The intention behind the provision is clear, but once again a number of challenges are posed. For instance, many charities that may be part of a group structure run activities that are residential in nature. Hospices have already been mentioned. Further examples are care homes and respite care. It will sometimes be difficult to decide what the main purpose is. It would be interesting to hear Ministers’ views on that. It may be difficult for those charities to access the scheme independently, as they may be entitled to only one limit across the whole

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group structure, unless they are awarded special consideration. Charities or community groups carrying out contracted services may also be considered commercial. That is a genuine issue for some of the charities that are delivering services on which many of our constituents depend.

If the additional limits are awarded only to groups carrying out charitable activities, this should be sufficient to restrict charity shops from accessing the scheme, if that is the purpose. Commercial activity that is carried out as part of the delivery of charitable activities—so-called primary purpose trading—should be exempt from falling under this definition.

A number of charities and voluntary sector organisations have expressed their concerns about the Bill, and the Minister gave us some information about involvement in consultation. The Bill has also raised concerns among some in the legal profession, including the Law Society of Scotland. It supports the policy intent of the Bill and suggests that it is an attempt to strike a reasonable balance between pragmatism and identifying fraud, so the Minister has the support of the Law Society of Scotland in that context. However, the LSS makes the point that it is difficult to identify a way of achieving in practice what the Bill attempts to do in theory. It suggests that flexibility be built into the legislation, as has already been mentioned this afternoon, or that there should be provision for a review of how it is working, as it may prove easier to identify ways to widen the scope of the legislation once it has been in operation for a time.

The Law Society of Scotland echoes the points made by NCVO and others that the legislation is likely to have limited impact and that it will not catch all the charities that could usefully benefit from it. The LSS goes on to highlight some specific issues about the drafting of the Bill. I do not want to spend too much time dealing with those this afternoon, but I shall set out a couple. On clause 3, the LSS has voiced concerns that £20 is too small an amount and that in certain situations it may be difficult for managers to police. It notes that the schedule to the clause provides that

“Where a gift of cash is made to the charity and its managers do not know whether the gift is £20 or less, the condition in sub-paragraph (1)—

With which I am sure the Minister is au fait—

“ is to be treated as met if the managers have taken reasonable steps to find out.”

The Minister and I have had enough exchanges in Committees to know that there are always questions about what “reasonable steps” in such a case would mean. This is another example where something that makes perfect sense to those drafting the wording of a Bill may not easily translate into practice and I, like the LSS, am left wondering what the “reasonable steps” envisaged might be in practice and whether the Minister is proposing guidance on this point.

I seek clarification from the Minister whether the provisions laid out in clause 12 are intended to provide continuity where a charity opts to change its legal form. Does she agree that although it would be sufficient in respect of incorporations, more would be required in the case of mergers? Does the primary legislation need to be wider in that respect?

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Although the Bill of course covers the UK and contains provisions for different parts of the United Kingdom, particularly the exception for Northern Ireland, the Minister will be aware that there is different legislation for charities in Scotland. Concern has been expressed by the Law Society of Scotland that the definition of “charitable purpose” in the Bill is the English definition. Will the Minister clarify whether the wording in clause 17(2)(a) is necessary or desirable in view of the terms of sections 7, 8 and 356 of the Charities Act 2011? Scottish charities will need to be aware of the different legal definitions that will apply to them for different purposes.

I know that all probably sounds pretty technical when broken down clause by clause, and there might be Members on both sides of the House whose eyes are now glazing over because of all the detailed points I have made, but it is an example of what we are going to have to deal with in Committee. However, I think that it is worth reflecting on the fact that these issues have been raised because charities have told us that the changes will affect people in our communities.

The CFG has highlighted the example of a local branch of a national charity that works with disabled children. The branch is independently managed and holds its own business contracts. It runs in-home services for children and young people and focuses on developing independent skills. It occasionally holds social groups for its beneficiaries in different venues, depending on the cost of rent and availability. A local commercial hotel and leisure club often provides it with low-cost space to hold such events. The branch regularly claims under gift aid and often fundraises with collection buckets in the local area and through events at local schools.

One of the concerns that have been raised is that that organisation might be unable to claim gift aid fully under the proposed scheme because, as a local branch of a national charity, it might be considered to be connected and so would fall under the community buildings rules. As its services are not linked to one community building, it might be unable to claim for small cash donations. Residential and commercial buildings are not eligible, so it will not be able to register off the back of regular meetings in beneficiaries’ homes or the local hotel that provides low-cost space. One-to-one services do not count, as the legislation stipulates that meetings in community buildings must take place with at least 10 people present, not including staff and volunteers, and at least six times a year. Donations are not always made during the course of its charitable activities or within a community building used for those activities, but rather through separate fundraising events and activities. That picture of what a typical charitable organisation or set-up involves is one that we will have to look at more closely in Committee to ensure that absolutely everything is put in place to assist them.

In conclusion, the scheme is a welcome addition to the gift aid landscape and could be of particular benefit to small charities. We know that millions of pounds in potential gift aid is left unclaimed every year, and the scheme could go some way towards bringing some of that money back to the beneficiaries who need it most. We know that giving small amounts of cash is the most common donation method, and it has been estimated that in 2010-11 the average person would have donated £11 through charity buckets or donation tins.

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Therefore, charities are asking the Government to simplify the scheme substantially to make it fairer and allow improved access for smaller organisations and equal access for similar charities. The abiding principle they want to see adopted is that the scheme should be easy to access and not tied up in red tape—something I am sure Ministers will absolutely wish to ensure. It would be helpful if the Minister gave some response to the concerns about the matching ratio requirement, the eligibility criteria and the community buildings rules. We have also heard some concerns about gift aid, such as the burden on charities of its being a paper-based system in an increasingly digital world. Indeed, the comment has been made that it is perhaps time to look again at the whole gift aid system and ways of bringing it up to date. I would be interested to hear her views in that regard.

Finally, I welcome what the Minister said about being committed to the consultation process and the new public reading stage for Bills, but I must reiterate the comments I made in my earlier intervention. It has actually been quite difficult for members of the public to find the information on the Cabinet Office website and take part in the consultation. If this is a pilot for the future, I hope that she will consult colleagues on how the whole experience could be improved. She has updated us on a number of comments that have been made, but perhaps she will also give us a specific time scale for when the information will be given to Members so that we have the opportunity to engage fully with the organisations that took the time to contribute.

The Opposition support the principle of the Bill and want to see it progress to Committee, where it needs to be amended to reflect the views of those who have contributed so far and the needs of the charities and community amateur sports clubs that do so much good work in our local communities.

5 pm

Gareth Johnson (Dartford) (Con): This debate might not be what everyone is concentrating on in Westminster today, but it is nevertheless an important contribution to the parliamentary calendar. Thank you, Mr Deputy Speaker, for the opportunity to support the Bill, which will close the gap that has existed in the gift aid system for too long. The system works well when the identity of the donor is known, but it is, of course, ineffective for small, anonymous donations.

Small, anonymous donations are increasingly important to charities that are trying to raise support during a recession. At present, tin-rattling fundraisers, who often work at the coal face for the charitable sector, could miss out, so I am pleased that that will change under the Bill.

The Bill will provide a dual benefit: it will encourage more people to donate to charities, safe in the knowledge that the tax on their contribution can be reclaimed, and it will encourage more charities to use gift aid. The Bill builds on the principle of gift aid; it does not replace it. I was pleased to hear the Minister reiterate that that principle lies behind the Bill.

The Bill has been introduced to Parliament on the back of a public reading stage. I think I am right in saying that this is only the second occasion on which this form of open government has been practised, the

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Protection of Freedoms Bill being the first. The public reading showed that there was broad support among the charitable sector for this Bill. The sector wants the proposed changes and recognises the benefits that they will bring.

The Bill will reduce the reliance of the charity sector on so-called chuggers knowing the identity of everyone they approach. At present, they need the identity of every donor in order for gift aid to apply. Once the Bill is enacted, the situation of somebody who rattles a tin will be just as tax-efficient.

The Bill will benefit many small charities that rely on small donations, such as the Arrow riding centre for the disabled in Darenth in my constituency. It relies heavily on volunteers asking for donations at various community events, without ever knowing the identity of many of those who have given small amounts of money to its cause. The Bill deals with that precise situation and will make a genuine difference to the work that small charities, such as the Arrow riding centre, carry out.

We all know the names of various large charities in the UK, but most charities have a turnover of less than £10,000 per annum and they are set to be the main winners. The Bill will also build on the benefits that this Government have given to those who are generous to charities, such as the changes in inheritance tax for charitable donations, which make it far more rewarding for individuals to provide a legacy to charitable organisations. Good government is about supporting those who are doing good things, and this Bill does precisely that.

For any charity law to work, it is essential that it remain as simple as possible, so that safeguards against fraud are in place but volunteers are not put off charitable activities by the weight of bureaucracy that they need to deal with. That is why we need to keep the registration process for gift aid simple. Gift aid has been targeted by fraudsters in the past, so the Bill will require a good track record before the measures can apply.

In conclusion, it makes genuine sense to encourage people to give donations to charity in a simple and cost-effective way that benefits the donor, the charity and the whole of society. The Bill will facilitate that. I therefore hope that it will receive its Second Reading today.

5.4 pm

Susan Elan Jones (Clwyd South) (Lab): It is a great pleasure to follow the hon. Member for Dartford (Gareth Johnson). He began his remarks by suggesting that people in the outside world might be more interested in the current reshuffle in Westminster. If it is any consolation to him, the first discussion of charities in this House took place in 1601 and the discussions about charities in this House have mattered far more than any reshuffle. I am therefore sure that what we are discussing matters more.

The modern charities sector in England and Wales is large and diverse—far more diverse than it was in 1601. A recent briefing by the National Audit Office for the Select Committee on Public Administration stated that in 2009-10, there were approximately 160,000 registered charities in England and Wales with an estimated combined

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income of £55.4 billion. It also stated that there were more than 191,000 unregistered charities with a combined income of at least £57.7 billion. That shows the size, diversity and importance of the sector. More than that, it shows the importance of our getting this legislation right.

When we think about the Bill, we have in our minds a selection of small, voluntary organisations that work against the odds to do the very best for their communities. Those are the organically formed groups that exist across the country. They are the groups that the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), who I think is still the Secretary of State for Work and Pensions, once noted are animated by “fire in the belly”. He went on to give the following description:

“For it is that which has traditionally motivated people to form voluntary and community organisations, and then to take action to correct some injustice which has made them angry, or fill some gap in services which has moved them.”

It is surely our task in this House to do everything we can to support the work of such groups. That is why I am sure that everyone in the House will want this legislation to be the best that it can possibly be.

All moves to encourage giving and to simplify the system should be welcomed, including the principle behind the Bill. There have been many welcome changes in this area in recent years. Many Members will remember that until 1990, one needed to enter into a four-year covenant for charities to be able to get tax back. Then came the welcome break of gift aid on cash gifts of £600 or more. Later, in the great spirit of the Jubilee 2000 movement, came millennium gift aid, which was introduced by the then Chancellor, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown). That major change in the support for charitable giving, which applied first to projects in the developing world, meant that charities could claim the tax back on gifts of £100 made in a lump sum or in instalments. Subsequently, that was extended to all charities and to all sums of money, which I am sure was welcomed by all.

The principle behind the Bill is very much in that tradition. The new scheme will enable charities to claim back the tax on small donations of up to £5,000 per charity, without the need for donors to fill in a gift aid declaration. Charities will therefore be able to claim a maximum of £1,250 a year, which is welcome. I urge the Government to consider carefully the concerns of groups in the voluntary sector, such as the National Council for Voluntary Organisations, the Charities Aid Foundation and the Institute of Fundraising, about whether the bureaucracy will make things too complex for the charities that the Bill is intended to benefit and that the Government and Opposition parties want to see benefit.

We will particularly need to see what happens with the matching principle. The Economic Secretary was absolutely right that the National Council for Voluntary Organisations does not like the existing provisions, but it does not really like these proposals either. It states:

“We recommend that the 2-1 matching principle is dropped. We would also welcome steps to open the scheme up so that start-up charities, and those that are currently not registered for Gift Aid, have the opportunity to register and begin using this scheme sooner.”

I hope the Government will take that on board sooner rather than later.

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Under the Bill as it stands, charities will have to have been registered with HMRC for at least three years. Many voluntary groups are not registered with HMRC, and they are the exact small groups that would benefit most from the scheme and are doing good work in our communities. I urge the Government to consider that.

There is also cause for concern about community buildings. I very much welcome the impact that the Bill will have on certain churches and places of worship of other faiths, because I personally believe that there should be a special place in heaven for anyone who volunteers for the post of gift aid secretary. However, the Economic Secretary made an interesting point about how the scheme would benefit Catholic parishes. Indeed it would, but there is an anomaly in it. A parish doing fundraising work in its church premises would be able to benefit from the scheme, but not one running a cake bake or similar fundraising programme elsewhere, even if it were identical work. That matter needs to be considered.

There is also the issue of the Bill’s impact on hospices, which the hon. Member for Congleton (Fiona Bruce) raised earlier. There cannot be a Member in the House who does not recognise the excellent work done by hospices across the country.

A further anomaly involves independent care home that provides low-cost residential care for elderly people. It is registered with HMRC and so able to make gift aid claims. It is not independently registered with the Charity Commission, because it is part of a wider group of residential care homes and falls under the governance of a larger charity. The care home independently manages its own finances, human resources, business development and marketing, and being local it often receives small cash donations from collection tins positioned in shops in local towns and villages. It is also contracted by the local authority to provide services.

It is bad luck for that care home because it will not be entitled to a penny under the Bill’s provisions. As a small branch of a national charity, it may be considered “connected” and therefore fall under the community buildings rule, but as its services are not linked to one community building it will be unable to claim for small cash donations. Residential and commercial buildings will not be eligible, and as an organisation providing residential care on a contracted basis, the care home will fall under both those categories. Its donations are also not made during the course of charitable activities or within a community building being used for those activities, but through separate fundraising events and activities. That is just one of many anomalies that have to be considered.

I do not wish to discuss wider issues in detail, but we have to recognise that these are tough times for voluntary and community groups. The recent National Audit Office briefing that I cited earlier quoted the NCVO’s estimate that in 2015 the charity sector is likely to receive £1.2 billion less than in 2012. Moreover, back in July Mr Christian Guy, the managing director of the Centre for Social Justice, a think-tank that I believe the Secretary of State for Work and Pensions set up, said that

“the Government must do more to convince charities that it is supportive of the valuable work they do in communities. Support is all the more necessary during a time of austerity, when budget cuts could enable the most disenfranchised people in society to slip through the cracks.”

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We could debate many more issues today, but as a start it is vital that we look at all possible anomalies and at evidence from pan-sector charitable groups, as well as from individual charities and people with an interest in the area. For those with fire in their bellies and those who will benefit from the legislation, we must ensure that we get it right.

5.15 pm

Jeremy Lefroy (Stafford) (Con): It is an honour to follow the hon. Member for Clwyd South (Susan Elan Jones). I welcome this Bill. Many hon. Members have looked forward to it for a long time, and I congratulate the Government on introducing it. The importance of improving tax benefits for charities has had cross-party consensus in the House for many years, from the introduction of gift aid in 1990 and its improvement under the previous Government, to this Bill—an honourable thread of legislation.

This Bill is long overdue and will hugely benefit smaller charities in all our constituencies. This morning I was with a group from the Rotary club of Stafford Castle. They do a lot of collecting in the town centre and would benefit from the Bill and, like many volunteers, they give up huge amounts of time to collect donations. Research shows that around 50% of all charitable donations in the UK are made in cash, against 29% by direct debit and the rest by cheque or card. The Bill will make a welcome contribution to those charities, adding 25% to the value of donations.

The Bill is important for two reasons. First, it is important for small charities, as other hon. Members have made clear, but secondly, it is important because it concerns donations from those in lower income groups, who until now have not really been recognised. At the moment, a person must be an income tax payer in order to claim gift aid. With the welcome increase in the income tax threshold for the 20% rate, fewer people will be taxpayers, and hence fewer people will be able to reclaim gift aid. As we search for equality in many areas, it is important to have equality among donors. Those who do not pay income tax should have the same right as those who pay it to have income tax on their donations reclaimed by charities.

Last year, the Centre for Charitable Giving and Philanthropy found in its report, “How generous is the UK?”, that

“donor households towards the lower end of the expenditure distribution tend to give away more of their money to charity”

than those at the upper end. Donors at the lower end of the income scale donate something like 3% of their income, and those at the upper end 1%. At the moment, however, donations to charity made by those on lower incomes do not receive tax back.

Figures from 2009-10 showed that tax was reclaimed through gift aid on 40% of all charitable donations in the UK. There is, however, a huge gap between large and small donations because 73% of larger donations of more than £100, which come mainly from wealthier donors, use gift aid to boost the impact of their donation, while only 20% of donations under £10 claimed gift aid.

This Bill will make a great difference not only to small charities but to the way in which those who give regularly and faithfully view their donations, which they will see recognised by the state through the return of tax relief.

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On the meat of the Bill, many hon. Members have spoken of the need to simplify the measures, which I echo. I shall not go into great detail, but I urge hon. Members in Committee to look at the limit of £20, which seems arbitrary. I would be interested to know from the Minister where the limit came from. Why not £25 or £50? It is important that we do not impose unnecessary bureaucracy in the Bill and make people afraid. We do not want people thinking, “I will not claim gift aid because I am not sure whether people have put more than £20 in this bucket and I do not want to break the law.” We should look at that problem. Clearly, we must strike the right balance between simplicity and the prevention of fraud, but I get the impression that we are perhaps erring slightly too much on the side of the prevention of fraud as opposed to the side of the simplicity that all hon. Members want.

Another question is this: how can we encourage those fine national organisations that rely so much on street collections for the bulk of their income? I am thinking of the Royal British Legion and the poppy day appeal. Such organisations might be registered as one charity and do not have community buildings in each borough or district of the country. Is there a way for them to register individually, but not as individual charities, which would involve too much paperwork and bureaucracy? Perhaps such organisations could be entitled to claim up to £5,000 in each collection district. In my area of Stafford borough, the Royal British Legion is immensely proud of the fact that it increases the amount it collects every year, even in a recession. Almost all of what it collects is taken on the streets, in cash. It would be excellent if the Royal British Legion could see the result of that in the tax brought back from donations made in the district.

Finally, on schools, I regret to say that young men between the ages of 16 and 24 are the least likely segment of society to donate to charitable causes—just 31% donated to a charity in 2009-10. All hon. Members have schools in their constituencies that raise a lot of money for charities and it is great thing to encourage young people to do. Charity committees in schools are excellent, and we need to look at how we can encourage them to become eligible for tax relief on small donations, and particularly small cash donations. We should bear in mind that committees are often set up for only one year—one group of people in the lower sixth or fifth form will set up a committee for a specific purpose—so it will be difficult for them to meet the three-year requirement. Perhaps we could examine in Committee how we can encourage schools to benefit from the Bill.

I repeat my congratulations to the Minister and the Government on this excellent Bill, which will doubtless bring a lot of additional, much-needed income to many of our local charities. However, I urge hon. Members not to forget the important fact that it will for the first time recognise the small donations from millions of people throughout the country who put something in the bucket week in, week out.

5.23 pm

Dr Eilidh Whiteford (Banff and Buchan) (SNP): May I first declare an interest? Until relatively recently, I was a trustee and non-remunerated director of two

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charities and am currently a trustee of the Parliament Choir, which has charitable status.

Charities, and particularly small charities, are the backbone of our civil society. The contribution they make to our communities is immeasurable. It would be remiss of hon. Members if we did not acknowledge the people around these islands—in my constituency and those of all hon. Members—who give up their time and money for the public benefit. The Government could never replicate, reproduce or replace what they do, and it is right that they remain at the forefront of our consideration of the Bill.

These have been difficult times for charities; their capacity to fundraise in tough economic circumstances has been stretched ever tighter and greater demand has been placed on their services. Gift aid has been immeasurably and immensely valuable to many charities large and small, so it is a good innovation and a step forward that small charities can start to benefit from it too. I therefore welcome and support the principles behind the Bill—it will be a meaningful step forward for a number of charities.

Having said that, however, previous speakers have highlighted feedback from stakeholders making it clear that, as things stand, the scheme is still too complex and will not be accessible to all the charities that could legitimately benefit from it. The Economic Secretary introduced the scheme with the intention of providing opportunities for charities, but the National Council for Voluntary Organisations, the Institute of Fundraising and the Charity Finance Group have all expressed concerns about the complexity of some of the preconditions and about the difficulties that they will create for some charities.

I am sure that we all realise that getting a scheme of this nature right is tricky, and we would acknowledge that a balance needs to be struck between enabling charities to maximise the value of small cash donations, and protecting both the Treasury and charities themselves from fraud. Nevertheless, cash giving remains an important method of fundraising for the charitable giving sector. As the hon. Member for Stafford (Jeremy Lefroy) said a few moments ago, almost 47% of donations are made in cash, and, according to the NCVO and the Charities Aid Foundation, it remains very much a part of our giving sector, even though other forms of giving are coming on stream.

I am sure that I am not the only person in the Chamber with lots of experience rattling a bucket to raise cash for projects. It can be a very effective way of raising money, particularly for certain situations and kinds of appeal, but it is only fair to recognise that it is open to abuse. It is not only the Treasury that might lose out; I have seen how easy it is for people to put a logo—particularly the logo of a big charity that is a well-known household name—on a bucket, shake it and collect money that will never benefit anyone in any part of the world. There have to be protections, and reasonable steps have to be taken to prevent that from happening.

Many charities, particularly those that have professionalised over the past 20 years or so, have made a great effort to encourage people to give regularly. That is good for charities, because it means that their donations are predictable and that they know what revenues are likely to be coming in. It also helps them to communicate

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with their donors, makes them much more accountable to the people giving money and helps people to understand what their donations are being used for. On the whole, therefore, this move is a good thing, and I welcome the fact that, even in tough times and a recession, more and more people are signing up for direct debits and finding more long-term and sustainable ways of giving to charity. But that does not mean that there is no place for bucket rattling, and the Bill will help smaller charities that want to collect in that way from people who do not want, or are not in a position, to give a regular amount.

Although in recent years we have moved in that direction, an awful lot of charities still work entirely through volunteers—they do not function with staff but are still dependent on people who selflessly give up their spare time and weekends for fundraising activities and the bureaucratic administration on which charities—large and small—depend. Just as it is important that the laws regulating charities take a proportionate approach to governance and regulation—that important principle has underlined the charity regulation changes of recent years—it is important that we recognise the difference between large professionalised charities delivering public services and small organisations raising money for a local community project with no paid staff. It is also important that the opportunities open to charities through gift aid-related schemes demand a proportionate level of administration.

I listened carefully to the Minister’s opening remarks, and I think the Government seem to be trying to find a middle path, but as we manage risk in a proportionate way, there are still things we could be doing. The concerns of the umbrella bodies in the charity and voluntary sector should be taken on board. I encourage Ministers to keep engaging with those organisations as the process goes forward and to look at some of the detail, particularly in implementation. Charities are conscious of their reputations, especially when it comes to managing cash. In my experience charity managers desperately want to encourage regular giving not in cash, but in other ways.

I am interested in what has been said about the restrictions on gift aid. Some of them are reasonable—it is quite reasonable to have a track record with charities—but we have to recognise that there will be a detrimental impact on people raising for, say, a one-off event to install a piece of community equipment or for a community project. They will not be able to benefit from the scheme. I would be keen for Ministers to come back to us on that point and see whether there is a way round it. There are also questions about the matching provision. It could be useful for charities trying to comply with the requirements, as it would help them to build up more knowledge of who is giving them money. Charities should not be afraid of that—indeed, I would encourage them to do it—but in the meantime let us find a way forward through the detail.

I am also interested in the explosion in the number of people giving through their mobile phones in recent years or finding other ways to give—for example, through websites such as JustGiving. All are innovative ways of raising funds which have been developing rapidly as the technologies develop and people come up with innovative solutions. Again, however, smaller charities find it harder and more expensive to access such schemes. They do not come free; they come with a cost, which erodes the

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benefit of gift aid schemes for smaller charities in particular. Will the Minister consider working with the Charity Commission and the Office of the Scottish Charity Regulator to see whether it is possible to develop some HMRC-approved tools that might help smaller charities to take such schemes forward and benefit from the gift aid small donation scheme? I would be interested to hear what the Minister has to say about that. Such strategic investment in the sector could protect public money and at the same time help grass-roots charities that do not have big infrastructure and bureaucracy at their disposal, keeping costs down for everyone.

I also reiterate what the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) said about clause 17(2)(a). These points have been raised by the Law Society of Scotland in particular, which, in recognising that a balance needs to be struck in the Bill, has pointed out that there is a difference between how “charitable purpose” is defined in Scots law and how it is defined in English law. I urge Ministers to engage with the relevant bodies to ensure that the Bill is absolutely devolution-proof and works equally well in both jurisdictions.

To conclude, the Bill is a step in the right direction. I support its principles, but as we go forward I urge the Government to look carefully at how it might be implemented more effectively and benefit more of the charities that currently will not manage to be part of the scheme. The hurdles are surmountable, and I hope those issues can be ironed out.

5.33 pm

Chris White (Warwick and Leamington) (Con): I am pleased to follow the hon. Member for Banff and Buchan (Dr Whiteford), because of what she said and the many excellent points she made.

Let me begin by congratulating the Government on introducing the Bill and the measures in it that will help our small charities. Like many hon. Members, I spend a lot of time visiting some of the fantastic local community organisations in my constituency. Most are small, with only a handful of people working and volunteering in them, but they make a big difference, and I am always impressed by their passion and dedication. However, these are difficult economic times, and it is the smallest charities—organisations that rely on perhaps a few thousand pounds in donations and grants each year—that are coming under the greatest pressure, yet they make up the backbone of our civil society. They generate hundreds of thousands of volunteering hours every year, and are often set up to champion local issues and causes that might not be considered by the Government or the big charities. I am thinking particularly of local community facilities and local environmental charities.

Despite the fact that more than half of all voluntary organisations are micro in size—that is, with less than £10,000 income—they receive only 0.6% of the total income of the voluntary sector. There are 474 major organisations—those with an income of more than £10 million—that take in nearly half of all voluntary sector income: about £17 billion in 2009-10. In contrast, 87,683 micro voluntary organisations shared just under £240 million. So, when the Chancellor announced last year that he was going to make gift aid easier for small charities to claim, thousands of organisations across the country were delighted with the news.

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It is often difficult for charities to get gift aid declarations for small cash donations, and a top-up payment scheme will provide a real incentive to smaller charities to get out there and seek new ways of raising funds. The British public are incredibly generous. I know that at first hand, as I am proud to say that Leamington was named the most generous town in the UK by Oxfam last year. In 2009-10, charities made nearly £8 billion in individual donations, including gift aid and membership subscriptions. That is equivalent to about 0.5% of our gross domestic product.

The intentions behind the Bill are to be applauded, but there remain a number of concerns about the details, and I hope that the Government will pay close attention to the submissions that have been made by the Charity Finance Group and the National Council for Voluntary Organisations. I know that the details will be dealt with in Committee and on Report, but I would like to touch on just a few of the Bill’s provisions.

First, concern has been expressed about eligibility. Charities will have to have claimed gift aid for three years before they can take advantage of the scheme. That is a long time for many smaller organisations to wait, and if we are going to encourage smaller charities to get on board, we need to reduce that time or at least create a probationary period so that the Bill can make an impact in the shorter term.

Secondly, there is concern about the matching principle. I understand that the Treasury wishes to target the scheme, and to link the amount of gift aid that can be claimed to the amount that charities have already claimed in a year, but that provision will disadvantage many of the smaller charities that we are trying to help. A 2:1 matching principle will benefit only those charities that are already good at claiming gift aid. It will not encourage those that do not have the necessary resources to do so. I hope that the Government will consider scrapping that provision, so that we can encourage as many small voluntary organisations as possible to take part in the scheme.

Thirdly, there are concerns about the community building rules. I appreciate that the Government are keen to ensure that charities do not abuse the scheme by splitting into smaller organisations, and to ensure that independent local groups that are part of small charities are not excluded from the scheme. However, the rules might have unintended consequences. For example, they could disadvantage charities such as support groups that work with vulnerable people.

I am confident that those details can be ironed out, and that if all parties work together in a constructive, non-partisan manner, we will get the legislation on to the statute book in a form that prevents abuse and ensures that benefits are targeted at those organisations that need them most. Time is of the essence, however, and we should not make the voluntary sector wait too long for the scheme to come into effect. I hope that all parties will therefore ensure that the Bill gets a speedy passage through this House and the other place while also ensuring that its provisions receive proper scrutiny.

The Bill could make all the difference for small charities up and down the country, so I have no hesitation in giving its Second Reading my full support. I look forward to discussing it in more detail when it comes

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back to the House, and showing that, despite the challenges our country faces, we still appreciate and support the invaluable work that these organisations do.

5.39 pm

Mark Durkan (Foyle) (SDLP): In common with the hon. Member for Warwick and Leamington (Chris White), I am happy to give this Bill positive support on its Second Reading, but in common with him, too, in being positive about the promise the Chancellor made when he announced these plans and in supporting the stated principle and purpose behind the scheme, I am concerned that some problems still need to be ironed out.

For all these schemes, people will say that the devil is in the detail. The problem is that as the charities and others that were interested in the idea and animated when they heard this announcement have looked at the scheme, they have seen too much devil in too much detail. This is called the Small Charitable Donations Bill; let us hope that it does not end up having a by-name of the “Petty Conditions Bill”. Although nobody wants to create a charter for chancers in connection with anything the Treasury might do to support charities and charitable giving, there is a danger that some of the qualifying conditions will end up more often becoming disqualifying rather than qualifying conditions in practice.

Other hon. Members have raised issues relating to community buildings. This is, of course, a UK-wide Bill, which will need the legislative consent of the Northern Ireland Assembly to make this an accepted matter; and, of course, there is a separate Charity Commission for Northern Ireland. I hope that Ministers will take every step to ensure that the plans for this scheme take full account of the specific circumstances of Northern Ireland—not just of the different legal regime that applies to its Charity Commission, but of the border issues that relate to much of Northern Ireland.

The Economic Secretary made the point that the Bill had been changed to take account of the fact that it could have a more adverse impact on Catholic-related as opposed to Church of England-related charities. We need to recognise in the context of Northern Ireland that it is not only Catholic churches that have cross-border parishes, as other churches are organised on a cross-border basis, too. We must ensure that the interpretations and assurances that have been afforded do not end up creating problems because of the cross-border character of some organisations, which perhaps take their money, through bucket collections or other means, from either side of the border. The provisions must be sensible for the givers, sensible for the charities and sensible for the beneficiaries, as well as be consistent with the assurances that the Treasury appropriately expects in respect of taxpayers.

If the aim is to emancipate and reward a more comfortable level of charitable giving and to ensure that more charities can benefit from the gift aid scheme, the Bill has to be given every possible encouragement. We must also encourage the Government to ensure that the detail is not unnecessarily prescriptive or restrictive.

Other hon. Members have referred to start-up charities, suggesting that they might be badly disabled by the qualifying time. This applies not just to start-up charities, but to those that might be created in response to particular

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tragic events or a natural disaster such as a flood in a particular area that has created difficulties for certain families. Other examples might be the terrible incident in Dunblane or the terrible shootings in Cumbria, to which people might want to have a charitable response to support particular beneficiaries. In those cases, there is no need to set up a charity for life, for three years, seven years or whatever; it is about having a genuine response in order to aid particular people in particular circumstances.

It would be odd if those moved to make a charitable response in such situations were disqualified from benefiting others through gift aid. The normal situation is that people are moved to give some help on impulse, so Ministers need to think about whether another way of providing help would be more appropriate—perhaps by extending the “connected purposes” issues or allowing defined or established charities to lend their names to a particular one-off fund created in those circumstances. We need to prevent the disqualifications from coming into force when there is a response to particularly tragic situations; I do not believe that Parliament would or should intend that to happen. We may need to look further into that.

As I have said, I support the principle and the purposes of the Bill, but I join others in urging Ministers to consider not just what Members have said here, but what many charities and groups that work with them have been saying. The Bill provides an opportunity for us to do some good and to improve the position of charities, but let us not create hurdles that are impossible for them to surmount, or we shall all be writing to Ministers saying “Surely we did not intend to disqualify this or that charity. Surely we did not intend this penalty to apply when the circumstances in which it was imposed had been overturned or were seen in a different light.” Under the Bill in its present form, a penalty would stand even if it were subsequently accepted that it had been the result of over-interpretation.

I urge Ministers to listen more, and to continue to respond to some of the issues that have been raised today.

5.45 pm

Iain Stewart (Milton Keynes South) (Con): I am delighted to have an opportunity to contribute to what I think has been a measured and constructive debate. I, too, welcome the Bill as a sensible complement to the gift aid scheme, which has operated successfully for many years.

Like most other Members, I find that one of the most pleasurable aspects of my constituency role is visiting local charities and observing the valuable work they do in the community, often supporting the most vulnerable members of society. Like the hon. Member for Banff and Buchan (Dr Whiteford), I think that we should take this opportunity to record our deep gratitude for all their work, and our gratitude to the thousands of volunteers who willingly give their time and money to make such a difference.

My constituency in Milton Keynes is blessed with a deeply philanthropic culture. We have nearly 400 registered charities, and more than 1,100 voluntary and community groups. Thousands of residents devote a huge amount of time and money to working directly on projects or

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supporting the various fundraising activities. I do not wish to detract from the work that large charities do, but small community organisations often have a disproportionate impact. They make a huge contribution locally, although they have very modest incomes: less than £10,000 in some instances, as was pointed out by my hon. Friend the Member for Dartford (Gareth Johnson).

When I was preparing for the debate, I contacted Community Action Milton Keynes, a fine organisation that gives practical support to local charities and other groups by helping them to manage or develop their operations. I was told that 62% of its members had an annual turnover of less than £10,000. Such charities do not have the wherewithal to employ staff to help them to deal with the complexities of gift aid or other schemes; they rely entirely on people who give up their time to help them with their administration. I think that the Bill will benefit those groups in particular. As well as providing extra income—an organisation with a turnover of less than £10,000 could receive an extra 10% each year—it will reduce the amount of time that volunteers must devote to administration, so that they can spend more time doing the good work that charities are there to do.

Let me give two examples of the benefits that the Bill will provide, one from my local area and one relating to a family connection. A constituent of mine, Dave Hand, undertook a sponsored walk from his old Army base in Somerset to Milton Keynes to raise money for a wonderful charity called BLESMA—the British Limbless Ex-Service Men’s Association. He raised about £2,000, the majority coming from donations made on the JustGiving website and similar online sources. However, he also raised a substantial sum at the pubs he visited en route—people would put cash in his bucket—and that cannot easily be traced back for the purposes of gift aid. The extra cash involved would not be a vast sum, but it would provide an extra bit of support to the charity, which could then use every single penny of the donations it receives. That example highlights one of the ways in which the Bill will be of real benefit.

The other example I want to raise is a family affair. About 25 years ago, my father set up a talking newspaper charity in his hometown of Hamilton. It was established to address a local need, by putting the contents of the local newspaper on to a cassette that could then be sent to local blind and visually impaired people. It is a very small organisation that relies entirely on volunteers. If it raises £1,000 a year, it is doing well, but it has very low operating costs. Those who donate to it are often the listeners. It is a free service, but they do so out of gratitude. They might send in £5 or £10 to help the organisation carry on. These are people with visual impairments and many of them are elderly, so they are not the kind of people who generally fill out gift aid forms. By addressing this point, the Bill’s provisions would add significantly to the income of such charities.

That example also serves to flag up a concern, however. I do not know whether the charity my father set up, Hamilton Sound, has ever claimed gift aid, but I suspect that it has not. Therefore, it would not be able to take advantage of the proposed scheme for three years. I ask the Minister to explore ways in which charities that are clearly bona fide—that might have been around for many years, but may not have technically qualified for gift aid payments—may take advantage of this scheme.

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We surely have the wherewithal to devise a scheme to address that. I completely accept the need to guard against fraud, but there is a balance to be struck here: we must not create a system that is so onerous and overly complex that the potential benefits cannot be realised.

I hope there will be an evolutionary process in respect of the Bill’s provisions. My hon. Friend the Member for Harwich and North Essex (Mr Jenkin) suggested they should be reviewed after a reasonable period, and I urge the Government to do that. It is a good Bill, however, and I am sure it will make a real difference.

There is support across the House for the principle of the Bill. I hope that our discussions in Committee will be as constructive as today’s debate, and that we will thereby address the details of the provisions so as to ensure they truly deliver for all charities, which we rely on so much in our communities.

5.53 pm

Barry Gardiner (Brent North) (Lab): I apologise for having been absent from the Chamber for the past couple of speeches. I was present at the beginning of the debate, however.

I wish to right a calumny. This summer I spent a couple of days clearing out my garage, and one of the things I threw into the skip was a short tome entitled, “The achievements of the Major Government”. A friend of mine had given it to me at the time of the 1997 general election, and its pages were, of course, blank—it was a joke. I recall, however, that John Major set up gift aid in his 1990 Budget: he instituted one-off charitable donations being made free of tax for gifts of, I think, £600. That proved extremely popular with charities, and the provision should have been written into that tome, even though it was an achievement not of John Major’s Government but of his time as Chancellor. Gift aid has been widely welcomed by Members on both sides of the House and by charities throughout the country.

That £600 limit was reduced to £400 in 1992, and ultimately a Labour Government abolished it entirely in the Finance Act 2000. In the 2007 Budget, the then Labour Government announced a number of measures to support the take-up of gift aid. The then Chancellor also announced, however, that the 10% starting rate of tax would be abolished from 2008-09 and that income tax on earned income would be charged at two rates: the basic rate of 20% and the higher rate of 40%. The gift aid scheme allows a charity to recover sums at the basic rate, so the cut in the basic rate from 22% to 20% hit them hard. That was why after my right hon. Friend the Member for Edinburgh South West (Mr Darling) became Chancellor he announced in his 2008 Budget a new transitional relief for charities, to compensate them for the impact of that basic rate cut. At the time—in 2008-09—the relief was projected to cost £60 million, and then £105 million in 2009-10 and £120 million in 2010-11. That was greatly welcomed by the charitable sector.

In 2010, Peter Fanning, chief executive of the Chartered Institute of Taxation, submitted a report on improving gift aid based on the gift aid forum’s discussions. Although

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the report did not discuss donations outside the scope of gift aid, one of its principal recommendations was that

“small charities are particularly vulnerable at times of economic stress and some find dealing with Gift Aid difficult. Their needs should be a priority.”

In December of that year, the then Economic Secretary, the right hon. Member for Putney (Justine Greening), wrote to Mr Fanning, and was generally supportive of his report, but ruled out extending gift aid transitional relief on the grounds that prolonging its life would not target support effectively and that it was always “intended to be temporary”—we have heard that from the Dispatch Box today, too, from the current Economic Secretary. In response to a parliamentary question, the then Economic Secretary said:

“Gift aid transitional relief was introduced as a temporary measure to give charities time to prepare their financial plans in response to a lower rate of relief from gift aid. By April 2011, when the relief ends, charities will have had four years since the announcement of the 20% basic rate of income tax to prepare for the change. In 2009-10 charities benefited by £105 million from this relief and it is forecast that they will benefit by £120 million in 2010-11. The Government believe the £100 million transition fund announced in the spending review will better target support on charities most in need.”—[Official Report, 14 March 2011; Vol. 525, c. 92W.]

Much of today’s discussion has been about those charities most in need, and that will be the focus of my remarks.

In the 2012 Budget, the Government confirmed their plans to introduce a small donations scheme from April 2013. Under the scheme, charities are entitled to claim top-up payments on income from cash donations totalling up to £5,000 a year. Qualifying cash donations can be up to £20 each, rather than £10, as initially proposed—we are grateful that the current Economic Secretary listened to some of the objections raised by the industry and amended some of the initial proposals. The size of the top-up payment on each small donation will be equivalent to the tax relief given under gift aid so that a charity can claim a maximum of £1,250 a year.

The Bill requires work in Committee. Its proposals are complex and run the risk of disadvantaging some charities. Eligibility for the scheme is limited. That will prevent those who need it most from using it. The amount a charity can claim being linked to the amount of gift aid already claimed—the matching principle—will disadvantage the charities that most rely on small cash donations, as they may not have made sufficient gift aid claims to be able to take full advantage of the new scheme. Charities need to have a three-year record of claiming gift aid, but many small charities that rely on small cash donations simply will not have established that. This Bill was part of proposals designed to meet the problems that smaller charities have in being unable to access gift aid. Creating this matching requirement is therefore going to prove very difficult for them.

The Economic Secretary talked about the problems of fraud and the need to introduce such conditions for small charities, in order to avoid the problems that might arise through charities being able to stipulate the amount of small donations they had received. All Members will recognise the need for the Bill to include protection against fraud for the taxpayer, but in so doing it proposes that a charity has to have been registered for three years, to have made a gift aid claim in three of the past seven

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years, and not to have had a penalty imposed as a result of such a claim. I ask those on the Treasury Bench to consider whether this is not a question of “belt and braces”, and whether those provisions could be relaxed.

Clause 1 includes the matching provision. Here, the amount that a charity can claim is limited to £5,000 in donations a year, or, if less, double the amount of donations that have been put through the gift aid process. This provision matches the amount that a charity can claim with the amount it has claimed on gift aid at a ratio of 2:1. Therefore, for a charity to take full advantage of the scheme—claiming the maximum of £1,250 on £5,000 of small donations—it needs to have claimed at least £625 in gift aid in the same year. That is precisely what is so difficult for many small charities to achieve, and the Treasury recognised that in saying that this process would be “without form-filling”. When the Chancellor introduced this measure, he said it would be good for the bucket collectors because it would be without form-filling. However, that will be required, and it is precisely that threshold that many of these charities will find so hard to match.

Many small charities are not even registered with HMRC, and the three-year period will not incentivise them to do so, because they can see the scheme’s possible returns recede into the future. Many small charities receive such small amounts in cash donations that they do not claim gift aid at all. I do believe that these provisions are intended to help the smallest charities, but in fact they will hold that intention back. That is why, when I asked the Economic Secretary about her assessment of the number, size and scope of the organisations likely to benefit from the scheme, I was disappointed by her response. She talked about her “aspirations” regarding the number of charities that might try to access the benefits of the scheme, rather than talking about a real assessment by the Treasury Bench. In summing up the debate, can the Exchequer Secretary give us the Treasury’s actual assessment of the likely number, size and scope of the charities that are likely to benefit from the Bill if these restrictions and regulations are kept in place? If an assessment has been made, we need to know precisely what the answers to those questions are, to ensure that the Bill will deliver to the small charities that Members in all parts of the House want to benefit from it.

6.4 pm

Mr Gareth Thomas (Harrow West) (Lab/Co-op): It is a pleasure to follow my hon. Friend and constituency neighbour, the Member for Brent North (Barry Gardiner), whose contribution reflects today’s interesting debate. We started with the Economic Secretary’s opening speech, during which there was a series of interesting interventions. The Chair of the Public Administration Committee, the hon. Member for Harwich and North Essex (Mr Jenkin), made a series of interventions, one of which dealt with the need to build into the legislation easy scope for a review of its effectiveness. As my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) made clear in her opening remarks, we need to make every effort to ensure that the primary legislation is as strong as possible. The hon. Gentleman made an interesting point. He has developed a reputation as an assiduous— and, for the Government, troublesome—Chair of the Committee. In the eyes of his Whips, that may rule him

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out of serving on the Public Bill Committee, but his comments were a helpful guide to amendments that we might want to think through.

In her intervention on the Economic Secretary, the hon. Member for Congleton (Fiona Bruce) highlighted a concern that has clearly been put to her: whether, because of the way the clauses on community buildings have been drafted, hospices will benefit from the Bill as much as had been hoped. The hon. Member for Dartford (Gareth Johnson), in the first substantive speech in the debate, made a point of praising the Arrow riding centre in his constituency. It does indeed sound an excellent organisation, and in that sense probably reflects the many excellent organisations that each of us in this House can point to in our communities. They benefit our communities and make them stronger, particularly because of the enthusiasm of the volunteers and original sponsors of these charities.

Our challenge is surely to try to do what my hon. Friend the Member for Clwyd South (Susan Elan Jones) suggested: to simplify the system as much as possible and to enable those with fire in their belly—those behind a particular charity with the passion and commitment—to benefit as much as possible from this legislation. She has clearly been working throughout the summer recess, carrying out extensive research on charity debates and tracking down the first ever discussion of charities in the House of Commons, more than five centuries ago. That is a particularly impressive piece of work that I suspect puts the rest of the House to shame. It is not surprising, however, given her track record of interest in this sector.

In his short time in the House, the hon. Member for Warwick and Leamington (Chris White) has already built a track record of interest and enthusiasm in this subject. He urged Ministers to pay close attention to the comments and concerns of the National Council for Voluntary Organisations and the Charity Finance Group. He raised a particular concern about whether the three-year HMRC rule is quite as necessary as the Economic Secretary suggested in her opening remarks. He went on to argue that Leamington is the most generous town in Britain. He is stretching the credulity of the House there, if I may say so; nevertheless, it sounds almost—but I suspect not quite—as generous as Harrow.

The hon. Member for Stafford (Jeremy Lefroy), who has already established a strong record in this House in working with international development charities, outlined his support for the Bill. He will recognise that people in this country rightly respond to disasters around the world, and that the Bill could enable such charities to do more to make their money and effort go a little further.

The hon. Member for Banff and Buchan (Dr Whiteford) emphasised that Ministers should do further work on the detail behind the Bill, and I understand that she has a strong track record of working with charities, including development charities. Among the many thoughtful points she raised was whether or not HMRC might be persuaded to use marketing or analytical tools to provide further support to ensure that charities benefit as much as possible from this legislation, when both Houses eventually conclude their debates.

My hon. Friend the Member for Foyle (Mark Durkan) outlined his scepticism about the Bill being perfectly formed. He made the perfectly proper point that debate

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with the Northern Ireland Assembly on some of the detail is required. Again, Ministers and the Committee will need to have further conversations with the representatives of the sector to maximise the Bill’s benefit.

The hon. Member for Milton Keynes South (Iain Stewart) praised another excellent sounding organisation, Community Action Milton Keynes, which he knows well. He raised concerns about the three-year rule on eligibility, highlighting the need to get right the balance between preventing fraud and helping more charities to benefit. He hoped that today’s discussion is part of an “evolutionary” approach by Ministers, and I hope to encourage the Minister to take such an approach. My hon. Friend the Member for Brent North, in his substantive remarks, emphasised the concern of all Members about the eligibility criteria in the Bill and whether as many charities that rely on small donations will benefit from the Bill as might do.

As my hon. Friend the Member for Kilmarnock and Loudoun made clear, the Opposition will support the Bill, but we have a series of concerns about its detail, which she set out and which I will touch on briefly at the end of my remarks. The House will of course be aware that the Bill’s proposed changes to gift aid build on the reforms that my right hon. and hon. Friends introduced under the previous Government—my hon. Friend the Member for Clwyd South made that point. My right hon. Friend the then Chancellor had an excellent track record of enabling smaller charities to benefit from gift aid, introducing a less complex audit process and helping at least some charities to get a proper advantage from the various changes that he introduced.

We will want to probe and challenge the complexity that has been written into this scheme by Ministers, which has been highlighted to us by the NCVO, the Charity Finance Group, the Institute of Fundraising, the National Association for Voluntary and Community Action and a series of other groups. I, like a series of other hon. Members, alluded to the fact that this complexity risks ensuring that a number of small charities miss being able to benefit from the changes implicit in these arrangements.

Ministers have highlighted this measure in the past as a big source of help for charities and proof of their ongoing commitment to the big society. The Chancellor made that point in one of his Budgets. In truth, this is a modest Bill, which risks being far more modest than it needs to be. It is, sadly, an isolated gesture of help amid a dismal funding and contracting environment for charities, entirely of the Government’s making. The Bill will, nevertheless, put back into charity coffers a small amount of the income that Ministers have collectively axed since they came to power.

The context for this debate is grim, as a number of hon. Members have said, and it bears spelling out as a reminder to the whole House and, in particular, to the Committee to do our utmost to maximise the benefit of the legislation to the maximum number of charities. As my hon. Friend the Member for Clwyd South mentioned, earlier this year the NCVO highlighted the “toxic mix of circumstances” facing charities: increasing demand for

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their services, rising costs, and an unprecedented fall in income. The NCVO argues that Government spending on the sector will fall by some £3.3 billion between the coalition’s taking and eventually leaving office.

A report by the Association of Chief Executives of Voluntary Organisations, which was commissioned by the Government—by the Cabinet Office—and which Ministers were eventually forced to release, revealed that charities would lose, in 2011-12 alone, at least £1 billion as a direct result of Government cuts, with two thirds of the charities most at risk of suffering being in the most deprived areas of Britain.

Richard Fuller: In a comment in his opening inquiries of the Minister, the hon. Gentleman referred to the transition fund and he is now referring to the same point about Government funding, so I would just like to pick up on the point. Does he accept that one of the underlying philosophical differences with this Bill is that it is using Government money to support the actions of individual citizens in supporting the charities they wish to help, rather than looking at charities as an extension of the state that should be supported by public moneys? Although there may be an issue to address about the quantum and how much we can afford to put into these charities, does he accept that this is a wise way for the Government to spend their money?

Mr Thomas: With the greatest respect, the previous Government and the one before had exactly the same approach. The difference between us is over the scale of the funding cuts that the hon. Gentleman and other Government Members have signed up to. As I said in my opening remarks, I accept that the Bill will make a small positive difference. We welcome it on that basis and we want to work with Ministers and, indeed, with all hon. Members to try to maximise its benefit. He does not serve his cause well by minimising the scale of the cuts which charities are suffering. According to the National Children’s Bureau in April, two thirds of children’s charities had cut staff last year and reduced the range of services they offered, with 25% expecting to have to close this year. That grim direct funding situation is hardly a sign of a commitment to charities and community groups, or indeed of Ministers’ professed commitment to the small platoons or the so-called big society.

I say gently to the House that not one of the more than 140 charities I have met over the past 12 months has said that reform of gift aid is the defining answer to the problems the Government are causing charities, despite the Chancellor’s enthusiastic claims in the Budget. Ministers, notably Cabinet Office Ministers, have failed in the past 12 months to offer serious heavyweight leadership in Whitehall for charities. The Work programme has become an iconic example of charities losing out on funding because of poor commissioning of major Government contracts.

Let us consider the example of just one charity, St Mungo’s. Given its skills at getting people in the most challenging circumstances back into work, one would have thought it was the perfect participant in the Government’s Work programme. However, having had no referrals in just under 12 months, St Mungo’s

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finally called it a day earlier this summer. You couldn’t make it up: record long-term unemployment, a Work programme that is not exactly going all guns blazing and a charity with huge experience not being used —not even once.

We have, of course, also seen charity after charity having to line up to demand that the Government withdraw their charity tax relief cap. For example, Cancer Research UK is seriously worried about donations to build a world-class centre drying up because of Ministers’ incompetence. It was a badly bungled Budget measure from Treasury Ministers—one of a number. One of the arguments originally used to try to justify that measure, until it was eventually pulled, related to the problem of “dodgy charities”. Although the Economic Secretary veered a little towards such language in her opening remarks, she certainly did not repeat that mistake. However, we need to be careful that the requirements that we set out in the legislation that is finally passed do not allow people to think that Members in all parts of the House share the concern that there is a huge problem with poorly managed charities engaged in fraud. We will certainly wish to probe her argument about the three-year relationship with HMRC that charities must have in order to benefit from the Bill.

We debate this Bill in the context of a dismal picture of substantially reduced charity funding and of Treasury Ministers who need to make amends for the charity tax relief debacle. The Bill nevertheless deserves a Second Reading and further robust scrutiny. We will want to explore carefully the Government’s arguments on a series of clauses, particularly to try to reduce the complexity of the new arrangements, which has been highlighted by the likes of Sir Stuart Etherington, Peter Lewis, the chief executive of the Institute of Fundraising, and NAVCA. Let me take just one set of comments as an example: NAVCA called the proposed system “overly bureaucratic” and “out of proportion”.

To be fair, the Economic Secretary hinted that Ministers would be flexible in Committee. I hope that her ministerial colleague will emphasise that Ministers are determined to be flexible and to see the discussions in Committee as an evolutionary process. That point was made by the hon. Member for Milton Keynes South in particular. We will want to probe the concerns about the eligibility criteria as there is particularly wide consensus outside the Treasury among voluntary groups that many charities will miss out if the Bill goes through unamended in that regard. We will want, too, to explore the thinking of Ministers on the connected charities rules, which risk creating an unnecessary barrier to recruiting high-quality trustees if they have similar roles in similar organisations.

On community buildings, there is a risk that some charities could lose out, as other Members have highlighted. Ministers would be wise, given the scale of the Government’s failure to help and support charities, to recognise the limited scope of the Bill. It is a worthwhile Bill with the potential, if Ministers are open-minded, to offer even more significant benefits. It builds on the reforms Labour introduced when we were in power. It needs amending in Committee, and Committee members, particularly Ministers, will need to show further flexibility to maximise the benefit it could have for the charity sector. We will support the Bill tonight and I commend it to the House.

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6.22 pm

The Exchequer Secretary to the Treasury (Mr David Gauke): We have had a thoughtful and constructive debate, although the hon. Member for Harrow West (Mr Thomas) perhaps introduced a party political element in the past few minutes.

Throughout the debate we have heard hon. Members from all parties raise thoughtful points. My hon. Friend the Member for Dartford (Gareth Johnson) made the point that the purpose is to complement, not replace, gift aid. The hon. Member for Clwyd South (Susan Elan Jones) gave us a history of charity law and taxation going back to 1601, although she missed a bit before returning to more recent years—the House is probably grateful that she did not run through the 17th, 18th and 19th centuries in detail. My hon. Friend the Member for Stafford (Jeremy Lefroy) pointed out the need to strike a balance between simplicity and preventing fraud. A number of speakers returned to that point, including the hon. Member for Banff and Buchan (Dr Whiteford), who raised a number of detailed points, as did my hon. Friend the Member for Warwick and Leamington (Chris White). I know that he has also done so in correspondence with my hon. Friend the Economic Secretary. As has already been pointed out, he also highlighted the generosity of the good people of Leamington. The hon. Member for Foyle (Mark Durkan) also set out a number of detailed points, as did my hon. Friend the Member for Milton Keynes South (Iain Stewart) and the hon. Member for Brent North (Barry Gardiner). I hope to address as many of those points as possible this evening, but I am sure that the Public Bill Committee will enjoy scrutinising them very thoroughly.

I am grateful for the widespread support from across the House for the principle behind the scheme and I hope to be able to respond to the issues raised, but before I do so let me recap. As my hon. Friend the Economic Secretary set out at the beginning of the debate, the new scheme is not designed to replace gift aid. It complements it, allowing charities to claim for the cash donations they receive for which it is too difficult or impossible to get a gift aid declaration. The scheme is not intended to replace gift aid or to be a substitute for it in cases where it is straightforward to operate for charities of all sizes. Whenever and wherever possible, we want charities to make full use of gift aid, which is a very successful tax relief that contributes more than £1 billion annually to the charitable sector’s income.

A number of Members were concerned about complexity in the scheme and the fact that it might exclude the small community charities that could benefit most from it. Let me assure Members that it will not do that, as the basic scheme is very simple. Claiming on donations under the scheme will be simple, with no requirement to obtain a gift aid declaration from donors and with claims being made on the same form used to claim gift aid payments. Charities will not be required to keep any additional records of the money received over and above best practice record keeping. As the scheme is simple and based on cash donations and will have limited donor records, the scheme could, however, become attractive to fraudsters. I am sure that all hon. Members will agree that we must protect the scheme from abuse and one way of doing that is by linking it to gift aid.

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It was said that the gift aid small donations scheme excludes those charities that would most benefit from it—the small charities that do not currently claim gift aid—but it is right that it should be a requirement for charities participating in the small donations scheme to claim gift aid alongside it. Gift aid is easy to use if the charity is simply collecting donations of money and it will soon become even easier when HMRC introduces its new online system for claiming gift aid next year. We hope that the small donations scheme will encourage those charities that do not use gift aid to do so.

The design of the scheme, with a requirement for a three-year successful track record of claiming gift aid, is one way to counter the fraudsters and protect the scheme from abuse. It is a straightforward way to protect the scheme from exploitation without reintroducing all the paperwork that it is designed to remove. I am sure hon. Members will agree that it is only sensible for the scheme to have a test, such as that three-year check, so that HMRC can be more certain that a charity will not abuse the scheme. Reducing the three-year limit, as has been suggested, would significantly increase the cost of the scheme.

Let me turn now to the point specifically raised by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) about trustees and the concern about charities that are connected by a shared trustee. The Bill sets out that for trustees to be connected they would have to have purposes or undertake activities that were the same or substantially similar. If someone was a trustee of two charities that were completely unrelated and did very different sorts of charitable activities, those charities would not be connected under the scheme. We received some feedback on that rule during the consultation and adapted it to meet concerns that charities would unintentionally be caught by the rule as originally proposed. We are looking further into that, however, to see whether it would be possible to amend it further to ensure that no charities are caught unintentionally.

Another concern that has been raised is the community building rule and the question of access to the scheme for those charities doing similar work at a local level. The community building rule has been written into the Bill to ensure fairness of access and to avoid significantly unfair results. Most charities will not need to worry about the rule because they are independent and collect less than £5,000 in small donations, so they will get their £5,000 allowance regardless of their activities or where they collect the donations. But we sought fair access to the scheme. As my colleague the Economic Secretary said, in developing the scheme, it soon became clear that without some special rules, some charities would benefit hundreds or even thousands of times more than others, based purely on the way they were historically set up. That clearly is not right, so the community building rule was introduced to avoid significantly unfair results between charities carrying out similar activities in local communities, either as independent charities under an umbrella organisation or as local groups operating as part of a single large charity.

The vast majority of charities will not need to concern themselves with the extra allowance. For those that do, there will be detailed guidance to ensure that it is simple to access. It is important to remember that the basic

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principle of the scheme is that each eligible charity should be entitled to top-up payments on a maximum of £5,000 in donations. I am sure hon. Members will agree that we are doing the right thing to ensure fairer access to the scheme for charities that would otherwise lose out, just because of the way they were historically set up.

The intention of the community building rule is not to allow all buildings where charitable activities take place to receive a separate allowance of up to £5,000 of small cash donations; it is to remove the worst inequalities that would otherwise exist, so that some charities would be able to claim hundreds, perhaps thousands, times more payments under the scheme than others undertaking similar activities. We believe that the rule as drafted achieves that objective.

I want to pick up a point about the definition of charitable purpose raised by the hon. Members for Kilmarnock and Loudoun and for Banff and Buchan and about its application in Scotland as well as in England, given that charitable purpose is being used in the English definition. Given that top-up payments are not a tax relief, clause 17(2)(a) makes it clear that the definition of charitable purpose according to the law of England and Wales is to be applied across the United Kingdom. The hon. Member for Banff and Buchan raised an important point about the Bill applying across the UK, and said that we should ensure that devolved issues are considered. I assure the House that the devolved implications have been explored and agreed with policy administrators in all the devolved Administrations.

The hon. Member for Kilmarnock and Loudoun and my hon. Friend the Member for Stafford referred to the £20 limit and asked what is meant by managers taking reasonable steps to find out whether a gift was £20 or less. Charities will be expected to have a process to ensure that their staff and volunteers do not deliberately include gifts of £20 or more as small donations. HMRC is developing guidance to explain the steps it would be reasonable for charities to take, but those steps will be proportionate to the risk because we want to ensure that the rules are applied with a light touch and give charities maximum flexibility. The aim of the scheme is to allow a top-up payment without a gift aid declaration on small donations, and we think £20 covers that. For larger donations, charities are more likely to be able to ask the donor for a declaration. We have already increased the limit from £10 to £20 following earlier representations.

Another issue raised by the hon. Member for Banff and Buchan related to donations by text—which are growing in use—cheque or credit card, which are not allowed under the scheme. The aim of the new gift aid small donations scheme is to allow charities and community amateur sports clubs to claim a gift aid-style payment on cash donations received in circumstances where it is difficult to collect a donor’s details or where donors may be reluctant to give them. As a donor may be giving details to the charity through other channels, and the extra amount of information needed for a gift aid declaration is therefore relatively small, we are focusing the scheme on cash. Where a charity has an ongoing relationship with a donor, we believe it should use gift aid if at all possible.

In an intervention and in his speech, the hon. Member for Brent North asked about the Treasury’s assessment of how many charities would take up the scheme.

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We estimate that around 80,000 individual charities will claim annually by 2016-17. Some charities will make extra claims on behalf of their local groups under the community building rule and some of those local groups may make claims for gift aid on behalf of their parent charity. However, it is only an estimate, so the take-up rate could be higher or lower. The fundamental methodology for costing the scheme, at around £100 million, as my hon. Friend the Economic Secretary pointed out earlier, was signed off by the independent Office for Budget Responsibility in the 2011 Budget. The final numbers, including assumptions about local groups, will be submitted to the OBR for approval at the next fiscal event.

Barry Gardiner: I am grateful to the Minister for answering the question directly. Could he be slightly more specific than just the number of groups? The concern is not just about the number of charities, because they may be medium-sized or larger; it is about their nature, scope and size. Does he have any evidence about that from Treasury assessments?

Mr Gauke: More information may be available during the Public Bill Committee—the hon. Gentleman looks like an enthusiastic volunteer. My hon. Friend the Economic Secretary pointed out earlier that a pool of about 100,000 charities have claimed gift aid in the past four years, and we think about 80,000 of them will make a claim under the scheme.

To return to the central point, there is a reason for linking the scheme to gift aid: to prevent fraud and ensure that the money goes to genuine charities. I am sure we share the belief that the measure is the best way of doing that. I hear the concerns that have been raised about smaller charities that may not submit gift aid applications, but we have to remember that the scheme involves paying out taxpayers’ money, so we need to ensure that it goes in the right direction.

To conclude, in designing the gift aid small donations scheme the Government have listened to the sector and made a number of changes following consultation. We reduced the level of matching required between gift aid claims and donations under the scheme, to make it easier for small charities to claim. We refined the rules for better targeting when charities are connected to one another, and we increased flexibility for connected charities to share their allocation under the scheme. However, I remind hon. Members that the overall objective of the scheme is to allow individual charities to claim a top-up

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payment on up to £5,000 of donations. The Bill will provide much-needed additional financial support to the charitable sector in these tough times. I therefore commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

small charitable donations bill (programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Small Charitable Donations Bill.


1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 30 October 2012.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

7. Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Angela Watkinson.)

Question agreed to.


Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Small Charitable Donations Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Angela Watkinson.)

Question agreed to.

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Prisons (Interference with Wireless Telegraphy) Bill (Money)

Queen’s recommendation signified.

6.39 pm

The Minister for Policing and Criminal Justice (Damian Green): I beg to move,

That, for the purposes of any Act resulting from the Prisons (Interference with Wireless Telegraphy) Bill, it is expedient to authorise the payment out of money provided by Parliament of expenditure incurred under or by virtue of the Act by the Secretary of State.

We are moving the motion because the Government are keen that the Bill should go forward and be scrutinised in depth in Committee. Passing a money resolution is the next step in that process. The Ministry of Justice does not currently intend to seek additional funding from the Treasury, nor does the Scottish Prison Service intend to seek additional funding from the Scottish Government, to purchase equipment. Should private prisons in England and Wales seek to deploy signal denial equipment in light of the legislation, all equipment would be purchased by the contractor without an increase in the contract price paid from the public purse. We consider that any costs that might arise from the legislation will be proportionate when set against the harm caused by illegal mobile phones in prisons. I commend the money resolution to the House.

6.40 pm

Jenny Chapman (Darlington) (Lab): We are pleased to welcome the Bill and I am grateful to the hon. Member for Mole Valley (Sir Paul Beresford) for introducing it. I also welcome the Minister to his post. It is most pleasing to see a Policing Minister with, shall we say, some in-depth experience of the police taking on the role.

It is right that the Prison Service should adopt helpful technological advances as they become available and that appropriate resources should be made available. The technology has been piloted since 2008, and the Opposition support the expansion of its use across the prison estate and its introduction to private prisons.

The Opposition remind the Government of the need to project-manage the programme robustly so that all equipment purchased is put to good use, staff are properly trained and the information obtained from intercepting signals is used to prevent crime without disrupting the communications of those living nearby.

6.41 pm

Sir Paul Beresford (Mole Valley) (Con): This is a small private Member’s Bill, but before referring to it I must welcome my hon. Friend the Minister to his new job.

I thank Members on both sides of the House for their support for the Bill, which we hope will progress to consideration in Committee fairly promptly as it is clearly important. During 2011, 7,422 illicit phones and SIM cards were found in England and Wales, and the figure for Scotland—1,335 phones and SIM cards—is proportionate to that. The Bill is sufficiently broad to enable us to hope that, as technology changes and moves forward, it can be adapted to meet whatever the

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technology comes up with. It is supported not only by the prisons hierarchy, but by the prison officers. We might have that support explained to us in a moment.

I visited a prison last week and there had just been an incident where, due to special timing, warders managed to pick up seven phones with cocaine attached. SIM cards and so on were lobbed over the wall, but they were collected and therefore cannot be used. The key point is not just the phones, but the SIM cards. One small phone does not cost much money, and its adapter and charger can be used for goodness knows how many SIM cards.

These measures will be implemented in such a way that anyone phoning illegally will suddenly find that their phone is engaged constantly, whether they are phoning in or out, and it will be possible to track the phones and pick up the various numbers, which will be useful for anti-crime activities. That is important, because there is ample evidence of the range of activities involved in the commissioning of serious crime and violence, and many of the heavy boys and girls in our prisons have been organising crime outside while they are inside. If one believes only half of what one reads in the Daily Mail, one will agree that things such as the harassment of victims and gang activity happen, and that there is also the existence of extremist networks.

It will be possible to set these measures up in such a way that certain numbers will go straight through. By that I mean important numbers. I understand that the Coke machine in the prison can dial outside and tell the supplier that it is about to run out, so the supplier can rush more supplies in. I consider such a provision to be vital.

This is a little Bill with support from both sides of the House, and I hope that it makes progress. I also anticipate the money resolution receiving the support of the House tonight.

6.44 pm

John McDonnell (Hayes and Harlington) (Lab): I, too, welcome the Minister to his new post and hope that it is not out of the frying pan into the fire. I am sure it will not be.

There is general, all-round support for the measure, and I congratulate the hon. Member for Mole Valley (Sir Paul Beresford) on introducing it as a private Member’s Bill. There are real concerns for some of the staff about ensuring that adequate resources are devoted to providing proper training and sufficient staff. Members of the Prison Officers Association have welcomed the legislation, and have indeed been calling for such legislation for some time, but I would welcome any information that the Minister can give on cost estimates for implementing the Bill, the number of staff who will be involved, the cost of the training and where those resources will be found. So far, he has said that that will be contained within existing budgets, which is somewhat worrying as there is already a resource stretch in the Department, particularly on staffing issues and in the light of the escalation of the number of prisoners in our prisons.

With that information, we could reassure the prison officers that there will be sufficient investment to implement this welcome legislation effectively and with their co-operation.

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Sir Paul Beresford: I hope that, on second thoughts, the hon. Gentleman will realise that introducing such a facility will reduce the time spent on, for example, searches. There will be savings on one side, which will compensate for the costs on the other.

John McDonnell: I hope that that is the case and I see the rationale behind the hon. Gentleman’s case, but start-up costs will need to be met, particularly with regard to resourcing the training. If existing staff are to implement the legislation, they will have to be taken off other jobs, which will put stress on other Prison Service staff, unless some additional resource is made available. Assurances need to be given to the professionals who will implement the legislation that that will not be at a cost to their role elsewhere in the Prison Service.

6.46 pm

Damian Green: With the leave of the House, I thank Members on both sides of the House who said kind words about my new job, especially the hon. Member for Hayes and Harlington (John McDonnell), who used a phrase to do with frying pans and fires that I have been using all day.

A substantive point about money was raised. Money is already spent managing the threat posed by mobile phones in prisons. Both centrally and locally, we must balance the benefits of using equipment that interferes with wireless telegraphy against the cost of that equipment, but we must also consider whether that money could be better spent dealing with competing threats to prison security. The legislation will allow budgets to be spent in more diverse ways, but because it does not require that any particular equipment be deployed, it will not in itself impose any additional costs on the national authority. I hope that that reassures the hon. Gentleman.

Question put and agreed to.

Business without Debate

European Union Documents

Motion made, and Question put forthwith (Standing Order No. 119(11)),

Establishing the New Schengen Evaluation Mechanism

That this House takes note of European Union Documents No. 5754/6/12, relating to an amended proposal for a Regulation of the European Parliament and of the Council on the establishment of an evaluation and monitoring mechanism to verify the application of the Schengen acquis, and No. 11846/11, relating to a draft Council Regulation on the establishment of an evaluation mechanism to verify the application of the Schengen acquis; and supports the

4 Sep 2012 : Column 210

Government’s intention not to opt out of the draft Council Regulation under Protocol (No. 19) of the Treaty on the Functioning of the European Union.—(




Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 119(11)),

External Dimension of EU Social Security Co-ordination

That this House takes note of European Union Document No. 8552/12, relating to a Commission Communication on the External Dimension of European Union Social Security Co-ordination; supports the Government’s view that the organisation and financing of national social security systems is exclusively the competence of Member States; and shares the Government’s concerns that the extension of European Union competence in the area of social security co-ordination, through developing case law and regulations, will further undermine Member States’ ability to protect their social security systems.—(Angela Watkinson.)

Question agreed to.


Proposed Closure of Wellingborough Prison

6.48 pm

Mr Peter Bone (Wellingborough) (Con): I have the great honour to present a petition organised by Lynne Holcombe and Martin Field and signed as leading petitioners by Adam Trundle and Verity Sayers against the closure of Wellingborough prison. The Speaker has granted me a debate tomorrow on the very matter. There are 3,000 signatures against the closure of Wellingborough prison, which is the third cheapest prison in the country, and with the changes in the Ministry of Justice, I hope the decision will be reviewed.

The petition reads:

To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled.

The Humble Petition of residents of Wellingborough, Northamptonshire and the surrounding areas,

Sheweth, that the proposed closure of Wellingborough Prison would result in the loss of up to 600 jobs, reduce capacity in the already overcrowded prison estate and would cost the taxpayer millions of pounds as it is the third cheapest prison to run in the whole prison estate, and is mindful of the Borough Council of Wellingborough’s unanimous decision to keep the prison open.

Wherefore your Petitioners pray that your Honourable House urges the Secretary of State for Justice to postpone the closure of Wellingborough Prison until a full review of the prison estate takes place, and a proper cost-benefit analysis is undertaken for each prison and an oral statement is made in the House of Commons which, if any, prison should close.

And your Petitioners, as in duty bound, will ever pray, etc.


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Motorcycle Licences

Motion made, and Question proposed, That this House do now adjourn.—(Angela Watkinson.)

6.50 pm

Steve Baker (Wycombe) (Con): I am extremely grateful to the Under-Secretary of State for Transport, my hon. Friend the Member for Lewes (Norman Baker), for being here to answer the debate tonight. Earlier today I was afraid that there would be nobody left in the Department for Transport to take the matter on. I hope my hon. Friend will not mind too much if I place on record the admiration of a great many motorcyclists for all the work that his colleague and my hon. Friend the Member for Hemel Hempstead (Mike Penning) did as roads Minister; he wrestled manfully with the subject.

I declare my interest as a motorcycle owner and rider of about 24 years’ standing with an unrestricted licence. I am chairman of the associate parliamentary group for motorcycling. Motorcycling is a joy, not least because it combines freedom with a crucial need for personal responsibility and skill. Riding well requires consideration, courtesy and concentration. I believe that every serious motorcyclist will pursue the development of their skills as a matter of course, and that that journey begins with basic training and licensing.

Motorcyling is also something for which young people yearn. The journey from being a 15-year-old with a superbike poster on the wall to being the rider of that superbike can feel heart-rendingly long. The smiles on my colleagues’ faces will inform the House that of course I speak of myself. Now, thanks to the EU and the regulations, that journey almost certainly will be heart-rendingly long, if it is undertaken at all. It is therefore with a sense of grinding determination that I bring before the House the issue of licensing individuals to ride motorcycles under European Union legislation.

As my hon. Friend the Minister knows, since the coalition came to power this is not the first battle that bikers have fought against the EU and its intervention in relatively petty matters that infringe on minute details relating to the ownership of their bikes. He and I have corresponded, including through written questions, on so-called anti-tampering legislation, which has no supporting evidence and which may also be related to licensing. I understand that progress has been made and I am grateful to the Government for the vigour with which they pursued that matter. However, the motorcycle community remains very anxious and I am concerned that the Government should defend their rights and freedoms.

There was a time when the EU at least pretended to uphold the principle of subsidiarity, which was originally explained as decisions being taken at the lowest practical level. If that had not long ago been exposed as a sham, the heavy-handed mistreatment of bikers in relation to both anti-tampering and licensing would prove yet again that the doctrine is nothing more than a cynical ruse to distract us from the reality of ruthlessly centralised power over comparatively minor matters—matters that I have found often become mere bargaining chips in protracted negotiations over one bureaucratic matter or another.

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I turn to the shambles of the bike test. Brussels-dictated changes to the motorcycling licence regime are far more advanced than the attack on bike modification. The second driving licence directive changed the test. From the beginning of 2003, the Motorcycling Industry Association, the MCI, warned that the proposals were flawed. The MCI argued that the manoeuvres element of the test gold-plated the directive and would require very large test sites; that the size of the sites would in turn greatly reduce the number of proposed test centres; that the Driving Standards Agency proposal was likely to result in a separate off-road element to the test, and that therefore the full cost of a test would rise substantially. Indeed, this is what came to pass when the test was implemented in 2009.

The number of test centres dropped from 223 to fewer than 40. As the new test was in two separate segments tested on different days, fees rose by about 30%. The Driving Standards Agency’s antiquated trainer booking system could not cope with the new two-part tests, creating chaos. The changes were delayed by six months at the last minute, by the late split of the test into two parts, which left trainers and learners in limbo. The result was massive aggravation for trainers and pupils and, more seriously, the beginnings of a potential new problem: permanent learners.

Passing the full test is now so bureaucratic and inconvenient that, two years after passing their initial compulsory basic training, it can be expected that at least some new bikers will choose to take their CBT again so that they can drive for another two years without passing their full test. So a new system supposed to make the roads safer and to make motorcyclists safer could make them less safe by creating permanent learners who are not only not fully qualified road users, but who may be less likely to develop the interest in motorcycling that encourages the development of essential skills. So these changes may be not only expensive and aggravating; they may also be counter-productive.

Following uproar from the motorcycling community, the Transport Committee resolved to look into the matter in July 2009. In March 2010, before the election, the Committee found the DSA’s implementation and delivery to be lacking and agreed with almost all the points made by the industry. However, the DSA seems to have taken little action to address the findings. In June 2010, my hon. Friend the Member for Hemel Hempstead, the then new Minister, announced a review into the issue because of widely expressed concerns

“about the safety of the off-road module 1 part of the test and about the difficulty of accessing the limited number of off-road test centres.”

That announcement was warmly received by bikers. The review was due to report in autumn 2010. Here we are, almost two years later, and we still do not have a projected date for publication.

I appreciate that the matter is being looked at thoroughly, in great depth, with dedicated research commissioned and wide consultation undertaken, with results to be provided, presumably, in the fullness of time, but this is too long. The attitude of my hon. Friend the former roads Minister throughout has impressed the biking community, which strongly believed that he was on their side. As a motorcycle action group member, I am sure he was, but as the years roll by with no resolution in sight, some of them are losing faith.

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The Government deserve full credit for the interim mini-fixes that have occurred. Examiners have been redeployed and a few new test sites have opened. Module 1 was slightly amended to become fairer. A single event test is being trialled. Flexibility between modules is sometimes possible. But I put it to the Minister that the core problems remain. More test sites are needed. Geographical coverage is too patchy and bikers believe that trainers working far from the module 1 test centres are going out of business, leaving further gaps in trainer coverage. Some accidents still take place on the module 1 test, which includes manoeuvres that are not necessarily easy to relate to the real world. The two part test remains complicated and bureaucratic for candidates. A single event, on-road test remains the simplest format to understand. Anything else is a discouragement to people considering taking the motorcycle test. The evidence since 2009 proves it.

Progress on the review appears to be painfully slow. It took only six months to split the test in two in 2009, but reconsidering that decision appears to be mired in a highly complex and bureaucratic health and safety process that is still unresolved after two years. Bikers who have been consulted praised the roads Minister and even praise DFT officials, who they believe are doing their best, but they have complained that certain quango officials lack a can-do attitude and that they have been rigid and unrealistic in interpreting the directives. Will Sir Humphrey triumph in both Europe and the UK in thwarting past, present and future Ministers? I implore the Minister to encourage the motorcycle community with a concrete prospect of the review concluding, in the manner that the original policy set out, and with substantive recommendations to improve the shambles left by the previous Government in collusion with the EU.

I regret to report that the misery being inflicted on bikers by the EU does not end there. There is now, in addition, a third driving licence directive, which was translated into domestic law in January 2011. The EU has again left chaos in its wake. In January 2013, the licence categories must change. Currently, to obtain a motorcycle licence a rider must first purchase a provisional motorcycle licence and then pass compulsory basic training, which enables them to ride on the public road with L-plates for up to two years. To obtain a full motorcycle licence, they must pass a motorcycle theory test and then a practical test. There are different categories of licence and two routes to a full licence.

The new system is, of course, more complex: riders under 24 years old will be required to go through more stages and repeats of the same test to reach a full licence; a new A2 category is to be introduced, so four categories replace three, at least if we include the medium-power bike to which riders would be restricted; the age for riding a full-power motorcycle rises from 21 to 24; and the top speeds of restricted mopeds is reduced. I have to say, from my own experience of riding a 50 cc moped, that reducing the top speeds seems to be a measure that could create danger rather than solve it.

How many under-24-year-olds will be willing to jump through all those hoops? How many can afford to? The effect will be to discourage cheap and convenient transport for many young people, which could be a real lifeline to help them into work, and certainly to fulfil their lives.

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It might add to congestion as people turn to cars instead of bikes. It will certainly secure the primacy of the direct access route for older learners.

As if all that was not complicated enough, 11 months later, in December 2013, the sizing of bikes in the new categories changes again. Rather than having one co-ordinated disruption, the system will have to change and then change again within a year. All those trainers who diligently complied with the new rules and bought equipment in advance could be left out of pocket and up the Swannee by the capriciousness of the EU. It is as if the EU is deliberately trying to cause as much expense and inconvenience as possible. Some cynics have suggested that officials would like to eliminate motorcycling. I would not go that far, but I know that even when the EU consults it does not listen; it goes through the motions and then does what its bureaucrats want anyway.

I appreciate that the Minister is not responsible for Britain’s membership of the EU and that the Government have been attempting to clear up a mess dumped on us by Brussels but, I refer him to the unfinished review and the need for: an easily accessible, single-event test; a testing regime that is easy to understand; cost-effectiveness for both consumers and the institutional structures; and full national coverage. I remind him that the increase in the size of the 125 cc market, together with the reduction in test numbers, might be an early indication of a growing category of permanent learners. If that proves to be the case, the EU-imposed testing regime will be failing by its own standards.

As I conclude my remarks, I will return to where I began by paying tribute to my hon. Friend the Member for Hemel Hempstead—he is now in his place—who has really fought for the interests of motorcyclists. Both I and the motorcycling community are grateful for all he has done and wish him well in his new role.

Finally, motorcycling is not merely a form of transport; it is the exercise of liberty under the law, personal responsibility and individual skill. It is sometimes a hobby and sometimes a way of life. It is a joy to which many aspire and which many of us treasure. The EU and the DSA together are working towards ruining it. Will the Government please sort out this mess and tell us when they will do so?

7.3 pm

The Parliamentary Under-Secretary of State for Transport (Norman Baker): I thank my hon. Friend the Member for Wycombe (Steve Baker) for raising this subject and for his kind comments about my colleague and hon. Friend the Member for Hemel Hempstead (Mike Penning)—I was going to say that he is on his way to Northern Ireland, but he appears to have returned to the Chamber for one last transport debate, for which I am grateful. If I miss anything out, he can pass me a note and I shall happily incorporate it into my comments, as the matter has been part of his portfolio, not mine, and as he knows much more about motorcycles than I do. What I do know is that he has been very supportive of motorcycling, as has the Department since the coalition Government took office, and I do not see that changing.

With regard to bike modification and the Commission’s proposals to overhaul the existing scheme for type approval of motorcycles, we have argued strongly against extending anti-tampering measures, which we felt were

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based on unconvincing evidence for change. We have been successful in limiting their application to bikes that are subject to power or speed restrictions, such as learner bikes, so larger, unrestricted bikes will not be affected by the proposed anti-tampering measures. The proposals relate only to modifications that change the power and speed, so riders will continue to be able to customise their bikes.

More widely, we have opposed the delegation of powers to the Commission within the proposed regulation to set technical detail and argued against measures that impose unnecessary costs and restrictions. We have secured a number of positive objectives, such as limiting the application of costly anti-lock braking requirements on smaller bikes, while ensuring the safety benefit of their fitment to larger machines, simplifying test procedures and blocking tighter requirements for the approval of one-off specials—custom bikes. Despite our objections, it is likely that the regulation will be adopted later this year and enter into force in 2016.

I recognise the concerns my hon. Friend expressed about the changes to module 1 of the motorcycle test. Since then, we have implemented a number of changes to improve riders’ and trainers’ ability to access the test, including: addressing trainers’ concerns about manoeuvres by restructuring the order in which they are undertaken, providing more flexibility in speed measurement and making small changes to the layout of the test; making more test sites available by acquiring casual sites, such as those already owned by the Vehicle and Operator Services Agency and privately owned sites such as Silverstone, to try to minimise gap areas; and working with trainers to review the booking system to improve the availability of test appointments at times that suit the trainers and trainees.

My hon. Friend will also know that the motorcycle test review has been considering alternative ways of providing a motorcycle test that maintains UK riding standards and improves the accessibility and safety of the test candidates while meeting the requirements of the European legislation. The aim is to accommodate all the manoeuvres in a single-event test that can be delivered in all parts of Great Britain. We have focused on the higher-speed, low-speed and braking manoeuvres required by EU directives, including the design and content of the manoeuvres and the locations where they could be performed as part of the test.

We have made progress in identifying potential alternative manoeuvres and the kinds of locations that could be suitable. We are now holding independent trials to evaluate these options to see whether they are feasible, safe and deliverable in all areas. Subject to these trials, there will be a public consultation on any proposals for changing the motorcycle test. I appreciate that hon. Members across the Chamber sometimes want us to make progress more quickly than we are able to. I can assure my hon. Friend that my hon. Friend the Member for Hemel Hempstead has been very busy in trying to make as much progress as he can, and we will not let up on that as we move forward under the new Secretary of State for Transport.

Under the third driving licence directive, new driving licence rules will come into force on 19 January 2013. The directive will introduce new categories for motorcycles

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that will apply from 19 January 2013. The changes will not affect entitlement gained before that date. There are new categories for mopeds and for small, medium and unlimited-size motorbikes—categories AM, A1, A2 and A respectively. As my hon. Friend is aware, a rider can progress from a smaller to a larger bike by direct access, based on a minimum age for a specific category, but progression can also be through staged access, based on two years’ experience for a given category. Through that progression route it is feasible for the rider to gain entitlement at age 21. The new categories implement the EU’s third driving licence directive and UK legislation has already been made. There is no further scope to influence the EU on the directive, which has now passed into EU and domestic law, but much work has been done to publicise arrangements in advance of it coming into effect.

The directive also specifies the minimum size of bike on which the practical test can be taken. My Department has been working with the Commission to ensure that the categories make sense and provide flexibility—for example, by working on categories that align with manufacturers’ specifications on the engine size. A 5 cc tolerance around the minimum engine capacity for a motorbike has been proposed, so for category A the minimum engine size for a test vehicle can be between 595 cc and 600 cc. For electric bikes, specifying a power-to-weight ratio rather than engine displacement is also something we have been pursuing. As part of this work, the Commission has proposed a change for the conventional petrol engine bikes that can be used for the practical test, allowing entitlement to unrestricted access to any sized bike in category A. The change increases the minimum engine power from 40 kW to 50 kW—or 54 to 67 brake horsepower, for those interested in such measurements—and introduces a minimum 180 kg unladen weight, kerb weight.

In June this year the EU Commission circulated a directive that included all those changes and amended the third driving licence directive. The change to bikes that can be used for the test under category A was not welcome and we raised concerns about the impact it would have.

The Commission’s main argument for the new requirement in relation to engine power and minimum weight is that it will lead to the tests taken on motorcycles being more representative of their category. We are concerned that inadequate justification has been provided by the Commission to explain why that particular change to category A is being made and why the specific requirements have been chosen. Apart from greater development of electric bikes, there has been no significant change in bike technology to warrant any change since the third driving licence directive was originally adopted in 2006. In addition, there is little difference in handling between a bike with 40 kW and one with 50 kW, so there is no obvious road safety benefit from taking a test on a bike with 50 kW. Furthermore, I am concerned, as is my Department, about the impact it will have, particularly on training providers.

The new amendments are due to come into effect on 31 December 2013. To make this change so close to the introduction of the new rules in January 2013 is, in our view, confusing and provides very little notice. There is inadequate protection and no transitional provision to safeguard those who, quite understandably, have purchased

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bikes at 40 kW in anticipation of the law changing on 19 January 2013. Those points have already been raised clearly with the Commission, which has powers to make minor amendments, subject to the views of member states. Disappointingly, at the Commission’s driving licence committee on 26 June, few other member states shared our concerns. The Commission extended the lead-in time for the changes to take effect to 31 December 2013, but secured a positive vote for them from the majority of member states. I am concerned that the change does not add real value to road safety and that it will have a disproportionate impact on training providers.

The Government are committed to simplifying regulations so that they do not impede growth, and to working with the European Union to make that happen, but we do not think that this particular change makes sense. It is an example of change that does not tie in with the EU’s objective to develop measures that add value and encourage growth, and we think that it is out of step with the EU’s smart regulation agenda to ensure the quality of regulation.

The Government are, therefore, taking the step to make objections to the Council of the EU within permitted grounds of objection. We would need a qualified majority to block the amendment and we are writing to other

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member states to enlist their support. The Council has until October to make that decision. Obviously, we do not know what the response of other member states will be.

In the meantime, we have taken action to make sure that the motorcycle industry is aware of the changes as soon as possible. On 16 July, we published the changes on the Department for Transport website and notified the motorcycle training industry and other representatives of the motorcycle industry.

I hope that my hon. Friend will appreciate that we are taking steps to get the amendment to category A changed and to achieve a positive outcome. I also hope that he will welcome the general steps that the Department is taking to ensure that we give support to motorcyclists. Despite the unwelcome departure of my hon. Friend the Member for Hemel Hempstead to Northern Ireland—it is unwelcome for the Department, but I am sure that he is very pleased about it—we in the Department will do our best for motorcyclists.

Question put and agreed to.

7.12 pm

House adjourned.