopkins: There is an area of human life that is entirely appropriate for volunteering. I can think of religious organisations, football and sports clubs, scouts and guides, political parties and so on. We are all involved in a number of voluntary bodies of that kind. But then there are vital public services, such as looking after damaged children or caring for elderly people with dementia, which have to be publicly accountable. Isn’t the idea that voluntary groups or charitable groups should undertake those public services trying to send us back to the 19th century?

I must say that my own overriding feeling about the Big Society is that it is yet another attempt-in a process that really started, going back 40 or 50 years, with von Hayek-to dismantle the modern state and drive us back into a world where we are much more dependent on ourselves, business and the private sector, and taking away from the democratic state.

Justine Greening: I’m sure Nick will have something to say. However, I think that the Big Society is not at all what you just described. It is about recognising that charities play a major role in people’s lives and what charities have been saying is that they feel that they can play a broader role still. I think that the huge frustration that many of them have had in recent years is that, for various reasons, it has been difficult for them to play that broader role.

Part of what the Government are doing is giving charities the option and the choice to be able to play a broader role, but of course that must be done in a way that still has the accountability and that still has local authorities commissioning and having contracts in place.

Perhaps for some of the people who, for example, may end up being part of service provision and who themselves are involved with charities in a way that means that they themselves are able to volunteer and get work, so that they can then potentially become part of service provision, perhaps in the long run it will be seen as a real way of joining up our community far more cohesively than we have been able to do in the past. Perhaps the best thing is for charities to deliver some of our public services where they want to do so and where the local community wants them to do so. Obviously, Kelvin, from the Labour party’s point of view, I would have thought that the fewer private sector companies that we have doing this, maybe the better for you. I think that it’s about choice and about giving charities options.

Q219 Kelvin Hopkins: There is a second part to my question. Is it not inevitably a drift towards the private sector, because many of these voluntary sector organisations and charities will actually fail in the end, and it will be down to the private sector or indeed the state? That will be the real choice, between the private sector and the state. Boy scouts will still be run on a voluntary basis, but when it is provision of public services it will either be private sector organisations, including private hospitals for the wealthy who can afford them, or public provision.

Justine Greening: The key, Kelvin, is that we are giving local authorities more power. So it is up to local communities to decide who will provide their services, and how. Transparency is key to that. The more transparency we have locally, the more people can make their own decisions. I am sure, Nick, that you have some comments on this.

Mr Hurd: On your concern about accountability, Justine has talked about accountability commissioners and accountability to people using services. But accountability will be made so much easier by the fact that the world will change in terms of transparency and information that is available to the public about grants, contracts and everything that the state is doing in our name. That is one of the big changes that is being added.

Q220 Chair: May I ask about corporate giving? Corporate donations in this country make up only 3% of private cash given to charities, whereas in the US the equivalent figure is 5%. The Government seem to be arguing that red tape and lack of information are the key obstacles. What are we going to do to get rid of the red tape and give better information?

Justine Greening: You’re asking me once again to stray into the territory of what the Treasury may or may not do in the future, but what I can tell you is that through corporation tax, we currently give about £500 million in tax relief to companies that give to charity. So we have some incentives for companies to give to and work with charities. I think you’re right to say that the Big Society is not just about getting individuals involved; hopefully, it’s about getting corporations and companies involved, too.

Q221 Chair: Finally, it is not directly in either of your portfolios, but a great deal of the extra regulation that’s piled on business, particularly employment regulation, applies to charities. What small businesses complain about, charities complain about.

Mr Hurd: Exactly.

Q222 Chair: Are you joining the push, for example, to reform employment tribunals, which afflict charities just as much as small businesses?

Mr Hurd: I agree completely with your premise. That’s why we set up a joint taskforce with BIS to look at red tape on small organisations, whether they be businesses or civil society organisations. It’s being led by Lord Hodgson, and he’s due to report to me within the month with practical suggestions on things that we can take away.

Q223 Chair: Which would apply to small businesses as well?

Mr Hurd: Exactly.

Q224 Nick de Bois: Notwithstanding some of the misgivings represented around this table, would you agree with me that once Government have set the levers and done their leadership role, the ultimate test for the Big Society is going to be when we see how much take-up there is from the public responding to the challenge?

Mr Hurd: Yes.

Chair: Thank you both very much indeed for your time this morning. It’s been a very full session, and you’ve given us a great deal. We may well have further questions you can help us with in writing. We are going to launch an inquiry into the Big Society, and that announcement will be made formally later today. Obviously, the evidence that you’ve given us today will be very much the foundation of our work. Thank you.

[1] Note from Member: Correction – Lindsay Roy apologises for this quote which was incorrect.