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House of Commons Hansard
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Charitable Fundraising Websites
28 November 2017
Volume 632

[Mr Philip Hollobone in the Chair]

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I beg to move,

That this House has considered charitable fundraising websites and associated charges.

It is a pleasure to serve under your chairmanship, Mr Hollobone. Britain is a nation of givers. More than 160,000 charities are registered in England and Wales, and, thanks to the generosity of the British public, last year they raised almost £10 billion in donations. We all immensely value their role in our communities and public services, and I know that Members will join me in thanking them for the tremendous part they play in providing support for vulnerable and local community groups.

Charities contribute to every walk of life, such as medical research, animal welfare and local hospices, to name but a few. However, larger organisations such as Cancer Research UK, the British Heart Foundation and Oxfam—those with incomes of more than £5 million —make up only 1% of registered charities, and 40% of charities have an income of less than £10,000 a year. Those charities tend to be embedded in our communities, often engaging with local causes.

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I know that my hon. Friend will raise some interesting points, but will she also join me in recognising that today is Giving Tuesday? That provides a good opportunity for us all to celebrate the work across the country of the small charities that she refers to, as well as local, national and international charities.

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I am grateful to my hon. Friend for her intervention. She is right to point out that Giving Tuesday is our opportunity to celebrate the volunteers who work in our communities to raise money for charities.

Charities rely largely on donors and Government grants for their income. Over the past decade, donating to charities online has become a well established practice. Websites such as BT MyDonate, Virgin Money Giving and JustGiving, which is the largest site, have become the go-to places to donate to charities. Such platforms allow donors to search for their preferred charity and donate money using their smartphones, computers and other electronic devices. In a few clicks, donors can register their debit or credit card, choose their charitable cause and donate.

Last year, websites, social media and apps accounted for more than £2.4 billion in donations, representing 26%, or one in four, of all donations made in the United Kingdom. That figure will only increase as charities adapt to the evolving technological landscape. People like using online platforms because they provide a hassle-free way to present a fundraising case, and they allow individual donors to set up their own mini fundraising campaigns for causes close to their heart. Indeed, many hon. Members may have used the sites to raise money for charities in their own constituencies, perhaps by running the London or Manchester marathons, or by climbing Kilimanjaro—if they are very athletic and adventurous.

Rather than using traditional means of donation, such as cheques or bank transfers, young donors in particular find it far more convenient to donate to charities through online platforms. If we look at the spread of donations across age, we see that last year 58% of donors who contributed online were aged between 16 and 44. Many charities also find using third-party sites more convenient. They provide a huge bonus by attracting funds from friends and family who fundraise on a smaller scale for large charities, such as for the hugely successful Motor Neurone Disease Association ice bucket challenge some years ago.

However, the ability to raise funds generally comes at a cost. Most online giving platforms charge charities an administration or transaction fee for processing each donation. Those typically range from zero to £2 per donation and can make a significant difference to the overall amount that a charity receives, especially if the total comes from many small donations that are all subject to a fee. There are also set-up or monthly rental charges that charities pay for a presence on fundraising websites.

Most fundraising platforms are not-for-profit organisations, although a few sites are run for profit. JustGiving is run for profit. Charities, depending on their size, are required to pay a monthly subscription fee to JustGiving of up to £39, plus VAT, and are charged a 5% fee on the amount raised. The fee is taken from the gift aid received, if eligible, or is deducted from the total if no gift aid can be claimed. Virgin Money Giving is a non-profit company. Charities registering with it are required to pay a one-off set-up fee of £150 and it takes a 2% fee on donations, but all the gift aid is received by the charity.

I declare an interest as a Greater Manchester Member of Parliament, because one online fundraiser, the Wonderful Organisation, is located in Manchester. Wonderful.org is the only site in the UK not to charge any fees. Its core belief is that charities should receive 100% of donations from their fundraising efforts, including gift aid. It is a non-profit organisation run by volunteers and funded entirely by corporate sponsorship from philanthropic businesses, which guarantees that charities, fundraisers and sponsors pay nothing and that the charity or good cause gets all the benefits in full.

As hon. Members may have gathered, the landscape for charities and giving sites is confusing. Transparency is therefore a fundamental issue facing the sector. A recent survey revealed that almost 80% of the people who use the largest run-for-profit platform are unaware that it is a for-profit business. To put that into context, when we register for a bank account or credit card, we understand that institutions have a legal responsibility to explain to customers certain charges and fees that they may be obligated to pay. With large sums being donated and handled, transparency is important.

It is apparent that when people donate online many are unaware of the fees and charges. The sector is telling me that users are simply not aware or do not know. For example, in the wake of the Grenfell Tower fire, Karolina Hanusova created a fundraising page on JustGiving. Through her fantastic efforts, she raised more than £400,000 for the survivors and victims of the fire, but £25,000 of the total was taken in processing fees. Karolina was surprised to find that such a significant amount was deducted from the total raised.

Karolina’s case is not uncommon. Immediately following the Manchester Arena bombing in May, the Manchester Evening News began an appeal, raising £2.5 million through the JustGiving website, but that was subject to deductions of £100,000 in fees. Time and again, I have come across users who registered with fundraising websites but were not aware of such substantial charges being taken from the donated funds. Users need to be aware of the costs and fees so that they can make an informed choice, just as we would expect with any other financial body. The payment process needs to be clear from start to finish.

Public trust in charities is critical and has become a key question over recent years following various crises and media coverage of the sector. Worryingly, this year’s Charities Aid Foundation report revealed that only 50% of the population—half, that is—believe that charities are trustworthy. Clearly, that has to be taken seriously by the sector, and I believe that the sector is now doing that.

I understand that the Charity Commission and the Fundraising Regulator recently met 14 major UK giving platforms to discuss these issues and to agree principles collectively to increase public understanding and transparency. Online fundraising platforms have agreed to provide information to the Fundraising Regulator about their complaints process, and to work with the regulators and the Government to explore how their transparency on fees and charges can be improved.

I am pleased that registration with the Fundraising Regulator is now open to third-party fundraisers, offering platforms an opportunity to demonstrate a public commitment to meeting the highest standards for fundraising. I urge the Government to encourage platforms that have not yet registered to consider doing so and signing up to the code of practice.

However, the Fundraising Regulator is a self-regulating body with no formal powers, so I further ask the Minister, what powers can be granted to the regulator to give it some teeth in dealing with platforms that do not adhere to the code of conduct? All charities must submit their accounts or annual returns to the Charity Commission, and those are available to view on the commission’s website. One benefit of compulsory charity registration is increased transparency across the sector. Perhaps the Fundraising Regulator could replicate that best practice. I suggest that to move towards that aim and promote best practice and transparency, online platforms should also be encouraged to submit their accounts to the commission or Fundraising Regulator.

Anecdotally, many people assume that fundraising platforms are themselves charities. They are not. They are more akin to agents or intermediaries. Although I am of the opinion that not-for-profit platforms are a better fit for the charitable sector, they too have operating costs that are ultimately borne by charities. Card-processing fees are the principal culprit. All charities must pay transaction fees on receipt of donations from PayPal, credit cards and major banks.

I have met representatives of Wonderful.org, whose running costs are covered by corporate sponsors. That is a great initiative. Will the Minister highlight what steps the Government are taking to encourage large corporations and banks to engage with the charitable sector on this issue? For instance, they might provide assistance by exempting card charges and processing fees. After all, corporate responsibility is at the core of many banking companies’ charitable activities, and that would be one way to engage with charities that clearly matter to the general public.

I would like to mention gift aid. Some platforms use a part of taxpayers’ gift aid—a scheme enabling charities to reclaim tax on donations—to cover their costs. Gift aid is a significant cog in the charitable sector. It increases the value of donations to charities by allowing them to reclaim basic rate tax on donations as long as the donor pays tax. Charities can take the donation and reclaim the basic rate of tax from Her Majesty’s Revenue and Customs.

Since the introduction of gift aid in 1990, more than £13 billion in relief has been paid to UK charities. The commitment of this and previous Governments to supporting and expanding gift aid has been a tremendous boost to charitable fundraising—currently, it allows charities to claim an extra £25 for every £100 donated—but although some sites automatically pass on the full amount, others do not. In my opinion, the gift aid reclaimed should benefit the relevant charity, rather than being used to pay an intermediary cost.

I believe that the way forward must be ensuring, with guidance from the Fundraising Regulator and the Charity Commission, that online fundraising platforms are transparent and clear from the outset. I am encouraged by the action that has been taken to update the regulator’s code of practice, but I seek further assurance that the Government will take on board fundraisers’ concerns to make the process as transparent as it needs to be and get more people giving with confidence to our wonderful charities and good causes.

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It is a pleasure, as always, to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for Cheadle (Mary Robinson) for bringing such a topical and important issue to our attention.

We should celebrate the fact that we are a generous nation. As my hon. Friend said, Charities Aid Foundation research indicates that the British public donated about £10 billion to charity in 2016, making the UK the most generous nation in Europe and one of the most generous in the world. Today is Giving Tuesday, the global day of giving that encourages people to volunteer, donate to charity and spread the word about doing good stuff. Last year, 4.5 million people in the UK gave their time or money to charity on Giving Tuesday, and for the second year running the campaign broke the world record for the most money donated online in 24 hours.

Many people need to be asked before they give, so charities have to invest some of their money in fundraising in order to raise funds to undertake their important work. According to the National Council for Voluntary Organisations, every £1 that a charity invests in fundraising raises an average of £4 in return. Fundraising, when done well, also means that charities can develop positive relationships with their supporters.

Recent years have seen the emergence and rapid growth of online fundraising platforms as a new and convenient way for people to donate to charity or other causes. Huge sums are raised for charity through online fundraising platforms. The largest, JustGiving, has helped people to raise more than £3 billion for good causes since 2001. We need only look at the incredible public generosity and use of online fundraising platforms following recent tragic events such as the Grenfell tower fire and the terrorist attacks in London and Manchester to gauge the popularity of that form of fundraising. However, fundraising must be undertaken responsibly by all if public trust is to be maintained.

Sadly, in 2015, charity fundraising came into the spotlight for all the wrong reasons, risking public trust and confidence in charity. Two years on, the charity sector has taken responsibility and embraced change. It set up a new independent and effective self-regulatory body, the Fundraising Regulator, which has worked with fundraisers and charities to strengthen and enforce the code of practice. It has implemented the Fundraising Preference Service, enabling members of the public to easily put a stop to unwanted fundraising requests. Charities and their trustees have embraced higher standards. They are monitoring and overseeing their fundraising activities much more closely, and are strengthening their data protection policies and practices.

My hon. Friend asked whether we could give the Fundraising Regulator more teeth. The regulator regulates the fundraising community by consent. Working with the sector, it has taken major steps to strengthen the regulation of fundraising and ensure that the public are protected from poor practices. Where there is deliberate abuse or unlawful activity, it is for the Fundraising Regulator to report to the relevant statutory regulators—for example, the Charity Commission, the Information Commissioner or the Financial Conduct Authority, and in appropriate cases the police—and encourage them to use their statutory powers. We think that effective self-regulation rather than Government intervention can deliver on the public’s expectations.

As my hon. Friend also mentioned, recent online fundraising has shed light on the need for improved standards of transparency and accountability for online fundraising platforms. The issues include a lack of transparency about website fees and charges, the potential for online fraudulent activity, and the need for the public to have access to good advice about online giving. We need to ensure that high standards and best practice are shared and followed across all online fundraising platforms. That is why, earlier this year, I asked the Fundraising Regulator and the Charity Commission to work with the online fundraising platforms to address public concerns and promote high standards and good practice.

The Fundraising Regulator and the Charity Commission convened a summit with 14 of the largest online fundraising platforms in September. The aim was to agree collectively on principles to increase public understanding and transparency about the different forms of online donating, in order to secure public trust and confidence. I am pleased to report a positive response from the online fundraising platforms and a number of commitments from their meeting with the regulators. They have confirmed their commitment to transparency on fees and charges and have agreed to work with the Charity Commission and Fundraising Regulator to explore how that can be improved. They have also agreed to disseminate clear and consistent public advice about the choices available for donating. They will review their resilience to fraud and help the regulators to review the code of fundraising practice with the aim of expanding the standards for online fundraising.

On fees and charges, we need to recognise that there is a range of commercial and not-for-profit organisations that operate as online fundraising platforms. In addition to the debit and credit card transaction fees that apply in all cases, there are significant costs to be covered in providing the service. That is the case for online fundraising platforms and for traditional methods. In some cases, those costs or a proportion of them are subsidised by associated businesses as part of their social responsibility programmes, reducing the proportion of fees that comes out of individual donors’ gifts. In other cases, fees are taken from the donation or any gift aid on the donation.

My hon. Friend the Member for Cheadle asked about gift aid and the fees that are taken from the total value of the donation plus gift aid. That is the case regardless of whether the platform says that the fees are taken from the body of the donation or from the gift aid that is paid on top of it. Platforms also take responsibility for processing gift aid claims on a charity’s behalf, including any associated reporting and audit requirements. As always, we continue to have discussions with those involved. It is important that in all cases any charges and fees are reasonable and transparent, so that donors can make an informed choice. I welcome the decision that some fundraising platforms took to waive or reduce their fees, or to make a donation, in relation to fundraising for disasters such as the Grenfell Tower fire and the terror attacks earlier this year.

My hon. Friend asked whether we could put pressure on the industry to reduce debit and credit transaction fees. I assure her that UK card processing fees of generally between 1% and 2% compare favourably with the payment processing fees charged in other countries, which are usually higher—significantly so in some cases. I am fairly certain that members of the industry will be watching this debate and they are welcome to discuss what they can do to help support charities’ fundraising efforts with me and my colleagues.

The Charity Commission and Fundraising Regulator will continue to work with the online fundraising platforms and will keep me updated on progress. They sent me a letter yesterday that outlined current progress, which I am happy to share with my hon. Friend. Those platforms provide an important service that is popular with the public and raises significant sums for charity. They have shown that they are willing and committed to work with the regulators and the Government to respond to public concerns and to strengthen standards and transparency. I welcome that, and I hope that other hon. Members do too.

Again, I congratulate my hon. Friend on securing this important debate, particularly on Giving Tuesday. I am willing to continue the conversation outside this Chamber.

Question put and agreed to.