Small Charitable Donations Bill
The Committee consisted of the following Members:
Alison Groves, Steven Mark, Committee Clerks
† attended the Committee
The Chair: Before we begin, it might be useful if I explain how the proceedings work. The selection list for today’s sitting is available in this room. It shows the amendments selected for debate and those that have been grouped together for debate. Amendments grouped together are generally on the same issue or a similar one. The Member who tabled the amendment makes an opening speech and proposes the amendment. Any other Member is then able to speak on the amendments in the group. Once all Members have replied, including the Minister if appropriate, I will call the Member moving the amendment again. It will be useful for that Member to indicate whether he wishes to withdraw the amendment or seek a Division. The same applies to any other amendments in the group. Amendments are voted on in the order in which they appear in the Bill, although they may have been debated in an earlier group. I hope that that gives some clarity before our proceedings.
Mr Gareth Thomas (Harrow West) (Lab/Co-op): On a point of order, Mr Turner. My hon. Friend the Member for Kilmarnock and Loudoun noted in an exchange with the Minister during Tuesday’s evidence session that the Exchequer Secretary had said in his winding-up speech at the end of the Second Reading debate that the abolition of the three-year rule would significantly increase the cost of the scheme. You will be aware that we may consider today whether the three-year scheme should stay within the terms of the Bill.
My hon. Friend asked the Minister whether he had the figures with him or could get them. Perfectly understandably, the Minister said that he did not have such specific figures with him. My hon. Friend went on to inquire gently whether he might get us that information, and the Minister helpfully offered to do so. I have checked my e-mails today, and I have not yet received any such letter; I have checked with my hon. Friend, and she has not either. Have you received any such letter, Mr Turner, or any indication from the Minister when such a letter might appear?
The Economic Secretary to the Treasury (Sajid Javid): First, I thank the hon. Gentleman for raising that point. He is right that that matter was raised in the evidence session. I have just received the figures, and during the course of this sitting I will be happy to discuss them further.
Mr Thomas: Further to that point of order, Mr Turner. I am grateful to the Minister for that intervention. If it is possible to have those figures in written form for us to consider, perhaps for the start of the afternoon sitting at the latest, that would be an even greater courtesy than the Minister has offered. Will you accept a further intervention from the Minister to clarify whether that is possible?
Mr Thomas: On a second point of order, Mr Turner. You will be aware that this is, as I understand it, a money Bill, and that therefore no amendments can be tabled and accepted by peers in the other place, so it falls on this House to scrutinise the Bill and, if needed, to amend it. Yet we also know from Tuesday’s sitting that there is as yet no detailed, up-to-date public estimate in the public domain of the cost of the Bill as it stands. We know that officials and, presumably, the Minister have been working on that estimate, and that it must be put before the Office for Budget Responsibility before it can be released. It seems a little perverse, given that the House is considering the Bill with all its potential cost implications, that we cannot have sight of such an estimate now. Again, Mr Turner, I crave your indulgence to ask whether you have had any indication from the Minister or from others on the Government side as to whether such a detailed, up-to-date assessment could be released without the OBR having necessarily cleared it at this stage. We understand that the OBR has other pressing things to do in the run-up to the autumn statement; nevertheless, it would be helpful to have that detailed estimate before us. Will you solicit an intervention from the Minister to see whether that can be released?
Mr Thomas: Further to that point of order, Mr Turner. I am grateful for your ruling. At the very least, will you encourage the Minister to consider the matter? If he cannot make such an assessment available to us because the OBR needs to look at it for the Committee’s deliberations, can it at least be made available to those interested in its figures before consideration on Report, so that we can debate the Bill at its final stage with a view to amending it from a position of greater knowledge of its possible final cost?
To delete the requirement that the scheme can only be run by HMRC.
To delete the requirement that the scheme can only be run by HMRC.
Similar to purpose of amendment 17—to explore why only HMRC and not alternative bodies should administer what is a small grants scheme.
‘(f) make provision in relation to the government department or organisation with direct oversight of and responsibility for the top-up payments scheme.’.
Similar to purpose of amendment 17—to explore why only HMRC and not alternative bodies should administer what is a small grants scheme.
Mr Thomas: It is a pleasure to serve on a Committee under your chairmanship, Mr Turner. Such was the newness of the Committee proceedings that we went through on Tuesday that I did not have the opportunity formally to congratulate the Minister on his elevation to his current role or on the honour of taking this Bill through its remaining stages.
I do not know whether the Minister was regarded as glamorous by his colleagues before he got this job, but to be a Treasury Minister, as any political nerds will recognise, is to hold one of the most glamorous positions in the Government, not least because he has at his disposal the SAS or the Parachute Regiment of the civil service in the form of Her Majesty’s Revenue and Customs. I say all that, Mr Turner, because it falls to you to ensure that there is at least some balance in our proceedings today. The Minister has all the cards stacked in his favour; we on the Labour Benches rely on you to help prevent the Committee from being bullied by the Minister, who can use the expertise of his vast numbers of civil servants.
In moving these amendments, it is not our intention to change our position on the substance of the Bill, nor do we want to outline a series of new spending commitments. None the less, we do want to probe the rationale behind the inclusion of what are key restrictive clauses and to question as a result some of the grander claims that have been made about this Bill, and, in so doing, to encourage Ministers to listen to the concerns of charities, especially those representing small organisations.
I am sure the Minister has reflected long into the night on the comments made in Tuesday’s evidence sitting. He will remember and recognise that those organisations representing the smallest charities were most concerned about the way in which this Bill has been drafted.
The specific reason behind these amendments is to probe why Ministers think that only HMRC can, or indeed should, run the scheme. Amendments 24 and 25 in particular point to possible alternatives that the Minister and his hon. Friends might want to consider. For example, the Charity Commission is an excellent, independent body that Ministers have praised in the past, and other Departments might be more appropriate to run the small grants scheme. My amendments would not preclude the scheme being run by another body that another Department might think is more appropriate.
Perhaps because of the Treasury’s determination that the scheme should be run by HMRC and linked to the claiming of gift aid, the Bill has become much more complex than people outside the House were initially led to believe. It would be harsh on the Minister—I am
It is far from clear whether HMRC has as much experience as other departments or bodies that have worked for other Departments in organising a small grants scheme. Clearly, it has had plenty of experience of implementing tax relief. We know, and had a long discussion in Select Committee, about the way in which HMRC implements gift aid, but not about its managing small grants. The Committee should remember just how small the grants in the Bill are. The maximum that can be claimed by most charities is £1,250, and many will claim a lot less. This is a very small grants scheme.
We do not know what experience HMRC has had in running effectively such a small grants scheme. That did not come out in our exchanges on Tuesday, and it would be useful to hear from the Minister what consideration he, his predecessor or indeed the Chancellor gave to other possible ways of implementing the scheme. Partly because Her Majesty’s Revenue and Customs is running the scheme and linking it to gift aid, tying its delivery into the process of bringing gift aid online, the effect will be to pit charity against charity, and church community against church community, as I will describe. Big charities will be pitted against small charities.
Sheila Gilmore (Edinburgh East) (Lab): Does my hon. Friend agree that, just because this scheme initially arose from the view that there are small organisations with small ways of gathering money that people cannot get gift aid for, it does not follow that we must link it to gift aid with all that goes with it, and to the use of HMRC? The two are not necessarily linked, just because the origin of the scheme was the feeling that a gap exists here.
Mr Thomas: My hon. Friend makes an extremely good point. She is right to say that some of the briefing for this Bill suggested that this small grants scheme—effectively, that is what the Bill will establish—was needed to help charities that were not claiming gift aid. As she rightly points out, we are now in the daft position whereby charities that do not claim gift aid cannot benefit from the Bill. I suspect that that is because Ministers are determined that the scheme’s delivery should be linked to the new IT system being introduced in the Treasury, which will help to ensure that gift aid claims can be submitted online. HMRC clearly needs to run that function, but it does not follow that HMRC should necessarily have to run the scheme.
Jeremy Lefroy (Stafford) (Con): Will the hon. Gentleman acknowledge that when this scheme was introduced in the Budget 2011, the Chancellor stated that he, with the Culture Secretary, had been working on a series of
Mr Thomas: I acknowledge that the Chancellor may well have said that. I do not have the transcript to hand, but I believe that the hon. Gentleman is correct about what was said at the time. None the less, perhaps there is a greater concern now than purely focusing on giving, and that is the division that the scheme creates within the charity sector. The big charity in the hon. Gentleman’s constituency will be up against the small charity that has not claimed gift aid, and, as a result, will not be able to claim anything under this small grants scheme because of the way in which the Bill is drafted. At the moment, it appears that Ministers are determined that HMRC should implement this scheme through its new IT system.
The Minister alluded to a series of other reforms that are being drawn up by Ministers. The hon. Member for Stafford may be aware that the Cabinet Office has sought to reduce the regulatory burden on charities and encouraged Lord Hodgson to investigate in some detail how to remove red tape for charities. The effect of asking HMRC to implement this scheme, because of the need to link it to the online gift aid process, is to introduce a whole series of new forms of red tape that charities will have to deal with. I encourage the hon. Gentleman to recognise how far we have moved away from the original intention behind the Bill.
Mr Thomas: I beg your pardon, Mr Turner. I will happily give way to both hon. Members, but as the hon. Gentleman was intervening on me first and his intervention might be linked to his previous one, I shall let him go first.
Jeremy Lefroy: I apologise, Mr Turner, and thank the hon. Gentleman for giving way. I emphasise that this is not a small grants scheme. In my experience of running a charity and, at the same time, being involved in many charities, the bureaucracy involved in obtaining grants far exceeds that involved in obtaining gift aid once a gift aid system has been set up. I acknowledge that a lot of work is required in setting it up.
Mr Thomas: I say gently to the hon. Gentleman that this may not have been conceived as a small grants scheme, but that is what it now is. Indeed, the need to consider such legislation on Second Reading, in Committee
Fiona Bruce: I recall that, during the evidence sessions, one representative speaking on behalf of charities said that where fraud occurs there is a double whammy: not only is the money taken from the charity, but its reputation suffers. Because this is a pioneering scheme involving cash—although each amount might be relatively small, as the hon. Member for Harrow West said—the cumulative sum involved may be large. It is right that we take into account the experience of HMRC in dealing with ensuring the probity of applications.
To highlight the sums involved, with regard to gift aid to charities HMRC pays some £1 billion a year. We were given evidence showing that HMRC stopped £10 million of fraudulent claims and roughly another £30 million in errors. It has relevant experience and it is right that we trust that at this stage of a pioneering scheme.
Mr Thomas: I defer to the hon. Lady, who has stated her position on the Bill. I will have to work a lot harder to convince her to echo the Opposition’s concerns and, if we are not convinced by what the Minister says, to vote with us. She rightly said that we need to protect against fraud in any grant-making scheme and she highlighted evidence from the head of the charity section in HMRC in our evidence session on Tuesday, showing that some £10 million is lost in fraud. Although we need to ensure we are rigorous in putting in place the mechanisms to cut down on fraud, we also need to be proportionate regarding the amount of red tape we expect charities to deal with to access grants.
I hope I have the chance to demonstrate to the hon. Lady that similar grant-making schemes have similar low rates of fraud, compared with other parts of the economy, but with lower levels of bureaucracy for charities. I encourage her to stay for both the morning and afternoon sittings today, during which I shall mention some examples that might tempt her to err on the side of our position on the relevant clauses.
Susan Elan Jones (Clwyd South) (Lab): Does my hon. Friend agree that one big problem with this programme in respect of bureaucracy is the matching principle, which is one of the main things that will impact on smaller charities? In my constituency, the parish of St. David’s, Rhosllanerchrugog is delighted with the potential of this programme for donors there. However, it might make life difficult for, say, the talking newspaper in Ruabon, for reasons connected with the Conservative Member whom I cited in the previous debate. Those sorts of things are problematic. We Opposition Committee members want to reduce the amount of red tape, and there is great support for that across the charitable sector and generally from hon. Members. I was hoping we could get some good consensus on that.
Mr Thomas: Mr Turner, I am grateful for your guidance. None the less, I think that some of what my hon. Friend said is pertinent to this set of amendments. Her general point about the need to ensure that as many small charities as possible can claim from this scheme is surely one on which the whole Committee could achieve consensus. Our contention in these four amendments is that insisting that HMRC must implement the scheme means that many small charities will not be able to benefit. I am sure you would agree, Mr Turner, and one hopes that Government Members would agree, that that would be a tragedy, not least in the context of an extremely difficult funding environment for charities. We need to ensure as a Committee and a House that, where there are sources of funding through a grant scheme such as we are establishing in the Bill, as many charities as possible can benefit, subject to the overall limit that Ministers want to impose on the funding of the scheme.
Penny Mordaunt (Portsmouth North) (Con): I welcome the Bill. It is not perfect for the sector as it is today, but it might be ideal for the sector that we want to see. One of the issues I raised in the evidence session was that in what will always be a difficult funding environment, the sector has introduced great measures to get charities to work together in a more constructive way. Again, rather than someone setting up a small charity, perhaps in memorial of a lost child, they will work with larger charities working in that disease area. It strikes me that a charity of that nature—of the kind that I am pleased to hear the hon. Gentleman talking about—has a choice. It can either plan for the future, do its five-year business plan, grow and work towards being able to use this scheme, or it can look at other ways of working, perhaps endorsing a research call, for example, for that charity. This measure supports a lot of what the voluntary sector has been encouraging smaller charities to think about and do for some time.
Mr Thomas: I am grateful for the hon. Lady’s intervention. I certainly would not want her to leave today with a sense that I do not think any benefit can be achieved from the Bill; I do. Our ambition is try to improve the Bill to enable it to help more charities quicker. Our contention is that a different Government body, perhaps even the Charity Commission, given the same amount of money that will be available under the terms of this scheme, might be able to ensure that more of the smaller charities benefited.
At the moment, we risk a situation in the hon. Lady’s constituency and in all our constituencies where a big charity that has been claiming gift aid for some time can benefit from the scheme, but a small charity that has not yet claimed gift aid cannot benefit at the moment or for another three years. If we shifted the running of the scheme to another part of Government, that huge division—in the hon. Lady’s constituency, in my own, in the Minister’s, and, indeed, in the constituencies of every Member of the House—between big and small charities, and between charities claiming gift aid and those that are not, could be resolved.
One of the imperatives behind these amendments is the scale of the cuts in funding to the charity sector. The National Council for Voluntary Organisations estimates that some £3.3 billion will be lost to charities between now and 2015. That surely makes it even more incumbent upon us to ensure that those charities that have lost out—often smaller community charities that are perhaps reliant on local authority funding and have now been hit by the scale of the Government’s cuts to that funding—can benefit from this scheme.
John Hemming (Birmingham, Yardley) (LD): I share the view of the hon. Member for Stafford that this is not a grant scheme. It is a tax refund scheme, where the decision as to who qualifies is taken by the donor, not the Charity Commission. The hon. Member for Harrow West suggests that body as alternative: has he taken into account the additional bureaucracy of making the decision at the centre? The fact is that in a scheme like this one, which is a tax refund scheme, almost all the money goes to the charity, not to fund bureaucracy in, for instance, the Charity Commission.
Mr Thomas: I want to come on to the hon. Gentleman’s final point, and the way in which the administration will work within HMRC to implement the scheme, during the debate. I also want to consider whether the staff resource that is going into setting up this scheme might be better deployed on other purposes in HMRC. Indeed, I suggest to the hon. Gentleman that that is also a reason why we might want to explore the option of using another Government body, or an agency that works for another Department, which might potentially be better placed to introduce what is—I have to tell him gently—a small grants scheme. We know that it is one because we have to go through the process of legislating for payments under the scheme.
John Hemming: The key point is how complicated the decision is for the Government body, be it the Charity Commission or the HMRC. A system such as the one in the Bill is nice and simple. The qualification is straightforward, the administration can essentially all be done by a computer programme and therefore almost all the money goes to the charity. That is a far better scheme.
Mr Thomas: I admire the hon. Gentleman’s optimism. He suggests that this is an immensely simple scheme. I do not know whether he was present for all the evidence sessions that we held on Tuesday, but several representatives of leading charities pointed out just how complex the scheme will actually be. Indeed, several witnesses pointed out just how many charities do not claim gift aid at the moment and therefore will not be able to benefit from the Bill.
John Hemming: My point is that, whichever Government body it may be—HMRC, the Charity Commission, the lottery or some other body—it will have administrative overheads itself. A scheme like the one in the Bill, which is nice and simple, has a very low administrative overhead at the centre. Such an overhead has to be paid for.
Mr Thomas: I say gently to the hon. Gentleman that I do not think that it has been proved that the scheme has very low overheads or is very simple, or indeed that no other Department, or body working for a Department, could implement such a scheme more effectively than he believes HMRC would.
Sheila Gilmore: Does my hon. Friend agree that there appears to be an assumption that, if HMRC does not administer the scheme, we will have to move away from money being matched to donations? I certainly think that we could design a scheme in which, to qualify for the money, charities would have to demonstrate that they have received donations to the defined level, and that any other body could administer that scheme just as well. It does not have to mean that we would have to assign grant-giving criteria.
Mr Thomas: My hon. Friend is right to make that point. I assume that she was motivated in part by her worry about what will happen in her constituency when the many charities, with which I know she is in contact, ask her whether they will benefit from the scheme. She will have to tell them that, because of the link to the HMRC online gift aid implementation system, which is fundamental to making the system work, after April 2013, only charities that are already registered for gift aid will be able to benefit. Some charities in her constituency will not be able to claim under this small grants scheme; others will be able to. I know that she shares the concern of all Opposition Members that, with this scheme, we are creating an unnecessary division in access to funding.
I suggest to Government Members that they might want to think through, from a slightly different perspective, how this scheme might come across. If the Committee were to imagine for a second that we are members of the Tea Party—very challenging for Opposition Members, but potentially less so for Government Members—perhaps we would consider this scheme to be an example of big boots government of the sort that Paul Ryan, the vice-presidential challenger, has railed against.
Think of the powers that HMRC has at its disposal. It is a body with significant covert and surveillance powers. It has 2,000 criminal investigators working for it. This scheme, remember, has just £1,250 potentially available at the end of the process. There are already 60 pages of guidance that have to be read, understood, digested and followed extremely closely in order for a charity to claim gift aid. There would have to be further guidance for this scheme to be implemented. It could result in a huge amount of bureaucracy of the type that would provoke—unnecessarily, I agree—the ire of the Tea Party, were they to come across from the US and look at this scheme. Of course, Opposition Members do not see it like that, but I wonder whether putting it in such provocative terms to Government Members might encourage them to recognise that there is, or might be, another body better placed than HMRC, which has so many other functions, to implement this small grants
Jeremy Lefroy: I was a little puzzled when the hon. Gentleman mentioned the Tea Party, because I could not see what Lewis Carroll had to do with the debate. Unfortunately, I think the hon. Gentleman is living in Wonderland. I proudly have a picture of President Obama on the wall of my constituency office, and so perhaps he should reconsider his idea that all Government Members are necessarily in agreement with something that comes across the Atlantic.
More seriously, I am a little concerned because I think the hon. Gentleman is trashing his own Government’s great legacy, gift aid, which was one of the best things they did. I find it a pretty straightforward solution to this particular problem. It may take time to set up at the beginning, but I ask him to be a bit more charitable to his Government’s legacy and say that it would not be beyond HMRC to make a very good job of this scheme, as they have of gift aid in the years under his Government and, indeed, in the past two years of this Government.
Mr Thomas: I apologise to the hon. Gentleman for the suggestion, or for allowing him to think, that I thought that he was a Tea Party enthusiast. I am delighted to hear that he is a supporter of President Obama, and it is good to have one of the few modernisers in the Conservative party on the Committee to help us explore this subject. From some of my comments, I can see why he might be worried that I was trashing the previous Government’s record, but that is the last thing I want to do. As he quite rightly says, gift aid is a great success and, indeed, HMRC’s implementation of gift aid is to the credit of all the officials in HMRC who worked on it.
However, I come back to the point that I was making: because of the way the Bill is designed, there is a risk that we will make many small charities feel that the scheme does not work for them. Ministers raised the problem of charities, and small charities in particular, that do good things—whether in the constituency of the hon. Member for Stafford, that of the Minister’s or mine—but do not claim gift aid at the moment. The scheme does not help those organisations. I contend that that is because we are, effectively, creating a small grants scheme and linking it to gift aid unnecessarily because Treasury Ministers insisted that implementation of the scheme must stay within the responsibilities of HMRC’s charity section.
I hope that the hon. Gentleman will accept my apology for impugning him, or creating any sense for his constituents that he may be one of the more extreme Conservative Members. Clearly, he is a moderate, and we welcome his presence in the House to help tone down some of the views of others in his party—he looks as though he is preparing to intervene again; let me allow him to do so.
Mr Thomas: Mr Turner, I risk falling foul of your guidance, but my reading of the hon. Gentleman’s remarks, and its relevance to this set of clauses, is that he is perhaps moving back from his initial position; I need to reflect on what he said. Perhaps I should avoid allowing him to divert me from the substance of the amendments, as he appeared to be tryimg to do.
Perhaps this is an opportune moment to consider which tasks we—in this great House, and the other place—ask Her Majesty’s Revenue and Customs to perform for us and then, given the scale of the tasks we ask it to do, to consider whether this small grants scheme sits well in that list of functions. It is worth reminding the Committee, and the House, that, in no particular order of priority, we ask HMRC to collect and administer direct taxes, such as capital gains tax. There is also the requirement on it to collect corporation tax, income tax, inheritance tax and national insurance contributions.
We ask HMRC not only to do all those tasks but to collect and administer a series of indirect taxes, including excise duties, the insurance premium tax, the petroleum revenue tax, stamp duty, stamp duty land tax and stamp duty reserve tax. We also ask it to collect VAT, which has been unnecessarily raised by the Chancellor of the Exchequer, potentially giving it an even more difficult task. We ask HMRC to do not only those tasks but to pay and administer child benefit. We also used to ask it to administer the payment of the child trust fund, and we still ask it to pay and administer tax credits. That is a huge list of very significant tasks that we ask of Her Majesty’s Revenue and Customs.
John Hemming: There is a long list of things that HMRC does, and it includes administering gift aid. Is the hon. Gentleman suggesting that HMRC should not administer gift aid, or is that as mad an idea as some of the Tea Party ideas?
Mr Thomas: It is as mad an idea as many of the Tea Party ideas. It is good to hear a further voice of reason on the Government Benches, arguing against the tendency of some Government Members to be enthused by the Tea Party. It is entirely right that we ask Her Majesty’s Revenue and Customs to implement, to pay out and to help charities understand how the gift aid process works. As I made clear in response to the hon. Member for Stafford, it does an excellent job on that score. I give way to the hon. Member for Stafford.
John Hemming: Stafford is represented by a Conservative Member. If it is as mad as some of the ideas of the Tea Party to ask HMRC not to administer gift aid, what is the difference with this particular scheme, which is, after all, a tax refund?
Mr George Mudie (Leeds East) (Lab): The hon. Member for Birmingham, Yardley asked an interesting question, but does my hon. Friend not agree that there is a difference between this scheme, gift aid and the payment through wages? Two schemes have a clear connection with tax. As the document and HMRC have explained it, they have a clear audit trail. The only reason that this scheme is complex is that because of the cash collection in tins there is no audit trail, so the HMRC and the Minister have connected it to gift aid to get some sort of audit trail, which does not really matter. The two things are entirely different. The first one is connected, because it is a tax relief scheme. This scheme is simply related to the amount of money collected in buckets and does not have a trail.
Mr Thomas: My hon. Friend makes an extremely good point. One can understand Ministers and parliamentarians in general wanting to help the charities that were not claiming gift aid to get further financial support at an incredibly difficult time to get access to public funding. As my hon. Friend rightly said, Ministers have made the scheme unnecessarily restrictive. Ministers originally said that they wanted to help charities, but they are actually excluding them from the terms of this scheme as drafted.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): Does my hon. Friend also recognise the point that was made on numerous occasions during the evidence session about those who give via small cash donations, who do not have an income on which they pay tax, so there is no benefit to them from filling in gift aid forms? That is important.
Mr Thomas: My hon. Friend makes an extremely important point. She highlights a further example of the divide that Ministers are unnecessarily creating between charities registered for gift aid and those that are not. It is the Opposition’s contention that were it not for the HMRC gift aid online system that is helping to implement the scheme, the divide would not have needed to occur. We should explore whether another Department or non-departmental public body, or indeed an organisation that works and liaises with other Departments, might be better placed to implement the scheme.
Mark Durkan (Foyle) (SDLP): Does my hon. Friend recognise that for many existing charities using gift aid, a scheme such as that proposed in the Bill for what is essentially supplementary gift aid for small donations could be appropriate as a sort of lean-to on gift aid? The problem with the Bill is that it insists that small charities receiving small donations, who basically just want a complementary top-up payment, have to construct a gift-aid house and then get the lean-to. What we need from Government is a route 1, such as is in the Bill, for
Mr Thomas: My hon. Friend makes a critical point and cuts to the heart of the dilemma before the Committee today. Her Majesty’s loyal Opposition have proposed the amendments to try to encourage Ministers to be a little more open-minded as to who might be the best source for implementing the scheme.
Fiona Bruce: A few moments ago, the hon. Gentleman referred to another Department working or liaising with HMRC. Is that not a real give-away? The hon. Gentleman is saying that there will have to be additional administration and therefore additional costs. Why cannot HMRC have a simple route 1 or route 2? There is nothing to stop it having an arrangement that gives charities an opportunity to make a claim as simply and cleanly as possible, as in any other Department.
Mr Thomas: To be fair to the hon. Lady, I can see why she makes that point, but other Departments and non-departmental public bodies already make grants to other bodies. They already liaise with HMRC to see what information it has on possible fraud. In that sense, we are not seeking to insert a new process in the Bill. There is a further judgment for the Committee to make: is the sum total of the burden of tasks that we ask HMRC to perform such that it would be better for another Department to implement the small grant scheme?
Some time ago, before I took the various interventions that were extremely helpful in illuminating the choices before us, I was describing the general functions that we ask of HRMC, and I had not quite completed the list. We not only ask HMRC to do a series of challenging tasks, but also to help enforce and administer border and frontier protection, environmental taxes, which I know will not be of concern to Conservative Members because they are no longer interested in green issues, and the national minimum wage, to ensure that it is not denied to some of the most vulnerable people in the country.
I suspect that the hon. Members for Birmingham, Yardley and for Bristol West share our concern and believe that HMRC should continue to enforce national minimum wage legislation. I am not sure that other hon. Members are quite so worried about whether it continues to be a prime responsibility of HMRC.
John Hemming: I agree that it should continue to be a responsibility of HMRC. I see no difficulty in adding the tax refund relating to small donations to gift aid. It is logically within HMRC’s area and would not prevent it from enforcing the minimum wage.
Mr Thomas: I welcome the hon. Gentleman’s continued support for HMRC enforcing the national minimum wage, but there are problems with the enforcement, which I hope to mention in the debate. I encourage him
I am sorry, Mr Turner, that I accidently provoked the hon. Gentleman to intervene before I completed reading the huge list of tasks that we ask HMRC to perform. You will recognise the significance of the one further task that we ask of HMRC from the heated row—it is fair to use such a term—we had when Liberal Democrats reneged on their tuition fees promise and brought in fees of £9,000: we expect HMRC to recover student loans. Inevitably, with fees to attend university having gone up by so much, that is sadly likely to be a bigger task for HMRC. Hon. Members will recognise that we, as Labour Members, did our best to minimise the burden on HMRC of recovering non-paid student loans, by ensuring that fees to attend university were not unnecessarily high. We lost the argument on the numbers, so HMRC faces a hugely increased burden. The small grant scheme that we are asking for HMRC to be approved to administer is one task too many.
John Hemming: The hon. Gentleman’s argument is that HMRC is so overloaded that we cannot add any more taxes. Yes, we have introduced a graduate contribution tax, which means that lower-paid graduates pay a lot less—29% over their lifetime pay less than previously—and it is administered by HMRC. However, the Opposition propose a graduate tax, which I presume would not be administered by the Charity Commission, but by HMRC. Following the logic of the hon. Gentleman’s argument, HMRC is now so overloaded that there cannot be a banker’s bonus tax because that overloads it, there cannot be a graduate tax because that overloads it, so what will the Opposition do? Will they create a completely new body to cope with all those additional tasks that are beyond the powers of HMRC?
Mr Thomas: You were quite right, Mr Turner, to chide the hon. Member for Birmingham, Yardley. HMRC will potentially have a series of additional responsibilities. We certainly think there should be a banker’s bonus tax. I believe the hon. Member for Birmingham, Yardley is a supporter of the Business Secretary, who supports a mansion tax. Presumably HMRC would have that responsibility.
Mr Thomas: Mr Turner, I am grateful to you for pointing out the need for me not to be provoked by Members such as the hon. Member for Birmingham, Yardley. Nevertheless it is important to dwell on the task that we are asking of HMRC and to consider whether organisations in other Departments would better placed to run the scheme.
Let us think through the character of HMRC. It is a law enforcement agency with a strong and effective cadre of criminal investigators, responsible for investigating
Again, there is a judgment about where the balance of responsibilities and tasks across Government should lie. As my hon. Friends the Members for Foyle and for Leeds East highlighted, the small grants scheme is not directly related to the core tasks HMRC has to fulfil. Why does it need to sit within HMRC? We need to hear from the Minister why there is no other Department that could deliver the scheme? Surely, one of the key tasks that the Minister set out for HMRC is to help small charities to make a judgment about whether a donation of £50 should be included in their total for registering gift aid. That is surely not a task on which one needs HMRC to advise, but something that another Government body might be better tasked to do or, indeed, an organisation that works with charities on a regular, daily basis, perhaps on the instruction of another Department.
Fiona Bruce: HMRC deals with charities on a daily basis, and I am sure that it is perfectly capable of appointing staff at an appropriate level—not senior HMRC staff—to deal with the kind of inquiry to which the hon. Gentleman has alluded.
Mr Thomas: The point is this. If HMRC is appointing staff, albeit at the appropriate level, to give advice on whether £50 should count towards the charity’s total under the scheme, it has less resource to appoint people to crack down on non-payment of capital gains tax, corporation tax or income tax. I gently suggest to the hon. Lady that that is a classic, clear reason why the task that we are trying to load on to HMRC should be offered to another Department. We are already asking HMRC to do a huge number of tasks.
Mark Durkan: Does my hon. Friend accept that although the hon. Member for Congleton is right to say that HMRC obviously deals daily with many charities of scale, there are probably very few community amateur sports clubs that HMRC deals with every day, but it will have to deal with such bodies under the Bill?
Mr Thomas: My hon. Friend makes another extremely important point. That group of vital community organisations could surely be supported in gaining access to the small grant scheme by another Department. One worries that some people will be deterred from seeking to benefit from the scheme, because it is HMRC that has responsibility for implementing it. People across the country recognise the importance and quality of the work that HMRC does in cracking down on fraud. It rightly has a reputation for pursuing fraudsters. As I shall go on to demonstrate if I am able to catch your eye on other groups of amendments, Mr Turner, there is no doubt that people who do not have regular contact with
The hon. Member for Stafford asked whether I was proud of the contribution of HMRC in implementing gift aid. I am. I do not think that because people who are not claiming gift aid at the moment have one or two fears, we should somehow shift overall responsibility for gift aid elsewhere. However, my hon. Friend the Member for Foyle’s point was well made. We need to be aware that there are people in charities or other community organisations who do not have regular experience of HMRC and the way it works and who, sadly, would be deterred from taking advantage of a small grant scheme that it administered.
Mr Mudie: Does my hon. Friend agree—I think that this is what he is alluding to—that HMRC’s ethos is damaging to the direction in which the Government want to travel? The Government are providing this scheme, which is expected to cost £100 million. Because they have given it to HMRC to deal with, it is packed with all the worries and rules that HRMC comes with; they are part of its baggage. That, we fear, will affect the outcome of the scheme in a way that the Government do not want. Let us consider this. We are giving the Department for Environment, Food and Rural Affairs £90 million to kill badgers. This scheme is expected to cost £100 million and has more paperwork. I wonder how much paperwork people have to fill in before they kill a badger in order for the figure of £90 million to be reached. It is sheer silliness to give this light scheme to a Department that comes with such detailed baggage.
Mr Thomas: My hon. Friend will have heard me use the word “Kafkaesque” to describe how the scheme has slowly emerged since the Chancellor first announced it. HMRC does a hugely important job in collecting capital gains tax, corporation tax and income tax, but I say as someone who believes he is honest that occasionally, when I have to send information on my tax return to my accountant, I am conscious of HMRC’s power and authority, and I suspect that all Members recognise that sense of the need to be very diligent in our dealings with it.
What, then, should a charitable organisation with little contact with HMRC feel? One can understand such organisations’ fear of getting involved with the scheme. Given the considerable concern expressed by Members about anti-fraud and HMRC’s responsibility to crack down on fraudulent claims within the scheme, one can understand the reluctance to be involved. That is surely, I contend, a further reason why we should explore assigning the implementation of the Bill to another Department, another body that works for a Department or indeed a non-departmental public body that works with charities.
The hon. Member for Birmingham, Yardley pointed out the evidence that we received on the amount of fraud involved in gift aid. Mr Edwards, the head of HMRC’s charity section, pointed out rightly and to his credit that he, his staff and others within HMRC had successfully prosecuted a fraudster responsible for some £500,000-worth of gift aid-related fraud. We know from other evidence, reading between the lines, that other prosecutions and investigations are ongoing, and we
I have been hinting at, although I have been diverted by interventions from discussing, the series of alternative bodies in Government that might run the small grants scheme. I will set out for the Committee shortly the options before the House regarding who might be asked instead of HMRC to run the scheme. I recognise that it is incumbent on the Opposition, as we moved the amendment, to suggest and explore the pros and cons of possible alternatives to HMRC, and I intend to do so, but before I come to that part of the case for our amendments, it is worth dwelling on the scale of the cuts in staff at HMRC, which Ministers have insisted on since the election, and the impact on all those tasks that we are asking HMRC to perform for us.
I have not had the chance to check the accuracy of the media coverage of this issue, but I understand that 10,000 staff at HMRC will have left its employ by the time of the next election. That will inevitably impact on its ability to do as good a job as it might in collecting and administering capital gains tax, corporation tax, income tax, inheritance tax and national insurance contributions. It is reasonable to ask the Minister where the axe will fall in particular Departments, and whether staff who will be required to implement this small grants scheme might be better deployed on some of those other HMRC functions and tasks.
I know hon. Members follow closely the work of the Public Accounts Committee, for which the National Audit Office produced a report setting out the amount of tax loss as a result of some of the cuts in staff. That is surely a salutary reminder for this Committee of the impact of cuts in staff on the ability of HMRC to perform all its functions. It is, therefore, even more incumbent on us to consider whether this additional burden that we are legislating for HMRC would not be better allocated elsewhere.
There is a further, more political argument that I might return to later: the concern that the Chancellor of the Exchequer effectively controls the implementation of the small grants scheme. Is a Department of Government controlled by the Chancellor best placed to run a support for charities, given the scale of the cuts in funding for charities that he has driven through elsewhere, and given that we are talking about a maximum of only £1,250?
We need to consider some of the problems facing our country that we ask HMRC to tackle. Tasking HMRC with the administration of this scheme might make it more difficult, even in a small way, properly to address those other challenges. One challenge faced by the country is how to tackle tax evasion and avoidance. Ministers have said it is a priority to crack down on both areas. Who could not support Ministers wanting to do that? The question before the Committee, considering the evidence we have received, is whether additional
There is a judgment to be made. We place a huge range of tasks on HMRC, with particular challenges around tackling tax evasion, which is much more of a concern according to media reports. Surely, if there are ways of freeing up staff time within HMRC, we should be putting those resources into cracking down further on tax evasion and, indeed, tax avoidance, rather than implementing a small grants scheme that a series of other Government Departments might be able to administer just as effectively in respect of the level of fraud.
Sir Tony Baldry (Banbury) (Con): On a point of order, Mr Turner. I am a bit new to this still, so I wonder if you can help me on processes. Am I right in thinking that the House has agreed the number of sittings for the Committee? If it has, by definition the Committee has a finite time for which it sits. So far, we have been sitting for an hour and a half, and the hon. Member for Harrow West has made just one point. At that rate of progress, a considerable number of the amendments that have been tabled will never be reached or properly discussed. It is a matter for you, Mr Turner, but there is a thin line between what we are hearing and simple filibuster. If anyone reads the record of our proceedings in Hansard tomorrow, they will know it does not require an hour and an half to say, “I think someone else other than HMRC ought to be running this scheme”.
The Chair: I have been fairly careful to observe when the Minister and other Members are staying within the rules and when they appear to be going beyond them. I shall continue to do that, although I agree with the many people who may observe that the Opposition have some discretion on how they use the time.
Mr Thomas: Further to that point of order, Mr Turner. You will understand that I am quite shocked by the accusation made by the hon. Member for Banbury. I have extremely high regard for him, but to say that I have been making only one point since we began the debate suggests that he has not been paying full and proper attention to it. What measures are available to me, Mr Turner, to correct the outrageous impression that the hon. Gentleman has given the Committee?
I was talking about the particular challenge that our country faces in tackling tax evasion and avoidance. I am sure that you and even the hon. Member for Banbury, who just made a point of order, are avid readers of the newspapers and will have seen that the issue of tax evasion or tax avoidance surfaced dramatically
Mr Thomas: I am grateful to you, Mr Turner, for your guidance. I was not making a judgment about the particular company, but merely wanting to highlight the fact that the issue has resurfaced before our very eyes. Presumably, HMRC will be tasked by Ministers to look into that case. That prompts the question whether there will be a diversion of officials at HMRC to look at that challenge. Not loading the small grants scheme on to the responsibilities of Her Majesty’s Revenue and Customs might enable those officials who are being diverted to examining the Starbucks issue to continue to perform their day-to-day tasks.
Stephen Williams (Bristol West) (LD): I was the first MP to raise the issue of Starbucks earlier this week. Is the hon. Gentleman seriously suggesting that the Inland Revenue staff who look at transfer pricing, international agreements and other areas of forensic accounting are the type of people who will be used to administer gift aid? If he is, his amendment is not credible.
Mr Thomas: I was not aware that the hon. Gentleman was the first Member to raise the issue of Starbucks; otherwise, I would have drawn the Committee’s attention to his role in such matters. I am not suggesting that the forensic accountants and criminal investigators who might be working on the Starbucks case would otherwise be working on the small grants scheme. It is absolutely right to say that that would be ridiculous.
However, surely the hon. Gentleman will recognise that, if we keep loading responsibilities on to a particular part of the Government, inevitably, certain tasks will not be done as well as they could, and fewer people will be given advice on how to handle difficult issues because fewer people will be answering the office helpline. It is not the direct correlation and risks to which I was referring, but the knock-on impact of loading on to HMRC an additional responsibility of administering a small grants scheme. It is far from clear that it has experience of such matters and, there must be another part of the Government that could do the task as effectively, allocating £1,250—for goodness sake, hardly a big sum of money—just as effectively, if not more so, than HMRC. I hope to have the chance to draw attention to some of the other Departments that might undertake the task.
We are fortunate to have my hon. Friend the Member for Leeds East in Committee. He has been tasked with chairing a Sub-Committee of the Treasury Committee and has hinted or made clear—I am not sure which, but his suggestion is in the public domain—that he will call HMRC officials to give evidence on tax evasion. That is a further small example of how officials at HMRC are being diverted by recent publicity. Surely we should make it a little easier for HMRC to perform the full range of its functions, particularly regarding its responsibility of reporting to and being held accountable to Parliament. I therefore genuinely suggest to the Committee that we explore another option for the management of the scheme.