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National Insurance Contributions Bill

My Lords, the noble Lords who put their name to the amendment have again raised the issue of making non-trading charities eligible for the employers national insurance contribution holiday. This matter was debated at some length in Committee and I again suspect that what I am going to say will not come as a huge surprise to the noble Lords concerned. Nevertheless, I will do my best to persuade them to withdraw the amendment. I thought that the noble Lord, Lord Davies of Oldham, was going to go off on some flight of fancy. I do not think that he went off on any flight of fancy, and he kept entirely to areas that the Treasury takes extremely seriously. I was therefore disappointed, because I expected the noble Lord to go down some exotic new avenue—but he did not. However, in the first half of his remarks, he did not recognise that an important group of charities will get the benefit of this holiday. It is important for me to confirm that new charities in qualifying areas are eligible for the holiday if they are carrying on a business. I appreciate that the noble Lord later on in his remarks started to distinguish between trading and non-trading charities, but this is an important point. For example, were employees to be taken on for a charitable trade, such as providing education or healthcare services, the charity is potentially eligible for this generous relief. Amendment 5 would specifically extend eligibility to new non-trading charities in qualifying areas. As, to be fair, the noble Lord recognises, this would not support the Government’s objective of encouraging new entrepreneurs to set up businesses in areas with a high proportion of public sector employment. The noble Lords suggested that his amendment would be a nice-to-have add-on, if I may crudely paraphrase him. However, he recognised that it does not chime in with the core purpose of the Bill. Just as we have other ways of supporting regions that are not covered by the holiday, the Government of course have other important ways in which they support the critical work of charities, not least in their contribution to the big society. We provide substantial support to charities and charitable giving with tax reliefs worth more than £3 billion each year. Gift aid and relief from non-domestic rates are each worth around £1 billion a year. I remind noble Lords that, across the UK, charities that are employers will also benefit from the increase in the employers national insurance contribution threshold by £21 a week, plus indexation, that comes into effect on 6 April. Because I think it is important to deal with the technical details of amendments and give them their due, I also respectfully point out to the noble Lord that the amendment on its own is somewhat defective as it does not deal with the many difficult issues that would arise if the holiday were extended to non-trading charities. For example, it would be necessary to consider carefully the commencement date of such a change. The scheme has been live since September 2010 and the relevant period commenced in June 2010. We do not think that any such amendment could be made with retrospective effect as the amendment implies. The legislation would need to provide a start date for charities. Is this to be the date of establishment or some other date—for example, the date it is registered by a regulator such as the Charity Commission or the Office of the Scottish Charity Regulator? What about the existing holiday rules covering businesses that are taken over or transferred or where there is a change in activities? Would these rules need to be applied so that only genuinely new charities qualified or would they need to be modified to cater for cases where charitable status might be obtained at some point after the activity had commenced? Therefore, there are considerable technical problems with the amendment. In any case, as the noble Lord, Lord Davies of Oldham, recognises, any benefit ensuing from such complicated changes is likely to be limited, as we estimate that relatively few non-trading charities employing staff are likely to be set up over the holiday period. By including non-trading charities, we would undermine the policy rationale for the holiday, which is to encourage new businesses to be set up and to take on employees. For example, if charities were included, employers of nannies and carers could claim that they should also be included in the holiday. We have drawn a line at trading because that is what supports the overarching policy. In conclusion, the scheme specifically targets new businesses that create new employment in areas that require it most. If a new charity were carrying on a business, of course it would qualify, but extending the holiday to non-trading charities would greatly complicate the scheme. Rather than channel resources through this scheme and impose administrative burdens on new charities, the Government consider that it is more efficient to provide support through existing mechanisms to all charities, as well as significant benefits, in the ways that I have outlined. Therefore, I ask the noble Lord to withdraw the amendment.