Skip to main content

General Committees

Debated on Monday 7 December 2015

Delegated Legislation Committee

Draft Small Charitable Donations Act (Amendment) Order 2015

The Committee consisted of the following Members:

Chair: Mark Pritchard

† Anderson, Mr David (Blaydon) (Lab)

† Burns, Conor (Bournemouth West) (Con)

† Cooper, Julie (Burnley) (Lab)

† Creagh, Mary (Wakefield) (Lab)

† Davies, Dr James (Vale of Clwyd) (Con)

† Davies, Mims (Eastleigh) (Con)

† Double, Steve (St Austell and Newquay) (Con)

† Flello, Robert (Stoke-on-Trent South) (Lab)

† Fysh, Marcus (Yeovil) (Con)

† Hinds, Damian (Exchequer Secretary to the Treasury)

† Long Bailey, Rebecca (Salford and Eccles) (Lab)

† McGinn, Conor (St Helens North) (Lab)

† Mathias, Dr Tania (Twickenham) (Con)

† Mills, Nigel (Amber Valley) (Con)

† Stride, Mel (Lord Commissioner of Her Majesty's Treasury)

† Sunak, Rishi (Richmond (Yorks)) (Con)

Marek Kubala, Committee Clerk

† attended the Committee

The following also attended (Standing Order No. 118(2)):

Tugendhat, Tom (Tonbridge and Malling) (Con)

First Delegated Legislation Committee

Monday 7 December 2015

[Mark Pritchard in the Chair]

Draft Small Charitable Donations Act (Amendment) Order 2015

I beg to move,

That the Committee has considered the draft Small Charitable Donations Act (Amendment) Order 2015.

It is a great pleasure to serve under your chairmanship, Mr Pritchard. I welcome the hon. Member for Salford and Eccles to her place. This is the first chance that we have had to interact in a Committee, although I hope today’s will be of modest duration.

The Government recognise the valuable contribution that the UK’s 165,000 charities make to many aspects of our society. That is why we continue to help charities achieve their charitable objectives and incentivise their donors, including through tax reliefs that were worth more than £4.5 billion in 2014-15. It is also why the Government have announced an increase in the limit for the gift aid small donations scheme from £5,000 to £8,000 per charity per year. The order provides a further opportunity to enhance Government support for charities, and the communities that they serve, by allowing charities to claim an additional top-up from Government on the contributions that they receive from their donors.

Gift aid is a well established and significant revenue stream for charities. Since 1990-91, more than £13 billion of gift aid relief has been paid to charities. However, it is not always possible or practical for all charitable donations to be accompanied by a gift aid declaration—for example, when charities collect donations in high street collecting tins or when churches receive donations via the collection plate. In 2013, the Government therefore introduced the gift aid small donations scheme, which was designed to help charities receive a gift aid-style top-up payment—a 25% top-up from Government—on small cash donations. The scheme is not, and is not intended to be, a substitute for gift aid. If a donor makes a larger donation or the donor can reasonably complete a gift aid declaration form, gift aid should be claimed.

In the first year, 2013-14, 8,100 charities claimed a total of £6 million through the scheme. Take-up increased last year; in 2014-15, 19,300 charities claimed a total of £21 million. Our intention is to continue to raise awareness of the scheme and to ensure that it can support a greater number of charities and of donations. At the 2015 Budget, the Government announced an increase in the annual limit on donations on which a charity can claim through the gift aid small donations scheme, from £5,000 to £8,000. The purpose of today’s debate is to agree that change so that it can come into effect from April 2016. The change will enable charities to claim up to £2,000 of Government support on up to £8,000 of donations, compared with the maximum £1,250 that can be claimed under the current £5,000 donations limit.

The Government expect the increase in the limit particularly to benefit the 7,200 charities that currently claim on the full £5,000. For other charities, I hope that the prospect of greater financial support from Government will provide an increased incentive to sign up to the scheme.

For completeness, I should mention that at the autumn statement the Government announced that they would review the scheme. The review will begin with a call for evidence from charities and other interested parties, which will be published before Christmas.

The increase in the scheme limit will provide additional support for charities that receive small, often spontaneous donations. It is right that the Government enhance those donations through the gift aid small donations scheme, because they are vital to charities and embedded in our country’s culture of philanthropy. I look forward to dealing with any questions that members of the Committee may have.

It is a pleasure to serve under your chairmanship, Mr Pritchard, and, as always, to debate with the Minister.

As we have heard, the order is designed simply to amend the Small Charitable Donations Act 2012 to increase from £5,000 to £8,000 the amount on which charities can claim a gift aid-style top-up payment on small donations. The order will come into effect on 6 April 2016. Charitable giving is supported on both sides of the House, but I note the evidence that people on lower incomes donate a greater proportion to charity. It is important, therefore, that what is in effect taxpayer subsidy is not unfairly skewed to the largest donations made by the very rich. Ensuring that gift aid is extended to smaller donations is therefore an important point of principle. The increase proposed in the draft order will undoubtedly help smaller donors and smaller charities achieve that end. It also meets one of the recent recommendations made collectively by the National Council for Voluntary Organisations, the Institute of Fundraising and the Charity Finance Group. On that basis, I do not intend to oppose the order, but I will take the opportunity to voice a number of related concerns and questions about the scheme that I hope the Minister will be able to answer.

During the passage of the 2012 Act, the Opposition raised concerns that the scheme was quite complex and would potentially create barriers for small charities that could be eligible to claim the top-up payment. Although we appreciate that there is a fine balance between allowing charities to access the scheme and protecting it from fraud, we are aware that a number of charities and organisations have reported that the scheme is complicated, thus rendering it inaccessible for smaller organisations that may find the administrative burden difficult to navigate.

In particular, research from the NCVO, the Institute of Fundraising and the Charity Finance Group found that the smallest charities are having difficulty even finding out about the scheme and working out whether they qualify for it. Some 38% of the small charities surveyed reported that they found it either difficult or very difficult to find out about the scheme, and 66% of small and micro-organisations said that it was difficult to understand what types of donations they could make a claim on. A third of small charities found understand the claiming process difficult.

Welcome as the increased limit is, the chief executive of the National Association for Voluntary and Community Action has made the point that

“unless the barriers to claiming are removed, the higher limit seems meaningless.”

Similarly, although the director of public policy at the NCVO welcomed the increase, he said:

“Increasing the limit will not in itself mean that more charities will claim the money… it will mean that more money will go unclaimed.”

He expressed concern that because smaller organisations often employ few or no staff, trying to claim under the scheme is not worth the administrative costs and effort involved. For the benefit of any charities following our debate today, will the Minister update us on efforts that the Government are making to publicise the scheme, especially to the types of smaller charities that have so far been left out? For example, are any new promotional campaigns planned?

Another point made by the sector is that the scheme applies only to cash donations, thus excluding charities that largely take donations in kind, such as food banks. Although we understand the challenges that such donations pose, has there been any consideration of whether there is a way to address that issue, given the potential inherent unfairness?

It would be helpful if the Minister could tell us what the Government’s assessment is of any abuse of the scheme for fraud or tax evasion to date. For example, how many instances of abuse have taken place so far? Are the safeguards that are already in place sufficient, or indeed excessive?

I turn to the amounts expected to be paid through the scheme. I recall that when the Chancellor of the Exchequer originally unveiled it, he told the House with his usual degree of excited modesty that these were among

“the most radical and most generous reforms to charitable giving for more than 20 years.”—[Official Report, 23 March 2011; Vol. 525, c. 962.]

It would be useful for my assessment of the scheme if the Minister could first set out his expectations of the amounts that will now be paid out through the scheme, and secondly update us on its impact to date, particularly its performance against the expectations first set out by the Chancellor. For example, the scheme was estimated to cost £50 million in its first year, yet Her Majesty’s Revenue and Customs estimates that the cost was only £6 million in 2013-14— an underestimate of nearly 91%—rising to only £21 million in 2014-15. The Chancellor also claimed that 100,000 charities would see their income boosted by the scheme, so will the Minister tell us how many charities have in fact benefited so far?

Finally, back in 2012, the right hon. Member for Bromsgrove (Sajid Javid) assured the House that a review of the efficacy of the scheme would be carried out. It is my understanding that, as the Minister outlined, that review is set to take place in 2016, with the call for evidence beginning this month. As he may be aware, the umbrella organisations that I have referred to today have called for the Government’s review to be brought forward and asked for steps to be taken specifically to make the scheme less complicated. With the sector’s views in mind, which I have outlined today, will the Minister now confirm the timetable for the review, and particularly when it will begin and end? Will it be in time for any improvements in the scheme to be implemented for the next tax year, when the order comes into force? Will he also confirm what the terms of reference will be and provide assurance that the concerns that I have expressed today will be examined carefully?

It is great to see the draft order, which is very much the big society in action. It is excellent. I have one question about the level of the claimable amount. The Minister said that 7,200 charities claim the full amount at the moment. What percentage of charities is that, and what percentage does he imagine will be covered by the £8,000 limit? Does he have a target in mind for that through promotion of the scheme?

The scheme that the Minister is expanding upon today is interesting and is well regarded by charities and the public. In Wakefield we have a number of small charities, as well as the national headquarters of the Penny Appeal—its name sounds like a small amount, but it is actually a large and fast-growing charity—and some local churches that collect for the Suzy Fund. A lot of people are interested in the scheme, although I am not clear whether some of the micro-charities in my constituency are aware of it, so I will write to them.

We politicians underestimate how difficult form filling and excessive bureaucracy—particularly HMRC bureaucracy —are for our constituents and people who run small charities. For example, they might be running food banks, as my hon. Friend the Member for Salford and Eccles said, brass bands or small football or rugby league teams, or even doing a small bake sale, such as the people who feed into the larger Comic Relief. There are all sorts of ways in which the scheme can be spread out. The example that springs to mind is the poppy appeal, although I am sure that the Royal British Legion has mechanisms in place to maximise the revenue from it. Will the Minister let us know what the legion’s approach is? The appeal involves a lot of very small cash donations, and it would be absurd to be filling in a gift aid form for £1 or however much people give.

I want to follow on from the question about the 7,200 charities that claim the full amount. The Minister said that 19,000 charities claim £21 million. According to his figures, therefore, 12,000 of the claiming charities are not claiming the full amount. That prompts the question, what is the median and the smallest amount claimed? Perhaps he will send me and other Committee members the figures for the average amount claimed, which would be interesting, and explain why the full amount is being increased. I am sure it is a good reason.

The suggestion about food bank donations was interesting. Although large retail companies do good work with food banks, I would be reluctant to see Tesco or Ocado—I must not forget Sainsbury’s or Asda—

Yes, all those large companies have done amazing work with food banks. I know that from my constituency and from my time on the Front Bench as shadow Secretary of State for Environment, Food and Rural Affairs.

For small charities, such as St Vincent de Paul in my local church and other Catholic churches, or for people donating to the Sainsbury’s appeal—a packet of cereal, a four-pack of beans or whatever it might be—there should be a mechanism to enable small donations to be match-funded or gift-aided. That would be interesting and innovative, given that so many people are now choosing to donate in kind rather than in cash. Will the Minister tell us how he plans to take things forward?

May I build on the questions about donations in kind and food banks? When the 2012 Act was debated, I tormented the then Minister with questions about why we were restricting the measures to cash donations. As the world moves on, we will all start using contactless payment or Apple Pay, and there will be many more situations in which one can make a small donation to a charity by walking past and waving one’s card or phone. Yet although that is practically the same as cash for all intents and purposes, under the rules as currently drafted it is outside the scheme, and the charity would have to collect someone’s gift aid details through their mobile phone provider or bank. What people think they are doing in such situations is making a small donation in cash; they just happen to be using a more convenient technological process to do so.

There are many other examples. People can deposit their Oyster cards in a bin at the tube station, and Transport for London takes the balance and gives it to a charity. Again, people are not making a cash donation, but that is effectively what they think they are doing. Three years on, is the Minister more open-minded than his predecessor on revisiting whether we should allow small donations to be extended to cash equivalents in order to capture such situations?

Thank you, Mr Pritchard, for your charitable comments before the sitting kicked off. It is always a delight to see you in the Chair.

The proposals are welcome. I agree with some of the comments that have been made, so I will try not to dwell on mine for too long. These feel like “widow’s mite” proposals, designed to support donations from the people who might be least able to donate, whose donation is a large one to them but perhaps not to the charity concerned.

I have a couple of questions. First, where did the £8,000 figure come from? It seems a little random. Why not £7,500 or £10,000? What was the rationale, and is £8,000 a step towards £10,000? If so, the Minister’s comments would be welcome.

To echo what has been said about advertising the scheme to the smallest of charities and addressing its complexities, I know from a previous existence outside this place that the smallest charities often have staff and volunteers who perform many different roles and wear many different hats. If one of those many hats involves fathoming their way through HMRC forms—I have experience of working for the Inland Revenue, and I know how complicated it can be—the forms for this scheme may well end up in the drawer with all the other difficult-to-deal-with pieces of paper while they get on with doing what the charity was set up to do. Will the Minister comment, ideally here in the Committee but if not by letter to Committee members, on how that complexity can be addressed and how the Government will advertise to the smallest charities?

Finally, comments have been made about donations of Oyster cards and food that is donated to food banks. Given that we are now a few weeks from Christmas, and that because of the season people will be putting an extra tin or packet into their supermarket trolley, can the Minister announce something this side of Christmas, even though the legislation might have to play catch-up? That would prove welcome to the people who want to share what little or largesse they have at this season of good will and cheer to all.

The Government are heartened by the support shown throughout the Committee for the gift aid small donations scheme. Several questions have been asked about the scheme’s general performance and the statistics behind it. Last year, 19,300 charities claimed a total of £21 million. We would like that to increase, and that is the point of the changes that we are introducing and the review that I mentioned. My hon. Friend the Member for Yeovil asked where that number sits in the overall universe of charities, and I can tell him that here are a total of 165,000 charities. A question was asked about the median claim. I do not have that number to hand, but I will be happy to follow up on it in correspondence.

Our general objective is for the scheme to be as simple, straightforward and low-cost for charities as possible, consistent with having a scheme in which everybody can have confidence and in which reasonable steps are taken to act against any potential misuse. That is why various safeguards are in place. For instance, a charity has to have been in the gift aid scheme for at least two of the previous four years, and given that the small donations scheme is a cash scheme, what a charity claims cannot be more than 10 times what goes through its regular gift aid programme.

The hon. Member for Stoke-on-Trent South asked the reasonable question of why the figure is £8,000, not £7,500 or £8,500. There is of course no precise answer to that question, but there has to be a number, and it is based on a judgment of what is consistent. The scheme is not about replacing gift aid. Unlike regular gift aid it is taxpayer support, not a tax relief. The £8,000 figure is appropriate and consistent with the scheme having reasonable safeguards in it and being as unsusceptible as possible to state aid action.

The hon. Member for Salford and Eccles asked the reasonable question of what the Government are doing to increase awareness. She also asked whether more charities should know about the scheme. There is always a certain degree of ramp-up in any new programme, and the Government have been trying to do more. We want to raise awareness of the scheme and have more charities and donors taking part in it. Through the HMRC outreach team, which was established in 2014, the Government have delivered face-to-face presentations to more than 650 charities to spread awareness, increase take-up and help charities receive support through the scheme and available tax reliefs. Furthermore, through the introduction of Charities Online in 2013, we have made it faster and simpler for charities to claim reliefs. Some 95% of charities submit claims online rather than through paper applications, and the majority of claims are processed within five working days, which is down from about 15 working days.

There have been number of suggestions, questions and comments on various aspects of the scheme, and they are all germane, but they are all also subject matter for the review of the scheme. I was asked about the timing of the review, and the call for evidence should come out before Christmas. It remains to be seen how many organisations and individuals respond to that call, but we hope to have very good material and a good opportunity for feedback, critique and suggestions on how to make the scheme even more successful. It was mentioned that these days, it is possible to make a digital payment almost as quickly as a physical one—through contactless payment, for example—yet the small donations scheme applies only to cash. The review will cover all aspects of the scheme, including questions about digital payments.

The Government are heartened to hear the support from members of the Committee today. As I said, the increase in the small donations scheme limit represents an additional way in which the Government are supporting the charity sector. It will enable a significant number of charities, especially the 7,200 that already claim their full top-up under the existing £5,000 limit, to access greater financial support from the Government. I commend the order to the Committee.

Question put and agreed to.

Committee rose.

European Committee

Subsidiarity and Proportionality

The Committee consisted of the following Members:

Chair: Mrs Anne Main

Blackwood, Nicola (Oxford West and Abingdon) (Con)

Blomfield, Paul (Sheffield Central) (Lab)

† Bruce, Fiona (Congleton) (Con)

† Cummins, Judith (Bradford South) (Lab)

† Hollingbery, George (Lord Commissioner of Her Majesty's Treasury)

† Kawczynski, Daniel (Shrewsbury and Atcham) (Con)

† Kinnock, Stephen (Aberavon) (Lab)

† Lidington, Mr David (Minister for Europe)

† McFadden, Mr Pat (Wolverhampton South East) (Lab)

† Morris, James (Halesowen and Rowley Regis) (Con)

Paisley, Ian (North Antrim) (DUP)

† Qureshi, Yasmin (Bolton South East) (Lab)

† Rees-Mogg, Mr Jacob (North East Somerset) (Con)

Katy Stout, Committee Clerk

† attended the Committee

European Committee B

Monday 7 December 2015

[Mrs Anne Main in the Chair]

Subsidiarity and Proportionality

Before we begin, it might be helpful if I remind Members of the procedure in European Committees. Proceedings must conclude no later than two and a half hours after we start. First, I shall call a member of the European Scrutiny Committee—I understand that it will be Mr Jacob Rees-Mogg—to make a brief statement about why the Committee decided to refer the documents for debate. Secondly, I shall call the Minister to make a statement, followed by questions for up to an hour, although I have some discretion to extend that period if there is appetite for it. Thirdly, the Committee will debate the Government motion. I will put the question on the motion when the debate or the time available—whichever comes first—is exhausted. Does a member of the European Scrutiny Committee wish to make a brief explanatory statement about the decision to refer the documents to the Committee?

May I say what a pleasure it is to serve under your chairmanship, Mrs Main? Although these two Commission annual reports are essentially factual documents, they were recommended for debate on the Floor of the House as their subject matter goes to the heart of the European Union debate: the democratic deficit of the EU. In the words of the Prime Minister in his Bloomberg speech of January 2013:

“It is national parliaments, which are, and will remain, the true source of real democratic legitimacy and accountability in the EU.”

It is notable that in the Prime Minister’s letter of 10 November to the President of the European Council, he also stated that he is seeking a new arrangement—a red card—

“where groups of national parliaments, acting together, can stop unwanted legislative proposals”

from the EU, and that he wants

“to see the EU’s commitments to subsidiarity fully implemented, with clear proposals to achieve that.”

The first report from the Commission sets out its assessment of how the EU institutions addressed compliance with the principles of subsidiarity and proportionality, including the operation of the formal reasoned opinion procedure whereby national Parliaments can raise objections to an EU proposal for legislation on the ground that it does not comply with the principle of subsidiarity and, if enough do so, they can force a reconsideration. The Commission concludes that the smaller number of reasoned opinions raised by national Parliaments

“must however be seen in the light of the decrease in the number of legislative proposals issued by the Commission towards the end of its term of office and not as an indication of diminishing interest of national Parliaments in subsidiarity matters. This conclusion is confirmed by the ongoing debate among national Parliaments concerning the subsidiarity control mechanism.”

It is noticeable that during 2014, 15 national Parliaments or Chambers issued 21 reasoned opinions covering 15 proposals. The highest number for any one proposal was three—well short of the lowest threshold for forcing a reconsideration of the proposal. This House issued three, proposing new measures concerning the presumption of innocence, animal cloning and undeclared work.

The second report sets out the Commission’s assessment of its relations with national Parliaments, focusing on informal political dialogue, rather than the formal reasoned opinion procedure. This vehicle can be used when it is not possible, because of the tight deadline, to issue a formal reasoned opinion. The Commission’s report records a drop in those informal opinions. In the analysis of key topics of dialogue, it identifies the discontent expressed by 10 Parliaments or Chambers, including this House, on the Commission’s reaction to the formal reasoned opinions against the proposal for a European public prosecutor’s office, in respect of which a yellow card was issued in 2013.

The report concludes by marking the commitment of the new Commission under President Juncker to forge a new partnership with national Parliaments, as evidenced by its early action in increasing visits and specifically inviting comments on its 2015 work programme. The European Scrutiny Committee originally called for the debate not just because of its analysis in these reports of relations between national Parliaments and the EU; as already indicated, they cover a subject that goes to the heart of the role of national Parliaments in the EU.

The European Scrutiny Committee’s report drew the House’s attention to the call, so far unanswered, of many national Parliaments and Chambers for the President of the EU Commission to set up a working group to look at the role of national Parliaments. It also welcomed the Commission’s efforts to improve its dialogue with national Parliaments, including its responses to reasoned opinions and the opportunity to improve parliamentary scrutiny arising from the early consultation promised by the Commission’s Better Regulation package.

Finally, the Committee’s report drew attention to the development of the informal green card procedure, whereby national Parliaments can suggest matters for which either new EU legislation should be brought forward, or existing legislation should be amended or even repealed.

I call the Minister to make an opening statement. I remind the Committee that interventions are not allowed during the statement, although questions are allowed afterwards.

It is a pleasure, as always, to serve under your chairmanship, Mrs Main. As my hon. Friend the Member for North East Somerset has said, today’s debate stems from two European Commission annual reports relating to 2014, the first on the principles of subsidiarity and proportionality, and the second on the Commission’s relations with national Parliaments.

Those questions of subsidiarity and proportionality go to the heart of the debate that we, and national Governments and Parliaments across Europe, are now having on reform of the European Union. Those principles are about determining whether it is appropriate for legislation to be introduced at the EU level and, if so, how and in what detail. The concept of subsidiarity, in particular, is at the core of the idea that the EU must respect the layers of government that are closest and most accountable to European citizens.

There is a balance to be achieved between taking action at EU level when it is clearly in the collective interests of member states so to do and recognising when it is better for decisions to be made at national, regional or local government level. The Government’s view is that too often the right balance has not been struck. The gap between the EU and its citizens is growing. While that is felt acutely in the United Kingdom, the concerns are not limited to us, as can be seen in polling from such organisations as the Pew Research Center and Eurobarometer.

More than a decade ago, at Laeken, European leaders pledged to reform the European Union so as to avoid

“a creeping expansion of the competence of the Union”,

but that ambition remains unfulfilled. That is why resolving the long-standing questions of sovereignty is an important pillar of the Government’s wider programme of EU reform, which my right hon. Friend the Prime Minister set out in his letter to President Tusk earlier this month.

Recent messages from the Commission suggest that it is taking subsidiarity and proportionality seriously and that it is alive and receptive to the UK’s reform agenda. That is encouraging. In particular, the Commission work programme for 2016 refers to a “renewed commitment” to dialogue with national Parliaments on draft proposals, and it commits the Commission to ensuring that national Parliaments have a strong voice in European policy making.

For his part, President Juncker has been clear about his personal commitment to strengthening the role of national Parliaments, which he believes will help to address the democratic deficit felt by so many EU citizens. In his 2015 state of the Union address to the European Parliament, he made a specific reference to the UK’s ambition in that area, an ambition that he said he shares and that wants to work with the Prime Minister to achieve.

Members of the Committee will appreciate that the Better Regulation agenda is closely linked to the debate on subsidiarity. It is positive to note that the Commission has taken a leading role in minimising unnecessary burdens in EU legislation. Last month 19 member states, including the United Kingdom, collectively called on the Commission to go even further by setting burden-reduction targets, and we reiterated our belief in the principle that the EU should not take action at all where better outcomes could be achieved at the national or sub-national level.

We understand, too, from working-level discussions that the Commission is looking at creating new ways for national Parliaments to feed their views into the legislative programming process. That is important, because the EU needs to focus on areas where it can genuinely add value. I believe that we and other national Parliaments need to capitalise on that positive momentum and ensure that we secure and implement real reforms.

Of course, it is incumbent on all participants in EU regulation and legislation to ensure respect for subsidiarity and proportionality, and to make full use of existing checks and balances. Impact assessments, for example, are already meant to assess subsidiarity and proportionality impacts. In addition to the Commission, the Council and the European Parliament are under an obligation to assess the impact of their changes to proposals. Member states, too, have a role to play in ensuring that they hold the Commission to account when proposals and amendments breach those fundamental principles.

The focus of the reports we are debating today is the mechanisms available to national Parliaments to uphold subsidiarity through the yellow and orange cards, and to influence Commission proposals through political dialogue. In 2014 national Parliaments submitted 21 reasoned opinions on subsidiarity to the Commission, covering 15 different proposals. That was 76% less than the 88 issued the previous year, and a significant reduction from what was already a fairly low baseline. It is true that the reduction should be seen in the context of the appointment of a new Commission and the European parliamentary elections in 2014, which meant that fewer legislative proposals were produced. However, it might also reflect a growing disengagement on the part of national Parliaments.

The tight time limit of only eight weeks from the transmission of a proposal to the deadline for a reasoned opinion is challenging for national Parliaments, particularly when a proposal is complex, or at certain times of the year—most obviously during parliamentary recesses. It does not allow much time for national Parliaments to share information with one another, which was crucial in the triggering of the first yellow card in 2012. The scope and threshold of reasoned opinions required to trigger a yellow card are also factors. Normally, a yellow card is triggered when reasoned opinions represent at least a third of national Parliaments—19 votes—and that threshold has only been reached on two occasions, with the second, as my hon. Friend said, being in 2013, on the European public prosecutor’s office.

The way in which the Commission responded to that second yellow card, which was to proceed with the original proposal without replying to the concerns expressed by national Parliaments or adding any evidence, highlights the shortcomings of the current system. It is no wonder that national Parliaments might feel disengaged from the current system. That demonstrates the urgent need for us to go faster and further in implementing reforms to the roles of national Parliaments in the European Union, and why the Government are asking for a new arrangement whereby groups of national Parliaments working together can stop unwanted legislation. Furthermore, we want the promise on subsidiarity made by all Heads of Government at Laeken to be fully implemented, and clear proposals to be in place to do that.

It has also been encouraging to see progress made on the so-called green cards, which would enable groups of national Parliaments to establish a more positive dialogue with the Commission, through which new legislation could be proposed or existing laws amended or repealed. I note that national Parliaments gave green cards a ringing endorsement at the COSAC plenary meeting in Luxembourg last week. I am supportive of that work and will continue to follow discussions on the subject with great interest.

I hope that the Committee is reassured that the Government are serious about reforms in this area and are determined to secure them. The Prime Minister’s letter to President Tusk made that clear, and the subject of today’s debate is very much at the heart of our EU reform agenda.

We now have until 5.35 pm for questions to the Minister on his statement. I remind Members that questions should be brief. It is open to a Member, subject to my discretion, to ask related supplementary questions, but there is also an opportunity for these in the subsequent debate.

It is a pleasure to serve under your chairmanship, Mrs Main. I would like to ask the Minister one or two questions about his statement. He referred to the letter that the Prime Minister sent, on 10 November, to the President of the European Council. It was a long letter, in which he said:

“I want to enhance the role of national parliaments, by proposing a new arrangement where groups of national parliaments, acting together, can stop unwanted legislative proposals. The precise threshold of national parliaments required will be a matter for the negotiation.”

Will the Minister say a little more about what the Government are pressing for on that question of national Parliaments? The Government talk about the development of a red card—I apologise, Mrs Main, for the multi-coloured cards we always refer to in these discussions. What exactly would the powers of that card be and how many Parliaments would have to come together to wield it? I ask the same question with regard to the green card, which is designed to be a proactive rather than a reactive measure: how many Parliaments would have to come together to wield it? Furthermore, is the development of the green card as much a priority for our renegotiation as that of the red one?

Finally, to complete the colours, I will ask about the use of the yellow card, which the hon. Member for North East Somerset said had been wielded very little. When it was wielded over the European public prosecutor’s office, the proposal was not substantially amended or withdrawn. What proposals do the Government have to strengthen the use of yellow cards, given that this is an unwieldy process and that when Parliaments come together in this way they ought not to be ignored?

I will try to respond as fully as I can within the constraints of time to the right hon. Member for Wolverhampton South East.

As the Prime Minister said in his letter, the level of a threshold to trigger a red card that would amount to a block on legislation would be a matter for the negotiation itself. I cannot pre-empt those detailed discussions, but we envisage that at a certain point what is currently a power for national Parliaments to require the Commission to review a particular initiative should become an outright bar to further progress.

As for the yellow card, to my mind a change that would be particularly welcome would be an extension of the timeframe allowed beyond the eight weeks permitted under current law. That would enable national Parliaments to consider proposals more closely and to co-ordinate with one another. I would also like to see such a change to the yellow card take into account the very creative proposal from the Dutch Parliament for what it termed a “late card”, so that in the event of a legislative measure changing significantly during its progress through the various institutions it would be possible for national Parliaments to come back and have another look at it, because at the moment that opportunity is forbidden to them regardless of how far-reaching any amendments might be.

Finally, the Government support the green card, but it is also an initiative that is actively being taken forward by national Parliaments at the moment. Yes, we support it, but if it can be achieved through Parliaments working together in COSAC, persuading the institutions to take that change on board, then we are happy simply to support the work that the Parliaments themselves have initiated.

May I ask the Minister a bit more about the red card? Is it fair to assume that the number of countries that would be required to send in a red card would be lower than the number required to vote against it in the Council of Ministers to provide a blocking majority under qualified majority voting?

The difference between the two arrangements, as my hon. Friend knows, is that to assemble a blocking majority in the Council of Ministers one has to assemble that majority on the basis of weighted votes, with the most populous countries having greater weight, in the calculation of a majority or minority, than the smaller member states, whereas in the case of the yellow card system each parliamentary chamber in the EU has a single vote. I suppose that it operates a bit like the way that the US Senate operates, with no regard to the relative populations of the different countries.

The answer to that question would therefore depend very much on what the comparator was in terms of the blocking minority among member states. I certainly envisage that a red card would have to involve a higher threshold than a yellow card would, since it would be a more far-reaching measure.

I am grateful to the Minister for his answer. However, could the red card serve any useful purpose if it were harder to get than a qualified majority vote against a proposal coming from the Commission, because all Governments are responsible to their Parliaments, and therefore to make it a workable proposition, the assumption would have to be that a matter had a qualified majority in favour but the Parliaments sought to stop it?

Having served as a Minister both in the last Parliament and this one, I have to say that I do not think that Governments can automatically assume that they have the majority in Parliaments, particularly on European matters. So, while the circumstances that my hon. Friend describes would be unusual, it would nevertheless be worth while to have that democratic back stop. Also, a strongly expressed parliamentary view would perhaps, in the case of a number of member states, put greater backbone into a Government resisting a measure to which their Parliament had declared itself opposed.

The very idea that Governments will have backbone in the face of Europe is a novel one, but I hope that we might see it one day.

Moving on to yellow cards, does my right hon. Friend think that part of the reason for the number of cards going down, apart from the lower number of proposals coming forward, is that once the decision was given about the EPP, Parliaments thought there was little point? The Commission did absolutely nothing regarding that important proposal. What is the purpose of this House or any other Chamber passing resolutions if they are just ignored?

As I said in my opening remarks, that might be part of the explanation. One would have to go back and talk to parliamentarians from the 27 other member states to have a clear analysis. I suspect that with some countries the lack of yellow cards might be down more to domestic political circumstances—perhaps a general election and a change of Government—than to anything happening at the EU level.

It is also fair, however, to take account of the changeover of the Commission. The Juncker Commission’s track record of launching many fewer new initiatives than the Barroso Commission, even in its first term, inevitably reduces the number of targets for national Parliaments. That too is part of the explanation. Frankly, if the Commission is going to stick to that approach and take account, in advance, of what national Parliaments and national Governments would regard as the right priorities, that is a change we should all welcome.

On that very point, the Commission has tended to respond even when a majority has not been reached, but it has often been pretty stubborn in pushing forward with its proposal anyway. Indeed, in one of the documents we can even see that it wanted to bring forward a more ambitious proposal rather than sticking with the one it already had. To date, therefore, the yellow card has not been hugely successful, as far as one can tell. Does the Minister accept that? Does he also accept that the time limit he mentioned, which it has been argued ought to be extended, can be extended only through treaty change? Is that part of the Government’s intended renegotiation?

I agree that although there is innovation in the Lisbon treaty—which was an advance, and better than not having any such process—it has not been particularly successful so far. It has certainly taken time for the culture of the Commission leadership to respond to what is necessary. The fact that someone such as First Vice-President Timmermans, who has been an elected politician in a country that has given a high priority to the opinions of its national Parliament, is now a key authority within the Commission has been an important contributing factor to the change we have seen on the part of the Commission in the past year and a bit.

Whether treaty change is needed is something that we are addressing in the course of the detailed negotiations. The technical talks that took place over the summer between UK officials and the secretariats and legal services of the institutions have, on that issue and on the others on which we seek reforms, fleshed out a menu of legal and procedural options for leaders to select from, depending on what deal leaders eventually succeed in negotiating. It would be wrong of me to go further than that, when those negotiations still lie ahead.

I am grateful for that because footnote 16 on page 12 of the document gives the Commission’s view that the deadline is enshrined in the treaty and therefore would require treaty change, but the Commission can err, so I hope the Government are right.

Finally—although I may have two questions on this point, depending on the Minister’s answer—I want to ask about the green card issue. Are the Government supportive of a situation in which the Commission loses its exclusive right to propose legislation?

That is not part of our set of proposals and it would probably be very hard to negotiate that. My word of warning to my hon. Friend is that if that issue were opened up, we would probably see a lot of institutional pressure from the European Parliament to have a right to initiate legislation, and that there would be quite a lot of national Governments around Europe, particularly those of smaller member states, that would be quite attracted by that idea.

As for my hon. Friend’s earlier point—alas, I have lost my thread, so perhaps he could just remind me.

That is right, and if I have not satisfied my hon. Friend, at least I have replied to him. I will rest it there, Mrs Main.

I am a bit puzzled by the Minister’s last answer. I thought the whole point of the green card was to give a group of member states the ability to propose changes to, amend, alter or even repeal EU legislation. Now, if it is not giving them the right that is otherwise the exclusive right of the Commission, I do not see what it is doing and whether it serves any purpose.

The distinction is this: the green card proposal would permit the national Parliaments acting collegiately to propose changes and to seek reviews, but it would leave it then for the Commission, having reviewed the matter, to decide whether to bring forward particular amendments.

That is perhaps analogous—not exactly the same as, but analogous—to the European Parliament’s powers to propose an own-initiative report, which can put forward ideas either for new legislation or the amendment or repeal of existing legislation but which cannot bind the Commission to act in a particular way. What one has found in practice, however, is that the Commission has taken very seriously those reports and frequently acted upon them. I hope that if we got a green card accepted, we would find that the Commission responded in the same way to well-evidenced, well-argued proposals from national Parliaments.

I now recall the point on which I was going to respond to my hon. Friend earlier. He expressed doubt as to whether, in the absence of treaty change, having a red card would mean anything. Of course the Commission, while it has the sole right of initiative, can always choose whether to initiate or to persist with a particular piece of legislation, so it faces a certain political choice when it is in receipt of objections from national Parliaments.

You are being very generous today, Mrs Main; I promise that this is my last question. Is the Minister therefore saying that the democratic deficit will be addressed by the good will of the Commission when it feels like listening to national Parliaments?

What I am saying is that the democratic deficit needs to be addressed by a number of different and complementary reforms. Those will include some in the culture of the institutions, which we are starting to see, such as a focus on a rigorous selection of limited priorities where the European Union can genuinely provide value-added to all its members from European-level action, rather than leaving it to member states.

I believe that our proposals on national parliaments are not a panacea, which I have never claimed for them, but will help to reconnect electors with what the European Union is doing on their behalf. Obtaining some kind of mechanism for turning the Laeken commitment into institutional reality in the EU would be a further way in which to bridge the democratic deficit.

At the end of the day, bridging the democratic deficit will be about cultural change as much as about legislative and institutional change. It will be about the EU and its institutions demonstrating through their choice of actions that they are attuned to the policy priorities that matter to the people—the citizens whom they claim to represent.

Motion made, and Question proposed,

That the Committee takes note of European Union Documents No. 10651/15 and Addendum, a Commission Annual Report 2014: Subsidiarity and proportionality, and No. 10663/15 and Addendum, a Commission Annual Report 2014: relations with national parliaments; recognises the importance of the principle of subsidiarity and the value of stronger interaction between national parliaments and the EU institutions; welcomes the Government’s reform agenda and efforts to ensure that the Commission responds to future objections under the yellow card scheme by substantially amending or withdrawing the proposal that has been put forward; calls on the Commission to respond to the request of 29 national parliament chambers to establish a working group to consider reforms to strengthen their role; is encouraged by the Commission’s announcement of its intentions to forge a new partnership with national parliaments; and calls on the Commission to set out its plans to do this.(—Mr Lidington.)

I will make a couple of brief points. It is true that the issue of subsidiarity, proportionality and the power of national Parliaments is important, and that view is shared throughout the Chamber. I have already read out what the Prime Minister said in his letter to the President of the Council two weeks ago, so I do not need to repeat it. In our manifesto, Labour stated:

“We will work to strengthen the influence of national parliaments over European legislation, by arguing for a ‘red-card mechanism’ for member states, providing greater parliamentary scrutiny.”

Today, in response to the Prime Minister’s letter, President Donald Tusk said:

“There is also a largely shared view on the importance of the role of national parliaments within the Union as well as strong emphasis on the principle of subsidiarity.”

There will be different views in the House as to whether that constant re-emphasis of the commitment to subsidiarity shows up in the actions of the Commission and the EU institutions, but the question is whether a new spirit has emerged.

The Commission certainly says that there is a new spirit. Some months ago we debated on the Floor of the House the Commission’s work programme, to which many Members referred. Earlier this year in London I attended a speech made by Frans Timmermans, the Vice-President of the Commission—the Minister mentioned him—and he posed the question, why does the ratchet always have to turn in one direction? Why can the Commission and the institutions not look at the existing corpus of legislation and ask whether it is still fit for purpose and necessary, or whether it has had unintended consequences after being in effect for some time? Those seem to be perfectly legitimate questions for the EU institutions, just as they would be for any national Parliament.

Looking around Europe, I wonder whether we are discussing the right exam question overall. At the moment, the EU is coping with huge crises of refugees and of security, but if we constantly view it as an organisation that is determined to interfere in our very way of life, we might not be asking the right question. Perhaps the question is how Europe works more closely together to deal with common challenges instead of always seeing working together as some kind of threat, as we tend to do in this country. The issue of national Parliaments is a legitimate one, but looking at the problems Europe is coping with today, I am not sure that it is the most urgent one facing the EU.

I will not go through again all the different powers of the different card mechanisms that have been outlined. Suffice to say, we will watch with interest how matters are developed in the negotiation that the Prime Minister has set out. The Minister has given us some useful pointers to the Government’s position on the various green, yellow and red card proposals, but it looks as if matters will not be concluded at the December Council. We will hope for more concrete results from the February Council early next year.

I am very sympathetic with the point that the right hon. Member for Wolverhampton South East makes that this might be the wrong issue to discuss, and that the real issue is how the nations of Europe can co-operate together. My answer is that they should do so through the nation state, because the nation state has validity and the European Commission does not. What we discover in today’s debate is that it is actually all about the validity of the European Commission, and that national Parliaments will be given a bauble here and a bauble there. They will be given a red card, a yellow card and a green card—they will have a three-card trick. They will have a whole deck of cards, but they will not be able to do anything with it because everything goes off to the European Commission, which may—if it is feeling benign—condescend to listen to the national Parliaments.

The Commission may take the Parliaments into account, and it may make proposals. How enormously generous. How thoughtful of somebody unelected, who was appointed against the will of the British Government, who has no mandate and who represents one of the smallest countries in the European Union. It is going to be up to Mr Juncker whether he listens to the German Parliament, the British Parliament or the French Parliament, all of which were elected by millions of people across Europe. One grand panjandrum in Brussels will decide whether he will take any notice of those cards at all.

The Government are great in their way—they push back a bit and say, “Oh, well, we’ve got a backbone, so therefore we’ll be tough and stand up to this. We’re going to put Britain first, the United Kingdom first, and make sure that we have our way.”

I appreciate the hon. Gentleman’s strength of view, but he is in danger of forgetting the existence of the Council of Ministers, on which sit the elected representatives of all of us—the Prime Ministers and Presidents.

The right hon. Gentleman is right. The Council of Ministers used to operate by unanimity, so our interests could be protected. At the heart of this is the question of who has the right to initiate legislation, because that is where the real democratic deficit is located; it is not the Council of Ministers but the unelected Commission that does that. That is a most extraordinary power. When one considers the power of this House, one sees that our right to initiate money Bills dates to 1407, and the power of this House grew because of that right of initiation and that right to control finances, which leads to control of the legislative programme.

The Commission’s right of initiation is central to its authority, and how sensitive was the Minister on its behalf when I said that this green card might interfere with that noble right of the Commission to initiate legislation—“No, that could not happen at all. It would upset the Commission too greatly, and the European Parliament might be a bit jealous.” The European Parliament is a body that has modest democratic legitimacy. A few people occasionally vote, but no one feels that it is their Parliament. People occasionally turn out to vote when they have to vote for something else. Even a police commissioner is more exciting to vote for than the European Parliament—well, not by very much, although it is a little more exciting. The democratic deficit is addressed not by the European Parliament, but by national Parliaments that represent individual citizens.

To return to the right hon. Gentleman’s excellent point about how Europe addresses such problems, it addresses such problems if it has validity, and it has validity if it is based on democracy. The European Union is facing problems at the moment because it has become so remote from that democracy. The President of Portugal is saying that a new Government cannot come in because that might upset the European Union, even when, in a coalition, the Portuguese Government have more support than any other nation. [Interruption.] We are saved by the bell.

Sitting suspended for a Division in the House.

On resuming—

We were not quite saved by the bell, as some had hoped. There is one final point that I want to make, which is that in the European Union Act 2011 the Government included a section clearly stating that sovereignty resides in this House and that we are only members of the EU because of that. It was a very good section that reminded us of what had been the perceived wisdom under the European Communities Act 1972: that the sovereignty of the British people is vested in this House and that only this House can use it in a fundamental way. If this House or this Parliament decides not to use it, we would be able to withdraw and restore all our democratic accountability. That underpins the importance of national Parliaments. Without their willingness or acceptance of a supranational body, and without the delegation of authority, there is no authority in the Commission. It does not exist in a vacuum. It is not a body created by God—the divine right of Commissioners—to rule over the whole EU; it is a body whose authority is drawn from us, but that is a drawing that can be withdrawn and perhaps may be.

I thank the right hon. Member for Wolverhampton South East and my hon. Friend the Member for North East Somerset for their contributions, and I will try to respond to their points. I am grateful to the right hon. Member for Wolverhampton South East for referring to President Tusk’s letter, which was published today and states a need to assert the importance of national Parliaments. It is an objective that President Tusk feels is shared by other Governments of member states.

The right hon. Gentleman asked about the degree of support that we have among other member states for strengthening the role of national Parliaments. My truthful answer is that the greatest support comes from member states that have vigorous national parliamentary systems. Countries such as the Netherlands and Denmark, whose Parliaments have come forward with ideas to strengthen the accountability of EU decisions to national Parliaments, are perhaps more naturally inclined to have regard to this question than other countries that historically have had weaker national parliamentary systems and have seen European institutions as the guarantors of liberties and the rule of law.

Clearly, different member states have different views that sometimes depend on whether they feel that their own scrutiny arrangements, which may reflect a mandate system rather than a system such as ours, would be affected by some of the changes that we would like to be made. As President Tusk’s letter makes clear, the ideas that we have put on the table have had a broadly positive response from our partners.

Let me turn to the points made by my hon. Friend the Member for North East Somerset. I do not think that I have ever pretended in the five and three-quarter years that I have been doing this job that European institutions are perfect or that, were I to be asked to take a blank sheet of paper and draft a new scheme for European co-operation, I would commence with the treaty of Lisbon and the current institutional framework. However, the political reality that we, as parliamentarians, must all confront is that that is the system we have at the moment. It is the product of decisions taken by our predecessors over the years. The key principle that we need to bear in mind in debating the question before us this afternoon is, in the words of the Prime Minister of the Netherlands:

“European where necessary, national where possible.”

That is the principle that should animate our policy and that I would like to be read, learned, marked and inwardly digested by the institutions of the EU.

I am not someone who habitually goes around lauding the work of the European Commission—it is an imperfect body, like all human institutions—but I thought that my hon. Friend was a wee bit unfair to it, because it is the United Kingdom that has often looked to the European Commission to champion work on the single market and on free trade agreements between Europe and other countries, and it is the Commission that has used its powers to challenge protectionist interests in other member states—member states that would have blocked proposals that we and successive British Prime Ministers have judged to be in the best interests of our country. After all, that was why Margaret Thatcher, when Prime Minister, introduced the Single European Act. I think I am still correct to say that was the biggest move towards qualified majority voting in the history of the European Communities or the European Union.

There are flaws in the present arrangements and improvements that we should seek, but we should ponder carefully before throwing aside an institutional framework and a habit of countries working together that over the years have brought some significant benefits, both economic and political, to the people of the United Kingdom. The right way forward is to secure a set of ambitious reforms that change the working culture of the European Union to make it more competitive, more flexible and, yes, more democratic than it is today. The measures before us have enabled us to debate one particular aspect of that reform agenda.

Question put and agreed to.

Committee rose.