Interview: Chloe Smith

The economic secretary talks up plans for a government supplement to small donations and tells David Ainsworth that the Treasury is also reviewing payroll giving and social investment

Chloe Smith
Chloe Smith

Chloe Smith made a major contribution to charity in 2006 - before she was an MP - when she was part of a team from the financial services company Deloitte that raised £100,000 for Leukaemia Research and the British Heart Foundation by climbing Mount Kilimanjaro.

Altitude sickness kept her from the summit, but now that she's Economic Secretary to the Treasury and the minister with primary responsibility for charity taxation, she's tackling another mountain - the unnecessary bureaucracy that prevents charities from being more effective.

In recent years, several rules have been made by the Treasury and HM Revenue & Customs to prevent misuse of charitable tax reliefs, culminating in the proposal in this year's Budget to limit tax reliefs for major philanthropists, which was scrapped after the success of the Give it Back, George campaign.

While the government was still sticking to its guns, Smith's colleague David Gauke, Exchequer Secretary to the Treasury, was the minister who went on television to defend the proposal and met sector representatives to say 'no'.

More prominent role

Since the U-turn, Smith has taken a more prominent role, offering articles and blogs to the media and conferring with charities minister Nick Hurd (who hadn't been consulted before the so-called 'philanthropy tax').

Smith says she believes that no lasting damage has been done to the sector by the proposed tax relief cap. "No one would want that to be the result," she says. "We have been clear through the process that we didn't want the reputation of charities and philanthropy to be damaged."

She is keen to concentrate now on several initiatives to support the sector - most importantly, the Small Charitable Donations Bill, which she is piloting through the Commons. This would allow charities to claim Gift Aid-like payments on up to £5,000 of cash donations.

"The scheme represents a great opportunity for charities large and small," Smith says. "This is a real way of getting funding where it's needed and will be put to good use. We want to urge people to get involved."

"Complex scheme"

The scheme has attracted criticism from the sector because it has several preconditions that would make it difficult for many small charities to use it. They will be able to claim the full £1,250 in relief only if they have claimed at least £625 in Gift Aid; and only charities that have correctly claimed Gift Aid in at least three of the preceding seven years will be eligible.

Smith says that some of the complexity involved is inevitable because of the need to protect the exchequer. "There are always challenges in the design of any new scheme," she says. "The government has had to have regard to possible windows for fraud. No one wants the public purse to be defrauded. I think people do understand that."

Smith also says that, despite the limitations on the scheme, the government is sticking to its original estimate that it will be worth about £105m to the charity sector by the tax year 2015/16, and £115m by 2016/17.

She says the current estimates, agreed by the independent Office for Budget Responsibility, are based on the prediction that about 100,000 charities will be claiming some element of the GASDS by 2015/16. At present, HM Revenue & Customs figures indicate that between 65,000 and 70,000 charities claim Gift Aid each year.

Barries to social investment

Payroll giving and social investment are also being examined by the Treasury, Smith says. It is conducting a review of the barriers to social investment, and the sector has lobbied for this to include tax breaks and rule changes to make it easier for groups to become social investors, including charitable foundations, pension funds and people interested in investing relatively small amounts.

Smith says it is too early to judge what the conclusions of the review might be and that she cannot reveal its priorities. "The Treasury is looking at any financial barriers," she says. "At the same time the Cabinet Office is doing the Red Tape Challenge to reduce the burden of regulation. It's important that there's joint working."

On payroll giving, she says she is keen to see increased take-up and that there are some excellent ideas about how to do this, but she is again reluctant to go into the specifics.

"There's a large opportunity out there," she says. "There's a need for the government to help and for parts of government to work together. Nick Hurd and I have been talking to payroll giving agencies and major charities, and everyone is agreed that we want to see increased take-up."

Also on her list is a new tax relief that will support donors who want to donate works of art. "It's a good thing that we have reliefs for everything, from the gift of a major artwork to £1 in a bucket on the high street," she says.


2011: Economic Secretary, HM Treasury
2009: Conservative MP for Norwich North
2004: Business consultant, Deloitte

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