CHARITIES (Hansard, 14 December 1973)

§ Mr. William Hamilton (Fife, West)

I wish to raise the question of the operation of charities in this country. This debate comes at an appropriate time, for it is clear that there is increasing concern about the charity jungle that we now have in this country. It has been highlighted to some extent in the recent book by Benedict Nightingale which I hope the Minister has read, by the BBC2 "Money Programme" on 30th November, by recent publicity about the activities of Shelter, by the controversy over fee-paying schools and, not least, by the publication of the December 1973 Money Which? pamphlet on charities.

I make no tirade against charities in general, nor any charity in particular. Despite the welfare State, voluntary effort is, in my view, still vital to fill gaps in it. I pay tribute to the thousands of voluntary workers in, and the subscribers to, existing charities. We would be the poorer without them.

There is much for saying that all charities are not equal; still less is it appropriate to say that all are equally necessary or necessary at all.

914 Charity is now big business. On the BBC 2 programme, to which I referred, it was said that there were 120,000 charities in all, raising £350 million a year.

The Charity Commissioners' annual report for 1972 stated that 1,000 newly formed charities were registered in that year—that is, three new charities every day of the year, Saturdays and Sundays included—and that 2,219 had been registered in 1972 alone—that is, six registered on each day of 1972.

Three questions arise. Who can register? What are the advantages of registering? Who controls the activities of charities when they are registered?

The answer to the first question—who can register?—depends on the definition of a charity. Mr. Nightingale devotes a whole chapter to this question, and a large part of the Nathan report, published in December 1952, was devoted to that matter.

Despite everything, the law on charities is still essentially based on the words in the Preamble to an Act passed in 1601 in the reign of Queen Elizabeth I. Modernised versions of that preamble have been based on court opinions—for example, the then Master of the Rolls, Sir Samuel Rommilly's judgment in 1804, and other well-known judgments, notably by Lord M'Naghten in the House of Lords in 1891—where charities were regarded as comprising trusts, first, for the relief of poverty, secondly, for the advancement of education, thirdly, for the advancement of religion, and fourthly—the blank cheque, as it were—for purposes beneficial to the community.

Nathan recommended, in paragraph 104 of the report, that there should be a rewording of the definition to allow flexibility in interpretation, and also recommended the repeal of the Elizabethan preamble to which I have referred. According to Nathan, it should be replaced by a definition based on the M'Naghten classification but preserving the case law as it stands, so we were back to square one. The Charities Act 1960 removed the preamble to the Elizabethan Act, but not the judgments of the court that were based on it, so the judges go on as if the preamble to the 1601 Act still exists.

The law is a nightmarish jungle, described by a recent Royal Commission 915 on Taxation as "hardly less than chaotic." As the Minister must agree, there are absurd anomalies and injustices. For example, Amnesty and the National Council for Civil Liberties are not charities, nor is the Disablement Income Group, but the British Goat Society is. The Lord's Day Observance Society is classed as a charity, but the National Secular Society, which operates in contradistinction to the Lord's Day Observance Society, is not so regarded. The Family Planning Association is regarded as a charity, and so is the Union of Roman Catholic Mothers—the one advocating birth control and the other not, or, at any rate, by different methods. So there are charities operating and collecting money for contradictory views. The London Zoo is a charity, and so is Eton College. I do not know what they have in common. Perhaps they have something in common, but it is not immediately apparent to me.

Then there is the strange story of Sanctuary in the 1971 Charity Commissioners' report. It was set up in 1970 by a Mr. Robert Jones, who claimed to have telepathic communication with Indian and Pakistani children held in brothels, not in India and in Pakistan, but in Southall, where Mr. Jones lives, and in other places. None was ever located by the police, by Mr. Jones or by the NSPCC. Notwithstanding that, the Charity Commissioners registered Sanctuary as a charity, and by December 1970 it had collected £5,759, of which £5,155 had been spent on expenses. Collecting boxes had been lost. According to Mr. Jones, they had been stolen by Indians who had an interest in child brothels. It transpired that collectors were being paid commissions of up to 50 per cent., and at least one of them had convictions for offences connected with collections. That story was told in the 1971 report, which went on to state that there must be a whole lot of charities like that which had not come to notice.

Those are the small fry, but what about the big fish? I am sure that the Minister will have read the December Money Which? report on charities. That looked into the accounts of 36 large charities, mainly fund-raising charities, and I shall give the names of the first six. Dr. Barnado's collected more than £4 million, the Cancer Research Campaign collected 916 more than £3,750,000, Oxfam collected just about the same figure, the Imperial Cancer Research Fund collected £3,250,000—I do not know the difference between the Imperial Cancer Research Fund and the Cancer Research Campaign—the Royal National Life-Boat Institution collected more than £3 million, and the Spastics Society collected £2,500,000. The investment income of these charities is often very high. For example, the Salvation Army's investment income is just about £4 million, Dr. Barnardo's is above £4 million and the National Trust's is £3 million.

Few can know exactly the value of any charity's assets, whether a charity is doing a bad or a good job, or whether it is run well or badly. In fact, few know what any charity's real administrative costs are. In Which? 36 charities are categorised. There is a table showing income from the public and from investments, expenditure, and the rest. One column in the table shows administrative costs as a percentage of expenditure, and there are very startling figures. In the case of the British Diabetics' Association, 33.5 per cent. of the expenditure went on administration. The comparable figure for the British Red Cross Society is 269 per cent.; for the Multiple Sclerosis Society, 25.9 per cent., and for the British Legion, 14.7 per cent. Mr. Nightingale puts that figure at 22.2, but he may have been referring to a different year. At any rate, there are contradictions, for reasons which I shall come to in a moment. The magazine gives a list of these organisations with the administrative costs as a percentage of total expenditure, including 1.1 per cent. for the Royal National Institute for the Blind.

Most charities are not of the fund-raising type mentioned by Money Which? Some people, rather than give their money to an existing charity, set up their own. They are called charity endowment trusts. There are 100,000 of them, many of them having been set up hundreds of years ago, and a few of them are very rich. Some are extremely small—the parish pump variety, as Mr. Nightingale called them. The Charities Act 1960 attempted to deal with this multiplicity of problems. It provided that all non-ecclesiastical charities would be better combined in any given parish. Mr. 917 Nightingale says that in Bristol 70 local charities have been linked over the years.

Especially in rural areas, trustees are genteel Tories, if I may use the expression, wanting to maintain their status. It is a kind of status symbol to be a trustee of one of these trusts, and they do not want any change. The 1960 Act states specifically that no charity may be reviewed without the consent of the trustees. Therefore, relatively little progress has been made in that direction.

One of the advantages of being a charity is rate relief of at least 50 per cent. on the premises, and the British Legion is in very lush premises in Pall Mall. The rate concession given to the British Legion, and to Shelter, with its magnificent offices in the Strand, is lost to the local authorities.

The second advantage is that a charity can claim tax relief on seven-year covenants, and this is widely used to pay the fees for children of wealthy parents to go to Eton, Winchester, Rugby, and the rest. Those subsidies come out of tax payers' money There is no income tax on investments. Gifts to them are largely exempt from estate duty and there is no capital gains tax. Mr. Nightingale estimated that the annual cost to the Exchequer is about £100 million a year, plus large losses to the local authorities.

I mentioned the public schools. Eton and Winchester continue to be regarded as charities. A more accurate description is "bastions of privilege". It is a highly controversial political matter. The subsidy from the taxpayer to those schools is estimated by Mr. Nightingale to have been £2,388,000 in 1965–66, excluding relief on tax payable on investments. The public school fees are often paid by deed of covenant. In effect, what a wealthy person does is to agree to transfer part of his gross income to Eton. It is then tax exempt. Eton claims tax exemption for it and lessens the tax liability of the giver. In practice, instead of paying a before-tax sum to Eton and claiming relief from tax, one pays an after-tax sum, and Eton claims a sum from the Inland Revenue which tops up the giver's payment to the before-tax amount.

The drawback in being a charity is that political activity is regarded as non-charitable. Nevertheless, we all know that 918 we are subject to political pressures from almost every charity one could name. We were talking about animals earlier. There are more animal charities than almost any other, and we are all subject, quite properly—we have been subject to it today—to pressure from these organisations.

The Disablement Income Group, a press-sure group addressing itself to politicians, and Amnesty International, however, are not charities because they are regarded as political bodies. There is no more political body, on the other hand, than the Child Poverty Action Group. Its representatives are never away from this place. I know Frank Field personally. He is a very good pressure campaigner. So was Des Wilson for Shelter. Nevertheless, these two organisations are regarded as charities, unlike DIG. This is an absurd anomaly.

We have witnessed the development of a morass of charities, some good, some bad, some honest, some inefficient, some unnecessary, and some even crooked. In my view, the Charity Commissioners are ill equipped to deal with this situation. I think that the commissioner who appeared on the "Money Programme" said that the Charity Commissioners were lucky if they examined the accounts of any one charity once every five years.

There are no accountants on the staff of the Charity Commissioners, and the accounts of charities, as Money Which? said, are often unclear, unhelpful and even misleading, and differences in accounting systems make comparisons difficult. Money Which? recommended that there should be a legal requirement on a fund-raising charity to supply simplified accounts on request to anyone who asked for them, and that accounts should be standardised as to income, spending and assets. Many of the larger charities are companies, and I presume that they will be covered by the new Companies Bill and have to disclose more information.

The Nathan Report reminded us that the Labour Government rejected the idea of a Royal Commission on charitable trusts, as had been recommended by Lord Beveridge in his book "Voluntary Action", and the reason given was that it was not desirable to have a Royal Commission "poking its nose" into the affairs of every individual trust. Why 919 not? The Labour Government argued that it would take years, and they appointed the Nathan Committee, which promptly took only three years. Some Royal Commissions take a shorter time than that.

Nathan found that the Charity Commissioners were worse off for senior staff than they were 90 years earlier. I have looked up the Supply Estimates, and I find that the position has improved. The commissioners, according to the Estimates, have a total of about 356 staff; that is, not just senior staff but right down the grades. They have one commissioner, two under-secretaries, five assistant solicitors, but no Minister to champion their cause, which was one of Nathan's recommendations.

Large sums of money are being collected, on an increasingly professional basis, but there is no public accountability and no machinery for ensuring that there is not duplication of activities. Little attempt is made to increase public awareness of where their money is going. Many causes which should be a Government responsibility anyhow have to rely on charity. I think of the lifeboat service, cancer research, the care of mentally handicapped children, the care of the aged, and so on.

I know before the Minister gets up—this is why he has only 10 minutes—that he will not agree to the setting up of a Royal Commission. He will say that the machinery is adequate and that the Government will strengthen the Charity Commissioners. What I should like to urge, however, is that at least the Government might consider taking from public schools charity status, as was recommended by the Newsom Report. I hope they will also affirm, as Money Which? advises, that the individual, before giving, should consider the aims of the charity to which he is donating and whether it is worth while and should consider giving to charities most likely to have an immediate charitable use for the money and to those with the lowest assets.

It is a matter of choice but this whole matter is a complete mystery to the giver. We salve our consciences by putting our 10p into a box or by pinning a flag to our coats and we think we have solved the problem. We have done no such 920 thing in nine out of 10 cases, and it is time something was done about it and done quickly.

§ The Under-Secretary of State for the Home Department (Mr. David Lane)

The hon. Member for Fife, West (Mr. William Hamilton) has drawn attention to an important problem, but he has not made out a convincing case for his particular solution of a Royal Commission. He has taken more than 20 minutes, but it was not until the last few minutes that he mentioned the Royal Commission. He does not help his case by the kind of exaggerated language he is apt to use.

I acknowledge that there are anomalies in the present situation, and the Government are ready to consider any constructive suggestions from whatever quarter for improving it. I want to put the whole matter into perspective, I know that there is public concern, and I shall sketch the whole position as fairly as I may with the safeguards as well as the snags in the present arrangements.

Charity has always played a large part in the life and organisation of this country. Many millions of pounds are given to charity every year and at once I acknowledge, on behalf of the Home Secretary, the House and the country, how much we all owe to those who give unstintingly of time and resources to the demands of charity. I say this with particular feeling at Christmas time. The country would, indeed, be the poorer without this ceaseless effort. We owe everyone concerned a great debt of gratitude.

With charity, as in many other spheres, this is a time of transition and adaptation. Charity once was the main plank of the provision of welfare in Britain, but subsequently it has had to adjust to a subsidiary rôle. Also, there have been new methods of fund raising which have emphasised the professional element in the organisation of charitable work. However, with the generous response from so many people, we are rightly concerned that the administration of charities should be effective and seen to be effective. Although anxieties are occasionally expressed about particular charities—some of them mentioned today—the general absence of complaint suggests that 921 the majority of them are well and efficiently run.

I am not relying here simply on impressions, because since 1960 there have been powers to ensure that the affairs of charities can be properly scrutinised. Charities in England and Wales are accountable to the Charity Commissioners. The Secretary of State for Education and Science has responsibility at present for educational charities but will be giving this over to the Charity Commission next February. The House knows of the powers of the commissioners under Section 8 of the Charities Act 1960. There are also powers under Section 6 for inquiries to be made into the administration of charities and for action to be taken under Section 20 to protect the interests of the charity. One of the circumstances specifically mentioned in Section 20(2) as justification for action by the commissioners is a disproportionate use of funds for administration. Copies of accounts are available for anyone to inspect at the Charity Commission's office. So the powers exist in the 1960 Act to enable the commission, using them properly, to look into any case which may be brought to its attention.

There has been concern, I know, about administrative costs—whether the money donated from the public to particular charities is properly used. This has been investigated in the special survey by Money Which?. I do not want to be drawn into a discussion of particular cases, especially with time being short, because I want to make the Government's position clear over the whole field. The Home Secretary has no powers directly in relation to individual charities, nor any direct responsibility in the day-to-day work of the commissioners or their handling of individual cases. Points at issue can be finally resolved only by the courts.

An hon. Member or anyone else who has specific information leading him to think that the administrative expenses of a particular charity are excessive should forward details to the Charity Commissioners, who will then carefully investigate all the circumstances. I refer the hon. Member and the House to paragraph 78 of the 1972 report of the commissioners, in which they dwell on this 922 very point of administrative costs, particularly in relation to the newer charities. This is very much in their minds. But one cannot lay down any rule of thumb about administrative costs. It is bound to vary from charity to charity according to their purposes and the way in which they operate.

Another point of public concern about charities is the scrutiny of accounts, particularly when a charity is new and the commissioners may have some doubts about the way in which it is being administered. I would draw the attention of the hon. Member to the new regional office which the commission has established in Liverpool. Through that office, its examination of accounts is now wider than it used to be.

As for the definition and the hon. Members' remarks about the law being a nightmarish jungle, it is easy to criticise, but there have been many attempts to find a better definition. Although it gives rise to some anomalies and difficulties, we should remember that it also provides flexibility, and it means that the frontiers of charity can change in response to changing social needs. In looking for a new definition, we should remember that.

I have tried to summarise the present position and the safeguards. I know that there is some public dissatisfaction with some aspects of the charity world today. Looking ahead, there is to be a conference in January organised by the National Council of Social Service, whose initiative here I very much welcome. The Government will be interested in any practical suggestions that may be made at that conference or which may be put forward by any individuals or groups who are specially concerned with charities.

We shall, of course, consider them carefully, whether they relate to the law itself or to its administration. This is the first law of its type for many years. It may have its disadvantages, but at least the law of 1960 is on the statute book. Before we try to change the law, we should make full use of it and of the machinery that it provides. This is the area to which I personally would look mainly.

The Royal Commission for which the hon. Member has been pressing does not 923 seem to us to be called for at present. I want to repeat what I implied at the beginning—that doubts or criticisms about particular charities or particular aspects of the present system should not cloud our appreciation of the generosity of people who support charities or of the work that charities do. The charity is, and will 924 remain, a valuable and heartening part of our national life.