§ Order for Second Reading read.
§ 9.25 p.m.
§ The Joint Under-Secretary of State for the Home Department (Mr. David Renton)
I beg to move, That the Bill be now read a Second time.
§ The Attorney-General (Sir Reginald Manningham-Buller)
I have to inform the House that I have it in Command from Her Majesty to acquaint the House that Her Majesty places her prerogative and interests, so far as concerns the matters dealt with by the Bill, at the disposal of Parliament.
§ Mr. Renton
The primary purpose of the Bill is to remove doubts which have arisen about the legal status of a wide variety of voluntary organisations which, until recently, have always been regarded as charities. As the Explanatory Memorandum points out, until the case of the Commissioners of Inland Revenue v Baddeley was determined by the House of Lords in 1955, many such trusts and institutions were commonly regarded as charitable, but as a result of that decision doubts have arisen about their position.
The Government have felt that it could not be right and, indeed, could not have been intended by their Lordships, that this wide range of public activities should be excluded from the charitable field. The immediate practical effect of such exclusion would be that relief from Income Tax, which Parliament has seen fit to accord to all institutions recognised as charitable in law, would be withdrawn—and the effect upon the finances of many of these institutions might well be crippling.
The Government White Paper on Policy on Charitable Trusts, issued in 1955, declared the intention of the Government not to enact a new definition of charity but to preserve the existing case law. Both the Nathan Committee on Charitable Trusts in 1952 and the Royal Commission on the Taxation of Profits and Income recommended against any extension of the field of charity. Our policy, therefore, is not to enlarge the definition of charity or to make new classes of trusts charitable, or to admit to the field the particular type of trust 321 which was rejected by the House of Lords in the Baddeley case. Our policy is to distinguish from that type of trust those which have in the past been regarded as charitable and ought to be restored unequivocally to that position.
It has therefore been necessary—and it has been a very difficult task—to find a legislative formula which would clarify the position without upsetting the decisions of the courts, including that in the Baddeley case, and without also impairing the organic structure of the law of charity. The search for the formula has therefore been prolonged. I can assure the House that many possible alternatives have been considered. The alternative embodied in the Bill, although it looks simple, is delicately balanced and is designed to avoid a number of pitfalls not immediately apparent. It represents the most satisfactory solution with the least possible modification of the existing law. We have been in consultation with the National Council of Social Service, and I understand that the Council is in general agreement with the solution which we have put forward.
There is one thing that I must stress before explaining the Bill to the House. The question whether a particular trust will be charitable under the Bill can only be decided by a court when construing a particular trust instrument.
§ Mr. Ronald Williams (Wigan) indicated assent
§ Mr. Renton
I see that the hon. Member for Wigan (Mr. R. Williams), who has some experience in these matters, nods his head. I am glad he has indicated his assent, because it is a fundamental matter and it will be impossible for us to approach this subject properly unless we all understand one thing, that Ministers cannot give a binding pronouncement on that.
The general intention of the Bill is clear enough. In Clause 1 (1), which is the main operative provision of the Bill —the remaining subsections of the Clause are explanatory—we say that…"it shall be and be deemed always to have been charitable to provide…facilities for recreation or other leisure-time occupation, if…provided in the interests of social welfare.322 We add that the test of public benefit must be satisfied in the future as it always had to be in the past.
We have chosen the phrase "social welfare" as a criterion not only because it is appropriate to the charitable trusts which we intend to cover, but also because it has been used in several Statutes in recent years and has been judicially interpreted. But to attempt a rigid and exhaustive definition of social welfare would be quite impossible, and in any event it is not necessary. In Clause 1 (2), we say that there cannot be social welfare unless the facilities provided improve the conditions of life for the persons for whom they are intended and either those persons need facilities because of their youth, age, infirmity or disablement, or from poverty or social and economic circumstances; or—and this is the other possibility which can arise—the facilities are made available tomembers or female members of the public at large.There, paraphrased, is the formula. I shall have to say something more about the phrases used so that it may be clearly understood.
In Clause 1 (1), we find the words,…assist in the provision of facilities.Those words are intended to include national bodies, such as the National Council of Social Service, which centrally do not themselves provide facilities but make grants to or are the organising and administrative machine for those who provide facilities. The word "facilities" is intended to be widely construed and is further explained in subsection (3). Certain recreational facilities for public recreation grounds, public parks and so on have always been treated as charitable.
It is now made clear in the Bill that provision not only for out-door games and amusements, but also for the sort of recreational facilities ordinarily provided in village halls, community centres and Women's Institutes are charitable. Those illustrations are in no way intended to be limiting, nor are they intended to give any preferential status to the institutions mentioned in the Bill above the many others which come within the principle of the Bill but which are not mentioned. As I say, the object of the Bill is to provide a principle capable of wide interpretation and flexible application. That 323 object would be defeated if the illustrations which are provided for guidance were expanded into a catalogue.
Clause 1 (3) also explains that not only is the provision and maintenance of grounds and buildings for the declared purposes to be charitable, but also the provision of facilities by the organising of activities where the organisers may not provide any physical facilities at all. I wonder whether I may give an almost ludicrous example in order to illustrate the point, because it illustrates it vividly. It is the case of a children's outing to the seaside. A charitable trust may be organised to provide a children's outing to the seaside, but the trust does not provide any facilities. It certainly does not provide the seaside or the sea. It is merely an organisation for organising a particular event. It has no physical facilities to provide but nevertheless it may be a charitable trust.
The words "or leisure-time occupation" are intended to make it clear that the Bill applies to recreation in the widest sense and covers, for example, social intercourse, reading, games, physical training or, as was mentioned in another place, just sitting and thinking in old people's clubs. It will, I think, be clear from the reference to village halls and Women's Institutes in subsection (3) that the inhabitants of a locality may be regarded as a sufficient class of the public at large to satisfy the test. "The public at large" is a phrase intended to signify that the facilities are to be open to anyone who cares to make use of them, and are not, for example, to be subject to election to membership or a prohibitive entrance fee.
It will no doubt be asked why the provision of recreational facilities limited to women will satisfy the test of social welfare, while those limited to men only will not, and the answer is that recreational institutes and clubs confined to men of full age have been treated in the past as not being charitable; and we do not think that should be altered now. On the other hand, women have seldom been in a position to provide these facilities for themselves, and we consider that the charitable status hitherto enjoyed by Women's Institutes and the like should be preserved.
I pass from the facilities provided for the public at large to those for the classes 324 enumerated in Clause 1 (2, b i). It has long been established that the poor, the sick, the aged, the young and the infirm are proper objects of charity, and comparatively small classes of these suffice to establish an element of public benefit. With those types or classes of people we have included in the Bill that class of person who is in need by reason of what we call his "social and economic circumstances." That phrase is intended to cover such cases as may arise from time to time of people, including a class restricted to men, who though not depressed by poverty often find themselves cut off from their home life and social environment and are not in a position to provide themselves with adquate facilities for spending their leisure. A Mission to Seamen is an obvious example. A man finds himself in a strange port, far from home and with not much money for entertainment. He can find a decent place to spend an evening, perhaps a night, with a meal, companionship, billiards, television or whatever it may be. Therefore, the Mission to Seamen fulfils a purpose which has long been recognised as charitable.
The Bill is retrospective. Its broad effect is to confirm the charitable status of the institutions whose status is in doubt.
I must briefly trouble the House with the effect of the Income Tax provisions. Clause 3 (4) contains provisions about Income Tax. Trusts and institutions which the Bill makes wholly charitable will be entitled, in the period after the Bill becomes law, to the Income Tax relief which is due to charities if such trusts or institutions would have been treated by the Inland Revenue as entitled to tax relief under the practice applied by them immediately before 18th December, 1952, which was the date of the judgment of the court of first instance in the Baddeley case, the date when everyone was put on inquiry. They are given the right to claim such relief for 1946–47 and later years, unless that relief has been given already.
Subsection (5) makes parallel provision about the lower rates of stamp duty which charities pay on conveyances, transfers and leases. Care has been taken in drafting the retrospective application of the Bill to ensure that the unavoidable delay in finding the remedy 325 for the doubtful situation which arose should not prejudice those who have been affected as regards taxation.
It may be convenient to complete this survey of the retrospective action of the Bill in Clause 3 by mentioning that the general effect of subsections (2) and (3) of that Clause is, broadly, that anything done in the past on the view that the trusts declared by the Bill to be charitable were not charitable, shall remain effective.
Special provision is made in Clause 2 to deal with miners' welfare trusts. About 1,500 of these have been set up over more than 30 years to give effect to the intentions of Parliament declared in the Mining Industry Act of 1920 and the Miners' Welfare Act, 1952. It always has been supposed that these trusts were charitable, but it has not been possible, for technical reasons, to bring the existing trust instruments within the scope of Clause 1. All future trusts will, I understand, conform to the principles of that Clause.
Having had something to do with the miners' welfare trusts when I was at the Ministry of Power, I am glad of the chance of recommending to the House that miners' welfare should be helped in this way by any possible doubt about those trusts being removed, as it is removed in Clause 2.
The Bill, in general, applies only to England and Wales. It is many years since any Government introduced a Measure of this kind. I am told that the last occasion when charitable trusts were discussed at length was probably 1888 when the Mortmain and Charitable Uses Act was discussed. Traditionally, the law of charities has been the province of the courts. In putting forward the Bill, we have been anxious to avoid even the appearance of encroaching on the traditional functions of the courts, but we hope that we have succeeded in supplying certainty where there was doubt and in providing a firm foundation on which recreational trusts can be established without fear of invalidity or a sudden loss of tax relief which might otherwise bring them to an untimely end.
§ 9.45 p.m.
§ Mr. Ronald Williams (Wigan)
I say at once that the Opposition will give the fullest support in its power to the passing 326 of this very important Bill through all its stages. We will not only support its Second Reading but will support the Government during the Committee stage in any Amendment they may consider necessary to make this an even better Bill. Therefore, in anything that I now have to say, I hope that the Government will appreciate that I am speaking as a supporter of the Bill, and that the Opposition authorise me to speak in those terms. We give this Measure a very warm welcome indeed.
I have, of course, to make certain comments about the details, as there are certain aspects that are extremely difficult because of their technical nature and because of the decision with which we are confronted. We are really attempting, not to overrule Baddeley, but to escape from the consequences of Baddeley where those consequences would flow from the judgments as they appear in the Reports.
We appreciate at once, particularly on this side of the House, that the right hon. and learned Attorney-General and the draftsmen must have had a most formidable and almost terrifying task in trying to solve the problem presented to them. We certainly agree that we in this House should not overrule a decision of the House of Lords, because of the consequences that would flow if we completely altered in effect the basis of the law relating to charity. At the same time we say that we wish to assist the judges by not overruling Baddeley and by making the position clearer.
Have we really succeeded? I sincerely hope that we have. The Joint Under-Secretary is to be heartily commended for the very clear and fair-minded way in which he has presented the Bill to the House, but we must be absolutely clear in our own minds that we are really succeeding in our object. It is very important from our standpoint on the Opposition Benches that we should not give the impression to the country that we are doing more than the Bill, in fact, really provides.
The Bill provides a great deal. It will prevent many thousands of charities from going out of existence. There are many voluntary organisations that have been able to succeed in these difficult days because they have been free from the fiscal burdens which, under the Baddeley decision, would fall upon them. There are 327 many respects in which many of us feel that there would be grounds for moving with the times in relation to our concepts of charity, and we come very near to moving forward in applying the tests that we are putting in Clause 1. I think that it is the right thing to do, and I think and hope that the judges will be helped in this very technical field, and not hindered by the step that we are now taking.
I would ask the House to look at Clause 2—and perhaps the right hon. And learned Attorney-General may be able to help me here should he reply to the debate. In Clause 2 the Government are doing something that we very heartily applaud. It seems to me that, but for Clause 2, miners' welfare trusts would be in very grave jeopardy, but as has been mentioned by the Under-Secretary, 1,500 of those trusts will be saved from what would be a ruinous impact upon their funds were the provisions of the Income Tax Acts to be applied to them. It is splendid that that should be done. We applaud it, and we support it quite unreservedly and without any question.
I wish to put this point to the Attorney-General. In doing it in this way—and it is a triumph of Parliamentary draftsmanship to have done it at all—we are saying in the Bill that the miners' welfare trusts are not trusts within the meaning of Clause 1, and, therefore, they have to be provided for specially under the provisions of Clause 2. That, of course, raises the question what will happen in future to these trusts—not to the ones already established, for they are clearly admirably provided for and fully covered, but to trusts which come into existence after the passing of this Measure. These trusts will not be covered at all by this Clause.
We all know that they have always been regarded as charitable trusts, and therefore, picked out for special mention here; but, by saying that, we are surely saying that unless some special steps are taken in future to make miners' welfare trusts different from what they were and to bring them within Clause 1 in some way, they cannot be brought within it in future at all. I do not think it is the Government's intention—indeed. I am quite sure that it is not—to imperil the future development of miners' welfare trusts.
328 I think it is their intention, as it certainly is ours, to say that, as we are saying tonight that these are charitable trusts and always have been, we cannot say it without, by implication saying that trusts in identical form, which will be instituted and established in future, are similarly within that category. Unfortunately, because of a technical drafting difficulty, we are, in effect, saying that for the future they cannot relate their position to Clause 2, but must be brought within Clause 1, or otherwise they will fail as a charity.
By putting the future of miners' welfare trusts into that position we seem to me to be getting ourselves involved in something of a contradiction, and something which the Government would not desire. It may be that the Attorney-General might have seen some other way of establishing future trusts under Clause 1. We are, in effect, saying by Clause 2 that any future trusts under this heading cannot be regarded as charities unless they can be brought within the very flexible and very wide difinition—but, none the less, a definition which excludes the possibility of Clause 2—of Clause 1, because they would not be charities, and that in my submission would be something which the House would not desire.
I must confess quite frankly that the difficulties of drafting an Amendment here seem to me to be virtually insuperable, and it might help the Government if I indicate why the Opposition have come to that conclusion. What would he a very happy solution, of coarse, would be to say, in effect, that here is something which always has been regarded as a charity, which we now affirm is in fact a charity and which, provided it is in the same or a similar form, will for the future be a charity. There the Government would be in the difficulty that they would be obliged to retreat from a fundamental position which they have taken up in the Bill, which is that they do not want to enlarge its scope.
It seems to me that here all of us are in the position that we surely want the future to be safeguarded, and yet we are in a very great technical drafting difficulty. I mention that to indicate to the Attorney-General that I am not taking this point capriciously, or in criticism of the Government, but in order to indicate 329 that we understand some of the difficulties which the Government are facing here, and that we will do all we can by way of co-operation to try to resolve them.
It has been brought to my notice that one of the results of the Bill will be that certain difficulties will occur in regard to rating. Some local authorities feel that, once we pass a Measure in this form, they will be faced with a drop in revenue and will not be entitled to charge appropriate rates. They have indicated to me that they consider that the matter ought to be dealt with on a wider basis and not in what some of them regard as the piecemeal fashion of the Bill.
The attitude of the Opposition is absolutely clear. We say that we are, in the Bill, clearing up an extremely difficult situation affecting many thousands of voluntary associations in the country, removing what is essentially a fiscal difficulty. Matters of rates, we say, are apart from this. If difficulties arise about rates, they must be solved by amendment of other Acts of Parliament, not by an attempt to do the impossible and include specific positions in this Bill. The good and great things done by the Bill could be imperilled, if not frustrated, if we attempted to do too much. If there are any complications relating to rating, they should be dealt with at another time in some other Measure.
Since a special Committee has been set up by the Government to consider the rating of charities in general, that body will, in due course, over-reach the position at which we have now arrived and will take care of the situation as it then exists. In other words, the Committee considering the question of rating is bound to take into account the fact that the Bill will have been passed and will bear in mind the impact which that will have. We think that it is better to declare, first, what the charities are, and then the Committee looking into the matter can decide what should be done in relation to rates. There is, therefore, no hostility on this side of the House towards what we regard as the real, legal position of local authorities in relation to the rates in respect of these properties and transactions, but that is a matter being taken care of by a Committee which in due course will report.
330 The suggestion has been made to me, in quite strong terms, that the Bill might exempt from rating bodies which were not regarded as charities even before the Baddeley case. I have studied Clause 1 as carefully as I can, and I recognise that there is room for liberal interpretation by the judges. The courts could say, on the basis of the principles we are now proposing, that something is a charity which, before the Baddeley case, everybody would have said was not. I put that no higher than a possibility, and I do not think that the passage of the Bill should be imperilled by the existence of such a possibility.
After all, we must remember that the right hon. and learned Attorney-General, who appeared as amicus curiae in the Baddeley case, himself put forward some of the weightiest arguments I have ever read—they are to be found in pages 581 and 582 of the report—and, in spite of those arguments, the court came to a decision contrary to his submission, although, of course, he received very powerful support in the dissenting opinion of Lord Reid. We must, therefore, remember, when considering what the courts are likely to do, that they are not likely to go out on some extravagant hypothesis and change the basis of the law of charities because we have, as it were, tried to clarify the position in this Bill.
I hope that the Attorney-General will help me on the points that I have mentioned. I have attempted to put them contructively. Even if he is not prepared to help and cannot help and finds himself in impossible difficulties, I assure him that the Government will still have our support in putting into effect a Measure which is thoroughly good and which has much to commend it. I hope it will have the unanimous support of the House.
§ 10.0 p.m.
§ Mr. Knox Cunningham (Antrim, South)
In a very few words, I wish to welcome this Bill, which will remove the doubts which have existed since the Baddeley case. Retrospective legislation is generally suspect, but I do not think that anyone here would quarrel with the retrospective nature of Clause 1 (1).
There is, however, one point which I should like to raise with my right hon 331 and learned Friend in Clause 1 (2) (a), which reads:the facilities are provided with the object of improving the conditions of life for the persons for whom the facilities are primarily intended;Will my hon. and learned Friend consider inserting during the Committee stage the words "physical, intellectual and spiritual"? The sub-paragraph would then read: "the facilities are provided with the object of improving the physical, intellectual and spiritual conditions of life for the persons for whom the facilities are primarily intended." I suggest that such an addition would be an improvement on the existing words and would give a clearer picture of what is intended. I also welcome Clause 4, which enables the Parliament of Northern Ireland to pass similar legislation.
This is an excellent Bill, and I trust that it will rapidly pass through its various stages and become law.
§ 10.2 p.m.
§ Mr. T. L. Iremonger (Ilford, North)
My hon. and learned Friend has been very fair to the House in making precisely clear that this is a very narrowly conceived Bill, and, within the terms in which he presented it, it is very properly and purposely so. I join with hon. Members on both sides who have welcomed the Bill and expressed their approval of its intention so far as it goes. But I venture to submit with the utmost diffidence, in view of the pressure of hon. and right hon. and learned Gentlemen, that the House might question the fundamental assumption of the Bill and ask itself whether it goes far enough. It is my submission that the Bill raises, but avoids, a question of the greatest importance and difficulty in the modern society that we have developed. The question is the broad fundamental one of what kind of activities should be given special fiscal privileges in a modern State.
I think the question arises because of two characteristics of the modern State. The first is that the modern State does a great deal more for the citizen than the State did in the days of Queen Elizabeth I. Secondly, it charges a great deal more for doing what it does, by way of taxes. These two characteristics have two results. The first result is that the relief from taxes—which was originally and has been continuously up to the compara- 332 tively recent past a small matter—is now a matter of life and death for a great many charitable organisations and organisations which regard themselves as being charitable. The second reason is that charitable activity has shifted more and more into marginal fields. It has moved, for example, from the relief of destitution to, as we see in the very Title of the Bill, recreational activities and improving the social conditions of life.
I ask the House in that context to consider with sympathy and understanding the very great difficulty that confronts many typical non-profit-making organisations which are devoted to activities generally beneficial to the public and which, because of their charitable nature, regard themselves as entitled to some relief from taxation. The alternative to which these societies have to look forward if they are not to come within an extension of our conception of charities is nothing less than extinction.
Such organisations have to ask themselves two questions. The first is whether they are a charity. That is a question of law, the answer to which is difficult to find and still more difficult to interpret. When it is found and interpreted, one is probably wrong anyway, for the journey from the Statute of Elizabeth I in 1601 through the Pemsell case to the Baddeley case is a maze of caprice, fantasy and historical humbug.
In confining the Bill to the problem of those recreational charities which have been brought within spitting distance of the Baddeley decision, the Government are missing an opportunity to face the changed circumstances of our society and to re-define their whole conception of what is a charity and what kind of organisation should be entitled to fiscal relief. They are failing to recognise a challenge which has clearly been put to them. I refer to the White Paper on Government Policy on Charitable Trusts in England and Wales which the Government published following their consideration of the Report of the Committee under the chairmanship of Lord Nathan on the Law and Practice relating to Charitable Trusts.
The Government White Paper, referring to the Nathan Committee, said:The Committee consider…that it would be well to provide a new statutory definition, 333 having much the same effect…[as] …the obsolete statute of Elizabeth I.The White Paper went on, however, to say:Any new definition that could be devised would be new in substance as well as in form…the choice is between leaving things as they are and adopting a new definition which is different in substance.That is perfectly correct. A change would, in fact, involve a recognition of a change in substance in the nature of charity. The House might ask itself whether the Government were right in deciding not to accept this challenge.
It would be right also here to refer to the fact that a change was advocated by the Royal Commission on the Taxation of Profits and Income, which stated in paragraph 175 of its Report:We recommend that the law should be amended…for the present situation is hardly less than chaotic and the prevailing uncertainty does no credit to the tax system.I am bound in all honesty to say that in making that recommendation that the law should be changed, the Royal Commission said that the definition of charities should be restricted and limited. With the greatest respect, however, I wonder whether we might not differ from that view too. In view of the changed social conditions and the enormous effect, far greater than before, that fiscal provisions have on charitable organisations, we might consider whether the time has not come to look again at this whole question.
It is only fair to myself to make the clear reservation that I am not maintaining that such a redefinition and change in substance would be simple to make. I recognise that great difficulties of principle would arise if we tried to draw the line afresh between what is and what is not a recognisable charitable organisation under the new dispensation. I might be led to agree that such a thing is impossible and that it might do more harm than good, but my complaint is that the Government have not tried. With the existence of so many voluntary organisations at stake, the Government really ought to have tried in the years that have passed since the publication of the Nathan Report and the Report of the Royal Commission. This is a disappointing Measure from that point of view. The Government ought not to rest on their laurels and, in their own words, leave things as they are, and 334 content themselves with just trimming the edges by introducing this Bill.
The second question that the charitable or near-charitable organisation has to ask itself when threatened with extinction is. having decided that it is a charity. Are we a charity for Inland Revenue purposes and are we a charity in the eyes of the local authority for rating purposes?" If I may say so, that question was put in absolutely the right perspective by the hon. Member for Wigan (Mr. R. Williams). The situation in respect of these two forms of relief from rates and taxation is that the State's right hand knoweth not what its left hand doeth. It is possible for an anomalous situation to arise whereby an organisation which is charitable for Inland Revenue purposes is not held to be a charity under Section 8 of the Rating and Valuation (Miscellaneous Provisions) Act, 1955.
Section 8 provides for a standstill period in respect of charitable organisations during which, although an organisation might be valued by the Inland Revenue at a level equal to that which it would have reached had it been an ordinary business premises, provision is made, I quote the Act, that in the case of any hereditament whose main object is charitable the amount of rate chargeable shall be limited for the first year of the new list to an amount not exceeding the total amount of rates which were charged for the last year before the new list came into force.
Therefore, an organisation which regards itself as a charity by virtue of its Inland Revenue status and wishes to take advantage of the standstill provided for it under Section 8 of the 1955 Act, has to rely upon its status being upheld in the courts. That is not happening to a great many charities at the moment. Thereby they are being put into their coffins, and nothing short of a redefinition now which will put them into the class whereby they can be held by the courts to come under the protection of the standstill of Section 8 will save them.
The appointment of the Pritchard Committee will not save them. They may well say to the Committee, "We think that we ought to be regarded as a charity and given special terms for rates", and the Committee could well say, "You are a charity and you should 335 be rated accordingly," but in the meantime rates will have been levied upon them. Whatever the Pritchard Committee's recommendations and whatever the House sees fit to do in line with those recommendations, I see no possibility of retrospective legislation to reduce rates legally levied, and those rates will actually kill the charities. That will be the result of the Government's decision in their wisdom not to look at the entire question of charities and decide whether, in modern conditions, a wider scope and a new statutory definition should now be introduced.
Therefore, I personally cannot welcome this Bill without expressing my disappointment that the opportunity has been missed, and expressing my regret at the casualities which rate demands now pending will cause for lack of a new, wider statutory definition of charity before the recommendations of the Pritchard Committee, if they are going to save them, can do so. It would be melodramatic to say that the Government will have the blood of these organisations on their hands, but at least the Government will have to bear the charge of having done nothing to save them. If the Government are content to extinguish these non-profit-making voluntary organisations, which may be different in scope and nature from the charities of old but are their true, historic heirs, the Government will be cutting off a continuing flow of voluntary effort for the good of the community, which is one of the things of which our nation has for so long been rightly proud.
§ 10.16 p.m.
§ Mr. John Diamond (Gloucester)
Unlike the hon. Gentleman the Member for Ilford, North (Mr. Iremonger), I rise to give the Bill a warm welcome, on the assumption that it means what I thought it meant when I read it and what I still think it means, having heard the hon. and learned Gentleman the Joint Under-Secretary introduce it. For the sake of removing doubt, I will give an example, and no doubt I shall be told if I am wrong.
I take the example of a youth club which clearly satisfies sub-paragraph (i) of subsection (2, (b) of Clause 1. Let us assume also that it satisfies paragraph (a) inasmuch as the facilities are provided with the object of improving 336 the conditions of life of the youths. I am also assuming that it is not prevented from ranking as a charity for Income Tax purposes as a result of the proviso to Clause 1 which refers to the public benefit. I assume that the public benefit is satisfied, although a youth club provides facilities for only a limited section of the public.
If there is any doubt about my assumption, I am sure that the rest of my speech will enable the Government to introduce any necessary Amendment in Committee. On that assumption, therefore, I give a very full welcome to the Bill. I should perhaps disclose the fact that at the moment the boys' club with which I have been closely connected for the past thirty-two years is awaiting a repayment of Income Tax suffered at source, which the Inland Revenue has held up pending the passing of this Bill. I am sure that the wholehearted welcome of all of us assembled on these benches. to which my hon. Friend the Member for Wigan (Mr. R. Williams) referred. will be sufficient to persuade the Government during the Committee stage of the Bill to remove any doubt there may be.
As I understand the purpose of the Bill, it is to be commended, because this is a most important activity which is becoming more and more so as our pattern of living changes and develops. Clause 1 refers to the use of leisure time and to leisure-time occupation. It is on- of the earnest desires of hon. Members on all sides of the House, particularly on this side, that leisure-time opportunities should be increased.
The purpose of additional production is either a higher standard of living, or not quite such an increase in the standard of living but with additional leisure. Therefore, opportunities for using leisure wisely are something which our society ought to take very much into account. One is continually reminded of that by unfortunate episodes connected with young men who are called "Teddy boys." I am sure that there would be fewer of those episodes if those young men had had the good fortune to be encouraged in their early teens and had had the opportunity to go to a boys' club or youth centre in their neighbourhood to be trained in citizenship and responsibility.
337 The hon. Member for Ilford, North suggested that youth clubs could not possibly carry on unless the relief from taxation and the treatment as charities which was always previously meted out to them before this decision was made were continued. I very much hope that the Attorney-General will be able to confirm that a youth club which was a charity and which would so he treated but for the decision in the Baddeley case will, as a result of the Bill, once more be treated as a charity.
Notwithstanding what I have said, I support the Government in the view that the door through which an organisation must go to be ranked as a charity should not be opened too wide. I support the view that the rôle of a charity is a very honourable one, but that it would not be in the best interests of our society for near-charities and non-profit-making organisations to be included—and which one of us is not associated with one or many of them and which one of us would not wish that we could have the benefit of a seven-year deed of covenant in favour of our own non-profit-making society and solve all our problems as treasurer and so on? None the less, the definition gained by practice and laid down by Statute is right and proper.
I am sure that the need for youth clubs will not be disputed. I am sure that there are many hon. Members whose association has been as great or greater than mine; but I feel that we should realise that those who attend youth clubs, whether as members or as managers, derive a benefit which is lasting and which is of enormous benefit to society as a whole. They have a stabilising effect and an effect on the training of character which only those who have had the good fortune to participate in and to be connected with the management of a boys' club can fully understand.
I wish it were possible for Members to come to a function which takes place every second year when some 400 old boys, ex-members of a boys' club in the East End of London, now between the ages of 25 and 50, assemble for the pleasure of seeing one another and for the pleasure of paying tribute to those who assisted them.
I am sure that what I have said is acceptable to the House, and I am sure that the Attorney-General will confirm 338 that what I have understood is correct and that the Bill will receive the welcome which we all wish to extend to it.
§ 10.25 p.m.
§ Mr. Philip Bell (Bolton, East)
In the course of his remarks the hon. Member for Gloucester (Mr. Diamond) said that the drafting of the Bill must have presented a terrifying task to my right hon. and learned Friends. I do not know whether it terrified them, but the draft that they have produced has profoundly disturbed me, both in principle and language. I congratulate the hon. Member for Gloucester upon his interest in boys' clubs, but I should require a good deal of shaking from my conviction that the sort of boys' club to which he gives such useful service is not already treated as a charity.
It is a matter of regret that we have not the advantage—if it be an advantage —of more lawyers to speak in the debate, although I agree that we have some honorary lawyers. As everybody knows, the subject of charities is a difficult one, and it is impossible to understand the Bill without some basic knowledge of the law of charity which has grown up for four hundred years. The hon. Member said that he did not agree that any non-profit-making society, which is good fun and offers good companionship, should have the advantages of a charity, and I believe that that is true. It is useless to give a privileged position to everybody, for it is at the expense of somebody else.
What is the position about charities with which the Bill, in a confused way—as I see it—attempts to deal? As defined and elucidated by decisions, charities are grouped into four classes. The House will excuse me if I appear to be lecturing it, but there are no other lecturers here. The four classes of charity relate to the relief of poverty, the advancement of religion, education, and one other purpose to which I shall refer later. In the case of education, religion and poverty, it is possible to devote the charitable funds to a certain part of the community. It could be provided that the boys at Eton should be educated, but it is still a charity. It could be provided that the funds should go exclusively to the Roman Catholic Church, but it is still a charity. In each of the three classes to which I have referred the beneficiaries 339 could be defined, but in the case of the fourth class that was not allowed.
In that case, the charity had to be for other purposes which were beneficial, not to a section of the community, but to the community as a whole, or a substantial part of it; and the purposes had to be analogous to those mentioned in the Statute of Elizabeth. Not everything that was for the benefit of the community in a vague and jolly sort of way came within that description; there had to be some practical benefit for the community or some part of it, or it had to be for public purposes instead of private purposes. One of the legal text writers said, in a discouraging way, that the question whether a purpose was a public or a private one was practically incapable of distinction. At any rate, such a charity had to be of general public utility.
Perhaps I may depress hon. Members opposite by giving them a few examples. A gift to encourage Conservative principles, combined with mental and moral improvements, is held to be a good charity; but something to encourage the Primrose League is not. The charity must have an educational element. But a gift for some recreational purpose for the inhabitants of a certain borough or town, even if it is in order to play netball or hockey, it is a good charity because the public are concerned. But a similar gift to a trade union is not, because the public are not concerned and it is not religious, educational, or for the relief of poverty. A gift to a subscriber's library has been held not to be a charity, for it was for the benefit of subscribers, and a gift for encouraging football or cricket was held to be not charitable because it did not benefit the public in a practical way.
That, briefly, is how the law stood. In three departments one could select one's beneficiaries. The theory was that it was so obviously to the advantage of the community to have some people religious, some relieved from poverty and some educated that it did not matter if the charity was not spread among the masses of the community. But if one got outside the three departments, one had to see that it had some public benefit, not necessarily national, that it was indiscriminate for all the people and not restricted to membership of a particular body.
340 A good deal has been said about the Baddeley case. Perhaps my right hon. and learned Friend, who had the advantage of taking part in that case—I have the record here to check him—would explain it to me. As I understand it, it was a gift of land on rather curious terms for the promotion of the religious, social and physical well-being of residents of West Ham and Leyton and for the use of persons likely to become members of the Methodist Church and of insufficient means otherwise to enjoy those facilities—a pretty complicated trust whichever way one looks at it.
Mr. Geoffrey Cross, a learned colleague of mine, argued that this trust was not exclusively for the benefit of religious education or the relief of poverty alone. It was a mixture. He went further and said that it was not for the benefit of the public because it was for a section of the public, namely, potential Methodists.
My right hon. and learned Friend the Attorney-General said, "I ask the Court to regard those trusts as educational because the promotion of well-being is, in fact, itself educational." He made no reference to the fact, according to the Report, that the trust was not, in fact, for the public, but for a limited section of it.
I ask the House to bear with me for a moment. Remember that one can have a trust for religion, for Methodists, but it is not for the public if one restricts it to potential Methodists, though, oddly enough, one can restrict it to members of Little Puddlington. The court did not decide that physical training was or was not a charitable trust. What it decided was that the words used were so vague that the moneys or the property could be used for purposes which were non-charitable, that is social, and that the trusts were not educational in the sense of the law. It did not decide anything more. It did not decide that it was a terrible thing that recreation was not a charity. It did not say that at all.
It would manifestly have been a good trust had it been for the recreation of the inhabitants of that area. There was a good deal of authority for that. All that the court decided was that the words were too vague. It is true that Lord Simmons went on to say that he thought there was no benefit to the 341 public. He said, I think, that it was for the public benefit to build a bridge. That is one of the things which is a charitable business, but to build a bridge exclusively for the use of the Methodists is not regarded as a public purpose. Indeed, both Lord Simmons and Lord Reid said that if there had been a trust for recreation grounds for the use of the inhabitants, it would have been good.
Somebody may understand—I confess that I do not the preamble to this Statute to the effect that it was to alter the decision in the case of the Commissioners of Inland Revenue v. Baddeley. All I can say is that if that case went back to the court on this Bill the court would still say that it was too vague, and it might say that it was not to the benefit of the public. I confess that I do not understand that reference.
Now let us look at the Bill for a moment, bearing in mind what the Master of the Rolls said when he was trying to consider the meaning of the phrase "social welfare." He said—he was a generous man—that Parliament must at least have assumed a certain precision of meaning, but even it had not seen fit to offer any clue for the guidance of the judges.
Let us look at the clues in the Bill. Clause 1 (1) reads:…it shall be and be deemed always to have been charitable to provide, or assist in the provision of, facilities for recreation or other leisure-time occupation, if the facilities are provided…There let us stop. It goes on:…in the interests of social welfare…The reason why I said that we should stop there is that if the words had been "for the public benefit" if they read "the provision of recreation or leisure-time facilities for the public benefit," for example, the provision of recreation grounds in a locality, it would already be a charity. But the words are:…in the interests of social welfare…We get a clue about what is meant in subsection (2), which says that the facilities are provided:…with the object of improving the conditions of life…We often hear of "living conditions". We are asked what living conditions are like in Russia or France. What does "conditions of life" mean? Is the 342 meaning that facilities are to be provided for improving the conditions of life? Does it improve my "condition of life" if a football ground is provided for me? It might improve something but which— "conditions of life" or my "living conditions"? Suppose a village hall seeks permission for rock 'n' roll to take place. Is that what we mean by "conditions of life"? It is nonsense! When we talk about conditions of life and living conditions we mean food, shelter and clothing, real things which are the real objects of charity.
The confusion does not stop there. When we try to find out something more about social welfare, which is to improve whatever the conditions of life may be, who are the people who are to be helped? They include youth. In respect of education and relief of poverty, they have always been an object of the law. Is it really desired that special facilities should be devoted—at public expense, for ultimately it conies to that—to the relief of the youth of rich people? Rich people also like to be richer and to have their conditions of life improved.
The Clause continues:.. age, infirmity or disablement, poverty or social and economic circumstances…Most of these are already the objects of charity. We do not need any new rule to say that facilities provided for them would be charity. But think of the extraordinary words "social and economic circumstances". They mean "persons who have need of these facilities for social or economic circumstances". "The poor" I could understand but what does "social or economic circumstances" cover? Does "social circumstances" cover someone with a need to belong to a bridge club? Does "economic circumstances" cover someone with a need to join a hunt but whose economic circumstances do not permit it? Those things would certainly improve the conditions of life of such people. This Clause goes too far. Finally, we have the stop-gap—an alternative—the public at large!
Who can say whether this Measure would have made a difference in the Baddeley case? Would it have been said that the trust was less confused? Would it have been found to improve the "conditions of life"? Who were the people who would have benefited by it? I think they would in any case have been caught by the proviso to subsection (1) in that 343 it could not be proved to be in the interests of public welfare.
What is the principle behind this Bill? It is to extend, if it means anything—and I have some doubts about that—the provision of a new class of charitable trust. That is not done for nothing. Money does not fall out of the sky. If somebody pays less taxes today—which charities do, and nobody grudges that—someone else pays more. We all pay for this charity. Do we want to equate social welfare with charity as it has been known? Do we think the desirable in life should be equated with the essential things? The words now used are getting so vague and embracing that they will include what the hon. and learned Gentleman said he did not want included, all non-profit making activities.
The words "social welfare" are a delusion which also bedevil the Rating and Valuation Act and the Copyright Act. To take an example. In a recent case the Nurses' Register claimed exemption from rates and it was ruled that nurses were not concerned with social welfare and could not get any relief. It was held in a case immediately afterwards that the Derbyshire Miners' Welfare Holiday Camp should get relief from rates. I am not complaining particularly about that, but it shows inconsistency. The nurses who are not concerned directly but indirectly with welfare get no relief because it is said that they were not concerned with social welfare, but the miners' home gets it. The court said in the nurses' case that there must be a concept of fulfilling a social obligation towards a community whose living conditions are inadequate. That was the idea of social welfare, and I do not begrudge it. But no one suggests today, whatever might have been the case in the past, that the living conditions of miners are inadequate and that providing them with a home is fulfilling a social obligation to them.
The Copyright Act uses the same words. It states that no copyright fee shall be chargeable on a gramophone record if it is played as part of the activities of an organisation whose main object is social welfare. How is "social welfare" to be interpreted? Is it to be interpreted, as in this Bill, by the people who are the objects of social welfare, and, if not, why not? Is it to be interpreted in the 344 revised Baddeley sense, that we have not to confine it to Methodists? Can miners play a record at a social in their holiday home without paying a copyright fee, but if the nurses who belong to the Nurses' Register arrange a little dance they have to pay a fee for the gramophone records which they play?
This Bill is adding confusion to a confused part of the law. It should try to establish what is meant by public benefit and give a clue, as the Master of the Rolls asked, to the meaning of the words "social welfare." I should have liked the House to consider this at some length and had a longer debate to thresh out this vital question—whether in the end we are not going to destroy the conception of charity by making the objects so extensive that we shall dry up the wells of charity. I have the gravest doubts about this Bill.
§ 10.45 p.m.
§ Mr. Geoffrey Rippon (Norwich. South)
This is a valuable Bill which obviously will be welcomed by a great range of charitable organisations whose status is now in peril. To that extent I am sure that we all welcome it and wish it to be given an unopposed Second Reading.
At the same time, the Joint Under-Secretary of State has pointed out that this is the first opportunity we have had since the Mortmain and Charitable Uses Act, 1888, to consider this subject in the House. It is perhaps a pity that we are trying to deal with a Bill of this importance at this hour of the night. I wish, in the circumstances, only to associate myself very largely with the remarks which my hon. and learned Friend the Member for Bolton, East (Mr. Philip Bell) made about some of the difficulties which are bound to arise in relation to the Bill as it now stands. I hope that my right hon. and learned Friend the Attorney-General will be able to deal with the point which was raised about the way in which the Bill will link up with the position under the rating law and with the definition of social welfare in the Copyright Act. I am sure that we all feel that it is very important that at some stage the rating and the Income Tax law should march together, and inevitably the Pritchard Committee must be affected by the definition of social welfare in the Bill.
345 Those of us who are lawyers are well aware of the great difficulty which the courts have had in interpreting social welfare under Section 8 of the Rating and Valuation (Miscellaneous Provisions) Act, 1955. I feel that those difficulties will remain even under the definition of social welfare in this Bill, and even if this definition or something like it is imported into rating law. Possibly these are matters which can best be dealt with in Committee, and so for the moment I merely propose to raise general doubts about the position.
The Bill contains a number of new expressions which it is difficult to define, such as "recreation or other leisure-time occupation" and "improving the conditions of life". For example, what will be the position of a coffee bar with rock-'n'-roll facilities provided for youths under 21, even if it is conducted for profit? It is notable that in this Clause, as distinct from Section 8, there is no reservation about "not established or conducted for profit". Presumably if it were just a coffee bar it might not be "recreational facilities", but does the provision of rock-'n'-roll facilities improve the conditions of life of young people? It seems to me that these are vague phrases which we shall have to clarify further if we are to resolve the difficulties which I think will arise out of the definition of social welfare as now set out.
It is unfortunate that the Bill deals only with one of the two sets of difficulties which arose in the Baddeley case, the facts of which have been explained by my hon. and learned Friend. In my respectful submission it is by no means clear in relation to that case what the decision would have been if the sole point at issue had been whether the beneficiaries constituted a sufficient class to satisfy the necessity of a benefit to the public. There was certainly a divergence of opinion on that point, and while I agree that undoubtedly it would be unwise in a Bill of this kind to interfere unduly with the existing law, I had hoped that it would be possible to attempt some clarification of what constitutes a sufficient class to satisfy the test of public benefit.
I am emboldened to make that suggestion by the fact that although under the existing law employees of a particular firm have been held not to con- 346 stitute a sufficient class, the special position of miners' welfare trusts is confirmed in Clause 2 and, as the hon. Member for Wigan (Mr. R. Williams) pointed out, the very fact that the specific provision is made in respect of miners' welfare trusts implies that everything else is probably out, not only under the definition of "charitable" but probably under the definition of "social welfare" for the purpose of this Bill and of Section 8 of the Rating and Valuation (Miscellaneous Provisions) Act, 1955.
Moreover, quite apart from that, there is a very novel change in the law—already commented upon in another place—in relation to women's organisations. I do not dissent from the proposition that something should be done to safeguard the position of women's institutes, but I am not sure that this is the best way to do it. It is preferable to lay down a general principle than to enumerate all the types of organisation which might qualify for relief; but since we have made an exception in the case of miners' welfare trusts, it might be better to deal with these by way of specific exceptions for women's institutes and similar organisations. The alternative is to deal with the other difficult point raised in the Baddeley case, namely, what constitutes a sufficient class to satisfy the criterion of public benefit.
§ 10.51 p.m.
§ The Attorney-General
The debate has covered a fairly wide field. Criticism came mainly from Government benches and it was mostly with regard to drafting, asking for more precision.
My hon. and learned Friend the Member for Bolton, East (Mr. Philip Bell) treated us to a rather elementary lecture to start off on the law of charity, and has managed to get the first two classes right. He seemed to be in a little doubt about the other two. I do not think that was very helpful in the consideration of the Bill.
Then my hon. and learned Friend went on to discuss the Baddeley case. I am not going to deliver a lecture to him on what that case decided. I commend it to him for further study; but I will say that one of the difficulties that resulted from that case was that the terms of the trust deed under consideration in that case so closely resembled the terms of many 347 trust deeds of all kinds of institutions which had, prior to that decision, been regarded as charitable institutions without any doubt at all, that the Government felt that the position of uncertainty created over a wide field could not be allowed to rest.
There were two possible ways of tackling the problem. One was that suggested tentatively in regard to women's institutes by my hon. Friend the Member for Norwich, South (Mr. Rippon), that we should follow the specific reference to miners' welfare trusts by references to women's institutes and perhaps to other things as well. The difficulty about that is that if we tried to make a list of all the different types of charitable institution, regarded as such before the case, and which have similar terms in their trust needs, it would almost certainly not be complete.
We considered it very seriously indeed, and rejected it. Our endeavour was to find a formula which would rectify the position with regard to those charities whose position was placed in doubt by the Baddeley decision, without enlarging the field of charity. It was no easy task to find a form of words which would bring about that result and which would not be easily criticised, by my hon. and learned Friend, the Member for Bolton. East, for example I think my hon. and learned Friend would find it very difficult, when he really applied his mind to this problem, to find any form of words which would achieve that object more satisfactorily than the words here.
The words "social welfare" have been subjected to the consideration of the courts on a number of occasions. The words appear in many trust deeds and many Acts of Parliament, and a body of case law has been built up in regard to them. It has been said that there should be a clue for the guidance of judges; the clue is here, in Clause 1, subsections (2) and (3). Without seeking to limit the category of institution it gives a general colour to the content of the Clause and will, in my opinion, be helpful with regard to its interpretation.
The hon. Member for Wigan (Mr. R. Williams), whom I thank for giving a very warm welcome indeed to the Bill and with whose commendations of my hon. and learned Friend's introductory 348 observations I would respectfully wish to associate myself, raised a question with regard to Clause 2. One reason that there has to be a special reference to miners' welfare trusts declared before 17th December, 1957, is that, if we do not make that specific reference, they clearly will not be able to bring themselves within Clause 1, the reason for that being that those trusts not only cover recreational and social activities held in the Baddeley case to be not charitable—but so often they are limited to miners only or to particular pits which were, before nationalisation, owned by individual companies. For those trusts, special provision is, therefore, made. The hon. Gentleman is quite right in saying that any new trust created under the Act will have to come within Clause 1 to be held charitable.
It is the case—here I pick up a point made by the hon. Member for Gloucester (Mr. Diamond)—that it is is a principle running through the whole subject that these trusts must be for the public benefit. As regards new trusts, it may be that their terms will have to be somewhat wider than we have seen hitherto, in order to ensure that such trusts are within Clause 1 and are treated as charities. But that is not really changing the law; it is, rather, making these new trusts conform more accurately to what has always been regarded as the law in relation to charities.
A question was asked about rating. The Bill as it stands has no impact on rating law. If it operates as we hope and believe it will, its only effect will be to make it certain that those institutions which were regarded as charitable before the Baddeley decision will, despite that decision, continue to be treated as charities. I do not think that local authorities have any reason to suppose that the passage of the Bill will lead to their losing rates from buildings in respect of which, before the Baddeley decision, they were able to derive rates on the ground that they were buildings of non-charitable institutions.
My hon. Friend the Member for Antrim, South (Mr. Knox Cunningham) suggested a drafting amendment to Clause 1 (2, a) by the insertion before "conditions of life" of the words "physical, intellectual and spiritual". I think that 349 he will, on reflection, probably agree that those would be words of limitation. The paragraph would then mean that, to come within its terms, the object of the trust would have to be not only the improvement of the physical, but also the intellectual and the spiritual conditions of life. The object would have to serve all three purposes, which would, I think, be unduly restrictive of the scope and intent of the Bill.
My hon. Friend the Member for Ilford, North (Mr. Iremonger) made a somewhat lengthy speech, but I see that he has not waited for me to reply to it, so that I need say only that he complained that the Government have not tried to find a new definition of the word "charity". I fear that he cannot have listened to my hon. and learned Friend's speech in full, because that made it quite clear that the Government had considered this matter and in our White Paper on Policy on Charitable Trusts, issued in 1955, it was declared that it was our intention not to enact a new definition of "charity", but to preserve the existing case law. If one tried to make a new definition of the word "charity", the real beneficiaries of any new definition would be the members of my profession and the other branch of the profession and for those reasons I need say no more than that I am against attempting it.
This was a difficult Bill to draft and I agree that it is a difficult Bill to understand. I am glad that it has been so generally welcomed. I do not think that one can add precision to it in the way my hon. Friend the Member for Norwich South suggested, because once one seeks to define some of these words with more precision, the result may be to defeat the object of the Bill and to exclude from treatment as a charitable institution some of those institutions which, for years until the decision in the Baddeley case, have been regarded as charitable without doubt.
§ Question put and agreed to.
§ Bill accordingly read a second time.
§ Bill committed to a Committee of the whole House.—[Mr. Hughes-Young.]
§ Committee Tomorrow.