HC Deb 16 April 1981 vol 3 cc451-8 11.51 am
Mr. William Hamilton (Fife, Central)

I am glad that I have an additional few minutes to debate the topic that I have chosen. I am grateful to the Under-Secretary of State for Health and Social Security for giving me the extra minutes. I know that she is interested in the subject.

I call attention to the tenth report of the then Expenditure Committee entitled "Charity Commissioners and their Accountability." That report was published on 30 July 1975. I was a member of that Committee, which was ably chaired by the hon. Member for Plymouth, Drake (Miss Fookes). The Committee sat regularly on a weekly basis from 20 January to 12 May 1975.

The Committee took oral evidence on 14 occasions. We visited the two London offices of the Charity Commissioners. In addition, we received written memoranda from 24 organisations and individuals, including the Home Office, the Scottish Office, the Charity Commissioners, the Inland Revenue, the Charity Law Reform Committee, the National Council of Social Service, the Royal Society for the Prevention of Cruelty to Animals, the National Council for Civil Liberties, the British Legion, the Independent Schools' Joint Committee, religious organisations of all denominations and the Chief Chancery Master—to mention only a few.

I put that on record to show that Select Committees try to make serious studies, in depth, of specific problems. I recall sitting on a Committee with the Minister of State who is to reply to the debate. He will support that view. The Committees are constituted on an all-party basis. In general, they work as teams and strive, frequently with success, to produce unanimous reports and recommendations. Everybody who has watched the Committees at work agrees that their members work hard and diligently, often bringing to bear their own experience in a particular sphere.

The Committee to which I referred eventually produced a report containing 27 recommendations. It is appropriate to begin by quoting the concluding words of the report. Paragraph 135 states: The sheer numbers of Charities, the assets they command—probably some £2,500 million-£3,000 million and their tax privileges—quite apart from the good they do ensures that they occupy an important position in our society. The Charities Act of 1960 … has not lived up to all the hopes built upon it, largely because of its failure to grasp the nettle of the definition of Charity. I emphasise the concluding words of the paragraph, which are: We are convinced that the nettle must now be grasped and we advocate the adoption of 'purposes beneficial to the community' as the overriding criterion. Paragraph 136 states: We believe that this change and the other reforms we recommend can be best dealt with by a new Charities Act which will provide the framework for charitable activities until the end of the century and beyond. That reference to the lack of a clear and modern definition of what is meant by a charity or what is meant by charitable purposes is the crux of the matter. It is amazing that we still stick to the definition, such as it is, provided in the statute of Elizabeth I of 1601.

In a footnote to the report the Committee produced a modernised version in modern language. The definition of charity under which we are still working is: The relief of aged impotent and poor people; the maintenance of sick and maimed soldiers and mariners, schools of learning, free schools and scholars in universities, the repair of bridges, ports, pavements, causeways, churches, seabanks, and highways; the education and preferment of orphans; the relief, stock or maintenance of houses of correction; marriages of poor maids; supportation, aid and help of young tradesmen, handicraftsmen and persons decayed;— One can look along the corridor for some such people. The definition continues: the relief or redemption of prisoners or captives, and the aid or ease of any poor inhabitants concerning payment of fifteens, setting out of soldiers and other taxes. That is the modernised version of the definition of charities under which we still operate.

I put that on record because I do not think that the public understand the basis on which charities work today. Society has changed out of all recognition since 1601–380 years ago—and yet we still blandly use the same definition. However, the courts, according to the report have interpreted it that is, the definition— by extending it by analogy to new purposes as they arise. That development was accelerated by Lord Macnaghten's judgment in 1891, in the Pemsel case—the Commissioners of Income Tax v. Pemsel—which restated the Elizabethan preamble in modern terms by classifying the purposes of charities under four heads, not three. The first head was the relief of poverty, the second the advancement of education, the third the advancement of religion, and the additional head was other purposes beneficial to the community.

Our Committee went into the historical development of charity law from that time. It was pointed out that in the early 19th century there was great anxiety about the state of charities and the misuse of their funds. That anxiety led to a series of inquiries, culminating in the Charitable Trust Act 1853, which set up a board of Charity Commissioners. After the Second World War, with the considerable growth of ex-Service men's charities and other problems, that development resulted in the establishment of the Nathan committee in 1950, to examine the whole problem again, apart from tax considerations.

Without going into further historical detail, suffice it to say that the present 1960 Charities Act, under which we now operate, was the outcome of the proposals embodied in the Nathan report. The 1960 Act—the consolidation measure—has now operated for more than 20 years and it was the operation of that Act with which our Committee was concerned. The basic issues, as we saw them, were: first, the sheer magnitude and complexity of the problem; secondly, the part to be played by the Government in encouraging, by fiscal and other means, voluntary effort while at the same time eliminating abuse, or at least reducing it as far as possible; thirdly, the provision of the administrative machinery independent of Government and party politics, while maintaining some degree of public accountability and public confidence; and lastly—probably the most important—the problem of a modern and flexible definition of a charity and charitable purposes. We addressed ourselves to those issues.

We elicited evidence, on which the Minister will probably have up-to-date information, and I shall give the statistics that were given to us in 1974–75. At that time, 115,000 charities were registered with the Charity Commissioners. There was an annual growth rate of 2,500. The total must now be between 140,000 and 150,000 registered charities, with a further 10,000 or so in Scotland, which is not covered by the Charity Commissioners. In addition, thousands of charities are excepted or exempted from registration. They include places of worship, the universities of Oxford, Cambridge, London and Durham, colleges such as Eton and Winchester, the independent schools generally, the British Museum and the Church Commissioners. Those are all free from the jurisdiction of the Charity Commissioners, though to a greater or a lesser degree they are controlled by other legislation.

The total wealth of these charities is unknown, but in 1974 the estimated annual income was well over £300 million. Repayment of tax to the charities was then estimated to be between £70 million and £75 million a year. All those figures excluded the amount that was exempted from tax on untaxed income coming to the charities from, for example, investment in gilt-edged securities, capital gains, trading profits, and so on. We estimated that the value of the assets of all charities at that time was about £3,000 million.

The administrative machinery for ensuring that those charities act within the law is provided under the 1960 Act by the Charity Commissioners in England and Wales. Since 1960, we normally have three commissioners—the chief commissioner and two others. They are barristers, as I am sure the hon. and learned Gentleman is interested to hear. The chief commissioner is generally a civil servant whose future is behind him.

Some interesting observations on the way in which the Charity Commissioners operate were contained in our report. At that time, the commissioners had a staff of 360, and the cost of running the show was about £1 million in 1975–76. The set-up was politely described by our Committee in paragraph 121 as a 'quiet backwater', though for certain members of the legal profession it has certain attractions". We did not say what those attractions were—in the report, anyhow. The report also said of the commissioners that in living up to their self-imposed image of benevolent family solicitors they have perhaps given too much to their legal duties as opposed to their responsibilities in other spheres". Again, They failed to convey to us any impression of dynamism (as opposed to dedication), imagination, innovation or management efficiency". It is a matter that should concern us that that organisation is deputed by us to look into what is, by any standards, big business—that is what charity is today—which has amassed cash and assets as a result of the generosity of the public, with huge tax and rate concessions.

Big business of that kind cannot be run as though it were a village shop. Yet that is what is happening now. Many charities are undoubtedly run fairly, honestly and efficiently, but no one can be sure, least of all hon. Members. Of the 115,000 that I quoted, only 8,500 were inspected in 1974. That is about one in 13. What about, the other 12 that got away? There is little or no parliamentary accountability, and little or no accountability to Government.

That brings me to the second of the questions posed earlier, namely, the role of the Government in encouraging voluntary effort, in preventing abuse, and in providing statutory machinery with a degree of freedom from political pressure, yet maintaining elements of public accountability. I shall quote some of the Committee's recommendations in that regard. Recommendation 26 said: The Home Secretary should answer Parliamentary Questions on Charities and the Charity Commissioners". The Home Secretary refuses to do that. Recommendation 27 said: The Home Secretary should have wider powers to make Orders and Statutory Instruments in respect of the Charity Commissioners and Charities —instruments that would be debatable on the Floor of the House.

Recommendations 23, 24 and 25 relate to the appointment of the chief charity commissioner, the appointment of a standing selection panel to advise the Home Secretary on other appointments, and the creation of a special task force widely representative of outside bodies to carry out local reviews and investigations of particular charities.

Recommendation 15 was that all charities should be brought under the jurisdiction of the newly appointed and constituted Charity Commissioners.

Recommendation 9 was that a charities tribunal, should be established to hear appeals from decisions of the Charity Commissioners and, in certain cases, the Inland Revenue, the cost of that tribunal to be met from a special levy on the registration of each charity.

In the considered view of the Committee these 27 recommendations represented a bold, imaginative attempt to modernise existing administrative machinery, increase its efficiency and extend its accountability.

I turn quickly to the 64,000-dollar question—the definition problem. The Committee engaged in a great deal of cross-examination of witnesses on this issue and much heart searching. Eventually, we provided in recommendation I that all charities should be required to satisfy the Macnaghten test of purposes beneficial to the community. We said that charities already registered under any of the other legal requirements—the relief of poverty and the advancement of education and religion—should continue to qualify.

We recommended certain important qualifications on involvement in political activities and education in private fee-paying schools.

It is nonsense for private fee-paying schools—including Eton and Winchester, and Gordonstoun in Scotland—should be regarded as charities and be able to reap enormous tax and rate benefits from the taxpayers and the ratepayer. Children attending those schools are almost invariably from wealthy families. They are certainly not from families in the bottom quarter of the incomes groupings. For those children to be subsidised by the taxpayer and the ratepayer is an indefensible obscenity.

I shall skip over some of my notes, in view of the time. The gist of the report was the recognition that our charity law was crying out for modernisation, liberalisation and a greater degree of public accountability.

What has happened? The report was produced in July 1975—nearly six years ago. There has been no debate on it. There has been no departmental reply of any kind. The Government have thumbed their nose—I blame the Labour Government, too, because this is not a party matter—not only at the Committee but at all those who gave evidence.

A reply was eventually elicited from the Government by the hon. Member for Drake who was the Chairman of the Committee. That reply was in the form of a written answer on 24 January 1980 at column 315 of Hansard. It is an appalling answer. It states that the Government appreciate the work of the Committee and recognise the importance of its report, but they intend to do precisely nothing. That is to treat a Select Committee of the House with unparalleled contempt. There may be reasons for it, but they have not been produced to the Committee in interim statements or in any other way.

Meanwhile, the Committee had almost foreseen the disgraceful scandal of the Moonies, which has just broken. I shall not quote the exact words, but the Committee indicated that there were many peculiar religious groups. We quoted some examples of family life being threatened by some of theses peculiar groups. Had the Government taken action on our report in 1975, or shortly thereafter, and produced legislation, the Moonies scandal might have been prevented. That matter was well covered by the hon. Member for Putney (Mr. Mellor) and other hon. Members in the Easter Adjournment debate on 6 April, as reported in Hansard from column 697 onwards. More than 190 hon. Members of all parties signed an early-day motion calling for the ending of the charitable status of the Moonies organisation following the loss of its libel action against a newspaper.

The carefully considered and forthright judgment of a High Court judge at the end of that six-months trial was followed in a matter of days by what is generally regarded as an ill-considered statement by the Charity Commissioners virtually rejecting out of hand the consequences of what had been said in the High Court. The Charity Commissioners' statement showed that they did not seem to comprehend the law that they were supposed to operate. The proven ignorance and imcompetence, not to say arrogance, of the Charity Commissioners were such that nothing short of their comprehensive dismissal will satisfy the House and opinion in the country.

I hope that the Government will decide to come to grips with this matter—to grasp the nettle, as the Committee said—all the more so now that they are increasingly committed to replacing State provision in education, health, housing and other areas with voluntary effort. I think that many hon. Members, and people in the country, regard it as vital to clean out this stable. The legislative programme for the next year or two years will be light. The time for action in this area is now appropriate. I hope that the Government will be more forthcoming today than they have been in the past few weeks.

12.17 pm
The Minister of State, Home Office (Mr. Patrick Mayhew)

It was timely that the hon. Member for Fife, Central (Mr. Hamilton) secured an Adjournment debate for today to refer to this subject, particularly in the light of the considerable public attention and criticism that have been focused on charity law in recent weeks. I am glad to have the opportunity to clarify the Government's position on some of the issues that have been raised.

I cannot, within the time available, or, indeed, within the rules of order, refer to proposals by the Committee, on which the hon. Gentleman served, that call for legislation. I appreciate that the Committee's report was published in July 1975. As the hon. Gentleman fairly acknowledged, nearly four years remained to the Labour Government to indicate their response to it before the general election.

The Conservative Government came into office in May 1979. We, at any rate, went public with a statement of our intentions in January 1980. We want to give careful consideration to the recommendations of that Committee in the light of the other policies of the Government, and to the recommendations of Lord Goodman's committee, which was set up by the National Council of Social Services.

It is worth referring in greater detail to the answer that my right hon. Friend gave in January 1980. He said: The Government recognise that charitable trusts occupy a special position in our law and that special privileges attach to charitable status. We believe that the concept of charity in the legal sense remains valid and useful since it both reflects and encourages a spirit of benefaction and public service whose continuance is of great important to society. The Government do not consider that there is at present a need for changes in the law on charitable status or in the administrative practices relating to charities. We do, however, set great value on the contribution made by voluntary organisations and volunteers to the provision of a wide range of services and facilities that are essential to the well-being of society. We are considering how best we may, within the present financial restraints, encourage the development of the voluntary sector as a whole, and in that context we are paying particular attention to the Goodman committee's recommendations relating to fiscal matters."—[Official Report, 24 January 1980; Vol. 977, c. 316.] I do not think that that can be dismissed as a wholly negative approach to the problems of charities in these difficult days.

The Expenditure Committee's report contained 27 recommendations, and I shall refer to some of them. I shall say something about those that have been highlighted in the recent controversy about the Unification Church, the Moonies, notably the definition of charitable status and the respective powers of the Charity Commission and of the Government to prevent abuse in the general area of charity law.

The hon. Gentleman rightly said that the law that is applicable goes back to the Statute of Uses, the statute of the first Queen Elizabeth, and indeed before that. I understand that that was a declaratory statute of the existing common law. Its modern statement is that of Lord Macnaghten.

It may be fairly said that the present law of charity is founded upon the principle of recognising certain sorts of activity. The four heads of charity are trusts for the relief of poverty, for the advancement of education, for the advancement of religion and for other purposes beneficial to the community. These are recognised as being in principle for the public benefit. Any activity within these categories that is not carried on primarily for private profit or for the advantage of those who conduct it may be accepted as a charity and attract the special privileges attached to charitable status, principally those of exemption from the rules against perpetual trusts and from most forms of direct taxation.

Trusts for the relief of poverty or the advancement of religion or education are considered to be intrinsically charitable unless there is relevant evidence of illegality or harm to the community. I, too, wish to pay tribute to the thoroughness with which the Expenditure Committee went into these difficult matters. It is not by any means an adverse comment on the quality of the work of a Committee if the Government of the day do not find it practicable or necessary to give effect to its recommendations.

The Expenditure Committee recommended that in future the main head of charity should be a requirement to satisfy the test of purposes beneficial to the community and that charities formerly admitted under the other three heads should continue to qualify only if they satisfied the main criterion. It is difficult to see the distinction between this recommendation and the present position by which an educational or religious body which can be proved to be contrary to public policy would not be granted charitable status. The problem lies in the proof and the definition of "beneficial to the community", about which the Expenditure Committee did not give guidance, and this difficulty applies more to the religious head than to the others.

The hon. Gentleman referred to trusts for the advancement of education and condemned in rather extreme language the extension of charitable status to public schools. We have traditionally accepted in Britain that the object of the advancement of education is rightly considered to be charitable.

Mr. William Hamilton


Mr. Mayhew

No doubt that is because it is in the interests of the community. I do not see why that advantage should be withheld from the public schools, where the quality of education is in the main unquestionably excellent and where many scholarships, bursaries and other awards are available for children from families that could not afford to pay fees. They have been available for a long time and I guess that more are available now than ever before.

The Committee expressed particular anxiety that religious cults which it regarded as obscure and sometimes dangerous could be registered as charities; but it is hard to see how its proposed new definition would strengthen the hands of the Charity Commissioners and the courts in dealing with them, as it hoped, without the setting of more specific criteria. But which criteria? The problem was set out best perhaps by Mr. Ben Whitaker, who submitted a minority report to that of the Goodman committee. He said: Deciding which religious practices are too anti-social to be allowed charitable benefits is an invidious task.… the satisfactory test of a religion in this context poses superhuman problems: what law court or human agency empowered to demarcate charitable status is competent to judge the validity of a religion or the genuineness of a new guru or claimant to be a new Messiah? What would have been the verdict of an early Charity Commission on Jesus Christ, or the first Christians or the Inquisition? That rather concisely describes the difficulties with which we are faced.

In addition to whether the purposes of a religious movement can be made to fit specified criteria to meet the "beneficial to the community" requirement, there is whether the actual conduct of the movement is in accordance with those objects or whether it has significantly harmful features. This is, I think, the most pertinent point in relation to the Unification Church. The Expenditure Committee expressed concern about the possible abuse of charitable status but did not make any radical recommendations for change Rather, it proposed the tightening up of current procedures.

I take up the issue on which the hon. Gentleman concluded his speech. He talked about the carefully considered judgment of a High Court judge. As I understand it, that is an inaccurate way of expressing what has recently taken place in the libel action to which the hon. Gentleman referred. That case was tried not by a High Court judge, but by a jury. The jury attached a rider to its verdict relating to the charitable status of the Moonies, or the Church of Unification.

I should say in the short time that the hon. Gentleman has left available to me that the Attorney-General, as the protector of charitable interests, has important functions in the prevention of abuses of charitable status. He has powers to institute legal proceedings to protect the interests of a charity generally and to appear in proceedings where the interests of a charity generally may be affected, or where there is an appeal against an order of the Charity Commissioners.

My right hon. and learned Friend the Attorney-General is currently considering what action, if any, it might be appropriate for him to take in relation to the Unification Church. This is an important issue, which has recently been made public. It is something that the public should know, because they are understandably concerned with the opinion expressed by the jury at the end of a long case.

The hon. Gentleman referred to the appointment of the Charity Commissioners. The Government find that there are obvious attractions in the recommendation that the chief charity commissioner's post should be drawn from a much wider area than now. The Committee considered the position of the other commissioners. The Government will also consider that. However, there is an obvious attraction, at least to the first of those recommendations about the chief charity commissioner.

I cannot cover all the points made by the Expenditure Committee. I hope that I have touched on the Government's attitude to many of the most relevant. We shall, of course, carefully consider what the hon. Gentleman has said today.