Registrations and Accountability of Charities (Hansard, 20 June 1984)

§ Mr. Timothy Yeo (Suffolk, South)

I beg to move, That leave be given to bring in a Bill to require all charities to be registered; to make regular annual returns (including independently audited financial accounts) available for public inspection, and to grant access to annual general meetings to all financial supporters. The Bill would require all charities to be registered, to make regular annual returns, including independently audited financial accounts, available for public inspection and to grant access to annual general meetings to all financial supporters.

There can be few people in the country who have not had some contact with charities in one form or another, whether as a voluntary worker, a financial supporter making a donation or as a direct or indirect recipient of the service of a charity. However, the popular perception of charities remains focused on a few well-known organisations such as Dr. Barnardo's and Oxfam, or, at the other end of the scale, local charitable activities such as — [Interruption.] My hon. Friend the Member for Ealing, North (Mr. Greenway) explained that he would have to leave before I had finished presenting the Bill to the House. As I said, at the other end of the scale there are local charitable activities such as the repair of a church roof.

Four essential characteristics reflect the state of charitable activity today. First, there is the size. Collectively, charities are very much larger than most members of the public realise. In 1980, the last year for which any accurate estimate is available, total charitable income from all sources amounted to more than £5 billion, which was more than 2 per cent. of the gross national product for that year. It also represented more than half the total defence budget and more than half the total EEC budget at the time. Within that very large collective total there is an increasing number of large organisations, 15 of which have an annual income in excess of f 10 million. The organisation for which I was responsible before I became a Member of Parliament, the Spastics Society, now spends more than £25 million a year.

The second characteristic is the extensive tax concessions which charities quite properly enjoy, with full public support. Charities are a uniquely privileged category of organisation. They enjoy complete freedom from income tax, corporation tax, capital gains tax and capital transfer tax, and even enjoy mandatory partial relief from local authority rates. Those concessions are now estimated to be worth more than £500 million a year in total in terms of lost revenue to the Treasury.

The third characteristic is the increased direct financial support that is available to charities from the Government. In 1981–82, central Government grants amounted to £130 million, which was more than three and a half times the amount five years before. In addition, quangos such as the Manpower Services Commission and other agencies grant more than £100 million a year to charities. Also, a large amount of unquantified local authority grant goes direct to charities.

The fourth characteristic is the almost complete absence of accountability within the charitable sector. Not all charities even have to be registered. Of those that are 315 registered, about three quarters have not filed any financial accounts during the past five years. Clearly what goes on in those organisations is not properly scrutinised. In addition, charities are not required to admit people to their annual general meetings in the way that shareholders are admitted to the annual general meetings of companies. It is astonishing that bodies which receive so much direct and indirect Government aid, and which enjoy such extraordinarily favoured status, are not more answerable to the public or the taxpayer. It is against that background that I produced my Bill.

Before explaining the three provisions in the Bill, I should tell the House that the present scope for abuse with regard to charities is very considerable. However, from my experience and the extensive contacts that I have in the charitable sector I can happily say that at present cases of abuse are limited, although there are some signs that the number is increasing. The vast majority of charities are doing an excellent job and are responsibly managed but, as the Charity Commissioners make clear in their annual report, which was published last week, there is a danger that the image of charities could be tarnished if malpractice became more widespread.

My Bill has three provisions. First, it introduces a new and unified system of compulsory registration for all charities whose income is in excess of £1,000 per annum. That puts an end to the existing anomaly whereby there is no system of registration at all in Northern Ireland, very limited and very narrow categories of charities need to be registered in Scotland, and the system of registration in England and Wales is very incomplete.

Charities should be seen as part of the public domain. Compulsory universal registration of all the larger charities in the way that I have suggested would be a recognition of the fact that they are in that public domain. The Bill provides for a registrar of charities, but in practice the registrar could work with, or be incorporated within, the Charity Commission.

The second provision requires all registered charities to make an annual return containing a list of the names and addresses of the current trustees. The return would also include an up-to-date set of annual accounts and there would be an obligation to subject them to an independent audit. The registrar would need to charge a modest fee to cover the cost of maintaining the register, and all the returns would be available for inspection by the public. Failure to make an annual return within a reasonable time limit would render the trustees personally liable to financial penalties—a sanction which would ensure that the trustees took a more active interest.

The third provision would allow anyone who has given money to a charity to have the right to attend its annual general meeting. To obtain admission, donors would have to produce an official receipt from the charity concerned, and once admitted they would not be permitted to vote, but could raise subjects, provided that they had given advance 316 written notice of their intentions. I do not believe that that would lead to annual general meetings being swamped by cranks. It would concentrate the minds of the trustees and serve to promote both accountability and efficiency.

The overall purpose of the Bill is to deter and prevent malpractice within the charitable sector. I hope that the substantial public resources involved in charitable activity will thereby be more properly used. That will help to promote the confidence which the public and the Government have in charities and will lead to greater resources being made available to them. In turn, that will enable them to do the increased job that we all want them to do.

On 4 May the Chancellor of the Exchequer, speaking about charities, said: There is no public opinion brought to bear upon them. The press knows nothing of their expenditure. Parliament knows nothing of it. It is too much to say they are managed by angels and archangels and do not, like the rest of humanity, stand in need of supervision, criticism and rebuke. Those are the words, not of the present Chancellor of the Exchequer, but of Mr. Gladstone, who spoke on 4 May 1863 during a debate on his proposal to tax charitable bequests. That proposal was quite properly thrown out by the House. Although I should be very pleased to have my remarks quoted approvingly in the House in 121 years' time, I hope that we shall not have to wait until the year 2105 before the simple but necessary reforms contained in my Bill are implemented.