Small Charitable Donations Bill
The Committee consisted of the following Members:
Alison Groves, Steven Mark, Committee Clerks
† attended the Committee
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.
I should like to remind all Members that the time allocated to go through the Bill is finite. I therefore strongly urge them to use the time wisely and to make their speeches as concise and to the point as possible.
Mr Gareth Thomas (Harrow West) (Lab/Co-op): On a point of order, Mr Turner. In the light of that traditional guidance, may I thank the Minister for sending through some additional information about the cost of the matching requirement? That is extremely helpful and we will reflect on the letter over the course of the debate. Have you had any information on when we might see the estimate of the overall sum that will be spent on the Bill? Will it be during the course of the Committee stage or before Report to allow us to consider the measure with due diligence?
Mr Thomas: I am grateful to you, Mr Turner. I look forward to probing the Minister on that point. Whenever one speaks in the House one should approach the occasion with humility. I realise that I perhaps have not done a good enough job thus far to convince the Committee of the quality of the amendments and that they deserve to be accepted. So, conscious that I have to step up a gear in trying to persuade Government Members, I went over some of the evidence presented to us. Questions 98 to 100 in column 61 help us to cut to the real truth behind why the Opposition believe that the amendments are worthy of consideration by the House.
The longest serving Member here, the hon. Member for Banbury, sought the Minister’s support in question 98 to help him understand how the scheme might work for Banbury Sea Cadets, whose president he is. The Minister replied and the hon. Gentleman thought that he had it clear in his mind. He asked another question and it was clear that the explanation had not provided him with a full understanding. He is a very distinguished Member. He is very intelligent and very shrewd. If he has questions about how the scheme will work, it would hardly be surprising if a whole series of charities wanted to get on the phone to Her Majesty’s Revenue and Customs to ask for advice. The Minister drew our attention to the free HMRC phone line. As I understand it from his evidence, that phone line will not see any increase in staffing. It will just be more pressure on that phone line to give accurate information.
A later question, question 100, is one that I posed to the Minister and his officials, about the number of officials in a particular charity section of HMRC who will be available for the implementation of this Bill. Mr Edwards helpfully made it clear that there were approximately 190 staff in the HMRC charities section, presumably all available to help with the administration of this scheme or to answer the queries of people in the charity sector. He also said that there would be a significant slimming down and that in the next couple of years the 190 staff would be down to 150. That is a significant reduction: a 25% cut in the number of staff available in the charities section, just at a time when a funding scheme that is hugely significant for many small charities is coming into force.
Mr Thomas: My understanding is that a new IT system is coming into force to help make it easier to claim gift aid and that that is part of the reason Ministers want to link the small grants scheme to gift aid. However, it does not necessarily negate the point about the impact of such a significant reduction in staff in the particular section of HMRC that will be available to help charities implement small grants schemes.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): I wonder whether you share my concerns and those of many hon. Members who have raised the question of the staffing levels at HMRC, particularly the ability of HMRC to meet the targets for dealing with phone inquiries and other forms of inquiries within the time scales? It is not something that I am blaming individual staff for; but there have clearly been problems with the system.
Mr Thomas: I am grateful to my hon. Friend for that intervention and I apologise to her. I had not seen her previous questions raising this perfectly legitimate concern. It is a worry that, presumably, a whole series of sections of HMRC face pressure due to cuts in the number of staff to whom people in the charity section might have been able to turn for support in the initial implementation
Mr Edwards gave some fairly revealing information in the second part of his answer. This is at column 61, question 100.
So it would appear that the scheme does require extra staff to implement it. One wonders what impact the deployment of those extra staff to the management of this scheme will have on the rest of HMRC. I can give a further real-life example of an organisation which does not have as its president a very distinguished Member of Parliament such as the hon. Member for Banbury to whom it can go. Imagine, if you will, a youth and community centre that provides space for all sorts of activities for some 60 young people that help both to give them a good time and to keep them out of trouble. Imagine that it is set to close. No alternative facility is being provided for those young people. When the organisers are thinking what they might do to organise a place to meet, they consider establishing a charity. We know that they might want to phone HMRC for advice on how they might access the small donations scheme—not knowing clearly, at this stage, that they must be registered for gift aid and must have three years’ worth of gift aid claims in before they can do it. That is a real scenario.
In the Minister’s constituency, exactly that situation is happening. Rubery youth and community centre—Rubery is in the Minister’s constituency—tonight faces Worcestershire county council, which is determined to shut it down. The question is, where will those 60 young people go? What will happen to the centre? Perhaps they will want to organise themselves into a charity and will need to seek advice.
The Economic Secretary to the Treasury (Sajid Javid): The hon. Gentleman raises the issue of Rubery youth centre, and he is correct that local young people are rightly concerned about it. However, he asks where they will go. They will go to the brand new £5 million youth centre that has opened one and a half miles up the road.
Mr Thomas: With all due respect to the Minister, one welcomes investment in youth and community facilities, but, for the children and young people who use Rubery community centre at the moment, one and a half miles is a significant distance. The new centre is perhaps unlikely to be used as much as the Minister hopes. He will be aware that an alternative facility just opposite Rubery youth centre was on offer for those young people to use. However, I fear I am digressing. Needless to say, that facility is no longer on offer, and, as he quite rightly said, those young people face a one and a half mile trek down the road. It is unlikely that they will take advantage of it.
To help those young people directly, the Minister could think about whether shifting this scheme somewhere else might free up staff time to support those young people to enable them to establish themselves as a charity and secure assistance under this scheme. If he is not prepared to try to save Rubery youth centre, and it
Nigel Mills (Amber Valley) (Con): I am loath to break the hon. Gentleman’s wonderful flow, but surely the logic of his argument is that this charity would need to ring up not only this mythical new place that might give them advice, which probably would not yet exist or have any expertise, but HMRC to get advice on the gift aid scheme, which would probably raise more money towards their noble goal. Is that not making life harder for that charity?
Mr Thomas: The young people believe that it would be better if their youth and community centre stayed open or if another facility in Rubery were made available, but that is moving away from the subject of the clause. Needless to say, the hon. Gentleman’s intervention might encourage the Minister to think again about what else he can do to help those young people.
Just before we broke for lunch, we were looking at the challenges that face the country, and therefore HMRC, in cracking down on tax evasion. Mr Turner, you follow these things closely so you will remember that in last year’s Budget the Chancellor, quite commendably, chose to shut down three forms of tax avoidance. One wonders whether, faced with the same type of scenario in the future, he might be able to shut down four forms of tax avoidance if staff were not having to be diverted from tackling tax evasion and avoidance, which is surely HMRC’s core function. Instead, we are having to set up a small grant scheme.
“The new scheme does not require many extra staff because it is being brought in at the same time as we are introducing a new IT system for gift aid, which we have designed with this scheme in mind.”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 61.]
Does the hon. Gentleman agree that it would be fatuous to have a completely separate IT system set up in a completely separate Department, when this plan has already been put in place and seems to be the most economical one that we could possibly propose?
Mr Thomas: The hon. Lady might be right, but what we need to hear from the Minister is the extent to which he has talked with colleagues in the Departments for Education and for International Development, the Charity Commission, the Cabinet Office and the Big Lottery Fund about whether they can implement the small grants scheme, which is what we are establishing under this Bill, just as effectively, or perhaps more effectively, than HMRC. There are other bodies providing grant schemes in Government that could run this scheme. We need to know whether the Minister has properly explored those options. From the evidence that we heard, it was far from clear that there had been a conversation with those other Departments. A number of Members raised the issue of the Awards for All programme, which is run by the Big Lottery Fund, and it was not clear whether
I mention the issue of tax evasion, but, as I said earlier, HMRC faces a series of other significant challenges. One of them is the enforcement of minimum wage legislation. Surely no one in this Committee would not want to see the Government make a wholehearted effort to crack down on those who will not pay the minimum wage. The fear is that the scale of cuts to HMRC may make that task a little harder, which is surely why it is incumbent on us to consider again whether those few extra staff, who we know will have to be diverted from other tasks such as minimum wage enforcement, might not be better deployed in tackling the existing challenges facing HMRC.
Nigel Mills: I am just trying to find the logic of this argument. The hon. Gentleman is saying that it is wrong to give HMRC something new to do that is not strictly related to tax, yet he is taking us back to the previous Government’s decision to give HMRC the minimum wage legislation to enforce, which is not strictly to do with tax. Is he not better off suggesting that HMRC should now be left to focus only on tax collection and enforcement, and that its other responsibilities should all be moved? Does he think that the previous Government made mistakes on that score?
Mr Thomas: I do not think that the previous Government made a mistake in this area. The point I was making this morning was that there is a balance to these things. One needs to consider the burden of tasks that one gives to particular Departments. Surely that is especially true when the Government have asked HMRC to downsize to the tune of 10,000 staff by 2014-15.
Let us briefly consider the scale of the challenge that faces HMRC in the enforcement of the minimum wage. The hon. Gentleman might have seen the evidence from the Institute for Public Policy Research suggesting that there are 100,000 interns working in the UK, some of whom should be paid the minimum wage but are not. Perhaps if there were additional officials who were not tied up with the implementation of this scheme, things might be improved for those interns. If the minimum wage is not properly enforced, the only two options available for those affected are either to accept the situation and to live with it as best they can—a grim scenario if they do not have the resources to back them up—or to go to court, which is a challenge that is almost as daunting as a small charity trying to fill in a gift aid claim when it has never done so before. Again, it is about thinking through the balance of tasks that we are asking of Her Majesty’s Treasury.
There has been a particular challenge in the film industry; 20th Century Fox is being challenged by interns who are not being paid. One wonders whether there is the same problem on the new James Bond film. We do not know and, at this stage, nor should we, but we should be able to have confidence that HMRC has the staff at its disposal to crack down on unpaid internships to which the minimum wage legislation should apply.
There is also the huge challenge that HMRC faces with the implementation of universal credit. As we know from the leaks from No. 10, there is considerable concern across government about whether universal credit will be implemented effectively come April next year. Indeed, many businesses are also extremely worried about their responsibilities to provide real-time information to the Government.
On Monday, I was at an event at Harrow council in my constituency where businesses met, together with an extremely effective, Labour-run council, to consider what else could be done to support business. Representatives from HMRC were present, and businesses wanted to ask about the support they would get for the implementation of the real-time information provisions.
Universal credit is a huge change across Government, and there is a huge responsibility on business to give real, accurate information. Understandably, there is genuine concern as to whether the scheme will be properly implemented and what it may mean for businesses if they, perhaps inadvertently, do not provide the right information for the Treasury.
Potentially, that scheme could be introduced at the same time as the Bill’s scheme, and universal credit is surely the bigger challenge that faces HMRC in terms of new responsibilities, so why do we want to load on another responsibility in terms of a small grant scheme when there may be other Departments that could handle the challenge?
I have alluded to the scale of the problems that HMRC may face in terms of reclaiming student loan debt, as the burden rises significantly. In our brief break, my hon. Friend the Member for Leeds East downloaded a most interesting publication that has come online—from HMRC, I believe—which looks at the scale of the tax gap we face. In that hour, I skimmed the 11 pages of the scheme, and I cannot find any reference to a tax gap in the charity sector. Significant information is given in terms of the VAT gap collection rates, diesel tax gap rates and spirits and beer duty tax gap rates, but nothing about the charity sector or gift aid tax gap. That suggests that HMRC faces a much bigger challenge in terms of reducing the tax gap in areas other than the charity sector, and begs the question: if fraud, tax evasion and tax avoidance are more of a problem in other parts of the economy, as a Committee, should we not ask HMRC to focus purely on those bigger challenges? Then we could leave some other Department to examine the challenges around the implementation of the scheme, and, as far as is possible, prevent abuse under it.
I know that the Committee has eagerly awaited my suggestions for other possible Departments or non-departmental public bodies. What about the Charity Commission? We mention it in our amendment. It is a non-ministerial body; the thought that Ministers will not be able to interfere in its running will be attractive to many charities. It is completely independent of ministerial influence; it is also completely independent of the sector—again, giving confidence to the sector. The commission is required to report annually on its performance, so the House would get an annual report, which would include how this new scheme is being introduced. The commission is also responsible for the registration of charities, the
Susan Elan Jones (Clwyd South) (Lab): I know that there have been some discussions about the Awards For All programme. I accept that there are certain differences, which the Minister alluded to. However, what is interesting is that there has never been any insinuation that there has been a high level of fraud in the Awards For All programme. I would venture to suggest that that is because Awards For All links very closely to local media publicity. I suggest that the Government have gone a bit too far over the top and are being overly statist in their approach. If there is publicity in a particular area and people think, “Well, this is a dodgy organisation,” the local community, who are, of course, the big society, would report the organisation to the relevant body or to the police. That is true in our villages and towns, where people can often smell fraud in advance of the official bodies.
It is worth making clear the scale of charities that have some connection with the Charity Commission. As of 31 March this year, Mr Turner, there are some 162,098 charities, which between them have an annual income of £56.9 billion. The vast majority of those charities would have been registered with the Charity Commission. If they are not registered, they will have had to have considered and understood that although they did not need to register, they nevertheless needed to be familiar with the commission and the concepts underlying it as the sector’s independent regulator.
I recognise that there may be some arguments as to why the Charity Commission should not be the body that handles the implementation of the scheme, and it would be wrong of me not to outline those arguments for the Committee’s consideration. It is true that as some charities do not need to register with the commission, they will not have had the day-to-day contact that might be required, on occasion, when a charity is first registering. If a charity’s head office is not in England or Wales, it may not have had direct contact with the Charity Commission, as Scotland and Northern Ireland have their own regulators; nevertheless, the fact that those charities have to deal with an independent regulator might suggest that they would be comfortable with the concept of the Charity Commission.
It is also true that if they are part of a larger organisation, some smaller charities that are effectively independent and control their own funds will not have to register with the Charity Commission; nevertheless, those charities will be familiar with the concept that their parent body registers with the commission. I would gently suggest that for people setting up charities who have never had any contact with Government before, the prospect of engaging with the Charity Commission will not be a more intimidating one than that of engaging with HMRC.
The other argument, I suppose, as to why the Charity Commission should not be asked to take on this task is that it too has seen significant cuts in funding, which is down from £29.3 million in 2010-11 to some £21.3 million come 2014-15. That might make the hon. Member for Congleton even more determined in her view that the Government have got it right by asking HMRC to handle the scheme. I gently suggest to her that on balance the commission might be a more attractive place for more of the smallest charities, which are already familiar with it as a regulator.
If Treasury Ministers cannot abide the thought of giving responsibility for the scheme to an independent body not controlled by Ministers, they may want instead to pass responsibility for its implementation to another part of Government. What about the Cabinet Office? It has already had to handle the transition fund. The Cabinet Office chose to have the Big Lottery Fund administer that, in partnership with the charity infrastructure body, the Association of Chief Executives of Voluntary Organisations. The experience of charities engaging with ACEVO and the Big Lottery Fund, given the huge number of applications that the fund received in the wake of the huge cuts in Government funding for charities, suggests that the Big Lottery Fund and ACEVO could implement and administer the scheme effectively in partnership, could have the confidence of the charitable sector and could take a small part of the burden that Ministers want off HMRC.
The Cabinet Office might want to directly manage the scheme. It still has officials in the Office for Civil Society and is used to working with local organisations, such as the transforming local infrastructure fund and the investment and contract readiness fund. Those are two examples of the amounts of money—albeit tiny relative to what there was before—available to charities to access from the Cabinet Office.
An argument against the Cabinet Office having responsibility for administering the scheme is that the Office for Civil Society has faced a significant cut in its funding and, as a result, in its staff. That cut is of almost a third and has had a significant impact. Nevertheless, it has a good track record of working with charities. There may be a way of ensuring that it has the support it needs to administer the scheme.
The responsibility could be given to the Department for Culture, Media and Sport, which, again, is used to engaging with charities through the National Lottery. There are other key lottery funders, such as the Arts Council, Sport England or the Heritage Lottery Fund, which are all used to working with voluntary organisations and might be a better place than HMRC, in light of the existing burden on HMRC, for handling the existing small grants scheme.
My hon. Friend the Member for Clwyd South referred to the Big Lottery Fund’s Awards for All scheme in her intervention. I have with me the guidance that Awards for All sends out. It gives out small awards of up to £10,000. That is 10 times the maximum amount available under the scheme in the Bill. The Awards for All scheme does not have a 60-page book of guidance, as is required by the Treasury for gift aid. It is a much more manageable 20 sides, designed to make it easy for the newest charity to claim, or the individual who has never claimed a grant for local community works.
If the Big Lottery Fund can work with the smallest organisations already and can recognise through its Awards for All programme that it has the staff and expertise to go into our communities and ensure that lottery funding gets to the UK’s smallest charities, why can the BLF and Awards for All not be the body specifically tasked to run the small grants scheme? I recognise that that would move the scheme out of Treasury and HMRC control, but the BLF has the great advantage of being an organisation with which many charities are already familiar.
If I have not yet convinced you, Mr Turner, or other Committee members that those other bodies or the Charity Commission, the first body that I suggested, might be the best place for the small grants scheme to reside, let us consider two types of charity and what would be the most comfortable source for them to access the scheme.
The Chair: Order. I think that if the hon. Gentleman moves into a comparison between two different organisations that might both be suitable, he will go outside the scope of the amendments. It is all right for him to speak about where they might go, but it is not necessary for him to compare A with B.
Mr Thomas: I am grateful for your guidance, Mr Turner. I will not make the comparison, but I will explain to the Committee why those two organisations might be more comfortable with the Charity Commission, one of the organisations named in amendment 24. There are 19,000 parent-teacher associations across the UK, but just 16% are registered for gift aid at the moment. The vast majority of PTAs in our schools must register with the Charity Commission—although not if they are in Scotland or Northern Ireland—but only 16% of them have contact with HMRC. Proportionately more of those registered for gift aid are in the south-east and south-west.
PTAs in general do not have a history of being linked to HMRC, but they do have a history of being linked with and familiar with the Charity Commission. An estimated 70% of PTAs in the UK are registered with the Charity Commission. That excellent association, PTA-UK, is promoting a model constitution for school PTAs that has been agreed by the Charity Commission. PTAs are small charities; the average amount of money a PTA raises is about £8,000, although some raise more and others raise less. It is a relatively small amount, but it is significant in the context of what it can do for the children in a school. As I said, 70% are already familiar with the Charity Commission, and the other 30%, facing the work by PTA-UK to promote the model constitution, may also become familiar with the Charity Commission as we go forward.
The other types of charity that might prefer accessing a small grant scheme via the Charity Commission to HMRC are hospital radio stations. Radio Northwick Park, which serves my constituency hospital, is excellent. There are about 230 hospital radio stations around the country. Virtually all of them are registered charities, familiar with the Charity Commission and its work and comfortable with its independence and style of operating. About 40% of those 230 hospital radio stations are not registered for gift aid, so do not have any track record of liaison with HMRC. If we are looking to help the smallest charities, who are part of the bedrock of
To summarise this group of amendments, there are a series of reasons why the Minister might want to consider that HMRC is not, as first believed, the most suitable home for the small grants scheme. The last offering of thoughts for the Minister comes not from me directly, but from the Gift Aid Forum, which reports to the Economic Secretary to the Treasury. Presumably this report was prepared for his predecessor. Its first recommendation to the Treasury says,
I say again that if that is the best advice from a forum set up by Ministers themselves, and recognising that at the moment the scheme is directly linked to gift aid and therefore directly in the hands of HMRC, perhaps it is time to listen to the experts the Treasury got to look at gift aid and recognise that another Government body might be better placed to administer the scheme. I am open to be persuaded that HMRC is still best placed for it and I will listen with care and diligence to the Minister’s response.
John Hemming (Birmingham, Yardley) (LD): I am very pleased to speak on this issue. It is quite amazing how much time can be spent on amendments that are basically as absurd as these. We start with the principle of what we are trying to achieve. We are trying to be efficient so that the money paid by taxpayers, or in this case refunded to taxpayers, is used as efficiently as possible for the purposes for which we would like to use it. In this instance, the purpose is to support charities. If we have the opportunity for a slight change to the gift aid computer system, so that HMRC can handle the administrative process and refund some of the tax paid on the basis of money donated to those charities by a top-up payment—not a grant scheme—that is an obvious thing to do. There is a Department that has the experience of handling that and this is an extension to gift aid. I accept that there are constraints to avoid fraud, but otherwise the difficulty in handling a grant scheme is having to make judgments about whether grant is payable. In this instance, the judgment is quite straightforward. It is based on money paid in tax and money donated to the charity. On the basis of those calculations a sum of money is refunded to the charities. The fact that it may actually encourage more charities to register for gift aid is good in itself. As the Opposition spokesman said, it would be absurd to try to handle gift aid in any other way.
Unless the aim to is to disconnect completely and have a scheme to calculate how much money is being given out per word of that Opposition statement, we get some comparatively very cheap words. Given that the amounts of money will not be great, that was one of the longest speeches I have heard on a minor issue. It would be surprising to have a more efficient system than HMRC handling an extension to what it is doing already.
We also need to look at the other amendments, not just 16, but 17, 24 and 25. We have to consider, in passing legislation, that we are giving authority to a Minister to do something. The authority is not to say to his or her researcher in the office, “Why don’t you manage this system?” The Opposition are suggesting in amendment 24 that the job should not be guaranteed to HMRC but to a Government Department or the Charity Commission. They have not said that it can be the Minister’s researcher who handles it, or that it can be handed to a quango, a non-ministerial public body. Instead, it can go to any Government Department.
What is being proposed by the Opposition is not that the job could go to any other non-ministerial Department but that it could also go to a ministerial Department. We as parliamentarians should be concerned about the discretion that we give to Ministers. We should not suggest that a Minister should be able to interfere in details of a grant scheme such this, and who gets the money and who does not.
I am mystified why the Opposition wish to take the task from a non-ministerial Department—HMRC—that is well qualified and experienced in this area, and give it to any old random Government Department, be it DEFRA or wherever. I am mystified as to the logic of that. It is clearly not appropriate to have ministerial interference in such a matter. This is rather sad: the Opposition suggest not only a very inefficient system, requiring a lot more taxpayer money to be spent on administration and less on charities, but that the task could go to any Government Department that would not necessarily be even within the Treasury.
If the Opposition were suggesting that the task should go to a non-ministerial Department, one could perhaps say that they had put a little bit of effort into thinking about their amendments, rather than into finding things to say about badly thought out amendments. In practice, there is a proposal to give very wide discretion to the Government as to who handles the scheme. Frankly, I do not think it appropriate, with a scheme of small grants such as this, for a Minister to say, “We can give a grant to this person but not that one; to that cause but not another.” This issue should be handled by a non-ministerial Department.
Today, we face a choice between the Opposition’s amendments, which propose a lax regime where anything could happen, or a straightforward system run by HMRC, which already has the experience to encourage charities to register for gift aid to get extra money on their cash donations. Given the choice between an improper proposal from the Opposition and an entirely proper and efficient proposal from the Government, there is no choice but to support the Government’s position.
Mr George Mudie (Leeds East) (Lab): My hon. Friend the Member for Harrow West has taken a long time to go through this, so I can be brief. There is some misunderstanding, despite the care he has taken. We are getting caught up in the issue of HMRC, and there are
This is not a party political issue. I trace the decline in the Department to the decision to merge it with Customs. In all the discussions I have had at various levels, many levels of HMRC make this point: there was an ethos, a professionalism and a way of dealing with things, but the merging of two Departments, each with its own ethos, has led to dysfunctionality and the problems are there to be seen.
The Treasury Committee produced a report on customer care which covered a full list of problems. The Mail on Sunday did a marvellous job and presented me with a thick dossier of complaints from ordinary people having all sorts of problems with the Department. We brought our report out on a Sunday, and I travelled down here to speak to the press, at its invitation, about it. I almost thought that it was unnecessary, because HMRC immediately apologised. It held its hands up and said, “Yes, these things are happening and we are sorry about them. We apologise.”
I have said that this is not a party political thing. This was a merger under our Administration. Matters were made worse by the fact that a very powerful Chancellor wanted discipline and savings in other Departments. One thing he did was to provide an example through the Departments under his control, such as the Treasury and HMRC, by pushing through cuts in staffing that are still going on. These are having amazing, disastrous effects in the Department, added to by a great belief in the power of computers to take over from human beings. That is fine, but as we have discovered in Parliament, it is always better to get the computer working, the programmes tested and running before dispensing with the human factor. Parliament and Governments of all kinds have not had any success in introducing major computer systems that have worked immediately and come in on cost; so HMRC, having dispensed with human beings, has found itself in all sorts of trouble.
As every Member here knows, HMRC has closed offices—I know I am making a political point—and opened call centres. If anybody here has had a human, sensible, reasonable conversation on a matter of detail with anybody in a call centre, they are to be congratulated. People do not phone call centres and expect to have a detailed discussion that they can later quote, or decide that they can speak to the same person they spoke to the day before. The response would be “Who’s John?”, if indeed they got a name in the first place. They get an anonymous person who takes down what they say and has no decision-making power. That is what was happening to ordinary people, with the closure of offices, the cutting of staff, and the imposition of a call centre with everything done by computer. It has been chaos.
I do not blame the people who run it. Sadly, Dame Lesley Strathie, who was the chief executive, died suddenly, when she was getting to grips with things. She had come
That all might be history, and irrelevant, but what my hon. Friend the Member for Harrow West is saying is that we are not trying to be unhelpful. I have raised the matter with previous Ministers, and warned them about it. Universal credit, and the real-time information that underpins it, is due to come in in 2013, which is about three or four months away. There is great scepticism and many worries. Many private conversations are going on about how worried everyone is, and, considering the past record of computer systems in this place, I would not advise the Minister to stand up here and say to the Opposition and to the public that the scheme is spot on and will work wonderfully. It is, however, the jewel in the crown of the Government. It is a key policy with which even the Chancellor was not able to interfere, and so to start expecting a Department to do this, that and the other when the roof is falling in on it and it has the crucial task of getting ready in six months, is unfair.
Penny Mordaunt (Portsmouth North) (Con): I have been critical of a lot of the public’s experience of HMRC, largely because of the complexity of the tax code, but I ask the hon. Gentleman to be a little more generous towards HMRC, and in particular towards its charity unit. I have spoken about the fact that the Bill looks not only at the sector as it is, but at where we want it to go. The key evidence that the unit is fit for purpose and for taking stewardship of the initiative is the very existence of the Bill.
Mr Mudie: I am coming to that. I have not criticised the unit; my conversations have been about the Department generally, and the great policy matters that need to be addressed. If we want to deal with the issue, however, we must look at the evidence, not at the staff, and that is where my good friend, the hon. Member for Birmingham, Yardley, goes away from the point.
My colleagues and I want the scheme to succeed, and we pay tribute to the Chancellor of the Exchequer for the initiative he has taken. The hon. Member for Birmingham, Yardley should listen to the Chancellor a bit more closely, because in making his speech he has defied the Chancellor, and I will tell Members why. In 2011, the Chancellor said, when introducing the scheme, that it would be light in bureaucracy,
Mr Thomas: My hon. Friend must make his comments in the way that he wants to; I would not dream of stopping him. He is right to focus on whether we can make the scheme a success. There is concern about the community buildings provisions in the Bill, which introduce a new concept into charity legislation. Does my hon. Friend agree that that is one example of the new complexity in the scheme, which the hon. Member for Birmingham, Yardley might want to focus on over the weekend as his homework for next week’s deliberations?
I want to take the hon. Member for Birmingham, Yardley back to the unit and gift aid. He is defying the Chancellor and should be aware of that. Careers are on the line here: not his, but those of Committee members on the Government Back Benches. Gift aid has been successful, but not in terms of numbers. Figures show that 65,232 of the 162,098 charities registered with the Charity Commission claimed gift aid. If Committee members think that that is acceptable, they must factor into the equation a recent examination suggesting that there are between 200,000 and 350,000 charities. Good as it is—it is an excellent initiative—
Mr Mudie: I am very sad that the hon. Member for Birmingham, Yardley is not here. The basis of the scheme was no bureaucracy—or light bureaucracy—and donors, unlike with gift aid, not having to fill in any forms. That is what was envisaged. I invite Government Members, whether they want to leave it with HMRC, which is beyond doubt for the majority, to look at whether that meets the Chancellor’s wishes and vision of how the scheme would be run.
I was talking about gift aid before the Committee suspended. I was pointing out that the figures demonstrated that, with such a scheme where there was a need, as the hon. Member for Birmingham, Yardley said, for some bureaucracy, because tax was involved, even lighter bureaucracy has meant that take-up has been low. That is why the Chancellor has extended the scheme through the scheme that we are now considering. Sadly, take-up is below where we would all want it to be—65,000 out of 162,000 registered charities. It is even lower if we include substantial numbers of non-registered charities.
Interestingly, 47,000 of the 65,000 registered charities, which is 73%, claim payments under £5,000. The point that we were making—because we think those figures need to be improved; we share the Chancellor’s view—was about extending the scheme that was easier. The point about tax is that it is involved with gift aid and payroll giving. The Revenue has a part to play. It has to have administration and a system.
However, with the scheme that we are considering, tax is not involved. The charity simply has to register with the gift aid scheme and participate in it for three years successfully, and from that point, its gift aid allocation is doubled, up to £1,250. A magic, big, bureaucratic machine is not necessary, because the Chancellor is quite right that the more complicated the scheme is made, the fewer the people—and small businesses—who will use it, as demonstrated by gift aid itself. On two occasions, my hon. Friend the Member for Harrow West mentioned 60 pages of guidance, but that is for only two clauses. There are 80 pages of guidance on the HMRC website—and that is for a scheme that is supposed to be light on bureaucracy.
Mr Thomas: I had not realised it before, but the amount of bureaucracy involved is even greater than I feared. My hon. Friend said there are 80 pages of guidance for a charity to claim gift aid. Further guidance will be published by HMRC about the implementation of this scheme. Effectively, what he appears to be implying is that there will be close to 100 pages of guidance for a charity to claim gift aid and a small top-up payment under this grant scheme. By any definition, that is surely Kafkaesque.
Mr Mudie: That is pretty accurate. However, the major worry about the involvement of HMRC is that, as I described earlier in an intervention, it brings baggage, and quite rightly. HMRC is the body that brings in the revenue. I shall not get political and I shall not refer to a certain coffee company, but people are willing, able and looking for opportunities to find any loophole that enables them to evade or avoid paying their proper share of tax. So, the Inland Revenue over the years is well established in terms of knowing that it has to be specific and that it has to have detailed regulations. Above all, it has to understand that, however detailed its regulations are, there are unscrupulous people and companies out there, and the minute the regulations are written and passed they set out—at enormous expense to them, but in the hope of enormous gain from avoiding tax—to avoid those regulations and to beat them. So we do not expect anything else from HMRC: it is doing its job; that idea is in its mindset; and that is the way it should be.
Before I forget, let me say that if we have a straightforward scheme that only means £1,250 to a small charity—my hon. Friend the Member for Harrow West earlier referred to the fact that a charity often arises out of an incident, such as a shooting or a flood—because of these regulations, that charity may well wait three years before it is eligible for the new scheme, and in that three years it has to claim gift aid, with all the bureaucracy involved. Well, whatever help the charity was going to give flood victims—God forbid, it has to wait three years. Even Governments bring aid to people more quickly.
Mr Thomas: My hon. Friend is making a good point. He said that he did not want to mention the particular coffee company, and I recognise that if I were to do so again, I would probably incur the wrath of the Chair, but my hon. Friend will acknowledge that part of the reason, I assume, why his sub-committee wants to see HMRC officials and generate that extra work load for
Mr Mudie: My hon. Friend is absolutely right. The information sent to me today by HMRC—maybe it was sent to members of the Treasury Committee, or to us all—confirmed that the tax gap sits at £32 billion in 2010-11. One can imagine the effect on the Government’s financial position.
Mr Mudie: We were simply making the point that this scheme is going to cost £100 million. It is common sense that, if we had resources, and these figures come from HMRC itself, taxes being avoided on the scale of £32 billion—
I reiterate that we wish the scheme well. Although we have taken up a lot of time, we have done so more in sorrow than in anger or opposition. We want the scheme to work. On the basis of its complexity, we fear the worst. If I can just close on one particular written piece of evidence that came in from Ian Clark, which I thought—
Mr Thomas: Before my hon. Friend makes his final remarks, it is worth alluding to the heckle from the Minister’s Parliamentary Private Secretary on the tax gap. If I heard the heckle, or sedentary intervention, correctly, the hon. Member for Warrington South implied that the tax gap—bringing it down must be the core task of HMRC—was the lowest in Europe. I do not know whether he is correct. He clearly believes that that is the case, but surely that is not a reason for complacency when the tax gap is £32 billion. Surely we should be looking at what else we can do to free up the resources to allow HMRC to get stuck into that gap, and this is another reason why our amendments would be helpful to the Government: in reducing the tax gap.
Mr Mudie: I am sad that my hon. Friend has brought that my attention. I heard a noise from my good friend across the Committee and I thought he was signifying approval. I thought it was muted applause. Clearly, I am over-optimistic.
I was making my final point, which relates to Ian Clark’s written evidence, and it should be a worry for everybody in this room. He seems to be an individual with great experience and good judgment. He indicates that he shares the Chancellor’s ambition to get 35,000 additional charities to participate, but in his opinion, because of the Bill’s complexity, they will be lucky to get 350.
Jeremy Lefroy (Stafford) (Con): It is an honour to follow the hon. Gentleman. I oppose the amendment because I believe that HMRC is the best body for this, and the only body that should be involved. I will briefly give four reasons for that. The first reason is intent. As hon. Members said earlier, the intention of the Bill is to support giving, rather than making grants. That is a big distinction: grants are usually for projects, whereas the support of giving affects donations. The key is in the title—the Small Charitable Donations Bill. To me, the intention of the Bill is clearly that giving is key. Until now, the body that we have used to administer Government support for giving is gift aid, an excellent scheme set up by the previous Government. As I have said, I give them full credit for that, and for the improvements that they made to it. When I first set up a charity in the 1980s, I had to go through extremely time-consuming covenants. Gift aid has cut out a lot of that work and has increased the number of charities, which have benefited enormously.
The second reason is efficiency. HMRC already has a system in place, and we are told that it is preparing to incorporate this new top-up payment in its system. I believe Governments should always look for efficiency. We hear that rather ugly phrase “joined-up Government”; this is an example of efficient, or joined-up, Government.
Mr Thomas: The hon. Gentleman says that there is a system in place, but there are systems in place in a series of other bodies to give out money to small charities. Surely that part of his argument—I will listen with interest to the rest—does not hold water, given the number of other places that could, because of the many systems in place in those Departments, administer small grants to small charities just as efficiently.
Jeremy Lefroy: I thank the hon. Gentleman for that intervention. I listened extremely carefully throughout the two-plus hours of his speech, in which he made some persuasive arguments along those lines, although he did not persuade me. My point is that we are talking about the intention of rewarding and increasing the value of donations, rather than making grants. The Government’s current system for rewarding donations is gift aid, which is not something the Government have to do. In many countries across the world, charitable donations do not attract tax relief; in this country we have rightly decided that they should, and we have generously supported that through the tax system over many years. The clause is an example of that being extended. There is logic here. I have listened carefully, and I am not saying that there are not other bodies that could do this, but I believe HMRC is the best body for the role, because it already possesses the gift aid system.
Mr Thomas: I apologise for pressing the hon. Gentleman, but has he had a chance to dwell on the final point raised by my hon. Friend the Member for Leeds East? My hon. Friend presented evidence from a man who has been appointed to a charity tax group specifically to advise HMRC on a range of giving-related tax reliefs. He was specifically asked to comment on this scheme, and he said that, in his view, not only will we not realise the target of getting 100,000 charities to benefit from the £100 million or so under the small grants scheme, but that, at best, just 350 will benefit. That suggests that the scheme is not so efficient and is not likely to achieve the Chancellor’s targets.
Jeremy Lefroy: I have heard that, and I understand it. All I would say is that I believe that the hon. Gentleman is wrong. I believe that far more than 350—10 times, maybe 20 or 30 times that—will apply, qualify, and become part of the scheme. I believe that the scheme will become very attractive as people learn about it. I want to see the guidance restricted as much as possible; I think everybody would like that. I ask the Minister to ensure that the system is made as simple as it can be. A hundred pages of guidance sounds far too much.
I have set up a gift aid system and I do not find it particularly complex, even at the moment. I would argue with those who tend to underestimate the capacity of people involved in charities to grapple with HMRC, and perhaps to set up the charity with the Charity Commission in the first place. Setting up a charity with the Charity Commission involves going through the wording of the trust deed and putting together all the other documents. To me that is a bigger administrative task than registering with HMRC and fulfilling its requirements.
Mr Thomas: I am not surprised that the hon. Gentleman felt entirely comfortable registering for gift aid; he is a shrewd, intelligent and clearly extremely effective member of his community. He is confident in his ability in a variety of areas. There are many people—we have heard evidence to that effect—who are not as confident as perhaps he was when he approached the gift aid scenario. That is surely an argument for trying to make a grant scheme as simple as possible. This scheme is not simple. It introduces whole new concepts, and it will be very difficult for many small charities that are not as confident as he is about how to handle gift aid.
Jeremy Lefroy: I thought carefully before making my comments, because I suspected that the hon. Gentleman would come back with something along those lines. I still disagree with him. There are tens of thousands of charities up and down the country with excellent people running them who can cope with the current gift-aid scheme, which, as I have said at least twice, his Government improved. It was not one of the schemes instituted by his Government that was a bureaucratic nightmare. It is simple and straightforward. I believe that this can be done, but I agree with him that it is incumbent on the Treasury and HMRC to look very carefully at the take-up of the new system. If they find that the number of the smallest charities is as low as has been predicted— I am pretty confident and sincerely hope that it will not be—action must be taken. I agree with him there.
Mr Thomas: The hon. Gentleman understandably urges the Treasury and his ministerial colleague to monitor the scheme extremely carefully for take-up. I welcome that comment. Does he not think it would be helpful if there were a report to Parliament that looked at the level of take-up? In the light of all the concerns we heard on Tuesday, we should ask Ministers to report back on take-up; that would enable Committee members to focus on whether the scheme is likely to see an extra 35,000 charities register for gift aid by 2015.
Jeremy Lefroy: Thank you for your guidance, Mr Turner. I would just say that the suggestion has merit. If that provision is not put in the Bill, I suggest that Members on both sides ask parliamentary questions on the subject. They would get the answer pretty rapidly. I point to the example of the Rural Payments Agency, a body that we all agree had problems when it started. I do not wish to make any particular political points about that; it has improved greatly over the past couple of years, following changes made by the previous and current Governments. It is therefore possible for a body designated to do something to ensure that its performance improves, provided it monitors it carefully, even if it is slow on the uptake. I am not for one moment suggesting that HMRC will be anything other than incredibly efficient in taking up the scheme.
The point I was coming to is about additionally—a rather ugly word, but I cannot think of another. As Members on both sides of the Committee have said, we want more charities to take up gift aid as a result of the measures. Bodies that must, for the first time, enter the gift aid system will suddenly realise what they have been missing out on over the past 10 or 15 years through not claiming gift aid. That is another reason why it is essential that the responsibility remains with HMRC; it administers gift aid and is therefore able to help bodies to claim the top-up and traditional gift aid.
My final point, on fairness, is perhaps slightly more esoteric. A fundamental advantage of the Bill is that it recognises for the first time that non-taxpayers’ charitable donations should be entitled to a top-up or payment from the Government. That may not be the prime intention of the Bill, but it is certainly an effect.
Susan Elan Jones: There is merit in the point that the hon. Gentleman makes. Does he agree that the change will benefit only those charities that reach the matching amount for gift aid? Therein lies a problem that I hope the Government will solve.
Jeremy Lefroy: Yes, and although we are not discussing that issue at the moment, we will come on to it. I am sure that Members on both sides of the Committee will want to make some points about it, and I know that the Minister will listen carefully.
I would like to stress the point about fairness. The proposals mean that when people put donations of £1 and £2 coins and £5 notes into buckets, those donations, which historically did not attract any top-up from the Government through gift aid, can do so for the first time. As such top-ups are given through gift aid by
Clearly, the origins of the proposals lie in the fact that small donations—largely, but not wholly, collected by small charities—were not easily eligible for gift aid. That was seen as a problem and perhaps a disincentive for people to give. It therefore seemed appropriate to look for a means of incentivising such small giving and to assist the mostly small charities that fall into this category. The argument is that as there appears to be a gap, or a failure of gift aid to reach out to those people, the solution must be a quasi-gift aid scheme that must go to HMRC. We should not, however, necessarily make that connection simply because someone has identified that problem.
The appropriate legal description is “donation” rather than “tax relief”, hence the type of Bill that we are considering. Government Members are concerned that if the scheme were not run as suggested in the Bill, it would not encourage donation. At one point, while doing some preparatory reading about the complications, I wondered why we do not just give everyone £1,250, but I certainly acknowledge that that would undermine the purpose. The Bill is intended to encourage donation, and it is not necessarily the case, if we tie the payment to donation, that the scheme has to be administered by HMRC.
John Hemming: The scheme does not have to be administered by HMRC. Does the hon. Lady not agree that it should be administered by not a ministerial Department, but a non-ministerial department, to avoid ministerial interference?
Sheila Gilmore: Certainly other organisations could be more appropriate, and one such might be the Charity Commission. If the scheme is tied to donations, and people clearly have to demonstrate that they have collected those donations, I am not entirely sure that we should be too concerned about whether the rules have been drawn up correctly. Clearly, there have to be some rules.
Mr Thomas: This is encouraging; we appear to have begun to swing the hon. Member for Birmingham, Yardley in the direction of supporting our amendment. To give him further confidence that there might be a body other than the Charity Commission that is free from ministerial diktat—I can understand his worry about control freakery and ministerial diktat with regard to which charities benefit, given the Ministers in the Treasury—I point out that the Big Lottery Fund is similarly independent. My hon. Friend the Member for Edinburgh East might like to encourage the hon. Member for Birmingham, Yardley, to feel further confidence in our amendment, as there is that second obvious organisation that could do the job.
Sheila Gilmore: I thank my hon. Friend for his helpful intervention. Those of us who have experience of the Big Lottery Fund know that it works well and that it has been found to be relatively simple for applicants.
As for the other reason why HMRC has been suggested as the appropriate body, it has been said that what we are discussing is a form of tax relief, but it cannot be that, because we have no means of identifying who is making the donations or whether they would be eligible to claim such relief. That is the whole point of the Bill; it covers a situation in which it is, in essence, very difficult to qualify for tax relief. Clearly, anyone could fill out forms for every pound donated into a box, but people collecting who had to stop and wait for forms to be filled out would collect far less than they otherwise might. That would be counter-productive.
As some of what has been claimed is not necessarily the case, the argument that the body has to be HMRC is lessened. We may be putting the cart before the horse, partly because of the arrangement of the Bill, but if we take out some of the other provisions, which we shall debate shortly—I know that it is not appropriate to discuss them now—as I sincerely hope that we will, the argument for assigning the scheme to HMRC would be reduced. If we amend the Bill in that way, we may, as many of those who gave evidence suggested, want to come back to the issue, perhaps on Report.
Sajid Javid: It is a pleasure to serve under your chairmanship, Mr Turner. I welcome you to the Chair, as this is my first opportunity to speak. That seems a bit odd, as we have been speaking for hours. Why? Because the Opposition spokesman has spent almost three hours making a simple suggestion. He could have made his point in a few minutes rather than a few hours, as was said by my hon. Friend the Member for Banbury, who is not in his place, and many others.
I understand that the purpose of the group of amendments is to enable a debate on HMRC and its role as the administrator of the small donations scheme. I am happy to have that debate, but I shall ask the hon. Member for Harrow West to withdraw his amendment in any case, because if the amendments are made, they could result in administrative complexity and uncertainty for charities, and significant extra costs for the Exchequer, which I do not think any of us in this room would support. That point was made by a number of hon. Members who spoke; it was also well made by my hon. Friend the Member for Birmingham, Yardley.
The amendments are intended to allow other departments to run the scheme instead of HMRC. However, numerous references to HMRC would remain in the Bill, although not enough to enable HMRC to administer the scheme. If the amendments were passed, HMRC would still be the only body that could make orders relating to community buildings under clauses 7
That sounds like an administrative and accounting nightmare. Which Department would decide who would run the scheme and make regulations? Charities could face a situation in which one Department is paying out money but another Department is responsible for receiving any payments. My hon. Friend the Member for Birmingham, Yardley, said that he was mystified as to why the Opposition were suggesting that another Department should be involved, and I think he was absolutely accurate in his description.
Mr Thomas: So far, the Minister does not seem to be dealing with one of the substantive points that we sought to make. He says that £60 million will be spent in the first year, and we are led to believe that that might rise to about £100 million or £125 million. Why cannot another department spend that £60 million and get it to small charities through an existing channel? There is no reason why only HMRC should be allowed to do so. Why just HMRC and not other bodies? He has not explained that yet.
Parliament needs to be confident that the money is being handled properly and that there is a clear account of how the powers that it has granted to operate the scheme are being used. Having numerous different parties involved would certainly not be the clearest and most efficient way to ensure that. The Government are anxious to act transparently.
It is not clear that the amendments would actually empower HMRC to operate the scheme. The references to HMRC that the amendments would delete were inserted to ensure that the commissioners for Revenue and Customs have sufficient authority to operate the scheme. Without those references, it is questionable whether HMRC could continue to work on implementing the scheme, which could lead to unwelcome delay while a new administrative body was being set up.
I have set out some of the problems that would arise from the amendments, but there are also good policy reasons why HMRC should administer the scheme. The first, and probably foremost, one concerns gift aid, about which we have heard much during this sitting, and I want to refer to the excellent speech made by my hon. Friend the Member for Stafford. I find myself almost always agreeing with what he says in most debates, but I hope he will permit me to correct him on one thing that he said today. If I remember correctly, he mentioned that the gift aid scheme was established by the Labour Government. It was actually established by the Conservative Government in 1990. More interestingly, I noted that the Opposition spokesman was quite happy to take the credit when my hon. Friend said that, so it is either that he did not know or that he was deliberately trying to make an impression that would have been misleading—I am sure that he was not trying to mislead anyone.
Sajid Javid: I agree that I would also not want to incur your displeasure, Mr Turner but my point is clear. I note a pattern of behaviour with Labour Members in that while they will take the credit for things for which they were not responsible, they will quite often not take the blame for things for which they were responsible.
Mr Mudie: Given that the Minister pulled up my hon. Friend the Member for Harrow West, I wish to know whether, if he had not been passed a note from certain quarters, he would have known when gift aid was introduced.
Jeremy Lefroy: I apologise for my mistake. Indeed, I was sitting here kicking myself as I remembered that gift aid was indeed introduced earlier, but I have to pay credit to the fact that the scheme was improved under the previous Government, so both sides can take credit for the current operation of gift aid and both will take credit for the top-up payment when the Bill is passed.
Susan Elan Jones: Had the Minister read my speech on Second Reading, he would have seen that I gave full credit to John Major, but I also mentioned the improvements. In 1990, the minimum donation that earned gift aid was £600, and it went down incrementally to £100 when my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) was Chancellor, but we will not quarrel over that nor the Labour improvements to the scheme.
The purpose of the Bill has always been to allow charities to collect a gift aid-style payment on small cash donations for which it is impractical to collect a gift aid declaration. If the scheme were a tax relief like gift aid, it would be administered by HMRC and legislated through the Finance Bill process. We all know that the absence of a gift aid declaration, and therefore the absence of a link to a donor’s tax record, means that the scheme will be funded through public spending. That is a major technical issue, but it does not subvert the policy intention of the scheme being an extension to gift aid, as a number of Committee members mentioned.
The integration of the scheme with gift aid brings a number of benefits. It will be an add-on to gift aid, which means that the costs of administration will be low for both charities and HMRC. Charities throughout the UK are already familiar with the gift aid rules and working with HMRC. Indeed, we heard from witnesses at the evidence session on this point.
The hon. Member for Kilmarnock and Loudoun asked a witness a question during the evidence session, prompting a response from the first panel we heard from on this group of amendments. I did not want to rely just on my memory, so I checked the record and I do not think that a single member of that panel agreed with her proposition. [Interruption.] Does the hon. Lady want to intervene?
Sajid Javid: I thank the hon. Lady, but I think she is not disagreeing with my point that not a single member of the panel agreed with the suggestion of having an agency other than HMRC. It would be simplistic and wrong to think that another Government body handing out public money would not have rules about which charities were entitled to payments. If any other public body were to administer the scheme—
Mr Thomas: We are not disputing that another Government body would have to have rules for administration of a scheme. We are suggesting that the complexity implicit in HMRC’s having responsibility under the Bill would not be there to the same extent with another Government body.
Sajid Javid: If another Government body were involved, that would potentially lead to more complexity and higher costs. Let me deal with costs, because the Opposition spokesman raised that, understandably, on a couple of occasions.
First, the hon. Gentleman knows that HMRC already works extensively with charities on a number of issues, not just gift aid. It has a special unit dedicated to working with charities on income tax issues, as well as gift aid, and on corporation tax and helping them with VAT issues. That unit could be described as a one-stop shop for charities on all issues related to tax matters. I am sure that most charities would say that that is helpful.
Given that that provision already exists with HMRC, I am sure that many Committee members would agree that the cost to HMRC of administering this new scheme would only be a marginal addition to its costs, because it could get economies of scale from the work that it already does for charities. That is important, particularly at a time—
Mr Thomas: I wonder whether the Minister is as accurate as he might be in terms of the administrative costs. I understand that the ambition behind the scheme, if we believe the Chancellor’s announcement in his Budget statement, is to move from 65,000 to 100,000 charities claiming gift aid and benefiting from it as a
Sajid Javid: I thank the Opposition spokesman for his comments. He knows that during this debate we have heard about the new online system that HMRC is about to roll out for the gift aid system. That is a significant development that will lead to significant savings in costs for HMRC, and reduce the burden of costs on the charities involved. I believe that during the evidence session some of the witnesses referred to that, and that they all did so positively.
Cathy Jamieson: Briefly, something the Minister said has triggered a question, but if he cannot answer it now, perhaps he will get inspiration from elsewhere. How many charities have registered for gift aid for the first time since the announcement of the Bill?
Sajid Javid: I do not have that information, and I do not think the hon. Lady expects me to have it. However, as she suggested, I am happy to find it, and perhaps she will permit me to write to her with it.
This may be an opportune moment to turn to some of the comments from the hon. Member for Leeds East, who referred to the merging of the Customs part of our tax system with the Inland Revenue. If I understood him correctly, he seemed to criticise that, and said that it should not happen. That made me wonder whether, given his role in a previous Government—if I recall correctly, he was a Whip, so he had a significant role in ensuring that that Government’s policies went through—when the Government he supported decided to do that, he spoke up and made that point. If he wishes to intervene, he may do so.
Mr Mudie: I certainly do. I think the Minister is looking for a political battle between us that is not there. We have said that we are totally in favour of the scheme, but its complexity is putting people off. On that point, it was accepted in the House without much worry that bringing the two together could make significant savings because there was an overlap. I have made the point, however, that it is accepted almost universally that the departments operate differently, and had different methods of working and a different ethos. That merger has harmed and been detrimental to HMRC. In retrospect, it turned out to have harmed a very proud and long-established department with great traditions. I think that is regrettable, and that is the point I was attempting to make.
Sajid Javid: The hon. Gentleman has made his point clearly. On another point, he referred to the complexity of the scheme, as did the Opposition’s spokesman. Again, I ask them to turn their minds to the evidence session, when the issue came up several times. Kevin Russell gave evidence on behalf of Stewardship and said of the scheme’s complexity:
Mr Thomas: The Minister quotes from the evidence session. The Government wanted Kevin Russell and Stewardship there, and it is reasonable that he quotes from that evidence, but I gently suggest that in his position as a Minister he should stray a little wider than just the witnesses who offered him most comfort. The gentleman who came to speak to us from WaveLength, a small charity, commented on the scheme’s complexity and said that he could not see how the scheme as currently drafted would benefit his organisation.
Sajid Javid: I thank the Opposition spokesman for that intervention. I am talking about the general sense of the evidence session. There is no doubt that there is complexity in any new scheme that is introduced; there is some level of complexity that one cannot get away from. I picked the points of evidence that I did because those people have significant experience of working with HMRC. Within their organisations, they have branches of charities that are perhaps smaller than others. Their experience is important when it comes to the issue of complexity.
“Although the Bill is complex, I am confident that the guidance for parishes need not be, such that I think that it can probably fit on one sheet of paper.”––[Official Report, Small Charitable Donations Public Bill Committee, 16 October 2012; c. 5, Q6.]
Those were very important contributions, and if I may say so, I do not think that at any point during the almost three hours of speaking time taken by the Opposition spokesman, he made it clear how his suggestions would make this system any less complex.
Mr Thomas: The Minister was right to quote John Preston from the Church of England in the way that he did, but he will recognise that the Church of England is able to provide considerable support to its parishes on the implementation of gift aid and the liaison with HMRC. It is an extremely good thing that it does that. I hope to go on to show that there is a similar organisation, with considerable links to the Church of England—the Churches Conservation Trust—that is worried about the Bill as currently drafted. I am thinking about the needs of those small charities that do not have access to the infrastructure of a bigger, experienced parent body. The critical point is that those are the organisations that are most at risk of not benefiting from this scheme because of the way the Bill is currently drafted.
I would like to respond to a point made by the hon. Member for Leeds East about IT systems. The point that he was making, if I understood correctly, was that IT systems can go wrong and money can be wasted on new IT systems. I wondered whether what he had in mind as an example was the NHS national programme for IT, which was reported to have lost more than £10 billion for the Government before it was abandoned. Had that £10 billion been spent on a scheme such as this, it would probably have paid for about 100 years of payments under this scheme.
Mr Thomas: That is an interesting, cautionary example; the Minister is right to make that point. Is he telling us that he is completely confident that the IT system for this scheme will be up, running and perfect from 5 April 2013?
Sajid Javid: That is a good question. I am very confident and I will explain why. The IT system that will be used for this scheme is the same IT system as will be used for the gift aid system. In fact, this point touches on complexity as well. What will be required from any charity that is making a claim under this small donations scheme are the answers to a simple couple of questions. It will have to identify the relevant tax year. This will be done within the gift aid declaration, so there will be a separate couple of additions to that. It will have to identify the tax year. It will also have to identify the amount of money on which it wishes to claim these top-up payments.
Mr Thomas: To be clear for the record as this is an important point, in the Minister’s view there will be no problems with the online system, and charities will not have any problems with the scheme as a result.
Sajid Javid: No, I am stating the facts. HMRC is a non-ministerial department, so Ministers are not involved in its day-to-day running, nor should they be. With the assurances that I have been given, I am confident that the system will be up and running in time, and I do not anticipate any problems.
Mr Mudie: Getting up to explain my speech is almost as bad as giving it. The point I was making on computer systems was not related to the computer software for this scheme and its importance to the Government. HMRC is working with the Department for Work and Pensions on a huge scheme on universal credit and in-time information. There are great worries that it will blow up in the Government’s face, and that would be catastrophic as they believe in that scheme. I was making the point that we should not take any attention away from that big scheme. The Minister has again challenged me in relation to the complexities putting people off. He did, none the less, agree to put in writing to my hon. Friend the Member for Kilmarnock and Loudoun the
Mr Mudie: With the greatest respect, I think that the Minister has forgotten that he is the Minister. We are asking him not to go to the moon or anything but to ask civil servants to provide him with information, which is not subject to computer work, about how many charities have registered. I assume that now I have clarified that, he will be able to say to my hon. Friend the Member for Kilmarnock and Loudoun that she will have that information in good time, and certainly not eight minutes before the start of the Committee.
Sajid Javid: If that information is available, I will provide it. As a Minister, I cannot promise to provide information that I do not know is available, let alone whether it is available in time to inform this Committee before we next meet. I do not want to make a commitment about timing that I might not be able to keep. I am sure that the hon. Gentleman, with his years of distinguished experience of working in the House, will agree with me.
Penny Mordaunt: I urge my hon. Friend to resist the temptation to do a scheme down before it has even been set up. The sector wants clear guidance, but we should be encouraging people to make use not just of the existing gift aid system but the new scheme when it is brought in, as I hope it is.
John Hemming: One presumes that HMRC has plans in place to develop the appropriate arrangements to deal with the small donations system, and that if it were handed to another Department, there would be a massive delay.
Sajid Javid: I thank my hon. Friend, who is absolutely right: HMRC has spent considerable time preparing for the introduction of the scheme. That means that as soon as the House passes the Bill and it receives Royal Assent, we can ensure that we stick to the timetable. HMRC has started working on the required guidance, and I am confident that when it comes out and charities see that guidance, they will find it far easier to use the scheme than they anticipate.
Cathy Jamieson: Can the Minister say when we might see draft guidance? It will be important for the wider sector, but also, given that he said during the evidence session that the guidance would explain many things, it would be helpful to have a time scale for its appearance.
Sajid Javid: First, HMRC will produce two levels of guidance, which I gather is not unusual in such circumstances. Entry-level guidance will set out the rules in a simple, approachable way, supported by examples, flow charts, and so on, in order to make it as easy to follow as possible. That will be followed soon after by detailed guidance, which will set out thorough explanations of how the law works more specifically. If charities then want to discuss the guidance with HMRC and make suggestions on how it could be improved, HMRC would work together with the charity sector and support them in making the most of the new legislation. In terms of timing, we expect it to be complete by the end of the year.
I turn, for one moment, to devolution and the devolved areas. Not much has been said about that issue, even though the Committee includes Members from all over the United Kingdom. Charity law is a devolved matter in respect of Scotland and Northern Ireland. It would be a big step for the Charity Commission for England and Wales, for example, to start regulating charities in Scotland and Northern Ireland, only in order to administer the scheme. I am not sure how the devolved authorities would take that, as that area was purposely devolved to them.
Any scheme handing out money would be targeted by fraudsters—fraud has come up a number of times in our discussions, as I am sure it will again. Any public body that is handing out public money must take steps to prevent fraud. Where the money available is unlimited—as it is in this scheme; there is no limit to the number of charities that can take part—the anti-fraud measures must be proportionate and robust.
Mr Thomas: The Minister says that the money is unlimited, but we greet that assertion with surprise, given the scheme’s complexity. It appears to have been drafted so that three years of gift aid claims must be implemented before a charity is eligible. He made it clear that he is not yet tempted to accept our amendments to clause 2, on reducing the three-year rule, because of the cost involved in increasing the scheme. He needs to be careful with the House, in terms of stretching our collective credibility and saying that the scheme is somehow unlimited.
Sajid Javid: The scheme is unlimited in terms of the number of charities that can make use of it. The Government have rightly not set any limits on the number of charities that can take part in it, as long as they meet the criteria.
Cathy Jamieson: Just for the record, it would be helpful if the Minister could state how much the scheme would cost during the course of a year if every charity eligible to participate in it claimed the maximum.
Sajid Javid: I do not have that number to hand. We talked in earlier sessions about the number of charities. Of the 180,000-odd charities in the UK, approximately 100,000 already have a relationship with HMRC, and in a typical year about 65,000 are making claims under gift aid. One could use those numbers to provide an approximate answer to the hon. Lady, but I am happy
Before I finish, I just want to address a couple of other points that hon. Members kindly raised. The hon. Member for Foyle is not in his place, but he asked a question about community amateur sports clubs. Since they are covered by these donations, I think that the question that he was asking—it is an understandable question—was whether they have a relationship with HMRC. I believe that his assumption was that they did not have a relationship so it was perhaps harder for them to work in this scheme than for charities that already had a relationship with HMRC. However, more than 6,000 community amateur sports clubs are already registered with HMRC and working with it. Those clubs benefit from a range of tax reliefs, including mandatory business rates relief. It is helpful that that relationship already exists for such organisations.
Mr Thomas: I am slightly reeling from the Minister’s answer to my hon. Friend the Member for Kilmarnock and Loudoun. He talked about the number of charities that already claim gift aid at the moment. Broadly, about 65,000 charities, between them, get £1 billion of gift aid. If the scheme is as unlimited as he says it is and if every charity were to benefit from what is—to paraphrase the words of the hon. Member for Birmingham, Yardley—an amazingly simple scheme, potentially another 120,000 charities will benefit from it. In very round figures, that suggests that another £2 billion of gift aid will be available.
I do not know if Ministers are seriously suggesting that they have made provision for that level of cost in the scheme. Clearly the Minister cannot do so today, but it would be helpful if he could give us a clear sense of how many additional charities he thinks will claim gift aid under the scheme and, as a result, what provision the Chancellor is making in the best-case scenario, in the Minister’s term, in which every charity claims gift aid, or, in the worst-case scenario that my hon. Friend the Member for Leeds East described, in which only an additional 350 charities claim gift aid.
Mr Thomas: I apologise to the Minister for my sedentary heckle. He cannot ignore the implications for gift aid of what he says will be one of the benefits of this scheme. If he is right and this scheme is so attractive that it leads to a surge of organisations registering for gift aid, there will be an additional cost to the Exchequer for gift aid as well as for this new scheme. If he is right, we need to know those figures.
Sajid Javid: Clearly, when HMRC is making its estimate of the total cost of this scheme, it needs to consider—to the best of its ability—behavioural changes that will come about. Those kinds of changes are notoriously difficult to assess; I am sure that the hon. Gentleman will agree with me on that.
In the original costing of this scheme, HMRC has estimated that, after it starts on April 6 next year and
If I understood the hon. Gentleman correctly, behavioural changes could occur that would impact on gift aid claims, as opposed to claims under this small donations scheme. Clearly there are likely to be some behavioural changes. HMRC has made its best estimates of that, but they are just estimates. I am sure that he understands why.
Mr Thomas: I understand that there may be behavioural changes and this may lead to additional costs. It would be helpful to understand what HMRC thinks will happen. If we are unsuccessful in amending the scheme, how many additional charities in each of the next four years will apply for and receive gift aid under this scheme? That has a significant cost to the Treasury. This small donations scheme is, in part, advertising to get more organisations to claim gift aid. So what, in HMRC’s view, will be the number of additional charities in each of the next three years that will start claiming gift aid in order to benefit from this scheme as well?
Sajid Javid: Let us say that the gift aid effect of this Bill has already been taken into account in the estimates that HMRC has made. When it comes out with its fresh estimates, it will include that.
Mr Thomas: On a point of order, Mr Turner, given what the Minister has said, we need to see those estimates in order to have a properly informed debate in Committee. Will you use your best efforts to encourage the Minister to find a way round the OBR problem, to allow the Committee to have access to those estimates? They have apparently been done and are absolutely fundamental
The Chair: I think I understand the point you are making. The point is, though, that this amendment is on HMRC and is not wider than that. I am sure we will get to the points you raise, but not today.
Sajid Javid: The Opposition spokesman refers to unfunded, reckless spending commitments. His party has experience. Considering the public funding problems that this Government are having to deal with as a result of the terrible inheritance from the Labour Government, they are taking a much more robust and tougher line on public spending and making sure that things are costed properly at the outset. Allow me to sum up. We have had a useful, wide-ranging and lengthy debate, and I hope that hon. Members now have a fuller understanding of what the impact would be if HMRC was not able to administer this scheme, as set out in the Bill. Hon. Members from all sides have made some excellent contributions and some good issues have come up. I hope that the debate has been helpful and that the points raised, which were perhaps related only tangentially to these amendments, have helped us to understand this Bill better.
I have explained that the effects of the amendments would be to delay the start of the scheme and would increase complexity and uncertainty for charities and increase costs for the public sector. For all those reasons, I hope that the hon. Member will withdraw his amendments.
Ordered, That the debate be now adjourned.—(Greg Hands.)