That this House has considered Government support for membership-based charity organisations.
It is a great pleasure to serve under your chairmanship, Mr Twigg.
Membership organisations play a central role in protecting and enhancing the things that we consider important to our national character. The great British countryside is maintained and safeguarded for future generations by conservation charities such as the Royal Society for the Protection of Birds, the Wildlife Trusts and the Woodland Trust. The most iconic landscapes, sold around the world as the backdrop of British soft power—reminding visitors of the iconic settings for Jane Austen, Dickens and Harry Potter, as well as the paintings of Constable and Turner—are kept open to the public by membership charities such as the Youth Hostels Association and the Canal and River Trust.
Speaking of Turner and Constable, membership charities are the stewards of our country’s heritage. They look after the artefacts, artworks and architecture that make us proud to be British. Between them, charities such as the National Gallery, Tate, the National Trust and English Heritage have millions of members. If I were to ask everyone in this room and in this building whether they have ever been a member of one of these charities, I would be surprised if anyone could say truthfully that they had not. The National Trust, for example, has nearly 6 million members. English Heritage and the RSPB have 1.2 million each. Those are numbers that political parties can only dream of.
The hon. Member mentioned the National Trust and preserving our national heritage. West Dorset’s most famous feature is the Cerne Abbas giant. The National Trust, which looks after it, has just launched a fundraiser to raise £330,000 to buy the land around the Cerne Abbas giant to improve access. Does she agree that membership-based organisations and charities preserve such institutions?
The hon. Gentleman has done beautifully to put that on the record. He is absolutely right that these incredible membership charities preserve our national heritage.
If we were to ask people why they support such charities, I expect they would not say that they do so just to get access to some of the venues and the fantastic historic treasures they promote. They would probably say that they value the mission of those charities, whether conserving the countryside, protecting our heritage or serving the vulnerable. They want to support those missions; they are members because they value what those organisations do.
In doing those things, the charities provide significant benefits to the Government. All told, the voluntary sector delivers £14 billion of public services to the Government and directly contributes £70 billion to the UK economy. Much of that is delivered by membership organisations. All that is without mentioning the indirect benefits that many membership-based charities provide: for example the health benefits to the public of maintaining hundreds of thousands of hectares of land, the demonstrable mental health impact of engaging with arts and culture, and all the educational enrichment they offer.
But all that is under threat. Charities are under more strain than ever. It is a question of time and money. Telegraph readers were recently outraged that the National Trust, in order to save on costs, is replacing homemade scones—however one prefers to pronounce them—at some of its properties, but this is just the tip of the iceberg, or the jam on top of the cream, depending on which way one prefers one’s scones.
Billions of pounds of additional financial pressure has been put on charities at a time when the demand for their services is rising and income streams are drying up. The biggest impact, as we know, is through national insurance contribution changes, which have collectively added £1.4 billion to the charity sector’s bills, but our art institutions are set to see huge rises to their business rates as well, and many heritage organisations have seen the cost of maintenance far outstrip inflation.
It is a pleasure to serve under your chairship, Mr Twigg, for the third time this afternoon—I enjoy your company so much. You are kind and patient as a Chair—thank you very much.
I congratulate the hon. Member for Gosport (Dame Caroline Dinenage) on securing us the opportunity to sow into this debate. She made an excellent speech and presentation. I learnt something from her—I always do, of course—and I have a better idea of her ask of the Minister. It is also a pleasure to see the Minister in her place. I thank her for all her hard work and all the answers she has given us over the past year in her role.
When we bear in mind that some of the UK’s most well-known charities are member-based charitable organisations, it is clear why we must ask, and ensure that, the Government work alongside such organisations that offer so much to our communities. The hon. Member for Gosport clearly outlined the issue. I am a member of the National Trust and the British Legion, and a past member of the Scouts—those are the three I would be aware of. The point I am making is that those are partnerships that I believe the Government can work better with, although I think the Minister recognises the good work that the organisations do. The hon. Lady for Gosport referred to English Heritage, and its work on houses, land, and preserving our history and our culture. All those things are incredibly important. All such British institutions operate from a charitable position, to effect change in individual and community lives.
I am going to give a wee bit of information about the National Trust in Northern Ireland and what it does, just as an example. Such organisations do not simply stand in shopping centres shaking a tin at passers-by; they are more than that. They are intricately involved in the lives of constituents, their aim to enhance those lives effectively throughout the Province and the United Kingdom as a whole. The National Trust, for example, provides employment for some 500 people across Northern Ireland in all the estates, lands and places that it looks after.
I thank the hon. Member for allowing me to intervene. I wonder if the Minister would consider the following. I was the vice-president of the National Trust for Scotland for the majority of 10 years and I know the senior management there very well. They have been extremely hurt by the national insurance increase, particularly on people who do part—
Yes—sorry. Does the hon. Member agree that when the Government introduce legislation on, for example, national insurance and people doing part-time work, and now this gift aid issue, they should consider charities as separate organisations?
I thank the hon. Member for his intervention. The knowledge that he has developed over the years is an important addition to this debate. I know that the Minister is listening when we make our asks, as the hon. Member for Gosport has done and as I will do now.
The service that these organisations provide needs the support that the Government can give, from charitable taxation to gift aid facility. However, there now seems to be a question mark over how gift aid will work. I seek clarification about how the Government can ensure that it continues in some way, so that charities can enjoy the advantages it brings. I did not know the figures involved, which the hon. Member for Gosport referred to. The gift aid facility gives massive help to charities, but I never knew that the amount raised was anywhere near the amount that she mentioned in relation to charitable taxation.
Such support by Government is essential to allow these charities to operate and to make a difference, so it must be enhanced. I understand the need for transparency and openness, and I agree with Government scrutiny when that is necessary. Such scrutiny must continue. However, we must always be aware that for every penny lost in tax, so much more is gained in local economies making an investment, which is a worthwhile investment.
As the reach of these organisations extends so far, it is wonderful for us to work in a mutually beneficial partnership. I ask the Minister for assurances that the work carried out in the charitable and voluntary sector will be fostered, supported and encouraged by Government. If that happens, the concerns of the hon. Member for Gosport, of the hon. Member for Inverness, Skye and West Ross-shire (Mr MacDonald), and indeed of all of us who are here today can be alleviated in some way. We look forward to hearing the Minister’s response to the debate.
It is a pleasure to serve under your chairmanship, Mr Twigg, and I congratulate the hon. Member for Gosport (Dame Caroline Dinenage) on securing this important debate. It is also a pleasure to serve with her on the Culture, Media and Sport Committee.
I begin by paying tribute to some of our fantastic membership-based charities, including the National Trust, the Royal Society for the Prevention of Cruelty to Animals, the Royal Society for the Protection of Birds and English Heritage, which play a central role in our national story and do so much to enrich the country’s cultural, social and environmental life. Liberal Democrats recognise that membership-based charities safeguard our cultural and natural heritage, strengthen community life, and provide vital service that the Government alone cannot deliver.
Last month, in response to my question at the Culture, Media and Sport Committee’s pre-appointment hearing for the chair of the Charity Commission, the successful applicant, Dame Julia Unwin, said that the hike to employer national insurance contributions was:
“a crushing blow for many charities.”
We are already seeing the consequences. In July, the National Trust announced plans to cut 6% of its current workforce, or around 550 jobs. At a time of sustained financial pressure across the charity sector, the Government should not be adding additional burdens and barriers.
As we have heard, gift aid for membership-based charities is crucial, supporting organisations in increasing their fundraising income and financial stability, and enabling them to have a greater impact. In the tax year ending April 2025, UK charities received £1.7 billion in gift aid, but only around half of the value of gift aid payments went to charities that received less than £1 million each.
There is concern among membership-based charities that the implementation of the Digital Markets, Competition and Consumer Act 2024, which was introduced by the previous Government, risks jeopardising the ability of those charities to claim gift aid on membership subscriptions. Organisations including the Tate, the Royal Horticultural Society, the Royal British Legion and the Wildlife Trusts have penned a letter to the Prime Minister stating that risking charities’ ability to claim gift aid on membership would increase cost pressures and could lead to them having to reduce their services. Will the Minister commit to bringing forward the necessary secondary legislation without delay to close the loophole in the Act and guarantee that eligible membership subscriptions continue to qualify for gift aid so that charities can plan ahead and protect the services our communities rely on?
It is a pleasure to serve under your chairmanship, Mr Twigg. It is also a pleasure to take part in this important debate on Government support for membership-based charity organisation. I thank my hon. Friend the Member for Gosport (Dame Caroline Dinenage) for securing such an important debate and for her opening remarks. It was apparent on hearing my hon. Friend speak just how important some of our national treasures are, what it is to be British, and how those treasures are entrusted to—and very often in the care of—membership-based charities.
As someone who used to work for a charity for six years before entering this place, I know the amazing work they do in all aspects of life. Many charities, particularly those in the cultural and heritage sectors, continue to be some of the largest membership-based organisations in the UK. Museums, galleries and libraries also contributed over £1.1 billion in gross value added to the UK economy in 2023 and employed nearly 100,000 people in 2024, while civil society contributed £18.5 billion and employed nearly 1 million people.
However, many membership-based charities are now facing growing financial challenges because of impending regulatory changes, the knock-on effect of Government cuts to the Department for Culture, Media and Sport’s budget and the continued effect of Labour’s increases to employer’s national insurance contributions.
One of the most immediate challenges facing membership-based charity organisations is the impending changes to subscription contracts as a result of the Digital Markets, Competition and Consumers Act 2024—as we have heard—and the Government’s failure so far to close a loophole that was identified when that Act was taken through Parliament. The introduction of a 14-day cooling-off period jeopardises the future value of membership as a sustainable income as it will create a loophole allowing people to gain access to venues, exhibitions or creative content and then cancel their membership after enjoying all the benefits within the first 14 days. My hon. Friend the Member for Gosport articulated that problem perfectly. Those cancelled memberships also mean that charities will lose their ability to claim gift aid on membership income.
It is a pleasure to serve under your chairmanship, Mr Twigg, and I am glad to respond to this debate. I begin by congratulating the hon. Member for Gosport (Dame Caroline Dinenage) on securing this important debate. The hon. Lady’s support for membership-based charities is evident from her speech and through her work as the Chair of the Culture, Media and Sport Committee. Of course, it is always a pleasure to hear from the hon. Member for Strangford (Jim Shannon). I thank him for his kind words. I would like to take this opportunity to thank all those who work, volunteer and donate to charities across the country.
The UK has many notable membership charities, including our great national museums and galleries, such as the V&A and the Tate, the caretakers of our heritage, including the National Trust and English Heritage, and our celebrated arts organisations, from the National Theatre to the English National Opera. The hon. Lady gave so many powerful examples, as did other Members. She rightly highlighted the huge number of people across the country who are supporters and members of these organisations.
The Government highly value the work that the sector does and the social value it delivers. It is an incredible force for public good. Over the past year, I have had the opportunity to visit and meet with many charities, including the Samaritans, Citizens Advice, London Plus and the NCVO, to name just a few. Each has reminded me of the vital and inspiring work that charities do each day.
I will address the main concerns that the hon. Lady has rightly and understandably raised, and then talk about some of the broader support that the Government are offering the sector. I recognise, and I am very sympathetic to, the concerns raised by the hon. Lady about the implications of the Digital Markets, Competition and Consumers Act for charities with membership schemes.
I am grateful to the Minister for her response. I am also grateful to her for advocating on my behalf, and on behalf of membership charities, with the Department for Business and Trade on the issue, which we have been wrestling with today, of trying to get clarity about the roundtable and the response to the letter.
The Minister talked about the Government carefully considering, but what the sector needs is action. It needs certainty and clarity, and it needs them fast. The Digital Markets, Competition and Consumers Act will start impacting them next year, and they cannot wait till 2027 for this to be solved. They are facing a perfect storm: the real unintended consequences of the national insurance rises, which are impacting charities and the amazing work they do, and now the impact of the Act.
The Government say that they care deeply about this issue, but they need to follow up those words with action. I am grateful to the Minister for helping to try to deliver that action. When she advocates for us with DBT, she needs to be in the room. The silos of Government and things falling between the stools are one of the biggest issues in trying to resolve these issues for charities, which our constituents and our country depend on.
Question put and agreed to.
Resolved,
That this House has considered Government support for membership-based charity organisations.
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Meanwhile, so many are seeing demand for their services skyrocketing. The Royal Society for the Prevention of Cruelty to Animals, for example, tells me that rescues are operating at 120% of their capacity, and Cats Protection says that, in the last three years, it has seen a 71% increase in the number of cats being abandoned. The wider trend is clear. Around 83% of charities recorded an increase in demand for their services over the last 12 months, but even those pressures might be bearable were it not for the fact that the stability of the funding model itself is being called into question.
Fewer people are donating to charity, and while the average donation is increasing, this highlights the narrowing of the base from which membership charities can secure funds. Those donations are not coming from the places one might expect, such as the wealthy London constituencies of Kensington and Bayswater, Chelsea and Fulham or Holborn and St Pancras, all of which form the three least generous constituencies as a percentage of their income in the UK. In real terms, the amount donated by British businesses has declined as well, with the number of FTSE 100 companies donating more than 1% of their profits falling by 14%.
Money is not the only thing that charities rely on; they rely on people donating their time. However, long-term trends in hours spent volunteering are in decline as well—from 45% in 2013-14 to 28% in 2024-25. People put that down to a whole range of things, such as the bureaucracy and paperwork involved in volunteering and the cost of living pressures that people are under. I will not attempt to understate it: this is a full-blown crisis in the charity sector.
It is no wonder a majority of charity leaders say they would not be confident that they would be able to cope if they saw a decline in their income streams. However, and I know the Minister is aware of this, a decline in their income streams is exactly what we will discuss today, and it is why I asked for this debate.
Membership charities at the moment are able to claim gift aid on memberships that are currently deemed donations by the Government. That settlement is a direct expression of the way that charity members regard their relationship with charities. It is one of the supports that people can give to the aims and the work of the fantastic charities, many of which I have already discussed. They are not private services; their work supports the public good and, in many cases, saves a lot of money for the Government.
I know that the Government see it that way too and the Minister will tell me how much he values the work of membership charities and how much store the Government put into that value, but the truth is that the Government have been very slow to tweak well-meaning and necessary consumer protection legislation despite the imminent impact of the Digital Markets, Competition and Consumers Act 2024 on membership charities’ cashflows.
Fundamentally, the Act alters the way that membership charities process memberships and the benefits of them, leading to a potentially huge loss in revenues at a time when charities’ finances are already overstretched. The provisions of the Act move us away from a place where we view a charity membership as an expression of support. If, for the purposes of the DMCCA, refundable memberships are no longer considered to be donations due to the Government insisting on applying a 14-day cooling off period, the result is that gift aid can no longer be claimed.
Let me provide a bit of perspective on that: national insurance contributions added more than £10 million to the National Trust’s wage bill. That has been devastating. Gift aid is worth five times that for the National Trust. The story is the same for English Heritage, on which I must declare an interest as I am a member. While it has seen a £1.7 million cost increase due to national insurance contributions, the impact of losing gift aid on their memberships would be more than five times that—valued at around £10 million.
I am no fortune teller, but I have an idea of what the Minister might say. She might say the Government have issued guidance that means membership charities will continue to be able to claim gift aid. But the fact is, as things currently stand, that is not what the law says, and that is creating confusion not just for the big players but for the small ones as well, because charity practice is currently at odds with the Digital Markets, Competition and Consumers Act 2024 and at odds with consumer law. Due to the widespread confusion of three very conflicting pieces of legislation, the Chartered Institute of Fundraising has written to the Department for Business and Trade. I know that is not the Minister’s Department, but I hope that she will convey this message. The institute has written to the Department offering to draft legal advice for small charities so that the Government can just sign it off, but it has had no response to that letter. Will the Minister speak to her colleagues in the Department for Business and Trade to chase that up, please, because small charities are very worried?
Perhaps the lack of response is because there is no clarity about who is affected. The CIF has told me that even it does not know the exact number of membership charities that could fall foul of the change. What is concerning is that His Majesty’s Revenue and Customs believes that only primary legislation can really sort out the legal contradiction between current consumer law, charity practice and the provisions of the DMCCA. Again, I do not want to put words in the Minister’s mouth, but I expect she might tell me that the Government have committed to passing legislation about this in the future. However, we know that the wheels of Government can move quite slowly, so when she says that, she probably means establishing certainty for charities by 2027 at the earliest, but it needs to be sooner than that. So, working with colleagues across Government, can the Minister find a suitable legislative vehicle to provide the certainty that the Government say they want? I am not asking her to do anything the Government have not already articulated a need for. And that has to start with reconvening the roundtable of membership charities that was cancelled due to the reshuffle. I would welcome that being reconvened, and I know the sector would, too. Will the Minister commit to that today?
Membership charities have told me that the best possible solution lies in classifying charitable memberships as excluded contracts in secondary legislation. In recognition of their unique nature, their charitable membership should be placed in that category. It would be helpful if the Minister could confirm that today if she can. It is not unprecedented. Streaming subscription services, for example, have been given waivers from the 14-day cooling-off period. Membership charities should at least be able to expect the same support as users of streaming subscription services.
I will give an example of how this could work perversely for membership charities. Why should someone buy membership of something like the National Gallery? It has sell-out exhibitions such as the very popular Van Gogh exhibition. We could potentially buy ourselves membership, skip the queue, be able to get into sell-out exhibitions, receive a discount for the ticket while we are at it, and then cancel the membership once we have seen the exhibition and received an almost total refund.
The same could be said of the National Trust or English Heritage sites. As things stand, I could purchase membership, visit half a dozen sites for free over a week’s holiday, and then cancel my membership for almost a total refund. English Heritage told me that its membership works out at around 22p a day. Is that the rate at which the membership charity should reimburse a departing member? Will the Minister say on what basis she wants charities to offer proportionate refunds in such instances? If not, maybe she could commit to giving membership charities the freedom to calculate themselves what a proportional refund might look like.
The National Trust believes, for example, that based on current guidance alone, every 1% of its membership that takes advantage of the loophole will lose it £3 million. Even if a tiny number of its members takes advantage of the new loophole in the law, that is a huge and significant impact on its finances, and that means less money spent on its core mission, which is to conserve our heritage.
We expect our charities to do so much. They provide so much for our nation and they do it really well. But membership charities need a vote of support from the Government now. They need this albatross removed from around their necks. And in light of the billions of pounds of tax rises that charities have already seen, there is an incentive for the Government to provide legal clarity. I hope that that is what the Minister will be able to provide in her remarks today.
I think right away of the incomparable Mount Stewart in Strangford. It is definitely—not just because it is in my constituency—the jewel in the crown of the National Trust. It is the gateway to the Ards peninsula, where the National Trust has other places such as Kearney in Portaferry and Saintfield, where the headquarters are. It also has places further down, across Northern Ireland, and right over as far as Enniskillen in the west of the Province.
Mount Stewart has one of UNESCO’s top 10 gardens in the world. That does not happen just by clicking fingers and seeing how it grows; it happens because the volunteers—the workers—work hard in the gardens. That is why Mount Stewart is so well renowned: the hard work that individuals put in to plant the trees and preserve the gardens. The volunteers have also undertaken projects such as rewetting peatlands and planting native trees to help absorb carbon emissions, build climate resilience and protect the surrounding landscape from flooding. Those are all things that have been done by the National Trust, by volunteers and by contributions from individuals.
The trust has planted hundreds of thousands of trees in Northern Ireland, with a goal of establishing half a million trees by 2030. That is not that far away. That goal will help this great nation of the United Kingdom of Great Britain and Northern Ireland to be good stewards of our planet and our environment. The trust works towards our environmental goals, which must be welcomed. Those are all things that the Government and the Minister want to see achieved as well. We should work together to make them happen.
The trust seeks to educate, to inform and to involve all who come. It is about not simply preserving the past, although that is incredibly important, but protecting the future. I always think that what we have today is in trust for those who come after. What the National Trust and others do is important because of that. All within the charitable confines help the Government to achieve their aims without the need for Government control or Government responsibility. It is one of those win-wins for the Minister and for Government.
Clearly, organisations such as the National Trust and the British Legion—just two—are foundational ones in the United Kingdom. Their relationship with Government is a two-way street, one that works well when both work well together.
Before concluding, I would just like to take this opportunity to give a shout out to some of the amazing charities in my constituency, such as the Pavilion on the Park, Citizens Advice, YMCA Eastleigh, Age UK, Two Saints housing, Guide Dogs, the Asian Welfare and Cultural Association Eastleigh, the Blue Cross and 1Community. I urge the Government to look again at what more they can do to support those charities, including reversing the increase to employer’s national insurance contributions.
Liberal Democrats welcome the Government’s commitment to greater engagement with civil society as part of the civil society covenant. However, we urge the Government to make that covenant a reality and look again at policies that run counter to its spirit. I hope that the Minister will engage in further discussion with organisations such as the National Trust, which is facing a potential cost of around £50 million in income if it can no longer claim gift aid on membership subscriptions.
At a time of rising costs, pressures and increased demand, the Government must do all they can to avoid adding additional burdens and barriers on our incredible membership-based charity organisations. Protecting gift aid, fundamentally addressing the crisis in charity funding, and honouring the commitments set out in the covenant are essential steps forward. Small and large membership-based charities safeguard our cultural and natural heritage, support vulnerable young people and families, strengthen community life and provide the services that the state all too often fails to cover. I urge the Government to take all necessary steps to support charities so that they can maximise their impact for the people and communities who depend on them.
As I said, that problem was identified when the Act was going through Parliament and the last Conservative Government committed to solve it by introducing regulations to close that loophole. Multiple times throughout the year, Ministers in the current Government have announced their intention to amend Gift Aid rules to ensure that charities can continue to claim it on membership subscriptions after the DMCCA comes into force. However, it is disappointing that legislation to that effect is still yet to materialise a year and a half after the change of Government. Can the Minister therefore confirm whether new legislation will in fact be necessary? If so, when we can expect to see it?
In July, some of the UK’s most prominent charities and cultural organisations, including the National Trust, the Tate, the Victoria and Albert Museum, Historic Royal Palaces, the Royal Horticultural Society, the Royal British Legion and the Wildlife Trusts, wrote to the Prime Minister to highlight the impact of the problem on their valuable work. Has the Prime Minister replied to the letter, and what action have the Government outlined to remedy the issue?
Although the Government have consulted on the implementation of the new subscription contracts regime, the consultation closed almost a year ago and those who contributed are still waiting for a response. The uncertainty for charities and cultural organisations, which need to set their budgets and make plans for next year and beyond, is having a chilling effect on some of the most cherished organisations in our country. Can the Minister therefore confirm whether the Government intend to waive the cooling-off period for cancelling a subscription for membership-based charities? When will they introduce legislation to do that if they consider it necessary?
Shortly before the Chancellor’s jobs tax took effect—which the National Council for Voluntary Organisations warned would cost charities £1.4 billion—we in the Opposition warned about the crushing effect of these new taxes. It is disappointing that the Government chose to press on with them, which has forced charities to reduce their staff numbers and scale back their services. Ministers have so far declined to outline what assessment, if any, the Government have made of the effect of their tax increases insofar as they affect the charity sector.
I urge the Minister to use this opportunity to provide much-needed and long-overdue certainty for membership-based charities on how the Government will support them and ensure they are not taken advantage of as a result of the new subscription rules. I endorse all the questions put to the Minister by my hon. Friend the Member for Gosport.
Just two weeks ago, I spoke to some of our national museums about that very issue. I know that funds raised from membership schemes are a vital source of income for membership-based charities. Earlier this year, the Department for Business and Trade consulted on the secondary legislation that would be required and has since been engaging regularly with the sector to understand its concerns better and make sure its voices are heard. I am very grateful to the charitable sector for its engagement so far with the Department for Business and Trade on those proposals. I reassure hon. Members and charities that the Government continue to carefully consider these issues, particularly the cooling-off period and the additional administrative costs.
It is important to say that I did meet and speak to the relevant Minister, the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Halifax (Kate Dearden), and I would be very happy—she would be as well—to meet the hon. Member for Gosport to discuss this issue further. She will understand that this is not my policy area, but I have relayed the concerns to the DBT. I am confident that we will be able to find an acceptable solution, because the DBT will shortly publish the Government response to the consultation on subscription regulations, and we are committed to continuing close engagement with charities. Although I acknowledge that it is not my Department, I want to specifically address the point about the response to the letter, and a date for the roundtable, that she references. I will endeavour to get both those issues dealt with as soon as possible, to get her a date and a response. There is also the offer of a meeting with me and the relevant Minister.
On a related note, I hope that the charity sector will be reassured by His Majesty’s Revenue and Customs’ guidance, which has been changed to set out its interim position, so that charities can continue to claim gift aid on eligible membership subscriptions. The Government’s intention remains that eligible charities can continue to claim gift aid on the same basis as now.
I acknowledge the concerns that Members have raised about the impact of national insurance contribution increases on charities. I have met representatives from the sector to discuss the NICs changes on more than one occasion, and of course we debated the issue in this Chamber in January. As part of last year’s Budget, the Government took a number of difficult decisions on tax, welfare and spending, to fix the public finances, fund public services and restore economic stability. In her open letter to the voluntary sector on the issue, my right hon. Friend the Chancellor of the Exchequer stated that raising the rate of employer national insurance contributions for charities was one of the most difficult decisions that she had to take in that Budget.
The Government recognise the need to protect the smallest businesses and charities, which is why we more than doubled the employment allowance, taking it from £5,000 to £10,500. That means that more than half of employers—including charities—with NICs liabilities will either gain or see no change this year, and eligible employers will be able to employ up to four full-time workers on the national living wage and pay no employer NICs. In addition, we expanded eligibility for the employment allowance by removing the £100,000 eligibility threshold, to simplify and reform employer NICs so that all eligible employers now benefit, and all charities are eligible for the EA, even if they are wholly or mainly carrying out functions of a public nature.
I will now move on to some of the broader support that the Government are giving. I know that in recent years charities have faced significant challenges, including a difficult funding situation. I have seen that at first hand in my own constituency, where I am a patron of BIADS—Barnsley Independent Alzheimer’s and Dementia Support—which is a charity supporting people across the area. I recently met its representatives, alongside my constituency neighbour, my hon. Friend the Member for Barnsley North (Dan Jarvis)—the Minister for Security—to discuss its challenging circumstances. It is one of a number of brilliant Barnsley charities that support local people; its challenges are reflected across the borough.
The Government are committed to supporting the sector in a number of ways, including direct funding to aid its vital work. That includes the £270 million arts everywhere fund, which delivers on the Government’s “Plan for Change” to support growth and increase opportunities. It can provide support for organisations in need of urgent financial support and infrastructure work. In June, the DCMS published the Government’s first ever dormant assets strategy, setting out our ambitions for boosting participation, ensuring its continued good governance and illustrating how the next £440 million of funding will be distributed. In July, the Chancellor announced £500 million for the better futures fund—the largest outcome fund of its kind in the world—to support 200,000 struggling children, young people and their families through innovative impact funding projects.
Alongside direct funding, the Government continue to support charities via tax reliefs and exemptions. Charities and their donors received about £6.7 billion in tax reliefs in the 2024-25 tax year. The long-running gift aid scheme paid out more than £1.7 billion during that timeframe alone, benefiting more than 67,000 organisations. Charities also benefit from a range of VAT reliefs, estimated to be worth more than £1 billion annually. The Government are committed to removing tax barriers where possible. The Chancellor announced in the Budget that we are introducing a new VAT relief for business donations of goods to charities for onward distribution or use in their services. The new relief will boost the supply of essential items to charities, enabling them to reach the people and communities who need them most.
Cultural organisations, many of which are charities, also benefit from tax reliefs, which help to ensure that they can share their world-class productions, performances and arts with more people across the country. Since April 2025, theatres, orchestras, museums and galleries have benefited from higher tax relief rates of 40% for non-touring productions, and 45% for orchestral and touring productions. Finally, museums and galleries exhibition tax relief was also made permanent.
Charitable giving is one of the most commendable characteristics of British society, and the Government recognise the importance of fundraising to the charity sector. It would be remiss of me not to highlight the remarkable work being done across the impact economy sector and the vast potential for increasing funds for civil society. Charitable giving and philanthropic investment build on the British spirit of generosity. A remarkable £15 billion was donated to charities last year.
I have often heard that more can be done to grow philanthropic investment. That is why earlier this year I outlined how the Government will better connect, unlock and partner with philanthropists. As part of this work, the Secretary of State has committed to the development of a place-based philanthropy strategy. It will set out how the Government can create an environment that encourages philanthropists to support local communities and ensure that the benefits of philanthropy are felt nationwide.
We are going even further to promote investment in civil society. The recently launched Office for the Impact Economy provides a front door for investors and purpose-driven business to partner with Government to extend their social impact across the nation. DCMS will be working closely with the office to build capacity and capability, driving cross-Government strategy at all levels of government to make every pound of public funding go further.
As well as providing funding to the voluntary, community and social enterprise sector, the Government have committed to reducing administrative burdens on businesses, including charities, by 25% by the end of this Parliament. That is why in October I set out a series of changes that we will make next year to the financial thresholds for charities. Updating the financial thresholds will save charities an average of £47 million each year, while ensuring that the regulation of the sector remains proportionate and effective.
All that work is underpinned by the civil society covenant, which represents a fundamental shift in how the Government work with the sector. It is a recognition of the value that civil society brings, and a commitment to work in partnership to deliver better for citizens and communities. I was pleased to meet a number of civil society organisations at London City Hall a few weeks ago to discuss how the civil society covenant can help the Government to connect across the whole sector.
I am delighted that No. 10 this week announced plans for the civil society council, which will work in partnership with Government at the highest level to drive and oversee implementation of the covenant. Kate Lee, the chief executive officer of NCVO, will chair the council, and an expression of interest process, which opens this week, will identify members from across the diversity of civil society.
I again thank the hon. Member for Gosport, the Chair of the Select Committee, for securing this important debate and giving us all the opportunity to raise the profile of this important subject. I want to continue to further Government support for membership-based charities, whether that is direct or indirect financial assistance, improving the philanthropic environment, or bringing in charities to work more closely in partnership with the Government. I have heard the serious points she made, and I am happy to follow up with her after the debate.