House of Commons
Tuesday 4 September 2012
The House met at half-past Two o’clock
[Mr Speaker in the Chair]
Oral Answers to Questions
Foreign and Commonwealth Office
The Secretary of State was asked—
Progress in the middle east peace process is needed urgently. We have urged both sides to focus on dialogue, to avoid steps that could undermine the prospects for peace and to work towards the resumption of direct negotiations. We are in regular contact with the Israeli authorities on legal issues relating to the conflict, and we urge Israel to comply with its legal obligations, including those arising under international humanitarian law.
I welcome the Foreign Secretary’s commitment to this area, which is particularly important in the light of the problems that are affecting the region, to which he referred in his statement yesterday. Does he, however, understand the concern being expressed by many people that, on 24 July, the EU-Israel Association Council agreed to extend into a further 60 areas of trade co-operation while, at the same time, the increase in the number of demolitions and settlements and the blockade of Gaza are continuing apace. Will he tell us what his Department’s role was in that agreement, and whether he is going to hold Israel to account?
We have repeatedly made clear to the Israeli authorities our serious concern at the 40% increase in demolitions last year, as recorded by the United Nations. We view such demolitions and evictions as causing unnecessary suffering to ordinary Palestinians, as harmful to the peace process and, in many circumstances, as contrary to international humanitarian law. I can reassure the hon. Lady about the EU-Israel Association Council, which discussed some practical co-operation in line with the existing EU-Israel action plan. The EU has been very clear that no progress can be made on upgrading the wider EU-Israel relationship until there is substantial progress towards a two-state solution.
The Israelis are considering closing the Ras Khamis checkpoints in Jerusalem; they are also building new housing in illegal settlements such as Har Homa. Just two days ago, a rocket was fired from Gaza into Israel. What route map does the Foreign Secretary believe can move the conflict from where it is now towards an agreement between the Israelis and the Palestinians by the end of this year, as recommended by the Quartet?
It is a difficult route map. My right hon. Friend is right to draw attention to the depressing aspects of what is happening now. We have been working hard this year, as have many others in the region, to achieve the resumption of direct negotiations between the Israeli and Palestinian leaderships, but that has not worked so far. My right hon. Friend referred to what might happen later this year, and it will be vital that, whatever Administration emerge following the American elections, they put their full weight behind this issue from the very beginning of that Administration in January.
21. The Palestinians claim that they will return to negotiations if settlement building stops, but they did not do so when settlement building did stop. They have now introduced two new conditions, including the release of all prisoners. Why does the Foreign Secretary think they are doing that? (118518)
There has been fault on both sides when it comes to making a success of negotiations. We have advocated the need for Israel to make a more decisive offer than has been the case in the recent past, but we have also pressed the Palestinians to enter negotiations and not to set new conditions for doing so. I have said in the House in the past that Israel had been too intransigent in this process, but the Palestinians have been too erratic about the basis on which they are willing to enter negotiations. Both those things need to be put right in order for negotiations to get going and succeed.
Has my right hon. Friend seen the reports that, on Sunday, 280 Israeli settlers were removed from the settlement in Migron under Israeli legal process, as a result of action initiated by Peace Now and Palestinian landowners? Does he not agree that it would be even better if those in some quarters dropped their blanket hostility towards Israel, if the Palestinians were to remove their preconditions to talks, and if there were direct and comprehensive negotiations during which the question of the settlements could be fully addressed?
I absolutely agree that it is important to drop blanket opposition to Israel. We should stoutly defend the security and the legitimacy of Israel, but we must also be absolutely clear that Israel needs to make its contribution and recognise that settlements on occupied land are illegal, that settlement building activity must cease and that outposts on occupied land are illegal. We should be clear about that and maintain the pressure on Israel, as well as on Palestinians, to enter into direct negotiations and give them some chance to succeed.
According to the House of Commons Library, multilateral and bilateral aid to the occupied territories and Gaza cost European taxpayers £670 million last year. Does the Foreign Secretary agree with me that, given that Israeli policy on settlements is making a two-state solution less likely, any deepening of trade relations with Israel would not be justified when the cost to European taxpayers is so high?
We do give that support. The right hon. Gentleman is right about the extent of our support, which is, of course, very important for the Palestinian Authority to be able to function, particularly on the west bank. The position on trade relations is the one that I explained to the hon. Member for Glasgow North (Ann McKechin), and the European Union is very clear that an upgrade of the wider EU-Israel relationship depends on making substantial progress towards a two-state solution. That is a position that the United Kingdom firmly supports.
We have made representations about this case. The Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for North East Bedfordshire (Alistair Burt) has done so, and he visited the family on his recent visit to the region. Of course, we want all such investigations to be carried out thoroughly and to meet international standards. That will be part of our continuing representations.
Middle East and North Africa
In addition to diplomatic and political support given to countries in the region, following the dramatic events of the last 18 months, our Arab partnership programme, which is now worth £110 million, provides practical support with a range of projects, including election reform, media transparency and employment initiatives. We will operate across 15 countries in this coming year, with a budget of some £60 million.[Official Report, 5 November 2012, Vol. 552, c. 2MC.]
We would like to see Libya as the partner of choice in a range of commercial activities. The work done to date, following the re-establishment of the UK Trade & Investment office in September last year, has been to look at key sectors of mutual benefit to us both, such as health care, education and civil security. UKTI has led some 12 trade missions over the last year—about one a month—and has a further 27 planned.
The development of democracies in this region will take a long time. Many organisations, including the Westminster Foundation for Democracy, are involved in this, and they are learning from the experience of what works in those countries and what help they will need in the future. Will the Minister ensure that the total learning from all that work, funded by the Arab partnership fund and others, is brought together so that parliamentarians and, equally, people who work in the Foreign Office understand exactly how we can best support that process?
The hon. Lady makes a good point. I pay tribute to her work and that of other parliamentarians involved in the Westminster Foundation for Democracy. It is indeed the case that the various non-governmental organisations have different skills to apply, and it is important that we learn all the lessons from them. We have learned, as if we needed it told, that each of these countries is different, following slightly different paths and requiring different skills to be applied. The value that this country’s really good NGOs and parliamentarians can provide to the development of the democratic system will stand these countries in good stead. We certainly need to make sure that we have pooled all the lessons learned.
Last year, the Foreign Affairs Committee recommended a political surge in Afghanistan with talks involving all the regional players. The Government response agreed with that. A year later, however, nothing has happened. Despite the turmoil going on in the middle east and political paralysis in Washington because of the presidential elections, is it not time to give fresh impetus to this process and kill off the logjam of momentum caused by the delay?
Despite all the events that have taken place in different parts of the world, the United Kingdom has never ceased to focus on the fact that Afghanistan remains the principal foreign policy issue affecting the Government. The political paralysis that the hon. Gentleman describes is not necessarily there. Political processes continue in Afghanistan, and we continue to encourage both the Government and those whom we wish to enter into talks with President Karzai on the Afghanistan Government’s principles for engagement to maintain their activities. Following the death of the former chairman of the High Peace Council it has been difficult to get the process moving, but we continue to apply pressure, and we are sure that, as time moves on towards the presidential elections in 2014, the reconciliation process will continue.
Legal processes are necessary for the return of any money that has been frozen in the United Kingdom as a result of sanctions. We are continuing to work closely with the Egyptian authorities, and we are providing support to ensure that they have the necessary expertise to navigate through British legal processes. We want to ensure that money that rightfully belongs to those in Egypt who have rightfully reclaimed it is indeed returned.
We are very concerned about the current situation in Mali, particularly in the north of the country, where violent extremist groups including al-Qaeda in the Islamic Maghreb have taken advantage of the instability to consolidate their position. We will continue to work very closely with key international partners, especially France, to support the region in its efforts to restore political stability and security to the country.
I pay tribute to two charities in my constituency which do excellent work in Mali. May I ask the Minister to encourage the Economic Community of West African States, and in particular Senegal and Algeria, to work with what remains of the democratically elected Government in seeking a peaceful solution before military intervention is considered?
I join the hon. Gentleman in paying tribute to those non-governmental organisations. I entirely agree with him that the situation is very fraught, but the good news is that President Traore has come back from Paris, and there is now a Government of national unity which is truly inclusive. The most important consideration is that ECOWAS must help to secure the state institutions in Bamako and then rebuild the capacity of the Malian army before even thinking about taking any action against the rebel groups in the north of the country.
As the Minister says, the situation is extremely serious: more than half the country is now occupied by al-Qaeda-backed rebels. What steps can he take with his international counterparts to ensure that sanctions are imposed on sources of supply for those rebels, particularly in relation to arms and ammunition?
I share the right hon. Gentleman’s concerns, especially in view of the number of former mercenaries from Libya who have found their way into the region. Obviously the region is extremely unstable. A number of different rebel groups are plying their evil trade. What is most important is for the Government of national unity to secure Bamako, to work with ECOWAS and other international organisations to build capacity, and then to think about what action can be taken against those groups in the north. In the meantime, I agree with the right hon. Gentleman. There has been a United Nations Security Council resolution, and we will consider, as best we can, sanctions and other measures against individuals.
Fortunately, under this Government the United Kingdom will never be part of the eurozone, but the economic crisis is nevertheless having a dampening effect on UK economic growth. What strategy is the Foreign Office adopting to persuade the eurozone leaders to stop kicking the can down the road and find some solutions that will help the UK economy?
We are certainly continuing to support the efforts that eurozone Governments are taking to make their currency zone more stable and sustainable than it is at present, but we are also continuing to emphasise at every EU meeting that Europe’s competitiveness depends in the end on deepening the single market, improving free trade with the rest of the world, and cutting red tape and regulatory burdens on business.
I am one of those who happen to believe that the eurozone is not long for this world. Is the Foreign Office looking seriously at what Europe might look like after the eurozone, and is it not possible that international relations within Europe will be improved once the tensions of the eurozone are gone?
We make all sorts of contingency plans for all sorts of contingencies, as the hon. Gentleman would expect, but I say this to him: while I believe the United Kingdom is much better off outside the eurozone, those 17 countries have taken democratic sovereign-national decisions to form this currency union, and we who support national independence and the right of nations to determine their own futures should respect those decisions.
The best thing for the future of Europe would be for Europe to start to get to grips with the shift in global economic power to Asia and Latin America that is taking place as we speak, and to focus on making it easier for European businesses to compete through enlarging and deepening the single market, through encouraging free trade with other parts of the world and through cutting the red tape that holds European businesses back compared with those in Asia and south America.
I remind Government Members that it was the previous Labour Government who kept this country out of the euro. There has been recent speculation in the German press that the German Chancellor will push for a new treaty to create closer fiscal and political union in the eurozone. What is the position of the Government on this proposal, and what discussions have the Minister and his colleagues had with their German counterparts about this proposal?
There are all sorts of exciting media reports, but there are no proposals for treaty change on the table at present. I simply remind the hon. Lady, however, that while the Government parties have supported giving the British people the final say over any proposal from any Government to join the euro, her party leader has said that securing the objective of Britain joining the euro will require only his remaining as Prime Minister for long enough.
Iran (Nuclear Programme)
We remain deeply concerned about Iran’s nuclear programme. A nuclear-armed Iran would result in still greater instability in the middle east and increase the risk of a nuclear arms race. Iran must negotiate seriously on the nuclear issue, to give the international community confidence that it is not developing nuclear weapons.
The International Atomic Energy Agency reckons Iran has 189 kg of uranium enriched to 20%. Were this quantity enriched to 90%, that would be enough for five nuclear bombs. Given that enrichment to 20% requires four fifths of the effort to get to 90%, will my right hon. Friend redouble the United Kingdom’s efforts to prevent Iran from becoming a nuclear-armed military power?
Those efforts have been redoubled in recent times in many ways, and my hon. Friend will be aware that, with our partners in the European Union and many other partners and allies around the world, we have imposed more serious economic sanctions on Iran than we have imposed on any country in recent times. This has caused Iranian oil exports to fall by about 1 million barrels a day from last year. Iran is losing almost $8 billion in revenues every quarter as a result of that, and we will continue to intensify the pressure from sanctions, as well as remain open to negotiations, in order to try to resolve this issue. In the longer term, we take nothing off the table in our efforts to resolve the issue.
Has the right hon. Gentleman read the article by David Remnick in the current issue of The New Yorker? He has just returned from Israel, where he discussed this issue with all the top figures in Israeli intelligence, every single one of whom is opposed to Israeli military action against Iran. Vile though the regime in Iran is, and while it is proper for the right hon. Gentleman to be taking the action he is, will he make it clear to Israel and everybody else that we are totally opposed to military action against Iran?
I have not seen the article in question; I will be very pleased to have a look at it. Certainly, there is a variety of views in Israel about the merits of military action at any time. We have been very clear to Israeli leaders—the Prime Minister and I have been clear in our recent meetings with Israeli leaders—that the policy we favour and are pursuing is the twin-track policy of sanctions and negotiations. We have been very clear that under those circumstances, we oppose a military strike on Iran.
20. Can the Secretary of State explain the stark discrepancy between the comments made by Sir John Sawers on 4 July and the Senate testimony early this year of the director of the CIA, General Patraeus, in which he stated that there was no evidence of a decision by Iran to build a nuclear weapon? (118517)
I am not going to comment on the reported comments of the director of the Secret Intelligence Service, but I do not think there is any contradiction in anything that has been said in public. Iran is, as has been pointed out by my hon. Friend the Member for Kettering (Mr Hollobone) in asking this question, accumulating material for which there is no logical explanation other than an ultimate intention to construct a nuclear device. There is no peaceful explanation that has been given to the world, and that is the important truth we have to confront, whatever decision-making process is going on in the Iranian leadership.
I have noted all that the Foreign Secretary has had to say about the sanctions that are in place, but given the very concerning terms of the IAEA report, of which he and other colleagues have already spoken, and in particular the reports of the doubling of production capacity in the Fordow underground site, will he share with the House a little more of his sense of whether the current sanctions are themselves sufficient to effect behavioural change in Tehran, or whether other sanctions could be imposed to achieve that outcome?
Those sanctions are having a substantial effect—I quoted some facts in relation to that a moment ago—but it is important to note not only the impact on their oil revenues, which I mentioned, but that Iran’s other industries are also suffering. Domestic car production has dropped by nearly 40%, textile manufacturers are operating at 50% capacity, and there has been a surge in inflation, which is perhaps twice the official figure of 25%. These are very difficult economic circumstances, which Iran is making worse by the policies it is pursuing.
There is no evidence, so far, that this has produced a change of policy in the Iranian leadership, although I am sure it is the best policy for us to pursue. Certainly, I believe there is a strong case for the intensification of sanctions, and for additional sanctions to be agreed in the European Union and brought into force with the United States and other partners around the world, so that Iran is clear about the consequences of continuing with this policy.
As the Opposition, we have associated ourselves with and support the Government’s approach of intensifying sanctions but also securing engagement and dialogue with the Iranians. Given what the Foreign Secretary has had to say about sanctions, many of us welcome the re-establishment of the E3 plus 3 process. Can he update the House on his assessment of the progress made in those discussions, and has a date been fixed for further discussions?
It was progress of a kind to have the discussions between the E3 plus 3—with Baroness Ashton speaking on our behalf, but all six countries present—and the Iranian negotiators, but those negotiations have not produced any breakthrough. Baroness Ashton and the Iranian chief nuclear negotiator, Mr Jalili, spoke again on 2 August—their most recent conversation—and we expect further contact between them in September. But for those conversations to make progress, it will be necessary for Iran to have less unrealistic objectives for the negotiations, and to be ready to respond to the clear and generous offer that the E3 plus 3 have made.
I held intensive discussions on Syria with Foreign Minister Lavrov during June, in Kabul and Geneva; the Prime Minister and I met President Putin in August; and I will look forward to meeting Foreign Minister Lavrov again at the United Nations General Assembly this month.
I thank the Foreign Secretary for that answer. The civil war in Syria has just witnessed its most bloody week, and the head of the Syrian National Council has today said that the extent of the economic destruction in Syria means that nothing less than a Marshall plan by the international community will be required to reconstruct the Syrian economy. Will the Foreign Secretary continue to remind his Russian counterpart that a policy of engagement rather than obstruction is necessary for a secure middle east, and is in our and the Russian national interest?
I absolutely will, and I did that, as I reported to the House yesterday, at the meeting of the UN Security Council in New York last Thursday. We will, of course, continue to press this point through the General Assembly meeting later this month. Again as I said in my statement yesterday, we are, in the meantime, working on what happens the day after Assad in Syria. There will be immense challenges for any future Administration of Syria. It is difficult for the United Nations to do all the necessary planning because the current Government of Syria are still a member of the United Nations, but we are doing that with the Friends of Syria group and we will be taking it forward energetically over the next few weeks.
Did Kofi Annan resign because he recognised that the civil war in Syria is a focal point of the ancient war between Sunni and Shi’a, that even locally it is beyond the power of the great powers to resolve unless Russia is prepared to help and that Russia is determined not to allow its Alawite allies to be overthrown by a western-backed Sunni rebellion?
My right hon. Friend always puts these things extremely well, and that question is no exception. One of the dangers of this conflict going on and on is, indeed, that it becomes even more of a focal point for Sunni-Shi’a rivalry. That is not the only origin of this conflict, as I have argued to him before; there are also many people in Syria who want freedom from an oppressive regime, whatever their religious or ethnic affiliations. Kofi Annan resigned because he was not getting the necessary support from the Security Council, because of the Russian position, which my right hon. Friend describes. As I said to the House yesterday, I believe that that position will probably change only when the situation on the ground changes further in Syria. Sadly, that means a great deal more death and suffering along the way.
Instead of an obsession with regime change, why has the Foreign Secretary not been promoting a negotiated settlement, based on compromise, as all such conflict resolution is? This is not about appeasing Assad’s butchery, Iranian malevolence or Russian self-interest; it is about ending an horrific and deepening civil war, which is reverberating beyond Syria’s borders. Is this not the time to admit that there has been a catastrophic and monumental failure of western policy, and to change course?
The right hon. Gentleman may wish to familiarise himself with the positions that we have been taking, in common with not only western Governments, but the majority of Governments in the world. Our position was the position of the 133 nations in the UN General Assembly that voted for the resolution of 3 August, with only 12 votes against. That position is to have a transitional Government in Syria, including members of the current Government and the current opposition, based on mutual consent. That is the compromise solution. If he wants us to make a further compromise with forces who have killed indiscriminately and oppressed the people of their country with appalling human rights violations, I can tell him that that we are unable to do.
Although one can welcome his recent announcement of certain modest increases of contacts with the Syrian opposition, does not my right hon. Friend acknowledge that the arms embargo, which Britain supports, creates a hopelessly unbalanced situation, because the Syrian Government have a monopoly of air power, artillery and other forces, and because the embargo is not binding on Russia or Iran, which are not members of the European Union? Does he not acknowledge that this is simply going to mean that this conflict will last for many more months than would have been necessary, with many more thousands of Syrians being killed in the process?
My right hon. and learned Friend always makes an eloquent case on this subject. I respect his views and always pay great heed to them, but although I do not exclude any option for the future, I do not agree that it would be right now to lift the EU arms embargo. It has not been our policy in any of the conflicts in the middle east to send arms into a region of conflict. He will know that there are disadvantages as well as advantages to the course that he advocates, because it would be very hard to know what some of those arms would be used for. In the long term, there would be at least as great a risk that they would make the conflict greater as reduce it. We support the opposition in the terms that I set out yesterday in the House. It is clear that Syrian opposition groups are obtaining arms from other sources, but it has not been our policy at any stage to join in with that.
The humanitarian situation in Syria is dire and getting worse. More than 2.5 million people are in need of humanitarian assistance, many are internally displaced and more than 200,000 have sought refuge in neighbouring countries. The UK is the second largest national donor of international aid for the Syrian people and will continue to do all it can to assist.
Yesterday, the Foreign Secretary outlined the blocking stance that Russia and China were taking in the Security Council. Will he set out whether Russia and China, in light of their approach, are giving additional humanitarian aid to ease the suffering of the Syrian people?
No, and the hon. Lady is quite right to raise that point. Given the under-subscription to the UN appeal for funds, which we discussed in the House yesterday, we need countries around the world to contribute. We are setting a strong example in doing so, as is the United States. It is very important that other countries do so, and in my view that should certainly include all the permanent members of the UN Security Council.
I welcome the efforts that the Government are making through their contact with opposition groups in Syria to promote the protection of minority rights in whatever regime replaces the murderous Assad regime. Will my right hon. Friend particularly bear in mind the especially vulnerable position of the Christian community in Syria—he will understand the reasons for that position—and continue to do that work?
Absolutely. The position of Christians is vulnerable not only in Syria but in other middle Eastern countries, and it is an issue to which we regularly return. The Syrian opposition must not only come together as a united front for the purposes of negotiation and transition in this crisis, but reinforce at every opportunity their commitment to the representation of all groups and religious affiliations through their own composition and through support for the rights of all communities in Syria. That is crucial and is constantly reiterated by our special representative to the opposition.
I thank the Foreign Secretary for his statement yesterday and for reporting to the House so promptly. One of the areas that he has identified as of real concern is the overspill of refugees and humanitarian problems across Syria’s borders to the adjacent nations. What specific assistance is he giving to the countries that are offering so much to those people?
Our assistance takes many forms. Our main assistance comes from what the Department for International Development is doing in support of international agencies and the United Nations High Commissioner for Refugees. That is helping to fund the supplies for people in camps who have crossed the border into Jordan and Turkey. Again, through international agencies, a lot of that aid is getting to people inside Syria as well. There are specific projects, for instance to help the victims of sexual violence who have gone to Jordan, which I talked about yesterday, and to help buttress Lebanon and support the work of its armed forces in maintaining its own security. So we have a lot of specific projects, too.
The Foreign Office has totally transformed Britain’s relations with Latin America after years of neglect. There have been more than 30 ministerial visits to Latin America in just the last 15 months. We have opened an embassy in El Salvador and a consulate in Recife, Brazil, and we will reopen in Paraguay and Haiti in 2013. Our extensive co-operation with Brazil on the London 2012 Games has been the closest ever seen between consecutive hosts.
Undoubtedly, the Foreign Secretary’s speech to Canning House in 2010 opened a new chapter in relations with south America, and I support the Government’s aspiration to double exports to Brazil, Colombia and Mexico by 2015. However, we must not neglect our traditional staunchest allies, such as Uruguay and Chile. Given our historic role as a trading nation, and the implosion of business confidence in the eurozone, what practical steps is the Minister taking to bolster UK trade with Latin America?
I share my hon. Friend’s analysis. We have a very close working relationship with Chile, which is the most developed economy in Latin America, as well as with Brazil, Colombia, Mexico and other countries with an outward-looking free trade disposition. We continue to work closely to promote British trade and, more generally, wider British interests, including our political interests.
Can the Minister give us a progress report on what the Foreign Secretary called
“Britain’s most ambitious effort to strengthen ties with Latin America in 200 years”?
Does he regard the motion passed by the Organisation of American States, expressing solidarity with Ecuador over his bungled threats to their embassy, as a measure of how successful the Foreign Secretary has been so far?
As an indication, the Foreign Secretary and I have visited Latin America more than did all the Ministers in the previous Government put together. We are strengthening our ties with like-minded countries such as Mexico, Colombia, Chile and Peru. As for Ecuador, when I visited I was the first Minister to go there for 12 years.
May I take the Minister back more substantially to the issue of Ecuador? If we appear to behave in a high-handed fashion, is there not a risk that the very objectives to which he has referred will be substantially prejudiced, not least of course our interest in preserving the independence and self-determination of the people of the Falklands?
It is worth reminding the House that the case to which my right hon. and learned Friend alludes is about Britain discharging its legal obligations with regard to Sweden and an Australian national, so we should not allow it to obscure our wider relations with Latin America. There is no question of Britain acting improperly or beyond the law, and I assure the House that Britain’s relations with Latin America are on a better footing than they have been for decades.
Arms Trade Treaty
At the month-long negotiating conference in New York in July good progress was made towards getting a robust and effective arms trade treaty in the manner we wished for, but unfortunately it was not possible to reach a conclusion on the text at the end of the month. Accordingly, we are now recommitted to doing everything we can to see that base built upon, and we hope to make progress as soon as possible towards the treaty, which we hope will be in the next UN session beginning this month.
I thank the Minister for that response, and I am glad that he is talking about taking the matter to the UN General Assembly, rather than waiting for yet another meeting—under the rules, next year. We would need to get a two thirds majority, so this could be made faster now. Is he concerned that there are still many loopholes in the arms trade treaty, not least the fact that ammunition will be subject to fewer restrictions than conventional arms and that there is no requirement for the public reporting of arms deals? What plans does he have to address those loopholes?
I do not want to risk taking too long in my answer, because there is an awful lot in this. The pause that the chair of the conference gave to allow nations to consider progress allows us the opportunity to make representations to see whether we can make progress on what we thought was already a good text. There are some good things there already. For the first time, there is a global commitment to arms export controls and a mandatory requirement that arms exports should be subject to a range of requirements, including human rights, with a mandatory refusal if there is a risk of abuse. In company with civil society, non-governmental organisations and other partners, we will look for the process that is most likely to improve it and we will work with partners on the best way of taking steps forward.
I do not want to intrude on the love-in!
Last minute blocking tactics by the United States and then by Russia prevented the signature of a robust treaty in July. What assurances has the Minister had from the American Government that the international community will be able to pick up where it left off, perhaps after any distracting events in November are out of the way, and that the treaty will not be watered down in the meantime?
“Assurances” is not necessarily the right word. The conversations between us and those we expect to be major signatories, such as the United States, go on all the time. Time scales might have an impact on the negotiations that are going on, but it is important that we use the time that has been given to build on the good things in the treaty and do our best to ensure that those are not lost as we take the process forward.
United States Foreign Policy (Asia)
I regularly discuss US foreign policy priorities with Secretary of State Hillary Clinton. We welcome the rebalancing of US focus to the Asia-Pacific region, which is in line with our own renewed engagement in the region.
Given the United States’ refocus on Asia and repivoting there, will my right hon. Friend tell the House what steps the Foreign and Commonwealth Office is taking to further our diplomatic and commercial interests in the growth markets of China and south-east Asia?
We are doing a great deal to increase our emphasis on the Association of Southeast Asian Nations member states. This autumn, I shall reopen our embassy in Laos, which means we will be one of the few EU countries with representation in all 10 ASEAN states. We are doing a great deal to add to our commercial diplomacy in China, adding 60 new posts in the diplomatic service. This year, UK Trade & Investment expects to help more than 3,000 British firms to do business in China in design, construction, management of hospitals and energy generation, and there is a lot more to do.
What discussions has the Foreign Secretary had with our US representative about the sabre-rattling between China and Japan over disputed islands, and between Japan and Korea in relation to their long-term relationship? This is a matter of just a little concern at present, but we do not want it to escalate.
Of course, we discuss all global affairs with the United States, including those disputes. It is primarily for the countries concerned to resolve them, as is the case with the disputes in the South China sea. We want those disputes to be resolved peacefully and in accordance with international law. That is what we call for when we meet all the countries concerned.
The United Kingdom remains strongly committed to a reinvigorated Commonwealth. We want to see a relevant and effective organisation that brings strong values, development and prosperity to all its citizens.
In December 2010, my right hon. Friend the Foreign Secretary told the House in a statement that the Government should use the Commonwealth to develop trade and investment opportunities for the United Kingdom. Will he update the House on progress being made on that, especially given that Commonwealth GDP is poised to surpass that of the eurozone and is projected to grow at three times the eurozone’s rate for the next five years?
As my hon. Friend says, the Commonwealth brings with it some of the world’s fastest-growing economies, such as India, Ghana, Nigeria and Mozambique. We are responding with our FCO network shift. We opened a new deputy high commission in Hyderabad on 31 May and are to open another in Chandigarh later this year. We are strengthening FCO and UKTI commercial teams in Canada, Sierra Leone, South Africa, Mozambique, Kenya and Cameroon. I could go on and on, Mr Speaker.
Does the Minister agree that successive British Governments have neglected relations with Commonwealth countries? That is due mainly to the overweening obsession of the Foreign Office with the European Union and relations with Brussels. Will he set out how we will rebuild those relationships, particularly during this year, which is the 50th anniversary of Jamaica’s independence?
I assure the hon. Gentleman that we are completely committed to a reinvigorated Commonwealth. We feel that it will be one of the most important organisations in the world going forward. That is why we welcome the work being done by the ministerial action group and some of the other initiatives. For example, there is a proposal for a Commonwealth commissioner for human rights. We also want to see the new strategic plan. I pay tribute to the work of the eminent persons group—including my right hon. and learned Friend the Member for Kensington (Sir Malcolm Rifkind), who did so much work on that group—to help to move the Commonwealth in what will be a much more dynamic direction.
Following the London conference on Somalia in February, there are encouraging signs of progress in Somalia, which matters greatly to the security of the United Kingdom and the world. A new Speaker has been elected to the Somali Parliament and presidential elections will be held on 10 September. The new British office in Somaliland opened yesterday, and a new British embassy in Mogadishu will open soon—our first diplomatic representation on the ground for 20 years.
Will my right hon. Friend confirm that the stories surrounding Mr Julian Assange, currently holed up in the Ecuadorian embassy, that he might be executed if he faces trial in the United States, are utterly without foundation, and that his rights would be fully protected should he be extradited to Sweden, as that country has requested?
Yes, my hon. Friend is right. I set out the position in a written statement to the House yesterday and made clear the implications of the fact that the United Kingdom and Sweden are both signatories of the European convention on human rights. We are two countries which have some of the strongest attachment of any countries in the world to human rights. Therefore the fears that have been expressed that extradition to a third country could lead to a death sentence are without foundation.
The Bahraini Government have long claimed their determination to pursue the path of reform and reconciliation, but only yesterday it emerged that the retrial of 20 activists and Opposition figures had resulted in all of them being found guilty, with long sentences and, in the case of eight defendants, life sentences. In light of this, can the Foreign Secretary set out the British Government’s judgment as to whether these were fair trials? More widely, what is his assessment of the Bahraini Government’s commitment to reform and reconciliation?
I am very disappointed at the Bahraini civil court’s decision to uphold all the sentences of 20 political activists in Bahrain. We welcome the decision to review these cases in a civilian court but we remain very concerned by some of the charges that defendants were convicted of, and I urge the Bahraini Government to ensure that the human rights and freedoms of their citizens are fully upheld at all times. We are aware that the defendants can now appeal to a further court and we hope that this will be conducted thoroughly, with urgency and with due legal process. That will be one of the tests of the Bahraini Government’s commitment to reform.
T4. In light of the recent news that the legislature of Argentina in Buenos Aires has passed a Bill to prohibit British ships from docking in its ports, what recent discussions have Ministers had with their counterparts across south America to prevent other states in the region from taking similar economically counter-productive measures? (118524)
We have regular discussions about ensuring that British interests are protected in Latin America, but as I said in response to an earlier question, our relations with Latin America as a whole are in a better condition than they have been for many decades.
T2. The lives of 179 brave British soldiers were lost in pursuit of non-existent weapons of mass destruction in Iraq. If the nuclear state of Israel attacks Iran in pursuit of non-existent long-range Iranian missiles carrying non-existent Iranian bombs, can we have a guarantee that the House would discuss its position before any British lives were put in jeopardy? (118522)
First, the hon. Gentleman must be careful not to extrapolate too much from one case to another. The position on Iran and its nuclear programme is documented in dramatically more detail than any of the programmes of Iraq discussed before the war in Iraq. But of course we have established a clear convention in the House over the past 20 years about the commitment of our forces to military action and the need to consult Parliament and to have a vote in Parliament at the earliest opportunity. That is a convention well understood across the House.
T5. Ministers will be aware of the concern about the case in Pakistan involving a young girl, Rimsha Masih, who is thought to be as young as 14 and to have learning difficulties and who has been accused of blasphemy. Can Ministers update the House on what representations they have made to the Pakistan Government about this case? (118525)
My hon. Friend is right to raise concerns about the case. It has attracted a great deal of attention. It has been noticeable also that President Zardari has commented about it and raised concerns, as indeed have a number of Muslim clerics. There now appears to be some doubt about the individual who raised the accusations against the girl. I spoke to Paul Bhatti, the President’s adviser on religious affairs, just two days ago to raise the United Kingdom’s interest in the case and we will now watch events with interest.
T3. Given that Venezuela has held more elections than nearly any other country in the world in recent years, and that these have been independently verified as free and fair by international bodies, will the Foreign Secretary join me in calling for all parties in Venezuela, including the Opposition parties, to recognise the outcome of October’s presidential elections, whatever the result may be? (118523)
There is certainly a vigorous election campaign going on in Venezuela; there is no doubt about it. We support a democratic process in Venezuela, and of course want the elections to adhere to the highest standards. Everyone will have to make their own judgment about the elections at the time, but we certainly hope that they are elections whose outcome everyone can respect.
As my hon. Friend knows, our troops will not be in a combat role after the end of 2014 and will not be there in anything like the numbers they are now, but we have gone out of our way over the past couple of years to stress our long-term commitment to Afghanistan. That will include, on the military side, leading the officer training academy. Decisions will be made in due course about any other military support. Of course, our prime contribution will be an economic and diplomatic one, and the Secretary of State for International Development has announced large-scale development aid for Afghanistan for the future, so I hope that our role will be one of encouraging regional support for Afghanistan and working with a democratically elected Government on the country’s future.
T7. Is the Foreign Secretary aware that the directors of G4S are possibly violating article 76 of the fourth Geneva convention through their involvement in imprisoning Palestinian children in Israeli jails and, if so, would he like to comment on that? (118527)
The issue of contractual arrangements between the Israeli Government and their contractors is a matter for them. We are aware that concerns have been raised about the issue and know that enquiries are going on in that regard, but essentially the contract between G4S and the Israeli Government is a matter for them.
T9. I welcome what my hon. Friend has said about the case of the Pakistani Christian girl accused of blasphemy in Pakistan. Last week I met a group of Asian Christians in my constituency to discuss the case. Will he comment further on what more he and Members of this House can do to support religious tolerance and freedom in Pakistan? (118530)
The fact that Members of this House speak regularly and clearly about the importance of religious tolerance and freedom is significant and important not only in Pakistan, but in the countries right across Asia, the middle east and around the world where our voices are heard. There are some difficult issues to be confronted in those countries where the Government’s writ does not always run in every area, but the House can be reassured that we make regular representations on these matters. The more voices that can be raised in support of tolerance and freedom and the brave people in those countries who are working for them, the better.
T8. Now that the President of Colombia has announced talks with FARC about the peace process, will the Minister confirm that it is important that all sections of civil society are involved in any settlement and that the deep inequalities in that country are addressed? Will he be pressing the international community to support those Colombians who have worked for years for peace, often risking their own lives, so that they can contribute to the future of their country? (118528)
The hon. Lady is right to draw attention to the importance of Colombia, the second most populous country in south America and one that we work with closely. I know that Members on both sides of the House want to see a peaceful future for Colombia with an emphasis on human rights, which is also very much the priority of the British Government. We hope that the talks between the Colombian Government and the FARC are successful after decades of conflict and are keen to play a full part in assisting with that process.
Yes, absolutely. We have said what we have said about demolitions on the west bank, and that certainly applies to demolitions in Gaza as well. I will look at the reports to which my hon. Friend refers. There are many things that we call on Hamas to do in order to make a peace process viable and, of course, it is important that it respects the rights of the people living in Gaza.
The Minister will be aware of the strong relationship over the past year between trade unionists in the United Kingdom and in Colombia. What recent assessment has he made of the spate of killings this summer of trade unionists in Colombia known personally to members of the British trade union movement?
I have regular meetings with groups to discuss this problem and have raised it on numerous occasions with members of the Colombian Government, right up to the President of Colombia. We are extremely concerned to ensure that the human rights of trade unionists around the world, including in Colombia, are protected. It is worth saying that significant progress is being made in Colombia and I hope that we will see, both in talks with FARC, and more generally in terms of the advancement of civic society, a peaceful future for Colombia whereby murder rates in general, including those for trade unionists, fall dramatically to levels comparable to those in many other parts of the world, including Europe.
In the past few weeks there has been growing concern about the human rights situation in the Gambia. I am very grateful to the Minister for all the assistance that he has given my constituent, Deborah Burns, whose husband is one of those who has been threatened with execution on death row. Can the Minister provide an update on the representations made by the Government and assure us that human rights will be restored in the Gambia?
We are obviously very concerned about what is going on in the Gambia, because there has been an effective moratorium on the death penalty since 1985. All of those on death row, including General Mbye, the husband of my hon. Friend’s constituent, had effectively had their sentences commuted to life imprisonment. We have made very strong representations to the Gambian Government. I will meet Gambian Foreign Minister Tangara in the near future, and we will push them very hard indeed on this matter.
It is difficult at present to go into the circumstances because of confidentiality issues, but as the right hon. Lady knows, representations have been made on behalf of the British Government to those representing Mr Manning. The indication has been that he has not wanted that involvement, so it may not be possible— and indeed it is not always the practice—to have observers. I would be very happy to meet the right hon. Lady privately—arranging such meetings seems to be a feature of my exchanges this afternoon—to discuss the issue further.
Will the Secretary of State provide the latest information on the situation facing the Rohingyas in Burma, and would he be prepared to meet a group of Rohingyas who live in my constituency and have appalling tales of atrocities to tell about the situation in both Burma and, indeed, Bangladesh?
These people are in a very difficult and often desperate situation in Burma and in neighbouring countries. This is a subject that both I and the International Development Secretary have raised in recent times with the Prime Minister and Foreign Minister of Bangladesh, and with Burmese leaders, including the Opposition and Aung San Suu Kyi, as well as the Burmese Government, so we are constantly engaged on the issue and wish Burmese leaders to address it. Certainly, one or other of the ministerial team would be delighted to meet the hon. Gentleman to discuss it.
The Foreign Secretary will have seen the worrying reports about young people from the United Kingdom travelling to Syria as the recruits of al-Qaeda and other extremist groups, and he will recognise the risk that such individuals may pose on their return. Will he assure the House that the security services will do all that is needed to counter this potential threat?
Absolutely. We take very seriously the reports that British nationals are among the foreign fighters in Syria. We cannot provide any estimate of the numbers, which the right hon. Gentleman asked for in his earlier question on the Order Paper, because there are numerous travel routes via many third countries. However, where there is evidence that British nationals are involved in terrorism or other illegal activity, the Government have a range of powers to stop them travelling and will use those powers appropriately.
Point of Order
On a point of order, Mr Speaker. I seek your advice on a matter that a constituent brought to me during the summer recess. The long-running, Government-funded small firms loan guarantee scheme was designed to support companies that have not traded for more than five years and that have exhausted all forms of security to get a cash injection. Evidence has been passed to me that Barclays bank used the scheme to underwrite its own bad loans for companies that did not meet the original loan criteria. It appears that it was underwriting small firms—
Order. I am extremely grateful to the hon. Gentleman. I hope that he will understand that I have heard enough to know that this is certainly not a matter for the Chair. If he was concerned to put the matter on the record, he has achieved his objective. There are other ways in which he can pursue it, and I trust that he will. We are grateful.
Plastic Glasses and Bottles (Mandatory Use)
Motion for leave to bring in a Bill (Standing Order No. 23)
I beg to move,
That leave be given to bring in a Bill to require local authorities to impose mandatory use of plastic glasses and bottles in licensed premises; and for connected purposes.
The Bill would require the Government to work with local authorities and licensing authorities to make the use of polycarbonate bottles as a replacement for glass bottles mandatory in premises with a history of violent incidents.
A year ago, my constituent, Nicola Roberts, was in a nightclub in Wrexham. She was 20 at the time. Without warning, an unknown person threw a glass bottle across the room. It hit Nicola on the head and shattered, causing three deep wounds to her face. The wounds required 17 stitches.
Nicola decided that she was not going to accept that. She came to see me with her mother and asked why it was that, when alternatives are available, glasses and glass bottles are still used in licensed venues. I confess that I did not know the answer. From then, I have worked with her on this question. Thankfully, Nicola has now recovered fully and is looking forward to entering her final year at Leicester university. She is using her experience to raise awareness of the issue.
We know very well that Nicola is not alone as a victim. According to the Home Office, there are about 87,000 violent incidents involving glass every year in the UK, and about 5,500 glassings are reported annually. Glass can cause considerable physical damage, and glasses and bottles used as weapons can intimidate victims, bar staff or bystanders and cause serious injuries. Intact glass can cause significant damage. However, when used as a sharp weapon, the damage can be horrific. Glass-inflicted injuries to the eyes and face can require stitches or surgery and can result in heavy blood loss and even loss of sight.
As a result of my Bill appearing on the Order Paper, I was contacted by another victim who has suffered even more grievously than Nicola. Jane Sheriff is a young mother. As a result of an attack with a glass bottle in April this year, her husband, Phil, was killed. In Jane’s own words, she does not want that to happen to another family. Like Nicola Roberts, she is not prepared to accept the law as it stands.
Jane set up the bottlestopnow Facebook site, which calls for the use of glass bottles in late night venues to be banned. I have seen a powerful ITV news report that sets out her case. She has attracted huge support, which has helped me in preparing for this debate. Her site stands as a record of the huge scale of the problem and of the profound grief of those affected by attacks using glass and glass bottles. Thousands of our constituents, particularly young people, have huge, lasting physical and psychological scarring from their injuries.
I am pleased that the Government have taken some steps in this area. Reassuringly, the Police Reform and Social Responsibility Act 2011 lowered the standards in the Licensing Act 2003 for passing restrictions on a premises, making it easier for the police to
“seek the imposition of appropriate conditions”
if they have a concern about a particular premises.
The new package of measures will provide more powers to reduce alcohol-related violence, deaths and personal injuries, including the imposition of conditions restricting glassware to specific premises. It will also make it easier for licensing authorities to remove licences from, or refuse to grant them to, premises that cause problems.
However, we must do more. Violent incidents and attacks on our constituents, particularly young people, remain common. As long as glassing incidents continue to occur at pubs and clubs, it is the Government’s responsibility to take action to prevent more violence from occurring. I am confident that more can be done at Government level to raise awareness and to prevent the occurrence of future violent incidents caused by glass bottles. The Government need to ensure that local authorities and licensing authorities use the powers they have to promote the use of plastic bottles in bars and clubs where there is a history of violence and glassing incidents.
A number of towns and cities have made important progress on the issue. Newport city centre is now glass-free on Friday and Saturday nights after 10 pm in a bid to crack down on glass crime. That follows a campaign by the Safer Newport Partnership, which introduced a trial of polycarbonate glasses in 2010. As a result, glass and bottle attacks in the Gwent force area fell from 53 in 2006-07 to 16 between April and December 2011. Newport city council used the Licensing Act 2003, and other local authorities need to be encouraged to do the same. Other towns and cities have taken action to varying degrees, including Glasgow, Bournemouth, Manchester, Reading, Cardiff and Fareham. Community safety partnerships across the country have succeeded in addressing the problem.
Injuries cause substantial expenditure of taxpayers’ money, because criminal injury compensation awards and NHS treatments are enormously expensive. The problem absorbs a significant amount of police time and carries an estimated £100 million bill for the NHS every year.
Developing safer alternatives to traditional glasses could involve the engagement of industry, trade and consumers to create solutions. I take this opportunity to congratulate all those involved in bringing about the universal adoption of toughened glass over the past five years, and in continuing the development of manufacturing standards for such glass. What is most frustrating, however, is that we already have available an alternative to lethal glass bottles. Polycarbonate makes a durable type of plastic bottle and is extremely difficult to break. If glasses and bottles were replaced, I am quite certain that even if the number of violent incidents did not decrease, their severity would decrease substantially.
Nicola Roberts came to see me last September, and Jane Sheriff’s husband was killed this April. Phil would not have died if a ban on glass bottles had been in place. We therefore have an obligation to act now. Government legislation in other countries, such as Australia, may offer us guidance in pursuing stricter enforcement of the Licensing Act. In Queensland, the liquor licensing authorities gave establishments a year, warning that they would face restrictions if it was determined that they were high-risk venues. Venues had to submit a risk management plan detailing the steps that they would take to minimise the risk to patrons, in order to avoid a blanket ban. The high-risk venues that were issued with a blanket ban could then serve alcohol only in toughened, tempered or polycarbonate glassware.
Of course, the action of replacing glass bottles and glasses with polycarbonate ones should not be taken alone, but rather within a collective framework that addresses other contributory factors to violence in our pubs, bars and clubs, including binge drinking. We must also consider what action we can all take to minimise risks. Of course binge drinking is a major problem, and we must continue to tackle antisocial behaviour in communities across the country. I know that those and related issues were addressed in the Government’s 2010 alcohol strategy, which included commitments to introduce a minimum unit price for alcohol. Nor must we overlook the causes of aggressive behaviour. However, glass replacement is one solution that has been proved to reduce the number of violent incidents and injuries.
For as long as we fail to act, young people such as Nicola will continue to be scarred and wives such as Jane will continue to be widowed. For that reason, I urge the House to support the Bill.
I do not intend to press the matter to a Division, or detain the House for long. You will appreciate, Mr Speaker, as I am sure the whole House will, that at this very minute the Prime Minister may be trying to get hold of me, so it is best that I move on as quickly as possible as I do not want to disappoint him.
I oppose the Bill because although the aim of reducing some of the serious offences listed by the hon. Member for Wrexham (Ian Lucas) is admirable, he is dealing with the issue in completely the wrong way. Whenever there is a problem, Labour Members always seems to believe that the solution is to ban something or ban somebody from doing something—that is the only solution they look for. Unfortunately, however, that is like saying that because there are so many accidents and people die each year on the roads, we should ban cars. This Bill is as stupid a solution to the problem we are discussing as banning cars would be to reducing road traffic accidents.
There is no doubt that the desire to reduce the number of people who suffer horrific injuries as a result of thugs who use glass bottles as weapons is admirable, but the answer to the problem does not lie in the Bill. First, the practicalities involved in banning glasses and glass bottles mean that such a measure would be virtually impossible to implement across the country. It may be easy to control the use of glasses, but what would happen to wine, champagne, beer or coke bottles? Will they be banned from the premises in case somebody gets their hands on them? What about glass tables—are we going to get rid of those too?
There are all sorts of dangerous things in pubs and clubs. Places that serve food have knives and forks, with which a terrible amount of damage can be done. During a recent TV programme about the riots, a police officer spoke about the problems that the police faced when dealing with thugs in a public house. He complained that everything was thrown at them—chairs, tables, frying pans and knives. Perhaps the hon. Member for Wrexham will seek to prevent tables, chairs, frying pans, knives, forks or anything else from being used in bars or pubs in case some thug gets their hands on them and starts trying to assault people. Where on earth would it end?
Not all glassing incidents take place in public; some take place in people’s homes, and obviously there is no possibility of banning all glass. There will always be victims of nasty glassing incidents, and even if it were possible to ban glasses in licensed premises, who would pay for it? If, in these hard-pressed times, businesses are mandated to supply non-glass glasses, not to mention bottles, will they be forced to pay, or will we pay from central funds or via local authorities? Many pubs are currently suffering, not least from the effects of the recession, high taxation and the smoking ban, and this proposal would create an extra regulatory burden and cost that the pub industry can ill afford and does not need.
The hon. Gentleman has rightly identified a problem, but there are better solutions than those in the Bill. First and foremost, we need harsher sentences for those who use glass as a weapon, and that is the route the Government should take. A sentence recently received by Rebecca Bernard at Bolton Crown court was a complete and utter joke. She reportedly had 51 previous convictions for crimes including violence and threatening behaviour when she smashed a bottle over a man’s head, and then stabbed another man in the arms with the bottle’s jagged neck. Unbelievably, she was not sent straight to prison for those violent attacks and—even worse—it appears that she had previously received a non-custodial sentence for another bottle attack. Such ridiculously lenient sentences are completely outrageous and are in no way a deterrent or suitable punishment for such vicious assaults. If the hon. Gentleman wishes to tackle the problem, rather than going down this nanny-state route, he should urge much tougher sentences to be imposed on those who perpetrate such crimes, and I would be happy to support him.
During a debate on this subject in the other place in 2009, Lord Mackay of Clashfern said that glassing
“certainly was a severe problem in Glasgow years ago. The answer to it that was produced at the time was very severe prison sentences. The judge who dealt with that problem meted out much more severe sentences than had previously been the case and reduced the incidence of the problem in Glasgow”.—[Official Report, House of Lords, 13 October 2009; Vol. 713, c. 160.]
Lord Mackay of Clashfern has pointed the way to the solution to the problem, but both the Government and the Opposition appear intent on ignoring the obvious solution that most people in the country want.
There are other common-sense solutions apart from sentencing. Many licensees already use a combination of polycarbonate and glass, as the hon. Member for Wrexham said, and use their judgment and take precautions when antisocial behaviour is more likely to minimise the risk of glassings. For example, many use plastic glasses during busy sporting events or at live music venues.
In addition, reports from around the country show the success of voluntary efforts by Pubwatch and safer neighbourhood partnerships in encouraging and facilitating the use of polycarbonate glasses generally. The Licensing Act 2003 enables local authorities to attach conditions to licensed premises for the prevention of crime and disorder and/or to protect public safety, either from the outset or as a result of a review requested by the police or another responsible authority. Insisting on plastic glasses is an example of such a condition that could be imposed in a problem case. That power can be used when it is needed and appropriate, but the Bill proposes a blanket ban for all licensed premises.
I very much support the use of voluntary and other initiatives to minimise the problem of glassings. I applaud the work of campaigners who highlight the problem and commend the existence of projects such as Design Out Crime, which tries to promote new thinking and good design ideas to reduce crime, including alternatives to glasses.
Given that, I do not believe there should be any moves towards mandating people to use plastic glasses and bottles in all cases, as the Bill seeks. I support the voluntary measures, but, more importantly, I support much tougher sentences for those who perpetrate such terrible and horrific crimes to ensure that they cannot be let out to commit them again. For those reasons, I oppose the Bill.
That Ian Lucas, Dame Joan Ruddock, Pamela Nash, Susan Elan Jones, Hywel Williams, Albert Owen, Chris Bryant, Mark Tami and Chris Ruane present the Bill.
Ian Lucas accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 26 October 2012, and to be printed (Bill 63).
Small Charitable Donations Bill
I beg to move, That the Bill be now read a Second time.
It is my pleasure to move Second Reading of the Bill, which is the product of many months of consideration and consultation, both formal and informal. I begin by thanking all who have worked so hard on it, including the voluntary and representative bodies, Her Majesty’s Revenue and Customs, and officials and lawyers, who have worked hard over the past months to produce the Bill.
The Bill provides the legislative framework for the gift aid small donations scheme, which was announced in Budget 2011. This scheme was announced as part of a significant package of measures to encourage charitable giving and philanthropy by donors from all walks of life, from the largest donors to those who give small amounts through charity bucket collections. The measures announced included reducing the rate of inheritance tax for individuals who leave 10% or more of their estate to charity, and a tax reduction in return for the donation of a pre-eminent object, or collection of objects, to the nation. Taken together, the 2011 Budget philanthropy package of measures represented the most radical and generous reforms to charitable giving for more than 20 years.
Crucially, at the centre of the package was the announcement of the gift aid small donation scheme.
I hope you will forgive me, Mr Speaker, if I do not tackle that question in the context of this debate. I do not believe it is crucial to this scheme, but I will be happy to come back to the hon. Gentleman after the debate, if there is a pressing matter he needs answering.
I shall be happy to look into the matter, within my powers, and come back to him. However, it might well be a question for the Charity Commission, in which case the hon. Gentleman will know where to direct his inquiries. If there is information I can give him, though, I shall be happy to get back to him.
To assist the Minister and the House, may I inform Members that the Public Administration Committee is conducting an inquiry into the post-legislative review of the Charities Act 2011 and that the role and charitable status of religious organisations are subjects we are concerned about? I invite the hon. Member for Coventry South (Mr Cunningham) to engage with the Committee on this subject. We are happy to discuss it with him.
If the hon. Gentleman will allow me to set out the purpose of the scheme, I shall be happy to engage in further debate as we proceed.
The purpose of the scheme is to enable charities and community amateur sports clubs to claim a gift aid-style payment on small cash donations of up to £20 in cases where it is often difficult to obtain a gift aid declaration. In general terms, eligible charities and CASCs will be able to claim top-up payments on up to £5,000 of small donations each year. As I said, the crucial point is that the Bill provides for top-up payments to be made to eligible charities that find it difficult to claim gift aid on donations, such as those from street buckets and church plates—when donors might be reluctant to stop to fill in gift aid declarations. In such situations, charities are currently missing out on income.
I declare a non-pecuniary interest as a member of the Institute of Fundraising. Are Ministers aware of the institute’s response? It has welcomed the Bill as an important measure for small charities that might have difficulty claiming gift aid, but pointed out that there are so many conditions and complexities in the scheme that it will actually undermine its accessibility to those very charities. Will she agree to meet the institute and discuss some of its suggestions for improving this important Bill?
I am aware of that point of view, and if my hon. Friend will allow me, I will deal it and some others. I think he will know that the Bill has been subject to a pilot of a particular type of scrutiny over the summer, so there have been many opportunities to start that kind of discourse, and I look forward to continuing that in this debate.
I thank the Minister for mentioning the public reading stage. How many people engaged with that process? It has been brought to my attention that it was quite difficult to find the information, which was tucked away on the Cabinet Office website.
I will be happy to come to that, but if the hon. Lady will allow me, I will make my points in sequence. I am starting to stack up—in a non-polycarbonate way, of course—the points I need to make, so I will set out a few more of the basics first.
The new scheme does not require individual donors to complete a gift aid declaration or the charity or CASC to collect and provide the donor’s details with every payment claim, as is required under gift aid. The aim of the scheme is to complement gift aid, not replace it, and we are keen that charities continue to make full use of gift aid wherever possible.
It is not just the Institute of Fundraising, which the hon. Member for Cheltenham (Martin Horwood) mentioned, which has concerns. Caron Bradshaw, the chief executive of the Charity Finance Group, has said:
“Eligibility for the scheme is limited and…will stop those that need it most from using it.”
Sir Stuart Etherington, the chief executive of the National Council for Voluntary Organisations, has said:
“Even for those of us who spend a lot of time looking at Gift Aid, some of the restrictions are hugely complex to understand”.
Why does the Minister think that charities that were initially positive about the Bill are now so sceptical about some of the detail?
I do not want this debate to descend into a battle of quotations—although I could, for example, provide the hon. Gentleman with a quotation from Mr Graham, the chief executive of a charity not far from my constituency, who has said:
“Being a very small charity relying on small private donations and monies collected in tins positioned in shops etc I welcome this Bill. It will certainly make a difference to the very needy children in Kenya that Mnarani Aid supports.”
The Bill has been broadly welcomed by the sector. It puts cash towards charities. I shall set out how it does that and deal with some of the points that some stakeholders have made over the summer and beyond. I am confident that the Bill does what it sets out to do, which is to support charities in a constructive way and the funding will be welcomed.
If I may, I shall take the Minister away from the details and towards the overall philosophy. In the tax treatment of charities, we can use the gift aid or “charity grabs back the tax” model or we could convert to a model whereby individuals deduct from their tax the charitable contributions they make, as happens in the United States and other countries. Was that general philosophical debate part of her consultation and deliberation on the Bill, or has she looked more specifically at how to improve and enhance the gift aid scheme with this new initiative?
I shall try to be careful in responding. A number of interesting issues have been raised that are not necessarily part of today’s Bill. In addition, a number of improvements to gift aid have often been mooted or discussed, but they are not necessarily part of the Bill either. In direct answer to my hon. Friend’s question, therefore, the matters for consultation and scrutiny to date relate closely to this scheme and the mechanisms within it, which I shall now set out.
Under the scheme, charities will be able to claim top-up payments equivalent to the basic rate of tax paid on a donation, which is currently worth 25p for every £1 collected on small cash donations of £20 or less. Therefore, if a charity claims on the full allowance of £5,000 of small donations in a year, that will mean an additional £1,250 of income. It is that which charities will welcome. Hon. Members will know that tax reliefs for charities and charitable giving are an important source of income for charities, totalling over £3 billion a year. Of those, gift aid is the largest relief and is worth over £1 billion a year. We estimate that the gift aid small donations scheme could result in additional Government funding of around £100 million a year for charities and CASCs by 2015. That represents a significant boost in income for the sector and will be especially valuable to small charities. That is why—I again emphasise the point—this is a Bill that is to be welcomed and which has been welcomed by many across the voluntary sector.
To ensure that the new scheme is as accessible as possible to charities, it will be administered using the same mechanisms that apply to claims for tax relief under gift aid. The scheme will look and feel familiar to those charities and CASCs that already claim gift aid, and Her Majesty’s Revenue and Customs will publish clear guidance ahead of the commencement of the scheme to ensure that it is simple to access. However, because the new scheme will not be a tax relief, it cannot be legislated for through the usual Finance Bill route— I regret to deprive my hon. Friend the Member for Bedford (Richard Fuller) of the chance to serve on such a Bill and discuss the philosophical principle—so we are legislating for it in this programme Bill instead. The scheme was widely welcomed by the sector when it was announced in Budget 2011 and continues to be well received. We have worked closely with the sector to get the scheme right.
Let me now address some of the points of detail that have been raised, and which I am confident will be well understood by hon. Members. I shall set out the rationale for the ways in which we have designed the scheme, but first I want to set it firmly in the wider context. We have had to take steps to ensure that it operates as fairly as possible, but also to ensure that it remains affordable and is protected against fraud. We want this money to go to legitimate charities doing important work with real social benefit. We also want the small donations scheme to be as fair as possible. We want to ensure that charities doing the same kinds of work at local level, but which have different historical structures, get allowances under the scheme that are not hundreds, or even thousands, of times different from one another.
Those are the key driving principles behind the scheme: fairness, protection against fraud, and providing a complementary scheme to gift aid. We also want to channel some extra funding to charities, which I suspect that no hon. Member would want to speak against. I ask hon. Members to keep those principles in mind as we debate the detail of the gift aid small donations scheme. Let me take them in turn.
First, we want the scheme to complement gift aid rather than to replace it. I would urge all charities that receive donations to make full use of gift aid, where there is no limit on the amount of donations on which the charity can claim. However, there are some donations for which gift aid declarations are hard to come by, and that is what the scheme is designed to address.
Will the hon. Lady tell the House how much the Bill will cost the country? I ask that question in the context of transitional relief for charities having come to an end last April, at a cost of about £100 million. Will the Bill simply lead to a replacement of that money?
I have already said that the Bill will channel up to £100 million to charities over the years in which the scheme gears up. That is to be welcomed. I think that the hon. Gentleman will also understand that the clue is in the title, in relation to transitional relief. This is a new scheme that ought to be welcomed in its own right.
The second principle behind the proposal relates to protection against fraud. We have designed the scheme so that for a charity or CASC to be eligible to claim, it must have a minimum three-year track record of successfully claiming tax relief under gift aid. It will also have to continue making gift aid claims while it is claiming under the new scheme. I know that the three-year rule and the requirement to match claims with gift aid claims have raised some concerns among charities, but I must be frank and say that the generous nature of charitable tax reliefs means that they are vulnerable to exploitation, with a small minority looking to take advantage of the arrangements.
The Minister has just mentioned two conditions: the requirements already to have claimed gift aid for three years and to match existing gift aid claims. The Institute of Fundraising has pointed out that charities that find gift aid hard to come by will be unlikely to be able to meet either of those conditions. May I repeat my request for her to meet representatives of the institute, which represents the fundraising sector, to discuss its amendments to this important Bill, which it otherwise supports?
I should make it clear that I am in no way refusing to have such a meeting. I would be happy to take up that point. The scheme will be complementary to the gift aid scheme. Some charities have struggled to claim gift aid on certain types of donation—for example, cash donations whose donors it might be hard to persuade to stop and fill out a form. However, that is a different type of problem from the one to which my hon. Friend has just referred. I shall be happy to take up his point in greater detail.
I shall explain why we have had to put in place the three-year matching rule. There is an understandable reason behind it, and I think that charities will find it reasonable to work with. I am keen to avoid a situation in which the new scheme might become vulnerable to exploitation. None of us would wish to see funds that have been directed towards charities and the good causes they support being diverted or lost to fraud. I certainly hope that all Members cleave to that principle.
As I have said, HMRC pays around £1 billion a year in gift aid to charities, and such large sums inevitably attract fraudsters. Fraudsters scrutinise any payment system for weaknesses, and we have to be aware of that in designing any new scheme. As the new scheme is based on cash donations, records of the donor will, by their very nature, be limited. It could be said that this makes it even more attractive to fraudsters, so the very qualities of the scheme that are designed to make it work for charities—in other words, the ease of putting some money in a bucket—also help fraudsters. We have needed to find ways to protect the scheme from abuse, without adding to the paperwork that it might be feared would sit along small donations. One way we have tried to do this is by retaining the link to the gift aid scheme, which has tried-and-tested methods to protect against fraud. This also fits in with the desire, as I have said, for this scheme to be complementary to gift aid, not to replace it.
You will be able to appreciate, Mr Speaker, the idea I am developing of the need for charities to have a compliance record that will give HMRC a little more reassurance that the scheme is well protected against fraud. I am confident that every Member supports that. Charities with a good compliance record will be able to access the quite generous top-up payments available. Linking the scheme to claims made through gift aid gives not only HMRC, but all of us in this House, vital reassurance that checks and balances are in place.
We all appreciate the need to ensure that the scheme is not open to fraud. That will be agreed across the House. What assessment, however, has the Department made of the number, the size and the scope of the charities that the Minister believes will be able to access the benefits of the scheme, with these conditions attached? The industry seems to think that the number, size and scope of such charities will be severely curtailed.
We hope that this scheme will be well used, and I have already set out that aspiration. I have set out the aspiration, too, that the scheme will get £100 million to charities. The hon. Gentleman will be aware of the numbers set out in the impact assessment, which has certainly been made available to him. The key point is that the scheme needs to be open and, as we have said, worth while for charities to access, which I think it will be. Equally, we need to be able to keep track of the possible costs of the scheme, which I am coming on to deal with. I can reassure the hon. Gentleman that a pool of around 100,000 charities have claimed gift aid in the past four years. It might be possible to take that number as an estimate of the number of charities that could be eligible to apply to the scheme. We hope that take-up will be high, but by its nature, it is somewhat hard to predict at this point, but I am not suggesting that all those 100,000 charities will put in claims.
Does the Minister accept that if organisations such as the National Council for Voluntary Organisations, the Charity Finance Group, the Charities Aid Foundation and, I believe, the Institute of Fundraisers have problems with the practicalities of what she has suggested, she should at least consider the details again? I am sure we all agree on the general principles, but this is about getting it right for predominantly small community and voluntary groups.
It is indeed about getting it right for those groups that we all care about. I can reassure the hon. Lady that I have already made changes to the Bill on a number of points, in comparison with what was originally outlined. If I can make a little progress, I will come on to explain them. I further reassure her that the whole point of having a public scrutiny stage for the Bill is exactly to hear those points. I have made it my priority to work with those representative bodies and, indeed, to work directly with charities as much as possible, reassuring them about the benefits of the scheme and explaining why I designed it carefully in order to protect its aims.
I welcome the Bill, as does the charitable sector generally. So many people making small donations have thought about the need for this reform, and it is such an obvious reform to make—although, of course, the implementation is much more complex than the concept. Would it be sensible for the Government to agree now that whatever scheme is implemented in the Bill will be subject to review after two or three years, so that there is a mechanism allowing it to be swiftly amended by secondary legislation within a limited period? That will enable lessons to be learned, and perhaps it will be possible to extend the scheme to a broader range of charities so that more of them can benefit from it in the future.
My hon. Friend has made a good point. I know that he has spoken to charitable groups in his constituency and others and has benefited from his experience on the Public Administration Committee. He will be aware that the impact assessment contains a commitment to keep the scheme under review. I am sure he will agree that the purpose of the scheme is to engage the charitable sector, and that it is certainly not intended to “turn off” charities that we want to support by means of the mechanism that it provides. I hope I can reassure him that we want to encourage smaller charities not to give up on gift aid, and to embrace a new scheme which we hope will be helpful.
As I was about to say to the hon. Member for Clwyd South (Susan Elan Jones), many improvements to the Bill have been suggested, and I have listened to those suggestions during our consultation on the scheme. We originally proposed a one-for-one match in relation to the amount of donations on which a claim could be made under the scheme, and on which a claim could be made under gift aid, in the same tax year. Every £1 claimed on small donations would need to be matched with £1 claimed under gift aid. However, the sector feared that that would constitute too high a barrier for many organisations, especially small charities.
Having listened carefully to what charities thought, I accepted that our proposed arrangement would limit the amount of small donations payments that could be claimed for some of those charities. We have therefore reduced the level of matching from 100% to 50%, so that charities and CASCs will be able to make a claim for £2 on small donations for every £1 donated under gift aid. I think that that is a good compromise between helping charities to claim as high a level of small donations payments as possible, and ensuring that the payments go only to legitimate charities. Given that such a matching procedure will significantly reduce the attractiveness of the scheme to fraudsters, I hope that the sector will support it.
Let me now explain how we intend to ensure fairness of access to the scheme for charities that are doing similar work in a given locality. The scheme allows all charities that meet the entry requirements to claim a payment on up to £5,000 of small donations per charity. For many charities, that will suffice. Small local charities that are independent charities in their own right need consider the rules no further. I hope I can reassure Members that small charities will welcome the scheme, and, in terms of what they receive of the proportion that they seek, will obtain the most benefit from it. However, the scheme also allows some charities to claim more on small donations than the main limit of £5,000 if they carry out charitable activities in what we have called a “community building”, and meet certain conditions.
When we were developing the detail of this part of the scheme, it became clear that unless special rules were introduced, some charities would be able to claim hundreds or even thousands of times less under the scheme than their counterparts doing very similar work, simply because of the way in which they were historically set up. For example, Church of England parish churches are generally set up as separate charities, but in the Roman Catholic Church there is usually one charity at the diocese level with a couple of hundred parish churches below it. Without special provision, the Catholic Church, and certain other secular and faith charities with similar set-ups, would qualify for a small fraction of what their counterparts could claim under the scheme, unless they were to fragment and set up many more charities locally. I do not think forcing charities to set up more charities just for the sake of this scheme is sensible, nor would placing them at a very significant financial disadvantage simply because of the way they have historically been structured. So I have introduced the community building rule to ensure that charities carrying out similar activities in local communities—either through independent charities under an umbrella organisation or as local groups of a larger charity—get allowances under the scheme that are not hundreds or thousands of times different. Finding a solution to that issue was a priority.
As I have said, there will, of course, be an opportunity to review the Bill in the light of how it operates. The answer to this question is all to do with realism: the Bill’s provisions are, in effect, a form of public spending—I shall explain later how they differ from tax relief—and so a limit has to be included in the design, because such funds are not endless.
The sector has raised concerns about the perceived complexity of the community building rule. It is true that in order to obtain a simple result—that charities doing the same things should get an entitlement that is similar—we are going to need to put in place some fairly detailed rules. I hope Members agree that that is preferable to disadvantaging some charities just because of the way they are set up. However, as I have said, it is only those charities, or groups of connected charities, wishing to apply for top-up payments on more than £5,000 in donations who need to consider the community building rule. Most small charities collect less than £5,000 in small donations, so the rules will be irrelevant to them. Her Majesty’s Revenue and Customs will issue clear guidance, developed through working with the sector, to show exactly how these rules will work in real-life situations. I am confident that that can be made to work.
That point has been raised, and I look forward to addressing the details of it with my hon. Friend and others. She will be aware that we have sought to put in place restrictions in respect of community buildings—the other being commercial and is in the same part of the Bill—because we want to focus the Bill’s provisions on charities that are operating for charitable purposes.
A separate rule ensures that charities that are connected qualify for just one allocation of the £5,000 maximum limit between them, so that there is no incentive for charities to fragment solely in order to qualify for extra allocations of the maximum limit. We had originally suggested a broad test in respect of connected charities. Following consultation, however, we have developed a much more targeted rule and, as a result, fewer charities will be connected for the purposes of the scheme.
As I have said, some in the sector have raised concerns that the community building rule does not go far enough. They have said that more charities should be able to benefit from the rule. It has been suggested that any charities carrying out one-to-one support for their beneficiaries should be eligible, and that the top-up should not be restricted to cash collected during the charitable activities carried out in the community building.
I want to remind Members of a central point. The objective is to allow individual charities to claim a top-up payment on £5,000-worth of donations. That is the starting point. It is not the intention to give a £5,000 allowance for every building they use; that is different from having an allowance per charity. Rather, I have used the existence of a building as an indicator that there may be a local group that warrants an additional £5,000. I do not envisage every charity that has a local presence claiming up to £1,250 of the payment for each local group or building from which it operates.
The community building rule is an effort to minimise some significantly unfair results between different charities. As I have said, some have been able to claim perhaps many thousands times more in the way of payments than others, in what are otherwise, to all intents and purposes, very similar situations. We have to draw a line somewhere, and I look forward to getting into the detail of the scheme.
It is very important to note a point that has emerged during scrutiny of this issue, and which I look forward to being published in guidance, so that it is clear to charities. Some of the examples that Members are raising will not necessarily be excluded under the rules of the scheme. It is a question of ensuring eligibility against the guidance once it is published. My hon. Friend the Member for Congleton (Fiona Bruce) mentioned the example of hospices. If the hospice itself is used for mainly residential purposes, it does not qualify as a community building under the provisions as drafted. However, if it is not so used—indeed, many are not—it could qualify as a community building if a section of the public has access to it, in ways that the guidance will make clear. Lines do need to be drawn, but there is a keenness to get this Bill right.
You will be well aware, Mr Speaker, that any such change needs to be agreed by this House under the affirmative procedure. What I want to see is this scheme bedded in as we begin. Like all limits, it will be kept under review—a point I am confident the hon. Gentleman understands, in the context of financial responsibility.
Throughout the development of the Bill, we have engaged with charities and other stakeholders on the detail through formal and informal consultation. We are engaging in a pilot initiative, aimed at getting members of the public more involved in the business of Parliament through holding a public reading stage. Although our public consultation was of course open to all, often, it is only those with a particular interest in the policy who respond. This Government are committed to giving voters the chance to participate more widely and to help develop the legislation that comes before Parliament. In answer to the earlier question from the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), there were 85 comments from a total of 21 people and organisations. She will agree that that is a starting point for a piloted procedure. We all recognise that there are ways to get the public more involved in the work we do here, and I know we all believe that to be very important.
We published the Bill and explanatory notes in July, asking people for comments and recommendations on the detail of the legislation. A report will be brought forward at the Public Bill Committee next month. The Government will consider the comments carefully and I will respond to those suggestions in Committee. We are also going to pilot the tabling of explanatory statements alongside amendments during the Bill’s proceedings. That will help to set out the rationale behind any amendments the Government table, and I encourage any other Members tabling amendments to provide accompanying explanatory statements. I look forward to using these piloted processes to continue our engagement with those for whom we work.
In conclusion, the Bill represents the potential for a significant new income stream for charities and for community amateur sports clubs, which is particularly valuable to the sector during difficult economic times. There is no point in denying an attempt to make the situation better because of a disagreement over technicalities; we should value this scheme. Charities will be able to claim these new payments on those small donations where, to date, it has been difficult or impossible to collect the necessary paperwork for gift aid to apply. As I have said, this scheme could unlock about £100 million a year for the sector as a whole, once it is up and running. As such, it represents an important part of the strategy that I strongly support to get charitable giving going in all walks of life. I hope that hon. Members from all parts of the House will join me in supporting this important new scheme for the benefit it will deliver to small charities. I commend this Bill to the House and look forward to further debate.
I am pleased to have the opportunity to speak on an issue that is particularly important for charities and CASCs. I am sure that Ministers well recall the Finance Bill Committee debates, where we heard about the good work being done by charities, local organisations and CASCs across the UK. I have no doubt that the success of the Olympics and Paralympics is leading to more and more people, particularly the young, seeking to be involved at that local level. That will, of course, be welcomed by the clubs and organisations, but it also places additional pressures on them to recruit, to retain volunteers and to expand on their activities, rather than just sustaining what they are doing. I am sure that we will hear a lot about the good work being done in each constituency.
We also know that many charities are feeling the impact of the recession. A number of individuals have told me that they are no longer able to keep up their monthly gift aid donations as they feel the squeeze on their household budgets. Many have reluctantly had to take the decision to cancel their donations or to lower the amount that they give to charity, and a large number of them have told me that they have felt particularly bad about that when they have received a phone call, an e-mail or other correspondence from a charity asking them to reconsider.
I have also heard that small local charities are finding that while donations are less than they would have received in the past, the calls on their services are increasing during these tough economic times. Only last week, I heard from people in my local area about churches being approached to help people who are struggling financially, and that has not happened for many years. So every additional penny and pound that can be added to the funds that charities have raised for themselves will, of course, be very welcome and will be put to very good use.
I recognise that the Bill’s intention is to provide more help to those organisations, which is why the Opposition support the Bill in principle. However, it is our responsibility to examine it closely, and to assess whether it delivers what it promises and where it may need to be improved. That will be the focus of my remarks. I hope that the Minister will accept that this is being done in a constructive way ahead of the Committee stage.
As the Minister said, the Bill introduces the gift aid small donations scheme, which was announced in the 2011 Budget; the Chancellor proposed a new scheme enabling gift aid to be claimed on small donations, up to a total of £5,000 per charity, without the need for donors to fill in a gift aid declaration. That would mean that each charity could claim up to £1,250 per year. As she said, the scheme is similar to gift aid, in that the amount the charity gets is linked to the income tax rate of the donor; it is a gift aid-style top-up payment. As we have heard, the scheme’s purpose is to enable charities and CASCs to claim a gift aid-style payment on small cash donations of up to £20, where it is often difficult, if not impossible, to obtain the gift aid declaration.
When the Chancellor announced the scheme, he said that it would deliver
“gift aid on the contents of the collecting tin and the street bucket”.
He also promised that the reforms would be bureaucracy-lite, as he described it,
“without the need for donors to fill in any forms at all.”—[Official Report, 23 March 2011; Vol. 525, c. 962.]
More recently, a Treasury spokesperson confirmed that the scheme is
“intended to reduce the administrative burden and boost the income of small groups that rely on”
those very important
As the Minister has said, and other Members have commented, the Bill’s intentions have generally been welcomed. Concerns have been expressed, however, by organisations such as the National Council for Voluntary Organisations, the Charity Finance Group and the Charities Aid Foundation, who described the legislation as highly complex and not accessible enough for smaller charities. They have raised concerns that there is a danger that it will simply act as a reward scheme for the established organisations that are already good at, and involved in, claiming gift aid. They also suggest that some of the provisions proposed in the Bill could significantly disadvantage certain types of charities, which has prompted some concerns about the equality dimensions of the scheme.
Those organisations are asking the Government to simplify the scheme, to make it more accessible to smaller organisations and to make it fairer, allowing equal access for similar charities. We have already heard the comments and concerns from Caron Bradshaw, the chief executive of the Charity Finance Group, and Sir Stuart Etherington, the chief executive of the NCVO. I say gently to the Minister that the Opposition’s approach is not about a battle of quotes. I am sure that she agrees that people such as Caron Bradshaw and Stuart Etherington reflect the sincerely held views of the charities and organisations and their concerns about the Bill. We should listen to those voices. The Minister has the opportunity to lay out how she will take account of some of those concerns as the Bill makes progress. To be fair, she has gone some way towards doing that, but we still need to hear more from her about a number of matters.
As I said, the Public Administration Committee is very interested in this issue and my hon. Friend the Economic Secretary was very receptive to the idea of revising the scheme after a period of operation to accommodate those concerns. Does the hon. Lady agree, therefore, that it would be sensible to include a clause that allows the scheme to be amended by secondary legislation without having to come back to the House to get another Act of Parliament? That clause is not in the Bill at the moment, but would she support its inclusion?
The hon. Gentleman makes an interesting point and that is precisely the kind of thing that the Bill Committee will want to consider very closely. Anything that makes reviewing and improving the Bill once it has been enacted better is worth considering and, potentially, supporting. I also hope that we will see where we can improve the primary legislation to make it less likely that we will need to revisit or revise it quickly. I hear what he says and I am sure that we will have further such discussions in Committee.
Let me return to some of the issues raised by the charities and the voluntary sector. The Bill proposes that an eligible charity must have been registered with HMRC for a minimum of three years, have made a gift aid claim in three of the past seven years and not had a penalty imposed as a result of a gift aid claim. One obvious concern raised by many small charities who rely on small cash donations is that they will not necessarily have a three-year history of claiming gift aid. They feel that that has the potential to disadvantage them from the start. I shall say something else about that shortly.
Another area of concern is the matching provision outlined in clause 1, and the Minister has given us some information about her thinking and why she decided to set the ratio at 2:1 rather than at the point she originally intended. In order for a charity to take full advantage of the scheme, claiming the maximum £1,250 on £5,000 of small donations, it will need to have claimed at least £625 in gift aid in the same year. Charities say that that raises a number of potential problems. As we have heard, many small charities may not be registered with HMRC, and unless they register they will not be eligible to join the scheme. There is a worry that the three-year period may not give people an incentive to do so. Many may simply decide that the scheme is too complex, particularly some of the small charities that do not have the resources or an extensive staff network; they may just rule themselves out.
Additionally, many small charities only receive cash donations, so they often do not raise enough to claim the maximum £625 in gift aid in a year that they would need to benefit from the scheme. Ministers may want to give charities some reassurance about that, because charities that claim less under gift aid are at a direct disadvantage as a result of the matching provision, compared with those that are better able to use the scheme. That could further reduce access to the very small charities that the Minister said she would like to see benefit.
The NCVO recommends that the matching 2:1 principle is dropped, and would welcome steps to open up the scheme—for example, so that start-up charities and those currently not registered for gift aid had the opportunity to register and get into the system sooner. I heard what the Minister said about anti-avoidance measures and potential fraud, but we want to ensure that we do everything possible to allow smaller charities that try to respond to local issues, or are set up to respond—not quite on an emergency basis—to a particular issue, to get as much benefit as possible.
On the connected principle, charities have identified additional areas of concern in clauses 4 to 9, which cover the rules intended to stop charities and community groups fragmenting in order to be eligible for greater amounts under the scheme. Clause 5 defines the meaning of “connected” using section 993 of the Income Tax Act 2007, where a person who has control is “a trustee”, or a person who
“has power to appoint or remove a trustee…or…has any power of approval or direction in relation to the carrying out by the trustees of any of their functions.”
However, charities are not connected
“unless the purposes and activities of the charities are the same or substantially similar.”
Once again, charities and the organisations that represent them have pointed out that in reality many trustees will serve on more than one trustee board, which is particularly likely at local level. The concern is that there could be an impact on the charity’s eligibility to join the scheme if a trustee sits on the boards of two organisations that are considered similar. Charities suggest that that could easily occur, because if an individual has expertise or an interest in a particular area of service provision, they might sit on the boards of two comparable organisations. It is important that the rule is not seen as a barrier to attracting people or appointing high quality trustees with experience and expertise. I hope the Minister will look at the issue and offer some reassurance and, if necessary, some changes so that we get the maximum benefit from the Bill.
It is highly unlikely that an organisation would be incentivised to fragment to increase its accessibility to the scheme, which has been given as the main reason behind the provision. The majority of charities simply want to get on with doing the job—I see the Minister nodding. Of course they want to maximise their resources and the last thing on their minds is setting up different structures to fragment to obtain some other advantage—as it has been described. Will the Minister consider providing further clarification so that charities with similar purposes will not be disadvantaged simply because they have a common trustee?
Does my hon. Friend agree that because of the matching requirement the conditions to stop fraud in gift aid will already be followed through? There is not the capacity for the extent of fraud that the Treasury fears, because it is already captured by gift aid requirements.
My hon. Friend articulately outlines one of the points that some of the charitable organisations make. They want a balance between ensuring that there is no fraud and maximising the income for charities. Many of them believe that the current provisions give the protection for that.
A number of organisations have raised concerns about community buildings. Clause 6 attempts to recognise that some charities have multiple independent local groups, which should not be excluded from the scheme if they would have been eligible as completely separate organisations. Having run a charity in a previous existence, I know something of the practicalities and difficulties of trying to work in that context. I recognise that it is difficult to get this right and we will have to return to this in Committee.
The proposal is that the use of a community building always should serve as a proxy for assessing eligibility of the independent local groups. Clause 6 stipulates that charities running activities in separate community buildings, which could be considered independent, might be entitled to an additional specified amount under the scheme. The additional community building limit applies only to small donations that are made to the charity in the community building in the tax year while it is running charitable activities. The charities tell us that, once again, that could be problematic.
Beneficiary and donor groups are usually separate, and it is often the exception, not the rule, that funds are raised during charitable activity, so the charities are saying that the provision risks disadvantaging those charities for which it would not be appropriate or possible to raise funds in that way. They give the example of a support group for people who are recovering from addiction problems, which would not be expected to raise funds during counselling or one-to-one sessions, whereas a church or a church organisation might often take up a collection during meetings. It is more relevant, therefore, that the funding is directed towards the activities of the local group, rather than that donations are made in the building during charitable activities.
Clause 7 stipulates that a charity running activities in separate community buildings, which could be considered independent, might be entitled to an additional specified amount with respect to the scheme
“if it carries out charitable activities with a group of 10 or more people in the building on 6 or more occasions in the tax year”.
However, specifying the number of beneficiaries could limit the types of organisation that may access the scheme of their own accord. Again, I hope that the Minister will listen to what the charities are saying about that. They are also concerned that some community groups are based in a community building that is itself a registered charity, with a number of non-registered organisations carrying out activities in an umbrella organisation of some kind underneath that. It is not entirely clear to the people who will have to work the scheme on the ground how the rules apply in such a situation. Perhaps the Minister can clarify that. If not, we shall return to the matter in Committee.
There are a number of other situations in which the criteria might not apply. Local groups of charities that deliver services such as counselling to individuals or small groups might well not meet the 10-people rule, although they might be doing good and valuable work. In local groups of conservation or animal welfare charities, the individuals present might be volunteers. One concern about the Bill is when a person is a volunteer, a staff member or a beneficiary of the charity. The reality of many of those organisations is that people might occupy each role at different times, or indeed occupy some of those roles at the same time. There could also be problems where local groups carry out home visits and service delivery in the buildings of partner organisations.
There are some limitations to such an approach, which sees the links with the community buildings as the most effective way to identify an independent local group. The concern is that, for those groups, the Bill restricts eligible fundraising activities to those conducted in the building. If that is the case, it is unhelpful and will disadvantage those groups compared with other charities using the scheme, where no such restriction is in place.
Clause 8 stipulates that a community building cannot include a building, or any part of a building, used wholly or mainly for commercial or residential purposes. That point has already been referred to. It is said that the provision aims to ensure that groups run from homes and commercial entities such as charity shops cannot access a separate entitlement to the scheme.
The intention behind the provision is clear, but once again a number of challenges are posed. For instance, many charities that may be part of a group structure run activities that are residential in nature. Hospices have already been mentioned. Further examples are care homes and respite care. It will sometimes be difficult to decide what the main purpose is. It would be interesting to hear Ministers’ views on that. It may be difficult for those charities to access the scheme independently, as they may be entitled to only one limit across the whole group structure, unless they are awarded special consideration. Charities or community groups carrying out contracted services may also be considered commercial. That is a genuine issue for some of the charities that are delivering services on which many of our constituents depend.
If the additional limits are awarded only to groups carrying out charitable activities, this should be sufficient to restrict charity shops from accessing the scheme, if that is the purpose. Commercial activity that is carried out as part of the delivery of charitable activities—so-called primary purpose trading—should be exempt from falling under this definition.
A number of charities and voluntary sector organisations have expressed their concerns about the Bill, and the Minister gave us some information about involvement in consultation. The Bill has also raised concerns among some in the legal profession, including the Law Society of Scotland. It supports the policy intent of the Bill and suggests that it is an attempt to strike a reasonable balance between pragmatism and identifying fraud, so the Minister has the support of the Law Society of Scotland in that context. However, the LSS makes the point that it is difficult to identify a way of achieving in practice what the Bill attempts to do in theory. It suggests that flexibility be built into the legislation, as has already been mentioned this afternoon, or that there should be provision for a review of how it is working, as it may prove easier to identify ways to widen the scope of the legislation once it has been in operation for a time.
The Law Society of Scotland echoes the points made by NCVO and others that the legislation is likely to have limited impact and that it will not catch all the charities that could usefully benefit from it. The LSS goes on to highlight some specific issues about the drafting of the Bill. I do not want to spend too much time dealing with those this afternoon, but I shall set out a couple. On clause 3, the LSS has voiced concerns that £20 is too small an amount and that in certain situations it may be difficult for managers to police. It notes that the schedule to the clause provides that
“Where a gift of cash is made to the charity and its managers do not know whether the gift is £20 or less, the condition in sub-paragraph (1)—
With which I am sure the Minister is au fait—
“ is to be treated as met if the managers have taken reasonable steps to find out.”
The Minister and I have had enough exchanges in Committees to know that there are always questions about what “reasonable steps” in such a case would mean. This is another example where something that makes perfect sense to those drafting the wording of a Bill may not easily translate into practice and I, like the LSS, am left wondering what the “reasonable steps” envisaged might be in practice and whether the Minister is proposing guidance on this point.
I seek clarification from the Minister whether the provisions laid out in clause 12 are intended to provide continuity where a charity opts to change its legal form. Does she agree that although it would be sufficient in respect of incorporations, more would be required in the case of mergers? Does the primary legislation need to be wider in that respect?
Although the Bill of course covers the UK and contains provisions for different parts of the United Kingdom, particularly the exception for Northern Ireland, the Minister will be aware that there is different legislation for charities in Scotland. Concern has been expressed by the Law Society of Scotland that the definition of “charitable purpose” in the Bill is the English definition. Will the Minister clarify whether the wording in clause 17(2)(a) is necessary or desirable in view of the terms of sections 7, 8 and 356 of the Charities Act 2011? Scottish charities will need to be aware of the different legal definitions that will apply to them for different purposes.
I know that all probably sounds pretty technical when broken down clause by clause, and there might be Members on both sides of the House whose eyes are now glazing over because of all the detailed points I have made, but it is an example of what we are going to have to deal with in Committee. However, I think that it is worth reflecting on the fact that these issues have been raised because charities have told us that the changes will affect people in our communities.
The CFG has highlighted the example of a local branch of a national charity that works with disabled children. The branch is independently managed and holds its own business contracts. It runs in-home services for children and young people and focuses on developing independent skills. It occasionally holds social groups for its beneficiaries in different venues, depending on the cost of rent and availability. A local commercial hotel and leisure club often provides it with low-cost space to hold such events. The branch regularly claims under gift aid and often fundraises with collection buckets in the local area and through events at local schools.
One of the concerns that have been raised is that that organisation might be unable to claim gift aid fully under the proposed scheme because, as a local branch of a national charity, it might be considered to be connected and so would fall under the community buildings rules. As its services are not linked to one community building, it might be unable to claim for small cash donations. Residential and commercial buildings are not eligible, so it will not be able to register off the back of regular meetings in beneficiaries’ homes or the local hotel that provides low-cost space. One-to-one services do not count, as the legislation stipulates that meetings in community buildings must take place with at least 10 people present, not including staff and volunteers, and at least six times a year. Donations are not always made during the course of its charitable activities or within a community building used for those activities, but rather through separate fundraising events and activities. That picture of what a typical charitable organisation or set-up involves is one that we will have to look at more closely in Committee to ensure that absolutely everything is put in place to assist them.
In conclusion, the scheme is a welcome addition to the gift aid landscape and could be of particular benefit to small charities. We know that millions of pounds in potential gift aid is left unclaimed every year, and the scheme could go some way towards bringing some of that money back to the beneficiaries who need it most. We know that giving small amounts of cash is the most common donation method, and it has been estimated that in 2010-11 the average person would have donated £11 through charity buckets or donation tins.
Therefore, charities are asking the Government to simplify the scheme substantially to make it fairer and allow improved access for smaller organisations and equal access for similar charities. The abiding principle they want to see adopted is that the scheme should be easy to access and not tied up in red tape—something I am sure Ministers will absolutely wish to ensure. It would be helpful if the Minister gave some response to the concerns about the matching ratio requirement, the eligibility criteria and the community buildings rules. We have also heard some concerns about gift aid, such as the burden on charities of its being a paper-based system in an increasingly digital world. Indeed, the comment has been made that it is perhaps time to look again at the whole gift aid system and ways of bringing it up to date. I would be interested to hear her views in that regard.
Finally, I welcome what the Minister said about being committed to the consultation process and the new public reading stage for Bills, but I must reiterate the comments I made in my earlier intervention. It has actually been quite difficult for members of the public to find the information on the Cabinet Office website and take part in the consultation. If this is a pilot for the future, I hope that she will consult colleagues on how the whole experience could be improved. She has updated us on a number of comments that have been made, but perhaps she will also give us a specific time scale for when the information will be given to Members so that we have the opportunity to engage fully with the organisations that took the time to contribute.
The Opposition support the principle of the Bill and want to see it progress to Committee, where it needs to be amended to reflect the views of those who have contributed so far and the needs of the charities and community amateur sports clubs that do so much good work in our local communities.
This debate might not be what everyone is concentrating on in Westminster today, but it is nevertheless an important contribution to the parliamentary calendar. Thank you, Mr Deputy Speaker, for the opportunity to support the Bill, which will close the gap that has existed in the gift aid system for too long. The system works well when the identity of the donor is known, but it is, of course, ineffective for small, anonymous donations.
Small, anonymous donations are increasingly important to charities that are trying to raise support during a recession. At present, tin-rattling fundraisers, who often work at the coal face for the charitable sector, could miss out, so I am pleased that that will change under the Bill.
The Bill will provide a dual benefit: it will encourage more people to donate to charities, safe in the knowledge that the tax on their contribution can be reclaimed, and it will encourage more charities to use gift aid. The Bill builds on the principle of gift aid; it does not replace it. I was pleased to hear the Minister reiterate that that principle lies behind the Bill.
The Bill has been introduced to Parliament on the back of a public reading stage. I think I am right in saying that this is only the second occasion on which this form of open government has been practised, the Protection of Freedoms Bill being the first. The public reading showed that there was broad support among the charitable sector for this Bill. The sector wants the proposed changes and recognises the benefits that they will bring.
The Bill will reduce the reliance of the charity sector on so-called chuggers knowing the identity of everyone they approach. At present, they need the identity of every donor in order for gift aid to apply. Once the Bill is enacted, the situation of somebody who rattles a tin will be just as tax-efficient.
The Bill will benefit many small charities that rely on small donations, such as the Arrow riding centre for the disabled in Darenth in my constituency. It relies heavily on volunteers asking for donations at various community events, without ever knowing the identity of many of those who have given small amounts of money to its cause. The Bill deals with that precise situation and will make a genuine difference to the work that small charities, such as the Arrow riding centre, carry out.
We all know the names of various large charities in the UK, but most charities have a turnover of less than £10,000 per annum and they are set to be the main winners. The Bill will also build on the benefits that this Government have given to those who are generous to charities, such as the changes in inheritance tax for charitable donations, which make it far more rewarding for individuals to provide a legacy to charitable organisations. Good government is about supporting those who are doing good things, and this Bill does precisely that.
For any charity law to work, it is essential that it remain as simple as possible, so that safeguards against fraud are in place but volunteers are not put off charitable activities by the weight of bureaucracy that they need to deal with. That is why we need to keep the registration process for gift aid simple. Gift aid has been targeted by fraudsters in the past, so the Bill will require a good track record before the measures can apply.
In conclusion, it makes genuine sense to encourage people to give donations to charity in a simple and cost-effective way that benefits the donor, the charity and the whole of society. The Bill will facilitate that. I therefore hope that it will receive its Second Reading today.
It is a great pleasure to follow the hon. Member for Dartford (Gareth Johnson). He began his remarks by suggesting that people in the outside world might be more interested in the current reshuffle in Westminster. If it is any consolation to him, the first discussion of charities in this House took place in 1601 and the discussions about charities in this House have mattered far more than any reshuffle. I am therefore sure that what we are discussing matters more.
The modern charities sector in England and Wales is large and diverse—far more diverse than it was in 1601. A recent briefing by the National Audit Office for the Select Committee on Public Administration stated that in 2009-10, there were approximately 160,000 registered charities in England and Wales with an estimated combined income of £55.4 billion. It also stated that there were more than 191,000 unregistered charities with a combined income of at least £57.7 billion. That shows the size, diversity and importance of the sector. More than that, it shows the importance of our getting this legislation right.
When we think about the Bill, we have in our minds a selection of small, voluntary organisations that work against the odds to do the very best for their communities. Those are the organically formed groups that exist across the country. They are the groups that the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), who I think is still the Secretary of State for Work and Pensions, once noted are animated by “fire in the belly”. He went on to give the following description:
“For it is that which has traditionally motivated people to form voluntary and community organisations, and then to take action to correct some injustice which has made them angry, or fill some gap in services which has moved them.”
It is surely our task in this House to do everything we can to support the work of such groups. That is why I am sure that everyone in the House will want this legislation to be the best that it can possibly be.
All moves to encourage giving and to simplify the system should be welcomed, including the principle behind the Bill. There have been many welcome changes in this area in recent years. Many Members will remember that until 1990, one needed to enter into a four-year covenant for charities to be able to get tax back. Then came the welcome break of gift aid on cash gifts of £600 or more. Later, in the great spirit of the Jubilee 2000 movement, came millennium gift aid, which was introduced by the then Chancellor, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown). That major change in the support for charitable giving, which applied first to projects in the developing world, meant that charities could claim the tax back on gifts of £100 made in a lump sum or in instalments. Subsequently, that was extended to all charities and to all sums of money, which I am sure was welcomed by all.
The principle behind the Bill is very much in that tradition. The new scheme will enable charities to claim back the tax on small donations of up to £5,000 per charity, without the need for donors to fill in a gift aid declaration. Charities will therefore be able to claim a maximum of £1,250 a year, which is welcome. I urge the Government to consider carefully the concerns of groups in the voluntary sector, such as the National Council for Voluntary Organisations, the Charities Aid Foundation and the Institute of Fundraising, about whether the bureaucracy will make things too complex for the charities that the Bill is intended to benefit and that the Government and Opposition parties want to see benefit.
We will particularly need to see what happens with the matching principle. The Economic Secretary was absolutely right that the National Council for Voluntary Organisations does not like the existing provisions, but it does not really like these proposals either. It states:
“We recommend that the 2-1 matching principle is dropped. We would also welcome steps to open the scheme up so that start-up charities, and those that are currently not registered for Gift Aid, have the opportunity to register and begin using this scheme sooner.”
I hope the Government will take that on board sooner rather than later.
Under the Bill as it stands, charities will have to have been registered with HMRC for at least three years. Many voluntary groups are not registered with HMRC, and they are the exact small groups that would benefit most from the scheme and are doing good work in our communities. I urge the Government to consider that.
There is also cause for concern about community buildings. I very much welcome the impact that the Bill will have on certain churches and places of worship of other faiths, because I personally believe that there should be a special place in heaven for anyone who volunteers for the post of gift aid secretary. However, the Economic Secretary made an interesting point about how the scheme would benefit Catholic parishes. Indeed it would, but there is an anomaly in it. A parish doing fundraising work in its church premises would be able to benefit from the scheme, but not one running a cake bake or similar fundraising programme elsewhere, even if it were identical work. That matter needs to be considered.
There is also the issue of the Bill’s impact on hospices, which the hon. Member for Congleton (Fiona Bruce) raised earlier. There cannot be a Member in the House who does not recognise the excellent work done by hospices across the country.
A further anomaly involves independent care home that provides low-cost residential care for elderly people. It is registered with HMRC and so able to make gift aid claims. It is not independently registered with the Charity Commission, because it is part of a wider group of residential care homes and falls under the governance of a larger charity. The care home independently manages its own finances, human resources, business development and marketing, and being local it often receives small cash donations from collection tins positioned in shops in local towns and villages. It is also contracted by the local authority to provide services.
It is bad luck for that care home because it will not be entitled to a penny under the Bill’s provisions. As a small branch of a national charity, it may be considered “connected” and therefore fall under the community buildings rule, but as its services are not linked to one community building it will be unable to claim for small cash donations. Residential and commercial buildings will not be eligible, and as an organisation providing residential care on a contracted basis, the care home will fall under both those categories. Its donations are also not made during the course of charitable activities or within a community building being used for those activities, but through separate fundraising events and activities. That is just one of many anomalies that have to be considered.
I do not wish to discuss wider issues in detail, but we have to recognise that these are tough times for voluntary and community groups. The recent National Audit Office briefing that I cited earlier quoted the NCVO’s estimate that in 2015 the charity sector is likely to receive £1.2 billion less than in 2012. Moreover, back in July Mr Christian Guy, the managing director of the Centre for Social Justice, a think-tank that I believe the Secretary of State for Work and Pensions set up, said that
“the Government must do more to convince charities that it is supportive of the valuable work they do in communities. Support is all the more necessary during a time of austerity, when budget cuts could enable the most disenfranchised people in society to slip through the cracks.”
We could debate many more issues today, but as a start it is vital that we look at all possible anomalies and at evidence from pan-sector charitable groups, as well as from individual charities and people with an interest in the area. For those with fire in their bellies and those who will benefit from the legislation, we must ensure that we get it right.
It is an honour to follow the hon. Member for Clwyd South (Susan Elan Jones). I welcome this Bill. Many hon. Members have looked forward to it for a long time, and I congratulate the Government on introducing it. The importance of improving tax benefits for charities has had cross-party consensus in the House for many years, from the introduction of gift aid in 1990 and its improvement under the previous Government, to this Bill—an honourable thread of legislation.
This Bill is long overdue and will hugely benefit smaller charities in all our constituencies. This morning I was with a group from the Rotary club of Stafford Castle. They do a lot of collecting in the town centre and would benefit from the Bill and, like many volunteers, they give up huge amounts of time to collect donations. Research shows that around 50% of all charitable donations in the UK are made in cash, against 29% by direct debit and the rest by cheque or card. The Bill will make a welcome contribution to those charities, adding 25% to the value of donations.
The Bill is important for two reasons. First, it is important for small charities, as other hon. Members have made clear, but secondly, it is important because it concerns donations from those in lower income groups, who until now have not really been recognised. At the moment, a person must be an income tax payer in order to claim gift aid. With the welcome increase in the income tax threshold for the 20% rate, fewer people will be taxpayers, and hence fewer people will be able to reclaim gift aid. As we search for equality in many areas, it is important to have equality among donors. Those who do not pay income tax should have the same right as those who pay it to have income tax on their donations reclaimed by charities.
Last year, the Centre for Charitable Giving and Philanthropy found in its report, “How generous is the UK?”, that
“donor households towards the lower end of the expenditure distribution tend to give away more of their money to charity”
than those at the upper end. Donors at the lower end of the income scale donate something like 3% of their income, and those at the upper end 1%. At the moment, however, donations to charity made by those on lower incomes do not receive tax back.
Figures from 2009-10 showed that tax was reclaimed through gift aid on 40% of all charitable donations in the UK. There is, however, a huge gap between large and small donations because 73% of larger donations of more than £100, which come mainly from wealthier donors, use gift aid to boost the impact of their donation, while only 20% of donations under £10 claimed gift aid.
This Bill will make a great difference not only to small charities but to the way in which those who give regularly and faithfully view their donations, which they will see recognised by the state through the return of tax relief.
On the meat of the Bill, many hon. Members have spoken of the need to simplify the measures, which I echo. I shall not go into great detail, but I urge hon. Members in Committee to look at the limit of £20, which seems arbitrary. I would be interested to know from the Minister where the limit came from. Why not £25 or £50? It is important that we do not impose unnecessary bureaucracy in the Bill and make people afraid. We do not want people thinking, “I will not claim gift aid because I am not sure whether people have put more than £20 in this bucket and I do not want to break the law.” We should look at that problem. Clearly, we must strike the right balance between simplicity and the prevention of fraud, but I get the impression that we are perhaps erring slightly too much on the side of the prevention of fraud as opposed to the side of the simplicity that all hon. Members want.
Another question is this: how can we encourage those fine national organisations that rely so much on street collections for the bulk of their income? I am thinking of the Royal British Legion and the poppy day appeal. Such organisations might be registered as one charity and do not have community buildings in each borough or district of the country. Is there a way for them to register individually, but not as individual charities, which would involve too much paperwork and bureaucracy? Perhaps such organisations could be entitled to claim up to £5,000 in each collection district. In my area of Stafford borough, the Royal British Legion is immensely proud of the fact that it increases the amount it collects every year, even in a recession. Almost all of what it collects is taken on the streets, in cash. It would be excellent if the Royal British Legion could see the result of that in the tax brought back from donations made in the district.
Finally, on schools, I regret to say that young men between the ages of 16 and 24 are the least likely segment of society to donate to charitable causes—just 31% donated to a charity in 2009-10. All hon. Members have schools in their constituencies that raise a lot of money for charities and it is great thing to encourage young people to do. Charity committees in schools are excellent, and we need to look at how we can encourage them to become eligible for tax relief on small donations, and particularly small cash donations. We should bear in mind that committees are often set up for only one year—one group of people in the lower sixth or fifth form will set up a committee for a specific purpose—so it will be difficult for them to meet the three-year requirement. Perhaps we could examine in Committee how we can encourage schools to benefit from the Bill.
I repeat my congratulations to the Minister and the Government on this excellent Bill, which will doubtless bring a lot of additional, much-needed income to many of our local charities. However, I urge hon. Members not to forget the important fact that it will for the first time recognise the small donations from millions of people throughout the country who put something in the bucket week in, week out.
May I first declare an interest? Until relatively recently, I was a trustee and non-remunerated director of two charities and am currently a trustee of the Parliament Choir, which has charitable status.
Charities, and particularly small charities, are the backbone of our civil society. The contribution they make to our communities is immeasurable. It would be remiss of hon. Members if we did not acknowledge the people around these islands—in my constituency and those of all hon. Members—who give up their time and money for the public benefit. The Government could never replicate, reproduce or replace what they do, and it is right that they remain at the forefront of our consideration of the Bill.
These have been difficult times for charities; their capacity to fundraise in tough economic circumstances has been stretched ever tighter and greater demand has been placed on their services. Gift aid has been immeasurably and immensely valuable to many charities large and small, so it is a good innovation and a step forward that small charities can start to benefit from it too. I therefore welcome and support the principles behind the Bill—it will be a meaningful step forward for a number of charities.
Having said that, however, previous speakers have highlighted feedback from stakeholders making it clear that, as things stand, the scheme is still too complex and will not be accessible to all the charities that could legitimately benefit from it. The Economic Secretary introduced the scheme with the intention of providing opportunities for charities, but the National Council for Voluntary Organisations, the Institute of Fundraising and the Charity Finance Group have all expressed concerns about the complexity of some of the preconditions and about the difficulties that they will create for some charities.
I am sure that we all realise that getting a scheme of this nature right is tricky, and we would acknowledge that a balance needs to be struck between enabling charities to maximise the value of small cash donations, and protecting both the Treasury and charities themselves from fraud. Nevertheless, cash giving remains an important method of fundraising for the charitable giving sector. As the hon. Member for Stafford (Jeremy Lefroy) said a few moments ago, almost 47% of donations are made in cash, and, according to the NCVO and the Charities Aid Foundation, it remains very much a part of our giving sector, even though other forms of giving are coming on stream.
I am sure that I am not the only person in the Chamber with lots of experience rattling a bucket to raise cash for projects. It can be a very effective way of raising money, particularly for certain situations and kinds of appeal, but it is only fair to recognise that it is open to abuse. It is not only the Treasury that might lose out; I have seen how easy it is for people to put a logo—particularly the logo of a big charity that is a well-known household name—on a bucket, shake it and collect money that will never benefit anyone in any part of the world. There have to be protections, and reasonable steps have to be taken to prevent that from happening.
Many charities, particularly those that have professionalised over the past 20 years or so, have made a great effort to encourage people to give regularly. That is good for charities, because it means that their donations are predictable and that they know what revenues are likely to be coming in. It also helps them to communicate with their donors, makes them much more accountable to the people giving money and helps people to understand what their donations are being used for. On the whole, therefore, this move is a good thing, and I welcome the fact that, even in tough times and a recession, more and more people are signing up for direct debits and finding more long-term and sustainable ways of giving to charity. But that does not mean that there is no place for bucket rattling, and the Bill will help smaller charities that want to collect in that way from people who do not want, or are not in a position, to give a regular amount.
Although in recent years we have moved in that direction, an awful lot of charities still work entirely through volunteers—they do not function with staff but are still dependent on people who selflessly give up their spare time and weekends for fundraising activities and the bureaucratic administration on which charities—large and small—depend. Just as it is important that the laws regulating charities take a proportionate approach to governance and regulation—that important principle has underlined the charity regulation changes of recent years—it is important that we recognise the difference between large professionalised charities delivering public services and small organisations raising money for a local community project with no paid staff. It is also important that the opportunities open to charities through gift aid-related schemes demand a proportionate level of administration.
I listened carefully to the Minister’s opening remarks, and I think the Government seem to be trying to find a middle path, but as we manage risk in a proportionate way, there are still things we could be doing. The concerns of the umbrella bodies in the charity and voluntary sector should be taken on board. I encourage Ministers to keep engaging with those organisations as the process goes forward and to look at some of the detail, particularly in implementation. Charities are conscious of their reputations, especially when it comes to managing cash. In my experience charity managers desperately want to encourage regular giving not in cash, but in other ways.
I am interested in what has been said about the restrictions on gift aid. Some of them are reasonable—it is quite reasonable to have a track record with charities—but we have to recognise that there will be a detrimental impact on people raising for, say, a one-off event to install a piece of community equipment or for a community project. They will not be able to benefit from the scheme. I would be keen for Ministers to come back to us on that point and see whether there is a way round it. There are also questions about the matching provision. It could be useful for charities trying to comply with the requirements, as it would help them to build up more knowledge of who is giving them money. Charities should not be afraid of that—indeed, I would encourage them to do it—but in the meantime let us find a way forward through the detail.
I am also interested in the explosion in the number of people giving through their mobile phones in recent years or finding other ways to give—for example, through websites such as JustGiving. All are innovative ways of raising funds which have been developing rapidly as the technologies develop and people come up with innovative solutions. Again, however, smaller charities find it harder and more expensive to access such schemes. They do not come free; they come with a cost, which erodes the benefit of gift aid schemes for smaller charities in particular. Will the Minister consider working with the Charity Commission and the Office of the Scottish Charity Regulator to see whether it is possible to develop some HMRC-approved tools that might help smaller charities to take such schemes forward and benefit from the gift aid small donation scheme? I would be interested to hear what the Minister has to say about that. Such strategic investment in the sector could protect public money and at the same time help grass-roots charities that do not have big infrastructure and bureaucracy at their disposal, keeping costs down for everyone.
I also reiterate what the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) said about clause 17(2)(a). These points have been raised by the Law Society of Scotland in particular, which, in recognising that a balance needs to be struck in the Bill, has pointed out that there is a difference between how “charitable purpose” is defined in Scots law and how it is defined in English law. I urge Ministers to engage with the relevant bodies to ensure that the Bill is absolutely devolution-proof and works equally well in both jurisdictions.
To conclude, the Bill is a step in the right direction. I support its principles, but as we go forward I urge the Government to look carefully at how it might be implemented more effectively and benefit more of the charities that currently will not manage to be part of the scheme. The hurdles are surmountable, and I hope those issues can be ironed out.
I am pleased to follow the hon. Member for Banff and Buchan (Dr Whiteford), because of what she said and the many excellent points she made.
Let me begin by congratulating the Government on introducing the Bill and the measures in it that will help our small charities. Like many hon. Members, I spend a lot of time visiting some of the fantastic local community organisations in my constituency. Most are small, with only a handful of people working and volunteering in them, but they make a big difference, and I am always impressed by their passion and dedication. However, these are difficult economic times, and it is the smallest charities—organisations that rely on perhaps a few thousand pounds in donations and grants each year—that are coming under the greatest pressure, yet they make up the backbone of our civil society. They generate hundreds of thousands of volunteering hours every year, and are often set up to champion local issues and causes that might not be considered by the Government or the big charities. I am thinking particularly of local community facilities and local environmental charities.
Despite the fact that more than half of all voluntary organisations are micro in size—that is, with less than £10,000 income—they receive only 0.6% of the total income of the voluntary sector. There are 474 major organisations—those with an income of more than £10 million—that take in nearly half of all voluntary sector income: about £17 billion in 2009-10. In contrast, 87,683 micro voluntary organisations shared just under £240 million. So, when the Chancellor announced last year that he was going to make gift aid easier for small charities to claim, thousands of organisations across the country were delighted with the news.
It is often difficult for charities to get gift aid declarations for small cash donations, and a top-up payment scheme will provide a real incentive to smaller charities to get out there and seek new ways of raising funds. The British public are incredibly generous. I know that at first hand, as I am proud to say that Leamington was named the most generous town in the UK by Oxfam last year. In 2009-10, charities made nearly £8 billion in individual donations, including gift aid and membership subscriptions. That is equivalent to about 0.5% of our gross domestic product.
The intentions behind the Bill are to be applauded, but there remain a number of concerns about the details, and I hope that the Government will pay close attention to the submissions that have been made by the Charity Finance Group and the National Council for Voluntary Organisations. I know that the details will be dealt with in Committee and on Report, but I would like to touch on just a few of the Bill’s provisions.
First, concern has been expressed about eligibility. Charities will have to have claimed gift aid for three years before they can take advantage of the scheme. That is a long time for many smaller organisations to wait, and if we are going to encourage smaller charities to get on board, we need to reduce that time or at least create a probationary period so that the Bill can make an impact in the shorter term.
Secondly, there is concern about the matching principle. I understand that the Treasury wishes to target the scheme, and to link the amount of gift aid that can be claimed to the amount that charities have already claimed in a year, but that provision will disadvantage many of the smaller charities that we are trying to help. A 2:1 matching principle will benefit only those charities that are already good at claiming gift aid. It will not encourage those that do not have the necessary resources to do so. I hope that the Government will consider scrapping that provision, so that we can encourage as many small voluntary organisations as possible to take part in the scheme.
Thirdly, there are concerns about the community building rules. I appreciate that the Government are keen to ensure that charities do not abuse the scheme by splitting into smaller organisations, and to ensure that independent local groups that are part of small charities are not excluded from the scheme. However, the rules might have unintended consequences. For example, they could disadvantage charities such as support groups that work with vulnerable people.
I am confident that those details can be ironed out, and that if all parties work together in a constructive, non-partisan manner, we will get the legislation on to the statute book in a form that prevents abuse and ensures that benefits are targeted at those organisations that need them most. Time is of the essence, however, and we should not make the voluntary sector wait too long for the scheme to come into effect. I hope that all parties will therefore ensure that the Bill gets a speedy passage through this House and the other place while also ensuring that its provisions receive proper scrutiny.
The Bill could make all the difference for small charities up and down the country, so I have no hesitation in giving its Second Reading my full support. I look forward to discussing it in more detail when it comes back to the House, and showing that, despite the challenges our country faces, we still appreciate and support the invaluable work that these organisations do.
In common with the hon. Member for Warwick and Leamington (Chris White), I am happy to give this Bill positive support on its Second Reading, but in common with him, too, in being positive about the promise the Chancellor made when he announced these plans and in supporting the stated principle and purpose behind the scheme, I am concerned that some problems still need to be ironed out.
For all these schemes, people will say that the devil is in the detail. The problem is that as the charities and others that were interested in the idea and animated when they heard this announcement have looked at the scheme, they have seen too much devil in too much detail. This is called the Small Charitable Donations Bill; let us hope that it does not end up having a by-name of the “Petty Conditions Bill”. Although nobody wants to create a charter for chancers in connection with anything the Treasury might do to support charities and charitable giving, there is a danger that some of the qualifying conditions will end up more often becoming disqualifying rather than qualifying conditions in practice.
Other hon. Members have raised issues relating to community buildings. This is, of course, a UK-wide Bill, which will need the legislative consent of the Northern Ireland Assembly to make this an accepted matter; and, of course, there is a separate Charity Commission for Northern Ireland. I hope that Ministers will take every step to ensure that the plans for this scheme take full account of the specific circumstances of Northern Ireland—not just of the different legal regime that applies to its Charity Commission, but of the border issues that relate to much of Northern Ireland.
The Economic Secretary made the point that the Bill had been changed to take account of the fact that it could have a more adverse impact on Catholic-related as opposed to Church of England-related charities. We need to recognise in the context of Northern Ireland that it is not only Catholic churches that have cross-border parishes, as other churches are organised on a cross-border basis, too. We must ensure that the interpretations and assurances that have been afforded do not end up creating problems because of the cross-border character of some organisations, which perhaps take their money, through bucket collections or other means, from either side of the border. The provisions must be sensible for the givers, sensible for the charities and sensible for the beneficiaries, as well as be consistent with the assurances that the Treasury appropriately expects in respect of taxpayers.
If the aim is to emancipate and reward a more comfortable level of charitable giving and to ensure that more charities can benefit from the gift aid scheme, the Bill has to be given every possible encouragement. We must also encourage the Government to ensure that the detail is not unnecessarily prescriptive or restrictive.
Other hon. Members have referred to start-up charities, suggesting that they might be badly disabled by the qualifying time. This applies not just to start-up charities, but to those that might be created in response to particular tragic events or a natural disaster such as a flood in a particular area that has created difficulties for certain families. Other examples might be the terrible incident in Dunblane or the terrible shootings in Cumbria, to which people might want to have a charitable response to support particular beneficiaries. In those cases, there is no need to set up a charity for life, for three years, seven years or whatever; it is about having a genuine response in order to aid particular people in particular circumstances.
It would be odd if those moved to make a charitable response in such situations were disqualified from benefiting others through gift aid. The normal situation is that people are moved to give some help on impulse, so Ministers need to think about whether another way of providing help would be more appropriate—perhaps by extending the “connected purposes” issues or allowing defined or established charities to lend their names to a particular one-off fund created in those circumstances. We need to prevent the disqualifications from coming into force when there is a response to particularly tragic situations; I do not believe that Parliament would or should intend that to happen. We may need to look further into that.
As I have said, I support the principle and the purposes of the Bill, but I join others in urging Ministers to consider not just what Members have said here, but what many charities and groups that work with them have been saying. The Bill provides an opportunity for us to do some good and to improve the position of charities, but let us not create hurdles that are impossible for them to surmount, or we shall all be writing to Ministers saying “Surely we did not intend to disqualify this or that charity. Surely we did not intend this penalty to apply when the circumstances in which it was imposed had been overturned or were seen in a different light.” Under the Bill in its present form, a penalty would stand even if it were subsequently accepted that it had been the result of over-interpretation.
I urge Ministers to listen more, and to continue to respond to some of the issues that have been raised today.
I am delighted to have an opportunity to contribute to what I think has been a measured and constructive debate. I, too, welcome the Bill as a sensible complement to the gift aid scheme, which has operated successfully for many years.
Like most other Members, I find that one of the most pleasurable aspects of my constituency role is visiting local charities and observing the valuable work they do in the community, often supporting the most vulnerable members of society. Like the hon. Member for Banff and Buchan (Dr Whiteford), I think that we should take this opportunity to record our deep gratitude for all their work, and our gratitude to the thousands of volunteers who willingly give their time and money to make such a difference.
My constituency in Milton Keynes is blessed with a deeply philanthropic culture. We have nearly 400 registered charities, and more than 1,100 voluntary and community groups. Thousands of residents devote a huge amount of time and money to working directly on projects or supporting the various fundraising activities. I do not wish to detract from the work that large charities do, but small community organisations often have a disproportionate impact. They make a huge contribution locally, although they have very modest incomes: less than £10,000 in some instances, as was pointed out by my hon. Friend the Member for Dartford (Gareth Johnson).
When I was preparing for the debate, I contacted Community Action Milton Keynes, a fine organisation that gives practical support to local charities and other groups by helping them to manage or develop their operations. I was told that 62% of its members had an annual turnover of less than £10,000. Such charities do not have the wherewithal to employ staff to help them to deal with the complexities of gift aid or other schemes; they rely entirely on people who give up their time to help them with their administration. I think that the Bill will benefit those groups in particular. As well as providing extra income—an organisation with a turnover of less than £10,000 could receive an extra 10% each year—it will reduce the amount of time that volunteers must devote to administration, so that they can spend more time doing the good work that charities are there to do.
Let me give two examples of the benefits that the Bill will provide, one from my local area and one relating to a family connection. A constituent of mine, Dave Hand, undertook a sponsored walk from his old Army base in Somerset to Milton Keynes to raise money for a wonderful charity called BLESMA—the British Limbless Ex-Service Men’s Association. He raised about £2,000, the majority coming from donations made on the JustGiving website and similar online sources. However, he also raised a substantial sum at the pubs he visited en route—people would put cash in his bucket—and that cannot easily be traced back for the purposes of gift aid. The extra cash involved would not be a vast sum, but it would provide an extra bit of support to the charity, which could then use every single penny of the donations it receives. That example highlights one of the ways in which the Bill will be of real benefit.
The other example I want to raise is a family affair. About 25 years ago, my father set up a talking newspaper charity in his hometown of Hamilton. It was established to address a local need, by putting the contents of the local newspaper on to a cassette that could then be sent to local blind and visually impaired people. It is a very small organisation that relies entirely on volunteers. If it raises £1,000 a year, it is doing well, but it has very low operating costs. Those who donate to it are often the listeners. It is a free service, but they do so out of gratitude. They might send in £5 or £10 to help the organisation carry on. These are people with visual impairments and many of them are elderly, so they are not the kind of people who generally fill out gift aid forms. By addressing this point, the Bill’s provisions would add significantly to the income of such charities.
That example also serves to flag up a concern, however. I do not know whether the charity my father set up, Hamilton Sound, has ever claimed gift aid, but I suspect that it has not. Therefore, it would not be able to take advantage of the proposed scheme for three years. I ask the Minister to explore ways in which charities that are clearly bona fide—that might have been around for many years, but may not have technically qualified for gift aid payments—may take advantage of this scheme. We surely have the wherewithal to devise a scheme to address that. I completely accept the need to guard against fraud, but there is a balance to be struck here: we must not create a system that is so onerous and overly complex that the potential benefits cannot be realised.
I hope there will be an evolutionary process in respect of the Bill’s provisions. My hon. Friend the Member for Harwich and North Essex (Mr Jenkin) suggested they should be reviewed after a reasonable period, and I urge the Government to do that. It is a good Bill, however, and I am sure it will make a real difference.
There is support across the House for the principle of the Bill. I hope that our discussions in Committee will be as constructive as today’s debate, and that we will thereby address the details of the provisions so as to ensure they truly deliver for all charities, which we rely on so much in our communities.
I apologise for having been absent from the Chamber for the past couple of speeches. I was present at the beginning of the debate, however.
I wish to right a calumny. This summer I spent a couple of days clearing out my garage, and one of the things I threw into the skip was a short tome entitled, “The achievements of the Major Government”. A friend of mine had given it to me at the time of the 1997 general election, and its pages were, of course, blank—it was a joke. I recall, however, that John Major set up gift aid in his 1990 Budget: he instituted one-off charitable donations being made free of tax for gifts of, I think, £600. That proved extremely popular with charities, and the provision should have been written into that tome, even though it was an achievement not of John Major’s Government but of his time as Chancellor. Gift aid has been widely welcomed by Members on both sides of the House and by charities throughout the country.
That £600 limit was reduced to £400 in 1992, and ultimately a Labour Government abolished it entirely in the Finance Act 2000. In the 2007 Budget, the then Labour Government announced a number of measures to support the take-up of gift aid. The then Chancellor also announced, however, that the 10% starting rate of tax would be abolished from 2008-09 and that income tax on earned income would be charged at two rates: the basic rate of 20% and the higher rate of 40%. The gift aid scheme allows a charity to recover sums at the basic rate, so the cut in the basic rate from 22% to 20% hit them hard. That was why after my right hon. Friend the Member for Edinburgh South West (Mr Darling) became Chancellor he announced in his 2008 Budget a new transitional relief for charities, to compensate them for the impact of that basic rate cut. At the time—in 2008-09—the relief was projected to cost £60 million, and then £105 million in 2009-10 and £120 million in 2010-11. That was greatly welcomed by the charitable sector.
In 2010, Peter Fanning, chief executive of the Chartered Institute of Taxation, submitted a report on improving gift aid based on the gift aid forum’s discussions. Although the report did not discuss donations outside the scope of gift aid, one of its principal recommendations was that
“small charities are particularly vulnerable at times of economic stress and some find dealing with Gift Aid difficult. Their needs should be a priority.”
In December of that year, the then Economic Secretary, the right hon. Member for Putney (Justine Greening), wrote to Mr Fanning, and was generally supportive of his report, but ruled out extending gift aid transitional relief on the grounds that prolonging its life would not target support effectively and that it was always “intended to be temporary”—we have heard that from the Dispatch Box today, too, from the current Economic Secretary. In response to a parliamentary question, the then Economic Secretary said:
“Gift aid transitional relief was introduced as a temporary measure to give charities time to prepare their financial plans in response to a lower rate of relief from gift aid. By April 2011, when the relief ends, charities will have had four years since the announcement of the 20% basic rate of income tax to prepare for the change. In 2009-10 charities benefited by £105 million from this relief and it is forecast that they will benefit by £120 million in 2010-11. The Government believe the £100 million transition fund announced in the spending review will better target support on charities most in need.”—[Official Report, 14 March 2011; Vol. 525, c. 92W.]
Much of today’s discussion has been about those charities most in need, and that will be the focus of my remarks.
In the 2012 Budget, the Government confirmed their plans to introduce a small donations scheme from April 2013. Under the scheme, charities are entitled to claim top-up payments on income from cash donations totalling up to £5,000 a year. Qualifying cash donations can be up to £20 each, rather than £10, as initially proposed—we are grateful that the current Economic Secretary listened to some of the objections raised by the industry and amended some of the initial proposals. The size of the top-up payment on each small donation will be equivalent to the tax relief given under gift aid so that a charity can claim a maximum of £1,250 a year.
The Bill requires work in Committee. Its proposals are complex and run the risk of disadvantaging some charities. Eligibility for the scheme is limited. That will prevent those who need it most from using it. The amount a charity can claim being linked to the amount of gift aid already claimed—the matching principle—will disadvantage the charities that most rely on small cash donations, as they may not have made sufficient gift aid claims to be able to take full advantage of the new scheme. Charities need to have a three-year record of claiming gift aid, but many small charities that rely on small cash donations simply will not have established that. This Bill was part of proposals designed to meet the problems that smaller charities have in being unable to access gift aid. Creating this matching requirement is therefore going to prove very difficult for them.
The Economic Secretary talked about the problems of fraud and the need to introduce such conditions for small charities, in order to avoid the problems that might arise through charities being able to stipulate the amount of small donations they had received. All Members will recognise the need for the Bill to include protection against fraud for the taxpayer, but in so doing it proposes that a charity has to have been registered for three years, to have made a gift aid claim in three of the past seven years, and not to have had a penalty imposed as a result of such a claim. I ask those on the Treasury Bench to consider whether this is not a question of “belt and braces”, and whether those provisions could be relaxed.
Clause 1 includes the matching provision. Here, the amount that a charity can claim is limited to £5,000 in donations a year, or, if less, double the amount of donations that have been put through the gift aid process. This provision matches the amount that a charity can claim with the amount it has claimed on gift aid at a ratio of 2:1. Therefore, for a charity to take full advantage of the scheme—claiming the maximum of £1,250 on £5,000 of small donations—it needs to have claimed at least £625 in gift aid in the same year. That is precisely what is so difficult for many small charities to achieve, and the Treasury recognised that in saying that this process would be “without form-filling”. When the Chancellor introduced this measure, he said it would be good for the bucket collectors because it would be without form-filling. However, that will be required, and it is precisely that threshold that many of these charities will find so hard to match.
Many small charities are not even registered with HMRC, and the three-year period will not incentivise them to do so, because they can see the scheme’s possible returns recede into the future. Many small charities receive such small amounts in cash donations that they do not claim gift aid at all. I do believe that these provisions are intended to help the smallest charities, but in fact they will hold that intention back. That is why, when I asked the Economic Secretary about her assessment of the number, size and scope of the organisations likely to benefit from the scheme, I was disappointed by her response. She talked about her “aspirations” regarding the number of charities that might try to access the benefits of the scheme, rather than talking about a real assessment by the Treasury Bench. In summing up the debate, can the Exchequer Secretary give us the Treasury’s actual assessment of the likely number, size and scope of the charities that are likely to benefit from the Bill if these restrictions and regulations are kept in place? If an assessment has been made, we need to know precisely what the answers to those questions are, to ensure that the Bill will deliver to the small charities that Members in all parts of the House want to benefit from it.
It is a pleasure to follow my hon. Friend and constituency neighbour, the Member for Brent North (Barry Gardiner), whose contribution reflects today’s interesting debate. We started with the Economic Secretary’s opening speech, during which there was a series of interesting interventions. The Chair of the Public Administration Committee, the hon. Member for Harwich and North Essex (Mr Jenkin), made a series of interventions, one of which dealt with the need to build into the legislation easy scope for a review of its effectiveness. As my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) made clear in her opening remarks, we need to make every effort to ensure that the primary legislation is as strong as possible. The hon. Gentleman made an interesting point. He has developed a reputation as an assiduous— and, for the Government, troublesome—Chair of the Committee. In the eyes of his Whips, that may rule him out of serving on the Public Bill Committee, but his comments were a helpful guide to amendments that we might want to think through.
In her intervention on the Economic Secretary, the hon. Member for Congleton (Fiona Bruce) highlighted a concern that has clearly been put to her: whether, because of the way the clauses on community buildings have been drafted, hospices will benefit from the Bill as much as had been hoped. The hon. Member for Dartford (Gareth Johnson), in the first substantive speech in the debate, made a point of praising the Arrow riding centre in his constituency. It does indeed sound an excellent organisation, and in that sense probably reflects the many excellent organisations that each of us in this House can point to in our communities. They benefit our communities and make them stronger, particularly because of the enthusiasm of the volunteers and original sponsors of these charities.
Our challenge is surely to try to do what my hon. Friend the Member for Clwyd South (Susan Elan Jones) suggested: to simplify the system as much as possible and to enable those with fire in their belly—those behind a particular charity with the passion and commitment—to benefit as much as possible from this legislation. She has clearly been working throughout the summer recess, carrying out extensive research on charity debates and tracking down the first ever discussion of charities in the House of Commons, more than five centuries ago. That is a particularly impressive piece of work that I suspect puts the rest of the House to shame. It is not surprising, however, given her track record of interest in this sector.
In his short time in the House, the hon. Member for Warwick and Leamington (Chris White) has already built a track record of interest and enthusiasm in this subject. He urged Ministers to pay close attention to the comments and concerns of the National Council for Voluntary Organisations and the Charity Finance Group. He raised a particular concern about whether the three-year HMRC rule is quite as necessary as the Economic Secretary suggested in her opening remarks. He went on to argue that Leamington is the most generous town in Britain. He is stretching the credulity of the House there, if I may say so; nevertheless, it sounds almost—but I suspect not quite—as generous as Harrow.
The hon. Member for Stafford (Jeremy Lefroy), who has already established a strong record in this House in working with international development charities, outlined his support for the Bill. He will recognise that people in this country rightly respond to disasters around the world, and that the Bill could enable such charities to do more to make their money and effort go a little further.
The hon. Member for Banff and Buchan (Dr Whiteford) emphasised that Ministers should do further work on the detail behind the Bill, and I understand that she has a strong track record of working with charities, including development charities. Among the many thoughtful points she raised was whether or not HMRC might be persuaded to use marketing or analytical tools to provide further support to ensure that charities benefit as much as possible from this legislation, when both Houses eventually conclude their debates.
My hon. Friend the Member for Foyle (Mark Durkan) outlined his scepticism about the Bill being perfectly formed. He made the perfectly proper point that debate with the Northern Ireland Assembly on some of the detail is required. Again, Ministers and the Committee will need to have further conversations with the representatives of the sector to maximise the Bill’s benefit.
The hon. Member for Milton Keynes South (Iain Stewart) praised another excellent sounding organisation, Community Action Milton Keynes, which he knows well. He raised concerns about the three-year rule on eligibility, highlighting the need to get right the balance between preventing fraud and helping more charities to benefit. He hoped that today’s discussion is part of an “evolutionary” approach by Ministers, and I hope to encourage the Minister to take such an approach. My hon. Friend the Member for Brent North, in his substantive remarks, emphasised the concern of all Members about the eligibility criteria in the Bill and whether as many charities that rely on small donations will benefit from the Bill as might do.
As my hon. Friend the Member for Kilmarnock and Loudoun made clear, the Opposition will support the Bill, but we have a series of concerns about its detail, which she set out and which I will touch on briefly at the end of my remarks. The House will of course be aware that the Bill’s proposed changes to gift aid build on the reforms that my right hon. and hon. Friends introduced under the previous Government—my hon. Friend the Member for Clwyd South made that point. My right hon. Friend the then Chancellor had an excellent track record of enabling smaller charities to benefit from gift aid, introducing a less complex audit process and helping at least some charities to get a proper advantage from the various changes that he introduced.
We will want to probe and challenge the complexity that has been written into this scheme by Ministers, which has been highlighted to us by the NCVO, the Charity Finance Group, the Institute of Fundraising, the National Association for Voluntary and Community Action and a series of other groups. I, like a series of other hon. Members, alluded to the fact that this complexity risks ensuring that a number of small charities miss being able to benefit from the changes implicit in these arrangements.
Ministers have highlighted this measure in the past as a big source of help for charities and proof of their ongoing commitment to the big society. The Chancellor made that point in one of his Budgets. In truth, this is a modest Bill, which risks being far more modest than it needs to be. It is, sadly, an isolated gesture of help amid a dismal funding and contracting environment for charities, entirely of the Government’s making. The Bill will, nevertheless, put back into charity coffers a small amount of the income that Ministers have collectively axed since they came to power.
The context for this debate is grim, as a number of hon. Members have said, and it bears spelling out as a reminder to the whole House and, in particular, to the Committee to do our utmost to maximise the benefit of the legislation to the maximum number of charities. As my hon. Friend the Member for Clwyd South mentioned, earlier this year the NCVO highlighted the “toxic mix of circumstances” facing charities: increasing demand for their services, rising costs, and an unprecedented fall in income. The NCVO argues that Government spending on the sector will fall by some £3.3 billion between the coalition’s taking and eventually leaving office.
A report by the Association of Chief Executives of Voluntary Organisations, which was commissioned by the Government—by the Cabinet Office—and which Ministers were eventually forced to release, revealed that charities would lose, in 2011-12 alone, at least £1 billion as a direct result of Government cuts, with two thirds of the charities most at risk of suffering being in the most deprived areas of Britain.
In a comment in his opening inquiries of the Minister, the hon. Gentleman referred to the transition fund and he is now referring to the same point about Government funding, so I would just like to pick up on the point. Does he accept that one of the underlying philosophical differences with this Bill is that it is using Government money to support the actions of individual citizens in supporting the charities they wish to help, rather than looking at charities as an extension of the state that should be supported by public moneys? Although there may be an issue to address about the quantum and how much we can afford to put into these charities, does he accept that this is a wise way for the Government to spend their money?
With the greatest respect, the previous Government and the one before had exactly the same approach. The difference between us is over the scale of the funding cuts that the hon. Gentleman and other Government Members have signed up to. As I said in my opening remarks, I accept that the Bill will make a small positive difference. We welcome it on that basis and we want to work with Ministers and, indeed, with all hon. Members to try to maximise its benefit. He does not serve his cause well by minimising the scale of the cuts which charities are suffering. According to the National Children’s Bureau in April, two thirds of children’s charities had cut staff last year and reduced the range of services they offered, with 25% expecting to have to close this year. That grim direct funding situation is hardly a sign of a commitment to charities and community groups, or indeed of Ministers’ professed commitment to the small platoons or the so-called big society.
I say gently to the House that not one of the more than 140 charities I have met over the past 12 months has said that reform of gift aid is the defining answer to the problems the Government are causing charities, despite the Chancellor’s enthusiastic claims in the Budget. Ministers, notably Cabinet Office Ministers, have failed in the past 12 months to offer serious heavyweight leadership in Whitehall for charities. The Work programme has become an iconic example of charities losing out on funding because of poor commissioning of major Government contracts.
Let us consider the example of just one charity, St Mungo’s. Given its skills at getting people in the most challenging circumstances back into work, one would have thought it was the perfect participant in the Government’s Work programme. However, having had no referrals in just under 12 months, St Mungo’s finally called it a day earlier this summer. You couldn’t make it up: record long-term unemployment, a Work programme that is not exactly going all guns blazing and a charity with huge experience not being used —not even once.
We have, of course, also seen charity after charity having to line up to demand that the Government withdraw their charity tax relief cap. For example, Cancer Research UK is seriously worried about donations to build a world-class centre drying up because of Ministers’ incompetence. It was a badly bungled Budget measure from Treasury Ministers—one of a number. One of the arguments originally used to try to justify that measure, until it was eventually pulled, related to the problem of “dodgy charities”. Although the Economic Secretary veered a little towards such language in her opening remarks, she certainly did not repeat that mistake. However, we need to be careful that the requirements that we set out in the legislation that is finally passed do not allow people to think that Members in all parts of the House share the concern that there is a huge problem with poorly managed charities engaged in fraud. We will certainly wish to probe her argument about the three-year relationship with HMRC that charities must have in order to benefit from the Bill.
We debate this Bill in the context of a dismal picture of substantially reduced charity funding and of Treasury Ministers who need to make amends for the charity tax relief debacle. The Bill nevertheless deserves a Second Reading and further robust scrutiny. We will want to explore carefully the Government’s arguments on a series of clauses, particularly to try to reduce the complexity of the new arrangements, which has been highlighted by the likes of Sir Stuart Etherington, Peter Lewis, the chief executive of the Institute of Fundraising, and NAVCA. Let me take just one set of comments as an example: NAVCA called the proposed system “overly bureaucratic” and “out of proportion”.
To be fair, the Economic Secretary hinted that Ministers would be flexible in Committee. I hope that her ministerial colleague will emphasise that Ministers are determined to be flexible and to see the discussions in Committee as an evolutionary process. That point was made by the hon. Member for Milton Keynes South in particular. We will want to probe the concerns about the eligibility criteria as there is particularly wide consensus outside the Treasury among voluntary groups that many charities will miss out if the Bill goes through unamended in that regard. We will want, too, to explore the thinking of Ministers on the connected charities rules, which risk creating an unnecessary barrier to recruiting high-quality trustees if they have similar roles in similar organisations.
On community buildings, there is a risk that some charities could lose out, as other Members have highlighted. Ministers would be wise, given the scale of the Government’s failure to help and support charities, to recognise the limited scope of the Bill. It is a worthwhile Bill with the potential, if Ministers are open-minded, to offer even more significant benefits. It builds on the reforms Labour introduced when we were in power. It needs amending in Committee, and Committee members, particularly Ministers, will need to show further flexibility to maximise the benefit it could have for the charity sector. We will support the Bill tonight and I commend it to the House.
We have had a thoughtful and constructive debate, although the hon. Member for Harrow West (Mr Thomas) perhaps introduced a party political element in the past few minutes.
Throughout the debate we have heard hon. Members from all parties raise thoughtful points. My hon. Friend the Member for Dartford (Gareth Johnson) made the point that the purpose is to complement, not replace, gift aid. The hon. Member for Clwyd South (Susan Elan Jones) gave us a history of charity law and taxation going back to 1601, although she missed a bit before returning to more recent years—the House is probably grateful that she did not run through the 17th, 18th and 19th centuries in detail. My hon. Friend the Member for Stafford (Jeremy Lefroy) pointed out the need to strike a balance between simplicity and preventing fraud. A number of speakers returned to that point, including the hon. Member for Banff and Buchan (Dr Whiteford), who raised a number of detailed points, as did my hon. Friend the Member for Warwick and Leamington (Chris White). I know that he has also done so in correspondence with my hon. Friend the Economic Secretary. As has already been pointed out, he also highlighted the generosity of the good people of Leamington. The hon. Member for Foyle (Mark Durkan) also set out a number of detailed points, as did my hon. Friend the Member for Milton Keynes South (Iain Stewart) and the hon. Member for Brent North (Barry Gardiner). I hope to address as many of those points as possible this evening, but I am sure that the Public Bill Committee will enjoy scrutinising them very thoroughly.
I am grateful for the widespread support from across the House for the principle behind the scheme and I hope to be able to respond to the issues raised, but before I do so let me recap. As my hon. Friend the Economic Secretary set out at the beginning of the debate, the new scheme is not designed to replace gift aid. It complements it, allowing charities to claim for the cash donations they receive for which it is too difficult or impossible to get a gift aid declaration. The scheme is not intended to replace gift aid or to be a substitute for it in cases where it is straightforward to operate for charities of all sizes. Whenever and wherever possible, we want charities to make full use of gift aid, which is a very successful tax relief that contributes more than £1 billion annually to the charitable sector’s income.
A number of Members were concerned about complexity in the scheme and the fact that it might exclude the small community charities that could benefit most from it. Let me assure Members that it will not do that, as the basic scheme is very simple. Claiming on donations under the scheme will be simple, with no requirement to obtain a gift aid declaration from donors and with claims being made on the same form used to claim gift aid payments. Charities will not be required to keep any additional records of the money received over and above best practice record keeping. As the scheme is simple and based on cash donations and will have limited donor records, the scheme could, however, become attractive to fraudsters. I am sure that all hon. Members will agree that we must protect the scheme from abuse and one way of doing that is by linking it to gift aid.
It was said that the gift aid small donations scheme excludes those charities that would most benefit from it—the small charities that do not currently claim gift aid—but it is right that it should be a requirement for charities participating in the small donations scheme to claim gift aid alongside it. Gift aid is easy to use if the charity is simply collecting donations of money and it will soon become even easier when HMRC introduces its new online system for claiming gift aid next year. We hope that the small donations scheme will encourage those charities that do not use gift aid to do so.
The design of the scheme, with a requirement for a three-year successful track record of claiming gift aid, is one way to counter the fraudsters and protect the scheme from abuse. It is a straightforward way to protect the scheme from exploitation without reintroducing all the paperwork that it is designed to remove. I am sure hon. Members will agree that it is only sensible for the scheme to have a test, such as that three-year check, so that HMRC can be more certain that a charity will not abuse the scheme. Reducing the three-year limit, as has been suggested, would significantly increase the cost of the scheme.
Let me turn now to the point specifically raised by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) about trustees and the concern about charities that are connected by a shared trustee. The Bill sets out that for trustees to be connected they would have to have purposes or undertake activities that were the same or substantially similar. If someone was a trustee of two charities that were completely unrelated and did very different sorts of charitable activities, those charities would not be connected under the scheme. We received some feedback on that rule during the consultation and adapted it to meet concerns that charities would unintentionally be caught by the rule as originally proposed. We are looking further into that, however, to see whether it would be possible to amend it further to ensure that no charities are caught unintentionally.
Another concern that has been raised is the community building rule and the question of access to the scheme for those charities doing similar work at a local level. The community building rule has been written into the Bill to ensure fairness of access and to avoid significantly unfair results. Most charities will not need to worry about the rule because they are independent and collect less than £5,000 in small donations, so they will get their £5,000 allowance regardless of their activities or where they collect the donations. But we sought fair access to the scheme. As my colleague the Economic Secretary said, in developing the scheme, it soon became clear that without some special rules, some charities would benefit hundreds or even thousands of times more than others, based purely on the way they were historically set up. That clearly is not right, so the community building rule was introduced to avoid significantly unfair results between charities carrying out similar activities in local communities, either as independent charities under an umbrella organisation or as local groups operating as part of a single large charity.
The vast majority of charities will not need to concern themselves with the extra allowance. For those that do, there will be detailed guidance to ensure that it is simple to access. It is important to remember that the basic principle of the scheme is that each eligible charity should be entitled to top-up payments on a maximum of £5,000 in donations. I am sure hon. Members will agree that we are doing the right thing to ensure fairer access to the scheme for charities that would otherwise lose out, just because of the way they were historically set up.
The intention of the community building rule is not to allow all buildings where charitable activities take place to receive a separate allowance of up to £5,000 of small cash donations; it is to remove the worst inequalities that would otherwise exist, so that some charities would be able to claim hundreds, perhaps thousands, times more payments under the scheme than others undertaking similar activities. We believe that the rule as drafted achieves that objective.
I want to pick up a point about the definition of charitable purpose raised by the hon. Members for Kilmarnock and Loudoun and for Banff and Buchan and about its application in Scotland as well as in England, given that charitable purpose is being used in the English definition. Given that top-up payments are not a tax relief, clause 17(2)(a) makes it clear that the definition of charitable purpose according to the law of England and Wales is to be applied across the United Kingdom. The hon. Member for Banff and Buchan raised an important point about the Bill applying across the UK, and said that we should ensure that devolved issues are considered. I assure the House that the devolved implications have been explored and agreed with policy administrators in all the devolved Administrations.
The hon. Member for Kilmarnock and Loudoun and my hon. Friend the Member for Stafford referred to the £