H.M. TREASURY

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SPEECH BY BARBARA ROCHE MP, FINANCIAL SECRETARY TO THE TREASURY, TOP THE NCVO FUNDING CONFERENCE ON 12 APRIL, 1999

Introduction

I am delighted to here today to address this NCVO conference on funding. Of course, Patricia Hewitt is Treasury Minister with lead responsibility for charities' taxation - unfortunately she is unable to be here today.

The theme of this, the third NCVO funding conference, is sustainable funding. I want to look at this issue in the context of what the Government is doing to promote sustainable giving.

Government's overall approach

The voluntary sector makes an immense contribution to the fabric of our society: 2 million employees; 3 million volunteers; £12 billion of economic activity. It makes a positive contribution to many millions of peoples lives, both here in Britain as well as in many countries round the world.

In his recent speech at your conference in January, the Prime Minister said we need to "ignite a new spirit of involvement in the community" - to encourage an active community.

To achieve real change, we must mobilize the strengths of every part of our society. Government - local, regional and national; increasingly the private sector; and you the voluntary sector, need to work together, in a new practical partnership. Jack Straw and Paul Boateng set out this new partnership with the voluntary sector in the Compact "Getting it right together".

This new partnership is already delivering results. Voluntary organisations are already playing a vital role in the New Deal, Sure Start and the New Deal for the Communities.

Active Community

But we need to go further than this. Already, millions of people give generously of time, energy and commitment to help our community and we as a society recognise and value this contribution.

Yet there is so much more we can do. Barely one in twenty young people, and fewer than one in ten adults gave time last month.

Of course, giving money is vital to the charity sector - but this is dwarfed by the giving in kind that takes place in every community in the country.

To achieve what we all want to see, a step change in community involvement, we must work together, in partnership.

Communicating and motivating

First, we must raise awareness and motivate people into giving their time and energy to their communities. We all know how rewarding getting involved and helping other people. And so we will be working with broadcasters and newspaper groups, and a new charity Pilotlight to pioneer new ways of encouraging people to get involved.

New volunteer programmes

Once people are committed, it is important to channel their efforts effectively. Our new £48 million Millennium Volunteers programme will help the younger generation volunteer. And it is not just the young who give, and so we are funding a new initiative to support older volunteers. To encourage employees to give from the workplace, we are providing financial support to Business in the Community.

New infrastructures

Of course, today we live in the information age, and so we need to make the best use of technology to make sure people know what is happening, and how to get involved. And so we are setting up a group that will bring together organisations to look at how best to we can enable to find out about getting involved in their communities.

Modernising Government

A modern approach to voluntary sector also means that we, as Government, need to modernise the way we provide help. The new Active Community Unit will have a brief to work across government to coordinate the work of departments, joining up the many different things the government does. It will make things happen, it will bring in outside experts, and it will raise the profile of the sector in government. This will allow vital improvements to the many strands of interaction between the Government and the voluntary sector.

Charities and the tax system

There are clearly very many strands to the interaction of the Government and voluntary sector. I have talked about some of them already. One I have not yet talked about is the tax system: that is what I turn to now.

We currently spend £2 billion a year on tax reliefs for charities, in addition to several billion pounds a year in grants to the voluntary sector.

You need a tax system which is as fair, simple and transparent as possible. And which offers real incentives to individuals and companies to donate some of their money to charities. It is not our job to fund you, or to raise money for you, or to tell you how to do your work. But it is our responsibility to help create an environment in which charities can flourish.

Consultation Document

The long-awaited consultation document on the review of charity taxation was published on Budget Day in March.

As Patricia Hewitt has emphasised, we want the tax system to encourage more people to give to charity, and to be as simple as possible for donors and charities to operate.

We are all acutely aware of the decline in the number of people giving to charity - particularly the young. And so we need to create a more dynamic environment for charitable giving.

The consultation document set out a range of options for doing just that.

We are proposing to improve Gift Aid to make it a more accessible means of tax effective giving: by reducing the minimum limit for donations from £250 to £100 and allowing that limit to be reached in instalments. This would extend the more generous Millennium Gift Aid - and would be intended to take effect at the end of the year 2000 when the Millennium Gift Aid scheme comes to an end.

We also propose to boost the Payroll Giving scheme by making it more flexible. Removing the maximum limit for donations, and allowing employers to distribute the donations directly to charities would make the scheme more attractive, both for donors, companies and charities.

But as well as making the scheme more flexible, we need to encourage a higher take-up of Payroll Giving. And so we propose a partnership with employers and charities to kick start the scheme from the public purse that would add an extra 10% to donations for two or three years. We would reinforce this with a campaign to encourage more employers to set up such schemes.

We also suggested changes to make the system of VAT reliefs for charities simpler and more consistent.

Another way on which the tax system can support charities is through being as simple as possible to operate. As one group told us "our hard-earned income is often spent on tax administration." And so we are proposing to simplify the tax system for charities. For example, by giving small charity businesses direct tax exemption, and by extending and aligning direct and indirect tax reliefs for fund-raising events.

We are proposing a single telephone helpline for charities to use for information on all tax matters.

Because giving from businesses is as important as giving from individuals, we are legislating in the 1999 Finance Bill to enable business to get tax relief against their profits on donations of equipment to all charitable causes. This is an important extension of the present system and will encourage many more businesses to offer support to charities.

I know you will have been disappointed not to see further proposals on compensating for irrecoverable VAT on non-business expenditure. Patricia Hewitt made clear the Government's position on this issue in her speech to the Charities' Taxation Reform Group in January.

A UK grant scheme for such irrecoverable VAT on purchases would firstly go against a fundamental principle of the VAT system, and secondly would need to be funded from elsewhere in the Government's budget. And it would impose higher administrative costs on both charities and Government.

Our proposals in the consultation document are far reaching proposals to modernise the tax system as it affects charities, and they offer incentive to increase giving, and to simplify tax system for charities.

Let me emphasise that this is a consultation process: a very genuine, and active consultation process. These are a set of points for consideration - not a final policy decision - and we want to hear a wide range of views. So I urge you to consider them very carefully and let us know what you think.

The deadline for comments, which should be sent to the Inland Revenue, is 31 August.

Millennium Gift Aid

We want to mark the Millennium in the best way possible, by making 2000 the Giving Year and helping millions of people around the world that desperately need our help.

The Millennium Gift Aid scheme aims to help UK charities raise funds to help education and anti-poverty projects in the world's poorest 80 countries. It gives tax relief on donations of £100 or more - whether paid in a single lump sum or easy to pay installments - by the end of December 2000.

The Government is already actively promoting the scheme through the publicity campaign, "Gift Aid 2000", aimed at boosting donations, especially from the younger generation.

A key feature of the campaign is the flexibility donors have in giving. There's an local rate phone number they can use to make donations, they can set up a direct debt on the telephone, and of course the usual credit card, debit card or cheque donations.

You will have no doubt seen the impressive Eddie Izzard and his "You Give: They Give" adverts on television.

Only last week, the Chancellor announced that Millennium Gift Aid would be extended to UK charities working with Kosovan refugees, wherever in the world they are being given shelter.

Everyone has been moved by the plight of the people of Kosovo. And of course many charities have already swung into action. And so by extending the scheme in this way, UK taxpayers will be able to do their bit to help, with the extra backing of the Inland Revenue adding to their donations.

Conclusion

Since coming into Government, we have embarked on a new era in our relationship with the voluntary sector. We have a new partnership, outlined in the Compact, where we are working together to meet shared aims and objectives. And in doing so, we have consulted you in how we can help you.

Partnership means that the Government and voluntary sector each have their own responsibilities. The Government to create the right dynamic environment as well as being responsible with the public purse. We have published a consultation document on modernising the system of charities taxation - and I urge you all to look at our proposals and take the opportunity to respond. We will be listening. And the voluntary sector to secure its future through being creative and resourceful.

On the brink of the 21^st century, it seems right to look at what we can do to improve the fabric of our society: to make a real difference to people's lives. It is only through our partnership that we can succeed. And so we look forward to working with you to take this agenda forward.