The government's reforms to payroll giving have been a damp squib, says Ian Clark.
For the last quarter of a century payroll giving has been struggling to make any progress as an effective fundraising method. Few donors have heard of it, and far fewer can actually use it, as only a few employers offer payrol giving to their staff. Promotion of the scheme rests in the hands of third-party fundraisers, not charities directly. Even if an employer is willing to offer payroll giving from their payroll, it is faced by a confusing array of different processing agencies with slightly different offers. As a result payroll giving generates less than £40m of tax refunds a year, compared with over £1bn from gift aid. Payroll giving’s impact on UK fundraising is derisory compared to the equivalent system in the USA.
The government’s green and white papers on giving had promised significant improvements for payroll giving. When it announced a public consultation earlier this year, there were clear hints that they were prepared to consider radical solutions. A hundred different organisations provided scores of ideas. Most wanted to see a much simpler system that utilised the power of modern computers and the internet to make payroll giving much easier to use for donors, employers and charities.
Instead we have a damp squib of a government response. It is a small step forward, but it is certainly not a giant leap for committed giving. A series of small tweaks is promised, mainly to the administration of the current system. But even then the standards are pretty low. Most donations will have to be forwarded within 35 days, rather than 60. But this is in an age where most banks transfer money to regular clients within 2 or 3 days. Even HMRC manages to process most of its electronic gift aid claims within a week. Why should payroll giving agencies be allowed to take five times as long?
Having an agreed minimum service level agreement (SLA) will help to drag standards up. But charities will still have to deal with a range of distributors, each presenting slightly different management information. There will be no official help for greater centralisation of administration, nor will commercial participators (like JustGiving or Virgin Money Giving) be allowed to join in. Promoting payroll giving to smaller employers is dismissed as being too expensive, so ruling out donors in well over half the working population, to say nothing of pensioners.
And HM Treasury has missed one very obvious solution that is quite literally on its own doorstep. HMRC has spent the last three years redesigning its PAYE computer systems so that it can track individual taxpayers and employers in real time. This is so the government can simplify the benefits system and implement Universal Credit.
Now the new real-time information (RTI) system is up and running successfully. It already deals with several payments from gross and net pay (thinks NI, pensions, CCJs etc). So the next RTI specification could include a payroll giving module – the designers have deliberately created “spare capacity” in the system to allow for such eventualities. Then it would probably then take the payroll software companies a year or two to ensure that all their packages included the core payroll giving capability.
So within a few years most taxpaying donors (staff or pensioners) could be given access to payroll giving through the PAYE system. Employers would simply send the gross donations to HMRC together with the rest of their income tax and NI. HMRC could then sort the gross gifts and send them regularly to the nominated charities, much as they already do with gift aid.
So let’s hope that in the Autumn Statement or next year’s Budget, the Chancellor stands up to say that the recent proposals are only an interim step to tide payroll giving over the next two or three years. A system fit for the 21st century will be developed that meets the sector’s call for universality, charity-donor connectivity, transparency and portability. PAYE RTI can potentially deliver this. Why not, George?
