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Public Bill Committees

Debated on Tuesday 18 October 2016

Small Charitable Donations and Childcare Payments Bill

The Committee consisted of the following Members:

Chairs: Nadine Dorries, † Mrs Madeleine Moon

† Blackman, Kirsty (Aberdeen North) (SNP)

† Campbell, Mr Alan (Tynemouth) (Lab)

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

† Duddridge, James (Rochford and Southend East) (Con)

† Ellison, Jane (Financial Secretary to the Treasury)

† Glen, John (Salisbury) (Con)

† Heappey, James (Wells) (Con)

† Jones, Susan Elan (Clwyd South) (Lab)

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

† Mills, Nigel (Amber Valley) (Con)

† Phillipson, Bridget (Houghton and Sunderland South) (Lab)

† Thewliss, Alison (Glasgow Central) (SNP)

† Tomlinson, Michael (Mid Dorset and North Poole) (Con)

† Turley, Anna (Redcar) (Lab/Co-op)

† Warburton, David (Somerton and Frome) (Con)

† Wheeler, Heather (South Derbyshire) (Con)

Matthew Hamlyn, Committee Clerk

† attended the Committee

Public Bill Committee

Tuesday 18 October 2016

[Mrs Madeleine Moon in the Chair]

Small Charitable Donations and Childcare Payments Bill

Before we begin, I have a few preliminary announcements. Members may, if they wish, remove their jackets; I see some have already done so. I remind Members that no refreshments other than the water provided may be consumed during Committee meetings. Will all Members ensure that their mobile phones, pagers and iPads are off or turned to silent?

Not everyone is familiar with the procedure of a Public Bill Committee, so it might help if I briefly explain how we will proceed. The Committee will first be asked to consider the programme motion on the amendment paper, for which debate is limited to half an hour. We will then proceed to a motion to report any written evidence. We will then begin line-by-line consideration of the Bill.

The selection list for today’s sitting is available in the room. It shows how the clauses, amendments and new clauses have been grouped together for debate. Where a group includes the words “clause stand part”, that means Members should make any remarks they wish to make about the content of the clause during the course of the debate. Clause stand part debates begin with the Chair proposing the question that the clause stand part of the Bill. There is no need for the Minister or any other Member to move that a clause stand part of the Bill. A Member may speak more than once, depending on the subject under discussion.

Ordered,

That—

(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 18 October) meet at 2.00 pm on Tuesday 18 October;

(2) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Tuesday 18 October.—(Jane Ellison.)

Resolved,

That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Jane Ellison.)

Clause 1

Meaning of “eligible charity”

Question proposed, That the clause stand part of the Bill.

It is a pleasure to serve under your chairmanship, Mrs Moon. I am grateful to all Members for being here to examine the Bill in detail and to many Members for their participation in the good and constructive debate we had on Second Reading. I welcomed the Opposition’s pledge to support the principles of the Bill, and I hope that today we can submit the Bill to further constructive scrutiny.

I will give a little bit of general background information before specifically addressing clause 1. The Bill makes a number of amendments to the Small Charitable Donations Act 2012. I know there are Members present who served on the Committee responsible for considering that Bill. The changes will ensure that the gift aid small donations scheme operates effectively and flexibly for a greater number of charities and community amateur sports clubs. The Bill also makes minor and technical changes to the tax-free childcare scheme, to improve parents’ experience.

The reforms to the gift aid small donations scheme are intended to simplify and increase access to it, particularly for new and small charities. We heard more about that on Second Reading. That will be achieved by removing a number of eligibility criteria to allow more small and new charities to benefit sooner, which I will discuss in a moment; reforming the community buildings rules to allow more charities to benefit from the important work they carry out in their local communities; simplifying the rule specifying the total top-up payment that charities and CASCs are entitled to claim, which will ensure fairness and parity of treatment between charities that carry out similar activities but are structured in different ways; and future proofing the scheme by allowing contactless donations to be eligible for top-up payments.

Clause 1 substantially simplifies the gift aid small donations scheme by removing two of the existing eligibility requirements, enabling smaller and new charities to access top-up payments much sooner. A number of charities have voiced support for that. Currently, a charity must have been registered for at least two full tax years and have claimed gift aid in at least two of the previous four tax years without a gap of longer than a year. However, the Government are keen to encourage take-up of the scheme, particularly among small and newer charities. Removing the two-year registration requirement will help to achieve that by allowing the up to 9,000 new charities that apply for recognition by Her Majesty’s Revenue and Customs each year to receive top-up payments as soon as that recognition is granted.

During the Government’s review of the small donations scheme, we heard about the difficulties faced by small charities making irregular or intermittent gift aid claims. The Government therefore consulted on relaxing the gift aid history requirement to only one year, rather than two. However, after listening to the views of the sector, we decided to go even further. Clause 1 removes the two-in-four-year gift aid history requirement entirely, which is a significant simplification for charities. The reforms are a good thing and have been widely welcomed by the charity sector.

The Charity Tax Group commented that relaxing the gift aid history requirement

“will hopefully widen access to the scheme, particularly among smaller charities.”

The Charity Finance Group said:

“The Bill is scrapping these rules and this means that more charities will be eligible and will reduce complexity.”

The removal of the two-year rule and the gift aid history requirement is a meaningful and significant simplification of the gift aid small donations scheme. It will make the scheme more accessible to smaller and new charities. I hope that the clause stands part of the Bill.

It is a pleasure for me, too, to serve under your chairmanship, Mrs Moon.

As the Minister outlined, clause 1 amends the meaning of “eligible charity” for the purposes of the gift aid small donations scheme, removing the requirement for a charity to have been registered for at least two full tax years before it can access the scheme. The provision also removes the two-in-four-year claims rule, which dictates that a charity must have made a successful gift aid claim in at least two of the previous four tax years with no more than two years’ gap between claims. Those measures will simplify the scheme and allow newly formed charities to access the Government top-up payment.

I am pleased that the Government have taken heed of responses to their consultation on reform to the scheme and scrapped the two-in-four-year claims rule fully. The initial proposal was to replace the rule with the requirement that charities must have made a successful gift aid claim only in the previous tax year. I understand that respondents felt that that could disqualify some charities that are currently eligible for the scheme but did not claim gift aid in the previous tax year for a variety of reasons. In the light of that change, the measures are welcomed by the Opposition and the industry. We are happy to support them. However, I have one concern on which I hope the Minister can provide some reassurance.

The requirement for a charity to have been registered for two years is arguably a way of ensuring that charities are not set up for the purposes of claiming a top-up from the Government illegitimately. The Opposition have tabled a new clause about anti-fraud measures, which we will debate later, so I will not digress too much. However it would be helpful if the Minister would assure me that the Government have carried out an assessment of whether removing the two-year rule poses an increased risk of fraud. Other than that small but important point, the Opposition are happy to support the clause.

I thank the Opposition Front-Bench spokesperson for those points, for her support and for her specific question. By removing the two-year rule, we want the scheme to be more flexible and generous, but we want to ensure that there are some safeguards.

We debated the balance between flexibility, generosity and safeguarding charities on Second Reading. That is why, as the Government made clear in the original impact assessment, the lack of evidence that a cash donation has been made makes the gift aid small donations scheme vulnerable to fraud. We must continue to protect against that but—as we will come to later—that is one of the reasons why the Government are retaining the gift aid matching requirement, which provides sufficient protection while getting the light-touch regulatory balance right. I will say more about that later. I hope that my response is sufficient and that the clause stands part of the Bill.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Meaning of “small donation”

I beg to move amendment 1, in clause 2, page 2, line 1, leave out lines 1 to 6 and insert—

“(a) in the heading after “small”, delete “cash payment” and insert “donation”

(b) in sub-paragraph (1) omit the words “in cash”;

(c) after that sub-paragraph insert—

“(1A) The gift must be made—

(b) by cheque;

(c) by electronic communication; or

(d) by a contactless payment.”

(d) in sub-paragraph (3) after the definition of “cash” insert—

““cheque” means a written order instructing a bank to pay upon its presentation to the person designated in it, or the to the person possessing it, a certain sum of money from the account of the person who draws it;

“electronic communication” means a payment made via the internet or text message;””.

This amendment would extend the range of methods by which payments can be made under the Gift Aid Small Donations Scheme.

With this it will be convenient to discuss the following:

Amendment 2, in clause 2, page 2, line 1, after “contactless”, insert “or SMS message”.

Amendment 3, in clause 2, page 2, line 6, at end insert

“, or

(c) by an SMS message”.

Clause stand part.

Clause 2 amends the types of donations eligible under the small donations scheme to include those made by contactless payment. Only cash payments under £20 are currently considered eligible donations. The Opposition support the clause but we question why contactless payments have been singled out in that way.

Amendment 1 would widen the scheme to include donations by text, by cheque or via the internet. A survey carried out by the Charity Finance Group for the National Council for Voluntary Organisations, the Institute of Fundraising and the Small Charities Coalition found that only 36% of the 340 charities surveyed wanted contactless payments to be included in the scheme. It also found that cheques were the method favoured for inclusion: more than 75% of respondents wanted them to be included. Half wanted text donations and two thirds wanted one-off online donations to be eligible. The amendment, which would include all those methods, is supported by the organisations mentioned and by the Charity Tax Group.

The Government’s likely response is that the methods do not need to be included in the scheme because a gift aid declaration can be provided, but the same logic applies to a bucket collection of cash donations: the fundraiser holding the bucket would simply need to hand over a pen and a piece of paper and—voilà—they have a gift aid declaration. However, the point is that it is difficult, albeit not impossible, to get the declaration. Most people send a donation via text in a spur-of-the-moment decision. A follow-up text is then required to ascertain whether the donation is eligible for gift aid, and most people are not as responsive as we would like, so it makes sense to include donations via text in the scheme. As for cheques, I understand that someone who is able to sign a cheque is probably able to sign a gift aid declaration at the same time, but 75% of charities surveyed said that including cheques would increase the efficacy of the scheme for them, so I would be interested to hear the Minister’s reasons for not doing so.

Amendments 2 and 3 would include SMS or text messages in the scheme. For the same reasons that I have already outlined, we see the logic in tabling them and we support them. I hope the Minister will accept our amendment or explain more fully her reasons for not accepting it, but I will not press it to a vote.

We support the amendments. As has been stated, a number of charitable organisations have got together and have come back with a really comprehensive survey that says that charities are hugely in favour of such an approach.

The gift aid small donations scheme is a really good Government initiative that has done part of the job it was set up for, but we can see from the number of people making a claim that it has probably not done as well as was intended—it has not quite reached the number of claims that were expected. That is partly because the way the world works has changed: people are giving through other methods. I rarely put money in a bucket, but I quite regularly make text donations or online donations, and I am as guilty as anyone of not following up with that second text with my name and address for the gift aid. In a world that is moving forward, we need to consider that.

I understand the Government’s reluctance to take on cheques, but it has been really clear from the groups that have come forward, particularly church groups, that they receive an awful lot of their funding from small cheques. It would be much better for them if they were able to claim for cheques under the gift aid small donations scheme. Although that may seem almost a backward step, we need to ensure that the gift aid small donations scheme works as best it can, particularly for small charities that do not have the staff—the people power—to fill in all the forms, which is still a requirement. Widening the gift aid small donations scheme would make it better, particularly for small charities.

It is a pleasure to speak in this debate. I spoke on a similar clause four years ago when this Bill first went through Committee; I think that the hon. Member for Clwyd South was here as well. Looking back, many of the Members who served back then appear to have moved on to far greater things than I have, so they will not be repeating this debate.

It is worth looking back at the debate four years ago, when the topic was whether restricting the measures to cash was appropriate and whether we should include different technologies or different means of giving impulse donations for which getting a gift aid declaration is hard, in order to achieve the objectives of the scheme. The current scheme is worthy. It is meant to give a level of support equivalent to gift aid to small donations, in order to give hard-pressed charities extra money. It is regrettable that four years into the scheme, the amounts claimed are much lower than we thought. Ideas to help charities claim and achieve the £100 million that Government thought this would originally cost are to be welcomed.

Four years ago, I was perhaps a bit prescient on this point; I even referred to contactless payments in that debate. I thought that the world might move on, that cash would become less common and that we would all find different ways of donating, whether by making contactless payments on terminals or by clicking buttons in an app. The Bill risked becoming out of date quickly if we were not careful. I suggested at that point that perhaps the Government should take the power in the Bill to amend by statutory instrument the definition of “cash or cash equivalent” in that situation, so we could keep up to speed with technology and not have to keep coming back every few years to primary legislation to fix it.

Here we are four years on, trying to fix contactless payments. That is quite right, and I will happily support it. We have even included Android Pay and Apple Pay, again quite sensibly, but we cannot predict where we will be in four years’ time. How will impulse donations be made? Will it still be by text message, by app, by cash in a bucket or contactless payments, or will we have found some new technology, perhaps fingerprint swipe? It is hard to imagine where we will be in four years’ time. If we are to keep the Bill as effective as we want it to be, why not have that power available so that the Government can say quickly, “Let’s make a tweak here, and allow this to fall within the scheme”?

My hon. Friend is making lucid points with which I agree fully, but he recommends that Ministers could make a change through statutory instrument. Would he perhaps consider allowing them to make the change without a statutory instrument, maybe by short consultation or even ministerial decision? That would be liberalisation.

My hon. Friend is being quite generous as a Back Bencher, offering the Government more power than they want to take. I suppose that there would be spending issues if the Government generously expanded some new and risky technology and that Parliament might want to scrutinise that. I would prefer, in my perfectionist world, some order that undergoes parliamentary scrutiny, but I concede the argument he is putting forward.

The then Minister four years ago, who is now the Secretary of State for Communities and Local Government, the right hon. Member for Bromsgrove (Sajid Javid), was called a “dinosaur” for rejecting the Labour amendments. I am hoping that this Minister will not be called something like that today, given the liberalising approach that she is taking. The then Minister was not keen to accept the amendments, which were meant to apply to cash in order to help people who do bucket collections and so on, where one cannot get a gift aid declaration, as it is an impulse donation and people are not inclined to stop and give those details.

My argument for amendments 2 and 3 is that an SMS message is also an impulse donation. We see adverts on the TV where it says to text a number with “YES” or “FIVE”. If I do that, I do not provide them with any more information. It is a small, impulse donation. The evidence that we have from the various charity groups is that people do not make a gift aid declaration after doing that.

If we cannot tempt the Minister to accept amendments 1, 2 or 3, perhaps she will think on Report whether she can take the power to allow new ways of donating to be included in future, so that she can gradually evolve the scheme and put the extra money into achieving the objectives that we all share. Especially at this time of year, when British Legion volunteers will all be out doing great work shaking their buckets to collect cash, we want the scheme to be as effective as possible. I fear that, by being too restrictive on how donations qualify, we will not give more money to charities, as we all really want to.

It is a pleasure to follow the hon. Member for Amber Valley and other colleagues. It was a great joy to be here in 2012 when the first Bill on small charitable donations appeared. It is lovely to see that contactless donations have made it into this Bill. I am speaking in favour of amendments 1, 2 and 3 because it is important that we expand the methods available.

The recent briefing from the main charitable organisations—the Charity Finance Group, the Institute of Fundraising, the National Council for Voluntary Organisations and the Small Charities Coalition—has made it clear that, although the scheme has been welcome, it is not reaching the number of charities that it could. The briefing said:

“Only one quarter”

—or 21,300—

“of the charities that could have used the scheme”

—it puts that number at 84,000—

“are using it.”

Clearly, we need to do everything we can to support the development of the scheme, particularly with a new generation of donors, and to encourage and to support the new philanthropists who may be giving by text donation or in other forms.

At the Bill Committee last time around, I was intrigued by a great debate initiated by the hon. Member for Foyle (Mark Durkan). It was possible to include euros in the scheme at the time, although it was not possible to include contactless donations. I am glad that the situation regarding contactless payments has been remedied, but I cannot see the sense in saying that, in one of our great abbeys, churches or cultural buildings, the euro, dollar, yen or whatever may be included in the scheme, but not a simple, humble cheque written in sterling. To me, that does not make any sense. I hope that the Minister considers that point.

Another related point is that this scheme works rather well for churches—I presume it also works well for other faith groups—because many small churches are part of larger denominations. Often the denomination, the diocese or whatever is registered in terms of gift aid. My slight fear, and why I think we need to look at how we can enhance and expand the scheme, is about whether we have the same reach for other small charities, because with a small church or perhaps another small faith group, the registering—the formal bit, the gift aid stuff—has already been sorted out at a higher, larger level. I question whether the scheme always has the same reach for some of the smaller charities in other sectors.

I welcome the positive move on contactless donations but hope, in the same spirit, that the Minister can extend the scope of the proposals, as my hon. Friend the Member for Salford and Eccles and other hon. Members have suggested. It would be truly dreadful if we had to wait another four years to come back to the issue and to thank the Government for including these methods in the scheme.

I thank colleagues for that debate; some points were made by veterans of the previous Bill Committee and I will try to respond to them.

Clause 2 is about amending the meaning of “small charitable donation”. Amendment 1 would extend the gift aid small donations scheme to include donations made by cheque, online or by SMS. Amendments 2 and 3 would extend the scheme to include SMS donations.

The scheme was introduced to address a specific problem. That is at the heart of the debate. It is intended to allow charities and community amateur sports clubs to claim a gift aid-style top-up payment when it is not practical or feasible to collect a gift aid declaration, such as with street collections. It is not simply a lighter-touch alternative to gift aid. I think this is probably at the heart of our debate. The scheme exists to provide a similar outcome in situations where charities cannot realistically obtain a gift aid declaration, but the Government are clear that, if a charity can get a gift aid declaration and claim gift aid, it should do so. There are obvious reasons for that, as colleagues will appreciate. For example, there is no cap on gift aid, whereas there is on this scheme. For that reason, the Small Charitable Donations Act 2012 restricted the scope of the gift aid small donations scheme to small donations in cash—coins and notes. Although I understand entirely the motivation behind the amendments, they are actually contrary to the stated policy intention of the scheme.

I am struggling to understand why the way in which money is donated matters, given that there is a cap on the amount that can be donated anyway. I do not understand why whether a donation is made in cash or by contactless affects the integrity of the purpose of what we are trying to do.

We are keen to extend the scheme to cover contactless as well as cash payments, but as those who were here in 2012 will know, the scheme augments what we expect charities to raise through gift aid donations and covers means such as bucket collections that it is just not feasible to do gift aid on. The scheme is capped. We actually want charities to claim as much as possible under gift aid, which is not capped and allows them to form a long-term relationship with donors, as many of us probably know from charities that we give to. From the simple point of view of a charity, a wholesale switch to claiming through this scheme rather than gift aid would move it away from such long-term relationships and limit what it could claim. The scheme is meant to be a complement to gift aid, not an alternative or a lighter-touch version of it, and it would be to many charities’ disbenefit if that were the case.

As I explained on Second Reading, the small donations scheme was never intended to cover methods of donations for which well-established and well-used processes for claiming gift aid already exist, such as donations made by SMS or online. It may help if I explain in a bit more detail the processes for claiming gift aid on electronic donations. As the Minister for Civil Society, the Under-Secretary of State for Culture, Media and Sport, my hon. Friend the Member for Reading East (Mr Wilson), outlined on Second Reading, there is a simple and well-established process that allows charities to solicit gift aid declarations from donors who make SMS donations. I take the point that the hon. Member for Aberdeen North made about the way people respond to that, but it is a pretty straightforward and well-established process none the less. The donor sends a short code word to a six-digit number—for example, “Dog” to 606060—to donate a set amount through their phone bill. A reply is then sent to the donor thanking them for their donation and asking them for their name, house number and postcode and confirmation that they are a UK taxpayer. Once the donor provides that information, the charity can claim gift aid.

I think that is a straightforward process, and I hope that hon. Members would agree that, in circumstances such as that, where a donor provides a charity with a ready means of making direct contact—their mobile phone number—it is feasible for the charity to solicit a gift aid declaration, and indeed many charities regularly do so.

Does the Minister not recognise that people generally see text messages as the same kind of thing as putting money in a bucket? They do not want to hang around or have to give their name and address. The two things are really parallel.

I have been stressing the point that this scheme was intended to work where it is not practical to establish such a relationship—where someone is passing in the street, is in a rush or whatever, and throws something into a bucket. That is not the same as an SMS donation. Yes, the motivation for an SMS donation might be quite instantaneous—perhaps someone has seen an advert or a documentary, or there is an appeal on the television, or whatever—but in terms of someone’s ability to respond to the gift aid query that follows, the relationship has been established, because they have given their mobile phone number. That is not comparable with a person rushing past someone with a bucket outside the supermarket and throwing something in, where that person is already on their way and cannot be pulled back to fill in a form.

Given that the Government have not included SMS or internet donations in the Bill, can the Minister tell us what the Government are doing to help the charities that benefit more from those kinds of donations?

Of course. If my hon. Friend will let me, I will go through the process for claiming gift aid. I have talked about how that can be done via SMS, but let me talk about how it is done online and how it can be made even easier. Online donations require donors to take the time to enter their name and payment details. The only additional information needed for a gift aid declaration is an address. Donors are then encouraged to tick a simple box to add gift aid at the point of donation. Most of us would agree that in those circumstances it is entirely practical for a charity to ask a donor to complete a gift aid declaration. Many fundraising websites have invested substantial effort in making the process for adding gift aid as simple and straightforward as possible. I am sure it will continue to get even more simple and straightforward; we have all seen the astonishing simplification of the online charitable giving world over the past few years, and we have every reason to think that it will continue to progress.

The Government want to make it even easier for donors to add gift aid to donations made through digital channels; indeed, we recently published consultation draft regulations intended to achieve that. Work is already taking place on gift aid and to make it simpler to make an online donation.

Has the Minister had a chance to look at the consultation issued by the Treasury in 2013 on ways of improving gift aid donation? At paragraph 1.8 it set out all the reasons why there was such difficulty in getting a gift aid donation on an SMS donation, and it was looking to consult on ways to improve the situation. The Treasury view seems to have hardened since that consultation, which recognised the difficulties, but the fundamental issues that it raised—getting someone to pay to send a second text message and to type in details on their screen while they are out and about—have proven very hard to tackle, and the take-up has been nothing like as high as for other methods of donation.

I understand my hon. Friend’s point, but I think it relates to how we can make giving under the gift aid scheme even easier; I do not think it is as germane to the issue of how to improve the small charitable donations complement to gift aid. However, I hope what I have to say about contactless will be closer to what he wants to hear. I confess that my familiarity with paragraph 1.8 of the document he mentions is not as great as his own, but I will familiarise myself with it when I get back to the Treasury.

As I said, draft regulations about making gift aid donations through digital channels easier are out for consultation; I am sure Members will have a look at them. As for contactless donations, Members may ask how they differ from other forms of electronic donation. The difference is, quite simply, speed. On Second Reading, the Minister for Civil Society used the example of commuters passing through the ticket barriers of a tube station to demonstrate just how quick contactless technology is—we are all familiar with the Oyster scheme, for example. That speed of transaction means that donations collected using dedicated contactless collection terminals have a lot of the same practical issues as bucket collections. Individuals can donate as they pass by a fundraiser without having to stop and talk—it is almost instantaneous. Fundraisers therefore do not have the opportunity to engage donors and solicit gift aid declarations. That is not the case with other methods of electronic donation, as I have explained. A lot of work is going on, as the Minister for Civil Society said in the debate. Big charities are already showing significant advances in technology: their terminals replicate the simple cash payment as nearly as we can imagine, and we expect to see them in use pretty quickly—they are already being trialled.

As for cheques, I understand that they remain a popular method of payment, particularly among older people, but writing a cheque is not an instant process. The payer needs to write the date, the payee’s name and the payment value, both in words and numerals, and then sign it. Our contention is that, if a donor has the time to stop and write a cheque, it is not unreasonable to suggest that he or she also complete a gift aid declaration. We are all familiar with those small envelopes with the simple form on them; they have only a fraction of the number of items to fill in that a cheque has. Moreover, by writing a cheque the donor is already providing some of their details to the charity, so the additional information needed for a declaration is relatively small. We believe that it is entirely feasible to obtain a gift aid declaration in those circumstances.

Perhaps I can suggest a scenario that may help the Minister. If an elderly person in their home sees something on television for a charity and they then sign a cheque and put it in the post, with no details about how to contact them on it, how does the charity get back to that person?

I understand the point, but I am not entirely clear how adding cheques to the scheme would help. I want to stress that, if we make changes that encourage charities to switch to claiming under this scheme, essentially moving away from trying to claim under gift aid, that will severely limit—cap—the amount they can claim and it will also prevent them from forging a relationship with the donor. I accept that there might be circumstances, like that one, in which claiming under gift aid might be more difficult, but the answer is not to include cheques in the scheme. The scheme has always been about trying to replicate the instantaneous cash-collection type of situation.

I am still a bit confused. I appreciate the point about trying to keep people focused on gift aid as the preferred means of donation, but the whole purpose of the Bill—its raison d’être—is to ensure that the scheme

“operates effectively and flexibly for the greatest number of charities and Community Amateur Sports Clubs”,

and we have heard that only a quarter of the charities that could use the scheme are doing so at the moment. Surely, therefore, we should be encouraging more charities to use it, rather than pushing them towards gift aid only. This scheme is much more accessible and more suited to small and locally based charities.

We want the charities to use both methods, and there is evidence that many do. The scheme was always envisaged as a complement to gift aid, so it is not an either/or.

I totally accept that there is always more to be done in getting charities to claim gift aid. In the Second Reading debate, the Minister for Civil Society talked about the charities day that is coming up and I mentioned that HMRC has an outreach team, which has already delivered more than 600 sessions with charities, talking about how they can make the most of what is on offer. Of course we want to see donations maximised. It is true, as my hon. Friend the Member for Amber Valley said, that we have not yet reached the point we wanted to, but the Bill takes us a good way in the right direction.

We do not want to incentivise a switch to this scheme from gift aid. In any case, there is a matching requirement, so any charity would have to do gift aid to access this scheme. We will perhaps debate that matching requirement later. It is important. We mentioned it briefly in terms of the assurance process.

The Government’s position has always been clear. The scheme was introduced to provide a payment similar to gift aid when charities cannot obtain a gift aid declaration. If a charity can claim gift aid, it should do so, because that is more beneficial to them in the long term, for the reasons I have touched on. Robust processes exist to allow charities to claim gift aid on electronic donations and the Government will shortly introduce legislation to make doing that even easier. I hope, therefore, that Members will not press their amendments to a vote.

This is just a technical question. Does the definition of contactless include Oyster cards? Donations can be made using an Oyster card, by registering to pay a penny a journey, and unused funds can be donated to various charities around London. Would that fall within the definition of contactless or has it accidently been excluded?

We believe that the definition of contactless payment is wide enough to cover most likely developments but I am more than happy to look into that further before the next stage of the Bill.

Clause 2 amends, as we have discussed, the meaning of “small charitable donation”, enabling charities to claim top-up payments on donations received using contactless technology. Confirmation comes, as if by magic, for my hon. Friend: can the definition include Oyster cards? Yes it can.

As my hon. Friend knows, because he was one of the people discussing it, the matter was raised during the passage of the 2012 Bill. The gift aid small donations scheme was devised only four years ago, when contactless payment technology was in its relative infancy. At the time, the Government promised to look at the issue again during our three-year review of the scheme, and that is what we have done. I hope that the answer I have just given about Oyster cards shows that we are trying to future proof that aspect of it, as my hon. Friend predicted we would need to do.

The changes made by the clause reflect the fact that there is a clear trend away from cash transactions generally in society. They are declining, while contactless payments are increasing. We accept that, unlike other methods, such as cheques, text messages and online giving, which require donors to stop and actively engage with their chosen charity, contactless donations share many of the same limitations. People can just tap to donate and walk away without stopping to fill in a gift aid declaration. Indeed, in some of the situations in which we find bucket collections, it is almost impossible to stop and give a gift aid declaration. Contactless technology could be extended to augment bucket collections in busy tube stations—I imagine we would be less than popular if charities cause great queues to form in busy tube stations—so it is easy to envisage situations in which this measure would be useful. Accordingly, clause 2 amends the scheme, allowing charities to claim top-up payments on contactless donations of £20 or less.

Although the take-up of contactless technology among charities is relatively low, we have had feedback from the sector and have seen demonstrations suggesting that the cost of the technology is likely to decrease. Therefore, we anticipate that the take-up will increase. It is important, as the new technology develops—it is developing at a fast rate—and as the charity sector innovates, that the legislation continues to reflect the realities of the way charities are fundraising.

Clause 2 will allow charities to claim top-up payments on donations made using credit and debit cards, as well as services such as Apple Pay and Android Pay. The scheme will therefore become more flexible, and the charity sector will have more opportunities to claim top-ups on small donations of £20 or less. Including that measure in the scheme will not impose any significant extra burdens on charities that choose to use the technology. Charities will not be compelled to use contactless payments if they do not wish to do so.

Clause 2 will without doubt future proof the gift aid small donations scheme, as was discussed in 2012. It will ensure that charities continue to benefit in years to come as contactless technology expands. I commend the clause to the Committee.

I welcome the Minister’s comments. From the contributions from Members on both sides of the Committee, it is clear that there is an issue in relation to some charities being able to avail themselves of the gift aid scheme for the donations. If the Minister will not accept these amendments, will she consider launching a Government review of the gift aid scheme as a whole within the next six months to address the issues that have been raised today?

I reiterate the comments I have already made. This is about how we make this scheme, which was always designed to be a complement to gift aid, work. We are separately consulting on some changes to regulations around gift aid, which are designed to make it easier. We are seeing an evolution in the way people are able to donate. The question is whether the amendments are suitable for this scheme, which was always meant to deal with the issue of cash or cash-like transactions—instantaneous donations, bucket collections and donations from people walking by in the street.

I am unpersuaded that a review in six months’ time would add anything to the information we have before us today. It goes without saying that all these things remain under constant review, and this small donations scheme is no exception. It is kept under review in the Treasury—the Treasury keeps charity and tax law under review—and the team there has regular meetings with key stakeholders. The Minister for Civil Society also has extremely regular contact with stakeholders, and I look forward to having contact with charities on charity taxation.

I hope to persuade the hon. Lady that there are already data out there. HMRC publishes a national statistics package every year, which contains an absolute wealth of data, including on the total amount claimed under the gift aid small donations scheme. That is a transparent approach and it allows interested parties to monitor constantly the take-up and the effectiveness of charitable tax reliefs. Of course there is more to do to encourage charities to take up such measures, but the answer lies more in the things I mentioned—the outreach I talked about and the work being done by the Minister for Civil Society—than in some of the changes that have been proposed today.

I appreciate the fact that the Government have consulted on the gift aid small donations scheme and received a variety of responses. Does the Minister not feel that charities and charitable organisations have largely spoken with one voice in calling for the methods under the scheme to be increased, at least a bit? I understand that things are under review, but do the Government not accept that it might be better to listen to people on this matter? I acknowledge that they have listened with regard to some of the other things they are doing.

Picking up on the hon. Lady’s last point, the Government have listened. There is always a bit of scepticism in politics—I think we have all felt it—on whether things change as a result of consultations, but the consultation in question was really open. We consulted and asked for ideas and, as a result the responses we received, made further liberalisations in the regime. I think that we have listened and that I have given good reasons why we do not want to go in the proposed direction for this scheme because of the nature of what it was designed to do. We are looking to future proof it for contactless payments.

On gift aid more generally, as I said, changes are already being proposed and there is a lot more we can do to increase charitable take-up. I am unpersuaded that the issues being advanced in this debate are the ones that will aid take-up without having unforeseen consequences. Perhaps we will debate those issues later in our discussions of other clauses.

I have a quick question about texts. The Minister spoke about the issue being people engaging with a chosen charity, but I am not sure that it is. For example, one might give to an appeal for a dog that appeared on the television, but the charity might be a wider animal charity. The donor might be drawn to a very specific appeal, not to wider support for the charity. As donors, consumers and even voters are much more fluid in their loyalties, can the Minister not see a case for the support running with the donation, not necessarily the institution it is going to?

I understand entirely the point being made, but that takes us into issues relating to the motivation and behaviour of people as they give to charity. I think that relates more to the gift aid scheme itself than to the scheme at hand.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 ordered to stand part of the Bill.

Clause 3

Charities running charitable activities in community buildings

Question proposed, That the clause stand part of the Bill.

Clause 3 will simplify the small donations scheme, making it easier for charities to operate while ensuring that the scheme delivers its original policy intention. It is about issues relating to community buildings. The clause also makes certain of the community building rules requirements more flexible, to give more charities the opportunity to benefit from the scheme. Clause 4 ensures that, for “connected charities” running charitable activities in community buildings, the rules retain the flexibility to claim top-up payments under the gift aid small donations scheme in the way that best suits their circumstances.

To explain the background, when the gift aid small donations scheme was introduced in 2013, the core principle was that each charity should be entitled to one allowance to top up their gift aid claims in circumstances in which asking a donor to complete a gift aid declaration was really not practical. As we have just discussed, that might be during a bucket collection or church service. The intention was also, most definitely, that the rules should operate as equitably as possible and not give manifestly unfair results when similar charities doing similar things in a similar way just happen to be organised differently. For example, the rules treat “connected charities” as if they are one charity for the purposes of the gift aid small donations scheme. It might help if I explain that, put simply, broadly charities are connected when they are controlled by the same people and have similar objectives. In that way, a charity is entitled to one allowance. For example, the head office and the regional offices could together register as one single charity, or each office or local branch could register separately. I am sure that everyone agrees that that is a fair and necessary rule.

Charities that regularly carry out charitable work in local communities are able to claim community buildings allowances in addition to the one core or main allowance. We want to ensure that, where a charity has a presence and is engaged in valuable charitable activities in our communities, such as in a church or village hall, it may claim a top-up allowance in respect of the local donations. Again, I do not think that anyone would argue that that was unfair. However, we have come to realise that the rules as cast do not always give the outcome that the Government want, or deliver on the intent of the scheme.

Some charities are able to claim many more allowances than others simply by virtue of the way in which they are structured, which is different, even though they might be carrying out similar activities in a similar way to the others. That disparity is acknowledged by the overwhelming majority of charities that can benefit from double allowances, as is the need to rectify the problem to restore the original policy intent.

The changes made by clause 3 will therefore make it clear that charities may claim one allowance, currently set at £8,000, or a community buildings allowance for each community building, with a maximum allowance for each building being £8,000. For example, therefore, a charity with three community buildings will, assuming that it has collected enough donations, be able to claim a top-up on £8,000 in respect of each of those community buildings. It will not, however, be able to collect an additional allowance in respect of any donations collected by its head office. That change will remove the scope for some charities to be able to double-claim allowances.

In making the change, we are adopting the approach that many respondents to the consultation suggested both as a way to ensure equity of treatment, and as a simplification of the scheme. In addition to simplifying the operation of the rules, the clause also makes the community buildings rules much more flexible and generous. At the moment, only donations actually made in the community building while charitable activities are being carried out count towards the community buildings allowance—that is, the amount of donations on which top-up payments may be claimed.

The Government, however, recognise—as I am sure we all do—that many charities carry out charitable activities in a community building, but collect donations to fund that valuable work outside the building itself, such as in collection tins in the local area. One hon. Member at least was taken back to his bob-a-job days with the scouts by our debate, but that is a perfectly good illustration of what we are talking about.

To enable charities in that position to get greater benefit from the scheme, therefore, clause 3 will allow donations made in the local authority area in which the building is situated to count towards the community buildings amount. As might be expected, a donation may only count towards one community buildings total, but the clause makes it clear that if a donation could be counted towards more than one community building amount—for example, if the charity had more than one community building in a local authority area—then, unless the donation was actually made in the building, the charity may decide to which building it is allocated. That means that charities with multiple community buildings will always be able to make best use of the total allowances available to them.

As I have explained, charities may claim one core allowance, or a community buildings allowance for each community building. They may claim whichever is more beneficial to them—that is what we want them to do. To ensure that the process for claiming top-up payments for charities is as straightforward as possible, a charity that is not connected with any others and collects less than £8,000 in small cash donations in total will not have to make a distinction between community buildings donations and other donations—a donation made anywhere, including within the community building, will simply qualify for the core £8,000 allowance. That will make things much easier for very small local charities to claim.

In practice, the Government anticipate that the vast majority of connected charities will be better off claiming under the community buildings rules, because connected charities are to be provided with an £8,000 allowance for each building, rather than a single £8,000 allowance to be shared between the group. So we have made that the default position. By designing the rules in that way, the vast majority of connected charities will automatically receive the most beneficial allowance.

Clause 4 will make life easier for most connected charities. They will simply collect up to £8,000 in or around their community buildings and submit a claim via HMRC’s Charities Online service, and a top-up payment will be paid into their bank account. However, we want the small donations scheme to be successful and for connected charities to have the freedom of choice to claim whichever allowance is more beneficial to them as a group. Where it is more beneficial for a group of connected charities to share a single core allowance, they may elect to do so by notifying HMRC. Where none of the connected charities in a group runs charitable activities in a community building, the amount on which allowances can be claimed would be calculated as it is currently. All small donations received are pooled and shared between the connected charities within the group. HMRC will be developing clear and detailed guidance in collaboration with the charities sector to help charities to determine how the new rules will apply to them, and how they can best use them.

To summarise, clauses 3 and 4 restore parity of treatment for comparable charities, and so deliver a fairer outcome. Charities can claim under one or other element of the scheme, but not both. Charities with community buildings have the freedom to claim top-up payments under the gift aid small donations scheme in a way that best suits their individual circumstances. For many charities, the rules will be simpler to operate and, given the relaxation of community building rules, more generous.

I shall try to keep my comments brief. Clauses 3 and 4 relate to the community buildings rule. Additional top-up payments may be made to those charities that meet and collect small cash donations in a community building. Every charity is entitled to an £8,000 a year allowance. Charities that carry out charitable activities in one or more community buildings can claim additional top-up payments of £8,000 per building subject to certain criteria. As the stewardship comprehensive guide to the scheme explains:

“A community building is a building, or part of a building, to which the public or a section of the public have access at some or all of the time.

So, a building which is kept locked other than at the times that Sunday services are held will qualify, provided that the public have access to it when it is open for public worship. Equally, if a church rents space in a local community centre on a Sunday morning, for the purpose of Christian worship, provided that the public have access to it, the use by the church on a Sunday will mean that the parts of the community centre used exclusively by the church will qualify as a community building.”

The community building is eligible if the charity carries out charitable activities on six or more occasions in the tax year with a group of at least 10 people. Clauses 3 and 4 would make a series of changes to the rules governing community buildings. Clause 3 would allow a charity to claim up to £8,000 from small donations raised anywhere, or up to £8,000 from donations collected from each community building it has. In the latter case, donations would include those made in person in the local authority area in which the community building is situated. Clause 4 affects the rules for connected charities making claims under the scheme where one or more of the charities run charitable activities in a community building. The House of Commons Library briefing paper summarised the change, stating that a group of charities will be entitled to claim

“up to £8,000 small donations made in the local authority area in which each community building is located.”

Alternatively it would be able claim

“up to £8,000 small donations made anywhere in the UK.”

As the first would generally be more beneficial, that would be the default option. The Opposition are very happy to support these changes to the rules governing community buildings. However, the Charity Tax Group has raised one point. It has called for a review of the requirement for there to be at least six events a year in a community building, and that they must be attended by at least 10 people. The group said that the rule is “arbitrary” and “impractical” for many charities, especially those in isolated community buildings or that have peaks in use, for example. Could the Minister use this opportunity to address the Charity Tax Group’s concerns about that rule? Other than that point I have no further comments.

The issue is really about the balance that we are trying to achieve. It is about trying to ensure that we keep a light touch in terms of what we ask of people claiming under the scheme. We feel that a reasonable balance is struck by the requirement that charities must carry on their charitable activities six times a year and, as the hon. Lady said, to be attended by at least 10 people. Most charities that are regularly active in most communities should be able to meet the requirements. It is not so generous that it is easy to contrive to meet it, and this is the issue. There will be other opportunities, in our debate on the Bill, to talk about striking that balance, but it is important to remember that protecting our precious charities means ensuring that we do not allow the rules to be so easily circumvented that abuse is widespread and that charities and the sector attract criticism for it.

We feel that this is a reasonable balance to strike. It is a light-touch requirement, but it is important to ensure that people do not contrive to work around it.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.

Clause 5

Childcare payments

Question proposed, That the clause stand part of the Bill.

We now change tack slightly. The second issue addressed by the Bill is childcare payments. Clause 5 will make a number of minor, technical amendments to the Childcare Payments Act 2014, which introduced a new Government scheme to provide tax-free childcare. We had a broader debate about childcare on Second Reading, but I make it clear to the Committee that these are technical amendments to ensure that the scheme works for the benefit of parents who claim financial support for their childcare costs. I will first explain how the tax-free childcare scheme will work and then explain the changes and why they are needed.

Tax-free childcare will support working parents and help with the costs of childcare, enabling them to go out to work or to work more. Parents will be able to set up a childcare account online, deposit money into their account and receive a 20% top-up from the Government to pay their childcare providers. For every £8 a parent pays towards their childcare costs through the account, the Government will provide a top-up of £2. Parents will be able to receive up to £2,000 of support towards childcare costs of up to £10,000 per child per year, up to the age of 12. That support will be doubled for parents of disabled children, who are entitled to up to £4,000 top-up on childcare costs of up to £20,000 per year, up to the age of 17.

Tax-free childcare is digital by default. Parents first apply for and then use their childcare account online, although non-digital routes will of course be provided for those unable to use the default digital form. HMRC will check a parent’s eligibility for tax-free childcare. Parents will then be able to open and pay into a childcare account for each of their children, and the Government will top up the account. Parents can then use their childcare account to pay for a regulated childcare provider.

We are ensuring that childcare accounts are as simple as possible for parents to operate, because we do not want to add to their burdens. Once HMRC has confirmed that a parent is eligible, the parent is entitled to use the scheme for a three-month entitlement period. Each quarter, parents must confirm their circumstances and that they still meet the eligibility requirements, with a quick online declaration for all their children at the same time. Tax-free childcare will be trialled with more than 1,000 parents later this year and gradually rolled out from early next year.

I speak as a father. My wife and I take advantage of exactly this scheme. Digitising the process once the employer has put it in place is very helpful, but will the Minister look at digitising the process that the employer follows to get the childcare vouchers registered initially? Most employers are still using the paper mechanism for that, which delays the system somewhat.

I note my hon. Friend’s point and will ensure that it is looked at. It relates to a different aspect of the childcare provision that the Government provides, but he neatly illustrates the point that we do not want the process for getting support for childcare to be onerous. Tax-child childcare, which is designed to be digital by default, is a move forward.

Will the Minister set out what conversations she is having with colleagues in the Department for Education about ensuring adequate places for children? She may be aware that the Public Accounts Committee has raised concerns about the number of childcare places available to parents. It is all good and well to put schemes in place to help parents, but we need to make sure that there are places for children to take up.

Although not directly germane to the Bill, I am happy to draw the hon. Lady’s remarks to the attention of colleagues in the Department for Education. I suspect that they have already noted the PAC’s reports—I think most of us as Ministers would take great note—but I will of course ensure that they see the point she has made.

To reassure the Committee, HMRC has been user-testing its systems with parents with regard to tax-free childcare. Over 400 parents have been consulted so far. That allows HMRC to improve the services it offers to parents. As a result of that user testing, the first change that the Bill proposes relates to the quarterly reconfirmation process. HMRC has the power to change the length and entitlement period to make parents’ online journey as simple as possible. At the moment, they can change the standard three-month period by up to one month, so entitlement periods of between two and four months can be set. The one-month rule does not allow reconfirmation dates for all of a parent’s children to always be aligned—for example, where a parent applies for a childcare account for an additional child at a later date, or if a new household is formed. If the application is made in the middle month of their existing entitlement period, then alignment for reconfirmation is not possible.

Let me give the Committee an example. Helen is returning to work after maternity leave for her second child, Jenny. She already has a childcare account for her first child, Iain. Her current entitlement period for Iain runs from January to March. She is returning to work on 15 February. Whether the first entitlement period for Jenny is shortened to two months or lengthened to four months, it will not align with that for Iain. Therefore Helen is faced with two online reconfirmation journeys a quarter instead of only one. This amendment to the Childcare Payments Act will allow entitlement periods to be varied to between one month and five months. That will allow HMRC to always give parents such as Helen a single reconfirmation for all her children.

I am taking the second and third changes made to the Childcare Payments Act by this clause together as they are very similar in nature. Both allow HMRC to set out what online forms parents should use when querying HMRC decisions. The first does this for ordinary review requests; the second does it for requests made outside the normal time limits. Parents can query any HMRC decision that adversely affects them, for instance a decision that they are not eligible or a decision to impose a penalty on them. If they remain unhappy after the review they can appeal to an independent tribunal. As I have set out, tax-free childcare is a digital-by-default system. Parents apply to open childcare accounts, and then use those accounts, via online forms set out by HMRC for that purpose.

These amendments give HMRC the power to specify in regulations the online forms to be used by parents when requesting a review of any HMRC decisions. That will allow tax-free childcare to be consistently digital by default across the full service. Regulations under these powers will provide the same safeguards for those unable to interact digitally with HMRC as in-scheme regulations. The safeguards allow those unable to interact digitally to get the same service through other means, which is important. The safeguards are in regulation 22 of the Childcare Payments Regulations 2015.

In conclusion, these are minor, technical amendments to the Childcare Payments Act 2014 that will allow HMRC to improve parents’ experience and the consistency of tax-free childcare. I therefore urge the Committee to accept that the clause should stand part of the Bill.

I will keep my comments brief. Clause 5 relates to the Government’s tax-free childcare scheme and makes minor changes to the Childcare Payments Act 2014, which is the legislative basis for the scheme. First, it would allow HMRC to vary the entitlement period in certain cases by two months rather than one, as currently stated in the legislation. The entitlement period refers to the period of time after which parents must confirm that they still meet the eligibility criteria. Typically this must be done quarterly; however, HMRC can vary that in certain cases. Clause 5 changes this variable amount to two months, to

“enable alignment of eligibility periods for additional children when parents already have another child in the scheme.”

We certainly welcome these proposals.

The other change relates to parents who want to apply for a review of a decision made by HMRC that affects them, or who wish to do so outside the usual time limits. Normally that must be done within 30 days of being notified of the decision, although that timeframe can be extended. The clause also allows regulations to be made to specify the form and manner of such applications. I believe that the Government’s intention is to allow such applications to be made digitally, but perhaps the Minister will confirm that.

These are technical changes, and the Opposition do not oppose them. However, we have significant concerns about the tax-free childcare scheme more broadly. I will not say more about that now as we are debating the finer points of the Bill, but we will perhaps revisit that at a later stage.

I will of course draw the hon. Lady’s wider comments about childcare to the attention of the relevant Ministers.

I feel that as someone who is likely to be using the tax-free childcare scheme for eight or nine years, it is sensible for me to make some comments. The current childcare voucher scheme is quite cumbersome—particularly given the paper methods that are used—and difficult for people to access, so I am pleased that the Government have listened to comments about the need to change how parents can access the scheme and ensure that there is consistency. I am pleased that the Government have piloted online access and listened to parents about making changes to that.

I have a couple of questions. First, I would like to check that the Minister is committed to ensuring that during the scheme’s roll-out, which I understand will happen next year, it is kept under constant review and feedback from parents is looked at. A relatively small group of 400 or 1,000 parents may not cover all the circumstances that we might see once the scheme is completely rolled out, so it would be useful if the Government were to continue in listening mode, and I would very much appreciate that assurance.

My other question relates to the conversations about the scheme with the Scottish Government. At the SNP conference at the weekend, announcements were made about changes that the SNP Government will make to some of the ways in which parents in Scotland can access childcare. What discussions have the UK Government had with the Scottish Government about how this Government’s new tax-free childcare scheme will link into the Scottish Government’s consultations on and proposed changes to the types of childcare that parents can access with their free hours? The Scottish Government are looking at making changes to the flexibility of the free hours that are provided to parents in Scotland and the settings that parents can access with that childcare provision. How will that scheme in Scotland link to the tax-free childcare scheme? Have the UK Government had any conversations yet about that with the Scottish Government? If not, will they commit to doing so?

I thank the hon. Lady for her comments. Of course we want the tax-free childcare scheme to work for parents. It is designed to make their lives easier, and that must be central to the way we approach the roll-out, which will be gradual, robust and extensively trialled with a variety of parents, to ensure that we replicate as many different circumstances as possible, as she said.

On the hon. Lady’s second point, we always deal with issues that relate to the devolved Administrations as appropriate. I will look at her broader point about how different childcare policies interact, but I do not think that that is directly relevant to the clause. In general terms, I reassure her that we are always assiduous in ensuring that where there are issues of interaction with the devolved Administrations that pertain to Bills, those are sorted out at official level ahead of proceedings such as these.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Extent

Question proposed, That the clause stand part of the Bill.

Clause 6 provides that the Bill extends to England, Wales, Scotland and Northern Ireland. Both the gift aid small donations scheme and the tax-free childcare scheme apply to the UK as a whole. The Small Charitable Donations Act 2012 included a provision to make the gift aid small donations scheme an excepted matter for the purposes of the Northern Ireland devolution settlement. A legislative consent motion was approved by the Northern Ireland Assembly in November 2012, providing consent for the UK Parliament to amend schedule 2 to the Northern Ireland Act 1998, to make the scheme an excepted matter. No legislative consent motion is required from the Northern Ireland Assembly.

Following a legislative consent debate in 2014, schedule 2 of the Northern Ireland Act 1998 was amended to make the childcare payments scheme an excepted matter for the purposes of the Northern Ireland devolution settlement, so the scheme applies in Northern Ireland in the same way as in the rest of the UK. No legislative consent motion is required from the Northern Ireland Assembly.

The Childcare Payments Act 2014 at section 74 defines the extent as England and Wales, Scotland and Northern Ireland. In the view of the UK Government the provisions of the Bill are not within the legislative competence of the Scottish Parliament or the National Assembly for Wales, so that no legislative consent motions are required.

Question put and agreed to.

Clause 6 ordered to stand part of the Bill.

Clause 7

Commencement

Question proposed, That the clause stand part of the Bill.

The clause simply provides that the changes to the gift aid small donations scheme will take effect from 6 April 2017. This will allow charities to benefit from the changes at the earliest opportunity. Changes to the tax-free childcare scheme will take effect two months after the Bill receives Royal Assent.

Question put and agreed to.

Clause 7 ordered to stand part of the Bill.

Clause 8

Saving and transitional provision

Question proposed, That the clause stand part of the Bill.

Clause 8 makes minor technical changes to ensure that a charity that has merged with another before 6 April 2017 does not inadvertently lose an opportunity to claim top-up payments for an earlier tax year as a consequence of the removal of two of the eligibility criteria from that date.

I explained earlier that the Bill makes changes to the eligibility criteria for claiming top-up payments under the small donations scheme. I explained that currently charities must have a gift aid history before they can claim under that scheme; in other words, they must have made a successful claim in two out of the previous four tax years.

Currently, if a new charity has taken over the activities of one or more charities, it may apply to HMRC for the gift aid history of the old charity to be taken into account for the purposes of the small donations scheme. If certain criteria are met—the old and new charities having similar purposes, for example—HMRC will issue a certificate that allows the new charity to claim top-up allowances on the strength of the old charity’s gift aid history. In other words, those rules ensure that when a new charity takes over an old charity it is not automatically denied access to the gift aid small donations scheme because it cannot meet the eligibility requirements.

As Members have heard, the Bill will abolish the two-in-four eligibility criterion and the need for new charities to have a successful gift aid history, so the merger rules will largely become redundant from 6 April next year. However, a charity may have taken over the activities of an old charity before April 2017 and want to take advantage of the merger rules to claim top-up payments under the scheme for an earlier tax year.

The changes made in clause 8 therefore retain the merger rules in their current form for cases in which a charity has taken over the activities of another, or more than one other, before 6 April 2017. The time limits for making an application to HMRC for the merger provisions to apply mean that a merger could take place before 6 April 2017, but either the charity has not made its application before that date or the charity has made its application but it has not yet been accepted by HMRC. The transitional provisions included in the clause will ensure that applications may still be made by a charity, and accepted by HMRC, in respect of mergers before 6 April next year.

The practical implications of the clause are obviously time-limited, because they apply only to mergers pre-April 2017. Nevertheless, without the clause, some charities that merged before that date may unexpectedly lose their entitlement to top-up payments.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9 ordered to stand part of the Bill.

New Clause 1

Abolition of Gift Aid donations threshold

“(1) The Chancellor of the Exchequer must carry out an assessment of the impact on charities and Community Amateur Sports Clubs of amending the Gift Aid Small Donations Scheme so as to remove the 10% Gift Aid donations threshold that must be met in order to access the Gift Aid Small Donations Scheme, including an assessment of the differential impact on different sizes of charities and Community Amateur Sports Clubs concerned.

(2) The Chancellor of the Exchequer must lay a report of the assessment before the House of Commons within six months of the passing of this Act.”—(Kirsty Blackman.)

Charities and CASCs must make Gift Aid exemption claims on donations received in order to make a claim under the Gift Aid Small Donations Scheme. The total Gift Aid donations must be at least 10% of the amount of the small donations on which top-up payments are claimed. The new clause would require the Chancellor to assess the impact of abolishing this requirement.

Brought up, and read the First time.

With this it will be convenient to discuss new clause 2—Review of anti-fraud measures in relation to Gift Aid Small Donations Scheme

“(1) The Chancellor of the Exchequer shall, within six months of the passing of this Act, publish an assessment of the efficacy of anti-fraud measures designed to regulate the Gift Aid Small Donations Scheme, including, but not limited to, the Gift Aid donations threshold.

(2) The assessment shall have particular reference to the efficacy of the matching requirement.”

This new clause would require the government to publish an assessment of anti-fraud measures designed to regulate the Gift Aid Small Donations Scheme.

I appreciate having the opportunity to move the new clause. Two of the three pieces of evidence that the Committee accepted today strongly support its inclusion in the Bill, one from the Churches’ Legislation Advisory Service and the other from the Charity Tax Group. The other submission is not against the new clause, it just does not mention it. As was mentioned earlier, a paper produced by the National Council for Voluntary Organisations, the Charity Finance Group, the Institute of Fundraising and the Small Charities Coalition says that it is vital that the matching requirement is changed or removed.

I take Members back to when the gift aid small donations scheme was first brought in. I was not present, but the Library has kindly produced a briefing that covers some of the matters that were discussed, and particularly the matching requirement. The right hon. Member for Bromsgrove (Sajid Javid) was the Minister at the time, and I want to quote what he said in the course of the debate on that legislation. Government amendment 30 was added to the Small Charitable Donations Bill, and it allowed the Government to make changes to the matching requirement. He said:

“It will allow us to remove the matching provision entirely…Even so, charities would always need to claim some gift aid in each year to ensure that they can claim under the scheme…It is something that many charities have asked us to introduce”.—[Official Report, 26 November 2012; Vol. 554, c. 98.]

So back then, charities were in favour of flexibility in the matching requirement and argued for it, and ultimately, the Government accepted that.

Having read the comments of Members at that time, I think the reason for that amendment was that the figures are arbitrary. The gift aid small donations scheme was amended fairly heavily during its progress through Parliament, particularly in relation to the matching requirement. When the scheme was introduced, it was suggested that top-up payments should be claimed only for amounts up to £5,000, but that was increased to £8,000. It was also suggested that the ratio of claims through the small donations scheme to gift aid claims should be 1:1 to begin with. The Government moved on that and changed the ratio to 10:1. Both those figures are fairly arbitrary, and the fact that the Government moved so dramatically shows that the figures are not necessarily set in stone.

Small charities have to receive £800 in donations under the gift aid scheme in order to claim the maximum allowance under the gift aid small donations scheme. Some very small charities will not receive £800 in donations that they can claim under the gift aid scheme, but they might receive £8,000 in very small donations, whether through church collections, people writing cheques or people making contactless payments. Unless they have that matching £800, they cannot claim the full allowance under the scheme.

The new clause, which is in my name and is supported by my hon. Friend the Member for Glasgow Central, would get rid of the matching requirement. It asks the Chancellor of the Exchequer to carry out an assessment. Because the change does not need to be made under primary legislation, the Government can carry out the assessment and make the change without being required to bring the matter back before the House in the spectacular way that they have to do with some other things.

Our proposal is widely supported by charities and would very much help the smallest charities, which feel strongly about it. As Members of all parties have stated today, take-up of the scheme has not been as high as expected. I argue that that is because some of the smallest charities are not able to manage the paperwork that is required.

I am not suggesting that we get rid of the requirement to claim gift aid in general. It is reasonable, given the Government’s desire to prevent fraud, that they have charities make at least one claim and fill in the full version of the forms. It is not, however, reasonable for the Government to expect the smallest of charities to go through that cumbersome process to claim the full amount of £800 in gift aid on small donations. That view is strongly supported by the organisations that have taken the time to write to us.

I intend to press the new clause to a vote. I understand that the Government might not want to accept it today, but I would very much appreciate it if they would seriously consider before Report the fact that a 10:1 ratio is possibly not the right arbitrary level. If they will not consider abolishing the matching requirement, will they consider making the ratio 20:1 or 50:1? That would be hugely beneficial to the smallest of charities, which benefit most from the gift aid small donations scheme and do not have the people power to fill in many of the relevant forms. I want them to continue to fill in forms, but not so many.

New clauses 1 and 2 both get to the most important issue for the charity sector: the so-called matching requirement. The requirement is that to make a claim under the small donations scheme, a charity must receive a certain amount of gift aid donations in the same tax year. The total of eligible donations on which a charity can claim a top-up payment is restricted to an amount between equal and 10 times the net donations on which gift aid is claimed for the year.

New clause 1 would require the Government to carry out a review of the impact of abolishing the matching requirement within six months of the passing of the Bill, and Labour’s new clause 2 would require the Government to conduct a review into the efficacy of anti-fraud measures designed to regulate the gift aid small donations scheme, with particular reference to the matching requirement. On Second Reading, the Minister said that the requirement is

“to protect from fraud the small donations scheme, which has substantially fewer record-keeping requirements than gift aid—an important factor that was looked at when the scheme was first designed back in 2012. It is by retaining the rule that donations under the scheme must be matched with gift aid donations that we best can do that.”—[Official Report, 11 October 2016; Vol. 615, c. 215.]

However, as far as I am aware, she did not produce any evidence that the matching requirement is an effective anti-fraud measure.

As we have heard, the sector says that the requirement is a huge barrier for many small charities. They would like it to be significantly reformed, if not scrapped entirely. For instance, the Churches’ Legislation Advisory Service has suggested extending the requirement to 20:1. Given the Government’s reasons for not proposing any amendments to the requirement, the Opposition think that we should simply have a chance to see the evidence that the requirement works.

We agree, of course, that preventing fraud in the scheme is of paramount importance, but if the measure is simply adding a layer of red tape and is not effective, the Government should review it. The Charity Finance Group has highlighted the fact that only 275 reports of suspicious activity were shared between HMRC and charity regulators in 2015, which represents a rate of one suspicious activity per 500 charities. The group considers that to be a sign that fraud in the scheme is not of a high enough level to justify the effects of the matching requirement. That might well be the case, or it could be that the requirement is an effective caveat to the scheme, but we would only know that if there was a publicly available assessment of the effectiveness of all the measures in the scheme designed to combat fraud and of where the requirement sits within that. I can see no reason why the Government would not want to carry out such an assessment, and I hope that the Minister will accept our new clause 2, or work with us to table a Government amendment on Report that deals with any issues or concerns with our wording.

Finally, I would welcome the Minister’s comments in response to evidence produced by the Charity Finance Group, which welcomes the intention behind our new clause but believes that the Government should focus on increasing punishments for those who commit abuse and providing more opportunity for charities to report on suspicious organisations.

As the hon. Member for Aberdeen North said, new clause 1 would require the Chancellor to lay before the House an assessment of the impact of removing the gift aid matching requirement within six months of the passing of this Act. New clause 2 would require the Chancellor to publish an assessment of the efficacy of the scheme’s anti-fraud provisions in the same period.

I should start by saying that I welcome the cross-party consensus on the importance of protecting the gift aid small donations scheme, and charitable tax reliefs more generally, from abuse. Indeed, I completely agree with the shadow Minister, the hon. Member for Salford and Eccles, who said on Second Reading:

“We must make sure that any loosening of the rules for access to Government grants or tax reliefs does not provide a further incentive for tax avoiders, albeit a small minority, to set up a charity.”—[Official Report, 11 October 2016; Vol. 615, c. 220.]

She was exactly right to draw our attention to that. The Government also agree with the hon. Member for Bootle (Peter Dowd), who said during his closing remarks on Second Reading that

“it is vital that sufficient safeguards are in place to prevent fraud when Government funding or tax breaks are provided, as in this case, to the charity sector. I think that sentiment would get cross-party support.”––[Official Report, 11 October 2016; Vol. 615, c. 247.]

Indeed, I think that sentiment does have cross-party support.

Let me say a little about fraud in the charity sector, which is relevant to the new clause. None of us likes to contemplate it or talk about it, but sadly it exists. As the Under-Secretary of State for Culture, Media and Sport, my hon. Friend the Member for Reading East (Mr Wilson), said on Second Reading,

“it is an unfortunate fact that unscrupulous individuals seek to exploit charitable status for criminal purposes.”––[Official Report, 11 October 2016; Vol. 615, c. 250.]

It might shock colleagues to hear that the “Annual Fraud Indictor 2016” document produced by Experian, PKF Littlejohn and the University of Portsmouth’s Centre for Counter Fraud Studies estimates that fraud costs the charity sector about £1.9 billion each year. The report also states:

“Fraudsters are fast, inventive, adaptable and willing to quickly exploit new opportunities.”

I am sure hon. Members will therefore agree that it is vital the Government make sure that any initiatives, no matter how well intentioned, have suitable safeguards in place to limit opportunities for abuse, particularly when those initiatives involve spending public money. Indeed, both the hon. Member for Salford and Eccles and the hon. Member for Bootle made exactly that point on Second Reading.

The gift aid matching requirement provides a deterrent for those who would seek to exploit the small donations scheme. A number of hon. Members have raised concerns about the matching requirement; we have heard them again today. A few hon. Members, including the shadow Minister and the hon. Member for Clwyd South, cited a survey by the National Council for Voluntary Organisations and others that suggested that the matching rule acts as a barrier to claiming from the gift aid small donations scheme, with 50% of respondents with an income under £10,000 wanting the matching rule to be removed or reduced. However, it is worth drawing the Committee’s attention to the fact that the same survey also found that only 5% of respondents claimed no gift aid at all, and just 10% felt that they did not claim enough gift aid to make claiming top-up payments worthwhile. Similarly, the Government’s own assessment found that 92% of charities claiming gift aid for the tax year 2014-15 claimed on donations of £500 or more, entitling them to the maximum small donations allowance, which at that time was £5,000. That is interesting evidence that for the vast bulk of charities, the matching rule is not a barrier.

I would put the burden of evidence and proof back on the Minister. This provision has existed for three years now. Does she have any evidence of its benefit or usefulness, either in promoting the use of gift aid or in reducing fraud? If there is none, then given the clear objection from the sector, I really do not see any benefit to it whatever.

First, I would argue that the matching rule has become more relevant because of the provisions in the Bill to simplify the scheme, for example the end of the two-in-four rule. Secondly, I have been sat here musing as I have listened to Members making their points about the need for me to prove that the rules are necessary. I cannot see how that can be done without first relaxing them and then having to report to the House that there had been large amounts of fraud, public money had been wasted and so on. In other words, the only way to prove it is to prove a negative.

I have already cited some evidence, and I will give some more. As appalling as the sad determination of some individuals to exploit charitable rules may seem to all members of the Committee, we have sufficient evidence across the range of charitable tax reliefs to believe with reasonable certainty that were any loopholes to be opened up, they would be exploited. It would be a sad situation if I had to come back to the House and say, “Actually, I was right. There has been a lot of fraud, we have lost a lot of public money. A number of small charities have had their reputations damaged as a result.” The evidence we have from the sector more broadly indicates that I am making a good working assumption that is well evidenced.

I am a bit concerned, because when we were here a few years ago the example we cited was the Cup Trust, where there was wide-scale evidence of fraud. We asked whether it was registered for gift aid and the answer was yes. I am concerned about linkage.

I appreciate that we are looking at is a review to do with gift aid six months after the Act comes into law, but in view of the changes made last time when we were told initially it had to be same for same—we ended up with something vastly different and vastly better—will the Minister look at those arguments? Even if the Government’s view is that there has to be some sort of matching, it need not necessarily be set at the current level. That is our big concern.

Two arguments are being advanced. One is that there should be no matching requirement at all. I am afraid I reject that for the reasons I have given, and I will try to provide more evidence. I understand the point that the hon. Member for Clwyd South makes and I understand that there was movement during the passage of the previous Bill with regard to the ratios. With all of these things it is sometimes about trying to strike a reasonable balance, and I think 1:10 is a reasonable number. It is an easy number from an administrative point of view and it keeps matters much more straightforward for the charities in question. I am glad however that she supports the principle that there should be a matching rule to avoid fraud. I will say a bit more about why we think that is important.

The Government’s own assessment found that 92% of charities claiming gift aid for the tax year 2014-15 claimed on donations of £500 or more. That would have allowed them to claim the maximum small donations top-up allowance, which at the time was £5,000.

It is worth adding that while the 8% of charities claiming on less than £500 of donations would not have benefited from the maximum small donations allowance because of how the matching rule operates, the vast majority would have been entitled to a proportion of that allowance. In fact, 98% of charities claiming gift aid in 2014-15 claimed sufficient amounts to receive a small donations allowance of at least £1,000. I submit to the Committee that with 98% of charities claiming enough to get an allowance of at least £1,000, the rules are not proving a barrier; they are being used and people are managing quite well with them. The figures do not support the assertion that the matching rule is a major barrier. Indeed, I think most people would say that it strikes the balance of reasonableness.

As I have said, the Bill is a simplification measure—it removes the two-year registration requirement and the gift aid history requirement—and leaves only the matching rule as the link between the gift aid small donations scheme and the wider gift aid scheme. The Government have always been clear that a link to gift aid is necessary to allow HMRC to carry out effective compliance activity. I ask hon. Members on both sides of the Committee to support that principle.

Does the Minister agree, in response to the concerns raised by the SNP spokesman, that the Government have done an awful lot to simplify the gift aid claiming process for charities? I speak as someone who has been involved in operating gift aid claims for charities for many years. The process now is incredibly simple in its online form, so it is not the burden that perhaps it was in the past.

I think that is right, and I thank my hon. Friend for that intervention. We are really trying to make this as simple and straightforward as possible, but we need some safeguards. That is why the matching rule is important. I would suggest that requiring HMRC to publish a detailed analysis of compliance activities and the efficacy of anti-abuse rules could be unhelpful. I would hate us inadvertently to provide a roadmap for fraudsters. If there was a requirement to publish that information, it would provide valuable information to that dishonest minority whom the Government are trying to root out.

I would like to reassure the Committee that HMRC works with charity regulators to ensure that charities are properly regulated, the abuse of charities is properly and robustly dealt with, and the tax reliefs claimed are used for charitable purposes. If a charity is suspected of fraud, HMRC will share that information with the Charity Commission, which can consider further action, including removal from the charities register. We have made it easier to report fraud. I hope that it goes without saying that all tax policy remains under constant review, and this scheme is no exception. The Government will of course continue to monitor the effectiveness of the small donations scheme, as they do with all charitable tax relief.

We are very keen to make sure that the good name of all those charities that do wonderful work at international, national and local level is not abused. I will give the Committee just one example. In May this year, three individuals were jailed for a total of 22 years for defrauding HMRC of £5 million in fictitious gift aid claims. I am afraid that there are more examples of large sums of money where that is true. Those people are out there and, as the report I cited earlier pointed out, they are very quick to spot loopholes, however well intentioned.

HMRC publishes a comprehensive national statistics package, to which I alluded earlier, which allows anyone to scrutinise the efficacy of the Government’s support for charities. However, requiring in legislation that the Government publish separate assessments within six months of the passage of the Bill is both arbitrary and unnecessary and, for the reasons I explained, in the case of one of the reviews it is likely to be impossible to prove what it seeks to prove. I therefore urge hon. Members not to press their new clauses to a vote.

Regarding the new clause that I tabled, I have asked the Government to undertake an assessment of the differential impact on charities of different sizes. As I have tried to make clear, both on Second Reading and today, my concern is particularly about the very smallest charities, some of which find that this is a barrier. I am slightly bothered by some of the conversation both today and on Second Reading. Perhaps I am naive, but I do not think that charities generally set out to defraud the Government. That is pretty unusual, and it bothers me how much of this conversation has been slanted towards concern about issues relating to fraud. I appreciate that some people try to commit fraud, but they are a small minority. It is only in relation to the largest amounts of money that we should be particularly concerned about that.

I want to clarify my remarks, which were principally centred on the fact that there are people out there who are fraudsters and who would seek to exploit loopholes in charity law and in gift aid rules. My comments were not focused so much on charities themselves being defrauders, although there have been one or two examples of this. Predominantly, this is about people exploiting charity law and the reliefs available in the same way that they exploit other loopholes.

I am really grateful for that clarification. I was concerned about the tone of some of the conversation that had been taking place. In relation to the new clause that I have tabled, I am asking the Chancellor of the Exchequer to look at the differential impact on different charities of removing the 10% matching requirement. The Government have made it clear, and it has been suggested by charities, that this could be changed to a different level of matching requirement.

The Government have accepted that this is a relatively arbitrary figure. It is good because it is a nice round number, but that is not necessarily helpful, particularly for the smallest of charities. I would very much appreciate it if the Government would consider accepting new clause 1, which looks at an assessment, and which would help those very small charities which most need this matching requirement to be removed.

Question put, That the clause be read a Second time.

New Clause 3

Scouts, Guides and Army, Navy and Air Force Cadet Branches to be exempted from connected charities rule

‘(1) Section 5 of the Small Charitable Donations Act 2012 is amended as follows.

(2) After subsection (5), insert—

“(5A) For the purposes of this Act, local Scout Groups, Guide Groups, Army, Navy and Air Force Cadet groups are not considered to be connected.”’—(Rebecca Long Bailey.)

This new clause would ensure that local Scout Groups, Guide Groups and Army, Navy and Air Force Cadet Branches are able to claim under the Gift Aid Small Donations Scheme individually, rather than being considered as part of single national charities for the purposes of the Scheme.

Brought up, and read the First time.

I beg to move, That the clause be read a Second time. New clause 3 would ensure that local scout groups, guide groups and Army, Navy and Air Force cadet branches are able to claim individually under the gift aid small donations scheme, rather than being considered as part of a single national charity for the purposes of the scheme.

We have received representations on behalf of those groups arguing that the current treatment under the scheme is unfair. Under the connected charities rules, those organisations are considered to be one charity. However, local organisations fund-raise independently and are independent from one another financially. The Charity Finance Group has suggested that the amount of top-up received by individual scout groups in particular equates to about 17p a year. The new clause would simply allow individual groups to make individual claims through the scheme.

According to the sector, that would improve take-up of the scheme and ensure that small local organisations, which were intended to benefit, are able to do so. I appreciate that there are probably many other organisations with comparable structures that would benefit from similar changes. New clause 3 is more of a probing amendment to try and tease out from the Government why they do not want to reform the scheme in such a way. Perhaps we can return to this issue in more detail on Report. I would welcome any moves by the Minister to review the position and propose an amendment on Report that would catch all similar organisations with comparable structures.

I dropped off my kids at beavers and cubs; and one of them is going to scouts. In this amendment, would the division apply to the 2nd Thorpe Bay unit, or would it apply to each constituent part, whether beavers, scouts, cubs, guides and so on?

The hon. Gentleman makes a very good point, and that is why I would welcome a review by the Minister of the proposal in the new clause. We need to catch more than what is simply on paper at the moment; the provision needs to go beyond the scope of local scout groups, for example. There are many other organisations that would benefit from being included individually in the ways I have proposed and I welcome comments on this point by the Minister. I also point Members to a note that they received this morning from the Charity Finance Group, which makes some helpful suggestions on this very point.

The new clause is designed to exempt scouts, guides and military cadet groups from the connected charities provisions of this Bill. We believe the new clause is not necessary.

The connected charities rules are intended to protect the gift aid small donations scheme from abuse and they work in conjunction with the community building rules to deliver fair and broadly equal outcomes for charities structured in different ways.

Without the connected charities rules, large charities would have a perverse incentive to splinter into groups of smaller charities to increase their entitlement to small donations allowances. I am sure none of us would want that to happen. However, it is important to make it clear that while connected charities are entitled only to a single shared £8,000 small donations allowance, they are still entitled to an £8,000 allowance for each of their community buildings.

The Government want the gift aid small donations scheme to be more flexible and more generous so that it can benefit a greater number of charities and donations. During the review of the scheme, we listened and HMRC became aware that the current rules did not deliver the desired outcome in certain circumstances. We received representations from local scout and cadet groups explaining that, while they welcomed the scheme and were entitled to a £8,000 small donations allowance under the community buildings rules, they were unable to take full advantage of it because most of their collections take place out in the local community—packing bags at local supermarkets, for example.

We listened and took this seriously, which is why the Bill will relax substantially the community buildings rules to allow charities to benefit from donations received outside their community building. As I said on Second Reading last week,

“among the many small, local civil society groups, the scouts and guides, the air and sea cadets and other local uniformed groups, in particular, will benefit significantly from this change and will be able to receive the support they deserve for the vital work they carry out in our communities”.—[Official Report, Small Charitable Donations and Childcare Payments Bill Committee, 11 October 2016; c. 217.]

I think this is a really important provision that deserves greater explanation from the Government. It goes much more widely, as my hon. Friend the Member for Salford and Eccles said. It should seek to include organisations, such as Age UK or Mind, which have much more devolved operational structures. For example, on the back of the loss of the steelworks in Redcar and Cleveland, the number of referrals to Redcar and Cleveland Mind went up by 93%. That charity relies almost entirely on its own local fundraising. That is an exact example of where the charity ought to be able to have a lot more freedom to raise money and keep its gift aid donations locally, rather than having to be part of a national structure. I implore the Minister to take this away and explore it much more widely.

I am fairly certain that the hon. Lady’s example will benefit from the Bill. At the moment, that is a good example of where a charity probably does not do fundraising in its premises, if it has a local office. If it fundraises in the local area through quizzes or events or whatever, it will now be entitled to claim against its community building for any activity in the local area. I will obviously double-check, but I think exactly that charity will benefit from the provisions in the Bill, for the very reasons the hon. Lady gives: they are people who have a base, but it is not usually the place where they fundraise. By contrast, when the original debate took place, the focus was on churches and cash donations within church buildings.

As I said at the outset, the new clause is unnecessary because the provisions in the Bill allow for what it proposes. The hon. Lady has neatly illustrated why we would reject it: it carves out a few selected charities, but we want the provisions to benefit a very broad range of charities, some of which are not named in the new clause.

Clause 3 achieves what Opposition Members are seeking to achieve but in a fairer way. It does not carve out a few selected charities, wonderful though they are, to benefit, but looks at how churches and other connected groups can claim more against their activities in a local area. The new clause is unnecessary and I hope that the hon. Lady will withdraw it.

I thank the Minister for her comments. Before we complete today’s proceedings, I would like to draw her attention to comments made by the Charity Finance Group this morning. It stated that “Scouts and so on often cannot claim under community building rules, because buildings have to be open to the public or a section of the public, some or all of the time. Their huts or barracks are often closed and unless they open up their buildings to the public during their activities or rent out part of their building for community activities, they will not benefit from this rule.”

To address that and deal with some of the issues we have just discussed, the Charity Finance Group has made a suggestion that HMRC could develop regulations and criteria to define local groups for the purposes of the Act, as it has done with other aspects of the gift aid regulations. Would the Minister give serious consideration to that proposal?

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Bill to be reported, without amendment.

Committee rose.

Written evidence to be reported to the House

SCDB 01 Charities Aid Foundation

SCDB 02 Churches’ Legislation Advisory Service

SCDB 03 Charity Tax Group

Higher Education and Research Bill (Thirteenth sitting)

The Committee consisted of the following Members:

Chairs: Mr Christopher Chope, † Sir Edward Leigh, Sir Alan Meale, Mr David Hanson

† Argar, Edward (Charnwood) (Con)

Blackman-Woods, Dr Roberta (City of Durham) (Lab)

† Blomfield, Paul (Sheffield Central) (Lab)

† Chalk, Alex (Cheltenham) (Con)

† Churchill, Jo (Bury St Edmunds) (Con)

† Evennett, David (Lord Commissioner of Her Majesty's Treasury)

† Howlett, Ben (Bath) (Con)

† Johnson, Joseph (Minister for Universities, Science, Research and Innovation)

† Kennedy, Seema (South Ribble) (Con)

† Marsden, Gordon (Blackpool South) (Lab)

† Milling, Amanda (Cannock Chase) (Con)

Monaghan, Carol (Glasgow North West) (SNP)

† Morton, Wendy (Aldridge-Brownhills) (Con)

† Mullin, Roger (Kirkcaldy and Cowdenbeath) (SNP)

† Pawsey, Mark (Rugby) (Con)

† Rayner, Angela (Ashton-under-Lyne) (Lab)

† Smith, Jeff (Manchester, Withington) (Lab)

† Streeting, Wes (Ilford North) (Lab)

† Vaz, Valerie (Walsall South) (Lab)

† Warman, Matt (Boston and Skegness) (Con)

Katy Stout, Glenn McKee, Committee Clerks

† attended the Committee

Public Bill Committee

Tuesday 18 October 2016

(Morning)

[Sir Edward Leigh in the Chair]

Higher Education and Research Bill

Clause 83

United Kingdom Research and Innovation

I beg to move amendment 246, in clause 83, page 51, line 23, after “Innovation” insert

“or, in Welsh, Ymchwil ac Arloesedd y Deyrnas Unedig,”

This amendment sets out the Welsh name for UKRI.

With this it will be convenient to discuss Government amendments 274 to 278.

It is good to have you in the Chair for the last day of our Committee’s proceedings, Sir Edward, to see us safely through to the end.

Amendment 246 is a minor amendment that places the Welsh language name for UK Research and Innovation on the face of the Bill. Amendments 274 to 276 are consequential and update the English and Welsh language versions of the Welsh Language (Wales) Measure 2011 to acknowledge the establishment of UKRI.

Amendment 246 agreed to.

Clause 83, as amended, ordered to stand part of the Bill.

Schedule 9

United Kingdom Research and Innovation

I beg to move amendment 330, in schedule 9, page 92, line 11 after “members” insert—

“(e) at least one member of the OfS Board with at least observer status”.

This amendment would ensure an interface between research and teaching.

With this it will be convenient to discuss the following:

Amendment 334, in clause 103, page 59, line 11, leave out “may” and insert “must”.

This amendment would ensure cooperation and information sharing between OfS and UKRI.

Amendment 333, in clause 103, page 59, line 12, after “functions” insert—

“(1A) The OfS and UKRI must cooperate with one another on—

(a) the health of disciplines,

(b) awarding of research degrees,

(c) post-graduate training,

(d) shared facilities,

(e) knowledge exchange and

(f) skills development”.

This amendment sets out where UKRI and the OfS must cooperate on issues at the interface between teaching and research.

Amendment 335, in clause 103, page 59, line 13, leave out subsection (2).

This amendment would ensure cooperation and information sharing between OfS and UKRI.

It is a pleasure to serve under your chairmanship on this last day, Sir Edward.

Because of the mysteries of grouping, these amendments are fairly far apart on the Order Paper, but fortunately they hang together. The amendments focus on co-operation and collaboration between research and teaching, specifically the relationship between the office for students and UKRI, which we have touched on previously. They spell out what the interface should be between teaching and research.

This question is probably as old as the hills. Ever since universities have been established, no doubt, people have been saying, “What on earth is he or she doing, doing all this teaching and no research?” and vice versa. The issue comes into particular focus after our lengthy discussions about the teaching excellence framework. In that process, reference is made to assessment of the research process. We are moving forward in general terms as well as in this Committee, and I think there is consensus across the Committee not only that research and teaching are of equal value, but that it is a mistake to put either into a silo. We would not previously have said that, even five or 10 years ago, but in general that is the position in the sector now.

The amendments draw on a wide series of comments that have been made about part 3 of the Bill by learned societies and the research and higher education communities. To be pedantic, we are considering the splitting not of the Higher Education Funding Council for England but of its responsibilities. As the Minister pointed out when we discussed this previously, HEFCE will be dissolved under the Bill. However, there is concern that the process of separating teaching and research—in this context, the Research England body—will mean that issues and activities at the interface of teaching and research, such as the health of disciplines, the awarding of research degrees, postgraduate training, the sharing of facilities, knowledge exchange and skills development, might not be effectively identified and supported.

There is no sense of a secret agenda; it is just a case of what can sometimes fall out if there are unintended consequences from perfectly reasonable regulation. I go back to what I and others have said about the weakness of the Bill, which was conceived entirely before the referendum and does not reflect changes since it took place. That is especially true in terms of the issues thrown up by Brexit. Of course one consequence of the referendum, as we all know very well, was a change of Government, a change of Prime Minister and, indeed, a change of Departments—the machinery of Government —that is almost but not quite as significant as the machinery of Government changes introduced in 2007 by Prime Minister Gordon Brown, when he split, largely on an age basis, responsibilities for apprenticeships and other elements between the Department for Education and the Department for Business, Innovation and Skills. That produced a situation, which continues after the latest changes, in which Ministers and shadow Ministers sit in two separate departmental and Opposition teams. The Minister sits in two teams. I sit more in one team than the other, but have to have a strong connection with the Department for Business, Energy and Industrial Strategy because of the research issue.

The concerns about the lack of effective identification and support for the list of things that I have mentioned have been intensified by the machinery of Government changes, in particular the division of teaching and research responsibilities between the Department for Education and the new or expanded Department for Business, Energy and Industrial Strategy. We cannot have an industrial strategy without skills or without higher education, or further education for that matter, so there will have to be that element of co-operation between the two Departments. Our concern, which is reflected in the amendments, is how that will translate and transfer into a strong interface between research and teaching, although what we are talking about will primarily be the responsibility of the Department for Education. I imagine that the Minister will comment on that. In amendment 333, we make specific suggestions about how the process might be accomplished. We do not claim copyright; the Royal Society and many other learned bodies and institutions made suggestions, but they are ones that we are happy to share with the Committee today as they probably cover the most important functions.

We have talked about the OFS and UKRI co-operating with each other on the health of disciplines, the awarding of research degrees and postgraduate training. I am sure that my hon. Friend the Member for Sheffield Central agrees with me that postgraduate training and indeed, the whole position of postgraduates and their future in detailed terms, have received relatively short shrift in the Bill. I hope that that will not be the case in the advice and guidance that will come. Postgraduates too, of course, will be keenly affected by the inter- connectedness of teaching and research, not least because many of them, in order to do research, end up having to do some teaching, although that is probably less prevalent here than in the United States. As someone who was doing postgraduate research and teaching at the same time, I do not think that is a bad thing. The ability to do both activities at the same time, provided they do not impinge on the postgraduate study, is very useful, not least in preserving some clarity of English when writing one’s thesis—but that is another matter.

The amendment proposes a mechanism by which this collaboration could be achieved. The Royal Society, as I am sure the Minister will be aware, has suggested that a committee on teaching and research should be established. I am sure the Minister will say it is not for us to dictate to UKRI, but it would be helpful to probe whether the Government are minded to say to the new body, its new chairman, chief executive and board members that this is something that ought to be high up in their in-tray. We also seek assurance that the requirement for the OFS and UKRI to co-operate will be included in governance documents for both organisations. Again, I am not expecting the Minister to give chapter and verse on that today, but we have in mind things such as operating frameworks, strategic plans and other relevant documents. No doubt that all sounds a little dry for breakfast on a Tuesday morning, but heavy fibre is good for us and that is why I am including it at this point in the proceedings.

The Wellcome Institute, which I am sure hon. Members are familiar with, has also offered thoughts in this area. Teaching and research are intrinsically linked, but that intrinsic link would be lost from higher education if the bond between them were broken. Clause 103 sets out the interactions between OFS and UKRI. Amendment 335 would ensure co-operation and information sharing between OFS and UKRI, strengthening the clause by replacing “may” with “must”—we are back to the old “may” and “must” scenario.

We see positive interactions between teaching and research responsibilities in many institutions, often most clearly in research-led undergraduate projects and modules, not least in the sciences. The Royal Society of Chemistry says:

“Bringing cutting edge research ideas into teaching helps ensure a dynamic and relevant curriculum. Close interactions with researchers can motivate students when considering their future in the chemical sciences. There is a risk that the separation of teaching and research in the new HE architecture will mean that the benefits of research informing teaching and learning practices could be lost. The current draft of the Bill allows for information sharing between the OfS and UKRI. It does not, however, require their cooperation unless directed by the Secretary of State”.

Other learned bodies and societies have contacted me and probably other members of the Committee to make similar points.

This issue is made more pressing because of the new machinery of Government structure and the shared responsibilities across the two Departments. That is why we suggest that the Bill be amended to provide that the OFS and UKRI must co-operate without being required to do so by the Secretary of State. Apart from anything else, the Secretary of State is going to have a hell of a lot in her in-tray—I am thinking of some of the other ground-breaking Government initiatives such as grammar schools and other measures that, by depute, would then fall to the Minister. I am sure the Minister would like to feel that this sort of thing can go ahead freely without him having to sign things off every other week. That is the principle, in a nutshell—a rather large nutshell—of our amendments to schedule 9.

I thank the hon. Gentleman for giving me the opportunity to explain further how the OFS and UKRI will work together on a range of issues relating to their respective remits. I appreciate the considered tone of his comments and observations. We understand that these matters are important and we have taken considerable care to try to address them when crafting the reforms and the Bill. I am happy to try to give some further clarification now as to how we see those two bodies working.

I assure the Committee that the Government are committed to the continued integration of teaching and research within the HE system. We believe the Bill reflects that and proposes safeguards to ensure joint working, co-operation and the sharing of information between the OFS and UKRI. Both organisations also have a statutory duty to use their resources in an efficient and effective way, meaning they will look for all opportunities to collaborate and share information.

On the specific points made by the hon. Gentleman, I will start with those relating to changes to the machinery of Government in July. We understand his concern about the potential impact of those changes, with the Department for Education now having responsibility for higher education but research policy remaining the responsibility of the Department for Business, Energy and Industrial Strategy. For my part, I am committed to my role across the two Departments and will be working closely with the two Secretaries of State and the heads of the two new organisations coming into existence through the Bill, UKRI and the OFS, to ensure a coherent approach and to maintain the continuity of day-to-day business.

As the Committee has seen, the Bill is supported by me, a shared Minister across the two Departments, and as the hon. Gentleman will see on the back page of the Bill, it also has important support from senior members of the Government. That provides significant continuity across the two Administrations we have seen since the general election, including the current Prime Minister, who supported the Bill in her former capacity as Home Secretary, and the current Secretary of State for Business, Energy and Industrial Strategy in his former capacity as Secretary of State for Communities and Local Government, and so on and so forth. There is significant continuity.

We entirely welcome not only that instrumental move across, but the move across of the individual concerned. I have always found the right hon. Member for Tunbridge Wells (Greg Clark) to be very forward thinking, and I think he will bring strength and hopefully some strategic vision to the Department for Business, Energy and Industrial Strategy.

I will not comment on any absence of strategic vision prior to my right hon. Friend’s arrival, which I would not deem to be a fair comment, but he will take the Department to further great heights.

The hon. Gentleman asked about postgraduates and postgraduate study and why there is not more on that in the Bill. The OFS and UKRI will work closely together to ensure there are no gaps between their respective roles. In a way, that is no different to the current situation in which an institution receives funding from a research council but is still subject to HEFCE’s regulatory oversight of the sector. Individual students will have little if any exposure to either body, as interactions primarily take place at an institutional level.

Turning to the hon. Gentleman’s questions around teaching and research and the so-called split, we see the research excellence framework, administered by Research England within UKRI, and the teaching excellence framework, overseen by the office for students, as mutually reinforcing quality processes. We will ask institutions to consider how they promote research-led teaching in their TEF submissions. Lord Stern’s recent review of the REF recommended that academics be rewarded for the impact of excellent research on teaching. We will ensure that deadlines and timescales have the flexibility to enable institutions to plan and schedule the demands of the two systems.

We see the TEF and the REF as providing a set of data that the Government, the OFS and UKRI can use to understand the sector better, ensure its sustainability and drive strategic decisions. The hon. Gentleman also asked about the governance of UKRI. I want to bring to his attention the letter I wrote to the Committee dated 10 October, addressed to the hon. Member for City of Durham, in which I gave further details about the governance of UKRI. I will not read it out now, but it is available to Committee members should they wish to look at it further. As I outlined in that letter, as these new organisations are created we will develop appropriate governance arrangements which embed joint working principles and practice in the framework documents for both organisations and, by way of a formal agreement between them, in a memorandum of understanding. The agreement will set out working arrangements between the two bodies, which are highly likely to include regular senior-level meetings that could be akin to a Committee.

Amendment 330 calls for a member of the OFS board to sit on the board of UKRI, with observer status at least. The suggestion of a shared board member with observer status is an interesting one, for which we are grateful. I would like to reflect further on that. I believe that the Bill as drafted provides a sufficiently strong basis for close working and collaboration between the two bodies. Critically, that will be at all levels of operation. It is not our view that a shared board member would be essential to bring about cohesion, or that responsibility for that should rest with a single board member. Through the provisions in the Bill there will be many ways in which the OFS, and UKRI members and wider staff will be able to collaborate and attend relevant discussions without needing to link formally the governance structures at board level. I can assure hon. Members that the Bill and, once written, the framework documents for both organisations will provide for good co-ordination. That will be at all levels, and will be relevant for all those processes where joint working will deliver on the duty for each to act in the most efficient, effective and economic way.

Amendments 334 and 335 would require joint working on any function of both organisations. As I have said, there are many areas where the OFS and UKRI will need to work closely together. However, I believe that it is unnecessary to be prescriptive in the Bill. The primary legislation must remain sufficiently flexible for the Government and the organisations to respond to the circumstances at the time.

I am listening carefully to what the hon. Gentleman has to say, because this is a complex issue for both him and me. Obviously, I will want to reflect on this when I see the Hansard report. The hon. Gentleman has been positive in thinking about having an observer on the two boards, but I wonder why even at this stage the Government appear to be relatively timid about the joint committee. A whole range of organisations have said similar things. MillionPlus stated in its evidence to the Committee that a committee and an annual report which referenced the areas and activities outlined in the amendment would help to achieve that symbiosis and provide greater public oversight and parliamentary scrutiny. I am a little surprised that at this stage the Minister is not considering a mechanism which might make some of these things easier and more automatic.

I am glad that the hon. Gentleman is pressing this point, because it gives me a further opportunity to say that I am reflecting carefully on his amendments and thinking of ways in which we can address the points he has raised. I reiterate our willingness to think very carefully about what he has said. In the event that the OFS and UKRI were not working together, the Bill provides an important safeguard. It gives a power to the Secretary of State to require the two bodies to work together. Of course, that does not mean that they cannot work together without his explicitly asking them to do so. They can do so, and that is what clause 103 makes clear.

Amendment 333 proposes a specific list of activities on which both organisations would be required to work together. I believe that it is undesirable and unnecessary to be prescriptive in the Bill. I wholeheartedly agree that it will be important for the OFS and UKRI to work together on those areas, but we would not want to restrict the areas on which they should work together by providing a list of that sort. Although it details many important areas for joint working that have been raised by the community, the list is not comprehensive, and it is not likely to be so in future. An example would be ensuring efficient interaction between the teaching excellence and research excellence frameworks. On that basis I ask the hon. Gentleman to withdraw his amendment.

I thank the Minister for his positive and proactive response to the amendments which, as he knows, are probing amendments. I am encouraged by his recognition of the importance of getting such things right at the beginning. No list, in any Bill, whether drawn up by a university body or by Opposition Members, could possibly compete with the perfect list for ever and a day, for the next 20 years. However, if I may use a term that I often use, such lists are points of entry to provoke further discussion. I am encouraged by the Minister’s focus on the issues. There will be other opportunities in other places to discuss the matter further, and on that basis I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 304, page 92, line 16, after “chair” insert “and the House of Commons Select Committees”.

This amendment would ensure that the relevant House of Commons Select Committees are consulted before any appointments are made.

It is a pleasure to serve under your chairmanship, Sir Edward. My hon. Friend the Member for City of Durham took the initiative in drafting the amendment, but she cannot be here today because she is leading for the Front Bench in another Bill Committee. [Interruption.] We multitask.

The amendment goes with the flow of the Government’s intention in other areas. It is intended to ensure that before appointing the chief executive, chief finance officer and other members of UKRI the Secretary of State should consult not only its chair but the relevant House of Commons Select Committees. That would be consistent with the approach suggested by the Minister to OFS appointments.

In the Committee’s oral evidence sessions, the vice-chancellor of the University of Cambridge and former chief executive of the Medical Research Council, Professor Borysiewicz, told us that

“the choice of members of that committee will be absolutely vital.”––[Official Report, Higher Education and Research Public Bill Committee, 6 September 2016; c. 26, Q40.]

It is therefore important that the Secretary of State should consult with others to make sure that the membership is the best possible.

Such broad consultation would enhance the scrutiny of the choices that were made, and therefore improve the likelihood of the best person being appointed, because it would require the Secretary of State to make a clear, strong case for choosing particular candidates. We saw the importance of that during the evidence sessions, because a number of witnesses made forceful points about who should be on the board of UKRI. Alastair Sim, director of Universities Scotland, suggested that membership should be

“expertise-based but it should also be based on geographic balance so as to have people with experience from across the UK sitting on UKRI and on the councils within it.”––[Official Report, Higher Education and Research Public Bill Committee, 6 September 2016; c. 68, Q106.]

Professor Borysiewicz suggested that UKRI should be made up of

“individuals who are broadly respected across the devolved Administrations, the different elements of research across industry and the different players”.––[Official Report, Higher Education and Research Public Bill Committee, 6 September 2016; c. 26, Q40.]

It is important to take into account those and other perspectives on appointments. We would all have confidence and agree across the House that consultation with Select Committees would make it more likely that a full and diverse range of opinions is taken into account before appointments are made.

In relation to appointments with the OFS, the Minister assured us that

“we fully intend to actively involve the Select Committee or Select Committees, as appropriate, in the appointment process”.––[Official Report, Higher Education and Research Public Bill Committee, 8 September 2016; c. 75.]

If that is good for the OFS, given the critical importance of UKRI, I assume it would be good in that case too and I am confident the Minister will be able to reassure me of that.

I thank the hon. Member for Sheffield Central for the amendment and the chance to discuss the involvement of Select Committees in UKRI appointments. The establishment of UKRI involves a number of particularly important public appointments. For all of these, subject to parliamentary approval in the passage of this Bill, we will run an open and competitive process in line with the guidance of the Office of the Commissioner for Public Appointments. This will apply to the permanent chair, CEO, CFO, other independent UKRI board members and the executive chairs of each council. I am happy to confirm that a pre-appointment hearing will be held in the House of Commons by the Select Committee on Science and Technology for the permanent chair of UKRI. That is in line with Cabinet Office guidance and, in keeping with this practice, the current interim chair, Sir John Kingman, has just appeared before the Committee.

Given the scale and importance of UKRI, I assure the Committee that I agree that it is appropriate to offer a pre-appointment hearing by the Science and Technology Committee with the chief executive officer. For other key positions, we intend to continue the current approach, which I believe works well.

Although it is not a statutory requirement for prospective research council chairs to appear before a Select Committee, it is common practice. I assure the Committee that we expect this practice to continue with any new executive chairs of the UKRI councils. This will ensure that the appropriate Select Committees are engaged in the appointment process for key leadership positions in UKRI. I hope that I have provided the hon. Gentleman with the assurances he is looking for and I urge him to withdraw the amendment.

I thank the Minister for his assurances, which go some way towards meeting the points made in the amendment. I ask him to reflect on the opportunities to cast the net slightly wider to other Select Committees as appropriate in the way that it suggests. With the hope that he will reflect on that, and reassured by his comments, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 186, page 92, line 18, after “experience” insert

“in the higher education sector in England, Scotland, Wales and Northern Ireland”.

This amendment would ensure that the new research body, UKRI, would include appropriate membership from the devolved nations.

With this it will be convenient to discuss amendment 187, page 92, line 38, at end insert—

“(6) UKRI must, in appointing members of each Council, have regard to the desirability of the members (between them) having experience of research in the higher education sector in England, Scotland, Wales and Northern Ireland.”

This amendment would ensure that the membership and strategy of the new research body, the UKRI, takes proper account of the policies and priorities of the devolved nations.

I declare that I have an interest as I remain an honorary professor at the University of Stirling.

During the earlier stages of debate on the Bill, I remained remarkably quiet for someone with my background. I have been saving myself for today because it is a vital one if there is to be proper and respectful consideration for the university sectors in Scotland, Wales and Northern Ireland. When I first read the Bill, I thought Scotland must already be independent because there was absolutely no recognition of the sector’s importance—so too, perhaps, in Wales and Northern Ireland.

The Bill was clearly not written in the spirit of the Nurse report, which stated:

“There is a need to solicit and respond to distinct research priorities and evidence requirements identified by the devolved administrations…it is essential that the Research Councils should play a strong role in…shaping research priorities and promoting the distinctive requirements of UK research, including in association with the devolved administrations.”

It is clear that when drafting the Bill the Government ignored to a great extent such an injunction. As it stands, UKRI is accountable only to the UK Government with principally English interests.

I speak not merely as an interested MP, but in an attempt to be a voice for the Scottish, Welsh and Northern Irish jurisdictions. The amendments would ensure that UKRI includes appropriate membership from the devolved nations and that its membership and strategy take proper account of the devolved nations’ policies and practices. I will give one example from Scotland of the way in which things are different now and could be increasingly different in future, post-Brexit. Just as the Scottish Government are exploring options to enable us to remain within the single market, so too have they started exploring how Scottish universities may continue to have serious engagement with EU research programmes. Both moves could create significantly different economic and policy contexts, making separate representation even more vital.

In constructing the amendments, we sought out a wide range of opinions. It is important to note that these amendments and subsequent ones I shall introduce today are supported by a wide range of bodies. If the Minister is interested, I can supply further comment from all the bodies that I will mention. They include Universities Wales, Universities Scotland, Queen’s University Belfast, the Scottish Council for Development and Industry, the National Union of Students Scotland, the University and College Union Scotland and the Royal Society of Edinburgh. I will also mention a wide range of academics, including Professor Anton Muscatelli, principal of the University of Glasgow; Professor Patrick Johnston, vice-chancellor of Queen’s University; Professor Dame Jocelyn Bell Burnell and many others.

The amendments are not partisan, but come from a whole sector of university opinion throughout Scotland, Wales and Northern Ireland. They also have the full support of the Scottish Government. I look forward to hearing a positive response from the Minister to this wide body seeking appropriate representation. As a parting gift to him, let me quote from Professor Anton Muscatelli, principal of the University of Glasgow, who recently wrote to me, stating:

“The creation of the new UKRI body provides a real opportunity to harness strategic co-operation across the devolved nations at a critically important time for economic progress in all the countries and regions of the UK. Having an active voice from the devolved nations as part of the new research body would assist that process of co-operation in both research and innovation at a time of major uncertainty in our external economic environment.”

I appeal to the Minister to think very seriously about the amendments.

I rise to make some observations on the amendments tabled by SNP Members. I have mentioned Hamlet without the prince once, so I will not do it again, but I entirely share the puzzlement of the hon. Member for Kirkcaldy and Cowdenbeath that the Bill, and indeed the White Paper, have been drafted with scant recognition of the knock-on effect and implications of what may be extremely valuable new structures on the devolved Administrations. At the risk of being tediously repetitive, I will simply remark that this is yet another example of why the Bill should have been looked at again after 23 June.

I add in passing, since we are talking about traditions in universities, that Scottish universities have historical traditions and strengths that could match many, if not all, of those in England. I am surprised that the Minister, being cut from that cloth, should not think that the legacy of the Scottish enlightenment—Adam Smith and other entrepreneurial characters who have flitted through Conservative party pamphlets—worth consideration in this process.

The hon. Member for Kirkcaldy and Cowdenbeath has done the Committee a service. Looking around, I can see no Members from Wales, and obviously none from Northern Ireland. Yet in both Wales and Northern Ireland, universities and higher education institutions will be significantly affected by this process. They will also be affected if the process with the new bodies is not universally seen to be fair in sharing out its attentions at an important time for our university system. I speak as a Unionist; the Labour party believes in the Union. Not to consider including such provisions in the Bill is a great mistake. The Minister and I will probably agree that one should not put people on committees and bodies simply on a symbolic basis, on which so many matters are often discussed and organised. Surely we should consider those interests in the context of a new research body.

What I have to say is highly relevant to the future of those research bodies. As I have said previously, the Government’s White Paper has overlooked a vital factor. There is little sense of the knock-on effects on what I describe as the brand of UK plc. I am not the only one to make that observation; other commentators and academics have also done so.

HE providers across England and the devolved nations are internationally competitive because of a trusted UK brand. If we are to have a trusted UK brand, it is important that all the integral parts of the UK feel that they have a say at the table. If they do not feel that and there is dissension and disgruntlement, then at a time that the UK Government need to be doing everything they can in the Brexit negotiations to safeguard that UK brand, there will be a weak link.

There needs to be a proper UK-wide strategy to safeguard the position of our researchers. We will talk about that in later clauses. For now, the amendments tabled by the SNP, whatever one’s views on the future of Scotland, are doing a valuable service to the Government by waking them up to some of the implications and pitfalls of having a body, though not what they wished, that might appear too Anglocentric. On that basis, we support the amendments.

I thank the hon. Member for Kirkcaldy and Cowdenbeath for his amendments and the opportunity to discuss the important role that UKRI will play in representing science and research across all of the United Kingdom.

I agree with him that Scottish institutions are a vital part of our vibrant research base. I am sure he will be aware that they gain more than a proportionate share of competitive funding from the research councils due to the excellence of their research under the current arrangements. The research councils and Innovate UK serve, and will continue to serve, the research and innovation communities across the UK.

Our reforms have been deliberately developed with the needs of all the devolved Administrations in mind, going all the way back to the Green Paper in November. The White Paper is clear that it is our policy intent to ensure that Research England, as part of UKRI, can work jointly with devolved funders. We have tabled a Government amendment to the Bill that supports this policy intent, which the hon. Gentleman will have seen. This will mirror HEFCE’s current effective working relationship with the devolved Administrations’ funding bodies, for example, with respect to the research excellence framework.

Research councils and Innovate UK as part of UKRI will continue to operate throughout the UK. We will work closely with the devolved nations as UKRI is established to ensure the UK’s research and innovation base remains one of the most productive in the world. The hon. Gentleman will have seen that we have tabled a series of amendments in recent days to ensure UKRI can work effectively across all four nations. We have been working closely with the Scottish Government in developing these clauses.

To deliver our integrated and strategic ambitions for UKRI, the body must have a proper understanding of the systems operating in all parts of the UK. It will need a detailed insight into not just the research environment but innovation strengths and business needs across the UK. That should include regional differences across England as well as the devolved Administrations.

In relation to the UKRI board and the composition of the councils, we have two primary objectives: first, that we attract and appoint the best people wherever they come from; and, secondly, that the board and councils are of a size that allows them to function effectively. As Professor Sir Leszek Borysiewicz said when he appeared before this Committee a few weeks ago,

“the choice of members of that committee will be absolutely vital. These will have to be individuals who are broadly respected across the devolved Administrations.”––[Official Report, Higher Education and Research Bill Public Bill Committee, 6 September 2016; c. 26, Q40.].

I agree with him completely on both counts. We must seek the highest quality individuals with a broad range of experience, not necessarily limited to the UK research community or UK higher education institutions. We need to learn from and bring in the best individuals nationally and internationally. They will be recognised for their experience and expertise spanning research and business-led innovation and their ability to represent the full range of interests of the UK’s research and innovation system.

We are very fortunate in the UK in the quality and extent of our research base. It is common for members of the research community to move around the UK or, indeed, abroad over the course of their careers. It is also common for researchers to collaborate extensively within the UK and abroad. As it is likely the members appointed on merit will have worked and will have extensive links across the UK research community, I ask the hon. Gentleman to withdraw his amendment.

I thank the Minister for his response, although I am slightly disappointed he has not gone further in saying that he would take the recommendation more seriously. We will have to return to this matter on Report.

I say to the Minister that the way in which he describes the role the devolved Administrations might be able to play in this regard sounds slightly complacent. If it were as precise and clear as he suggested, I wonder why he thinks Universities Scotland, the University of Wales, the Royal Society of Edinburgh and many others I have cited support the amendments and do not support the Bill as it stands. With the intent of bringing this matter back on Report, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 247, in schedule 9, page 92, line 21, leave out “and new ideas” and insert

“, new ideas and advancements in humanities”.

This amendment provides that the Secretary of State must, in appointing members of UKRI, have regard to the desirability of them having between them experience of the development and exploitation of advancements in humanities (including the arts), as well as the development and exploitation of science, technology and new ideas. A similar amendment is made to clause 85(1)(c) in amendment 256.

With this it will be convenient to discuss the following:

Amendment 315, in clause 85, page 52, line 8, after “out” insert “basic, applied and strategic”.

See amendment 316

Amendment 317, in clause 85, page 52, line 8, after “humanities” insert “social sciences, arts”.

This amendment would ensure that UKRI’s functions extend across the full breadth of research.

Amendment 316, in clause 85, page 52, line 9, after “support” insert “basic, applied and strategic”.

This amendment and amendment 315 would ensure a commitment to supporting basic, strategic and applied research.

Amendment 318, in clause 85, page 52, line 10, after “humanities” insert “social sciences, arts”.

This amendment would ensure that UKRI’s functions extend across the full breadth of research.

Amendment 319, in clause 85, page 52, line 12, after “technology” insert “humanities, social sciences, arts”.

This amendment would ensure that UKRI’s functions extend across the full breadth of research.

Amendment 336, in clause 85, page 52, line 12, after “technology” insert

“arts, social sciences and humanities,”.

This amendment explicitly names the arts, social sciences and humanities as being part of the remit of the UKRI.

Government amendment 256.

Amendment 320, in clause 85, page 52, line 14, after “humanities” insert “social sciences, arts”.

This amendment would ensure that UKRI’s functions extend across the full breadth of research.

Amendment 321, in clause 85, page 52, line 16, after “humanities” insert “social sciences, arts”.

This amendment would ensure that UKRI’s functions extend across the full breadth of research.

Amendment 322, in clause 87, page 53, line 34, after “life” insert

“and social and cultural wellbeing”.

This amendment would ensure the Bill includes the full breadth of research and innovation and their benefits for humanity.

Clause 85 sets out the functions of UKRI in broad terms. Among its key functions, UKRI will be responsible for facilitating, encouraging and supporting

“the development and exploitation of research and technology.”

It is intended that UKRI may also support the exploitation of advancements in the humanities, including the arts. However, this is not currently explicit in the provision made in clause 85(1)(c). Amendment 247 is a technical Government amendment that addresses that. For the avoidance of doubt, I should clarify that for drafting purposes, references to humanities in this Bill are defined as including the arts and references to sciences include social sciences. These definitions are given in clause 102.

In addition, amendment 256 seeks to amend paragraph 2 of schedule 9 which sets out the areas of experience that the Secretary of State should have regard to in appointing the board of UKRI. The consideration of the development and exploitation of advancements in humanities should form part of this consideration; the amendment enables this. As Professor Sir Leszek Borysiewicz, from whom we have already heard today, said:

“There is a lot of sense in having a body that will scrutinise and ensure that we can take a wider purview of the UK R and D effort.”––[Official Report, Higher Education and Research Public Bill Committee, 6 September 2016; c. 22, Q30.]

If I can find them in this bagatelle list which sends one diving across the paper, I rise to speak in support of our amendments, which are amendment 315, 317, 316, 318, 319, 320, 321 and 322.

Let me start by welcoming the technical amendments tabled by the Minister. As someone who has taught humanities, I was interested in his clarification that the arts were included in the humanities. I do not propose to have an etymological discussion about it, but I was also interested that social sciences— if I understand the Minister rightly—are included under the definition of sciences. I pause to think for a moment about the Minister’s first degree. Perhaps he might like to comment on whether he thought at the time that he was doing a science degree or a humanities degree. That is a little jeu d’esprit but nevertheless, it illustrates that this is a hazy area. Without being too pedantic, it is of merit to try to get some of the clarifications right so I welcome what the Minister has said.

Our amendments 317 and 318 would insert “social sciences” and “the arts” after “humanities”. I appreciate that there might be some overlap between what we have tabled and what the Government have tabled but obviously we did not necessarily consult them. The principle is straightforward: first, to ensure that UKRI’s functions extend across the whole breadth of research; and, secondly and not unimportantly given that this is a major change—this comes back to what I have said previously—to give reassurance to those in those areas that their interests are being properly and carefully catered for.

Amendment 319 is part and parcel of the same process although this time, after “technology”, we are inserting the words “humanities”, “social sciences” and “arts”. The amendments we tabled to clause 85, which include the words “basic”, “applied” and “strategic”, are intended also to reflect concerns expressed by both the Royal Society of Chemistry and the Royal Society of Edinburgh and probably other bodies too that basic science is essential for a good research system—often laying the ground for future applications — and that its funding should be a core function for UKRI. The royal charters of the research councils protected such fundamental research by requiring that basic strategic and applied research were all funded, hence their use in our amendments, but there is no commitment as such in the Bill, hence the suggestion that these amendments should be moved to include a commitment to supporting those issues.

Amendments 320 to 322 follow the same argument, inserting the words “social sciences” and “arts” after “the humanities”. Likewise, amendments to clause 87 insert a reference to social and cultural wellbeing after the word “life”, ensuring that the Bill includes a focus on the full breadth of research and innovation and their benefits for humanity. Without starting a philosophical discussion, I wish to be clear that we understand that much research and innovation does not always have an immediate practical application. Indeed that is not required, and that should not be the case. That is one of the elements of tension in this Bill between the effects of various changes, which we will be discussing later in terms of their structure and architecture.

At a time when people are bombarded—not least in the popular media—by sometimes highly contentious claims for research, it is important that we place in the Bill a recognition that research and innovation significantly benefits the man and woman in the street, either by the words suggested here or by other appropriate mechanisms. At a time of continued austerity and continued arguments over funding, which no doubt will tighten up during the Brexit process, it is important that that is made clear in the corridors of Government, not just to the general public.

I will speak to amendment 336, recognising and welcoming the fact that Government amendment 256 covers a significant part of what we were trying to achieve with this amendment. I wanted to probe a little further on going beyond reference to the humanities, and looking at arts and social sciences. That is covered in the footnote, but I would like further clarification on the Government’s view of their inclusion more generally. The Minister will recognise the value of the creative industries and social sciences to the economy and to our culture, and this amendment seeks to recognise arts and social sciences within the legislation.

A number of organisations submitting evidence to us, including MillionPlus and Goldsmiths College—part of the University of London—have raised concerns about the Bill’s lack of provision for the arts, emphasising that the legislation must work for all subjects. In their written evidence, Goldsmiths College made the point that,

“we also believe excluding the words ‘arts’ from the description of the UKRI remit could jeopardise future funding for arts research. We believe this also to be the case for the social sciences, which could be overlooked in favour of more traditional science subjects. As well as signalling a commitment to these important disciplines, this would also fully reflect the objectives of the research council’s reporting into the UKRI.”

The point on which I am seeking reassurance is that the Government do regard the arts and social sciences as being of important academic worth.

I welcome the amendments supported by the hon. Members for Blackpool South and for Ashton-under-Lyne, who are sitting in the absence of the hon. Member for City of Durham, which seek the same ends as the Government’s amendments. As hon. Members have said, it is absolutely right that UKRI should be able to take full advantage of the advancements that the UK research sector makes in the humanities, including the arts. In response to the point made by the hon. Member for Sheffield Central, I repeat that clause 102 makes it clear that “‘humanities’ includes the arts” and “‘science’ includes social science.”

I turn to the other tabled amendments to clause 85, which seek to spell out explicitly that the research UKRI may carry out should include “basic, applied and strategic” research. I welcome the opportunity to assure hon. Members that it is absolutely the Government’s intention that UKRI will support all forms of research, including “basic, applied and strategic” research, as hon. Members have put it. However, it is not necessary to be prescriptive in that way. The reference to research in clause 85(1) is drafted to be broad enough to include those types of research, and it is right that research experts, not politicians, decide what specific projects are supported.

I welcome the intention behind amendment 322 to clause 87(4). It seeks to require the councils to have regard to improving “social and cultural wellbeing”, in addition to the currently drafted “improving quality of life”, when exercising their functions. While I agree that the potential human benefits of research are wide-ranging, I am certain the current duty on councils to consider the desirability of improving quality of life is sufficient to cover those. I therefore ask hon. Members to withdraw their amendments.

Amendment 247 agreed to.

I beg to move amendment 248, in schedule 9, page 92, line 37, leave out “A Council may include” and insert

“A majority of the ordinary Council members of a Council must be”.

This amendment replaces the provision which made it clear that a Council of UKRI could include persons who were neither a member of UKRI nor one of its employees and provides instead that a majority of the ordinary members of a Council must fall into that category.

The Nurse review highlighted the importance of maintaining the distinct identities and integrity of councils within UKRI. Sir Paul Nurse recommended that the councils should comprise an independent membership drawn from their respective research communities. Professor Sir John Bell recognised the sense of that, saying:

“This would appear to be a sensible implementation of the Nurse Review, and will provide opportunities for better collaborations between scientific disciplines in the context of the new Board. It will hopefully provide the leaders of research councils to be able to devote more time to strategy and less time to administrative functions.”

In addition, the Government said in our White Paper:

“In addition to the Executive Chair, each Council will be made up of…experienced independent members drawn from the relevant community.”

The amendment means that membership of each council must comprise a majority of ordinary members who are neither members nor employees of UKRI. It replaces the current provision in paragraph 3, which only allowed for the possibility of councils’ including members who fell into that category. The amendment will ensure that the integrity and autonomy of the individual councils will be maintained through their having an independent membership.

Amendment 248 agreed to.

I beg to move amendment 249, in schedule 9, page 93, line 34, leave out “The Secretary of State” and insert “UKRI”.

This amendment and amendments 251 and 252 provide that it is UKRI rather than the Secretary of State who pays members of UKRI and Council members their remuneration, allowances, expenses, pension and compensation. The amounts paid are, however, still to be determined by the Secretary of State.

With this it will be convenient to discuss Government amendments 250 to 255 and 312.

This group of amendments relates to provisions in paragraphs 7 and 8 of schedule 9, which provide for powers for UKRI to make payments to UKRI members and its employees. Turning to amendments 249 to 252, paragraph 7 of schedule 9 is intended to place a duty on UKRI to pay salaries, pensions and allowances, compensation and expenses to the UKRI members as determined by the Secretary of State. The amendments make it clear that it is UKRI, rather than the Secretary of State, that pays members and council members of UKRI.

Amendments 253, 254 and 255 provide further powers for UKRI to pay expenses and allowances to existing and former members of UKRI staff and to provide pensions to these people.

Amendment 249 agreed to.

Amendments made: 250, in schedule 9,  page 93, line 35, leave out “, allowances and expenses”.

This amendment removes an unnecessary reference in paragraph 7(1) of Schedule 9 to allowances and expenses for members of UKRI or Council members as they are covered in paragraph 7(2).

Amendment 251, in schedule 9,  page 93, line 37 leave out “The Secretary of State” and insert “UKRI”.

See the explanatory statement for amendment 249.

Amendment 252, in schedule 9,  page 93, line 43 leave out “the Secretary of State” and insert “UKRI”.

See the explanatory statement for amendment 249.

Amendment 253, in schedule 9,  page 94, line 8, leave out “, allowances and expenses”.

This amendment is consequential on amendment 254.

Amendment 254, in schedule 9,  page 94, line 9, at end insert—

‘( ) UKRI must pay, or make provision for paying, to or in respect of a person who is an employee of UKRI, such sums as UKRI may determine with the approval of the Secretary of State in respect of allowances or expenses.”

This amendment makes the duty to pay allowances and expenses to UKRI employees consistent with the power to pay such allowances or expenses to former employees inserted by amendment 255.

Amendment 255, in schedule 9,  page 94, line 9, at end insert—

“( ) UKRI may pay, or make provision for paying—

(a) to or in respect of a person who is or has been an employee of UKRI, such sums as UKRI may determine with the approval of the Secretary of State in respect of pensions or gratuities, and

(b) to or in respect of a person who has been an employee of UKRI, such sums as UKRI may determine with the approval of the Secretary of State in respect of allowances or expenses.”—(Joseph Johnson.)

This amendment makes clear that UKRI has power, subject to approval by the Secretary of State, to make pension provision for its employees and former employees other than under the Superannuation Act 1972 (as provided for in paragraph 8(4) of Schedule 9), to pay them gratuities and to pay former employees allowances or expenses.

I beg to move amendment 331, in schedule 9, page 95, line 26, leave out “any” and insert “some”.

This amendment seeks to clarify which functions UKRI intends to delegate to its Councils.

This amendment relates to paragraph 12 of the schedule, “The delegation of functions by UKRI”. This probing amendment raised a metaphorical eyebrow when we— and, I think, others—were looking through the Bill. Paragraph 12(1) of the schedule states:

“UKRI may delegate any of its functions to—

(a) a member of UKRI,

(b) an employee authorised for that purpose,

(c) a Council or a Council sub-committee, or

(d) a general committee.”

I am fairly confident that this is not designed to confer—to borrow a phrase from another context—Henry VIII-type powers—on UKRI to delegate. And I am fairly confident that when the Minister responds he will probably say that it replicates—I do not want to be so unkind as to use the word “boilerplate”—things that normally appear in Bills at this point in the proceedings. However, I think it is worth probing because in this instance it is not simply that the Government are setting up a new body in UKRI, but that the relationship between that body and its research councils, for example, is one that has inevitably provoked a lot of comment and some concern as to how that process will be taken forward.

This probing amendment seeks to clarify the division of responsibilities between UKRI and its councils and, at least, to elicit from the Minister some sense—I appreciate this is an evolving conversation—of whether that particular subparagraph of the schedule is intended to be a passe-partout, if I may put it that way, for this process.

I also say that because we had the interim chairman, Sir John Kingdom, before us in our somewhat attenuated evidence session. He has also very recently appeared before the Science and Technology Committee. I confess that I have only scanned the minutes of that meeting; I presume the Minister has read them from cover to cover. It seemed to me that in the best traditions of the civil service, from which he emanates, Sir John had skipped rather lightly on some of those questions to the Committee thus far; but that is for members of the Science and Technology Committee to judge.

It is important that we try to get some greater clarification before the Bill goes to the other place, not least because the Government will undoubtedly be peppered with questions and observations by Members of the House of Lords. I am actually trying to give the Minister a little assistance.

To be fair, the factsheet published by the Government, “Higher Education and Research Bill: UKRI Vision, Principles & Governance”, makes the point that there is much detail still to come. It states:

“The government is working with Sir John, our existing Partner Organisations and key stakeholders to explore detailed organisation design options…This will inform the final design which will be refined and agreed in partnership with the UKRI Chief Executive and Board once appointed.”

I appreciate that that will not necessarily happen anytime soon. The factsheet then says:

“Further detail will be set out in guidance including the framework document between BEIS and UKRI, which will be published once agreed.”

I have already referred to, and the Minister has commented on, the evolving implications of the machinery-of-Government division of research in that fashion. Therefore, as well as moving the amendment, which, as I have said, is a probing amendment designed to reflect the concerns, may I ask the Minister—I will do so in a constructive way—how he sees that framework document developing and at what stage he thinks it might be available to be considered? Does he think that it will be available before the Bill leaves this House, or when it goes to the other place?

I thank hon. Members for the opportunity to explain in more detail what functions UKRI intends to delegate to the councils within it. As we have set out in the White Paper and the factsheet that we published on 12 October, our intention is that UKRI will delegate decisions on scientific, research and innovation matters to the nine councils. That will include, but is not limited to, the leadership of their area of expertise, including prioritisation of budgets and the development of delivery plans; ensuring the future of skilled researchers and other specialists essential to the sustainability of the UK’s research and innovation capacity; engaging with their community to develop ideas, raise awareness and disseminate strategic outputs; and appointing and setting terms and conditions of academic, specialist and research staff in the relevant council and any associated institutes.

As Sir Alan Langlands, vice-chancellor of the University of Leeds, told the Bill Committee, in his view the new overarching research funding body, UKRI,

“has the potential to retain the best of the current individual research councils, while bringing greater strategic oversight and direction.”

Of course, some functions will be retained at the centre of UKRI. Those include a lean but highly effective strategic brain, which will facilitate development of the overall direction, ensuring that we invest every pound wisely; the management of funds with cross-disciplinary impact; and responsibility for administrative and back-office functions across the organisation, such as procurement, human resources and grant administration. The Bill does not seek to set out the detail of all that, as that would be—

I do not want to interrupt the Minister’s flow unduly. I am still slightly struggling to digest, at this time of the morning, the concept of a “lean” brain, as opposed to possibly a fatty one or another type of one. The serious point that I want to make is this. How lean is this brain—to continue the analogy—likely to be? I ask that because throughout the Bill, not the elephant in the room but certainly the discussion in the antechamber is about what resources Government can bring to the administration of this area. It would therefore be helpful if the Minister, even if not today, gave some indication of that. Are we talking about dozens of people, hundreds of people or what?

I thank the hon. Gentleman for his question and draw his attention back to the impact assessment that we made at the start of the Bill Committee process, which gives a feel for the resources to be allocated to UKRI and the savings likely to be generated from the back-office efficiencies that will be enabled through its creation. It will be no bigger than is necessary to undertake its core functions, which, as I have described, are to provide a strategic vision for the sector, to ensure it can operate a cross-disciplinary fund in a way that the current research councils cannot and so on. The Bill does not seek to set out the details of all this, because we will put out a framework document in due course. The hon. Gentleman asked when that will be published. I assure him that it will be published before the formal launch of UKRI.

Again, I am not trying to tie the Minister down unduly, but can he give any indication of whether the document will be available when discussion of this matter goes to the House of Lords?

We have provided, as I said a few minutes ago, quite a detailed factsheet that outlines our policy thinking with respect to the creation of UKRI and the general principles that will guide its approach to its functions. That goes into some detail about the broad approach that UKRI will take—for example, its recognition of the fundamental importance of Haldane with respect to how it will operate funding for science and its fundamental support for the dual support system and balanced funding.

The factsheet also goes into considerable detail about the governance arrangements that will apply to the work of the chair, executive chair and councils within UKRI, as well as the way the board and senior management team will relate to each other and the leadership and autonomy of the nine councils. I believe that hon. Members in the other place have a considerable body of material to consider as they deliberate on our proposals to create UKRI.

This approach allows UKRI or another council to carry out certain functions normally exercised by a particular council. That will enable existing collaborative working across councils to continue and for UKRI to deliver one of its key aims: improving the UK’s support for inter and multidisciplinary research. Details of which UKRI functions will be delegated to the councils will be captured in guidance included in the framework document between the Department for Business, Energy and Industrial Strategy and UKRI. That will be published in due course, once agreed with UKRI’s future leadership.

I agree with hon. Members that it is important to have clarity on the functions of UKRI that will be delegated to the councils. However, it is not necessary to put that on the face of the Bill. I therefore ask the hon. Gentleman to withdraw his amendment.

The Minister’s observations and the detailed examples he has given are a helpful move along this road. There will be further discussion in other forums, and on that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 332, in schedule 9, page 97, line 1, leave out

“except with the consent of the Secretary of State”.

This amendment seeks to understand how UKRI will work with the private sector.

This is, again, a probing amendment. We are genuinely trying, along with people in the scientific community and associated areas, to understand the extent to which UKRI will work with the private sector. The Minister is keen on the private sector. We are keen on the private sector and believe it has a very important role to play. The way in which research councils can currently enter into contracts to conduct spin-out activity and form companies—MRC Technology is one example that has been cited—is extremely valuable to research and innovation.

At the risk of being repetitive, money will be tight in the next five years. I am sure that the Minister will fight his corner very vigorously, but however generous the Government are in going beyond the assurances they have already given about Horizon 2020, money will be tight. Therefore the ability to generate that activity and form companies will be important. It is also important for maintaining the entrepreneurial profile of UK plc. The current position—though the Minister may wish to clarify it further—is that this is what research councils can do. It would be useful to know what he envisages their being able to do in the future. In the 2015 spending review it was announced that Innovate UK would convert £165 million of its grant into new financial products. It would be helpful to clarify the extent to which the Secretary of State’s consent would be needed to operate those new financial products and any future products that Innovate UK might develop, such as equity investment. We touched on these issues in the evidence session with the chief executive of Innovate UK, but it would be helpful if the Minister could go further when he comments on the mechanism we have chosen to raise these issues.

I appreciate that there may be changes, or goodies, coming down the line in the autumn statement. No doubt we will find that out in due course.

I welcome the opportunity to set out how we expect UKRI to work with the private sector. Paragraph 16 of schedule 9 provides flexibility in how UKRI performs its functions, balanced by controls that safeguard public funding and guard against large, high-risk commitments being made against future public spending. The research councils currently possess significant flexibilities, and it is our intention that UKRI should retain those freedoms. We have, however, balanced that with the need to safeguard public funding.

To ensure appropriate use of public money, a number of activities have been made conditional on approval from the Secretary of State. Those include entering into joint ventures and borrowing money—namely, areas that could build up commitments and risks against future public spending. This mirrors current practice, where research councils are already required to seek approvals for such activities. That is in line with the principles of managing public money, by which all public bodies need to abide.

The amendment would inadvertently make it impossible for UKRI to do any of those things. We are saying that it can do these activities, subject to approval by the Secretary of State, in the same way as before. In practice, the details of those approvals will be set out in guidance from the Department to UKRI. That may, for example, include a de minimis level for an activity below which the Secretary of State grants approval without further process. That is in line with current arrangements for the research councils.

The amendment would unduly restrict the scope of UKRI and limit its flexibilities, putting at risk its capacity to fulfil the ambitious remit we have set for it and make best use of its resources. Specific details of how UKRI will work with the private sector will be developed by UKRI and the councils themselves, in consultation with the Government. However, we expect UKRI to build on the relationships that the legacy bodies currently enjoy with the private sector, and I ask the hon. Gentleman to withdraw the amendment.

I thank the Minister for that additional information and helpful explanation. As I said at the start, the amendment was a probing one, simply designed to facilitate further discussion. We have had that discussion and the Minister has given us more useful information, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 9, as amended, agreed to.

Clause 84

The Councils of UKRI

I beg to move amendment 314, in clause 84, page 51, line 39, after “Secretary of State” insert “following consultation”.

This amendment would ensure there will be a process of consultation before any changes are made to the Councils of UKRI.

With this it will be convenient to discuss amendment 323, in clause 87, page 53, line 36, after “State” insert “following consultation”.

This amendment would ensure there was a process of consultation before any changes are made to the Councils of UKRI.

We now move on to some of the meat of an area which has developed quite a head of steam: the relationship between UKRI and the councils. We have previously talked today about some of the ways in which UKRI might devolve its powers, and the Minister has been helpful regarding the councils, but the devil is always in the detail of parliamentary scrutiny.

There is considerable disquiet about some of the blanket powers that the new body UKRI may have and, indeed, that the Secretary of State may give him or herself. This is not a comment on any particular Secretary of State, or any particular universities Minister. If we are to make good legislation, we need to work to the potential scenarios that are most difficult rather than to the simplest ones. If everything went simply in government we probably would not need to think about this, but of course things do not always go simply.

I come back to the reputational issue, which I touched upon earlier when commenting on the amendments tabled by the hon. Member for Kirkcaldy and Cowdenbeath. We are at a critical period in our higher education history because of the big question marks over Brexit, and the lesser—although still significant—question marks over the machinery of Government changes. We should be doing everything we can to reassure the academic community and indeed the broader business community. We should not propose changes, potential changes or potential shutdowns that will cause problems. It is all very well for Ministers to say, “Well, this would never happen,” or, “It would be dealt with in guidance,” or whatever, but I am sure that we can all think of examples over the years where changes in legislation have set off great concern and scepticism, and in some cases had very bad financial and economic consequences involving overseas investors and overseas academic institutions.

We are debating this Bill at a time when our researchers, our research institutions and research bodies in our universities are being put under severe pressure and are concerned about their future relationship with organisations within the EU. It is highly relevant to changes that might be made to the councils of UKRI that changes in the EU or changes in our relationship with our EU partners do not necessarily have an adverse effect only on relationships with the EU, of course. They have, or can have, an adverse effect on relationships with other international institutions. At a Royal Society fringe meeting at our party conference last month at which I was present, comments were made by Professor Hemingway to the effect that when we think about these sorts of things, we also need to think about the implications for research in francophone Africa or lusophone Latin America, for instance, in terms of what we need to do to maintain our relationships there.

All these things are connected and related. That is why apparently arcane issues around the Secretary of State being allowed to change the name or responsibility of the council by issuing a statutory instrument subject to the affirmative procedure are important. Behind that dry statement lie some of the issues that I have described. As far as I can see, the Bill does not require the Secretary of State to undertake any public consultation before changing the name or responsibilities of a council. We have already had some discussion about the merits or otherwise of automatically deleting references to the Privy Council from the structures and architecture of the Bill, and the OFS in particular. The Government declined to think creatively about ways in which the Privy Council might be a backstop.

The Royal Society is particularly concerned about this, as are most of the major research-intensive university groups. It is worth the Committee reflecting on the Royal Society’s position statement.

“The landscape of Research Councils has changed over time. The Bill giving the Secretary of State the authority to change their number, name, and fields of activity through a statutory instrument is a pragmatic reflection of this. While this change is reasonable, both Parliament and the research community should be able to inform and scrutinise properly any major proposed changes to Research Councils’ form and function. The Society believes the Bill should include a duty for the Secretary of State to consult with the research community on any proposal for major Research Council reform.”

It says it should include a duty, not a possibility. I emphasise those words because I do not want the Minister to come back with the boilerplate response that if the Secretary of State had to consult on all these matters, he or she would not get anything done. We are not suggesting that and nor is the Royal Society. It is saying there should be a duty to consult on a proposal for any major research council reform.

The issue has also been taken up by MillionPlus and the Russell Group. The Russell Group specifically sought clarification that the affirmative procedure must be used to change the councils. That is not a point we have included in any amendments but it is certainly a concern that the Minister should strongly focus on.

We have tabled these amendments to emphasise the vital role of consultation, not simply because it is the right thing to do, but because if it is not done there will be negative effects on our economy, the wider world’s perception of us, the status of our research councils and the flourishing of UKRI, which we all want to develop strongly in its formative years.

Again, I thank the hon. Gentleman for giving me the opportunity to reassure the Committee and to explain in more detail how the powers would be exercised. They would allow the Government to react to the evolving needs of the research landscape and to keep the UK at the forefront of global research and innovation, while ensuring that the science and humanities councils cannot be altered without legislative scrutiny and the agreement of Parliament.

The hon. Gentleman mentioned the 23 June referendum. That is an event and process that has encouraged the science and research community to understand that UKRI can add value to the community in bringing coherence and strength to the voice of science and research in this country in the months and years ahead. I would like to highlight the evidence that Dame Julia Slingo, the chief scientist at the Met Office, gave to the House of Lords Select Committee on Science and Technology in September. She said:

“So the creation of UKRI is a real opportunity at this moment when we are thinking about where we are going on Brexit.”

Her views reflect an emerging, indeed strengthening, consensus across the learned societies and science community in general that UKRI is something that they want to get behind.

I thank the Minister for introducing that reflection. I agree with him. We are not saying that UKRI is likely to be an impediment to that process. For what it is worth, I entirely agree with the points the Minister has made; my concern—shared by the Royal Society and others—is that the Bill will need both to stand the test of time and to work well in its first years because of the post-Brexit complications and because there is a need for UKRI to be established as a strong, independent and credible force. With due respect, I do not see that the point that the Minister has made deflects or undercuts the points made by others, including the Royal Society.

I thank the hon. Gentleman for giving me the opportunity to elaborate on how I believe we are putting in place provisions to deal with his concerns. I welcome his support for UKRI and his recognition of the contribution it can make once it is up and running.

The powers reflect similar existing powers that have been used several times in the past to merge or create new discipline councils as priorities change and evolve, as happened with the creation of the Arts and Humanities Research Council in 2005. I assure hon. Members that future changes of that sort would not be undertaken lightly. The Government would seek the views of the research community through proper consultation before putting forward any proposals. I am sure that hon. Members would not hesitate to challenge any change of that kind that did not have prior consultation, but it is not necessary to place a formal duty on the Secretary of State to do that. Under clause 107, a statutory instrument must be laid before and approved by both Houses of Parliament via the affirmative procedure. That follows the current process to change the structure and remit of the research councils under the Science and Technology Act 1965.

In any future use of the powers I am sure that hon. Members would not hesitate to challenge changes on which there had not been proper consultation with the sector. I agree with hon. Members that consultation would be essential before the exercise of the powers in question, but it is not necessary to put that on the face of the Bill. I therefore ask that the amendment be withdrawn.

I thank the Minister for his response and for the opportunity to have a broader discussion of the circumstances in which UKRI would develop. I think I made it clear that on looking at the drafting of the provision we thought there was already a requirement for an affirmative resolution, but I am grateful to the Minister for confirming that, with reference to clause 107. At the end of the day, the list of people whom the Minister must satisfy includes not just the Opposition but the whole academic and scientific community. I am glad that he recognises that, and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 84 ordered to stand part of the Bill.

Clause 85

UK research and innovation functions

Amendment made: 256, in clause 85, page 52, line 12, leave out “and new ideas” and insert

“, new ideas and advancements in humanities”.—(Joseph Johnson.)

This amendment provides that UKRI may facilitate, encourage and support the development and exploitation of advancements in humanities (including the arts), as well as the development and exploitation of science, technology and new ideas.

I beg to move amendment 289, in clause 85, page 52, line 18, at end insert—

“(h) provide postgraduate training and skills development, working together with the OfS.”

This amendment would ensure UKRI reflects the current activities of the Research Councils as set out in their Royal Charters in respect of the learning experience of postgraduate research students, and would require joint working on this with the OfS.

I welcome the remarks made by my hon. Friend the Member for Blackpool South in his opening comments and I am pleased to be able to give the Minister an opportunity to clarify an area that our discussions have not so far touched on much, but which I think we will all agree is of some importance. The proposal for the office for students is at the heart of the Bill, and it deals primarily with the learning experience of undergraduates. It goes on to talk about the learning experience for postgraduate taught students, but fails to address a third, important category: postgraduate research students. Clearly they have a very different learning experience; nevertheless it is crucial for them because they are not only learners but teachers.

I am sure the Minister will agree that there is a number of issues relating to postgraduate research students, and although there is good practice across the sector, there are also areas where such students are occasionally let down. A crucial relationship for them is with their supervisor. Although there is much excellent supervision, there are also areas, such as feedback, where supervisors can get things wrong. Feedback and assessment are crucial to every student’s learning experience, but get them wrong and, given the particular intimacy of the relationship between a supervisor and a postgraduate research student, that can be quite destructive.

I recently saw comments that an early academic had written in The Guardian based on their own experience, making the point that feedback

“can take the form of constructive feedback for improvement, or demoralising sarcasm. I have experienced the full range, and it has had a direct impact on my research.”

Unfortunately there are examples of supervision being interrupted by:

“Unannounced departures for conferences, holidays and research projects.”

Those of us with experience of the sector will know about problems with the sudden retirement of supervisors. That could be halfway through a programme of work for a postgraduate research student, but I have known cases where people accepted a place based on a particular supervisor’s expertise, but found on arriving at university that that person was no longer in place. There is a whole range of issues there.

There is also the relationship between research and teaching. Two or three years ago the National Union of Students published a very useful report highlighting the challenges for postgraduate research students in taking on teaching responsibilities, the difficulty that there often is in getting the balance right between the two, and the pressure that is sometimes put on them to undertake teaching work, which can be to the detriment of their research and own learning experience.

The third area, which will be close to the Minister’s heart—I know the other two will be as well—is the issue of access and widening participation, because we need to be clear that those opportunities exist at every level of our higher education system. The initial focus was on undergraduate access and the Government have taken some welcome steps to address issues relating to postgraduate taught programmes, but we also need to have a focus on postgraduate research opportunities.

The amendment gives UKRI a clear responsibility for postgraduate training and skills development—it is phrased in a way entirely consistent with the royal charters of the current research councils—in conjunction with the office for students. As the Minister will remember, I raised this point with some of the expert witnesses at our oral evidence session. Professor Philip Nelson, the chair of Research Councils UK, agreed that this was an “important issue”. He went on to say that

“we in the research councils have three main ways of supporting PhD students across the sector. We do interact with HEFCE on that currently. I think it will be very important—the point has already been made in evidence to this Committee—that the OFS and the UKRI connection is carefully made.”

Professor Ottoline Leyser from the University of Cambridge agreed that that was an important point and went on to say that

“one of the opportunities generated by UKRI would be the possibility to have more integrated research into teaching and research training…we could develop better understanding of the most effective ways to do research training and teaching. That is one opportunity that is more difficult within a single research council.”––[Official Report, Higher Education and Research Public Bill Committee, 8 September 2016; c. 87, Q137.]

There are issues with how to address the learning experience of postgraduate research students. We are supported in the sector; there are problems that we are all aware of. Can the Minister reassure me on how he sees the roles of the two bodies? Will the OFS’s role in relation to postgraduate students include the regulation and assurance of quality, information needs for PGR students and their access to and participation in student protections? How does he see UKRI exercising its responsibility for the learning experience of PGR students, in conjunction with the OFS?

I welcome the opportunity to set out the importance of postgraduate training and skills development to the future of our economy, and in particular to the strength of our research and innovation sectors. That is reflected in the provisions of the Bill that ensure that UKRI is able to support postgraduate training and work with the OFS on postgraduate and wider skills issues. The OFS and UKRI have been designed to work closely together, but let me offer some thoughts on the division of responsibilities between them and on how they might work together.

The OFS will be the regulator for all students, including postgraduate students, and will monitor the management and governance of HE providers, as well as their overall financial sustainability. The research councils within UKRI will continue to provide research grants for projects. Research England will deliver HEFCE’s current research funding powers, such as the quality-related research funding block grant. The Bill proposes safeguards to protect joint working and

“cooperation and information sharing between OfS and UKRI”,

which reflects the integration of teaching and research that we discussed earlier.

Research England, within UKRI, will lead on quality-related funding, the allocation for which currently includes an element that recognises research degree supervision. UKRI will fund postgraduate research, as research councils do now. HEFCE currently provides some funding from the teaching grant to support masters-level PGT; all teaching grant responsibilities and associated responsibilities will transfer to the office for students.

UKRI and the OFS will work together on monitoring and evidence gathering on the pipeline of talent from undergraduate study to postgraduate study, early career research and beyond. That underscores our intention for the OFS and UKRI to work closely together to ensure that there are no gaps between their respective roles. We want there to be no difference from the current situation in which an institution may receive funding from a research council but is still subject to HEFCE’s oversight of the sector. In practice, individual students will have little, if any, exposure to either body, since their interactions normally take place at an institutional level.

The Bill is a legal framework for these reforms, with the functions of UKRI broadly defined, as are the current functions of the existing bodies. They are drafted to be inclusive and permissive, and to ensure that the functions currently performed by the existing nine funding bodies can continue.

A number of the Minister’s comments are reassuring. In describing the architecture and exercise of functions, he is talking largely in the context of continuity. The Bill has, at its heart, a drive to improve teaching excellence. Does he also see it as an opportunity to improve the learning experience of postgraduate research students? Should that be as much at the heart of what we are trying to do with the bodies we are creating as it is for the TEF?

We see the research quality assurance process, through the REF, and the teaching excellence framework—the teaching quality assurance process that we are introducing—as being mutually reinforcing, as I have previously indicated. We want institutions to consider how they promote research-led teaching in their submissions, and Lord Stern’s review of the REF recommended that academics be rewarded for the impact on teaching of the excellence of their research. We will ensure that the two processes are co-ordinated and that timescales and deadlines have flexibility so that institutions can plan for the demands of the two systems.

I listened to what the hon. Member for Sheffield Central said, and I contend that it is purely by having a flexible, open system that the things he asks for are actually possible. The problems within the system that he articulated are often due to the inadequacies of the departments involved. I know that because I have been closely affected by it. Allowing institutions to work with these overarching bodies but driving quality from the institutions themselves is what is wanted. Furthermore, an individual benefits from being asked to teach. It is not always detrimental for a researcher to expand their skills in that way.

In answer to the question from the hon. Member for Sheffield Central on the teaching excellence framework and postgrad research, in the first instance, no, it will not deal with the postgrad experience; it focuses on undergrad and part-time. The Bill sets out clear responsibilities for UKRI and the OFS, with the OFS being the regulator for all students, including at postgraduate level.

There are a number of areas that will require close co-operation between UKRI and the OFS, including on postgraduates, and it is vital that they are empowered to work together. The Bill does that through clause 103, which enables and ensures joint working, co-operation and the sharing of information. An emphasis on working together will run through the leadership and management of both organisations, supported by a legal framework that will be sufficiently flexible to deal effectively with areas of shared interest.

I thank the Minister for taking an intervention before he concludes, because I want to push a little further on the point I made earlier. The Bill seeks to improve the learning experience of taught students. Does he see that this is also an opportunity to improve the learning experience of postgraduate research students? Does he hope that the OFS and UKRI will work together to do that?

Yes. We obviously recognise that our intention to drive up opportunities for informed choice and for students to receive a higher-quality experience in HE applies to all levels of study and all modes of provision. We certainly want to see postgraduate research included in that.

In the initial phase of the teaching excellence framework, as it develops and as it is trialled, we are focusing on undergraduate provision in the first instance, but we hope that in time it will be able to capture aspects of postgraduate provision, including postgraduate teaching. That is not something that we anticipate happening in the first three years of the new teaching excellence framework, but it could be something that we put into practice in the years that follow.

I conclude by reassuring hon. Members that I recognise the importance of postgraduate training and skills development in ensuring the continued strength of research and innovation in the UK, which is reflected in the Bill. I therefore ask that the amendment be withdrawn.

I thank the Minister for his reassurance. I say in passing to the hon. Member for Bury St Edmunds that I was not suggesting that teaching is to the detriment of research. Teaching is vital to the learning experience of many PGR students, but it is sometimes a question of getting the balance right, as it is when dealing with some of the other issues and challenges that postgraduate research students face.

On the basis of the reassurance the Minister has given that he sees the OFS and UKRI as having a role in ensuring we enhance the learning experience of PGR students, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

We are coming to the end of our allotted time. It might be convenient to draw stumps before we start consideration of the next amendment. I apologise that I will not be here this afternoon for the last sitting. Appropriate words will be said at the end, but I thank Mr Marsden for his dogged perseverance in holding the Government to account and the Minister for defending the Government.

Ordered, That further consideration be now adjourned. —(David Evennett.)

Adjourned till this day at Two o’clock.

Higher Education and Research Bill (Fourteenth sitting)

The Committee consisted of the following Members:

Chairs: Mr Christopher Chope, Sir Edward Leigh, Sir Alan Meale, † Mr David Hanson

† Argar, Edward (Charnwood) (Con)

† Blackman-Woods, Dr Roberta (City of Durham) (Lab)

† Blomfield, Paul (Sheffield Central) (Lab)

† Chalk, Alex (Cheltenham) (Con)

† Churchill, Jo (Bury St Edmunds) (Con)

† Evennett, David (Lord Commissioner of Her Majesty's Treasury)

† Howlett, Ben (Bath) (Con)

† Johnson, Joseph (Minister for Universities, Science, Research and Innovation)

† Kennedy, Seema (South Ribble) (Con)

† Marsden, Gordon (Blackpool South) (Lab)

† Milling, Amanda (Cannock Chase) (Con)

Monaghan, Carol (Glasgow North West) (SNP)

† Morton, Wendy (Aldridge-Brownhills) (Con)

† Mullin, Roger (Kirkcaldy and Cowdenbeath) (SNP)

† Pawsey, Mark (Rugby) (Con)

† Rayner, Angela (Ashton-under-Lyne) (Lab)

† Smith, Jeff (Manchester, Withington) (Lab)

† Streeting, Wes (Ilford North) (Lab)

† Vaz, Valerie (Walsall South) (Lab)

† Warman, Matt (Boston and Skegness) (Con)

Katy Stout, Glenn McKee, Committee Clerks

† attended the Committee

Public Bill Committee

Tuesday 18 October 2016

(Afternoon)

[Mr David Hanson in the Chair]

Higher Education and Research Bill

Welcome back for what I regret to inform Members will be the final sitting of the Committee. I remind Members that we finish at 5 pm precisely, which means we have to deal with any matters outstanding before then.

Clause 85

UK research and innovation functions

I beg to move amendment 180, in clause 85, page 52, line 21, at end insert

“but must be exercised in such a way as to be for the benefit of England, Scotland, Wales and Northern Ireland.”

This amendment would place a general duty on UKRI to discharge its functions under section 85 for the benefit of the UK as a whole.

With this it will be convenient to discuss the following:

Amendment 181, in clause 88, page 54, line 4, at end insert—

“having regard to the economic policies of the UK Government, the Scottish Government the Welsh Government and the Northern Ireland Executive”

This amendment would ensure the specific duty of Innovate UK will be to have regard to the economic policies of the devolved administrations.

Amendment 326, in clause 89, page 54, line 33, after “appropriate” insert—

“including relevant bodies in the devolved administrations”

This amendment allows Research England to coordinate with its devolved counterparts.

Amendment 182, in clause 91, page 55, line 16, at end insert—

‘(4A) Before exercising his powers under subsection (4), the Secretary of State must consult the Scottish Government, the Welsh Government and the Northern Ireland Executive and have regard to their views in respect of any proposed research and innovation strategy.”

This amendment would place specific duty on the Secretary of State to consult the devolved administrations before exercising his powers in relation to a research strategy in section 91(4).

Amendment 184, in clause 94, page 56, line 24, at beginning insert “Subject to subsections (4A) and (4B),”

See explanatory statement for amendment 183.

Amendment 183, in clause 94, page 56, line 34, at end insert—

‘(4A) In giving direction to UKRI, the Secretary of State must act in the best interests of all constituent parts of the United Kingdom and, before giving such direction, must consult—

(a) the Scottish Government,

(b) the Welsh Government, and

(c) the Northern Ireland Executive

on research and innovation policies and their priorities.

(4B) Before giving any direction to UKRI under subsection (1), the Secretary of State must seek agreement to the terms of that direction from—

(a) the Scottish Government,

(b) the Welsh Government, and

(c) the Northern Ireland Administration.”

This amendment would ensure the Secretary of State takes account of the views of devolved administrations, including different research and innovation policy, before giving direction to the UKRI.

Amendment 185, in clause 96, page 57, line 14, at end insert—

‘(3) In exercising functions under this Part, the Secretary of State must act in the best interests of England, Scotland, Wales and Northern Ireland, having consulted—

(a) the Scottish Government,

(b) the Welsh Government, and

(c) the Northern Ireland Executive

before exercising these functions.”

This amendment would place a duty on the Secretary of State that in exercising their functions in relation to UKRI they must consider the needs of the entire UK and consult the Ministers of the devolved jurisdictions

What a pleasure it is to see you, Mr Hanson —my favourite Chair—[Hon. Members: “Ah!”]—for a Tuesday afternoon.

The Minister is such a reasonable person that I am sure he is keen to accept amendments 180 to 185. They would place a duty on the Secretary of State that in giving direction to UK Research and Innovation regarding research priorities, it is incumbent upon UKRI and the Government to ensure that the needs of the entire United Kingdom are met and to consult with Ministers in all the devolved jurisdictions.

The Scottish, Northern Irish and Welsh Governments must have a formal role in providing input to the UK Government. Too often, the needs of Scotland, Northern Ireland and Wales are forgotten. Allow me to give two examples related to the Bill—neither of which, I hasten to add, arose out of malice. My hon. Friend the Member for Glasgow North West and I noticed a few days before oral evidence sessions were due to start that every major institution in Scotland had been omitted from the list of those being called to give evidence. I know the Minister, and I know the Whip. They are reasonable people. I know they did not exclude us out of malice, but that omission demonstrated that we were an afterthought in a Bill Committee where they knew there would be representation from Scotland. For Scotland to be treated as a mere afterthought shows the need at times to put into legislation the right to be consulted. Being an afterthought is just not good enough.

Let me give another example. Later today, we will discuss an amendment relating to post-study work visas—a matter that has been raised many times by Scottish Members in this House and by the Scottish Government as it is of great concern to us and of great importance to our economy and our universities. What happened a few short weeks ago? Suddenly, the UK Government announced a pilot that involves no university in Scotland, Wales or Northern Ireland, nor any consultation with the Governments in the devolved Administrations. That is another example of us not being treated with any respect whatsoever. The amendment calls for formal recognition in the Bill that we will not be consigned to the role of a mere afterthought at the whim of this or any other Government.

The Scottish research sector has different priorities from much of the rest of the UK, and there is a concern that those priorities will be missed within the new UK-wide research body. For example, Scottish higher education institutions have been pioneers in research collaboration since the establishment of the first research pools in 2004. One of the key principles behind research pools was that they should support research excellence “wherever it is found”, which is sometimes in relatively small research groups in less research-intensive institutions. We are concerned that initiatives to encourage collaboration between mere institutions can sometimes exclude such pockets of excellence through, for instance, threshold criteria dependent on scale. Scotland’s higher education sector, as the Minister will know, is worth more than £6 billion to our economy, and we must ensure that that continues. As it stands, the Bill has the potential to harm Scotland’s world-renowned research.

The Minister and his Government need to ensure that devolved Administrations have an equal say and that their voices are heard within UKRI to ensure that this Bill will be of no detriment to any part of the United Kingdom. It is also critical to be able to take account of the different economic and social priorities of devolved Administrations. Mention was made of Brexit this morning—by the Minister, if memory serves me correctly—and it immediately brought to mind not the example of Scotland but that of Northern Ireland, where there are going to be particular challenges, not least in how cross-border trade, cross-border research collaboration and the movement of people will be handled. That presents a context in Northern Ireland that is not present in any other part of the United Kingdom. Its voice needs to be heard as well. Not to have proper input on these and other matters would potentially be not only disrespectful, but damaging. In Scotland our drive for innovation and growth and our highly distinct social agenda need to be factored in. I have no confidence that that will be possible without ensuring that a statutory duty is placed in the Bill. I beg to ask leave to move the amendment.

I wish to elaborate on my Scottish colleague’s comments, first by saying that you are my favourite Chair of all time, Mr Hanson, and not just for Tuesday—at least until someone else comes along and makes me a better offer.

Amendment 326 would allow Research England to co-ordinate with its devolved counterparts. I am very much in tune with the sentiments just expressed by the hon. Gentleman: nobody likes to be treated as an afterthought, though sometimes people are pleased just to be noticed. In these circumstances, the hon. Gentleman has put forward a powerful case. It is not a question of omission by design, we hope, but it is certainly omission by amnesia, to put it kindly. Rightly, he did not just put the case for Scotland, which he is bound to do, but referred to the situation in Northern Ireland. Those of us who can just about remember back to that steamy day of Second Reading, before the summer recess, will remember that there were representations from Northern Ireland Members on the Bill, not just about issues such as the teaching excellence framework and the future for Northern Irish students, but on some of the border issues. Since then those issues have come further to the fore.

It is a question of looking back as well as looking forward. The reality is that Research England will be inheriting, and will be challenged to perform on, the existing system. At the moment, the UK’s dual support system underpins an excellent research base. As Committee members probably know, it consists of two complementary streams: one targets specific discipline areas; the other is a block grant to institutions. Currently the former is disbursed by the seven research councils and the latter through the Higher Education Funding Council for England and its devolved counterparts, the Scottish Funding Council, the Higher Education Funding Council for Wales and the Department for the Economy in Northern Ireland.

As we heard this morning from the Minister, the proposed reforms will bring the seven research councils and the England-only research functions of HEFCE in the form of Research England—if the Committee has not been lost by this point, it will be shortly—into UKRI. The Scottish Funding Council, the Higher Education Funding Council for Wales and the Department for the Economy in Northern Ireland will remain sitting outside UKRI. Therefore, as the hon. Member for Kirkcaldy and Cowdenbeath rightly pointed out, it would be helpful to probe how UKRI will work with institutions in Scotland, Wales and Northern Ireland in providing strategic oversight of UK research.

I say gently to the Minister that the hon. Member for Kirkcaldy and Cowdenbeath has made it fairly clear—I support his view, and if I was a Member from one of the devolved Administrations, I would feel the same—that on this occasion simply rehearsing the line that we can be assured that UKRI will take such things into account is not going to be adequate, either practically or symbolically. If the Minister is in any doubt, since we have mentioned Scotland and Northern Ireland, I am now going to mention Wales and quote the written evidence that the Committee received from Universities Wales about three or four days ago. I refer to the section about UKRI governance and operation. Very much in the same spirit as the hon. Member for Kirkcaldy and Cowdenbeath, Universities Wales says:

“In the past the legislation has relied heavily on the Secretary of State and the Research Councils to act in the interests of the UK as a whole. With the increased divergence as a result of devolution, however, we question whether this will continue to be effective in appropriately reflecting devolved policy and interests. We welcome the UK Government’s proposed amendment”—

that is referred to as new clause 3, which we will come to—

“to enable joint working between relevant authorities where this is more efficient or effective. We would like the legislative framework to be strengthened, however, so that it not only facilitates joint working but ensures”—

I think there is a difference—

“that interests of devolved nations are catered for appropriately. In particular we agree with Universities Scotland that the legislation as a minimum must ensure there is appropriate representation on UKRI’s Council and on the Councils’ boards. The legislation must also include appropriate duties for UKRI and the Secretary of State not only to consult with devolved administrations but also to have due regard to devolved policy.”

That is the nub of it, and that is what we have tried to embody in amendment 326, which would give Research England the facility to co-ordinate with its devolved counterparts. That is the basis on which we have a great deal of sympathy with the amendments tabled by the hon. Member for Kirkcaldy and Cowdenbeath.

I will not join the auction of flattery, Mr Hanson; I feel that it is unnecessary, and I am sure you do not appreciate it. I am, however, glad to have the opportunity to assure Members, in particular those from Scotland, that I share their desire to ensure that the UK operates for the benefit of the whole of the United Kingdom.

Scottish and other devolved institutions are a vital part of our vibrant research base and have not been overlooked carelessly or by any other kind of omission in our preparations for these reforms or for the Committee. I know that it feels like a lifetime ago that we were sitting in Portcullis House listening to oral evidence, but I point out to the hon. Member for Kirkcaldy and Cowdenbeath that representatives of UK-wide bodies were invited to give evidence to the Committee, including Research Councils UK, Innovate UK and Universities UK. Those bodies all represent the totality of the United Kingdom, including institutions in Scotland, Wales, Northern Ireland and England.

I understand that all parties were invited to make submissions about who should give evidence before the Committee. We put forward a number of suggestions, as did the official Opposition. Relatively late in the day, Members from the Scottish nationalist party asked for additional people to be invited to give evidence, and we were delighted to accommodate Universities Scotland, the Royal Society of Edinburgh and the Scottish Funding Council to round out the evidence that we had already requested from those other representative bodies of the entirety of the United Kingdom. There was no omission. We were delighted to make time in the Committee’s proceedings to accommodate further Scottish voices, and we welcomed them, as we welcome them now.

I never suggested that there was any malice, but there was scope to have Scotland properly represented. The Scottish National party—I see there is still scope for education there, since the Minister does not know the name of the party that I represent—was not invited by the Government to give any suggestions about who should be invited, so I think it is fair to characterise it as an afterthought.

I thank the hon. Gentleman for his further clarification. I am always happy to be educated by him in lots of ways, but on this matter we will have to disagree. We gave opportunities to the Committee to submit names to give evidence before it. As I said, we had already invited significant representations from UK-wide bodies and were delighted to accommodate the further suggestions his party made. I think we have to move on.

Turning to amendments 180 and 181, the research councils and Innovate UK, within UKRI, will continue to fund excellence wherever it is found in the UK. UKRI has the ability to work with the devolved bodies and a statutory duty to use its resources in an efficient and effective way, meaning it will look for all opportunities to collaborate. It is also important than Innovate UK can operate independently to spot opportunities and to provide the right access to finance conditions for economic growth. To improve its understanding and response to economic policies in the devolved Administrations, Innovate UK will be appointing full-time regional managers in Glasgow, Cardiff and Belfast. That means that UKRI and its councils will have to consider the whole of the UK, ensuring that the current co-operation will continue.

Turning to amendment 326, on Research England consulting relevant bodies in the devolved Administrations on grant conditions, block funding of universities for research—so-called quality-related funding—is a devolved matter. It is therefore not appropriate to require Research England to consult its devolved equivalents, just as the devolved funding bodies are not required to consult HEFCE now. Our approach mirrors that taken in the Further and Higher Education Act 1992. Of course, that does not mean HEFCE has operated in isolation—in fact, HEFCE works closely with its devolved equivalents, such as the Scottish Funding Council, on areas like the research excellence framework. A Government amendment ensures that Research England can continue that joint working in the future.

Turning to amendments 182 to 185, on the Secretary of State consulting the devolved Administrations before taking key decisions that will have an impact on UKRI, the Government work closely with the devolved Administrations now and UKRI will continue to work with them. However, we would not seek to bind UKRI into a restrictive process of consultation. Legislation must remain sufficiently flexible for the Government and for UKRI to react quickly to emerging issues, as the research councils acted earlier this year to promptly commission research into the Zika virus.

The amendments also require the Secretary of State to act in the best interest of all parts of the UK. As a UK Government Minister, I assure the Committee that that is already the case. That was recognised by the former vice-chancellor of the University of Dundee, Sir Alan Langlands, in the evidence he gave last month:

“Even given the dynamics of devolution and the fact that essentially we are dealing with four different financial systems and four different policy frameworks, the one thing that has stuck together through all this has been the UK science and research community. The research councils, HEFCE and, indeed, BIS have played a hugely important part in that.––[Official Report, Higher Education and Research Public Bill Committee, 6 September 2016; c. 26-27, Q40.]

I agree with Sir Alan. The research community functions remarkably well across the UK political landscape, not least because the UK Government and the devolved Administrations work together to make it do so. Therefore, recognising that the Government share the hon. Gentleman’s concern in ensuring that UKRI effectively serves the whole of the UK, I ask that he withdraws amendment 180.

I thank the Minister genuinely for his responses. I will not put the amendment to a vote, but I make two observations. I do not think establishing mere regional managers in Glasgow, Cardiff and Belfast, if I recall his statement correctly, are in any way sufficient to guarantee the type of high-level involvement that is being sought. There are examples—I gave one related to the post-study work visa pilot—of where decisions have already been taken by the UK Government without proper consultation of the devolved Administrations. I therefore beg to differ with the Minister on those two points, but I also beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 310, in clause 85, page 52, line 21, at end insert—

“(2A) The functions conferred by paragraphs (a) – (e) of subsection (1) may be carried out in partnership with other funding bodies”.

This amendment allows other funding bodies to work with the UKRI.

With this it will be convenient to discuss the following:

Government amendments 111, 272, 273, 114 and 115.

Government new clause 3—Joint working.

Government new clause 17—Advice to Northern Ireland departments.

It goes without saying what an enormous pleasure it is contribute to this debate under your chairmanship, Mr Hanson. We are all aware of the significant amount of research done in the UK that is co-funded through partnerships with other organisations, and particularly those in the charitable sector. For example, the British Heart Foundation spends £9.1 million on projects with the local research council, and the Association of Medical Research Charities provides £1.4 billion of research funding overall.

As one of the primary roles of UKRI is to “facilitate, encourage and support research” within the sciences and many other fields, amendment 310 seeks to ensure that research funded by other funding bodies, and particularly charities, can continue unaffected by the creation of UKRI. At the moment, the Bill does not fully explain how collaborations and partnerships will occur when UKRI is established. It is unclear whether contracts will be formed directly with UKRI or whether that function will be delegated to research councils, in which case partnerships may become more complicated and time-consuming to establish.

It was surprising that in the Government’s document outlining the case for the existence of UKRI and their recently issued document on UKRI’s visions, principles and governance, there is no mention of charities, let alone any description of how charities are supposed to work with Government once UKRI is formed. I appreciate —I am sure the Minister does as well—that a whole range of charitable organisations are concerned about the lack of clarity and the potential impact on research. The Royal Society, the Association of Medical Research Charities and the British Heart Foundation raised significant worries in their written evidence to the Committee. When charities with such strong contributions to make to research say they are concerned in this way, we need to stop and listen.

Ensuring a simple and clear process for charities to jointly fund research with Government is, I am sure we all agree, important. The vice-chancellor of the University of Leeds, Sir Alan Langlands, whom the Minister has regularly quoted, explained in his oral evidence to the Committee why this clarity is necessary:

“At the moment in HEFCE, there is funding related to charity support, support for research degrees, and businesses research and innovation. All those things need to be resolved. It needs to be very clear between UKRI and the Government who is doing what in those areas.”––[Official Report, Higher Education and Research Public Bill Committee, 6 September 2016; c. 28, Q42.]

Professor Borysiewicz of the University of Cambridge also raised concerns about how charitable bodies will continue to fund research, saying:

“one has to remember that of the research funders in the UK, UKRI merely looks after the Government component side of the funding. For instance, 30% of funding sits with the charitable sector. What is important with UKRI, which is fine as is currently laid out, is that the support and the safeguards proposed in relationship to Research England are also very good. It has to be a body that takes into account the whole of the United Kingdom in its purview. It also has to work closely with other funders and other organisations that have a say in this important area”.––[Official Report, Higher Education and Research Public Bill Committee, 6 September 2016; c. 37, Q25.]

That demonstrates the concerns within the charity sector, and I hope the Minister will respond to the issues raised through the amendment by giving some reassurance.

I thank the hon. Member for Sheffield Central for raising these concerns on behalf of the hon. Member for City of Durham. The Government are keen, like the hon. Gentleman, that UKRI should be able to collaborate with any organisation if doing so would result in better outcomes. As I will make clear shortly, there are specific instances where it is necessary to put powers on the face of the Bill to allow joint working with the devolved Administrations and with the office for students. However, in all other instances I can reassure the Committee that UKRI will not need specific provision to be able to work jointly with other bodies.

Through clause 96, UKRI must look to be as efficient and effective as possible. In many instances, collaboration with other funding bodies will further its ability to achieve this aim. That will be supported by UKRI’s supplementary powers under paragraph 16 of schedule 9. The UK research base is internationally renowned for being highly collaborative and has a strong track record in successful partnerships with other funding bodies. I am therefore confident that not only are such opportunities possible, but that they will be actively sought as part of UKRI’s normal practice.

Government amendments 111, 114 and 115, new clause 3 and new clause 17 relate to joint working. Higher education and block funding of universities for research—so-called quality-related funding—are both devolved matters, but this has not meant that HEFCE has operated in isolation. In fact, HEFCE works closely with its devolved equivalents, such as the Scottish Funding Council, on areas such as the research excellence framework. The office for students and UKRI will take over HEFCE’s responsibilities for funding teaching and research and it is very important that such effective joint working can continue. That is why we, in consultation with the devolved Administrations, have prepared new clause 3, which enables the office for students, UKRI, the devolved funding bodies and Ministers, to work together where it enables them to exercise their functions more effectively or efficiently.

In addition to the new joint working clause, I have also tabled new clause 17, which gives the OFS and UKRI powers equivalent to the existing power for HEFCE to provide advice to the Northern Ireland Executive, as set out in section 69(3) of the Further and Higher Education Act 1992. This is an important power to preserve, as there is no funding council in Northern Ireland, where they have instead found it more effective to rely on advice and support from the English and Welsh funding councils, such as on quality reviews, on terms that all parties agree.

Amendments 272 and 273 are minor and consequential amendments that ensure that any references to UKRI predecessor bodies within the Government of Wales Act 2006 are corrected. I therefore ask the hon. Gentleman to withdraw amendment 310.

I thank the Minister for his assurances on the issue and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 85, as amended, ordered to stand part of the Bill.

Clause 86 ordered to stand part of the Bill.

Clause 87

Exercise of functions by science and humanities Councils

I beg to move amendment 257, in clause 87, page 53, line 11, leave out “Economic and other”.

This is a drafting amendment to simplify the way the field of activity of the Economic and Social Research Council is expressed.

With this it will be convenient to discuss Government amendments 258 to 260, 268 and 269.

These amendments are all directed at updating the way in which the fields of activity of specific councils are reflected in clause 87(1). They ensure that the descriptions of the fields of activities for the research councils are as clear and accurate as we can make them. These are technical amendments that we have agreed with the research councils to ensure that clause 87 properly reflects their respective fields of activities.

Amendment 268 replaces the term “in relation to” with the term “into”, which is the more conventional terminology used in other provisions in part 3. The change in wording does not affect the meaning of the provisions. The policy intent—that UKRI may provide research services—remains unchanged. Amendment 269 replaces “social science” with “social sciences” in clause 102 to make it consistent with the wording in clause 87, and to better reflect the diversity of disciplines within the social sciences.

These two minor drafting amendments seek to ensure that the language used throughout the Bill is consistent.

Amendment 257 agreed to.

Amendments made: 258, in clause 87, page 53, line 15, at end of entry in second column insert

“aimed at improving human health”.

This amendment provides that the Medical Research Council’s field of activity is limited to medicine and biomedicine which is aimed at improving human health.

Amendment 259, in clause 87, page 53, line 16, leave out “Earth sciences and ecology” and insert “Environmental and related sciences”.

This amendment provides that the field of activity of the Natural Environment Research Council is environmental and related sciences.

Amendment 260, in clause 87, page 53, line 18, after “physics” insert “, space science, nuclear physics”.—(Joseph Johnson.)

This amendment provides the field of activity of the Science and Technology Facilities Council includes space science and nuclear physics.

Clause 87, as amended, ordered to stand part of the Bill.

Clause 88

Exercise of functions by Innovate UK

I beg to move amendment 324, in clause 88, page 54, line 8, after “relate” insert

“to maintain its focus on assisting businesses and”.

This amendment seeks clarification that Innovate UK is intended to maintain its business facing focus as a Council of UKRI.

The clause is relatively brief on the exercise of functions by Innovate UK. Brevity is not always a bad thing, but we have tabled the amendment because we seek strong clarification of whether Innovate UK is intended to maintain its business-facing focus as a council of UKRI. I remind the Committee that the White Paper stated that its

“business facing focus would be enshrined in future legislation, which would replicate the functions in Innovate UK’s current charter.”

I am not a betting man, but if I were I would put money on the likelihood that, when I sit down and the Minister rises, he will look at me more in sorrow than in anger and refer me to the note published this month, “Higher Education and Research Bill: Innovate UK”, with its sub-heading, “What do the reforms mean for Innovate UK?” I shall not deprive him of the pleasure of reading substantial chunks of it to us, but I will just quote it. I do not know whether the Minister wrote it himself.

The end of the first paragraph states:

“We are very clear that Innovate UK will retain its current business-facing focus. Innovate UK will not become just the commercialisation arm of the Research Councils.”

Those are fine words, but you will know, Mr Hanson, that, in the words of the old proverb, fine words butter no parsnips. If I were to continue that metaphor I should say that, if I were a cynical person, which I am not, the mere emphasis given in the note would remind me of another old saying, that “the louder they protested their honour, the faster we counted the spoons”. On this occasion we should like to examine some of the cutlery, if I may pursue the analogy.

I refer the Minister back to the evidence session with the chief executive of Innovate UK. I thought that what she said was revealing. Her evidence was measured and confident and she was overall in favour of what was going ahead, but she put down some substantial caveats. I will remind the Minister of what she said. I asked her whether there were things with Bill that concerned her about the the financial tools. She said:

“There are three areas in particular on which we need to be absolutely sure that the intent and what was in the White Paper is still there in the Bill. The first of those is the business experience of the board and the Innovate UK champion, which is very clear in the White Paper. As I understand it, that is possible and enabled through the Bill, but I think that the balance of business and research experience is very broad and could be tightened up a bit.”

She then said, about the financial tools:

“We are keen to be able to use things such as seed loans and equity, and other councils within UKRI have dipped a toe into that.”

She went on:

“We need to be absolutely clear, in how the Bill is finalised”—

whether this is the finalised version remains to be seen—

“that we ensure we have as much flexibility as the research councils have had and some of our enterprise partners have. We work very closely with Scottish Enterprise, which uses more financial tools than we currently have, and Enterprise Northern Ireland. We want to move at speed and to empower companies to grow in scale and be really competitive, but we must ensure we have the flexibility to do that and not slow down our clock speed. I think there is a bit of work to do looking at that in more detail.”

Then when talking about institutes and research, she again said:

The Bill gives us the great opportunity to look across the whole spectrum…At the moment, as I understand it, if Innovate UK wanted to create an institute and employ researchers to do the work that businesses need, we absolutely could. I am not sure, within the letter of the Bill, that we are still going to be able to do that. I think that probably needs to be looked at.”––[Official Report, Higher Education and Research Public Bill Committee, 8 September 2016; c. 80-81, Q125.]

When I looked again at the transcript of that session and at what Ruth McKernan, the chief executive, said on that occasion, it reminded me of a little exchange between the Minister and I in the following session when we had the opportunity to put him in the box. In fact, he volunteered himself to the box for some cross-examination by the Committee. On that occasion, I pressed him rather strongly—he was not best pleased to be pressed and certainly gave a spirited response—on the subject of the reports of the House of Lords Science and Technology Committee. At the risk of inflaming the Minister further and perhaps getting him removed him from Lord Selborne’s Christmas card list, I will repeat a summary of the findings, but not the lot because I do not want the Minister to blow a gasket:

“We have serious concerns about the integration of Innovate UK into UK Research and Innovation. With the exception of the Government itself, none of our witnesses gave an unqualified welcome to the proposals. We do not believe that the Government has consulted effectively with Innovate UK’s stakeholders to achieve buy in for this proposal. The Government’s case for integration appears to be based on a flawed linear model of innovation where Innovate UK functions as the commercialisation arm of the Research Councils.”

The Minister has, of course, been keen to address and refute that.

There was a long letter from Lord Selborne and a reply from the Minister that was not as long but was substantial, and I think they probably agreed to disagree. The fact remains, however, that those concerns also remain. The Minister must do a slightly better and specifically more focused job if he is to reassure not just members of this Committee but the range of people he has prayed in aid during other sittings of this Committee—new providers, funds coming in, private equity and all the rest of it.

These other names will not easily go away and I want to quote three or four from the evidence session to which Lord Selborne referred. He quoted Dr Virginia Acha of the Association of the British Pharmaceutical Industry, who said:

“I would be concerned if Innovate UK were brought under the same decision-making approach that a research council would be brought under, because they are making very different decisions.”

Professor Luke Georghiou said:

“There is real concern about the huge disparity between the size of the budget between the existing research councils and Innovate UK, summed up by concern that Innovate UK’s influence would be dwarfed and its impact distorted. That was how members summed up the risks to us.”

Mr David Eyton, who spoke to the Lords Committee, said:

“Effectively”—

Innovate UK

“is the start-up in the context of”

the research councils.

“It is 10% of it; the other 90% is very stable. It is comparatively new and needs to really motor. Will it get the management attention and focus, which requires the quite different skills for governing innovation ecosystems from governing science? That is also the question for that body: the balance of skills on the governing body.”

Finally, but obviously not least, we have what Dr McKernan said to the House of Lords Committee on that occasion. She might have used slightly different terminology—not least because the Minister was there and in courtesy to him—but she said:

“There are also risks that I have not gone into.”

She was talking about the possibility of funding from other Departments being diminished. She continued:

“There are some other areas of mitigation where I still have concerns…We manage about £300 million of funds in partnership with other government departments, for example the Aerospace Technology Institute through BIS”—

with which I am familiar, because there is a BAE Systems site at Warton near my constituency in Blackpool. I am familiar with the work that BAE Systems has done previously with Innovate UK and the Aerospace Technology Institute. Dr McKernan went on to say that Innovate UK does a lot of work with the Department of Energy and Climate Change and the Department for Culture, Media and Sport. She continued:

“It is really important to safeguard those relationships and not feel the need to create something else because we have created”—

these are her words, not mine—

“a fracture in putting Innovate UK within UKRI.”

The Minister may feel that that is slightly overstating it and overegging the pudding, but I hope that I have done enough to show him that that succession of concerns, considerations, worries and so on will not easily be assuaged simply with a paragraph saying that the Government will allow Innovate UK to retain its current business focus. I think that people out there in the groups that I have described want something a little more substantial.

The Royal Society’s position statement on this subject sums up the issue. It says:

“There has been considerable debate about whether or not Innovate UK should be part of UKRI. On balance, the Society believes the potential benefits of creating an organisation with an integrated overview of UK research and innovation infrastructure, assets and expertise outweigh the risks of a more fragmented structure, and that Innovate UK should be part of UKRI. It is essential that in creating UKRI, however, that Innovate UK’s unique business-facing focus and links to its customer base are not put at risk.”

That is where we stand today. The jury is still out on that and on the assertions with which the Minister hoped to placate Lord Selborne, and we would be interested to hear a little more chapter and verse to assuage our concerns.

I thank the hon. Gentleman for the opportunity to comment on Innovate UK. We need to ensure that research and innovation come together at the heart of our industrial strategy. I set that out in my letter to Lord Selborne, which the hon. Gentleman referred to, about Innovate UK’s future inside UKRI, and again in the factsheet that we published for the benefit of the Committee on 12 October.

To fully realise our potential, we need to respond to a changing world, anticipate future requirements and ensure that we have the structures in place to exploit for the benefit of the whole country the knowledge and expertise that we have. I believe that we can do that most effectively by bringing Innovate UK into UKRI. That view is now shared by bodies such as the Royal Academy of Engineering and the Royal Society, which have recognised, as the hon. Gentleman rightly said, that the benefits of integrating Innovate UK into UKRI outweigh the risks.

Those two bodies are not alone. In other parts of her testimony, Ruth McKernan herself said:

“The establishment of UK Research and Innovation, including the research councils and Innovate UK, recognises the vital role innovation plays and further strengthens the UK’s ability to turn scientific excellence into economic impact.”

Alternatively, I can again point hon. Members towards the evidence given by Professor Sir Leszek Borysiewicz of Cambridge University, who said:

“The addition of Innovate UK is welcome, because it means that industry and the translation to industry has skin in the game at the very basic level.”––[Official Report, Higher Education and Research Public Bill Committee, 6 September 2016; c. 22, Q30.]

I recognise that the hon. Member for Blackpool South raised additional concerns in his remarks and with his amendment, which I will come to now.

Let me reassure the Committee that I agree with the hon. Gentleman’s sentiments about the importance of Innovate UK maintaining its business-facing focus. These are not just warm words from us in the Government. I recognise that Innovate UK has a distinctly different mission and culture from the research councils and from Research England. This is a good thing and must be protected. Innovate UK is not, and will not become, the commercialisation arm of the research councils.

Innovate UK is this country’s principal innovation agency and it is business led. These key characteristics will not change; however the commercialisation of research is important and the Nurse review highlighted the need to address the UK’s historic weakness around commercialisation. UKRI will help businesses identify possible research partners and will mean that research outputs are better aligned with the needs of business. This can be very powerful. Collaborative projects supported by Innovate UK with two or more academic partners have twice the economic return compared with those with no academic partners.

That is why the Bill protects Innovate UK’s distinctive business-facing focus and autonomy in delivering its functions. Innovate UK will continue to develop new projects and programmes, working with companies to de-risk, enable and support innovation that will help the UK economy to grow. This is vital. We have made strong commitments to this effect in the White Paper and in my response to Lord Selborne, which the hon. Member for Blackpool South has in front of him, and I am happy to reiterate those today.

Innovate UK’s current functions will be enshrined through this legislation and UKRI has a duty to ensure that such functions must be exercised by Innovate UK to increase economic growth. It will retain its separate budget, set out via a grant letter from the Secretary of State. The Secretary of State will appoint both academic and business representatives to the UKRI board, and will be able to nominate a member of the UKRI board who will lead in promoting and championing innovation and business interests. I think this is the tightening up of those characteristics of the board that the hon. Gentleman had in mind with his remarks. I hope these assurances demonstrate that we want Innovate UK to continue to go from strength to strength, and UKRI to be an organisation that supports this. However, the Bill already makes Innovate UK’s business-facing role clear.

I wanted to pick up the point that Dr McKernan made, which is highly relevant in the context of the debate we have just had about devolved areas. She made the point—her view was challenged by others, I think—that Scottish Enterprise and Enterprise Northern Ireland had “more financial tools” than Innovate UK had. Does the Minister share her concerns about that? If he does, what capacity is there in this new structure for Innovate UK to be able to match the flexibility she referred to?

We want Innovate UK to have significant flexibility in the range of financial mechanisms and financial tools it has at its disposal. That is one of the reasons why we are developing the new non-grant innovation finance products at the moment, to complement the important and popular grant finance products that it has at its disposal. The Bill sets out the activities that UKRI as a whole can pursue, and activities where it needs advance permission from the Secretary of State, such as establishing a joint venture. All these restrictions and activities will apply equally to all councils in UKRI, not just to Innovate UK. The restrictions replicate the current situation that applies to Innovate UK and to the research councils. We are not looking at placing undue restrictions on the councils once UKRI is created, but the Secretary of State will need to be assured that certain activities are in line with HM Treasury rules and delegations, as I am sure he will understand, such as the “Managing public money” guidance issued by the Treasury. Once it comes into being, UKRI will be managing a budget of more than £6 billion, so we need to ensure that those kinds of control are in place.

The Bill already makes clear Innovate UK’s business-facing role, not only through directing its focus on increasing economic growth, as set out in clause 88, but through specifically ensuring that it has regard to benefiting persons carrying on business in the UK. Although I agree with the sentiment behind amendment 324, I believe that its aims are already addressed in the Bill and I therefore ask the hon. Gentleman to withdraw it.

I am grateful to the Minister for running through those scenarios in some detail, and particularly for expanding on the potential financial instruments. It is fair to say that there is nothing more that he can do at this stage. The proof of the pudding will be in the eating, and of course the proof of the pudding will perhaps also be demonstrated by the nature of the board that is eventually set up. With that in mind, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 88 ordered to stand part of the Bill.

Clause 89

Exercise of functions by Research England

I beg to move amendment 325, in clause 89, page 54, line 13, at end insert—

‘(1) Research England may—

(a) provide non-hypothecated funding to eligible higher education providers for the purpose of supporting basic, strategic and applied research; and

(b) support knowledge exchange and skills provision.”

This amendment would allow Research England to fund eligible higher education providers to support basic, strategic and applied research and to support knowledge exchange and skills provision.

This, too, is a probing amendment. We have spoken slightly in brackets, in the context of its implications for the devolved Administrations, about Research England, but this is an important clause because it starts to spell out—obviously, in the Bill there is a limit to the amount that Ministers might wish or be able to spell out—some of the issues and concerns about how funding will be separated, assessed and actioned. We tabled the amendment in an attempt to tease out just what some of the things in clause 89 might mean.

The particular set of emphases in the amendment is one that the representations that I have had from members of the scientific community and various societies show they are keen on and anxious about. The Minister referred earlier to the various types of research assessment, and of course that will include taking on quality-related research assessment for the UK and funding for England. QR funding is generally highly valued because it can provide stable levels of funding over the period between research assessment exercises in a way that means the university can deploy it at its discretion. Of course, there is always a balance to be achieved in this respect. In the original debates about the research assessment exercises in the late 2000s, the issues of QR, how micromanaged it should be and how flexible it should be were hotly debated, and no doubt they will continue to be hotly debated in the future. However, I think that there is a general acceptance and general view that QR funding provides a valuable baseline of support for facilities and research operations.

Without wishing to sound like a Jeremiah, I might say that the mixture of factors that HE institutions in this country will have to face over the next three to four years—highly variable factors to do with the implications of Brexit and what does or does not come out of that —and the general financial climate in Government make it important that there should be an element of funding to provide a baseline of support for facilities and research operations. QR gives universities the opportunity to support emerging research areas and new appointees.

I remember debating these issues in Select Committee in respect of the REF, and this was always the discussion. Which came first: the chicken or the egg? The point was made that, certainly under the old research assessment exercise, it was difficult for new, cutting-edge disciplines that had genuine merit and genuine academic reference, and all the rest of it, to break into the structure. QR still plays a valuable role in that respect. Supporting emerging research areas and new appointees is important as well, because there was a time not that long ago—perhaps five, 10 or 15 years ago—when it was extremely difficult for young academics in their 30s or 40s to come through in new research areas and to develop institutes and things of that nature, particularly but not exclusively on the science side, in universities.

For all those reasons, most people out there in the HE environment believe, like I do, that QR is an important element of funding, and it would help to enshrine that purpose in law. We have suggested a mechanism. Again, this is a probing amendment. If the Minister is minded to consider it and does not like the terminology, we would be happy for him to take it away. It is important to give reassurance to the academic community about the role of QR, on which there is relatively little in the Bill.

I thank the hon. Gentleman for the opportunity to explain further the key role that Research England will play within UKRI. Research England’s function of providing funding for research within higher education institutions will form one part of the dual support system in England. It will take on HEFCE’s responsibility for issuing block grants to universities for the purposes of research, based on the research quality of those institutions.

The integration of HEFCE’s research and knowledge exchange function within UKRI is also critical to achieving greater strategic co-ordination across the research funding landscape. Professor Quintin McKellar, vice-chancellor of the University of Hertfordshire, said:

“I am very comfortable with the creation of UKRI. It seems that bringing together the major funders for what you might call blue-sky research with those that have responsibility for innovation and knowledge transfer is a good thing.”––[Official Report, Higher Education and Research Public Bill Committee, 6 September 2016; c. 24-25, Q36.]

UKRI will ensure a more joined-up approach in areas such as skills and UK-wide capital investment, where both HEFCE and the research councils have pioneered innovative funding approaches. For example, HEFCE’s UK research partnership investment fund has allocated more than £500 million to 34 projects running between 2014 and 2017, attracting £1.4 billion of investment from businesses and charities.

An amendment is not needed to assure the unhypothecated nature of the funding that will be provided by Research England, as clause 93(2) already provides such protections. In addition I would be cautious about placing any conditions on the funding beyond the conditions currently in place, such as the amendment suggests by referring to basic, strategic and applied research, which may inadvertently restrict what universities can do with this block grant funding. The Government believe in institutional autonomy, as the Bill demonstrates, and we do not want to place conditions on our universities that limit their freedom to undertake their missions as they see fit.

Research England will retain HEFCE’s research and knowledge exchange functions, including the higher education innovation fund. Research England and the new office for students will act together to deliver HEIF, as an example of the joint working between the two bodies and their shared remit to support business-university collaboration.

The Minister is moving on to paragraph (b) of the amendment, which prods me to return to a subject I touched on the other day. As this process goes along and HEFCE is, in the words of the White Paper, dissolved, there is the difficult question of the transition period. I think we agree that this is likely to be a two to three-year process. Will the Minister give any indication of the point at which Research England will become the active player in this new architecture?

As I said in answer to the hon. Gentleman’s earlier question on a similar theme, we expect the office for students and UKRI to become operational in 2018-19. They will take on functions including HEIF during that period and from that day onwards. HEFCE’s knowledge exchange functions will transfer with its research functions to Research England. That includes support for the research elements of HEIF. The reforms offer significant potential to build coherence with the knowledge exchange programmes currently operated by the research councils and Innovate UK.

Knowledge exchange is an essential mechanism to support universities in effectively contributing to UK growth, as evidenced by the Chancellor’s recent announcement of £120 million of additional funding for university collaboration on technology transfer and knowledge exchange. However, as the provisions of the Bill are sufficient to allow Research England to undertake these activities, I ask the hon. Gentleman to withdraw amendment 325.

I thank the Minister for his response and the further detail. It is particularly helpful that he has said a little more about the situation with HEIF and the timescale, which is similar to what we discussed the other day. With those assurances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 89 ordered to stand part of the Bill.

Clause 90

Exercise of functions by the Councils: supplementary

I beg to move amendment 261, in clause 90, page 54, line 39, at end insert—

‘( ) Arrangements under subsection (1) may result in a function of UKRI being exercisable by more than one Council.”

This amendment and amendment 262 make it clear that arrangements under clause 90(1) may result in a function of UKRI being exercisable by more than one Council and that functions of UKRI which are exercisable by a Council on UKRI’s behalf under arrangements under clauses 87 to 89 or 90(1) may also be exercised by UKRI. This enables Councils and UKRI to engage in cross-cutting activities.

Multidisciplinary research is of increasing importance in tackling complex challenges such as the impact of climate change. Currently, councils may hold and spend funds only for activity within their own remit. That means it is not within the remit of any of the research councils to manage and distribute inter and multidisciplinary funds such as the new £1.5 billion global challenges research fund.

Amendments 261 and 262 clarify clause 90 to enable UKRI and the councils to engage in multidisciplinary work more effectively. Amendment 261 makes it clear in the Bill that UKRI will enable councils to collaborate on funding multidisciplinary research. Amendment 262 proposes leaving out “in other ways” from the end of subsubsection (2), which provides further clarification that enables collaboration between UKRI and a council carrying out specific functions of UKRI.

As I have explained, these are technical drafting amendments that make it clear that UKRI and the councils are able to both continue with existing joint working and collaborate even more effectively in funding multidisciplinary research.

Amendment 261 agreed to.

Amendment made: 262, in clause 90, page 54, line 42, leave out “in other ways”—(Joseph Johnson.)

See the explanatory statement for amendment 261.

Clause 90, as amended, ordered to stand part of the Bill.

Clause 91

UKRI’s research and innovation strategy

I beg to move amendment 327, in clause 91, page 55, line 8, after “approval” insert—

“(c) consult with a Committee of Executive Chairs of Councils in the development of UKRI’s strategy.”

This amendment would ensure UKRI’s governance structure includes a Committee of the Executive Chairs of the Councils who are consulted with as part of UKRI’s strategy.

Although the amendment is probing, it is important, not only in terms of the practical arrangements that must characterise the relationship between UKRI and its nine councils but in terms of the signal—or lack of signal, if the Government do not move down this road—that it is in danger of sending to the academic community and the learned societies and institutions, which have already spoken strongly about the measure. That is why we, with the advice and opinions of many of those people, have tabled the amendment, which would ensure that

“UKRI’s governance structure includes a Committee of the Executive Chairs of the Councils who are consulted with as part of UKRI’s strategy.”

I read that out carefully, because I want to engage with the paper to which the Minister referred this morning, which Committee members should have seen: “UKRI: Vision, Principles and Governance”. Produced at the beginning of this month, it is a joint paper between the Department for Education and the new Department for Business, Energy and Industrial Strategy. The White Paper and the Bill have outlined the Government’s arrangements for UKRI and its nine councils.

The board will consist of the chief executive officer, chief financial officer and chair of UKRI, as well as between nine and 12 representatives of academia and industry. We really need a huge organogram, perhaps overlaying a large 19th-century painting, on the wall at this point to understand it, but I will do my best. Each of the councils will be headed by an executive chair with five to nine ordinary council members, but—this is the crux of the matter and of this discussion—the executive chairs of the councils do not sit on the UKRI board.

The Nurse review recommended that there should be a committee of the executive chairs of the councils that includes the CEO of UKRI and provides a continuing link to UKRI’s governing board, but the governance arrangements proposed in the White Paper and the Bill do not include an executive committee, although the Bill provides UKRI with the power to establish one. The factsheet published by the Government, which I have just quoted, makes that point. It says:

“It will be critical for the Board to work closely with the Executive Chairs and ensure highly effective co-ordination across UKRI and its key partners. Therefore, our policy intent is for the Executive Chairs of the Councils—along with the CEO, CFO and other senior directors of UKRI—to sit together on an Executive Committee, to support engagement with the Board and cross-council working. This is in line with good practice on organisational governance and Sir Paul Nurse’s recommendations.”

Some people might query the definition of Sir Paul’s recommendation that the Government have chosen to incorporate into the factsheet, but even if they do not, the fact remains that it does not go as far as the Royal Society or many others have called for by making it a statutory requirement on the face of the Bill.

I return to what I have said previously: I am not questioning the current Minister’s enthusiasm or bona fides for this arrangement, simply noting an observable fact. We must legislate for all sorts of Ministers, good, bad and indifferent, over a period of time, and regulation is needed on the face of the Bill to assure people that they can survive the occasional—dare I say it—bad Minister, autocratic Minister or whatever.

The Royal Society believes that it is essential th