§ Mr. Timothy Yeo (Suffolk, South)
I am glad to have this opportunity of introducing a debate on a subject that is of the greatest importance.
The operations of charities now cover every aspect of the welfare and education of human beings in this country and overseas. In addition to people, animals are cared for, protected and cured, buildings are constructed and restored, services are provided, research is conducted; and, indeed, in the field of medical research charitable funding is now the predominant element. Ideas and information are disseminated. There can be very few people in this country who have not been involved in charitable activity, whether as volunteers, as donors or as recipients, at some stage of their lives. The far-reaching nature of charities is one measure of their significance.
Another measure is the sheer sizeof charities. It has been estimated that total charitable income in 1980, the last year for which any reasonably accurate statistics are available, amounted to almost £5 billion. That was 2.2 per cent. of gross national product in 1980. It represented one third of our total defence expenditure in that year, it represented one half of the total rate support grant in that year and it represented one half of the total EEC budget for 1980.
Given all the agonising that we have in the House over those three subjects—defence spending, the rate support grant, the EEC budget—it seems to me surprising that issues relating to charity, whose total economic significance is equal to those items, command relatively little attention from the House. We are not, therefore, talking about peanuts when we talk about charities. Although there are a very large number of very small charities, there are also a small number of very large charities. My own organisation, the Spastics Society, has an annual turnover that is in excess of that of three quarters of the companies floated on the London stock exchange.
However, the diversity and the size are not the only reasons why charities are important. Today, there is a third, and even more pressing, reason. At a time when public expenditure, both nationally and locally, is being rightly and rigorously controlled, the role of charities in supplementing statutory functions and implementing new activities assumes a new and special significance. It would not be an exaggeration to say that the role of charities is greater in the 1980s than at any time since the war. I hope that I have established, briefly, that this debate deals with a matter of the greatest possible significance.
I must emphasise that I do not wish to talk about tax concessions. That does not mean that I am not concerned about tax concessions for charities—I hope to catch Mr. Speaker's eye on that matter, on which I have forthright views, on another occasion. However, I shall mention tax concessions in passing, because the argument has been made—in mentioning it, I do not wish to imply that I accept it — that the proliferation and the lack of regulation of charities is a barrier to granting further tax concessions. Although the achievement of tax concessions is not our primary objective in improving the regulation of charities, it might be a useful side-effect.
The accountability and regulation of charities must be overhauled, because the regrettable fact is that there is growing criticism of the activities of some charities. Even 168 more regrettable is the fact that much of the criticism is justified. The criticisms can be categorised in three broad ways. First, in relation to the activities of charities, some organisations engage in activities which common sense or public opinion would generally regard as not being charitable in nature. The second category concerns costs, where charities spend excessive proportions of their income on fund-raising or on administration. The third category is outright fraud, where money which is raised by, or on behalf of, a charity is not used for the purpose for which it was raised.
I shall not dwell on the latter category, because, although some frauds may escape detection, existing law and practice are largely sufficient to enable the police to deal with this aspect of the problem. However, I am very concerned about the activities and costs of charities. I stress that my concern is not confined only to what is still, I am glad to say, a few rogue organisations. My concern is about the impact which the publicity that the rogues attract has on the responsible and legitimate charities that make up the majority of the picture. Evidence suggests that public confidence in proper charities is damaged by the activities of the rogues.
The root of the problem lies, first, in an almost total lack of accountability by charities to their donors, their voluntary workers and, in many cases, to their client groups. It lies, secondly, in the inadequacy of the existing regulation machinery. It is almost impossible for anyone to find out financial information about a charity unless those who run the charity choose to make it available. Astonishingly, the Charity Commission does not receive annual reports and accounts from charities on a regular basis.
Under present law, there is a category known as exempt charities, which need not file accounts. Whatever the merits of permitting that group to conduct its financial affairs in secret — it is hard to see that any public interest is served by it — numerically, the substantial majority of charities are not exempt and are obliged by law to file accounts. Yet research undertaken last year by the Spastics Society showed that no less than three quarters of all charities had not filed accounts with the Charity Commission during the past five years. A great many charities have never filed any accounts since they were registered with the Charity Commission, so a large proportion of charities are not meeting the existing legal obligations. That is not as surprising as it might seem at the outset. The Charity Commission does not have the staff to check whether accounts are being filed. It has no means of enforcement if breaches of that obligation occur. I am not aware of any action taken by the Charity Commission on this issue other than to write a letter to the charity concerned when a member of the public draws the attention of the commission to the fact that the accounts are out of date.
That is all the more astonishing when one recalls the charities' income of £5 billion a year. Another aspect that makes it less acceptable is the fact that the level of direct Government financial support for charities has rapidly increased in the past few years. Between 1976–77 and 1981–82, Government grants rose from £36 million to £130 million a year. Grants from quangos, mostly the Manpower Services Commission, went up from £28 million to £100 million. Local government support increased and tax reliefs were extended.
169 Charities enjoy complete exemption from income tax, corporation tax and capital gains tax. They receive legacies completely free of capital transfer tax. They receive donations under covenants and can recover income tax on them. They receive mandatory rate relief to the tune of 50 per cent. and in many instances they receive 100 per cent. rate relief from local authorities. They are exempt from paying the national insurance surcharge. They have a comprehensive package, which many of us fought for and welcome, but it is uniquely beneficial. There is no other category of organisation that enjoys similar taxation privileges. The taxpayer pays for them. It has been estimated by the Institute for Fiscal Studies that the annual cost of those tax concessions is about £400 million a year. If a taxpayer who is contributing to that through his taxes wishes to inspect the financial accounts of three quarters of the organisations that receive that money, he cannot do so.
Therefore, my first proposal is that all charities should be required to file their annual accounts regardless of their category or status. I cannot see any justification for continuing to allow some organisations to cloak their financial affairs with that shroud of secrecy. If there is concern about the extra administrative cost which might be incurred, that could be covered by introducing an annual filing fee, which a private company has to pay. It might not need to be set at the £20 level for a private company. Perhaps £10 would be sufficient. If the consequence of introducing that annual filing fee was to freeze out some of the small charities that felt that £10 a year was an unacceptably high price to pay for their charitable status, that would be beneficial in tidying up the charity sector. I do not believe that in the eyes of the public £10 a year would seem an excessive price to pay for access to the unique range of privileges that I mentioned.
The key to the proposal would lie in the method of enforcement. I suggest using the same procedure adopted for private companies. Just as the directors of a private company are responsible for ensuring that their accounts are filed on time, the trustees of a charity would become liable. If their accounts were more than a year overdue in being filed at the Charity Commission, the trustees could be fined, and perhaps the fine could accumulate on a daily basis. A further benefit of that proposal would be to concentrate the minds of the trustees on their responsibilities. Too often, worthy individuals full of good intentions take on the responsibilities of trusteeship but find that they cannot devote the time necessary to supervise the affairs of the organisation for which they are legally responsible. I am sure that the Minister will be pleased to learn that that is the only legislative change for which I call. I do not expect him to say that he will have time to deal with such legislation in the near future, but if he will back in principle such a desirable, simple and cost free reform, perhaps a way can be found to provide the necessary parliamentary time in the not too distant future.
A second means of improving charity accountability could be access to the annual general meetings of charities. At present no obligation exists whereby the public or the press are allowed to attend such meetings. I suggest that any donor to a charity should be admitted to the organisation's annual general meeting upon production of the appropriately authorised receipt, allowed to speak and ask questions, although not to vote. I fail to understand why any responsible or properly run charity should refuse 170 to adopt such a procedure. Legislation is not necessary for the introduction of such a desirable reform. The Minister could promote such an approach by saying that from 1984–85 his Department will request any charity to which it makes a grant to open its annual general meeting in the manner that I have described. He must call upon his colleagues at the Department of Health and Social Security, and others that make financial contributions, to adopt the same procedure. I shall press this matter in future if my hon. Friend is unable to give such an undertaking in the near future. I do not believe that the public interest is served adequately by pouring taxpayers' money directly into organisations which appear reluctant to submit to the most innocuous and inoffensive public scrutiny.
A third means of improving the accountability of charities involves fund-raising and administration costs, which are growing areas of controversy. In an increasingly competitive environment, some expenditure is inevitable if funds are to be raised on any scale and if administration is to be undertaken. To raise the tens of millions of pounds from voluntary sources, which leading charities need to undertake their most important and valuable work, they must take a professional approach. Reasonable expenses are acceptable and accepted by the public. However, examples exist of fund-raising costs absorbing almost 65p in the pound, and that is not acceptable. I believe that public scrutiny will be the best corrective measure. It will be more effective than a ban on paid fund-raisers, which would be virtually unenforceable.
I propose that a group of interested parties — accountants, fund-raisers, administrators and so on—should collaborate with the aim of producing a workable definition of what constitutes fund-raising and administrative costs. The task will not be easy but well worth undertaking. Once a definition had been agreed, it could be applied by auditors to all charity accounts. The real step forward would be for charities to include their expenses ratio in all their fund-raising literature, advertisements and promotional material. This procedure could be introduced on a voluntary basis. Once one group of major charities adopted my suggested approach, pressure could be exerted by prospective donors to other organisations to follow suit. I do not seek Government action for my reform, hut an endorsement by my hon. Friend would be of inestimable value.
In discussing the inadequacy of the existing policing machinery, I do not wish to criticise the Charity Commission. Within the limits of its brief and resources. it does a good job. I commend, from my own experience, the way in which the chief commissioner, Mr. Denis Peach, has in the past 18 months introduced a more imaginative and flexible interpretation of the role of the Charity Commission.
The difficulty is that the commission's functions are enshrined in statute and its manpower is limited. It is unable to provide policemen for charities, although it investigates specific individual complaints. It is also apparently unable to take action to remove or withhold charitable status from organisations whose activities would, by the standard of common sense, render them ineligible for charitable status. On its own admission, the Charity Commission does not even know how many registered charities there are. That was uncovered by the same research that I mentioned earlier.
There is an urgent need for those functions to be performed by someone — whether it be the Charity 171 Commission or whatever. It may be that cumbersome legislation will be needed to enable the commission to undertake such functions. If so, the solution may lie in a form of voluntary self-regulation, for which charities seem especially appropriate. I suggest that a new body—which, for convenience, I shall call the Charity Council—should be established, composed of representatives of charities, professions, Government, the public and so on. It could be supported by paid secretariat to ensure that it functioned effectively.
The tasks of such a council would be three-fold. First, it would produce an acceptable definition of charitable activity, and keep that definition under review in changing circumstances. Of course, it would not be easy to arrive at such a definition. It could not be simple and it could not be brief, but it is urgently needed. Who better to produce it than a body involved with charities with the best and strongest motives for preventing abuses?
The council's second task would be to oversee the application of the definition to existing and new charities. The courts would continue to be the forum for testing the legality of individual charity activities. All registrations would continue to be undertaken by the Charity Commission, but the council could monitor existing charities' activities and could respond to public queries. It could also give guidance to new charities, and the Charity Commission might find it convenient to consult with such a body.
The third task would be to act as a watchdog over the charitable sector and to respond to individual complaints. The expansion of charitable activity has created the need for such a body that could respond more flexibly to public complaint than the Charity Commission. The aim would be to identify malpractice or gross mismanagement. The threat of publicity might be the best means of creating pressure or corrective action.
A council drawn up along those lines could have statutory power, but equally it could be set up on an entirely voluntary basis. In the latter case, its authority would derive from the calibre of its members. In many ways, a voluntary basis would provide more flexibility than decisions that required legal enforcement and interpretation in the courts. Faced with the possibility of criticism from such a council, a charity whose activities were held to be outside the scope of charitable activity might prefer to correct that voluntarily rather than face adverse publicity and the consequence of reduced income.
Zealous as ever to avoid adding a burden on to public spending, I can even suggest how such a council could be financed without recourse to public funds. The great success of the shorter period for covenanted donations to charities has significantly increased income from that source and the tax that is recovered thereby. I suggest a 1 per cent. levy on all tax recovered by charities, to be used to finance the operations of the Charity Council. In that way, the burden of financing that body would be thrown on to those most able to bear it.
The precise role of such a council should be discussed between the Home Office and the Charity Commission, together with representatives from the charities. I call upon my hon. Friend to respond as sympathetically as he can to that suggestion and, perhaps, to initiate such discussions to determine whether the need for such a council could be substantiated in detail.
172 I remind the House of my original arguments. Charities play a major role in our national life, and spending limits have enhanced their importance. The activities of rogue charities are undermining confidence in legitimate organisations. Action is therefore needed not just to eliminate malpractice but to ensure that the responsible organisations can continue their work. The fact that the majority of charities are doing good and responsible work which is of great importance to the whole community will not prevent damage to the public perception of charities as a whole. If action is not taken soon there could be a major loss of public confidence which could result in many organisations and their beneficiaries suffering. We must avoid the continuing stream of purely negative publicity. My solution involves mainly voluntary action, but it is voluntary action of a sort that needs Government encouragement and stimulus to get it going.
I hope that my hon. Friend the Under-Secretary can assure the House that appropriate steps will be taken. I have no doubt that the vast majority of the British people want to see our charities performing a wide range of functions effectively and positively. My proposals are designed to ensure that the tremendous energy and resources that exist within the voluntary sector continue to be harnessed for the benefit of the community as a whole.
§ Mr. Ray Powell (Ogmore)
I am glad to participate in this debate because it is of profound interest to a number of people, especially hon. Members who are responsible for and participate in a number of charitable organisations and perhaps sit on the board of one of those organisations. I am the chairman of one charitable organisation called CATO—Community Activities and Training in Ogwr.
Ogwr is a borough council in the Ogmore valley. About three years ago we set up that organisation to participate with the Manpower Services Commission in establishing job opportunities within the borough. When we attempted to register CATO as a charitable organisation, it took us about two of the past three years to have it approved and established as a charity eligible for all the benefits that such an organisation receives.
I view with some trepidation the rules and regulations governing charitable organisations, and I agree with some of the observations made by the hon. Member for Suffolk, South (Mr. Yeo). Last year CATO established positions for 264 persons within the group and applied to the Manpower Services Commission for a further placing of about 346 positions. Because of the cuts, reductions in job places or the drawback of funding — whatever terminology is in keeping; it depends on which side of the House one sits—voluntary groups such as CATO face the extra burden of worrying about resources. This is especially true when the schemes have already been approved and it is an unmitigated disgrace.
At an urgent meeting with the Manpower Services Commission we were told that the commission had to reduce its schemes substantially. With unemployment escalating in Ogmore and the establishment of schemes to try to create jobs, we were able—despite cuts in the money available for the community programme — to establish about 264 places in a period of two years. The schemes had been monitored and audited regularly by the MSC, but having established and secured MSC approval for 264 places from January 1984 the secretary of CATO 173 was told by a member of the MSC staff at a hurriedly convened meeting in Pontypridd that the number of places had to be reduced to 200.
Our charitable organisation had already committed itself for 1984 in terms of buildings, land and other aspects and is thus responsible for the amounts of money agreed in 1983 for next year's programme. The cut in the community programme of 64 places in Ogmore, some 800 in mid-Glamorgan generally and thousands in Wales as a whole has thus placed a great burden on charitable organisations, which now have to meet their commitments with reduced funds from the MSC.
The reduction of 64 places in our scheme means a reduction of £250,000 in funding. For that reason I put down early-day motion No. 331 in the following terms:That this House expresses alarm and concern at the action of the Manpower Services Commission and the Government in reducing the number of places in the Community Programme for 1984; and demands an early debate and a reversal of these policies that will substantially reduce employment opportunities for the 1,142,898 who have been unemployed for more than 52 weeks.My purpose was to highlight the problems facing those of us who have established charitable organisations such as CATO to try to create employment in our areas. If Conservative Members are wondering whether the community enterprise programme is really related to the present debate, I suggest that if their debate was No. 14 on the list they would probably have tried to get in now, just as I have.
Perhaps the Minister will find out how many similar schemes are run as charities and how many Members of Parliament and others give up their time, effort and energy to run them. There is a considerable burden on suh people, especially when ridiculous cuts are imposed in programmes that were approved in October.
When asked what opportunities the long-term unemployed had been afforded, the Secretary of State for Employment said that 106,000 places had been filled by October 1983. However, the Chancellor of the Exchequer promised in February 1983 that 130,000 places would be provided for the community programme at a cost of £550 million. The MSC has informed us that it has had to reduce the number of places available, as it has spent that £550 million. The result is that several schemes similar to that of which I am chairman have been reduced substantially, although they have planned for, costed and agreed funding—
§ Mr. Deputy Speaker (Mr. Paul Dean)
Order. I am sorry to interrupt the hon. Gentleman, but he is straying into the community programme and away from the subject of the debate. It will be extremely difficult for the Minister to answer points which are wide of the subject of the debate.
§ Mr. Powell
I appreciate that, Mr. Deputy Speaker, and shall stray no further, except to say that if we are to establish ourselves as charities to run similar schemes, trustees of charitable groups must have some protection. When a Minister promises funding, we must be assured that it will be made available.
§ Mr. Andrew Rowe (Mid-Kent)
From the Abbeyfield Society to the World Wildlife Fund, the web of British charities stretches throughout society. As my hon. Friend 174 the Member for Suffolk, South (Mr. Yeo) said, their resources are colossal and many argue that their functions are indispensable.
I thought that we had come some way from what obtained in 1834 when Dr. Folliott replied to the Brougham commissioners:The state of the public charities, Sir, is exceedingly simple. There are none. The charities here are all private and so private that I for one know nothing of them.My hon. Friend the Member for Suffolk, South told us that we had not come quite as far as I had thought. I am a Conservative. That means, even if it often does not seem like it, that I instinctively distrust the politician's desire to meddle. I have no doubt that wholesale re-writing of the Tudor statute on charitable uses would almost certainly do more harm than good. Nevertheless, I agree with my hon. Friend that there are worrying signs that all is not well.
It seems far too easy for men and women to set themselves up as charitable organisers and then, through incompetence at best or through fraud at worst, gull the public into parting with large sums of money of which only a tiny fraction serves the objects of the charity. The rest keeps the fund-raiser in a state which is a great deal more comfortable than that of any of those whom he or she purports to serve.
Too often, trustees seem unable to prevent that from happening. I do not know all the details, but I halve often observed that trustees of charities seem to leave outside their charity boardroom door nearly all of the skills for which they have been chosen as trustees. I remember a famous charity on the board of which sat itidges, accountants, academics, bank managers and business men, all of whom were highly successful, and yet on the centenary of that organisation' foundation the centenary appeal raised exactly minus £1,000. That sum represented the float which was given to the professional fund-raiser who was employed to run the appeal.
Perhaps we should look more closely at the quality arid expertise of charity trustees, not in their jobs outside, but as trustees. It is a significantly different role, too often confused with management, or too narrowly confined. This is the first time that I have heard my hon. Friend's idea, but it is admirable, and I hope that my hon. Friend the Minister will look at it seriously.
There is the Charity Commission, which is the lineal descendent of Brougham's great attempt to clarify and codify the behaviour of the charities. Often attacked and frequently derided, the Charity Commission is a creature of the legislation passed in the House, and, if it is defective, that is almost entirely because the House and the other place have made it so. If we want new charities to file accurate accounts every year within a few weeks of the year end, as we should, if we want those accounts to be examined regularly, and if we want fund raisers' records to be examined and their operations registered, as we should do well to insist, we should say so in law and give the charity commissioners the resources to do the work. It is not the slightest use kicking a watchdog from which the House has removed the teeth.
There is also the voluntary services unit, wrongly removed from its central position in the Civil Service Department by the then Labour Government and forced to rest in one of the major spending Departments. Nevertheless, it is an instrument for producing the 175 voluntary changes urged by my hon. Friend the Member for Suffolk, South, and I hope that my hon. Friend the Minister will give it that role.
There is a whole range of useful little measures which could be taken, few of them new, to improve the operation of charities. Some of my hon. Friends and I shall be looking at them to see which of them would do the most good and the least harm. I should like to see the creation of an "elephants' graveyard" where outdated charities could be painlessly dispatched or transmuted to more relevant purposes.
The Charities Aid Foundation, working with the Charities Commission and many trustees, has gone some way down this tangled path, but there are still too many charities locked into the service of their staff rather than of their proper clients by the sheer difficulty of meeting the needs for redundancy payments, or proper pension provisions for members of staff who were probably grossly underpaid in the early years of their service. Such problems lay a dead hand on too many organisations and bring charities into disrepute. It is still far too cumbersome to achieve a redirection of an outdated charitable purpose, and I hope that my hon. Friend the Minister will look at this.
Much more purposeful support should be afforded to the county surveys, which would make possible the useful redirection of numerous tiny local charities which are being strangled through lack of exiguous sums that are required to make them effective. There is also the famous conflict over what is meant by political activity. I beg the Government to tread more delicately even than Agag in handling this one. The day that Oxfam pointed out that a single cut in the United Kingdom overseas aid programme took more money from Oxfam's potential beneficiaries than it had managed to raise in 10 years, charities all over Britain realised that their work could be confined only in part to direct assistance. It was indispensable to them, and to the bodies which they were established to serve, that they should raise the public awareness of the plight in which their clientele subsisted. Elizabeth Fry and William Wilberforce would have recognised that move instantly and applauded it.
From then on, it became much harder to draw the line between acceptable and unacceptable behaviour. I believe that it should be left to politicians, or others who disapprove of a charity's policies, to argue against them publicly rather than to seek to have them emasculated by law. We shall lose more by over-zealous limitation of the charities' freedom to rouse our concern than by its indulgence. However, it is appropriate to ask how a charity divides its time and resources and to ask the public to pass a verdict on the excercise of that choice.
When all is said and done, these useful measures, and others like them, would simply be adjustments to the hem of the great robe which is British charities, and we have a duty not to run the risk, in our zeal for reform, of unpicking the whole garment. In the operation of charities, we possess one of the great instruments for enabling British society to adapt to the colossal changes that lie before it. Do we have to work out how to adapt to the arrival of new minorities and the resurgence of old ones? In charities we find the reservoirs of culture, religion and 176 voluntary enthusiasm that keep the minorities alive and provide us with the means to understand and work with them.
Do we have to find new ways of defining employment and the other activities that give dignity to our young, our old and our prematurely retired? Our charities, which so often create the challenging mixture of work and fruitful leisure, will surely help us to find the answer.
I am a trustee—a very new trustee—of Community Service Volunteers. It is a charity whose programmes use the talents of the young who have no other work, and the elderly but still vigorous who long to put their enthusiasm and experience to work in the service of others. It is among the leaders in the field. In passing, may I say that it manages youth training schemes at half the cost of the Manpower Services Commission. There are, and will continue to be, questions about the relationships between such programmes and the trade unions and others concerned with traditional full-time employment, but that is a different debate. All that we need to note is yet another example of how charities are seeking ways of answering the great questions about the future of work and human dignity.
When we have to seek new ways of organising our communities to provide for themselves services which used either to be provided for them, or were never thought of, we often turn to charities for the moral and financial support for experimentation. Community care schemes for the old, rural bus services, community shops and much else have often originated through the willingness of charities to risk a year or two's income for the sake of the future.
For all those reasons, I urge my hon. Friend the Minister to listen to those who seek to improve the functioning and accountability of charities, and to act decisively, but with great care. They are not lightly to be tampered with.
§ Mr. Patrick Nicholls (Teignbridge)
I do not suppose that there is any other area of activity which deals with the sums of money that we have heard about this evening, where the legislation governing it dates back to the 17th century. Nevertheless, as we have heard, the legislation that governs the operation of charities goes back as far as 1601.
I do not want to go over ground that has already been covered by my hon. Friend the Member for Suffolk, South (Mr. Yeo). He has already described a wide range of reforms. In my few words, I shall concentrate on the activities of charity fund raisers. I imagine that the first acquaintance that all of us have—or had—with charity fund raisers was when we went through the porch of our local church and saw the usual injunction over the doorway to the effect that some local worthy had endowed 20 shillings per annum in perpetuity to care for the needs of the poor of the parish. We have come a long way since that type of charity fund raising.
The figures are staggering. As far as one can ascertain, there are about 146,000 registered charities in this country. There are a further 10,000 charities which are not technically registered but which are known to the Charity Commissioners. Beyond that, there are other charities. The figures that are produced every year by way of income have already been mentioned. Total income receipts in the last financial year for all the known charities were a 177 staggering £5,000 million. Even in the top 200, voluntary donations alone, ignoring other sources of income, produced £329 million.
When discussing such figures one talks about a complete transformation in charity fund raisers and charity fund-raising. Gone are the days when the traditional fund raiser was the little lady selling lifeboats on pins or organising the charity ball so that the hoi polloi can turn up to see the quality at play. Such fund raising has long since passed.
In this day and age, to raise the sums required, fund raisers have to fish in deep waters. Any fisherman knows that in deep water one finds not only mermaids but sharks. It is the activities of the sharks in charity fund-raising to which I shall draw attention.
I cannot think of a better way to illustrate the fund raisers with which we are concerned than to mention two instances in an article by Ian Scarlet in the Sunday Times on 17 July. 1 pay tribute to the investigative work that Ian Scarlet has done in bringing such matters to our attention. Of one instance he says:On Sunday, March 26, Princess Margaret attended the annual Children's Royal Variety Performance at the Haymarket Theatre, London, in aid of the National Society for the Prevention of Cruelty to Children, of which she is president. A souvenir programme compiled by NSPCC volunteers, attracted advertising revenue of £27,291. Expenses of publication, including all printing and paper, accounted for less than 10 per cent. of gross. The NSPCC benefited to the tune of £25,000.That activity is at one end of the scale. The other end of the scale was illustrated in the same article which said:Two months earlier, a programme for a Grosvenor House 'Star Ball', in aid of the Tadworth court children's hospital appeal",was compiled by a charity selling advertising space. In this case the space was sold by professional tele-sales people at rates higher than the NSPCC amateurs would have dared to ask.
The article says:Companies and celebrities happily shelled out between £475 and £695 a page because they thought the bulk of their money would go to the Surrey hospital, then under threat of closure and in urgent need of a £1.4 million injection. Total revenue amounted to £79,250. The hospital received only £13,462, rather less than 17 per cent. of the gross."It is obvious that the incidents are examples of the two extremes. One can imagine that the NSPCC fund-raising was done by amateurs on a shoestring. They were able to keep expenses down. The expenses might justifiably have been more. At the other end of the extreme it cannot be right that the public should donate large sums, thinking that they will help charities, when that is not so.
§ Mr. Nicholls
My hon. Friend is right. I was about to say that the activities by some charity fund raisers are not known by the organisations for which they purport to raise money.
The difficulty is that the law is an imperfect instrument for curbing the type of incident to which I have referred. In the grossest cases, the criminal law can step in and fraud is relevant. But there are activities in a grey area that are a long way from fraud, but the public would be concerned if they knew the sums that can be taken in commission and 178 expenses. My hon. Friend the Member for Suffolk, South referred to another incident known to us both when about 65 per cent. of the take went in expenses and commission.
It is sometimes said that it is wrong to make a profit out of charities. I do not go that far. That is a puristic way of looking at the issue. One might as well say that it is immoral to make money out of death and that therefore undertakers should do the work free. The proposition makes no sense when reduced to that.
In this day and age, when we are talking about raising massive sums, the raising of that money will require a great deal of professional expertise. It is entirely right that people who operate in the area should receive a proper rate for the job, and it is clearly in everyone's interest that they should do so. But the difficulty at the moment is that there is no way of policing or regulating what a proper take is. It is fair to say that the Charity Commission and the Charities Aid Foundation have taken a great deal of stick at times because people imagine that in some way they are responsible for regulating the take in cases such as I have described. The difficulty is that there are no regulations for that and, at the moment, if a charity fund raiser wants to raise money for a charity, unless he is in breach of some contract into which he has already entered with the charity concerned, it would appear that society is powerless to ensure that the money is applied in the way that it should be applied.
Therefore, it appears to me that there is no alternative but for government to say that, regrettable though it may be, they will have to introduce some positive proposals to curb the charity fund raisers whom I have described. There are two areas where they must intervene. First, there must be proper regulations concerning what rates of commission and expenses is payable. It is not for me to try to suggest what those rates should be. They may have to be worked out in individual cases, but there must be some structured organisation and regulation to ensure that it is done properly.
Secondly, there must be proper regulations to govern the relationship between charity fund raisers and charities. My hon. Friend the Member for Suffolk, South has already pointed out the position where a charity fund raiser has not cleared his activities first with the charity concerned. I accept that point entirely. What about the relationship between a charity which sets itself up and is able to register because it has charitable interests, and then works hand in glove with a bogus charity fund-raising operation? That relationship must be examined and regulations must be introduced to safeguard it.
My final comment on this aspect—it is more by way of comment than a proposal for reform—is that there must be a much greater awareness among charities themselves that when organisations come to them, often to raise money for them in this way, all that glitters may not be gold for them and that they will have to look closely at what they are being offered.
People sometimes ask, "Does it really matter?" If a charity fund raiser, for the sake of argument, raises £1 million, keeps £900,000 for himself and hands over £100,000, at least that is £100..000 which the charity would not have received. The difficulty is—it is why the topic strikes me as so vitally important—that if the public think that every time they hand over money to a charity they are likely to be contributing at the rate of 65 per cent. to what they might see as a capitalistic fat cat, it will mean in the end that people will not donate to private charity.
179 It is inevitable as we approach the 21st century that the state will take a greater and greater part in looking after those who cannot look after themselves, and looking after the less fortunate in society. If we were ever to reach a stage, however, where it was in the public consciousness that there was no point in trying to make a private donation and that it should all be left to the state, as a society we would be greatly impoverished. It is a worthwhile and noble sentiment on the part of people of their own volition to contribute to charity, not simply to leave it to the state through their taxes but to make a positive contribution themselves. The wickedness behind the way in which some—by no means all—charity fund raisers operate works to this disadvantage—it brings all charity into disrepute, which ultimately makes us all a great deal poorer.
§ Mr. Alfred Dubs (Battersea)
I congratulate the hon. Member for Suffolk, South (Mr. Yeo) on initiating the debate. I know that he is experienced in this sphere. I first got to know him when he was with the Spastics Society, where he did an excellent job. I listened carefully to his remarks today and agreed with much of what he said.
The word "charities" covers such a wide field that it is difficult to generalise. Some charities are concerned entirely with work overseas, some operate nationally, while others have a purely local function, and therefore it is not easy to suggest ways in which charities should operate because inevitably one runs counter to the wide range of organisations that exist.
At one level charities provide services that the public sector also provides. That is particularly true of local charities, and some cover some areas that overlap with local government services. Although one does not want to make the subject more controversial than it need be, there are occasions when charities are seen as an alternative to the public sector, and that is an issue about which I am greatly concerned because it is sometimes an argument for cutting public expenditure. I do not want to develop that at length, but one must be careful, and in my area I have seen that argument arise.
Nevertheless, there is a close relationship between some charities and local groups in the community, and charities have a number of advantages over other ways of meeting the same ends. Sometimes, charities working through local community groups can be very local indeed in their contribution and therefore can be sensitive to local and community needs. Further, by their nature, charities can often be experimental; they can move quickly and they can do things that the public sector, local government and larger organisations cannot do. I hope that it is always true—although it may not be in every case—that charities are non-bureaucratic. In other words, they should be able to act quickly and not have an enormous bureaucratic structure that is sometimes the case in local government. Charities have the supreme advantage of being able to involve the local community or people who, even on a national basis, would not normally be brought into their activities, and that is a strength because they achieve a level of commitment that cannot be achieved when the same ends are sought to be achieved by different means.
I followed with interest what the hon. Member for Suffolk, South said about accountability, and I share his 180 views on that. If we were able to establish a greater measure of accountability for charities, we should establish a safeguard against some of the abuses to which reference has been made in the debate, abuses which sometimes get close to fraud, if they are not fraud, and abuses which, although they are not criminal, are not the sort of activities that one wants to associate with being the result of generous donations by people whose concerns are with the end result and not with some middleman who hives off too much of the money. I see that operating both at the level of financial accountability as well as accountability in relation to the activities of the charities.
As for the more difficult question of political activity, the hon. Member for Mid-Kent (Mr. Rowe) urged the Charity Commissioners not to be over-zealous in their approach to this problem, and he thought that rather than try to define political activity, it should be left to politicians. If I have misrepresented him, I am sure that he will correct me. I agreed with his general approach—that we should be more relaxed in our definition of political activity—but I parted company from him in his suggestion that we should leave it to politicians.
§ Mr. Rowe
That was not quite the impression that I meant to give. I meant to say that there has been much anxiety about the way in which some charities have stated their objectives in terms which political and other commentators and politicians have seen as being political, and — because they do not agree with them — wrong. Rather than trying to legislate against that, I believe that it is up to politicians who disapprove of the way in which a charity is proceeding to say so in public and argue the case out. I did not mean to be understood as saying that it should be left to politicians to do the defining.
§ Mr. Dubs
I thank the hon. Gentleman for having clarified that point. I had not understood him totally, but I part company with his argument. The danger is that the process of public debate and controversy about whether a certain charity is going too far in political activity will itself subject the charity to rather more pressure than is fair. It may cause the charity to pull in its horns and go for the safe option, and that will not necessarily be desirable. All too often in the past few years, charities have been criticised for getting too close to the area of political activity, with the result that they have been forced to defend themselves rather than to get on with the job. If we defined in a more open and sensible way the sensible limits of such activity, the charities would know what was the sensible way to behave, and how far they could go. Political arguments throughout the country in recent years would suggest that the Labour party would draw the boundaries in a rather more relaxed way than the Conservatives.
It is difficult to draw a clear demarcation line, but I should like to have a tentative shot at it. On the one hand, there is activity aimed specifically at the transfer or retention of political power in a local authority or in central Government. That would be clearly unacceptable in a charity. On the other hand, one asks whether charities should be able to take part in, and possibly even to initiate, debates on public policy and administration in the areas related to their own activities. I would regard that as perfectly acceptable. The hon. Member for Mid-Kent nods his head, but some of his colleagues would not be as liberal as that nod would suggest. Some would count that as political activity.
181 We have a responsibility for drawing lines, but we should be relaxed about it and not prevent charities which are expert in a particular field from being able to contribute to public and indeed political debate, provided that their contribution is not solely aimed at furthering the aims of one political party at the expense of others. The charity commissioners are much too restrictive in their definition of political activity.
There are some other ways in which I consider that the charities are unduly constrained at present, but I will not develop them in detail. First, there is unemployment. It is my understanding that charities are limited in what they can do in the area of unemployment, including job creation.
Secondly, there is the general giving of information and advice. My experience is that charities that are active in that field find it difficult to operate, and that the constraints forbid some such organisations to be classified as charities at all.
Thirdly, there is racial harmony. Following a court decision some years ago, the promotion of racial harmony is not within the terms of reference which the charity commissioners permit. I find that regrettable. Racial harmony is an area in which some charities ought to be allowed to operate.
Next, there is the general question of human rights, which is important overseas and sometimes in this country. We are much more restrictive about what charities may do than, say, the United States. My next point which involves improving and influencing international relations is related to that. I believe that that area is pretty well closed to charities at present.
My last point is rather odd. I was not aware of it until I studied the matter in greater detail. I understand that charities suffer serious constraints on their ability to deal with children in care.
I believe that the case has been made out that the law governing charities, their practice and accountability needs review. I hope that the Government will take on board the points made on both sides of the House this evening.
§ The Under-Secretary of State for the Home Department (Mr. David Mellor)
I welcome the opportunity of this interesting debate on charities and congratulate my hon. Friend the Member for Suffolk, South (Mr. Yeo) on introducing the subject. He spoke of a sphere in which he has practised efficiently for a number of years. He is a practitioner rather than a theorist in the administration of charities. That is apparent from the practical and common sense points that he put forward. The House is fortunate to have the benefit of his experience and expertise on this difficult but important matter.
It was a pleasure to hear from my hon. Friends the Member for Mid-Kent (Mr. Rowe) and for Teignbridge (Mr. Nicholls). My hon. Friend the Member for Mid-Kent has a great deal of experience in the voluntary sector, which was reflected in what he said. He called for ways to deal with small charities, and it was a great regret to me that the Bill promoted by Sir Angus Maude, as he then was, to assist small charities unfortunately fell at the general election. I have not given up hope that we shall be able to do something about that shortly. Unfortunately, the waters have been somewhat muddied by a dispute in 182 the House of Lords between his Bill and that promoted by Lady Faithfull, which the Government believe goes too far. However, we hope to make progress.
I welcome the contribution from my hon. Friend the Member for Teignbridge about fund-raising, and some of the clear abuses that appear to have come to light. He would do the House a service if he were to continue to take an interest in this subject and raise matters when appropriate. None of us can feel happy about the recent publicity on that issue.
It is important for me to make clear just how limited my right hon. and learned Friend the Home Secretary's powers are in respect of charities. It is open to the House to argue that they should be more substantial, although I was impressed by the arguments of my hon. Friend the Member for Suffolk, South who asks more for a coordinated effort by larger charities to ensure that they promote themselves and the image of charitable giving rather more impressively than has been the case, than for major legislative change.
While my right hon. and learned Friend has the responsibility for formulating charity law he has no powers to intervene in the administration of individual charities. Although he appoints the charity commissioners and presents their annual report to Parliament and is accountable to Parliament for the commission's general efficiency, the commissioners are answerable to the High Court, and not to my right hon. and learned Friend, for the way in which they exercise their responsibilities in respect of particular charities.
That procedure and constitutional position did not emerge accidentally. It was the conscious intention of Parliament—as can be seen from the Second Reading debate on the Charities Bill 1960 — that politicians should as far as possible be kept out of charities. It would plainly require a great deal of thought before any of us were prepared to go back on what many people believed, and still believe, to be an estimable sentiment.
Such a system has a great deal to commend it. Charities are independent voluntary bodies and as such it would be inappropriate for Government to intervene in their affairs beyond what might be said to be essential. The question of what might be essential has to be determined against the background of the situation as it exists at a given time. Some of the points that my hon. Friend the Member for Teignbridge and, indeed, my other hon. Friends made suggest that the borders can move according to what is happening in the charity world at the time.
The charity commissioners are an extension of the courts, in effect, and they have wide powers that they can use if it is thought to be necessary. I was delighted to note the warm words that my hon. Friend the Member for Suffolk, South had for the work of the charity commissioners. He specially singled out the fairly recently appointed charity commissioner, Denis Peach, for praise. I believe Denis Peach has done a great deal to improve the work of the Charity Commission while he has been there. It is right to say that the commission continues to look at its responsibilities and is prepared to make changes where that is desirable.
I have some good news for the hon. Member for Battersea (Mr. Dubs) on the important point that he was making about racial harmony as a charitable object. I understand that the charity commissioners as a board decided last week—this news may not yet have reached the hon. Gentleman or other hon. Members—that the 183 promotion of good community relations, the prevention of discrimination on the grounds of race or sex and the promotion of equal opportunity is in the commission's view charitable despite earlier High Court decisions that have led to the view that the promotion of race relations is not in itself charitable. I therefore hope that the hon. Gentleman accepts that as a useful step forward.
Against that background we need to examine the proposals that my hon. Friend put before the House and that he has written out in the recently published pamphlet that I hope anyone interested in the future of charities will take the trouble to read. On the one hand, the significant financial benefit derived through charitable status through tax and other fiscal reliefs means that the public have a right to expect that charities should be properly and efficiently administered in a way that best promotes the achievement of their objects. I was glad to see that that underlay all my hon. Friend had to say and, indeed, was supported in other speeches. On the other hand, we must not forget that trustees have very grave responsibilities in law for the adminisration of their charities. We should also not forget the heterogeneity of the charitable world. Charities vary enormously and their methods of administration will rightly vary. What is appropriate for the large collecting charity may be inappropiate for the small endowed charity.
My hon. Friend's proposals have only recently been forwarded to the Home Office. It would, therefore, be premature for me to try to offer the considered view of the Government on all these proposals. However, I should like to make a few brief comments about my initial reactions to what my hon. Friend wrote and to what he said in the debate. As I indicated earlier, the fact that my three hon. Friends have come into the House with their experience of the voluntary sector and the fact that they are obviously so concerned to take an interest in this is to my mind an important and welcome development. I look forward to engaging in a constructive dialogue with them about what should best be done in the charitable field over the next few years. The debate marks not the end of that process but only the beginning of it. There are plenty of points that we will need to pursue on other occasions. I want to respond as positively as I can to some of the points that my hon. Friend raised.
My hon. Friend's first proposal was for the compulsory filing of annual accounts. As he accepts, there is already a strict requirement in section 8 of the 1960 Act, which states that:Statements of account giving the prescribed information about the affairs of a charity shall be transmitted to the Commissioners by the charity trustees on request; and, in the case of a charity having a permanent endowment, such a statement relating to the permanent endowment shall be transmitted yearly without any request, unless the charity is excepted by order or regulations.The section also states:Any statement of account transmitted to the Commissioners in pursuance of subsection (1) above shall be kept by them for such period as they think fit; and during that period it shall be open to public inspection at all reasonable times.That is a rigorous requirement upon endowed charities to submit annual accounts unless they are excepted.
It goes further than that because any other registered charity may be required to file annual accounts on request. Those accounts, too, are available for public inspection. The chief charity commissioner recently told the Select 184 Committee of another place on the Parochial Charities (Neighbourhood Trusts) Bill and the Small Charities Bill that 6,000 to 8,000 accounts are examined each year. That is a tall order. He acknowledged, as he was bound to, the failure of many endowed charities to submit accounts, but he pointed to the considerable additional resources that would be needed to enforce the requirement.
We must recognise, in this area as in many others, the existence of priorities. Powers exist to require charities to submit accounts, and if unease arises in respect of a charity, I have no doubt that the commissioners would exercise those powers. It is open to anyone who is concerned about a charity or a group of charities to put the commissioners on notice, and invite them to exercise their powers; and, obviously, the commissioners must set forth a good reason why they are not prepared to do so. Whether it would be right to accord close scrutiny to each of the many thousands of charities whose accounts are already audited and whose administration is clearly beyond question, although they are not subject to the requirement to submit annual accounts, is debatable. It has been debated tonight, but I doubt whether we have arrived at the conclusion that the law is inadequate, although I hope that my hon. Friend will come back to me at a convenient time so that we can continue the dialogue. I am not slamming the door in his face on this or on any other proposal.
I was glad that several hon. Members, especially my hon. Friend the Member for Teignbridge, asked about fund-raising. The more that the public's attention is focused on the need to use their judgment in dealing with appeals for charities, as with any organisation to which they give money, the better. It is a matter for genuine public concern if money donated in good faith does not find its way to the charity. Charitable fund-raising requires considerable professional skill. My hon. Friend the Member for Teignbridge made clear how charitable fundraising has had to become more professional and adapt to the times. No one objects to that, and there is room for professionals—people doing the job for money—in this area as in any other. I cannot understand otherwise how the charity with which my hon. Friend the Member for Suffolk, South is concerned was assessed as having a turnover of £25 million a year. The idea that that can be done without a professional approach does not bear a second's examination.
However, there comes a point where professional fundraising can tip over into a pocket-lining exercise by some individuals or companies for which the benefiting charity seems to be only a front; and, moreover, where the benefiting charity often does not know that it is involved in the matter. That is not acceptable to the Government. The principle of charitable giving is too important in our community to be besmirched by the activities of a few reckless or dishonest people.
My right hon. and learned Friend the Home Secretary said in a recent speech to the Charities Aid Foundation:If it emerges that there are abuses that the existing law cannot deal with and for which it is practicable to provide remedies, we shall not hesitate to act.That is the Government' position. My right hon. and learned Friend put down a clear marker. We should keep a close eye on the situation as it develops. My hon. Friend the Member for Suffolk, South was right to say that it can be argued on the basis of investigations that we know have taken place and proceedings that have been mounted—it is not for me to comment on their merits or otherwise, 185 given that those matters are sub judice—that there are considerable powers under the present law for alleged malefactors to be brought to book, so it yet remains to be demonstrated that the present law is not adequate to deal with those abuses. However there is no doubt that the question of abuse is much more on the tip of people's tongues today than at any time in the past. We cannot ignore that fact, and do not intend to do so.
§ Mr. Rowe
If the existing law is adequate to deal with those abuses, whose responsibility is it? Are we saying that it is for the police in the ordinary course of events to pursue the matter on the basis of fraud, or is it the responsibility of the trustees of the charities, given that we have just heard that frequently trustees are not always good at spotting a rogue, or is it the responsibility of my hon. Friend's Department?
§ Mr. Mellor
It depends on the circumstances. If the charity is involved, the trustees have the responsibility. If the name of the charity is being used, I should have thought that it then becomes primarily a matter for the police. It would become a matter for the police if there was an alleged abuse of almost any sort. If a charity is in any sense alleged to be involved, wide powers are available to the Charity Commission so that it can satisfy itself that all proper steps are being taken. To clarify what I am saying to the House and what my right hon. and learned Friend said in the important speech that he made the other day, we are keeping an open mind on whether more needs to be done. We are putting down a marker that we share the considerable public concern about that aspect and welcome, as my hon. Friend the Member for Teignbridge did, the fact that some responsible journalists have done valuable work in unearthing facts that have given us all cause for concern.
Because of the enormous diversity of charitable organisations, the solution in the short term may lie, as was suggested, in education of donors and recipients. Openness on the details of fund-raising and administrative costs is an important reform, and could and should be done on a voluntary basis. I very much welcome what my hon. Friend the Member for Suffolk, South said on that. I should have thought that it was axiomatic that one of the ways to ensure than an appeal had the maximum effect on the public was to be able to prove beyond a peradventure where that money was going. I should have thought that all the major charities would want to do as much of that as possible.
In the same spirit of making charities more accessible to the public who support them directly or indirectly, it seems to me an excellent idea that charities supported by the generosity of the public should, wherever possible, 186 open up their annual general meetings to the public. I venture to suggest that their annual reports ate also an important vehicle for informing the public of their activities. Most collecting charities are only too anxious for the public to be aware of their activities. I hope that we can build on that in some of the ways suggested. However, I should need to be convinced as too whether the opening up of annual general meetings would need to be a matter for legislation.
I note the most interesting proposal of my hon. Friend the Member for Suffolk, South about the Government's relationship to those charities over which they have some influence by making funds available. I shall certainly look closely at that suggestion.
The final recommendation made by my hon. Friend is for a charity council. Again, I think we would need to examine detailed proposals to see what is intended, but I cannot help wondering whether what is being proposed is a Charity Commission with no executive power and without its legal status. I think we might first need to consider whether existing structures, powers and resources are being used to best advantage before trying to create new ones.
Hon. Members will be aware that another set of proposals for the reform of charity law and administration is on the table. The National Council for Voluntary Organisations published its consultation paperCharity Law—a Case for Changein June and I understand that a final document is expected shortly. We shall want to consider the proposals alongside those raised by my hon. Friend.
We are fortunate in this country in having a broad and flourishing voluntary sector which, with its charitable and other income and, where appropriate, central or local government grants, often undertakes in a partnership with statutory authorities an immense and valuable range of activities of benefit to the community. While we wish to avoid unnecessary Government intervention in what are essentially private organisations, when public money is given to voluntary bodies, whether or not they are charities, the conditions of the grants must be such as to secure an appropriate level of accountability. I was pleased that my hon. Friend raised that matter in such a forthright way. Where the public contribute to a charity, the public interest demands that its charitable funds are properly administered and devoted to the purposes for which they are donated. Whether the objectives can be achieved within the existing statutory frameworks by self regulation, voluntary agreement and good practice, we shall certainly be examining very carefully, as I have made clear throughout the debate.
As part of this process, I am grateful to my hon. Friend for raising these important points.