Another key example can be found in the England and Wales Cricket Board, whose investment has significantly increased the number of children and adults playing cricket at grassroots level, and that has had an impact on performance at elite levels. County cricket clubs are better able to choose high quality players when the pool of people playing the game is increased.
It is very difficult to debate a subject such as the Olympics without also reflecting on funding. The unfolding chaos in the Government’s approach to the 2012 Olympic Games is a clear demonstration of that point. I share the concerns stated by the shadow Secretary of State for Culture, Media and Sport that the Government’s use of lottery funds to pay for the 2012 Olympics, largely as a result of their dithering on how best to leverage private sector investment, will have regrettable consequences for sport at the grassroots.
I would be grateful if in his reply to this debate the Minister would assure the House that sports such as rugby union, cricket and netball will not lose out as a consequence of the Olympic Games. There is very real concern on this point, and it would be most helpful if the Minister could clarify the Government’s position.
I wish to focus my contribution this afternoon on the funding of grassroots sport and specifically on what could be done to the taxation regime to facilitate investment in grassroots sport. Whatever delight and success may be achieved as a consequence of the Olympic Games in London in under four years’ time, if the price to be paid is reductions in resources available to local and community sports clubs we should ask whether that is really a course that we should want to progress.
The interests of specific sports are, by and large, protected and promoted by national governing bodies, such as the England and Wales Cricket Board, the Rugby Football Union and so on. The taxation regime that they face is identical to that of companies, with this exception: national governing bodies do not obtain tax relief for expenditure on grassroots sport development, which is comparable to a company’s research and development expenditure. As a consequence, sport governing bodies are taxed on their investment in grassroots sport activity and have to bear the burden of the administrative costs incurred in achieving tax compliance, which is a rather complicated regime.
On that basis, I wonder whether the Minister would consider granting statutory tax relief for grassroots sport expenditure by national governing bodies. If, as seems reasonable, economic circumstances are going to make investment complicated, we should be examining options to facilitate the actions of national governing bodies in delivering grassroots sport activities in local communities. Another potential solution would be a corporation tax exemption for national governing bodies. A recent study has calculated that the cost of a tax exemption would be between £5 million and £10 million a year and would significantly reduce the amount of time spent by governing bodies on tax planning, compliance and payment. A recent study conducted by Deloitte found that, of the 26 European Union states that responded, all except the United Kingdom provided either a tax exemption or special relief to national governing bodies. Effectively, sport bodies in other countries across Europe do not pay corporation tax.
One argument advanced is that sport governing bodies should establish charities in order to benefit from the tax advantages afforded to them. The economic benefits of this route are, however, dubious. The time and costs associated with running a charity are considerable, possibly as much as £5 million a year for national governing bodies. Not all grassroots expenditure would meet the strict definition of charitable expenditure, and charities are unable to reclaim value-added tax, which may result in a substantial VAT bill. I understand that a number of national governing bodies have been in regular communication with the Government to press this point, with limited response.