APPLICATION OF MONEY BY DISTRIBUTING BODIES (Hansard, 28 April 1993)

§ Mr. Key
I beg to move amendment No. 40, in page 10, line 12, leave out from 'body' to 'for' in line 13 and insert 'shall distribute any money paid to it under section 22'.

§ Mr. Deputy Speaker (Mr. Michael Morris)
With this it will be convenient to discuss the following: Government amendments Nos. 41 and 42.
Amendment No. 11, inclause 24, page 10, leave out lines 33 to 35.
Government amendments Nos. 43 to 47.
Amendment No. 22, in clause 24, page 10, line 45, at end insert— '(4A) The Secretary of State shall, before making directions under subsection (1) and (3), consult the parties concerned and publish reasons for the making of such directions.'.

§ Mr. Key
I understand that my hon. Friend the Member for Stratford-on-Avon may wish to speak to his amendments Nos. 11 and 22, which are grouped with amendment No. 40. That is certainly acceptable to me, if, Mr. Deputy Speaker, it is acceptable to you.
On Second Reading my right hon. Friend made it clear that we were considering how the drafting of parts of clause 24 might be changed. In Committee I undertook to table amendments which would take account of some of the concerns expressed to us. The first change that we propose—amendment No. 42—would change the contents of directions which I might give to the distributing bodies. The original draft of the Bill would give the Secretary of State the power to direct bodies as to the purposes for which the money might be distributed or applied and adds the conditions which must be satisfied before money is distributed or applied.
We have listened carefully to the concerns of potential beneficiaries and of disinterested parties that, under these powers, a Secretary of State might be unnecessarily 1074 prescriptive. It is certainly not the intention to be so, but I understand that the original drafting gave cause for concern and that the distributing bodies might be presented with either a shopping list which they would be required to fund or with a long list of proscribed projects.
We propose, therefore, to replace the current subsection (1) of the clause with the one now on the amendment paper. This new subsection will enable the Secretary of State only to direct the bodies on matters which must be taken into account in distribution decisions. With this amendment there is no scope for the Secretary of State effectively to take the distribution decision himself. However, he will be able to set broad criteria for applications, for example, that capital projects should be favoured where possible—this might not be appropriate in the case of the Charities Board—or that partnership funding arrangements are to be preferred.
Amendment No. 45 specifically extends the scope of directions to the National Heritage Memorial Fund so that the NHMF must comply with them when applying money. This takes account of the fact that the NHMF has the power to apply money on its own behalf, to purchase objects or buildings of importance to the national heritage and to hold these for a transitional period.
Amendment No. 47 requires the Secretary of State to consult a distributing body before giving any direction to it. This is to ensure that directions cannot be made which are unworkable or without the views of the body concerned being taken into consideration and it reflects the undertaking that I gave to the Standing Committee.
In amendment No. 47 we accept the principle behind the first part of amendment No. 22. It is desirable that the issuing of directions should be informed by the experience and opinions of the distributors. I cannot, however, accept the second part of amendment No. 22 because the Secretary of State may not refuse to account for decisions taken in the fulfilment of his duties. But to require the reasons for every decision to be published would place on the Department the duty to produce documents which, to a great extent, would not be of interest to anyone save the distributors themselves.
During the consultation process, before a direction is issued, the distributors will be made aware of the intentions behind each direction. If a direction appears to be based on unreasonable grounds, the Secretary of State can be asked by Parliament to account for his decision. I hope, therefore, that hon. Members will agree that amendment No. 22 is not necessary.
I cannot accept amendment No. 11. Our purpose in drafting subsection (2) was to ensure that the distributing bodies did not act in a way that might give rise to conflicts of interest. A conflict of interest would arise if a distributor made grants to a body which it owned or wholly sponsored, or whose members were all appointed by the distributor, or whose membership was conterminous with that of the distributor. It is vital that the Secretary of State should be able to make it clear that certain categories of potential beneficiary should not receive money. This power is exercisable only by order, so Parliament would have the opportunity to scrutinise and the Secretary of State could be required to account for decisions taken on the use of the power.
In drafting the clause we considered whether it might be possible to state this aim explicitly in the Bill, and amendment No. 10 attempts to do just that. However, there would be problems in reaching a statutory definition 1075 of a controlling interest, particularly since we are likely to be dealing with public bodies which are not always constituted in similar ways. In addition, the inclusion of a statutory definition would remove any discretion on the part of the Secretary of State to take a reasonable view.
It is possible that a body might appear technically to be substantially controlled by the distributor, but the working arrangements might make a conflict of interest unlikely. The option suggested here would be to remove the Secretary of State's power entirely, and that we cannot accept. The subsection as drafted would make it possible for certain types of potential beneficiary to be ruled out, but at the same time to ensure that a decision to do so could be scrutinised. So I hope that right hon. and hon. Members will agree that this mechanism is necessary and desirable and that they will agree to retain the subsection.

§ Mr. Corbett
I thank the Minister for the way he has responded to the concerns voiced by hon. Members on both sides of the House. He understands them and has set out fairly to meet them.
As the Minister knows, both the Sports Council and the Arts Council have close working relationships with the Department of National Heritage, but they are their own people. They work closely with and consult officials in the Department, but in a hands-off way. I am quite sure that those officials would never try to lean on the Sports Council or Arts Council when those bodies came to distribute the grants allocated to them. The councils lead lives separate from that of the Department, although they sensibly get together with Department officials from time to time.
I invite the Minister to acknowledge that this is so—that the Government have no intention of disturbing the relationship. I hope that he will confirm that the councils' role as distributors is not to be altered. The Minister, I am sure, can easily give this undertaking; but he will understand that there is some nervousness about the future. We are all reluctant about and resistant to change, and especially suspicious of anything new. I am sure that the Minister can make a statement to allay these fears.

§ Mr. Alan Howarth
This is a very important group of amendments. In Committee, my hon. Friend the Minister undertook to redraft subsection (1) of clause 24 to make the powers contained in it less sweeping. He has been as good as his word, and I welcome the Government amendments, which limit the Secretary of State's powers in a reasonable way and require him to consult before making a direction.
My amendment, No. 22, contains, as the Minister observed, a requirement additional to the requirement that the Secretary of State would place on himself by means of Government amendment No. 47. He would be required not just to consult but to publish reasons when he makes directions. I believe it right that if the Secretary of State uses his power in an area where traditionally the Government have dealt at arm's length, he should explain what he has in mind.
I did not entirely follow the Minister's problem with the documents. No one is asking for immense numbers of documents to be published. We simply want some explanation of why the Secretary of State intended to use his power of direction in this sensitive area.
1076 Subsection (2) will also give rise to some anxiety. In his letter of 3 March to members of the Committee, the Minister explained that it is intended to ensure that the distributing bodies do not act in a way that would lead to conflicts of interest. The provisions of subsection (2), however, give the Secretary of State a much broader power to restrict persons or classes or descriptions of persons who may not be funded by the distributing bodies. The subsection therefore needs re-examination.
Amendments Nos. 11 and 10 attempt to deal with the matter in such a way as to make the Bill reflect more precisely the intention behind subsection (2), as set out in the Minister's letter. I hope that the Minister will accept the purpose of the amendments, which is to address in a more precise way the matter about which he is concerned.
Amendment No. 10 places a clearly stated duty on the distributing bodies to ensure that no possible conflict of interest arises, or seems to arise, in their grant-making decisions. Amendment No. 11 seeks to remove the more general power of direction to exclude beneficiaries, a power that I cannot imagine the Government wishing to use.
Unless clause 24(2) is replaced or redrafted, it runs the risk of affording some future Secretary of State the opportunity to forget the intention behind the clause and to use it to restrict the payment of grant to organisations that are perceived to be at odds with Government policies. We rightly pride ourselves on being able to operate an effective arm's-length relationship between Government and the voluntary sector, as well as the arts, heritage and sport. I am certain that we should not do anything to undermine that proper liberal principle.
11.15 pm
In the Committee debate on the clause, the Minister emphasised that the power in subsection (2) could be invoked only by order. While that represents some safeguard against the power being used unreasonably. it does not provide the same watertight guarantee that would be provided by redrafting. The terminology of the amendment is taken from the Local Government and Housing Act 1989 in which the question of local authority interests in companies is dealt with.
No doubt the amendment would technically need to be accompanied by other amendments to clarify aspects of its definitions and so on, but if my hon. Friend considers that the amendment is not the appropriate means of specifying his intention, perhaps he will undertake to look at the matter again with a view to tabling an amendment in the other place so that the matter may be made clear in the Bill.

§ Mr. Key
I thought that I had covered all but one of the points raised by my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth). The exception was the detail in amendment No. 10, which I do not think is necessary.
We are satisfied that the intention of amendment No. 10 is correct, that bodies should not distribute money to bodies in which they have a controlling interest. We thought carefully about a number of wordings, any one of which was similar to the amendment. However, I regret that the amendment as drafted would not work. Defining a controlling interest would be impossible and would be open to many interpretations and challenges. We 1077 concluded that the measure in clause 24(2) is the most practical approach. It might look draconian, but it is not intended to be.
I should like to read my hon. Friend's remarks to see whether I have failed to answer all his points. Perhaps he would also read what has been said, and we shall see whether we need to reconsider the matter.
I have no difficulty in giving the hon. Member for Birmingham, Erdington (Mr. Corbett) the reasonable assurance that he seeks. We have no intention of disturbing the relationship that we enjoy, and the arm's-length principle remains intact because it is a well-proven way forward.