Finance Bill

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Rob Marris: Will the Minister give us more information on the relationship between the five-year loan period and three-year accreditation period? I may be misreading the schedule, but paragraph 9(3) states that

    ''the loan must not have been made on terms that allow any person to require''

repayment within five years. If someone wants to invest in a CDFI, I would expect the investor to say, ''If accreditation isn't renewed, I shall want my money back.'' Although we want to encourage people to make loans, that would seem to fall foul of paragraph 9(3). Will the Minister explain the relationship?

Mr. Boateng: Yes, we do want to encourage people to make loans, but I would not put on the juxtaposition the interpretation that my hon. Friend the Member for Wolverhampton, South-West puts on it. Having a five-year period would not be of much assistance to an investor who makes an investment in year two or later, as there would still be accreditation during the holding period. The tax incentive recognises a number of risks and loss of accreditation is one of them.

The juxtaposition that my hon. Friend described will not have the effect that he fears. People will have to make a judgment, and it is right that they should consider all relevant factors when they make that judgment. The thrust of the legislation is not to protect people from the consequences of the decisions that they make. It is not to create a situation in which

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people do not look to make a commercial gain. That is what is so exciting about this—it is motivated by the desire to make a profit. If one is motivated in that way, one has to make a judgment and take into account the various risks that one's profit rewards one for taking. The measure, with its risks and its profits, is designed to promote that spirit of enterprise in our most disadvantaged communities. I hope that that response gives the Committee the assurance that it needs to enable it to give the clause its wholehearted backing and move on.

Mr. Flight: In the round, we wish CDFIs well and success. The Minister slightly misinterpreted my point. There is no doubt that venture capital incentives from the public sector have had a poor record and that harnessing private sector venture capital expertise for the benefit of deprived areas is a sensible approach.

11 am

My point was that a tax credit is being used for what amounts to a subsidy—an understandable justification. That makes it complex for both the Revenue and investors. Venture capital trusts, for example, have been relatively successful because they have been relatively simple, and I hope that the complexities inherent in using the tax system will not act as a drag on the success of this scheme. That is related to the issue of the three-year and five-year periods.

If we want the measure to succeed, the tax rules need to be as clear and straightforward as possible, but it is difficult conceptually to ensure that for a measure that in reality provides a subsidy. However, we wish the measure well. Let us hope that the outstanding issues will be ironed out satisfactorily.

Question put and agreed to.

Schedule 16 agreed to.

Schedule 17 agreed to.

Clause 57

Relief for community amateur sports clubs

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

The Chairman: With this we shall discuss new clause 3—Community amateur sports clubs to be treated as charities—

    '.—(1) The promotion of sport, provision or sports facilities, physical education or healthy recreation by a registered community amateur sports club shall be treated as having a charitable purpose for the purposes of the Taxes Acts with effect from 17th April 2002.

    (2) Paragraphs 1, 2, 3, 11, 12, 13, 14 and 15 of Schedule 18 shall have effect from 17th April 2002.'.

Mr. Flight: The new clause is designed to probe the Government's intentions. Hon. Members will be aware that there has been an historic problem with sports not being deemed suitable activities for a charity. The Charity Commission refined that last November by decreeing that sports activities whose ultimate objectives were health and fitness could be

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viewed as suitable activities for a charity. In principle, that enabled a large number of sports clubs to qualify as charities. However, certain sports do not qualify, including angling.

Clause 57 and schedule 18 are designed to provide a framework of tax relief to those amateur sporting clubs that either cannot qualify as a charity or that decide that they do not want to do so. However, if an appropriate amateur sporting club is dedicated to a sport that does not qualify for charitable status, why have the Government not, for the sake of simplicity, granted tax exemptions that are parallel to those that would apply if it could qualify as a charity? We have, in effect, two sets of rules for sports clubs, one of which falls into the Inland Revenue's box and the other into the charitable box. They are not greatly different, but a few important differences relate to gifting and trading income. The Revenue impact will hardly be significant, so would it not have been simpler—per what new clause 3 would achieve—to give entirely parallel tax facilities to those available to charities?

On the subject of golf clubs and exploitation for social activities, the schedule empowers the Treasury to specify an eligible sport, so protection is retained against an exploitation of the principle. It seems unnecessary, however, to have cluttered up the system with two different tax packages. People who might want to support amateur sports clubs will make mistakes, which puts an onus on those running clubs to understand in detail both the charity rules and the Inland Revenue rules. Does it make sense to introduce a different tax package for such clubs?

Dr. John Pugh (Southport): I shall put all my remarks into one contribution to save the Committee time and to allow me to probe the Financial Secretary's philosophy on the subject.

As has been mentioned, we have two distinct but parallel initiatives: the Treasury proposals for sports clubs, and the proposals from the Charity Commission and the Department for Culture, Media and Sport. Clubs are in the enviable position of being able to choose from an a la carte menu. We applaud the Government for doing something to help sports clubs. It is entirely a good thing and, from the Treasury's point of view, very prudent. Given the huge amount of money required for the national health service, we can conclude that a healthier, sportier nation will result in appreciable savings to future health Bills and to law and order as people will be happily exercised in recreational activity.

However, the choice between registration under the Treasury regime and charitable status under a different regime is taxing sports clubs a little. I have a briefing from the Rugby Football Union, which is unsure as to how to advise its members. The briefing states that the Treasury proposal has only limited tax exemption for investment, does not include the mandatory rate relief, and that company donations to sports clubs will not qualify for tax relief. On the other hand, it also suggests that the Treasury is much the preferred option, as the regime suggested by the Charity

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Commission imposes some fairly onerous duties and responsibilities. It makes it clear that the registration of a club as a charity involves a change in ethos, and that certain clubs will not be able to register as charities. Sports clubs are faced with a dilemma and I invite the Financial Secretary to comment on that.

I understand the line that the Charity Commissioners have taken; they place an emphasis predominantly on healthy recreation. They specifically exclude activities that they do not regard as healthy recreation. For example, snooker is excluded because, although it has a benefit for people's mental health and amusement, incidental by-products, such as drinking and smoking, are not good for individual health. [Hon. Members: ''What about Rugby?''] I was coming to that. Such sports can create a net disadvantage to the health service. Similarly, the commissioners exempt extreme sports, which are good for cardiovascular fitness but lead to many unnecessary injuries.

The Charity Commission's proposals could almost have been designed by the Treasury because, at the end of the day, the bill to the taxpayer is likely to be significantly reduced if the proposals are implemented across the board. However, the Treasury's thinking is not clear. The Bill leaves the registration of sports to the Treasury's discretion. Paragraph 14 of Schedule 18 states that

    '''eligible sport' means a sport that is designated for those purposes by Treasury order.''

In other words, it is precisely what the Financial Secretary designates as such.

In a way, I have great sympathy for the Financial Secretary. I can understand that he does not want to subsidise activities that would happen anyway. In a sense he wants more bang for the Treasury buck. There are no arguments against keeping the process under tight Treasury control. However, to return to the basic principle, if his philosophy is to have a healthy nation, which is why the tax exemptions are being made, and to ease what we all desire—an expansion of sports facilities, so that they progress and develop—the proposals by themselves do not go far enough. They do not seem to be sufficiently imaginative.

If the object of the Treasury is to secure large-scale expansion and real development of sports facilities—I like to think that that is the Treasury's objective, or at least the Financial Secretary's, who I would not expect to be interested in simply cosmetic improvements—the legislation needs to be framed in such a way that it does not fall prey to an obvious accusation. One could take the view that the charity route could be fairly expensive to public finances. One could also take the view that registration might be cheaper. Registration could be seen as a Pied Piper leading people away from the charity route. I do not think that that is necessarily the case, but I should be interested to know what the Financial Secretary feels about it.

I shall conclude by offering two further areas for consideration. Many new clubs face horrendous financial hurdles when they are set up, and particularly ambitious ones consider an element of cross-subsidy. I am familiar with a club in my constituency that has

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used go-karting—a straightforward commercial activity—to fund a range of good and desirable facilities. I am not sure whether it would benefit from any of the exemptions offered by the Charity Commission or the Treasury. I wonder whether the Financial Secretary is considering what might be done in future.

A second area of concern is the status of professional clubs that we do not regard as charities. What would happen if they provided open access community provision? Let us take the hypothetical case of a professional football club. Such clubs are very cash-rich, and not candidates for charity—[Interruption.]—well, one or two of them are, but the major league club that I know best, which is closest to me, is Liverpool football club. As we all know, it contributed massively to the psychological well-being of that community. It does not have quite the same effect in Manchester, but it makes a massive contribution to the mental health of Liverpool. If one looks at the area around the ground to see what healthy living patterns exist, one will see deprivation and an absence of sporting facilities.

Is there a strong case for future tax exemptions for projects that are linked to professional clubs—there are many such schemes on the continent—and community facilities provided not for the benefit of the club, but the community in which it exists? Is there not further scope to make the fiscal system make a real difference? Is the Financial Secretary tentatively going down a route of responding to a lobby, or is he beginning a genuine and important fiscal journey that could result in the tax system's being used to benefit the health of the nation?

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