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Charities

Volume 474: debated on Thursday 3 April 2008

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Michael Foster.]

I believe

“that there is no problem in this country that can’t be solved by the people of this country. Millions of people choose to bring about social change and to solve the problems we face through the third sector. In every part of our society, voluntary organisations, community groups and social enterprises are making people’s lives better, are fighting inequality and are creating a better environment for us to live in.”

If the Minister thinks that that is an uncharacteristically grandiloquent opening statement for one of my speeches in the House, the reason is that I did not write it. It is the statement that the Prime Minister made in his foreword to the Cabinet Office report on the future role of the third sector in social and economic regeneration. Not for the first time, he was absolutely correct to identify the fact that week in, week out, day in, day out, the British people—often quietly and often on their own—work to bring about social change and improve the lot of their fellow citizens and others around the globe.

I congratulate my hon. Friend the Under-Secretary and other colleagues in the Cabinet Office on their extraordinary engagement and on the Government’s commitment to developing the third sector, not least through the £500 million that they are investing in it in the current comprehensive spending review round. However, I am not here simply to congratulate the Government; I am here to ask the Minister to consider one way in which we might be able to help the charities in our country to make an even stronger impact on social change than they do now.

At the end of December last year, there were 190,541 charities on the Charity Commission register. Of those, 21,244 were subsidiaries or constituents of other charities. That means that there were 169,299 main charities on the register, which are required to prepare accounts. That figure includes 2,498 group charities, which are separate charities that nevertheless share the same registered number, because they have been grouped together for ease of administration.

When the income of those charities is broken down and itemised against the individual charities, a remarkable pattern emerges. Many of those 169,299 so-called main charities are very small indeed. Indeed, one fifth of them—more than 35,000 charities—have an income of less than £1,000 a year. Nearly 60 per cent. of all registered charities in the UK have an income of less than £10,000 a year. More than 95,000 charities—almost 60 per cent.—have a combined income of less than 1 per cent. of the total charitable income each year.

The financial wealth of registered charities, measured by their annual incomes, is concentrated in a few very large charities indeed. Just 8 per cent. of charities receive more than 90 per cent. of the total annual income recorded on the Charity Commission register. Perhaps most extraordinarily of all, out of the 169,299 main charities, a tiny minority—just 679—attract more than 50 per cent. of the total income, so that £22.4 billion goes to 0.4 per cent. of all charities.

I want to make it clear that I am in no way speaking against big charities. They do wonderful work, and I applaud their professionalism and success. However, I want to focus on the logical implications for the 92 per cent. of charities that operate on only 10 per cent. of the total income. That 92 per cent. represents 142,367 charities, all of which seek and apply for funds, accrue administration and funding costs, and have staff and trustees who are passionate about and devoted to their cause—yet those charities often compete with others in their field, rather than collaborating with each other.

I do not want to stop any charity, or any person in any charity, doing their bit to make a world a better place by alleviating suffering, promoting education, finding a cure for disease, protecting animals, cleaning up the environment or reducing poverty. However, I hope that the Minister agrees that there must be a more efficient and effective way of harnessing all the incredible human resources, commitment and good will that those 142,367 organisations represent.

The question presents itself: how much more effective could those charities be if there were an easier, cost-effective, integrated and secure way of generating a steady revenue stream into their good causes? What if they did not have to rely on the jumble sale, the bucket collection, the Christmas raffle or the fun run as their main fundraising event of the year?

Charitable fundraising in the UK has developed enormously in the past decade or so. It is now possible to donate to television appeals such as Sport Relief or Children in Need by giving credit card details over the phone. It is possible to donate over the internet, or even by downloading a British Legion poppy as the background image for one’s mobile phone. All of that is tremendous. Ease of giving is one of the most important elements of charitable giving.

Just as important, however, is the research that shows that people prefer to donate to the charities that have the lowest cost overheads. The CharityFacts website, set up by Professor Adrian Sargeant at the Bristol business school, states that, in general, it costs between 15p and 25p to raise £1. The average gearing is 1:5, with 20 per cent. of income spent on fundraising. That increases slightly with face-to-face collections, to between 20 and 25 per cent., whereas text message donations give almost as much money to the mobile phone company as to the good cause.

According to research carried out by the university of London, the reason why collection tins continue to be one of the most popular ways for the public to give money is that such giving is spontaneous. In fact, spontaneous giving accounts for 83 per cent. of giving in this country. Planned donations account for just 17 per cent. Here, we begin to see a recipe: low overheads, quick and easy, and spontaneous. Convenience and immediacy are key drivers. How can we turn that formula into a means of resolving the issues that beset the 142,367 charities, all with administrative and fundraising costs, that are competing with one another?

Let us imagine a situation in which, whenever anyone in the UK purchased anything in a supermarket, a petrol station, a clothes shop or any retail outlet where they could pay by credit card, they had the opportunity to round up the cost of their purchase to the nearest whole pound. Let us imagine that, instead of purchasing a camera for £69.99, they could send the extra penny to bring water to an African village or to campaign for human rights in Burma. Which one of us would not do that? Pennies4Change is a new charity that has set up a mechanism for precisely such fundraising. It is efficient and convenient, with low overheads. It is quick, easy and spontaneous. With luck, it might also be habit-forming.

Pennies4Change integrates seamlessly into the global financial payments system. On the card reader at the payment terminal, the customer will be discreetly invited to round up their transaction. One touch of the green button will round it up to the nearest pound. One touch of the red button will decline. If neither button is pressed within a couple of seconds, the default cuts in to decline and no donation is made, ensuring that there are no lengthy queues at the till. No new card is required, and the consumer does not need to sign up to anything. No staff intervention is needed. It simply involves a spontaneous choice with each purchase.

For the retailer, too, the process is straightforward. No new hardware is required, just a small change to the software running alongside the existing payments chip and pin system, all co-ordinated through the card-acquiring bank. The innovative technology that makes Pennies4Change possible applies just as much to the local corner shop as to the large supermarket chains.

Equally, the shared platform for all those retailers requires the collaborative effort of the acquiring banks. Pennies4Change gives the banks an opportunity to be seen to work together to enable the generosity of the British people to be released. It will drive down that 20 per cent. average overhead of charitable fundraising, increasing the effectiveness of charities, and it aims to improve their efficiency by promoting co-ordination and partnership.

What, then, am I asking of my hon. Friend the Minister? First, I hope that he will wish to congratulate Pennies4Change on bringing charitable giving into the electronic age. Secondly—in the light of my points about income and gearing—I ask him to arrange for his officials, as part of their work on the third sector, to investigate how Government can help these charities to achieve their aims. I suggest that he ask his officials to meet members of Pennies4Change, who have already done much work in this area.

Finally, I ask the Minister to recognise that the greatest threat to the success of this project lies in fragmentation. Pennies4Change is not about a few people giving occasionally; it is about the impact of millions of people giving very small amounts every day; it is about the power of pennies. However, its success will come from the simplicity of a single scheme that is undifferentiated across the country. Would my hon. Friend consider meeting a group of the major retailers and banks, which I would be happy to convene for him, in order to ensure that there is common and united action, and that different multiples and majors do not attempt selfishly to brand this good idea with their own logo, thus undermining the simplicity, integrity and national unity of the scheme?

In the foreword that I quoted at the beginning, the Prime Minister went on to say:

“At the heart of our approach is our desire to support those thousands of small community organisations who play such a vital role in our society. We want them to be free to access the funding or advice they need in a way that suits them.”

For 142,367 of the smallest charities in the United Kingdom, Pennies4Change does just that, and fulfils the Prime Minister’s objective. I trust that the Minister will be able to support it.

I congratulate my hon. Friend the Member for Brent, North (Barry Gardiner) on bringing Pennies4Change to the House’s attention. I also thank him for his kind remarks at the beginning of his speech in recognition of the work undertaken by the Office of the Third Sector and, indeed, my role as a champion of the third sector. This is the only country that has a Minister for the third sector.

My hon. Friend spoke of the needs of the very smallest charities—those voluntary and community groups which, in every constituency in the country, are doing such vital front-line work with local communities. Our new grassroots grants funding programme will give those front-line, often volunteer-led organisations with very low turnovers and incomes access to grants. It will be rolled out later this year, and I hope that many of the smallest charities that my hon. Friend rightly celebrated will take advantage of it. It is an endowment scheme: the money that the Government provide can be used to set up local endowment funds. The endowment itself will never be spent, but the interest generated by it will be there, not just in one year but in continuing years, as a regular, sustainable stream of income providing small grants for those small front-line organisations.

Let me now deal with the specific initiative raised by my hon. Friend—Pennies4Change. Like him, we want very much to encourage a culture of giving in this country. Pennies4Change in part helps to do that, and such projects are always of great interest to the Government.

Almost three quarters of us regularly give to charity, and there are lots of new market developments and schemes that have the potential to increase charitable giving and therefore lead to more income going into the third sector. They can be very powerful in the arena my hon. Friend is talking about. Through innovative means such as Pennies4Change, people are encouraged to donate small sums or make small changes to their everyday behaviour, and that can make a huge difference.

My hon. Friend mentioned a couple of such schemes, and I would like to mention a couple more. As anyone who has been on an aeroplane recently will know, under the British Airways “Change for Good” partnership with UNICEF people are encouraged on flights to donate small amounts of their left-over foreign currency. Since 1994, that has raised more than £18 million for charities. My hon. Friend mentioned an innovative mobile telephone scheme. There are new websites such as the “Everyclick” search engine, which encourages people to use its services, and every time they click, money gets donated to charities of their choice. There are charity credit cards, too, that donate to specific charities following every transaction. There are other schemes like Pennies4Change, which enable people to make small donations at the checkout. They have the potential to open up an entire new way of giving to significant numbers of people. This is therefore an important area of work, and I am very happy that people are showing concern about this issue and are willing to share ideas on how to increase charitable giving. It is important for further discussion to take place over the next few months about the implementation of such schemes and maximising the potential of the pennies in people’s pockets, as my hon. Friend puts it.

As my hon. Friend mentioned, the scheme has very attractive features: convenience, immediacy, spontaneity and the fact that it is quick and has low overheads. I will be happy to facilitate a meeting between my officials and all the relevant stakeholders—my hon. Friend listed many, and there may be others—to hear more about their plans and to find ways to overcome the potential pitfalls he described.

Let me say a few words about our wider strategy on giving, in which schemes such as that my hon. Friend mentions sit, which includes engaging with primary and secondary schoolchildren to instil an ethos of giving, working with charities to help make the most of tax-effective giving, and just improving the evidence base so we can better meet the needs of donors and charities. Progress on all of that has been very good. For example, we are establishing the Centre for Charitable Giving and Philanthropy to look at the huge number of organisations that exist and where the money goes. We have set it up with the Economic and Social Research Council to underline the importance of understanding giving: why people give, how they give, and how charitable giving can be encouraged and increased. The centre is intended to be a practical asset to the sector, developing valuable information for answering those questions for practitioners, and not just advancing academic knowledge but taking into account ideas such as those my hon. Friend described and then sharing them more widely.

I am delighted to say that the centre is chaired by Professor Nick Deakin, a well known figure in the charity world, and it will be a “hub and spoke” model with programmes on a range of issues. The centre will be formally launched in the next few months. We would encourage all strategic partners and everyone within the sector to engage with the centre and make use of what it has to offer.

In the same vein, and following up on our “A Generous Society” programme, “Go-Givers” is an initiative run by the Citizenship Foundation, funded by us, which has developed curriculum materials specifically for use in primary schools to raise awareness of charitable giving. Over the next three years, the programme will expand by training staff to act as co-ordinators. It will also provide increased support through its dedicated website, which already provides teaching plans to teachers, with the aim of registering 5,000 teachers by 2011. Since the programme was fully launched in June 2007, 975 teachers have already registered on the site from 650 schools, and about 17,000 primary schoolchildren are benefiting from the materials. In addition, more than 70 learning activities have been developed including eight original “Go-Giver” stories. The feedback from teachers has been universally positive. As children and young people learn about what charities are and what giving is about, they will tell their mums, dads, grandparents and other relatives about it when they go home, and we will start to see the spread of the culture of giving in the generous society that is the United Kingdom.

With our funding, the Citizenship Foundation also delivers the giving nation challenge in secondary schools. The challenge brings together the goals of education about charities in the classroom and enlivening the school environment through extra-curricular charitable activity. It is a good scheme. The giving nation challenge gives a year group within a school £50 per class, and each class must then do as much good as it can with the money, using the rest of the school as an audience or as potential recruits. Each class acts as a mini charity, whereby the pupils act as fundraisers. They have the job of generating as much income or positive activity as they can. The £50 start-up money is then returned to provide money for the next year group’s participation in the challenge. Some 144 schools have registered to take up that challenge and 85 have claimed the grant to get their project going, which means that about 22,000 pupils are involved across the country. I am delighted to be able to use the debate that my hon. Friend has brought to the House to announce that the project will continue with Office of the Third Sector funding over the next three years.

A third element that we have been developing is gift aid. In 2006-07, gift aid was worth some £820 million to the charities sector. Following the recent gift aid consultation, the Government have further renewed their commitment to promoting that tax-effective giving. The relationship between gift aid and these other forms of mass giving, if I may call them that, is an interesting one to be explored. The package of measures set out in Budget 2008 by the Chancellor is good news for the charities sector—if I may say so, achieving it was a bit of a win for the Office of the Third Sector. In a tight fiscal climate, we have protected the interests of the third sector. By offering transitional relief at 22 per cent. over the next three years we have in effect protected some £300 million-worth of charities’ income over that period. We are delighted that the charity world’s response to that clear statement of commitment in pounds, shillings and pence to third sector income has been so positive.

I return to the issue of small charities—those front-line groups to which my hon. Friend’s scheme is desperate to feed income. We are providing funding for a small charities training programme, marketed to, and tightly focused on, charities that have a turnover of less than £1 million. We are also developing and facilitating an online gift aid mentoring forum. That bit of jargon means that we want to give some of those smaller charities and voluntary groups access to a network of experienced professional fundraisers and practitioners so that they, too, can benefit from gift aid and all that it delivers.

My hon. Friend has mentioned a particular business initiative. I am delighted to say that businesses give in many different ways to charities across this country. In a way, we are most used to the role that businesses play in simply giving resources, be it through their corporate social responsibility packages or their work to support their local charities. Such giving, whether it is done through donations, community projects or sponsorship, is terrific. Businesses support charities in all manner of ways, but I would like to see them go that bit further.

Perhaps some businesses could buy from the third sector, using their purchasing power so that those third sector organisations—social enterprises in particular—that are looking for sustainable sources of income to enable them to carry on doing what they do become more enterprising in how they generate that income. If we could get private sector organisations to build third sector organisations into their supply chains, be it in respect of basic supplies, services for their employees or even delivering its core business by buying from a third sector organisation, we would get so much more from them. To push it even further, what about investing in the third sector? Many charities, particularly small ones, find that access to funding and finance is one of the biggest barriers to their growth and development. Perhaps we could promote that, too.

May I rather mischievously use this debate to announce an event called “Good Deals” that we are holding on 6 May to explore all the issues about how we might progress? I hope that Members will find an interest in that.

I am delighted to return to the focus of my speech, and my hon. Friend’s promotion of Pennies4Change. It is an extraordinarily positive way for individuals to give spontaneously and to make giving an integral part of their everyday lives, and it would be the cultural shift that he described, which is so important. He will appreciate that I am not allowed to endorse a specific proposal, but I thank him for highlighting the project and for giving us the chance to explore it in its initial stages and to see how it might contribute to the wider range of good work that I have tried to map out tonight which is being carried out in the sector as a whole. I shall certainly facilitate the meeting that he asked for to reinforce the initiatives that are already being championed by the Government through the Office of the Third Sector.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes to Seven o’clock.