§ Not amended (in the Standing Committee), considered. Order for Third Reading read.10.59 am
§ Sir Angus Maude (Stratford-on-Avon)
I beg to move, That the Bill be now read the Third time.
From the packed Benches, the fact the Bill was not opposed on Second Reading, that no amendments were made in Committee and none are proposed today, one may hope that the Bill if regarded as uncontroversial. It is, nevertheless, important. It is simple in essence but the background is somewhat complex.
It is well known that the substantive Charities Act 1960 made considerable reforms in charity law and helped to deal with the problem of the multitude of small charities, which are mostly parochial and have either outlived their original purpose or, as a result of inflation or other factors, become short of the resources necessary to carry out their original task satisfactorily. It was hoped that a voluntary process would result in the amalgamation of local charities into larger bodies with larger resources, which might be able to perform charitable functions better. That was the hope of the Goodman committee on charity law and the old Select Committee on Expenditure, which considered the matter about 10 years ago.
There have been local and regional efforts to get voluntary agreement to the merging of parochial charities in neighbourhood trusts. The trouble has been that the cooperation of parochial authorities and trustees of charities has not been anything like as forthcoming as was hoped. One can see why. Local people feel that local charities that might have existed for hundreds of years should serve their small village or parish area and they do not want to be forced to merge into larger bodies of trustees, which would not have the interest of that small community so much at heart, and in which they would not be so closely represented.
Despite the efforts that have been made there has been little progress towards voluntary amalgamation. As a result, there is still an immense number of local charities that are too small to perform any useful function. Some may have incomes of £5 or £10 a year. That was a substantial sum three or four hundred years ago but it does not go far now. It is a complicated business for the trustees of those small charities to go to the courts to approve mergers of local charities and it means a great deal of work for the Charity Commissioners. It was thought that there should be some measure that would enable voluntary rationalisation to deal with those small charities. The only recommendation that was common to the Goodman committee's report and the Select Committee report was that charities of a certain age with small capital endowments should be permitted to spend capital sums at their disposal in pursuance of the charity's original aims and, if necessary, to wind themselves up having done so. Both committees recommended the small change in charities law contained in the Bill.
I am deeply grateful to hon. Members on both sides of the House who have supported me and for the help that the Government have given me. This is a special occasion for me. I have been a Member of Parliament for nearly 28 years and, except during the two years when I was a Minister, I put my name down for every private Members' Bill ballot. The first time that I ever drew a place was in 561 my 27th year and the Bill was talked out on Second Reading. The second time, and in my 28th year—which will no doubt be my last here—I was fortunate enough to draw eighth place and introduced this Bill. It will be a great pleasure if, in what may be my last Session as a Member of Parliament, I am able to see this Bill on to the statute book. Although it is a small measure, it is useful.
The important point that I have tried to emphasise is that the Bill contains no element of compulsion. It has been objected that the Bill will result in many charities disappearing, but there is no compulsion on trustees either to spend the money or to wind up the charity. The responsibility is left where it ought to be—with local people in the area for which the charity was originally founded. Within certain limits, the trustees can act on the best advice that they receive and according to intelligent management of the charity's affairs.
We thought it right to impose some limitations, such as that in respect of land or other property, which was dealt with in section 29 of the 1960 Act. It was thought that special problems arose with regard to land, especially as a result of the rise in the value of property and land in the past few decades. It is a complex issue on which the trustees of a small parochial charity need expert advice as it would be easy for them to sell at far too low a price, thus not getting as good a bargain as they might. We thought it right that they should apply to the Charity Commissioners or the courts for an order to enable them to sell landed property. Nevertheless, the restriction applies only to the sale of land or property. Once they have an order which entitles them to sell such land or property, the proceeds are at their disposal to spend according to the original purposes of the trust. There will be some trusts that cannot carry out the benefactors' wishes because those purposes no longer exist in modern life. In that case, the trustees, under the cy-près process, must get permission to divert the funds to a new purpose.
However, I doubt whether that will amount to a high proportion of existing charities. Many charities that provide money for prizes at local church schools on a comparatively small income carry out a useful job, and I hope that they will continue to do so. In those cases, the trustees are under no obligation to divest themselves of their assets and can continue happily. However, in some cases it would be impossible for trustees to spend the capital for the original purpose of the trust because that purpose no longer exists.
Some years ago I became vicar's churchwarden in a small parish just before the process of parish amalgamation got under way. The vicar was elderly and historically minded, and had done much research into the history of the parish and his church. One day he came to me and said that he would welcome my help with a problem. He said that many years previously a benefactor of the parish had left a small parcel of land to the church, the proceeds from which were to provide for the maintenance of the sanctuary lamp in the church. He told me that on old maps the land was referred to as the "Lamp Ground." He complained that the land had been alienated from the church, and hoped that I, as a Member of Parliament, could do something about it. I asked him when the alienation occurred. He thought for a little while and said, "I think that it was some time in the reign of Henry 562 VI." I explained to him that it was a little late for me to take action. That is an example of the way in which the assets, endowments and purposes of charities can change.
There is nothing complicated about the Bill. It does not apply to Scotland or Northern Ireland because the Charities Act 1960 applies to Scotland and Northern Ireland only in the most minute way in respect of the repeal of some ancient and moribund statutes. The main charity laws in England and Wales are different from those of Scotland and Northern Ireland, and since my only purpose with this Bill is to amend the 1960 Act it is impossible to extend it to Scotland and Northern Ireland, nor would I presume to meddle in the affairs of those countries.
Some questions have been raised by those interested in charity law, by members of the public and by my colleagues in the House. The first relates to the figure of £1,000 that we have chosen. The Bill applies to charities with assets to the value of not more than £1,000, and by "value" we mean market value. Any court would interpret it as meaning that. It may be argued that the figure should be larger or smaller, but we believed that 1,000 was about right. Most charities with that amount of money might hope, if the money were reasonably invested, to receive an income of about £100 a year, which for most small neighbourhood charities is a useful and reasonable income. The trustees of such charities would almost certainly not wish to alienate their assets or to wind up the trust.
The other question asked was whether we should have inserted in the Bill a maximum income limit. That presented considerable difficulties, and it was pointed out to me that a charity might have invested in undated Government stocks, such as 2.5 per cent. consols or war loan stocks, many decades ago. If the stock was bought at par, it is now worth only a fraction of that amount, but the income from that small capital might be £100 a year or more. That would be a valid objection if there were an element of compulsion on the trustees to sell, but there is no such element in the Bill. It is entirely for them to decide, and in a case where the assets, if realised, would produce a small capital sum but the income is substantial most trustees would wish to carry on using the income for the original purposes of the trust.
I need not say much about the 40-year period, which was mentioned in the 1960 Act. It seemed a reasonable time to choose, because 40 years ago we saw the beginning of the period of high inflation when capital assets began to lose their value and the income from them ceased to go as far as it had previously.
There is provision in the Bill for the Home Secretary, by laying an order before the House, to increase the sum of £1,000 if that ceases to be a realistic figure. However, such an increase would be subject to the approval of Parliament, so there is no question that Parliament will not be adequately consulted on the matter.
The Bill makes a small but desirable reform of the charities law. It follows the recommendation made by the Goodman committee and by the Select Committee, and it leaves the responsibility for taking decisions about local charities with the local trustees, which is where it should be. There is no element of compulsion, which would be wrong. The Bill will make life much easier for many worried and frustrated trustees of small charities.
§ Mr. Richard Page (Hertfordshire, South-West)
A Back-Bench Member who puts down his name for the lottery of the private Members'Bill procedure does so more in hope than in anticipation. I have put down my name only five times, each time with hope but not expectation, and I have been amply justified in following that course of thought. We must congratulate my right hon. Friend the Member for Stratford-on-Avon (Sir A. Maude) on his wisdom, foresight and skill, and on his good fortune in having his name picked in the ballot, not just once but twice.
All of us have a mental sheaf of Bills that we would like to introduce in the House. I thank my right hon. Friend for plucking this one out of my small mental sheaf of Bills. I have had an interest in this subject for some time. My right hon. Friend's Bill will go a long way towards satisfying the concerns and interest of many people. The only thing that disturbs me is that I may have to wait 27 or perhaps 28 years before I have the opportunity to introduce my Bill to the House. The thought of another 22 unsuccessful years does not fill me with joy.
§ Mr. Page
That is absolutely true. One gets used to frustrations and disappointments. I suppose that that is part of the process.
The interest in charities has occupied Parliament for many a year. In the short period since the Charities Act 1980, the Expenditure Committee in 1974–75 took an interest in them, which led to the Goodman inquiry in 1975–76. Even in the other place only last month there was a debate on the modernisation of charity legislation.
My right hon. Friend, with his long experience and skill, is to be congratulated on introducing a Bill that is easily understood. To be able to do so is an art in itself. He has been wise in dodging the reefs and shoals of argument that abound whenever the scope and operation of charities are under discussion. I am sure that my right hon. Friend's Bill will pass speedily through the House. There are no Opposition Members here, and I can only attribute their absence to their utter and wholehearted support of the measure. I think that my right hon. Friend will find that when this Bill becomes an Act it will receive many expressions of gratitude from trustees, and in some cases frustrated trustees, who will now find another avenue through which they can operate their trust.
I shall make a few comments in support of the Bill. It must operate within, and in accord with, the general principles of charity law. There are four points on which the Bill should touch and with which we should be satisfied. I am not saying that they are the definitive four principles. They are just four important points.
The first is that we must see whether the area and operation of a charity command the general support and agreement of the community. Secondly, a charity must operate via charity law, and it should be flexible to meet changing circumstances. Thirdly, the wishes of the donors to the charity should be given consideration and respect. Finally, the funds of the charity must be correctly administered and the role of the trustees has to be seen to be one of propriety and correctness.
My first point was that a charity should operate in accord with the general approval and understanding of, and to the benefit of, the community. A more casually 564 drafted Bill could lead to questions of what is not a charity and a veritable minefield of definitions. My right hon. Friend, with his skill, has not strayed into that area.
The Bill recognises that the community needs change. With the material advancement of society, we can all see that the improvements in state welfare have overtaken the original purpose of setting up many of our charities. I think that the House and the country will agree that many charities have now outlived their usefulness in satisfying peoples needs or, with the erosion of the value of money, have become impossibly expensive to administer, in terms not only of expenditure but of time, which is completely out of proportion with the benefit that is given. Inflation ruins many things. It ruins businesses and the operation of many charities.
Many charities are quaint, with their touches of a bygone age. I assure the House that they can become a veritable headache in their operation. It is right to examine the role of the charity and assess its usefulness and also to give authority to the trustees to be able to move, enlarge, or, if necessary, close down. This is where the Bill does a service.
My second point was the need to give flexibility to charities and the trustees. The Bill achieves that aim. It gives more flexibility to the present charity law. For that reason it will be much welcomed. I hope that my next observation will not be misunderstood because I do not want to imply that we are suffering from too much charity, but the House might like to know that in 1978 there were 129,212 registered charities, and that number was growing at the rate of 3,000 to 3,500 a year. Now I understand that there are approximately 139,000 charities. Such a growth rate will be envied by many commercial concerns. Possibly the point that concerns me most about the figures is that half the charities have an annual income of under £100. On examination, we find that many of the projects are outmoded and time has made them redundant.
If one spends a few hours reading the annual reports of the Charity Commissioners one finds an occasional fascinating historical insight into the needs of society in past years. The House will be glad to know that it has become unnecessary to provide accommodation for two female lepers in Cirencester. I shall not lead the House down those historical highways and byways because the examples are long, though interesting, nor do I suggest to my hon. Friends that they should cull through the annual reports by the Charity Commissioners, because I assure them that they are not fascinating reading, important as they are.
Such charities are extremely expensive to operate. Sometimes they search desperately for qualifying recipients. In smaller cases, the time and administration outweigh any benefit from the charity. My right hon. Friend's Bill must be an aid to simplification, but, as he emphasised and as I should like to emphasise, there is no compulsion on the trustees. It is their decision whether they take advantage of the provisions in the Bill.
My third point was about respecting the wishes of the donors. In choosing 40 years, my right hon. Friend has made a stab in the right direction. The period could be 30 years or 50 years. I do not think that many donors would be still around after 40 years. I accept that 40 years is a long period for inflation on the historical time scale, but it would be a sufficient time for that charity either to have proved its worth or to have outlived its usefulness.
565 It is important that the funds of a charity and its administration be safeguarded. To be a trustee is rather like being a director. To be a director of ICI involves certain responsibilities, and to be the director of a small company—for example, working with one's wife in a corner shop—involves other responsibilities. I suggest that the two areas of responsibility are vastly different. When trustees are dealing with a national concern they have recourse to advice, current legal opinions and day-to-day experience of large and weighty matters. The trustees of smaller charities do not have that experience and they are not able to call on the same quality of advice.
I know that the Charity Commissioners produce advisory leaflets which underline the role of charities and the trustee operation. When the Bill is transmuted into an Act I hope that the commissioners will produce an advisory leaflet to give trustees further guidance on how the Bill may be used to their advantage. As my right hon. Friend the Member for Stratford-on-Avon has said, trustees can be involved in the tricky area of property disposal.
I think that my right hon. Friend has taken a wise step in choosing the figure of £1,000. It is one that will be readily identified by many trustees, and the House will have the ability, in the fullness of time, to amend that figure after due and proper consideration.
As my hon. Friend the Under-Secretary of State said in Committee, the Bill falls four square within the principles of charities and my right hon. Friend is to be congratulated on bringing it forward. He has performed a valuable service for the trustees of charities. I sincerely hope that I do not have to wait another 22 years before I can introduce a Bill.
§ The Under-Secretary of State for the Home Department (Mr. David Mellor)
It would have been a pleasant task to welcome the Bill on behalf of the Government and to wish it a fair wind into law, whoever had introduced it. My benevolence would have extended even to the other side of the Chamber had an Opposition Member been prepared to introduce the Bill, such is the quality of the measure. On this occasion it is a particular pleasure to welcome the Bill. This is an occasion for going beyond the normal courtesies of the House. My hon. Friend the Member for Hertfordshire, South-West (Mr. Page) has already paid my right hon. Friend the Member for Stratford-on-Avon (Sir A. Maude) a genuine tribute, and it is a real pleasure to welcome the Bill because my right hon. Friend has introduced it.
As I said in Committee—I think that my words bear repeating on the Floor of the House —my right hon. Friend the Member for Stratford-on-Avon has had a most distinguished career in the House and in British politics in general. Apart from being a respected Member of this place, he is a well-loved Member. That feeling is not confined to the Government Benches. I feel that it extends across the Floor of the House. He has managed to be a most distinguished polemicist both within the House and outside and has greatly increased public understanding of a number of key issues through having the enviable facility which, alas, I do not have—even if I am in this place 566 for 28 years I probably never will have it—of being as lucid in writing as he so manifestly is, and as he demonstrated this morning, in speech.
My right hon. Friend drew attention to a rather unusual series of events after all his years in this place. He has been able to introduce the Bill only in his last few months in the House, the Bill having been given a fair wind. I remind my right hon. Friend that he was about half way through his parliamentary career when we first met, when I was a minor functionary in the Cambridge university Conservative association. My right hon. Friend came to speak to the association and it was then that I had the first opportunity of hearing my right hon. Friend's lucidity on a public platform and the rapier-like wit that he brings to public debate, which enlivens such occasions. In the ensuing years I have had the opportunity fully to appreciate those qualities.
It was even more of a pleasure, on the occasion when my right hon. Friend visited Cambridge, to discover at dinner after his address what an amusing companion he is. Little did I think as I sat at dinner as a callow young undergraduate that it would fall to me to welcome the last major act of my right hon. Friend after a long and distinguished career in the House. I hope that he appreciates that in making these comments about him and the contribution that he has made to parliamentary life I am fulfilling more than a mere duty.
I shall substantiate what my right hon. Friend has already said about the Bill, he having been ably supported by my hon. Friend the Member for Hertfordshire, South-West. It was through the courtesy of the House that the Bill was given an unopposed Second Reading without a debate some weeks ago. It was only that which allowed the measure to proceed to this stage. We are all grateful to the House for taking that course. It would have been open to any hon. Member to have blocked the Bill's progress. However, everyone thought so well of it that no one did.
The Bill went into Committee, where it is right to say that there was only a brief debate. That was because all those present agreed with it. There is a case for saying that legislation should not pass through the House without it being clearly set on the record exactly why the measure is necessary. I welcome the fact that my right hon. Friend chose to explain with great clarity what motivated him to bring the Bill forward, what he thought it would do and why even the small ripples of controversy that it has engendered are not justified. I hope that the House will bear with me if I try to set the Bill in its context from the Government's standpoint, and explain why we genuinely believe that it will effect a useful reform of charity law, which will be none the less useful because it is uncontroversial.
Charity law as a whole is not uncontroversial. There is increasing public recognition that there is rather more to charities than the way in which they impinge on the lives of most of us as we go about our business. Few of us can walk down our local high street on a Saturday without seeing collecting boxes for one or other of the major charities. Charities come to be associated with the large and prestigious charities that most people connect with the term "charity". There are a few dozen charities that are household names, to which the public contribute in a large or small way according to their means and inclinations. There are many charities that rightly attach a great deal of importance to keeping their name before the public. There is a wide range of events in almost every locality, 567 including sponsored swims and sponsored walks. They are all organised with the aim of raising money for the large charities.
I do not suppose that anyone who has considered the controversy over the position of some religious sects on the charities' register any longer believes that charities are confined to the large and estimable charities. Anyone who thought that would be wrong to think that the large active charity was in any sense a typical charity in Britain. We had some insight into that in the helpful speech of my hon. Friend the Member for Hertfordshire, South-West. There are no fewer than 144,000 English charities currently registered with the Charity Commissioners. It has been reliably estimated that well over one half of those have an income of less than £100, so the typical charity is a very different beast indeed from the household name charities with which we are all familiar.
The reason for that is that small charitable giving is at the heart of the development of charities in this country, far more so than the very large charities, which are a quite recent development. Small charitable giving has been at the root of the development over the centuries of English charity law. Prior to the 16th century the Church was the prime source of philanthropy to the community. During the 16th century charitable giving was centred on the parishes. The famous preamble to the statute of charitable uses of 1601 lists charitable purposes as follows:Whereas lands, tenements, rents, annuities, profits, hereditaments, goods, chattels, money, and stock of money, have been heretofore given, limited, appointed, and assigned as well by the Queen's most excellent majesty, and her most noble progenitors, as by sundry other well disposed persons: some for relief of aged, impotent, and poor people, some for maintenance of sick and maimed soldiers and mariners schools of learning, free schools, and scholars in universities; some for repair of bridges, ports, havens, causeways, churches, seabanks and highways; some for education and preferment of orphans; some for or towards the relief, stock or maintenance for houses of correction; some for marriages of poor maids; some for supportation, aid, and help of young tradesmen, handicraftsmen, and persons decayed; and others for relief or redemption of prisoners or captives, and for aid or ease of any poor inhabitants concerning payment of fifteens, setting out of soldiers and other taxes; which lands, tenements, rents, annuities, profits, hereditaments, goods, chattels, money, and stocks of money, nevertheless, have not been employed according to the charitable intent of the givers and founders thereof, by reason of frauds, breaches of trust, and negligence in those that should pay, deliver and employ the same.Charitable trusts are characterised in common law by two features. First, charitable trusts, unlike other trusts, do not fail if they offend against the doctrine known as the rule against perpetuities. Charitable trusts may expressly state that they are intended to last for ever—which not even parliamentary careers do in the real world — or, more usually, they are not given a finite duration. That poses problems that lie at the heart of the Bill. Secondly, and perhaps more relevant, charitable trusts, unlike other trusts, are not allowed to fail because of uncertainty about their objects or beneficiaries. As circumstances change over the decades, what would have been a valid and viable purpose for a charity at the time it was conceived becomes less so as the years roll on.
The law has been developed for a long time to try to meet that point and to respect the charitable intentions of the original donor. Charity property may be applied, as the lawyers say, cy-pres; the purposes of the trust can be altered in certain circumstances so long as the new purposes are as near as possible to the old ones. In that way 568 it has been possible to modernise the objects of many charities through schemes made by the Charity Commissioners.
It is also possible to bring together small groups of charities within a parish, or across several parishes, with similar objects and for the Charity Commissioners to make, at the request of the trustees, a scheme for their administration as one charity. The latest figures available from the Charity Commissioners show that in 1982 they made 852 such schemes, and 307 of those amalgamated or grouped 1,422 small charities. As my right hon. Friend indicated, small parochial charities are particularly liable to find difficulties in working effectively in isolation. Since the Charities Act 1960 came into effect, making provision for local authority reviews of local charities, many have been amalgamated or grouped as a result of those reviews.
We should all like our charities to retain, wherever possible, the forms in which they were endowed, but we must recognise that that is not always an appropriate or realistic course to adopt. There are in existence many parochial charities whose income is too small to be useful, however hard one tries to dispense or arrange matters. We must also consider the insidious effects of inflation, which has damaged charities as much as many other aspects of the community. The fall in the value of money has meant that many endowments, once sizeable, are now worth very little. Many charities are known to have an annual income of less than £1.
Such charities were perhaps inadequately endowed in the first place so that they have no chance today of reflecting modern day values. Rent charges arising out of land are a typical example because, when redeemed, they often give a total endowment of perhaps £20 to £40. Or problems can arise through bad investment policies so that the fund, which may have been adequate ab initio, has become irretrievably depleted in value. And even where it is possible to be grouped with similar charities in the same area, the cost of making schemes for those charities —the mechanism of the administration to try to make them viable — may be out of all proportion to their income, and trustees are often put off by the scheme-making procedures, which can be lengthy and laborious.
We must also bear in mind that we expect the Charity Commission to look after the small charity as much as we expect it to look after the large one and it is a relatively expensive task which falls on the public purse. The Official Custodian for Charities has calculated that in 1980 a dividend of £1 or less was paid out on at least 7,000 holdings, but the costs of administration are there even though one is dealing with small sums of money. Nor should we forget the time and effort demanded of the trustees in administering such very small sums.
After what I hope has not been too tiresome a preamble —this is not a frequently ventilated area of charity law — I hope that I have satisfactorily established, in common with my right hon. Friend, the circumstances that have arisen to make us think it right that the trustees of such charities should be allowed to expend their charity capital as income, thus effectively winding up their charity. Those who have troubled with these matters have been aware of the problem for some time, because the Charity Commissioners described the problem succinctly in their evidence to the Expenditure Committee in 1975, looking at the accountability of the Charity Commissioners.
569 They had been asked whether there were any reforms to charity law not mentioned in their evidence that they would like to see introduced to make more effective the administration of charities. In their memorandum on the expenditure of endowments of very small charities, published as appendix 15 to the report of the Expenditure Committee in 1975, they said:Our experience over many years during and prior to the holding of local reviews has been that it is frequently not practicable to combine small charities of this nature with those in an adjoining parish or parishes which might be more favourably endowed. Trustees are often reluctant to see the benefits of parochial charities extended to other parishes, particularly where a reasonably well-endowed parish is asked to combine its charities with a single very small charity in an adjoining parish. Nor do we feel that it is a satisfactory solution to combine a large number of small charities of this sort over an even wider area. In such a case even the combined income is still insignificant in relation to the catchment area and the administration of charities over a wide area is almost bound to become impersonal by comparison with a single-parish charity.The memorandum went on to propose that the trustees of small parochial charities be empowered, within strict limits, to expend their capital funds. This suggestion found favour with the Expenditure Committee who suggested that legislation be introduced to enable the trustees of charities possessing only trivial funds to spend the capital of such funds for the purposes of the charity. It suggested that the donor should have been dead for a number of years. It envisaged such changes normally being made with the consent of the trustees, but felt that there should be reserve powers to act without their consent.
This recommendation was given weight by the publication in 1976 of another report on charities—the Goodman report. This was the report of a committee appointed by the National Council for Social Service—now the National Council for Voluntary Organisations—under the chairmanship of Lord Goodman to examine the effect of charity law and practice on voluntary organisations. After a thorough review of local charities, the modernisation of trusts and the progress of reviews, the Committee noted the Charity Commissioners' suggestion that small locally endowed charities might be permitted to spend their capital. The Goodman committee endorsed this view and recommended that power to expend capital should be given subject to appropriate consent by the local committee. It had in mind a permanent local committee to be established under the chairmanship of a representative of the Charity Commissioners to look after the continuing process of co-ordination between endowed charities and welfare services.
The Bill effectively carries this proposal into law—with an important difference which I welcome and to which I shall return in a moment.
It is necessary to make one or two other points central to the appreciation of the merits of the Bill which we hope to become law shortly. The Bill, as my right hon. Friend has said, would enable the trustees of charities with assets worth £1,000 or less to expend the property of their charity. The vital word here is "enable". I believe that this Bill will greatly assist the trustees of charities, the objects of which can often best be assisted by a once-off recourse to capital. A typical case would be the repair to a church roof, where the capital sum spent on one occasion may be more useful than the small amount of income it generates. I can think of similar examples, and I am sure that hon. 570 Members can, in the maintenance of other local amenities besides the church and its fabric—clock towers, town halls, museums, war memorials and the upkeep of roads and bridges. The list is long and encompasses all kinds of local charity. Small charities for the relief of handicapped or sick people may well wish to contribute towards the provision of special equipment or transport.
It is entirely at the discretion of the trustees whether they exercise the powers given to them under this Bill. This an important point to which I shall return later. The Government feel strongly that they would not support a Bill that would compel trustees to wind up their charities. We do not know how many trustees will avail themselves of the opportunity presented by the Bill. We believe that it is for the trustees to make up their minds about this. Compulsion would be an alien concept in the law on charities as it has developed over the centuries and, some might say, anathema to the principles of charitable giving.
Charity trustees are entrusted by law with the responsibility of administration in accordance with their trusts and in the manner laid down by their trust instrument. The Government have no wish to interfere with the independence of charity trustees. They value the contribution to the community made by thousands of people, who voluntarily administer these trusts in a caring and compassionate manner. They recognise how a locally based charity can be responsive to local needs at an individual and community level, in ways in which national organisations or statutory services cannot, nor can be expected to be.
I imagine that most hon. Members will be trustees. I serve as a special trustee of Westminster hospital. We all understand the important role of trustees. It is a vital way in which people within the community can add voluntarily to the benefits of the community by administering funds to the best of their judgment with the minimum of outside interference within the lines established by the original charitable donor.
The Government want those thriving local charities, which still have a viable contribution to make, to continue to flourish. They have no wish, however, to insist on the continuation of defunct charities whose financial and human assets could be put to better use elsewhere —financial assets, before the capital value dwindles still further and human assets in the energies of trustees which might be employed on purposes more beneficial to the community.
The trustees would have to spend the money on the purposes for which the charity was established, thus ensuring that as far as possible the benefactor's wishes will be respected until the last moment. Inevitably, under existing charity law, charities with outdated purposes would have to apply to the Charity Commissioners for a cy-pres scheme before they could spend their capital under the Bill. I am told, however, by the Charity Commissioners that this would only rarely be necessary as most have already had their purposes modernised.
There have been one or two queries about the Bill's provisions where the endowment consists wholly or partly of land, and it may be worth explaining this provision in detail. Clause 1(4) contains a saving for section 29(1) of the Charities Act 1960. It requires trustees to obtain an order of the court or the Charity Commissioners before carrying out certain transactions in respect of the permanent endowment of the charity. In particular, land forming part of the permanent endowment cannot be sold 571 without such an order. It ensures that transactions undertaken are proper, and, for example, not at an undervaluation. This section does not deal with the question how the proceeds of the charity's land should be dealt with. The Bill does this. The result of the Bill will be that if the charity is within the Bill's limits, the proceeds of sale can be spent instead of having to be reinvested. But the sale is still subject to the provisions of section 29(1); clause 1(4) accordingly provides that section 29(1) is to be unaffected.
The effect of this is that a charity with a permanent endowment of land worth less than £1,000 is, as regards the Bill, in no different a position from a charity whose endowment is not in the form of land. At present, a charity with a permanent endowment of land worth less than £1,000 is subject to two different rules: one is that it needs an order to sell the land, the other is that it cannot spend the proceeds of sale and must re-invest them. The Bill deals only with the second rule, and therefore leaves the first unaffected.
I am glad that in the form the Bill has been presented to this House my right hon. Friend has not thought it necessary to include the permission of the Charity Commissioners as a preliminary step in winding up small charities. As I said a moment ago, when this measure was first mooted, for example by the Expenditure Committee, it was thought that its permission should be obtained before the capital could be expended. I think it is right, as does my right hon. Friend, that this decision should rest with the trustees. To introduce another layer of decision-making, in the shape of the authority of the Charity Commissioner, would, I fear, be to introduce an unnecessary administrative complication. One of the purposes that lies behind this useful Bill is to minimise administrative complications.
The Charity Commissioners recognise that it is the trustees who have the most detailed knowledge of and interest in the charity and its future, and I know that they share the view that the trustees' wish for the disbursement will be sufficient.
My hon. Friend the Member for Hertfordshire, South-West asked about the upper limit of £1,000. I am sure that my right hon. Friend the Member for Stratford-on-Avon would be the first to recognise that any figure is bound by its very nature to be arbitrary to some extent. Nevertheless, in a world in which one has to make the best guess because some limit must be imposed, after much thought and his customary courtesy in consulting the Department, my hon. Friend's figure is, I beleve, appropriate to the purposes of the Bill. As my right hon. Friend said, it is important to remember that the Secretary of State will have power to alter that figure in the light of any change in the value of money. We all hope and pray that inflation is under control and that the banana republic inflation of the 1970s is now behind us. Nevertheless, it is right that that saving provision should be included to ensure that this measure does not become redundant because the upper limit becomes eroded to such an extent as to be as meaningless as the funds of some of the charities which, we hope, will achieve fresh point and purpose as a result of the Bill.
§ Mr. Richard Page
We all appreciate that £1,000 is a useful round figure and suitable for inclusion in the Bill at this stage. Quite apart from any erosion by inflation, however, would the Home Office consider raising the 572 figure to perhaps £1,500 or £2,000 if it turned out that that would enable a larger proportion of charities to take advantage of the Bill?
§ Mr. Mellor
I take my hon. Friend's point. Some people might have supported a higher limit at this stage. I cannot speak for my right hon. Friend the Member for Stratford-on-Avon, but I am sure that he agrees that the arbitrary nature of any upper limit means that such a case can always be put. At present, however, we believe that £1,000 is a realistic limit. However, if the measure proved so useful over the years that pressure built up to bring in charities just above that limit, the Home Secretary of the day would probably command the respect and support of the House if he decided to build on this valuable change in charity law by allowing more charities to come within its scope.
Another important aspect is when the powers in the Bill shall be exercisable. My right hon. Friend's proposal is very much in line with the recommendation of the Expenditure Committee that the donor should have been dead for a number of years. My right hon. Friend has chosen a period of 40 years as appropriate. I do not know whether "Forty Years On" was ringing in his ears when he made that decision. Again, whatever the period selected, a case could always be made for a shorter or longer period. We must strike an appropriate balance between respecting the wishes of the person who set up the charity and preventing the charity's funds from lying unused and losing their value. I suggest that that balance has been achieved.
Only one matter might have caused my right hon. Friend and I some concern as the Bill proceeded. A number of people have worked hard on the problems of parochial charities. I pay special tribute to Lady Faithfull who has shown great interest in this and indeed a wide range of social causes. My hon. Friend the Member for Woolwich, West (Mr. Bottomley) will be especially aware of her work with the all-party group. She introduced in another place the Parochial Charities (Neighbourhood Trusts) Bill. That Bill covered some of the same ground, but with crucial differences, covered by the proposals of my right hon. Friend the Member for Stratford-on-Avon.
I should also pay tribute to Sir Charles Kimber, not a member of either House but someone who has also thought deeply about these matters. He circulated a memorandum to the Committee considering the Bill in this House setting out certain criticisms. As there was some minor controversy on these points, I should explain to the House why the Government have not wavered in their enthusiasm for my right hon. Friend's Bill despite those criticisms.
Sir Charles was understandably concerned that the Bill might have the potential to destroy thousands of small charities. As I and my right hon. Friend have said, it is important to bear in mind that the Bill merely enables the trustees to wind up small funds that in their judgment can no longer serve a useful purpose. The Bill does no more than to give them that initiative. I should have thought that the concept employed by the word "destroy" would be utterly alien to what is merely an attempt to give trustees a better chance to deal fairly and effectively with the donor's bequests according to their own judgment.
Sir Charles also did not give full weight in his comments to the number of groups which had considered these matters over the years and sought this power. The Bill is no mere manifestation of legislative zeal on the part 573 of my right hon. Friend. He is responding to a need that has been identified by a number of different bodies in the past decade.
Sir Charles was concerned that the Bill offended the basic principle of charity law that a charitable trust cannot be allowed to fail. On the contrary, as the capital sum must be expended for the purposes of the charity the Bill will allow the trust to fulfil its purpose by allowing a larger sum to be expended. Indeed, it will probably permit trusts to fulfil their purposes more effectively than they could with small sums of interest in perpetuity.
We could not give Lady Faithfull's Bill the same warm welcome that we have given to my right hon. Friend's Bill because—I hope that this has been a consistent theme in the debate — we could not accept the element of compulsion. Lady Faithfull's Bill advocated a principle of compulsory amalgamation. I appreciate that there is a strong body of opinion to the effect that voluntary amalgamations have proved impossible to achieve. There is evidence that trustees of local charities are reluctant to see the funds of their charities diverted to neighbouring parishes in the way that I have described. It is also fair to state that the advisory powers of the Charity Commissioners have not always yielded the benefits that some outside observers would wish. Nevertheless, as I have said, we do not wish to contemplate such an element of compulsion at this stage.
We were also unable to be enthusiastic about Lady Faithfull's Bill because the resource implications for local authorities and for the Charity Commissioners would have been considerable and local authorities said that the obligations placed upon them would have made it difficult for them to implement that measure. The feeling was also expressed to my noble Friend that that Bill would have an indiscriminate effect, and that a parochial charity, working perfectly well at present, could be compulsorily swept up into an amalgamated charity, so that the benefit would be very mixed.
As I have said, my right hon. Friend's Bill covers much of the same ground but does so in a way that, in my respectful submission to this House, does not have any of the problems revealed by the other Bill, useful though a consideration of that other Bill has been in refining what seems to be the next step that we should take.
It has been most useful that the House should have had an opportunity of considering why my right hon. Friend's Bill is necessary. I end as I began, by thanking my right hon. Friend for allowing us the opportunity to have the debate. Charitable activity and enterprise are, we believe, very much a part of the core of English community life. Charitable spirit is flourishing as much today as it ever did, but there is a need to impose some practicable and realistic rules on the very small charities. That is what the Bill does, and we welcome it as a modest but very helpful reform in the administration and rationalisation of charities.
§ Mr. Peter Bottomley (Woolwich, West)
I apologise to my right hon. Friend the Member for Stratord-on-Avon (Sir A. Maude) for not being present while he was moving the Third Reading of the Bill. I was at a Commonwealth 574 Parliamentary Association meeting. I apologise to the House if I touch on areas which have already been fully covered.
I join in the tributes which have been paid to my right hon. Friend. The Bill and his actions demonstrate that the House of Commons usually works best when it works in small steps at sensible reforms. I had doubts, in the past, about the Expenditure Committee proposals and the Goodman report on the scale of sorting out and updating charity law. I approve of the objectives of those who spent many months in preparing recommendations. I have watched with interest successive reports of the Charity Commissioners on a wide range of issues. I have studied and occasionally indulged in the controversy over the difficulties that the Charity Commissioners and Ministers have had with certain charities.
However much one may feel frustrated and share the frustrations of a Minister over, for example, the Unification church—the Moonies—the independence of the Charity Commissioners needs to be protected as much as one would want to protect the independence of the judiciary. I welcome the ability to criticise them and engage in discussion with them. Rather than having Charity Commissioners who always do what the Government—or even the House of Commons, in a unanimous sense—want them to do, it is much better that the Charity Commissioners should have independence and be able to say, "No, the law does not require us to do that."
To try to update the general law of charities in one go would be counter-productive. I suspect that if the Labour party tried to do so over independent education it would run into difficulties. If it were to override those difficulties I suspect that the country would suffer enormously because of the many people involved in charity work and the many people who are recipients of charity.
To put my remarks in context, I should declare that I am involved with several charities, most of them substantial. I am chairman of the Church of England Children's Society and a trustee of Christian Aid, both multi-million pounds a year charities.
When we are talking of making it possible for trustees of small charities to modify rules of trust laid down by donors, we need also to emphasise how important it is that charities now, as before, should try to get direct donations, gifts and benefactions.
There is a great deal of publicity of indirect ways of raising money for charities. I do not criticise the charities for that. Often the indirect ways have done as much for publicity as for raising money. When considering charities in any way at all, we should always be willing to remind ourselves and others that direct giving is often the best giving. Even going a stage further and setting an example by sacrificial giving, it should be emphasised that the whole essence of charity is not that people give what they can afford but that often they given more than they can afford.
My experience of charitable work and the work of trustees of charities is that people are willing to give immense amounts of time, effort and concern. In many cases the value of the time that is given is greater than the funds being administered. There is nothing wrong in that.
My right hon. Friend's Bill allows trustees in different circumstances to make a decision for themselves that the purposes of their particular trust or charity would be best served and would be more likely to be in keeping with the 575 aims of the founder of the charity if the capital could be used as income. I do not think that my right hon. Friend would have proposed that, where it is merely a question of the bother of administering a small trust or charity, the trustees should then necessarily decide that they wish to treat capital as income.
In many areas it is a matter of pride — and also a good example — that people are willing to go on administering small endowments, with the intention that it should be done in perpetuity by their successors. Whether it is simply for symbolic reasons or for reasons of greater concern should not matter to us. The point is that where such trustees decide that they want to use the capital as though it were income, they should in those very resticted circumstances be empowered to go forward along those lines.
I acknowledge that the Minister did not take the opportunity to give the general Government view on the state of charities as a whole in Britain. I would not want to widen the debate too greatly by talking of a number of issues which charities themselves would like Parliament to discuss, but I hope I may be allowed to touch briefly on one of them. Before doing so, I suggest that it is perhaps a tribute to this House that on the day after some fairly exciting local elections, and perhaps in a time before a general election — when we shall be able to pay more tributes to my right hon. Friend and others who will be completing their service in this House—we are able to have a debate without party controversy. Perhaps I may say, in parenthesis, that there is no party controversy at the moment because the Labour party is apparently willing to leave to my right hon. Friend and two or three of his hon. Friends the responsibility for guiding the Bill through its Third Reading. The Labour party is right to trust us in that respect, as in other matters. It is right that the House of Commons should be able to change its mood from Prime Minister's Question Time on Thursday during local government elections to dealing with this sort of measure.
I should like to refer briefly to the effective income of charities. The Bill is concerned in the main with endowment income. If there were a continuing new flow of income from outside an endowment, there would stll be an intention for the trustees to keep the charity going or to rebuild an endowment that might have been hit by inflation or other things.
There has been a great campaign to relieve charities —certainly those above a certain size—of the impact of VAT. I suggest to the Minster—perhaps he will discuss my suggestion with the Treasury—that instead of simply looking at the relief of VAT he should consider whether the desire to boost the income of charities—which the Government have done fairly effectively in the past four years—or the desire to relieve them, in a way that is administratively simple, of taxes that should not be paid, could be met by following the method by which income tax is treated on life insurance premiums, and now on building society mortgage interest.
Perhaps I might put my suggestion in a sentence and then move on. Charitable income that is not from endowments, and is not for service charges from local authorities or others, should be regarded as coming from taxed income in all events. We should not require covenants to be made out all the time, because that writes off the widow's mite and other small donations. It is just as right to regard money that is put in a collecting tin for the Earl Haig fund as coming out of taxed income, and the 576 only time that it will not come out of taxed income is when it comes from people whose income is below the tax threshold. It would be right to impute the tax credit on that form of giving, just as it is for those who pay at the standard rate. However, I have diverted somewhat from the purpose of the Bill, and perhaps I should say no more on that matter.
My hon. Friend the Minister referred to the proposed legislation from our noble Friend Lady Faithfull. In general, when Lady Faithfull supports something and the Government do not, I would be on her side. Last week, when I supported something that the Government did not support, I was glad to have her on my side. She provided what I regard as legislative charitable help to a category of people whom I call elderly orphans. She and Baroness Seear managed to write into a Bill something that in my opinion would be of great advantage to and be thoroughly supported by the trustees of a number of charities concerned with the elderly, especially the National Council for Carers and their Elderly Dependants.
The point of view that has been put forward by the Minister about just making the Bill an enabling one is the right one, at least now in this Parliament. We should always try to take those assured and sensible steps with which my right hon. Friend will always be associated, and to have some scepticism in ourselves but perhaps going that extra stage that Lady Faithfull would like us to go, which has not been sufficiently established, and which might bring controversy into the matter. That would be of value to thousands of charities over the years, but only a few to begin with. People want to see that the enabling power can be used in a sensible manner, and then more people may have the confidence to re-examine their actions and trusts.
Perhaps I might illustrate the fact that the original intentions of benefactors may become out of date by an example from Oxford, with which I know my noble friend Lady Faithfull is associated. One of my wife's great-grandmothers was so upset that fellows' wives were not allowed to dine in college that she endowed a dinner to which wives were allowed to come. In fact, fellows could not go unless they brought their wives. This Poulton dinner was originally set up with an endowment of about £100. One could go along and have a ploughman's lunch, or something like that, although I am sure that it is grander than that. Now, of course, many colleges allow women to be fellows, and the original purpose is out of date. It is just a nice tradition. My wife's great-grandmother set up the whole thing as a charity for the purpose of the education of fellows so that they could meet the wives, or for the education of wives so that they could meet the fellows. Something along those lines could have been set up at any time during the past four or five hundred years and the trustees carrying the burden of administering the intentions of the benefactor might rightly say, "We shall move on from having Cheddar to Lymeswold, and we shall blow the lot, for the purposes of which the benefactor would thoroughly approve."
I come back to charities as a whole. I know that my right hon. Friend would not want any publicity about the Bill to prevent people from trying to establish more charities or new charities. However much he or I or anyone else might dispute the actions of certain charities, the idea of work for the public good without any prospect of profit, 577 for the avoidance of distress, disadvantage or handicap is a tradition to which we all give general support on almost all occasions, and specific support as well.
I pay tribute to the Charity Commissioners. In one or two of the charities in which I am involved we have had our differences with them on occasions, but that is a healthy process. In general, however, the support and advice that they give to charities, especially the small charities, is greatly to be welcomed. Whenever I hear of people having difficulty in getting a charity established—they cannot get the Charity Commissioners to accept their objectives, or whatever the case may be—I advise them to go and see the Charity Commissioners and have an open discussion with them. As long as the intention is right and the constitution or trust deed is right, there is normally a way round the occasional difficulties that arise because of the absence of much case law in charities and new legislation.
Part of the political process — speaking in a nonpartisan sense—is to try to make sure that people can match their actions with their ambitions within the framework of charity law. The Charity Commissioners have what I regard as an almost impossible job, in the same way as the Home Office has an almost impossible job in matters dealt with by the Bill that is to be considered next. Again, the common theme is the avoidance of distress, disadvantage and handicap. The legislative purpose is different, but the aims are the same.
The Charity Commissioners deserve a pat on the back. They must regard themselves as open to unwanted advice from this House on occasion, but I thoroughly support the independence of trustees and that of the Charity Commissioners, and progress in slow steps.
I congratulate my right hon. Friend on his success, and I hope that many trustees will consider taking advantage of the expanded powers that they may have. I believe that charities will find themselves in a better position after the passage of the Bill.
§ Question put and agreed to.
§ Bill accordingly read the Third time and passed.