§ [The Deputy Chairman of Committees (Lord Brougham and Vaux) in the Chair.]
§ The Deputy Chairman of Committees (Lord Brougham and Vaux)This is the fifth day of the Charities Bill in Grand Committee. Members of the Committee know the rules by now, but there will be Divisions in the House. When the Division Bell rings, I shall ask the noble Lord to stop speaking immediately. Members of the Committee will kindly come back as quickly as possible. We will stop for 10 minutes or until such time as the Front Bench spokesmen arrive. The result of the Division will appear on the screen later.
Schedule 4 [Appeals and applications to Charity Appeal Tribunal]:
§ Lord Hodgson of Astley Abbottsmoved Amendment No. 98:
Page 77, leave out lines 15 and 16.The noble Lord said: I rise to speak to Amendment No. 98. As the Deputy Chairman has reminded us, this applies to Schedule 4, which concerns,
Appeals and applications to Charity Appeal Tribunal".Amendment No. 98 would remove paragraph 2(1) on page 77. Paragraph 2 of new Schedule 1C to the 1993 Act relates to hearings by the tribunal of appeals against orders made by the Charity Commission under Section 9 of the Charities Act 1993. Section 9 states:(1) The Commissioners may by order—
- (a) require any person to furnish them with any information in his possession which relates to any charity and is relevant to the discharge of their functions or of the functions of the official custodian;
- (b) require any person who has in his custody or under his control any document which relates to any charity and is relevant to the discharge of their functions or of the functions of the official custodian—
- (i) to furnish them with a copy of or extract from the document, or
- (ii) (unless the document forms part of the records or other documents of a court or of a public or local authority) to transmit the document itself to them for their inspection".
Schedule 4 to the Bill (page 79, lines 46–52) allows anyone who is required, by an order under Section 9, to produce information or documents, to appeal to the tribunal against the order. The tribunal may, according to Schedule 4, quash the order or substitute any order that the commission could have made.
252GC However, paragraph 2(1), the subject of this amendment, of Schedule 4 limits the power of the tribunal in considering such an appeal, such that the tribunal may not consider the contents of the commission's order.
Sub-paragraphs (2) and (3) further restrict the tribunal's powers in relation to appeal against Section 9 orders. According to paragraph 2 as a whole, the tribunal may allow the appeal only if the document or information does not relate to a charity or is irrelevant to the discharge of the commission's or the official custodian's functions. In other words, the tribunal may not consider whether the commission was making proper use of its powers in making the order in the first place and quash it on that basis.
We can see no rationale for treating Section 9 orders differently from other matters. It would be preferable for the whole of paragraph 2 to be removed, with Section 9 orders being treated either according to the general appeals process prescribed in paragraph 1 or as a reviewable matter, under paragraphs 3 and 4. But we would be content with removing Section 1. I beg to move.
§ Lord Bassam of BrightonI think that I need quite a lot of persuading on that. I listened carefully to what the noble Lord said. I shall explain why that is and will go quickly through what Section 9 of the Charities Act 1993 does.
It is a general information-gathering power, which gives the commission the power to call by order for information and copies of documents from a charity or a person. But it can only do so on the following grounds: first, that the information is relevant, obviously, to the discharge of its functions or that of the official custodian; and, secondly, that the information or document relates to a charity.
It is entirely appropriate that such orders can he appealed against on the grounds that the information does not meet one or both of those criteria, which is why the criteria for appeal against the use of the power set out in Schedule 4 directly reflects the criteria for the use of the power as provided for in Section 4 of the 1993 Act.
The limited right of appeal here focuses the tribunal on the legitimacy of the commission's action in issuing the order. We do not believe that there is a need to extend the rights of appeal. Indeed, it could be argued that any further right to appeal would force the tribunal effectively to second-guess the operational work of the commission below a level at which a decisive operational decision had been made. That would curtail the commission's ability to carry out its business effectively and efficiently.
It is perhaps worth remembering that, in practice, orders are often made under Section 9 as a way of providing a person or a charity with the legal comfort of a statutory basis for providing the commission with information. Where the commission takes further action on the basis of the information supplied, there will generally be a separate route of appeal to the tribunal. 253GC I hope that the noble Lord will agree that that is not a full decision of the commission warranting an onward appeal. The amendment is unwise for the practical running of the commission and its ability to use information and be operationally decisive. I hope that the noble Lord will be happy to withdraw it.
§ Lord Hodgson of Astley AbbottsAlthough I am grateful for that explanation, I am not sure that I fully understand it or agree with it. It does not address the question of why the appeal could not consider whether the commission was making proper use of its powers in making an order, and quash it on that basis. However, this is quite a technical matter about which the Charity Law Association was concerned. I will not endeavour to prolong our discussion this afternoon. I will read carefully what the Minister said, consult and see whether he has been able to answer the technical point. I do not think that he has, but I will rest there and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ Lord Phillips of Sudburymoved Amendment No. 99:
Page 78, line 27, at end insert—( ) References in the second column of the Table to any other person who is or may be affected by the decision, direction or order shall include any person or persons representing or acting on behalf of any class of persons (including charities) who may be thus affected.The noble Lord said: The amendment relates to Schedule 4, which clarifies what decisions, directions orders and matters may be appealed against or reviewed by the Charity Appeal Tribunal. The middle column of the table in the schedule sets out those entitled to appeal or to seek a review and the third column sets out the powers exercisable by the tribunal with regard to the matter appealed or to be reviewed.
This is a probing amendment. I am not entirely sure whether those to whom my amendment refers—namely,
persons representing or acting on behalf of any class of persons (including charities) who may be",affected by the decision, direction or whatever—are or are not within entry (c), as it typically is in the column: the class of persons who can seek a review or make an appeal, comprising,any other person who is or may be affected by the decision".Explaining that has not been easy and I am sure that I have confused the Committee, but I hope that what I am getting at is clear enough, because it would be a sorry state of affairs if, for example, a group of charities felt that an issue decided on by the Charity Commission was inimical to their joint interest and selected an individual or one of the charities to act on their behalf, but that individual was cut out under the wording of the table from bringing the matter before 254GC the Charity Appeal Tribunal. That is to be one of the most important advances we hope to achieve by the Bill. On that basis, I beg to move.
§ Lord Bassam of BrightonIf the noble Lord, Lord Phillips, is confused in moving the amendment, I am probably on reasonably safe ground. I shall try to confuse him—no, no.
I am grateful to the noble Lord for moving this probing amendment. It gives me the opportunity to clarify how the Government intend this aspect of the tribunal to operate.
Schedule 4 provides a list of all the commission's decisions, directions and orders that could be appealed to the tribunal, the persons that could bring each type of appeal and the findings that the tribunal could make in relation to each type of appeal. For most of the commission's decisions, directions, and orders, the table in Schedule 4 provides the right of appeal to any person who is or may be affected by the decision, direction or order. A person who is or may be affected by the decision is not defined in the schedule. That would be a matter for the tribunal to determine in each case.
As I understand it, it is usual practice to allow an appellant to be represented at a tribunal. The representative need not be a lawyer—after all, that was the original purpose of tribunals, to try to move away from that mode of operation. The Bill would allow a number of parties to bring an appeal, somewhat like a class action and they could agree to use the same representative to put their case. However, if a number of parties were to make an application to the tribunal, it would have to be satisfied that all the parties in question were affected by the decision and therefore eligible appellants. For example, if 10 parties were to make an application to the tribunal, but only seven could demonstrate appeal rights, the tribunal would not be able to make a decision in relation to the other three.
It would not be appropriate to give direct appeal rights to representatives, unless the representative was an affected party in his own right. The right to appeal lies with the person listed in the second column to Schedule 4, as the commission has made a decision which affects that person in some way. It will be for the tribunal itself to determine whether an applicant could be considered a party to proceedings by virtue of being, or potentially being, affected by the commission's decision, direction, or order. It is right that the tribunal itself consider these matters, as the circumstances will vary in each case or class of case.
I can help the noble Lord by assuring him that in drawing up the rules, full consideration will be given to allow for the proper representation of parties before the tribunal. As I have said, the rules will be subject to extensive consultation and I would be happy to ensure that noble Lords involved in the Grand Committee's consideration of the Bill will be part of that consultative process. I hope that the noble Lord will accept that we do not consider it appropriate for a person acting in a representative capacity, but who is 255GC not himself affected by the decision, to be given appeal rights and I hope that the noble Lord will withdraw the amendment.
§ Lord Phillips of SudburyI shall read the noble Lord's words carefully and, for the time being, I beg leave to withdraw the amendment. I am obliged to him.
Amendment, by leave, withdrawn.
[Amendment No. 100 not moved.]
§ Lord Phillips of Sudburymoved Amendment No. 101:
Page 85, line 16, column 2, at end insert ", and (c) the charity trusteesThe noble Lord said: The amendment deals again with the table to Schedule 4. particularly a class of decision, which may be appealed against to the tribunal, that is an order made by the Charity Commission under Section 73C(5) or (6) of the 1993 Act, which is to be found in Clause 35 of the Bill. That clause inserts into the Charities Act 1993 more protective provisions concerning the position of a trustee who is disqualified from receiving remuneration under the 1993 Act.
[The Sitting was suspended for a Division in the House from 3.44 to 3.55 p.m.]
§ Lord Phillips of SudburyThis amendment again deals with the table to Schedule 4, setting out in column 1 the basis on which an appeal or review can be asked for; in column 2, those who may appeal or ask for a review; in column 3, the powers exercisable in response to the appeal or review. This is a particular addition to one of the many matters included in the table—specifically, that part of the table that deals with orders under Section 73C of the 1993 Act, which is referred to in Clause 36, in the context of changes in charity law vis-à-vis remuneration of trustees. The measures will be inserted into the Charities Act 1993 to make plain what is the new regime. Broadly, the new regime sanctifies the remuneration of trustees under carefully controlled circumstances.
Under Section 73C, the commission can disqualify someone from receiving remuneration and ask for remuneration to be reimbursed. The trustee affected by that can appeal to the tribunal. To get to the sharp end of the matter, the sole point of the amendment is that besides the trustee whose remuneration is to be taken away or reimbursed and besides,
any other person who is or may be affected by the order",we believe that the trustees of the charity concerned should be allowed to appeal against a tribunal decision. We believe that because, very often, trustees will have a strong view as to the circumstances in which the matter is dealt with by the tribunal and a strong view about the decision reached by the tribunal.It seems natural and necessary that the trustees, having their own objective and considered view about the fairness or unfairness of the tribunal decision, should themselves be of the category of people who can bring an appeal or review. But as things stand, they are not in either the first or second category. It is of 256GC some importance that they should be allowed to present their reviews arid request an appeal when necessary. I beg to move.
§ Lord Hodgson of Astley AbbottsI have an amendment in this group, Amendment No. 159, which has as its purpose an objective very similar to that raised by the noble Lord, Lord Phillips, in moving his amendment. Indeed,
the trustees of the charity",are mentioned in paragraph (b) of my amendment, and are the thrust of the noble Lord's remarks.The amendment is not to Schedule 4, as is the noble Lord's amendment, but would introduce a new subsection (9) to Clause 35, on page 33 of the substantive Bill. The noble Lord has made his points on the matter. We do not object to the provisions of Clauses 34 and 35, which widen the definition to not only trustees but persons connected with trustees and provide for disgorgement for breach. We do not object to those. However, we are concerned that the draft Bill contained a provision in Clause 28(8), I think, that any trustee or person who was required to repay should have the right of appeal to the Charity Appeal Tribunal, and this provision has now been lost in the substantive Bill.
The Law Society has drawn our attention to that point and, indeed, has suggested that it is better to put the provision on page 33 rather than in the schedule. Far be it from me to decide exactly where the best place for it is. Obviously we are concerned about the omission and we understand that it could involve a breach of the provisions of the European Convention on Human Rights both as to deprivation of property and the right to be heard by a tribunal. If such a provision for an appeal is not retained, there is a risk that the commission's order will be incapable of challenge and the commission will be given an uncontrolled power. That would be most unsatisfactory.
While I entirely support what the noble Lord, Lord Phillips, said, Amendment. No. 159 would reinsert the paragraphs in the draft Bill, ensuring the right of a trustee facing disqualification to appeal to the Charity Appeal Tribunal.
§ 4 p.m.
§ Lord Bassam of BrightonThese amendments work together in the sense that they provide for "charity trustees" to be specified as persons eligible to appeal against an order of the Charity Commission requiring a charity trustee to repay any remuneration that he or someone connected with him has received from the charity or requiring the charity trustee or a person connected with him not to receive that remuneration.
I think that I indicated earlier that careful consideration had been given to rights to appeal in relation to orders, decisions and directions of the Charity Commission, and, as we commonly understand, the appellants in every case are provided at the table in Schedule 4. 257GC In dealing with the amendment, it may help if I explain a little more about why an order under Section 73C would be made in the first place. Under the provisions of the Charities Bill, a charity trustee would be disqualified from being involved in any decisions relating to the agreement between the charity and him or someone connected with him for the service provided to that charity. So, for example, a charity trustee who was a trustee of a village hall and a plumber would be disqualified from acting as a charity trustee in relation to any agreement made between him and the village hall for his services as a plumber. The Charity Commission would make an order requiring that disqualified trustee to repay some or all, or not to receive some or all, of the remuneration for a service which he provided only where it was satisfied that he had acted as a charity trustee in relation to the agreement when he was disqualified from doing so.
As currently drafted, the Charities Bill provides that the trustee or connected person and any other person affected by the order may appeal against an order under Sections 73C(5) or (6) of the 1993 Act. And so the right of appeal here already extends to the person subject to the order.
On the matter of conferring the right of appeal on the charity trustees, it is the duty of the charity trustees to act in the best interests of the charity. In most circumstances, we would argue that it would not be in the best interests of the charity for the charity trustees to oppose an order requiring someone to repay or not to receive remuneration from the charity. It might be the case that the charity trustees support the charity trustee in question, but it would be for the relevant charity trustee to submit the appeal and not the charity. If, in a particular case, the charity trustees had a legitimate interest in pursuing an appeal, they would in any event be able to do so as they would fall within paragraph (b), which refers to,
any other person who is or may be affected by the order".Having explained that, I hope that the noble Lord will feel able to withdraw his amendment.
§ Lord Phillips of SudburyI am grateful to the noble Lord. As he said, the trustee whose remuneration is being interfered with has a specific right under the table to make an appeal. But I put this to the Minister. He said that the trustees of a charity in any particular circumstances may be any other person who is affected. However, with great respect, I do not think that that is consistent with the way in which the table is scheduled because many parts of the schedule have three categories of person. For example, the middle of page 85, just under the place where the amendment would be inserted, states that the persons who may bring the appeal are,
(a) the charity trustees,(b) — the charity itself, and(c) any other person who is or may be affected by the decision".That is repeated all the way through, so there is a distinction in the Bill between a person affected and the charity trustees. With respect again, a great deal of 258GC importance would surely be attached to an order made by the Charity Commission for a trustee to repay, for example, a substantial amount of remuneration because the complicated provisions inserted by the Bill into the Charities Act had not been pursued.The charity trustees may have a very particular point of view, in terms of the whole morale and functioning of their charity. I can imagine circumstances in which a trustee who was in the eye of that storm might well step back and say, "I absolutely refuse to take any steps to protect myself. That is not what I want to do or should do. It is inimical to my view of trusteeship". The trustees of the charity might be strongly of the view that the best interests of the charity have not been served by the order made by the Charity Commission, and thus might want to bring an appeal, largely because of the view taken by the individual trustee affected.
I would be grateful if the Government would review the matter. I see no reason at all why they should not add "the charity trustees", as they have done in so many of the other appeal rights. That would overcome the circumstances about which I am speculating.
§ Lord Bassam of BrightonIn response, it is worth saying that most orders are made on the charity, so that the trustees are given a specific right and are clearly affected. Under the power, the order is made on a trustee individually. The other trustees might be persons affected but are not always so. I am not sure that the problem that the noble Lord sees is in reality a difficulty. I am minded, similarly, to reflect further on his words. With all due respect to him, there may he a misunderstanding on his part. I am always open to taking a second look at issues, but I do not necessarily follow what he is saying on this matter.
§ Lord Phillips of SudburyI hesitate ever to suggest that the misunderstanding could be on the part of the Minister, but I shall do so on this occasion. Frankly, he needs to satisfy me that, if his argument is correct—if,
any other person who is or may be affected",includes charity trustees—why does the rest of the table separate those groups and include both of them?
§ Lord Hodgson of Astley AbbottsIt is interesting that the Law Society, which has also been concerned on the subject, suggests adding the third category to which the noble Lord refers in its amendment, even though that amendment comes in a different place. It thinks that there is a problem along the lines that he is describing.
§ The Deputy Chairman of CommitteesI am afraid there is a Division, so we will have to adjourn for 10 minutes.
§ Lord Bassam of BrightonDoes the noble Lord want to withdraw his amendment so that we can move on?
§ Lord Phillips of SudburyAs a matter of sentiment, no, but as a matter of practice, yes. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn. 259GC [The Sitting was suspended for a Division in the House from 4.9 to 4.19 p.m.]
§ Lord Hodgson of Astley Abbottsmoved Amendment No. 101A:
Page 85, line 32, at end insert—The noble Lord said: Amendments Nos. 101A and 147A concern the right of charities to make anonymous donations. Amendment No. 147A inserts a new clause into the Bill to this effect and is the central plank of the discussion. However, since under our proposals the Charity Commission will have the power to require disclosure, this in turn gives rise to an event which is appealable to the Charity Appeal Tribunal. Hence the grouping with Amendment No. 101A, which adds that event to the lengthy table given on pages 79 to 85 in Schedule 4 to the Bill, which discussed earlier. The grouping is slightly strange, therefore, because we have been forced to approach the issue back to front, considering the appeal before we have considered the event. However, "that's the way the cookie crumbles", as they say.
"Determination of the Commission under section 75F(2) of this Act to require trustees to make disclosure of a donation otherwise sought to be made without disclosure otherwise than as referred to in section 75F(1)." The Persons are—(a) the charity trustees of the charity to which the determination relates, and (b) (if a body corporate) the institution itself. Power to quash the determination and (if appropriate) remit the matter to the Commission with such directions as the Tribunal may think fit." The purpose of the amendments is self-evident. No charity can properly seek to have its operations cloaked in secrecy from its regulator, but the fact remains that some charity donors will wish to hide their support from those whom they have supported. That will require both an element of non-disclosure of the source—or the recipient—and the fact of the gift in the accounts, which will simply have to be referred to under some general heading such as, "other charitable expenditure". The effect of the two amendments would be that, if a charity donor so wishes, he or she may donate while remaining anonymous.
The reason for such anonymity is simple. Doing good by stealth has always been a form of philanthropy, which has been seen to have the highest merit, because it is done for the good of the recipient without the donor taking any credit for him or herself. It was Alexander Pope who said:
Do good by stealth, and blush to find it fame".More practically, in some cases donors may wish to protect themselves against the possibility that a substantially publicised donation may attract an excessive workload for trustees in terms of applications for donations from other potential donees who believe that they, too, might have a claim for similar bounty.
260GC It is no more than a statement of fact that many donors prefer their donations not to be too readily traceable. The use of anonymous names for charitable donor foundations is a commonplace and has been used to try to achieve anonymity. Of course, all too often, the anonymity originally sought is lost as the true identity behind the donor foundation becomes well known. The result can be that those otherwise inclined to make charitable gifts through foundations may if denied the chance of anonymity be tempted to limit their generosity to one-off gifts out of income through the medium of specially created anonymised CAF accounts, or similar. That cannot be in the interests of the charitable sector.
As long as there is a suitable mechanism for ensuring that the anonymous gift cannot be shielded from disclosure to the Charity Commission and/or the Inland Revenue, and the commission has suitable powers to require disclosure if it thinks fit, charities ought to be at liberty to seek to give anonymously.
My noble friend Lord Sainsbury spoke powerfully on this point at Second Reading, and I know that he wants to contribute to the debate this afternoon, so I shall say no more. But I hope that the Minister understands the persuasive logic of the amendment. I look forward to hearing the Minister's reply. I beg to move.
§ Lord Sainsbury of Preston CandoverAs I have not spoken in Grand Committee, I wish to declare an interest as I did on Second Reading. Having raised this issue in the speech, I welcome and support the amendments. I remind the Committee that the importance of the grant-making sector is within the charities—the importance of not only the size of the grant-making trusts, which give something like £22 billion a year in donations, with regard to the top 500, but also their role in innovation, taking risks and supporting unfashionable causes. They are an important part of the charity sector.
We do not want simply to rely on the existing grant-making trusts, but do all that we can to encourage new wealth to do what previous generations have done and commit funds in perpetuity—rather than using the excellent system of gifts, arid the benefit that can come from the gift system. That is now more attractive to a large benefactor, as it helps him to keep his anonymity, using gift aid. It can be entirely private and he need have no dealings with the Charity Commission in the gift aid to a charity, so he is free of bureaucracy. At present, we have a situation whereby most senior QCs recommend to their clients, when considering a new foundation, that they should not do so because of the hassle, the bureaucracy and publicity if they did it that way rather than through gift aid.
If the present rules applied, I would never have set up the foundation I did. The rules changed only in 1995, requiring trusts to list their 50 largest grants by name. An exception was allowed if there was a particular reason for anonymity on a small number of the 50. The second SORP came out in 2000, making it necessary to obtain clearance from the Charity 261GC Commission to give anonymity to exceptional donations. The commission showed no liking of that and, to my knowledge, it was difficult on the issue.
However, worse was to come. The new SORP, which is presently in consultation, contains a rule that anonymity can be given only to grants which could lead to violence or physical harm as a result of publicity. We can all think of what that might refer to. It shows that the Charity Commission does not like anonymous gifts.
Of course the commissioners have full information, as must the Inland Revenue, but I believe that it is almost like a human right: you should be able to give money to a foundation and to make the give without drawing attention to yourself. I invented the name "Linbury" for my own trust in order to disguise its origin, but it did not last long. It was the first half of my wife's name and the second half of mine, but inevitably it soon leaked out. You cannot achieve anonymity by being clever with a name.
I hope that the Government will look favourably on the need to return to where we were in 1995 when it was possible to make anonymous gifts.
§ Lord SwinfenI have slightly mixed feelings about the amendment because I administer a grant-seeking trust. Grant-seeking charities like to know where their funds are coming from so that they can more appropriately target their appeals for funds. Understandably, they spend a lot of time researching various volumes to discover the grant-making foundations which are liable to look kindly on their activities—the purposes for which they are seeking their funds.
Individuals can make anonymous donations with ease. A few notes of the realm in an envelope sent to a charity with no covering note is an anonymous donation. Anonymous donations can be made by instructing one's bank to send a banker's draft—money taken from your account—to the charity, which will have no idea of the source. It may write to the bank asking for thanks to be passed to the client, but it will not know who the client is. Anonymous donations can also be made through charitable foundations.
On the whole, however, I strongly support the amendment. It helps charitable foundations to make gifts outside their normal giving remit if they come forward with a cause or a charity which they believe richly deserves to be supported but from where they do not want to make appeals in future. To allow charitable foundations to make anonymous grants, particularly substantial ones—they are the only bodies which can make substantial grants— would be extremely useful. I therefore follow the example of my noble friend Lord Sainsbury in supporting the amendment.
§ 4.30 p.m.
§ Lord Phillips of SudburyI wish to ask some questions of the noble Lords, Lord Hodgson and Lord Sainsbury of Preston Candover, who, I think, said that 262GC being clever with names was no guarantor of anonymity. I am bound to say that I do not believe that he was very clever with his name, but he is a notable philanthropist and we are hugely grateful to him for that.
However, as one who, over many years, has dealt with the charity sector, one finds circumstances which are not all that unusual where a charity is offered a large sum of money by a donor, the name and identity of whom the trustees have misgivings about and are concerned that if they accept the gift, the donor would be at a commercial advantage or a philanthropic donor would make capital out of that gift. That could seriously harm the charity. I am not sure that the amendment takes account of that.
If it were to mean that a charity was offered anonymous funds on a statutory condition that they could not either know who was giving the funding or make anything of it, there would be potential dangers—it would be open to that donor, having hidden behind the provisions of this clause, to decide to make public the donation in circumstances that could cause embarrassment.
§ Lord SwinfenI am grateful to the noble Lord for giving way. He used to work for a Christian charity that had strong objections to receiving donations from bodies involved in gambling or alcohol. Obviously, if the so-called anonymous donor, after having made an anonymous donation, made public that donation and the charity disapproved, there would be nothing to stop the charity returning that donation. I know that they may not like it, but that has been done by charities in the past, where they have not approved of where the money has come from. I am sure that that will happen again.
I know that grant-seeking charities like to keep their funds, but they have the power to return an anonymous donation once the donor becomes public because they do not approve of how the funds have been raised in the first place, and to make public the fact that they have returned it.
§ Lord Sainsbury of Preston CandoverI entirely understand the point. I never thought that the donor was anonymous to the charity that was offered the money. Of course, most charities would want to know from whence it came—and so they should. I feel that it should not be anonymous to the beneficiary, but to the general public. In those circumstances, a grant-making charity might go to charity "X" and say, "Look, we may be considering giving you a substantial grant. It would be on the understanding that it would be from us. You should publish it as being anonymous, but you should know who it is". It is entirely right that a charity should know from where the money comes. It should be anonymous to the general public, because it is private. I admit that it may be more difficult for other charities to know that that is a grant-making charity from which to seek funds.
§ Lord Phillips of SudburyPerhaps I may respond to that before we become too muddled. I note what the noble Lord, Lord Sainsbury, said, but Amendment No. 147A states:
donations made by it shall he on terms that the name of the donor charity shall not be disclosed to the recipient".The recipient is the recipient charity. So I fear that, if his intention was as he stated, his amendment does not comply with it.
§ Lord Sainsbury of Preston CandoverIt is not my amendment; I saw it only yesterday because I have been abroad. Nevertheless, it is a good amendment, subject to that point. The recipient should have the right to know. Most people would want to know before they got a donation. They should receive it in confidence and not disclose it outside the trustees of that trust. I would accept that qualification; it is important.
§ Lord SwinfenMany charitable foundations already make donations to working charities subject to the fact that it should remain confidential and that no publicity should be given to it.
§ Lord Phillips of SudburyI am grateful. The noble Lord, Lord Swinfen, makes the point that I was going to make. Why is a charity offered a gift on the express condition that it does not make the name of the donor known to the public then, under SORP, required to breach the condition? In those circumstances it would not be required to breach the condition, but the exceptions to SORP cover precisely those circumstances. Indeed, the situation would be complete nonsense were it otherwise, as it would mean that people who wanted anonymity could not attach that condition. A charity that wanted money could not receive it on that condition.
The only other point that I would like to make is with regard to what the noble Lord, Lord Swinfen, said when he first intervened about repaying the money. That is all very well, but a great many of the charities of which I know, including some of which I am a trustee, receive funding that they immediately use. I can think of one this very week that has solicited £30,000 to remain alive. It is no good saying a year later, "Now we'll have to pay the £30,000 back"; that is simply not practical politics for a lot of charities. There is a problem.
§ Lord Shutt of GreetlandThis is clearly an area at which we need to look a little further. It seems perfectly proper for a UK charity to make grants to other countries where there may well be oppressive regimes for the relief of poverty. One can think of cases where, if all that were known, it would be very bad news, particularly to the recipients. The area is important. On one hand one greatly wants to be transparent, yet on the other there are circumstances where that would be incredibly dangerous.
§ Lord Sainsbury of Preston CandoverI draw attention to the fact that SORP forces every charity to list every grant unless that grant may result in physical violence. That is the latest thinking. It does not want exceptions made.
§ Lord Bassam of BrightonI am extraordinarily grateful to all Members of the Committee who have contributed to the debate, which is very interesting. I am particularly grateful to the noble Lord, Lord Sainsbury of Preston Candover. We happened to have a conversation on the issue not long after Second Reading. When we had it, I could certainly see where he was coming from. In less complicated times. I would find easy agreement with the position that he has adopted. I can also well understand the noble Lord, Lord Swinfen, who expressed his mixed feelings but came down in support of the amendment.
Having said all that, where do we sit on the matter? The current position is as set out in the 1993 Act, which, as I understand it, was given effect in 1995. As has been carefully explained and ably argued, the amendments are designed to allow a charity to make a donation without the recipient or, more particularly, the public knowing the identity of the donor charity. Many service-making charities make a small number of grants.
The amendments raise issues for the donor charity, the recipient institution and the commission. The most important issue is that of transparency and accountability. The noble Lord, Lord Shutt, together with the noble Lord, Lord Phillips, has ably pointed us in that direction. In a sense, that is the spirit of the times in which many grants and donations are made. It would be fair to say that people have very high expectations of charities in that respect. In a sense, that underlines the thinking behind this Bill and its predecessor. With regard to my point about simpler and easier times, the amendment would very much go against the argument for greater transparency and accountability.
There are two closely connected aspects to the amendment: first, to give a charity power to keep its identity hidden from the recipient of a donation; and, secondly, to exclude details of the donation from the public domain. Without the second, the first would clearly be unsustainable. We believe that it conflicts with one of the main, and important, principles of the Bill—that is, that public accountability and transparency of charities is in the public interest and, indeed, is a prerequisite for continuing trust and confidence in the charitable sector.
There is already a range of circumstances in which a charity's donations do not have to be detailed in its accounts. It may help if I mention them as they already allow scope for non-disclosure where that is appropriate. Reference has been made to the Statement of Recommended Practice on charity accounting published last Friday. A charity does not have to disclose the identity of grant recipients in the following circumstances. 265GC The first is when the grant is to an individual person. I think there will be general agreement on that point as it would be wholly inappropriate to [...]ake public the names of people who may have received grants to help them in times of need or hardship or to help them with the cost of their education. The second is when a charity's grant-making activities are not significant in the context of its charitable activities as a whole. The third is when total grants to a particular institution are not significant in the context of all the institutional grants that a charity makes. The fourth and final circumstance is where disclosure of a particular grant would seriously prejudice either the grant-maker or the institution receiving the grant.
Those exceptions are based on the recognition that sometimes factors outweigh the general presumption in favour of disclosure. The amendments of the noble Lord, Lord Hodgson, would, however, allow a charity to withhold from public disclosure any grant in any circumstances and for any reason—or for no reason at all.
Supporters of these amendments might see the position of the donor charity as being similar to the position of a private individual who wants to make an anonymous donation. We argue that there are significant differences, the most obvious of which is that private individuals can do whatever they like with their money—rationally or irrationally. There is no justification for requiring private individuals to account to anyone else for specific charitable donations or for the general stewardship of their funds. Charities are not in this position because they enjoy privileged fiscal treatment at the expense of the public purse. In return, they should be required to submit to requirements of accountability and transparency in order to allow public scrutiny of the use they make of charitable funds.
Moving to the practical, in our view the amendments seem likely to add to the bureaucratic burden of the donor. For example, donations would presumably have to be made via a third party; there would have to be arrangements for the transfer of the funds that did not undermine the anonymity; and it would be more difficult for the donor charity to check that its grant was being properly used and that any conditions attached to the grant were being met. From the recipient's point of view, the anonymity of a donation may well in itself raise a number of problems.
Recipients are entitled to consider the source of the donation in order to decide whether or not it should be accepted—a point made very ably earlier in the discussion. The question arises as to how the recipient is to know whether or not the funds have originated from an activity which is in conflict with the charity's own work. The noble Lord, Lord Swinfen, gave an example of how that might look. If the number of anonymous donations increase significantly as a result of the amendments, that would become a practical concern for more and more grant recipients.
266GC 4.45 p.m.
We also think that there might be difficulties with the audit of a recipient's accounts should it receive significant funds from an unidentifiable source. For example, would the recipient's auditor have to know the source of the donation before he or she could be satisfied that the transaction did not have to be reported under money-laundering regulations? We also wonder whether the Charity Commission or the Inland Revenue would be bound to disclose information given to them about the recipients of anonymous donations.
§ Lord SwinfenI thank the noble Lord for giving way. How often does he think that money raised totally illegally—either by terrorism or, for example, the Mafia—would be donated in order to launder money? Such organisations would want to keep the money and pass it through to an organisation where they could use it. I should have thought that donating money to charity would be outside that.
§ Lord Bassam of BrightonI am sure that the noble Lord makes a good point. But it is a serious concern and it could become a serious issue. I cannot pluck a figure from the air and say to the noble Lord on how many occasions that might happen in a given period. It would be foolish of me to make that sort of estimate. I can see—I am sure that the noble Lord would accept—that there may well be situations, individuals, networks or whatever, which might want to do that. I am sure that that is not beyond the realms of possibility. I have not had a discussion with the serious fraud squad about that issue, but it is worth taking some time to think it through.
Another question is how the Charity Commission or the Inland Revenue would respond to a request under the Freedom of Information Act for the sort of information that they would be bound to disclose about to the recipients of anonymous donations.
In summary, although I understand the issue and the cause for concern, we think that, on balance, there should continue to be a presumption in favour of disclosure in the interests of accountability and transparency. Non-disclosure should be allowed only in the circumstances that the SORP sets out. In our view, they are the appropriate ones. I do not quite agree with the noble Lord, Lord Sainsbury of Preston Candover, in his interpretation of the SORP becoming more rigid. We do not see that in its current published form. There is sufficient latitude for non-disclosure when it is justified and right.
I am sorry that I cannot be more helpful. I certainly understand the philanthropic spirit and thinking behind this issue. In personal terms, I have some sympathy with where the noble Lord, Lord Sainsbury, is coming from. In terms of the charitable sector overall, and its desire in the main to be open, accountable, transparent and in the public domain about where money is coming from and why, it is in the 267GC greater public interest that we retain the measure as it currently is and as it is being interpreted from the 1993 Act.
§ Lord Phillips of SudburyBefore the Minister sits down and the noble Lord, Lord Hodgson, stands up, perhaps I may say that nothing the Minister said countervails the point made by the noble Lord, Lord Sainsbury of Preston Candover, about discouraging philanthropy. Surely, there is no good reason, in public interest terms, why someone who wants to be generous anonymously should not be generous anonymously.
§ Lord Bassam of BrightonThe noble Lord is absolutely right, and I would not argue against that point.
§ Lord Sainsbury of Preston CandoverDoes the Minister not recognise the importance of the creation of new grant-making trusts and that, given the conditions of publicity that will happen, people will be discouraged from doing so? We already have evidence of a 20 per cent turn-off of people who do not want to have their generosity publicised. The advantage to the charity sector of giving money that cannot go other than to charity, compared to the gift aid scheme, is terrific.
I also ask the Minister to consider that one way in which to meet my objection, which is really that we should encourage philanthropy and new trusts, would he to have a different rule during the lifetime of a creator or founder of a new grant-making trust. The rules could apply differently during the lifetime of the man who has given the money, so that publicity of his generosity would not occur during his lifetime. The rules could apply afterwards. That would meet the Minister's point while at the same time meeting the nervousness of someone considering a very large gift from their wealth to give permanently to charity. I ask the Minister to give that proposal careful consideration.
§ Lord Bassam of BrightonThat is an interesting point, and it might be argued with regard to the fourth of the circumstances and the disclosure of particular grants—whether it might seriously prejudice the grant-maker or the institution receiving the grant. It may well be that it falls within that particular orbit.
I shall make two points. It is worth reminding ourselves that the Charity Commission will, as a consequence of the legislation, have a duty to act to encourage charitable giving. Its interpretation of SORP falls within that consideration. In addition, because we live in these more accountable times when people want transparency, that is in itself an encouragement to people to make donations. Their motives will go unquestioned and be quite clear and the motivation behind their giving will be entirely transparent. That is an encouragement to people.
Although the noble Lord has made a good point—that people may be put off—at one end of the argument, there is also an encouragement at the other 268GC end. There will be a giving regime in the context of accountability and transparency, which it is important to take on board.
§ Lord SwinfenI thank the Minister for giving way. One problem with wealthy people who wish to set up a charitable foundation is that they as individuals will be bombarded with appeals. Some 20 years ago, I talked to some representatives of a large commercial organisation. They told me that at that time they got within the region of 17,000 letters of appeal a year and had had to set up a complete department to deal with them. I know that that was an organisation; but an individual who is known to be extremely wealthy will already be getting appeals from individuals for charitable donations, and a large number of them, before they even set up a charitable foundation. When it is known that they have set up a charitable foundation, particularly when they wish to keep an interest about where the funds from that foundation are used, philanthropically, they will be bombarded with appeals. Quite honestly, I feel sorry for them.
§ Lord Bassam of BrightonI hear what the noble Lord says, but in any event I am not sure that the amendment would make a great deal of difference to the circumstances of the organisations to which he referred in their being recipients for requests for financial support. The noble Lord gave an example from 20 years ago when the regulatory regime covering these matters was somewhat different. I recognise that there is an issue, but I do not believe that this is the right way in which to proceed to resolve it. In fact, the amendment could create more problems than it solves.
§ Lord Hodgson of Astley AbbottsI am grateful to the Minister for his very full and considered, if ultimately unhelpful, reply and to those Members of the Committee who have spoken either for or partially for the amendment. We must be clear that nothing in the amendment is designed to ensure that the regulator or the tax authorities do not know. It is absolutely clear that the Charity Commission and the Revenue must be informed.
I knew that someone would produce the rabbit marked "money laundering" out of the hat before the end of the afternoon. I think that my noble friend Lord Swinfen dispatched that particular ball off the boundary fairly swiftly. My view is that if the charity of the noble Lord, Lord Phillips, does not want to take an anonymous donation, the words are, "No thank you". You do not have to take an anonymous donation or you could take an anonymous donation with—to meet the noble Lord's particular point—a requirement that there should be no subsequent publicity by the donor. The noble Lord might particularly wish to apply that if the prospective gift was of a size that would and could, in the eyes of the public, be seen to be influencing the operation of the charity and the way in which the charity was behaving.
There is a way through that particular thicket. I accept that there is a balance to be struck between personal privacy or the foundation privacy and public accountability and transparency. But the reality is 269GC that, as my noble friend Lord Swinfen has said, publicity means that charities and foundations are bombarded with requests. The Minister raised the question of there being more bureaucracy as a result of how the donor would check whether his requirements were being met. If he wants to give his gift anonymously, he surrenders the ability to influence that. It comes with the territory.
I would like to see the growth of philanthropy and philanthropists sometimes give money to unpopular causes with which they would not wish to be associated publicly, but perfectly proper causes. The real argument is my noble friend's argument: are we getting more foundations or not? He tells us that we are getting fewer foundations. Why is that? I think that it is because people do not want the publicity. They are frightened of being held up in the press. The Americans will say that the British disease is not idleness, the British disease is envy. People will feel concerned that they will be put in the public eye, which is a shame and a pity.
I do not pretend that the amendment is word perfect, but this amendment, suitably changed, could go some way to redress the imbalance to which my noble friend has referred. We will consider it some more. We will get opinion from the world at large. My noble friend will no doubt have some points to make and want to come back on Report. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 102 not moved.]
Schedule 4 agreed to.
Clause 9 [Registration of charities]:
§ Lord Hodgson of Astley Abbottsmoved Amendment No. 103:
Page 10, line 4, leave out "considers is no longer" and insert "no longer considers isThe noble Lord said: We now come back to the main part of the Bill; namely, Clause 9 and the "Registration of charities". This amendment rewrites new Section 3(4)(a)—at the top of page 10. Currently, it reads,
The Commission shall remove from the register—The amendment would alter paragraph (a) to read:(a) any institution which it considers is no longer a charity".any institution which it no longer considers is a charity".That change of words may seem a trifle pedantic, so I hope that the Committee will bear with me while I explain.
The current statutory obligation on the commission, relating to removing charities from the register, says that the commission will remove from the register an institution which it no longer considers to be a charity. That would include both organisations which never have been a charity, but which the commission registered in error, as well as organisations which may have been a charity but, because of a change in the law, the Charity Commission no longer considers to be a charity.
270GC The wording in the Bill would deal with only the second case, not the first. That is because the wording presupposes that the organisation's charitable status has changed. Because of the haste with which existing organisations had to be placed on the register in the early 1960s after it was created, when looked at now many organisations may seem never to have been a charity. It is important that the commission should be under an obligation to remove those and should not have to create a fiction that they were charitable but no longer are.
5 p.m.
That is extremely important in the context of the charity's assets. If an organisation was never a charity and was registered in error, there is no difficulty about it retaining its assets on ceasing to be registered. If an organisation was a charity but is removed because it no longer is, its assets—as the current law stands—will have to be applied cy-près and cannot be retained by the organisation. We argue that the change in wording would better reflect the commercial or charitable reality in each case. I beg to move.
§ Lord Shutt of GreetlandI do not know whether I support or oppose the amendment. I have difficulty with the words in the Bill. I have always thought of the charity sector as a one-way track. There may well he circumstances in which the trustees do not do things properly and should be removed, or the objects clause has lapsed and some new objects have to be brought in. However, I do not see the circumstances in which a crock of gold is there for charitable purposes that, all of a sudden, can be considered to be no longer there for those purposes. If there are such circumstances, I would like to know what they are. Once you put money into the charitable sector, that is where it stays, although there may be changes. I do not see money moving from the charitable sector into a non-charitable sector.
§ Lord Hodgson of Astley AbbottsThe difficulty arises out of charities that should never have been registered, and were registered in error, particularly in the early days when a large number of charities went on the register in a rush. They never should have gone down the one-way track to which the noble Lord referred.
§ Lord Phillips of SudburyIs it unkind to ask the noble Lord whether he is aware of any such charities?
§ Lord Hodgson of Astley AbbottsI cannot give an example, but the Charity Law Association says that there are cases of that. My briefing note and discussions with it has not gone so far as names. We have to have anonymity in this.
§ Lord SwinfenLocal authorities have a duty to look after people with disabilities and the elderly under law, as I understand it. A lot of that work is now farmed out to charities, many of which have been in existence for a long time. Most of those charities raise charitable funds and provide more in the way of benefit than the 271GC local authority would or could under its financial restraints. What would be the position if one such charity were to be unsuccessful in raising charitable funds and relied solely on the payments made by the local authority, produced only from the local authority's own funds? Would it still be acting charitably, or would it be acting only commercially? I do not know the answer. I pose the question because I wonder whether that might not happen at some stage with one or more organisation.
§ Lord Phillips of SudburyI think that I can assist the noble Lord, Lord Swinfen. A charity established by a local authority is a charity in full dimensions. A local authority that thinks that it can treat a charity to which it has been midwife as some sort of subsidiary is grievously mistaken. There is a Charity Commission explanatory leaflet, which makes it perfectly clear that the charity must be an independent entity and not merely dependent on the apron strings of the local authority—
§ Lord SwinfenYes, but the charity is charging the local authority. The funds going from the local authority to the charity are not a donation; they are in payment for services rendered. If the charity is not receiving any funds and is not doing more than it is being paid for, has it ceased to act in a charitable manner?
§ Lord Phillips of SudburyIs this helpful to the Committee? The answer is that the charity is getting into deep water if it really receives money only for services rendered from a single source. But many charities—in the hospital sector, for example—exist exclusively on fees, with no charitable donations at all. No one is suggesting that they are not charities: their purposes and the way in which they are carried out will ultimately determine the question reasonably raised by the noble Lord, Lord Swinfen. Of itself, it is fair to say that a local authority—or rather a charity established by a local authority—will not cease to be charitable because at a certain point it has a single source of funding, and that a funding for services rendered.
§ Lord SwinfenI was not thinking of charities established by local authorities. I was thinking of charities in many cases established many moons ago before local authorities had this responsibility. As to them being given the responsibility, they handed it over to the previously established charities already working in the field.
§ Lord Shutt of GreetlandWhen I was originally speaking, I was interrupted by the noble Lord, Lord Hodgson, on the business of the one-way track. I see the point he made about error and mistake and creeping back on the wall-tops in those circumstances.
There is also the whole business about tax relief—whether it will be repaid by that body—and I can just about see that. However, that apart, I do not really understand.
§ Lord Bassam of BrightonI listened with interest to the mini-debate and it has persuaded me that we need 272GC to think about the issue a little more. I am minded to accept the amendment tabled by the noble Lord, Lord Hodgson, because he seeks to put back into the Bill something which was taken out. If I read it correctly, it is the wording from the 1993 Act and probably there is a good technical argument for doing that. The Bill works better, is neater and there is clarity.
The noble Lord has hit the right button and has scored a run. I shall accept his amendment and leave it at that.
§ Lord Hodgson of Astley AbbottsI am grateful to the Minister. After five days' honest endeavour. I have managed to move "no longer" forward three words in the Bill.
On Question, amendment agreed to.
[Amendment No. 104 re-tabled as Amendment No. 105A.]
§ Lord Hodgson of Astley Abbottsmoved Amendment No. 105:
Page 10, line 5, leave out "or does not operateThe noble Lord said: We are still at the top of page 10 in the Bill and still concerned with charities that cease to operate and the registration of charities. The Bill states:
The Commission shall remove from the register … any charity which has ceased to exist or does not operate".I am now going on for a major prize!There are many cases in which, on a merger or incorporation of a charity, the original charity must be retained. The most common reason is that it holds permanent endowment and thus cannot transfer it to the merged or incorporated charity. Another situation might be that a lease cannot be able to be transferred because it requires the landlord's consent and the landlord is unwilling to give such consent. In those circumstances. the assets in question remain in the old charity and the new merged or incorporated charity becomes the trustee of the old, existing charity, which simply holds assets which it permits the merged or incorporated charity to make use of. In those circumstances, the charity might well be said to be one that, "does not operate". Clearly, it would be inappropriate for such a charity to be removed from the register.
I believe that Amendment No. 105A, tabled by the noble Lord, Lord Phillips, is aimed at the same objective. It would be a shame if for want of the words in the Bill we were to cause confusion. I beg to move.
§ Lord Phillips of SudburyAs the noble Lord, Lord Hodgson, said, my Amendment No. 105A is within this group. It would be a pity to leave the category as covering only charities that have ceased to exist because there will be the occasional charity that exists in form but not in any vital sense, and that is a permanent state of affairs. Therefore there seems some point in including my amendment, as it would be helpful to the public to have a register that reflects reality. If a shell is wholly empty of vitality—that is, if 273GC a charity is in "permanent abeyance"—the Charity Commission should have the discretion to remove it from the register.
I wholly concur with the other points made by the noble Lord, Lord Hodgson. It is for the reasons that he gave that the wording of the Bill should not be allowed to remain as it is.
§ Lord SwinfenI shall raise one black cloud over the argument. What about a small charity that has been left a residential property on the condition that the existing occupant is allowed to remain there for the rest of his life at a peppercorn rent, and that happens to be the main asset of the charity? Imagine that the charity remains in existence but is unable to do any worthwhile work while the tenant of the peppercorn continues to live. Once he dies, the property can be sold, perhaps at a substantial figure that then allows the charity to operate.
There is absolutely no reason why an individual should not set up a charity with such an asset, with the intention that it should operate some years later when the tenant of the peppercorn dies—imagining that the tenant is genuine and does not necessarily receive charity himself. We should consider the option that the charity might be dormant for a number of years and, like the acorn under the ground all winter, spring to life with the death of the tenant. We should not throw out such charities completely.
§ Lord Phillips of SudburyThe noble Lord has put his finger on the very important issue of dormancy. In fact, the circumstances that he describes would be ones in which the charity would be deemed to operate, albeit at a very modest level. But the dormancy case is vital. Lots of small charities enter periods of quiescence while they await funds, appoint new trustees or whatever else. There are many such charities and it would be utterly wrong to strike them from the register because they were not operating for a year or two.
The Lord Bishop of SouthwellPerhaps I could add to the debate, without digressing too much, by way of illustration. In 1987, when taking up my office as Archdeacon of London, I found a tin box in the Church of St Peter's, Cornhill, in the vestry, beautifully labelled "St Antholin charity". I took it home to investigate. I discovered a Bank of England chequebook in it. After a lot of research and help from the Charity Commission, I discovered that that charity had been in abeyance for a long time. It provided for 30 lectures to be given three times a year in the puritan school of doctrine by a benefice clergyman of the Church of England living within one mile of the Mansion House. They were a rare species, even in 1987.
With the help of the Charity Commission, we revivified that charity. It now provides an annual lecture by an Anglican clergyman from anywhere in the puritan school of doctrine. That is a worthwhile 274GC academic-come-spiritual charity. It would be sad if some of those dormant charities were lost forever by too quick an intervention by the Charity Commissioner without looking for an appropriate cy-près to find other people willing to revivify them.
§ 5.15 p.m.
§ Lord Bassam of BrightonThat was a very interesting example. I fancy that the co-operation that the right reverend Prelate received in 1987 would still be provided now; in fact I am sure that it would. The Charity Commission wants to work with charities to revive them in exactly the way that the right reverend Prelate described. That is a good example of how constructive a role the Charity Commission plays in such circumstances.
That was an interesting digression, but I return to the amendment because it raises one or two quite interesting issues. It may be helpful if I explain how, under the Charities Act 1993, the commission already has a duty under Clause 3(4) to remove charities that do not operate from the central register of charities. When I have explained how it works, Members of the Committee may take a different view of the amendments. If I were rating the amendments, I should give the noble Lord, Lord Hodgson of Astley Abbots, a higher rating than the noble Lord, Lord Phillips.
§ Lord Bassam of BrightonWell, one does these things for fun in one's idle moments. I like the term, "permanent abeyance", but it is probably not as clinical as the term, "does not operate". Anyway, we will come to that.
Maintaining an accurate and up-to-date register is an important role for the commission. Indeed, it is mentioned specifically in new Section 1C(3). The obligation to remove charities that do not operate is in support of the maintenance of the register. The commission will not remove a charity from the register until it is sufficiently satisfied that it does not operate. The commission undertakes a number of checks to determine that the charity does not operate. For example, the commission must be satisfied that the charity has no property of any kind, including money, land, shares or other assets, contractual rights and legal claims against third parties, no rights to receive property of any kind and does not expect to receive any property. The commission must be satisfied that all those conditions apply.
The commission must be satisfied either that there are no charity trustees or, where there are trustees, that they do not act and do not propose to act in the administration of the charity. The commission identifies charities that might not be operating by their failure to respond to requests for information. For example, each year the commission asks charities to provide information by way of the annual return and data update form. For charities that have not responded, the commission undertakes all reasonable enquiries of correspondents, trustees past and present, 275GC professional advisers, third parties and umbrella groups to establish whether charities are still operational.
The commission's priority is to get charities back into its regulatory regime, not to remove them as soon as possible. Sometimes, that may be impossible—for example, where the commission is told that that charity is no longer functioning or where the correspondent and trustees cannot be contacted. When the charity is removed, a letter is issued to the last known correspondent, offering the option of reinstatement on receipt of information to the effect that the charity is still operating. When it proves possible to contact the trustees of a charity that no longer operates, the commission asks for final accounts showing a nil balance, after which they will remove the charity from the register. I hope that in saying all of that, I have demonstrated that the commission does not and will continue not to remove legitimate charities which want to operate. Removal is carried out only after it has been reasonably established that a charity really is not operating or functioning.
The amendment would mean that the commission would have to leave on the register those charities that do not operate, which is incompatible with its duty to maintain an accurate register of charities. The amendment seeks to make it clear that it is those charities that appear to be permanently suspended that should be removed. I would argue that the commission's checks, which I have described, are sufficient to mean that, as far as is reasonably and practically possible, the commission can be satisfied that the charity in question does not operate.
In saying all of that, I hope that I have reassured Members of the Committee who have tabled amendments that the commission does not act in a way which undermines the credibility of the register, but gives every encouragement and opportunity to charities that might be dormant or semi-asleep to come forward and prove their existence, their good works and so on. I hope that noble Lords will feel able to withdraw, or not to press, their similar if differently worded amendments.
§ Lord Hodgson of Astley AbbottsI am grateful to the Minister. The definition that he has given of "operate" is pretty inclusive—with the presence of any property rights and the trustees' ability to respond. That removes the concerns that we have about the word "operate", if a conventional word can be defined. As the Minister said that it would not be the wish of the Charity Commission to rush to de-register people on an "asap" basis, as I believe that he put it, I am satisfied and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 105A not moved.]
§ Lord Hodgson of Astley Abbottsmoved Amendment No. 106:
Page 10, leave out lines 21 and 22.276GC The noble Lord said: Moving down page 10 of the Bill, we come to the issue of the copies of trusts of registered charities. This is a probing amendment to tease out the Government's thinking.
New Section 3(8) of the 1993 Act provides that copies from the commission of the trusts of any registered charities shall be,
open to public inspection at all reasonable times".But the subsection adds, in lines 21 and 22,except to the extent that regulations made by the Secretary of State otherwise provide".Our Amendment No. 106 would remove that power for the Secretary of State to make regulations which would interfere with public access to the trusts of registered charities. Why would the Secretary of State need the power to make regulations concerning public access? Perhaps the Minister could illuminate our debate with some examples of circumstances in which that might be deemed necessary.
[The sitting was suspended for a Division in tile House from 5.23 to 5.34 p.m.]
§ Lord Hodgson of Astley AbbottsAmendment No. 106 concerns the issue of copies of the trusts of registered charities, which are to be available for public inspection at all reasonable times. The amendment relates to the last two lines of Clause 9(8) half way down page 10 of the Bill, which states that public inspection shall be available,
except to the extent that regulations made by the Secretary of State otherwise provide".Before the Bell rang for the Division in the Chamber. I was saying that, as an emphasis on transparency and public understanding underpins a central theme as the Government's strategy for the charity sector throughout the Bill, it seems fairly contradictory to give the Secretary of State powers to undermine important features such as this. As I said, on a probing basis, we seek to remove these two lines so that the Minister can persuade us otherwise. I beg to move.
§ Lord SwinfenAs the commission is a non-departmental public body, why should the Secretary of State make regulations and why should that not be done by the Charity Commissioners?
§ Lord Shutt of GreetlandBearing in mind our earlier discussions, I wonder whether the measure is there to assist people who are thinking of setting up foundations and who the noble Lord, Lord Sainsbury of Preston Candover, may wish to assist.
§ Lord Bassam of BrightonIt does not particularly do the latter, but I hope that noble Lords will accept my explanation as being both benign and beneficial. The register kept by the Charity Commission includes details of all the registered charities in England and Wales and the details of charities which have been removed from the register. The register is available 24 hours a day on the commission's website. The governing documents of the largest 200 charities are also available to view on that website. Members of the public may visit the commission's offices on weekdays 277GC between 9 a.m. and 5 p.m. in order to search the register for charities or to view, by prior arrangement, files containing the charity's governing documents and recent accounts. In addition, for a small fee, anyone can obtain photocopies of charities' accounts and governing documents by calling the commission's Contact Centre.
The purpose of including the provision for the Secretary of State to make regulations contrary to this duty of the commission is so that, in the very rare circumstances where there are compelling reasons not to open the governing documents of a particular charity to public scrutiny, that document can be withheld. I can tell the Committee that, so far as we are aware, no regulations have ever been laid to achieve that effect. But, having thought about this matter and having talked to officials and to the Charity Commission, I can see the circumstances in which it might be appropriate. Two good examples come to mind.
The first is where a women's refuge was governed by trust deed and it included the names and addresses of the trustees. There might be good reason to withhold that trust deed from public scrutiny in order to protect the trustees. It is not unknown for women's refuges to be the subject of unwarranted and unpleasant visitations from former partners who may be violent and who may wish to take out their anger and frustration on a broader range of individuals. In those circumstances, one might accept that it would be entirely reasonable.
There might also be a good case for trust deeds and the details of trustees to be withheld where the trust was responsible for animal testing in the interests of scientific advancement. As we all know from experience, there is a real problem in that sector, and there may be circumstances in which, in order to offer a degree of protection, it would be right to withhold the document.
In any event, the Secretary of State would exercise the power only very, very occasionally and in circumstances of that kind. The assumption would always be that all trusts of registered charities should be open to public inspection.
Furthermore, when considering the amendment, we have identified that subsection (8) allows the Secretary of State to make regulations which state that certain trusts of charities should not be kept by the commission. While we can not envisage any circumstances when it would be appropriate to exercise this power, we feel it would be wise to table an amendment on Report to make it clear that the Secretary of State's power extends only to the circumstances described above. This probing amendment has made it clear to us that we may need to clarify that issue and I am grateful to the noble Lord for tabling it in such terms.
The noble Lord, Lord Swinfen, asked me a question which I have not answered. It is more appropriate for the Secretary of State, as the holder of the public interest, to make the regulations, rather than the 278GC commission itself to self-regulate its own activity in the alternative manner which the noble Lord thought might operate.
§ Lord Hodgson of Astley AbbottsI am grateful to the Minister for his reply and I am persuaded by the points that he made. When he says that, first, regulations have never been made under this heading, secondly, that it would be in exceptional circumstances and, thirdly, it would be "very, very occasionally", one is reassured. Obviously, the drafting is a good deal wider than that and that was what caused our concern—it does not say "except", "occasionally" or "exceptionally", it just says that these regulations can be—dare I say?—derogated from, apparently casually. We will read the Minister's comments carefully and look forward to seeing his proposals on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ Lord Hodgson of Astley Abbottsmoved Amendment No. 107:
Page 10, line 46, leave out "£5,000" and insert "£25,000The noble Lord said: We now move down the page to the registration levels for charities. This group is part of a series of amendments concerned with the levels of income and assets at which registration is required. Later, when we reach Chapter 6, we will consider the same topic in relation to requirements for audit or examination of trusts or charitable companies.
We accept that one of the purposes of the Bill is to maintain public confidence in the charitable sector and that regulation by the Charity Commission is an important element in that process. But we do not think that the Government have got the balance right regarding registration levels. Rather, we argue that the scales have tipped too far towards regulation with its form-filling and bureaucracy. Inevitably, this will fall particularly heavily on the smaller charities and may have an adverse effect on the development of that sector.
We accept that the proposals in the Bill for minimum registration levels represent an advance. An annual income of £1,000 has become £5,000, and we particularly recognise the value of the removal of the requirement to register if the charity has any endowment no matter how small. But, £5,000 annual income is a tiny sum—certainly the misappropriation of a sum of that size, while serious and undesirable, will not affect public confidence. So the amendment seeks to raise that £5,000 to £25,000 per annum. I recognise that that is an arbitrary figure, but we calculate that it would remove just under 50,000 charities or almost exactly one quarter of the total from the necessity to register. I use the word "necessity" to register and I shall return to that matter.
But consider the reduction in the burden of work both for the Charity Commission and for those smaller charities—all achieved at negligible risk to public confidence. So I appeal to the deregulatory instincts that should lurk in the breath of every free Briton. That is the purpose of our amendment. I see the 279GC Minister smiling at me, and I suspect that his speaking note suggests that research among the charitable sector indicates that smaller charities want to be registered. No doubt that is true. They do so for a variety of reasons. A registered charity number is an imprint of quality; registration is a protection for the trustees; and, finally and possibly most significantly, many grant-giving charities such as that of my noble friend Lord Sainsbury and local authorities will make grants only to charities which are registered.
5.45 p.m.
The force of this argument is accepted and that is where our second amendment, Amendment No. 108, comes in. It changes subsection (6), which currently gives the Charity Commission the permissive power to register smaller charities. By substituting "must" for "may" in line 34, the balance of power is switched to the charity. Therefore, if a smaller charity wants to be registered, for whatever reason, it can be assured that it can do so. In doing so, it must accept the inevitable paperwork. But if it does not wish to register, provided that its income is below £25,000 per annum, it does not have to do so. The saving in compliance costs would be huge and a better balance between risk and regulation would be struck. I beg to move.
§ Lord BorrieI have a feeling that Amendment No. 108 is more desirable than Amendment No. 107. However the Bill eventually lays down its requirements, if the charity is small and desires to be registered in order to obtain certain advantages of respectability and of being a potential recipient of certain moneys, and it complies, why not let it be registered, no matter how small it is?
Amendment No. 107, the main one put forward by the noble Lord, Lord Hodgson, makes a radical difference—a five-fold difference—from £5,000 to £25,000. He has carefully explained that the difference would cover 50,000 charities, so it makes a lot of difference one way or another.
The noble Lord, Lord Hodgson, thinks that we should all feel, as Britons, the love of freedom and the dislike of bureaucracy, but bureaucratic activity is a pejorative phrase, whereas registration is a polite phrase. There would be registration for a whole number of purposes, including concern about any misdeeds which might be committed. There would be misdeeds on a smaller scale if the figure was below £25,000 rather than into the hundreds of thousands. None the less, the limit having been £1,000, £25,000 seems a major difference whereas the Government's £5,000 takes into account inflation and so on. I am surprised that the noble Lord wants to make such a radical difference in the threshold at which registration would be required as distinct from optional
§ Lord SwinfenI believe that I know the answer, but perhaps we should have it on the record. The smaller charities which wish to be registered can indeed be registered. I should be grateful if the Minister would confirm that. It is extremely important for very small charities which need to raise funds from grant-making 280GC bodies. The vast majority will not make donations to unregistered charities—they find that extremely difficult. Furthermore, in Amendment No. 108 my noble friend wishes to change "may" in line 34 to "must" at the charity's request to be registered. I am not sure that I agree with him because the charity, in order to be registered, needs to satisfy all the requirements of the Charity Commission and that should not be watered down. A charity set up purely to provide bed socks for granny would not and, in my view, should not be registered.
§ Lord Phillips of SudburyI rather take the part of the noble Lord, Lord Borrie, on this one. The increase to an income of £25,000 is far too high. That would represent a capital base of £500,000, if one had that sum on deposit. Although I wholly agree with the sentiment with which the amendment was moved and am absolutely committed, as is the noble Lord, Lord Hodgson, to making life for the small charity as easy and unbureaucratic as possible, I would rather see that easy regime downstream from that of registration itself.
Registration is the most effective way of enabling members of the public to check up on a charity. The register is free to access and the one thing above all others that deters the very few rotten apples in the charity barrel from playing fast and loose is that they are registered. Anyone can have access to the registration; charities are required to put the registration number on their circulars, letters and so on.
If we take away that registration, I fear that there would be a significant increase in impropriety. If there is one thing above all others that would break the golden chain of trust between the public and the charity sector, it would be if instances of impropriety were significantly to increase. From my experience of the sector, I fear that you do get the small man who is playing fast and loose with charitable status, paying himself huge expenses and depriving the public of the purported charitable benefit. For that reason, reluctantly, I oppose the amendment. Whether there could be an annual increase, as there is with inheritance tax, to keep pace with inflation, so that we do not have to keep laying orders, is a small matter. As I said, I would rather see constraints on the Charity Commission, the Inland Revenue, and so on downstream.
§ Lord Shutt of GreetlandI am inclined to agree with my noble friend. I think that I could be persuaded that the figure might be £10,000, but much beyond that, I think that we will create problems because of what could be the capital sum involved in misdemeanours. There is one other point. There seem to be three elements here. We have the Charity Commission as a regulator; the law of the land; and the Inland Revenue. If the Charity Commission and registration is out of the way, the other two remain. The charity is still a charity if it has charitable objectives, whether or not it 281GC is registered. Because it is a charity, it will seek repayment of any taxes possible and may therefore need a relationship with the Inland Revenue.
Therefore, if we were to go along with the amendment of the noble Lord, Lord Hodgson, would that mean that the Inland Revenue would have to do rather more to check whether a charity is a charity whereas, at the moment, it may just rely on registration and say, "If it is registered, we repay the money"? That is a further problem.
§ Lord Bassam of BrightonI initially thought that this was quite a simple and straightforward group to deal with, so I was going to say as little as possible. I will still try to say as little as possible, because we want to make progress.
My starting point is the need to get the balance right. Of course the noble Lord, Lord Hodgson, is right: we do not want to end up burdening charities with ludicrous quantities of red tape. We want to reduce the scope for that as much as possible. Inside this Minister there is a deregulatory heart beating firmly and powerfully. But it is worth going back to where we started from and the Strategy Unit's original proposal, which was extensively consulted on. It was the unit that came up with the figure of £5,000. The Strategy Unit's proposal attracted great interest and comment, apparently—it had the second highest number of responses of any group of recommendations in the review. So it is obviously something of a hot issue.
The other thing to remember in this debate—
§ Lord Hodgson of Astley AbbottsI believe that the responses were that the charities might not be able to register. The concern expressed in the response to the Strategy Unit review was that they might be prevented from registering unless the figure was higher. That is why the two amendments should be taken together. No one is trying to prevent them from registering; as the noble Lord, Lord Borrie, pointed out, they can register. It is just a question of the point at which they have to register.
§ Lord Bassam of BrightonI understand that point. I believe that the noble Lord, Lord Swinfen, made an important point, encouraging me to put on the record—which I am quite happy to do—that small charities see the ability to register as being extraordinarily important. It gives them a "quality mark", which is extraordinarily important in terms of seeking out donors and attracting public credibility. We recognise and acknowledge that. There is not to be a bar on charities registering which have very small sums to disburse or use from a charitable purpose. We do not want to prevent them registering; in fact, we want to encourage them to continue to do so, because of the benefits that we see, the Charity Commission sees and the small charities themselves see.
282GC There is a flexibility here. As the noble Lord, Lord Phillips, understood in his comments, the figure is variable by order. Under new Section 3A(8), the Secretary of State,
may only make an order under subsection (7) above",so far as it relates to the matter.So there is flexibility to inflate the sum of £5,000 when it seems sensible and rational to do so. If we raised it to £25,000, we would take out of the registration threshold a large number of charities. In raising the threshold from £1,000 to £5,000, we take out 38,000 charities from the registration requirement. That does not prevent them registering. Those charities have an annual income of more than £103 million. If we raised the threshold from £1,000 to £25,000, rather than £5,000, we would take out a further 47,000 charities, with a combined annual income of something in excess of £0.5 billion. Those charities and sums of money would in effect go off the regulatory radar.
I believe that we have the balance about right. I understand the point about bureaucracy and accountability, but it is extremely important to retain public confidence in small charities. In settling on the £5,000 figure, that seems to be what most charities believe to be the right level.
As for Amendment No. 108, I have better news for the noble Lord, Lord Hodgson of Astley Abbotts. Having heard what he had to say about the amendment, I am prepared to take it away and give it some further consideration. However, I heard what the noble Lord, Lord Swinfen, said, and I shall balance that in my final judgment on the issue.
§ Lord Hodgson of Astley AbbottsI am grateful to the Minister and to all Members of the Committee who have spoken. I understand and accept that £25,000 was an arbitrary figure designed to test the Government's thinking on this point. I do not accept that, of itself, £5,000 is right. The noble Lord, Lord Borrie, said that £1,000 may have been right in 1993, but it might have been the wrong figure then, so we may be starting from the wrong base. The noble Lord, Lord Phillips, made a fair point on the capital base. Of course, on £5,000 a capital base is only £100,000, so it is quite small on the figure to which the Government are sticking.
I wanted to strike a balance and focus the commission on the areas of major risk, which are the big charities. For a charity with an annual income of below £25,000, I felt that public involvement—and therefore public risk—was very low, but I accept the points made. I hope that the Government may think again about the £5,000 and push it a bit further along the lines spoken about by the noble Lord, Lord Shutt. For the mean time, so long as the "may" and "must" issue can be resolved so that it is clear that charities can get on to the register if they wish and thereby access all the advantages to which the Minister referred, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ 6 p.m.
§ Lord Shutt of Greetlandmoved Amendment No. 107A:
Page 11. line 23, at end insert—( ) In subsections (3) and (4) above "the appointed day" shall not be before 1st April 2008.The noble Lord said: The amendment refers to line 23 on page 11, which sets out that certain charities at present not registered will need to register. Reference is made to the "appointed day", but we do not know when that is. I have been asked to move the amendment on behalf of the very small nonconformist Churches, which do not need to be registered at present. They would exceed the income of £100,000 and feel that they need time to get used to a new regime.
Another way of looking at the problem would be to exempt the Churches from the provision, but they see the point of being registered and are happy to do so. However, they feel that they need the time to get their house—or church—in order to be ready to register for the appointed day. The matter is therefore when that day should be. The amendment suggests that it be not before 1 April 2008, which gives us three years. That is the gist of the amendment. I beg to move.
The Lord Bishop of SouthwellThe changes to be made by the Bill as regards the charities that are currently "excepted" from registration are obviously of some concern to the Church of England as well, given that more than 2,000 of our parochial church councils alone seem likely to be affected by them as the Bill becomes law. We are therefore alert to the implications of the new arrangements, and do not underestimate their implications—in terms of the need both to equip the trustees of the charities concerned to comply with their new obligations, and to agree with the Home Office and the Charity Commission the detailed arrangements for what may be a substantial process of registration.
Given the scale of the exercise and the importance of conducting it as efficiently as possible, we imagine that those discussions will need to cover a range of issues, from the documentation on the basis of which registration should take place, to the question of whether applications by charities associated with particular denominations are better dealt with together, over a staged period. We see discussions of that kind as capable of assisting not only the Charity Commission, but the charities themselves.
In contemplating the process, we have been encouraged by the positive attitude of the Home Office and the Charity Commission, which have shown themselves ready not only to recognise the desirability of giving the denominations a sufficiently long lead time to prepare for registration, but to consider the issues raised in that connection. Consistently with that constructive approach, the proposal as we understand it is that the new arrangements will not be brought into force until the expiry of the current exceptions from registration in 2007. If so, it seems that the timetable will allow—adequate time for appropriate discussions to take place between the Charity Commission and all 284GC those denominations and other faith groups affected by the proposals, without any need for the coming into force of the new arrangements to be postponed further in the way proposed by the amendment.
As Members of the Committee can hear, I am resisting the amendment slightly, but not too virulently. Rather than seeking a further postponement, we are content to work with the Home Office and the Charity Commission within the timetable set out and with a view to resolving together, in collaboration and for the benefit of all concerned, the various practical issues which will inevitably arise if the process is to be completed efficiently and effectively.
§ Lord Hodgson of Astley AbbottsI have a Clause 10 stand part objection grouped with the amendment. We are concerned about the appointed day, as referred to by the noble Lord, Lord Shutt. Clause 10 relates to the interim changes in the threshold for the registration of small charities. It allows the Secretary of State to introduce changes in advance of the implementation of Clause 9 and the establishment of the new income threshold for the registration of charities. I thought that we could make better progress if we discussed the appointed day at the same time.
As we debated on Amendment No. 107, the Minister has stuck to his guns that £5,000 is the correct level for the registration threshold. I would therefore be helpful on a probing basis if the Minister could explain the purpose behind Clause 10. If the Minister believes that £5,000 is the correct amount, why should the Secretary of State have the power to make interim arrangements? In my reading, Clause 10 seems to reduce the impact of much of the drafting of Clause 9(3)(a) on page 10, since the figures specified can be changed by the Secretary of State at any point, apparently without any restrictions or need to consult.
The power to make interim changes also begs another question, at which the noble Lord, Lord Shutt, hinted. When do the Government expect Clause 9 to come into force? No doubt the Secretary of State has been given the powers in Clause 10 because the interim could be expected to be lengthy, but how lengthy?
The sector is concerned that the legislation should be put into effect reasonably swiftly after its passage through Parliament and that Clause 10 infers a time lock attached to Clause 9. If we are all concerned about bureaucracy, the cost of compliance and registration, to use the less emotive phrase of the noble Lord, Lord Borrie, we do not want to see the Bill coming into effect in dribs and drabs. Perhaps the Minister will explain why it is expected that the Secretary of State might find the need to alter the threshold for the registration of small charities in the interim before the commencement of Clause 9 and why any interim period is required.
§ Lord Bassam of BrightonIt may be helpful if I explain Clauses 9 and 10 together. The noble Lord, Lord Hodgson, and other Members of the Committee have rumbled the fact that they inter-relate. Clause 9 285GC introduces three sections—Sections 3A and 3B—which together replace the existing Section 3 of the Charities Act 1993. For the most part, these provisions restate the existing law as set out in that section. However, there are some changes of substance and one is the provision at new Section 3A(2)(b) and (c) at lines 35—
§ The Deputy Chairman of Committees (Baroness Turner of Camden)I must declare the Committee adjourned for 10 minutes.
[The Sitting was suspended for a Division in the House from 6.8 to 6.19 p.m.]
§ Lord Bassam of BrightonAs I was saying before we were interrupted, there are changes of substance. One is new Section 3A(2)(b) and (c), at lines 35 to 45 on page 10, which requires what are currently excepted charities to register with the Charity Commission if their gross income exceeds £100,000. Another is the general increase in the threshold for registration from £1,000 to £5,000—we have just discussed that—under new Section 3A(2)(d).
The Government have given an undertaking that no excepted charity will be required to register with the Charity Commission until October 2007, which is when the current regulations relating to some of the excepted charities run out. For that reason, it is not proposed to bring Clause 9 into effect in its entirety until October 2007. That will give the charities concerned ample time to prepare. We do not see that it would be necessary to delay the process for a further six months to April 2008, as mentioned in the amendment. The Government believe that it would be desirable to bring the general increase in the threshold for registration into effect sooner than that. Clause 10 accordingly allows my right honourable friend to make what the Bill calls interim changes in the registration threshold pending the coming into force of Clause 9.
The intention is to use that provision to raise the registration threshold for small charities to £5,000, perhaps a couple of months or so after Royal Assent, and to remove the current requirement that a charity must register, however small its income, if it possesses any permanent endowment or uses or occupies any land or buildings. Those changes will give small charities with income between £1,000 and £5,000 the early opportunity to decide whether to stay registered or to deregister. Subsection (1)(b) enables the Home Secretary to align the definition of gross income used for the purpose of the registration threshold with the definition of gross income used for the purposes of the other financial thresholds, such as those to do with accounting and auditing.
The noble Lord, Lord Hodgson, was concerned about Clause 10. He is right in his estimation of how it works. It will cease to have effect when Clause 9 comes into force in October 2007 and the new Section 3A takes over. I can see that that might seem a complicated way of achieving a fairly simple change, but I am afraid that the best brains in the Home Office 286GC and the Charity Commission and on these Benches have not been able to find a more straightforward way of doing it. The objective of raising the registration threshold is shared across the Committee, I am sure. I hope that the noble Lord will feel able to withdraw his amendment, having heard what I said on this technical matter—the date of implementation is not technical, but is to be established for a good purpose.
§ Lord Shutt of GreetlandThe Minister will understand that, until this very day, we did not know anything about a date in October 2007. Obviously I shall consult those who feel that they could still be affected, but that date—it gives people two and a half years—may be adequate. For the time being at any rate, I am happy to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 108 not moved.]
§ Lord Hodgson of Astley Abbottsmoved Amendment No. 109:
Page 11, leave out line 36.The noble Lord said: This is a probing amendment. In part, the Minister has answered it in his remarks on the previous amendment. It is designed to get an explanation of how quickly and by what means the Government aim to phase out excepted charity status, if that is their aim. New subsection (7)(a) at line 36 of page 11 gives the Secretary of State power to change the limit below which a charity is excepted from the regime. It is currently set at £100,000.
Leaving aside the 2007 date to which the Minister referred, are we right to presume that it is the intention of the Government that the Secretary of State should use the power gradually to reduce the ceiling, so bringing all excepted charities within the net over time? If so, over how long will that take place? Given the present situation, what will be the minimum figure? An annual income of £10,000 is referred to in one place, and there is the £5,000 annual income about which we talked earlier. I also note the proposal in paragraph 11.1 on page 130 of the regulatory impact assessment. It would be helpful if the Government could update us on their thinking on the matter.
As the Minister is aware, we remain concerned about this new legislation and its impact on service, on public funds—and on the Armed Forces, which will be raised next in Amendment No. 110—and on various other bodies that we shall discuss in Amendments Nos. 115, 116 and 116A. I beg to move.
§ Lord Bassam of BrightonThe effect of the amendment would be to prevent the Secretary of State from varying by order the £100,000 threshold below which excepted charities would not be required to register with the Charity Commission under the Bill. The threshold could then be reduced only by primary legislation.
Since the Strategy Unit review, the Government have stated their intention to end excepted status in phases. We believe that there is no longer a principled justification for keeping this separate status and in the 287GC long term they should be treated as registered charities are. Excepted charities, like other charities, have a legitimate public interest in them and under these proposals they will be subject to proper regulation.
The inclusion in the Bill of a £100,000 threshold above which excepted charities would in future be required to register reflects this. Our intention is to reduce the threshold progressively over a period of years so that eventually the same threshold applies for the currently excepted charities as for all others; in other words, progressively to phase out excepted charity status.
That will be a gradual process and will not be rushed. The Joint Committee recommended that before any plans were drawn up to lower the threshold, the Home Office and the Charity Commission should monitor and report on the actual costs and benefits of registering those charities with an income above that level. The Government accepted that recommendation and propose to carry it out as part of the broader review of the legislation to take place in five years' time.
If we were to accept the amendment, this financial limit in the Bill would be the only limit which could not be varied by order and could be varied only by primary legislation. In fact, since the Charities Act 1960, all monetary limits in charities legislation have been capable of being varied by order. This would be somewhat exceptional. We feel that there are compelling reasons for ending excepted status eventually and, therefore, we are not minded to accept the amendment.
§ Lord Hodgson of Astley AbbottsAs I explained, this is a probing amendment to make the Government put on public record how excepted charities will or will not develop. I am grateful for that and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 9, as amended, agreed to.
Clause 10 agreed to.
Clause 11 [Changes in exempt charities]:
§ 6.30 p.m.
§ Lord Hodgson of Astley Abbottsmoved Amendment No. 110:
Page 13, line 22, at end insert—( ) After paragraph (a) insert—(aa) service non-public funds of the armed forces of the Crown;".The noble Lord said: the noble and gallant Lord in whose name the amendment has been tabled is away and unable to speak to the Grand Committee and has asked me to speak on his behalf. My Amendment No. 114 in this group has exactly the same purpose, although it is phrased in a different way.
The amendments are a result of helpful briefings from The Independent Services Agency Ltd and we have received much correspondence from service 288GC charities. Therefore, I apologise if I speak at a some length, but there are substantive issues here, about which people feel quite strongly.
As we have been discussing, the Bill requires the so-called excepted charities, which includes service non-public funds and church charities that are not at present required to register with the commission, be brought into line with other charities by requiring them to register, in the first instance, when their income is in excess of £100,000. But, as the Minister has just explained, progressively that ceiling will be reduced until they are treated exactly as if they were any other charity.
As the noble and gallant Lord pointed out in our earlier debates, the service non-public funds are a totally distinct group. There are more than 15,000 of them. They range from small funds at unit squadron level, through station and command funds, to what are known as central funds for the three services. Officers and Sergeants Mess will have an SNPF account. They derive their income mainly from world-wide NAAFI rebates to be replaced at home by a levy on a pay-as-you-dine arrangement and some gift-aiding of a day or two's pay per year by servicemen and servicewomen.
Their purposes are to provide financial support for units and formations in the Armed Forces in a wide variety of ways, which range from social and local philanthropic activities to sport, adventure training and so forth. In a real sense, they contribute to good morale and well-being in the three Armed Forces and, thus, to their corporate identity and efficiency.
The noble Lord should distinguish between that type of efficiency, the efficiency mentioned in the statutory instrument that forms part of my Amendment No. 14 and military efficiency. The latter, of course, is a responsibility of the Government.
The two amendments, in their slightly different ways, propose to meet the Government's wish to run down and finally close off the category of accepted charities. In doing so, we wish to follow up and implement recommendation 45 of the Scrutiny Committee, which states:
We recommend that, before the real Bill is brought forward, the Home Office and the Ministry of Defence explore ways of ensuring that these funds remain properly accounted for without bringing such a large number of small Armed Forces accounts within the remit of the Charity Commission".We seek to do that today by moving service non-public funds into the list of exempt charities given in Schedule 2 to the 1993 Act.Service non-public funds, as we have already discussed, are the last remaining element of the Tudor public utility concept of charity—the setting out of soldiers. They are the domestic housekeeping accounts of units of the Armed Forces with,
nothing to show and nothing to hide".They are distinctly different from street collecting "good causes" charities. They are vital to the maintenance of morale, a major war-winning factor, and therefore need to be regulated in a different manner to other charities.289GC On these Benches, we are not yet convinced that the Government have understood that there are two distinct types of service charities. First, there are charities operating in support of the Armed Forces, which fundraise actively and become involved with the general public. Examples of that category would include St Dunstans and SSAFA. Such charities should clearly register with, and be regulated by, the Charity Commission.
But the second category is very different. Service non-public funds are essentially the accounts of units of the Armed Forces covering domestic—that is, internal—charitable activity. They do not fundraise from the public. Using government phraseology, they operate "below the radar" and, in our view, should continue to do so in view of their essentially domestic status.
As I have said, there are more than 15,000 such excepted charities in the three services. Turnover on such accounts can be very considerable and to impose a legal requirement to open them up to public inspection by the submission of accounts and returns to a central charitable register would impose a heavy administrative load on staff already operating under considerable pressure.
We do not believe that there is any activity within such accounts that is of major interest to the public. There is nothing to hide but, as I said, conversely, nothing to show. If it is the Government's intention to cut red tape, why introduce increased bureaucracy in such a way? Moreover, any extra staff will have to be introduced at the Charity Commission and, presumably, also at the new Office of the Scottish Charity Regulator and its equivalent in Northern Ireland to cope with this increased workload.
The proposal is to set the initial registration threshold for service non-public funds at £100,000 annual income. That is probably too low for the majority of the large ships of the fleet and major naval shore establishments, battalion-sized Army units and RAF stations. Such units operate on a "central bank" concept whereby individual sub-funds, each of charitable status, are aggregated together for administrative and banking efficiency. The turnover on central banks can be fairly high, but the sub-funds contained within could now opt out of the system and operate independently, at least below this initial threshold.
That might solve one problem but it would go against the stated principle of trying to facilitate charity mergers and administration. The measures contained in the proposed legislation are therefore simplistic and fail to take account of the unique status and requirements of the Armed Forces. If excepted charitable status is to be removed—we accept that that will now happen—we believe that the best solution is to move all existing and any new service non-public funds into the category of "exempt charity". A further reason that SNPFs do not need to be registered with the Charity Commission is that there are statutory records of their existence elsewhere within the services' finance branches.
290GC It may be that the Government's approach on this matter has been coloured by the fact that the Charity Commission has recently raised the issue of alleged illegality of Army non-public accounting systems. If so, the following is worth remembering. The excepted charity status of service non-public funds excepts such charities from,
the duty under section 8(1) of the Charities Act 1960 to send annual accounts to the Charity Commissioners otherwise than on request".Under the SORP, which we have already discussed this afternoon, charities with gross income not exceeding £100,000 may opt out of accrual accounts and prepare accounts on a receipts and payments basis. Paragraph 354 of the Charity Commission's publication, Accounting and Reporting by Charities: Statement of Recommended Practice, of October 2000 states that,receipts and payments accounts and statements of assets and liabilities may be organised in any way",I repeat: in any way—that the trustees feel appropriate".When considering the large number of service non-public funds below this level of turnover, we have some difficulty in understanding how the Charity Commission can claim that many accounts are in an inappropriate form when its own guidance expressly permits great latitude in its mode of presentation.Service non-public funds do not normally have formal deeds of trust or Charity Commission schemes because, to quote from Statutory Instrument 1965/1056—the Charities (Exception from Registration and Accounts) Regulations— referred to in my amendment, they are,
hereby excepted from the duty to be registered under section 4(2) of the Charities Act 1960, and it shall be an excepted charity for the purposes of section 8(1) of that Act".It is interesting to note the heading of this instrument: "Exception from Registration and Accounts". Clearly the original intention was to allow service non-public funds to operate independently under their own service rules and regulations. If the Commission is to insist on the registration of all SNPFs, is it its intention to demand deeds of trust or schemes for each and every unit? Who is to do this drafting and who will pay for it? A standard format will not work because elements peculiar to individual service charities will be missing from any such template. Thus, it is likely that large costs will have to be borne by every SNPF, as well as new audit costs for the larger SNPF. The Royal Air Force estimates that, as a result of the proposals, its future—new—external audit fees will be in the order of £900,000 per annum, all to be met from charitable funds.If the Government were minded to accept the spirit of these amendments and to revisit the recommendation of the Scrutiny Committee, it would be a simple solution to allow defined service non-public funds to be added to the list of exempt charities. Clearly, then, the question arises as to who the sector regulator would be. Who, in effect, would be the equivalent of HEFCE to the higher education sector? There is a simple answer: the Ministry of Defence, just 291GC like the Department for Culture, Media and Sport, which is acting as regulator to the museum sector, as shown on page 91 of the RIA.
If that is not specific enough, the regulator could be the Vice Chief of the Defence Staff for Personnel. And if a still more detailed approach is needed, regulation could be split between the Adjutant General for the Army, the Second Sea Lord for the Navy and the Air Member for Personnel for the RAF.
The uncomfortable truth is that in our view the Government have not understood the role, structure and relationships of service non-public funds. They have persistently confused them with organisations like the Royal British Legion, which quite properly should be regulated under this Bill.
I hope that the Minister will see the logic of this new approach and will agree to reconsider the approach adopted so far. I beg to move.
§ Lord Phillips of SudburyAs a member of the Scrutiny Committee, which made the recommendation read out by the noble Lord, Lord Hodgson, I entirely support the amendment in the name of the noble and gallant Lord, Lord Craig of Radley, as comprehensively moved by the noble Lord, Lord Hodgson. This is a large and potentially ferocious sleeping dog which should be left to lie where it is for all the reasons put forward by the noble Lord, Lord Hodgson.
The noble and gallant Lord, Lord Craig of Radley, spoke with force when we considered Clause 2, the meaning of charitable purpose, and wanted a specific reference to Army charities such as these to be put into the list. It would be of considerable comfort to the Armed Forces charities concerned to have specific reference made to them, even if it is in Clause 11 rather than Clause 2. The case made is overwhelmingly clear in terms of common sense, administrative savings and a huge saving in potential costs.
§ Lord SwinfenIf this amendment is not agreed, what is the potential tie-up of service manpower? Could people who did not want the services to undertake a particular operation be so awkward in tying them up administratively on their charities that they could disrupt what the services were being asked by the Government to do?
§ Lord BorrieI want to make a point arising out of what was said by the noble Lord, Lord Phillips of Sudbury. I am favourably disposed to what I have heard today, particularly the extensive speech of the noble Lord, Lord Hodgson. However, I am worried that if the amendment became part of Clause 11, but there is no amendment of the kind requested by the noble and gallant Lord to Clause 2, one has a great deal of detail while the basic question of the charities for a "charitable purpose" under Clause 2 is not answered.
§ Lord Bassam of BrightonAt the moment the charitable service non-public funds of the Armed Forces are excepted from the requirement to register with the Charity Commission, provided that those 292GC charities are mainly or wholly established to promote the efficiency of the Armed Forces. The purpose of these amendments would be to confer on those charities exempt charity status.
I shall put into my reply our thinking on the background to our position and to the excepted and exempt charity status. The Charities Act 1960 exempted certain charities from the Charity Commission's regulatory jurisdiction on the basis that they were adequately supervised by another regulator. Exempt status is very different from excepted status in that exempt charities are not able to register with the commission and are not subject to its supervisory powers. Excepted charities, while not required to register with the commission, can do so voluntarily and whether or not they are registered are fully subject to the commission's supervisory powers. As a general rule, charities are excepted from the requirement to register on the basis that they appear on some other list. Excepted charities are already subject to virtually all the accounting and regulatory requirements of charity law. Excepted status gives them exception from registration and little else.
One of the main aims of the Strategy Unit review was to bring forward proposals to enhance the accountability and transparency of the charitable and wider not-for-profit sector. One of the main means of achieving that is the changes to the exempt and excepted charities provided in the Bill.
6.45 p.m.
When considering the position of exempt charities, we have sought to ensure that where a principal regulator has been identified for an exempt charity, the monitoring regimes to which it is subject will be adapted to cover basic charity law requirements. For the larger exempt charities—those with incomes above £100,000 per annum—where no principal regulator has been identified, the charities would be required to register with the Charity Commission. For the smaller exempt charities—those with incomes below £100,000 per annum—for which no principal regulator has been identified, the charities would become excepted charities.
The Government do not intend to add any other charities to the list of exempt charities in line with our aim to increase the transparency and accountability of the sector as a whole, which we believe is vital to its success. In any event, as I have explained, exempt charities without a principal regulator are being required to register with the commission. There is no independent principal regulator for the Armed Forces charities.
It has been estimated that, at the £100,000 threshold, approximately 90 per cent of the Armed Forces charities will not be required to register with the commission. We are alive to the concerns of the Armed Forces. There have been discussions, which will no doubt continue. We will meet their representatives in order to discuss their concerns. Allowing for a long lead-in time for the implementation of the changes to the excepted charities will enable those charities above 293GC the registration threshold to prepare adequately for registration. As explained, we do not intend to introduce the changes to the excepted charities until October 2007.
It is sometimes argued that what the forces call service non-public funds do not warrant registration as charities because they do not appeal for money to the public and are administered wholly in the Armed Forces, so are of no legitimate public interest. We cannot agree. The funds have charitable status and benefit from the tax privileges that brings, including the ability of service personnel to give tax efficiently to them through Gift Aid. We believe that there is a legitimate public interest in any organisation benefiting from charitable status and tax privilege. That interest extends to knowing of the existence and purposes of the funds—and that is satisfied by requiring them to register as charities. We will introduce registration gradually to minimise disruption.
As a result of the changes provided for by the Bill, for the first time all charities will be monitored for their compliance with charity law. I hope that Members of the Committee will accept that adding to the list of exempt charities would have a negative impact on the transparency and accountability of the sector as a whole, so would not be desirable.
The noble Lord, Lord Hodgson, said that there could be another principal regulator for service funds. It would not be appropriate for the Armed Forces charities to be regulated by the service boards, because they are under the control of principal officers from the services, so are controlled by the beneficiaries of the charities concerned. Boards also have no expertise in dealing with matters of charity law. I think that it is the case that they would then have to acquire that expertise and that we would have to give them a statutory function to carry out the role that the noble Lord seeks to provide for them. There are some practical difficulties involved in the noble Lord's suggested strategy for that sector.
The expertise is already there within the Charity Commission. We have a gradualist approach in terms of implementation. Some 90 per cent of Armed Forces charities will not in the first instance be required to register with the commission.
§ Lord Hodgson of Astley AbbottsWhile I am grateful to the Minister, because he obviously thought extensively about the points that were raised in the debate, I cannot say that I am anything other than disappointed by what he has said. We accept that excepted charities will disappear. I understand that and why it makes sense. But we are to preserve a number of exempt charities that are listed, which we will debate shortly. They can be removed from but not added to. It is not clear why we are preserving an exempt list that is stuck like a fly in ambergris, which cannot be changed at all.
It seems that the Government have got themselves very hung up on that important, significantly large but internal, set of service charities. There is no question 294GC about St Dunstans, the Royal British Legion or all of those, which come in. There are any number of levels at which the regulator could participate. As I say, they can go from the individual service chiefs up to the MoD, which, surely, is far enough away from the individual charities at unit level not to have conflicts of interest.
I take the Minister's point that there is an associated tax privilege. Clearly, there has been a tax break and Gift Aid can be used. There is, therefore, a point of public interest. But, at this level, are we really talking about bringing around 12,000 to 15,000 internal charities into the Charity Commission net on that slim and rather narrow point? The service non-public funds will be very disappointed with the Minister's reply. I hope that before Report he will have a chance to think carefully on whether he is not using a sledgehammer to crack a nut—or a sledgehammer to crack a nut that does not even exist. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ Lord Hodgson of Astley Abbottsmoved Amendment No. 111:
Page 13, line 24, leave out paragraph (a) and insert—(a) for "the colleges and halls in the universities of Oxford, Cambridge, Durham and Newcastle," substitute "any college or hall in the university of Newcastle, and"; andThe noble Lord said: I shall be brief. Amendment No. 111 follows the wording of the original draft Charities Bill. We have been asked to raise this issue with the Minister to get an explanation on the record on why the change has taken place. This would have the effect of requiring the colleges of Oxford, Cambridge and Durham to register with the Charity Commission rather than remain exempt. As I understand it, that is what, certainly, the Oxbridge colleges wish to happen. They would prefer to be regulated by the Charity Commission than by their respective universities, which would almost certainly be the result should they seek to remain exempt.
I understand that the final Bill has omitted those words not because there is a proposal that Oxford, Cambridge and Durham colleges should remain exempt, but because there is some suggestion that removing their exempt status would change the nature of the Bill from a public general Bill into a hybrid Bill of some sort. As I understand it, the intention therefore is that those colleges should not be removed from exempt status by the Bill, but should be so removed by the Secretary of State under his powers given by Clause 11(12) and (13) shortly after the Bill is passed.
Hybridity is a topic to which constitutional lawyers no doubt devote a lifetime of skill and expertise. In my brief sojourn in the other place, I recall Mr Robin Maxwell-Hyslop, MP for Tiverton, bringing the Government's entire shipbuilding nationalisation programme to a grinding halt on the grounds of hybridity. Perhaps the Minister could favour us with a short explanation of the change from the draft Bill to the Bill before us now. 295GC Was hybridity threatened because the colleges or halls in the University of Newcastle remained in the draft Bill? If so, why is hybridity not still being risked because two educational establishments—Eton and Winchester—are being removed in the Bill before us today.
Noble Lords will probably have seen the briefing from Universities UK on this point. We share its view that, in the interests of clarity and transparency, it seems appropriate that the Bill should show the Government's true intentions rather than have them executed by means of the exercise of the Secretary of State's powers after the Bill is passed. I beg to move.
§ Lord Phillips of SudburyI suppose that in view of the forthcoming amendments in relation to universities, I should declare an interest as chancellor of Essex University. Of course, Universities UK does not represent colleges and halls which are parts of universities, but it accepts that those colleges and halls do not want to be regulated by HEFCE and, indeed, they have no direct relationship with HEFCE now. Universities UK also fully accepts the Government's policy in relation to universities and the Bill. There must be regulation by someone and it accepts that these halls and colleges would prefer to have a relationship with the Charity Commission. Therefore, it supports these amendments.
§ Lord Bassam of BrightonI am grateful to the noble Lord for tabling the amendment and to the noble Lord, Lord Phillips, for telling us that he is the Chancellor of Essex University. I did not know that; I suppose that I should have done. I express my gratitude to him. I used to use the library there regularly.
In any event, the amendment allows me to clarify the position of the colleges and halls of Oxford, Cambridge and Durham Universities, which are currently exempt charities. I understand that there are no colleges or halls at the University of Newcastle and so I do not think that we need to concern ourselves overmuch with that.
We consulted fully with the representatives of the colleges and halls of these universities, save for Newcastle, in an attempt to identify a suitable principal regulator to take on the role of monitoring their charity law compliance. The Higher Education Funding Council for England was identified as a principal regulator of higher education institutions. However, it was not considered to be a suitable principal regulator for these colleges as, although it has a relationship with the respective universities, it does not have a direct relationship with the colleges and halls. It did not prove possible to identify a suitable principal regulator for these colleges and halls and, with the agreement of the representatives of the colleges and halls, it was proposed that they lose their exempt status and register with the Charity Commission.
It remains the Government's intention that these institutions be removed from Schedule 2 to the 1993 Act and that they lose their exempt status and register 296GC with the Charity Commission. However, the Government intend to achieve that by use of the order-making power in subsection (12) of Clause 11. Such an order made under this clause would be subject to the affirmative resolution procedure.
A consequence of the amendment would be that seeking to remove the exempt status of these organisations by amending the Bill could give rise to hybridity. That could result in unwelcome complications for the Bill and its progress through Parliament. As the Government intend, albeit by different means, the same outcome as that which the noble Lord's amendment seeks, I suggest to the noble Lord that it may be in everyone's best interests if he withdraws the amendment.
§ Lord Phillips of SudburyBefore the noble Lord sits down, what is the impact of the European Convention on Human Rights vis-à-vis the hybridity point? It is not a serious point.
§ Lord Bassam of BrightonI realise that it is not a serious question but I am grateful to the noble Lord for asking it. If he really wants an answer, of course I shall write to him at length.
§ Lord Hodgson of Astley AbbottsI am grateful to the Minister. We wanted to get that point on the record and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ 7 p.m.
§ Lord Borriemoved Amendment No. 112:
Page 13, line 26, leave out subsection (4).The noble Lord said: The amendment stands in the name of myself and the noble Baroness, Lady Howe of Idlicote. Clause 11, as we know from the brief discussion that we have just had, makes certain amendments to the list of exempt charities in Schedule 2 to the 1993 Act. I have found Clause 11(4) rather odd—although it is probably not the only bit of the clause to be that. It purports to add to the list of the exempt charities a, "higher education corporation", but such a body is already listed in Schedule 2. Naturally, I turn to the Explanatory Notes to get an explanation, and there I am told that the change is described as a "technical change" that has,
no effect on the exempt status",of the higher education corporation. Given that Explanatory Notes are meant to be helpful, I do not believe that that helps any of us to understand why something that is already there should be inserted. In fact, if a textbook writer publishes a consolidation of the old Act and the new one, the paragraph will be repeated and everyone will think that it is the fault of the publisher. So I should like the Government to explain that.That is a technical matter, however. I am at any rate clear, because it has already been announced and the Minister has just mentioned it, that the Government intend in Clause 11 that a higher education 297GC corporation should have exempt charity status and that under Clause 13, which we have yet to come to, the Secretary of State by regulation will appoint the Higher Education Funding Council as principal regulator for universities.
I should have realised that a "higher education corporation" does not include what I might loosely call the older universities, some of which have just been mentioned. To be comprehensive in my amendment, I should have sought to remove exempt charity status from all other universities as listed in headings (b) and (c) of Schedule 2 to the 1993 Act. I apologise to the Minister and to other Members of the Committee for the inadequacy of my amendment, which I shall not of course press. But I trust that the Minister will appreciate that it is intended to probe whether universities ought to be regulated by the Higher Education Funding Council.
In the Second Reading debate on this Bill, my noble friend Lady Warwick of Undercliffe, chief executive of Universities UK, who is unable to be here today, made some pertinent remarks about the burdens of regulation that are already placed on universities. She voiced the concern of many that the Bill should not add to that burden. She said, on 20 January—which shows how long ago Second Reading was:
To their credit, the Government have recognised that danger. Instead of exempt charities having to register directly with the Charity Commission, they will be regulated by their current 'principal regulator'. The intention behind that is to avoid the duplication of regulation".—[Official Report, 20/1/05; col. 932.]Is HEFCE the appropriate regulator, however, given that it must have a dual role as funding body and regulator taking the place of the Charity Commission in its manifold responsibilities under the charities legislation?My principal concern is not ideological but practical. May HEFCE prove to be a more exacting task master and a more heavy-handed regulator than the Charity Commission? Anxiety on that score has been expressed to me by the Higher Education Regulation Review Group, to give it its full title, a body chaired by Dame Patricia Hodgson and set up by the Department for Education and Skills to review new legislation, regulations and procedures. The anxiety of that group is that whatever the intentions of the new arrangements under the Bill, which is no doubt that they should be light regulation and not impose burdens on the Charity Commission which would be bourne better by someone else, monitoring of universities and controls should not impinge too onerously on the university sector.
Is it possible or likely that HEFCE will seek to collect more information from universities or run more checks on them? Will new audit requirements be imposed by HEFCE which could be unduly burdensome? Will the Minister give a reassurance that the universities are not believed to abuse their charitable status at present and will not be burdened with new and seriously heavy obligations as a result of the exempt status provided by the Bill and the transfer of regulation from the Charity Commission to 298GC HEFCE? The exempt status, far from being something desirable, may become something undesirable. I beg to move.
§ Baroness Howe of IdlicoteIn support of the amendment moved so comprehensively by the noble Lord, Lord Borrie, I share the same reservations about HEFCE. It has a huge role already in a heavily over-regulated sector. No doubt with the passing of recent legislation, and further requirements on higher education institutions to comply with the no doubt very reasonable requirement to get more students from poorer backgrounds into universities, there will still be a certain suspicion.
The main thing is that, having been deregulated, they must now be regulated—and if that is necessary for the essential effective working of the Bill, so be it. What universities really want is that the burden can be spelled out by the Minister as not being too heavy. If he could give reassurances on that—that the extra auditing that will be required is to be done by ordinary auditors just as an extra bit of work. Nobody believes that the higher education sector is under-regulated. In 2002, the Better Regulation Task Force made it clear that in some respects it was overburdened. So I hope that we can have reassurance from the Minister.
§ Lord SwinfenI hope that the Minister will accept the amendment. As the noble Lord, Lord Borrie, said, in Schedule 2 to the 1993 Act, a higher education corporation is already included under paragraph (h). I notice that the next clause proposes to insert paragraph (j), which also refers to a "further education corporation". I notice, too, in Schedule 2 to the 1993 Act, at paragraph (j), a further education corporation is mentioned. There must have been a mistake in the drafting in those respects, and I believe that the references are unnecessary. I hope that the Minister accepts the amendment tabled by the noble Lord, Lord Borrie, and introduces one himself on Report on the point that I have raised.
§ Lord Hunt of WirralI have already declared my interest as senior partner of Beachcroft Wansbroughs. I am speaking on the amendment mainly because the noble Lord, Lord Dearing, who wanted to explain the answer to several of the questions posed by the noble Lord, Lord Borrie, has unfortunately had to go to another meeting. He asked me—if ever I could be an adequate mouthpiece—to put forward the points that he wanted to make. I have no advice for the noble Lord, Lord Borrie, on the actual effect of his amendment, and I look forward to hearing from the Minister on that.
The noble Lord, Lord Borrie, said that the purpose of the amendment was to probe the regulations proposed in the Bill relating to universities —and that was further explained by the noble Baroness, Lady Howe of Idlicote. The great majority of UK-based universities in England have said that they would prefer HEFCE to be the principal regulator, and the noble Lord, Lord Dearing, asked me to explain how that decision was reached. As was pointed out, universities already comply with charity law. When it 299GC was first proposed that that compliance should be regulated, Universities UK opposed that suggestion, as the noble Lord and the noble Baroness explained.
Higher education is a low-risk sector which is already heavily over-regulated. That fact is already reflected in the Government's response to Private Action, Public Benefit, which is called Charities and Not-for-Profits: A Modern Legal Framework. Paragraph 6.56 refers to that fact and quotes from the Better Regulation Task Force conclusion in 2002 that higher education institutions,
were in some respects overburdened with bureaucracy".However, when it became clear that some form of regulation must be put in place, the universities chose HEFCE as the most suitable principal regulator. The noble Lord, Lord Borrie, referred to the Higher Education Regulation Review Group, which is concerned that regulation should be light touch. But the majority view of member vice-chancellors is that universities would prefer to take the route proposed under the Bill and fight the battle for a light-touch regulation approach rather than face regulation by a body with whom they do not already have a relationship.
I shall explain. As the funding body for English universities, HEFCE already receives the information that would be needed by a regulator, such as audit reports and the financial memorandum. Having HEFCE as the principal charity regulator, therefore, avoids the duplication of regulation. Furthermore, HEFCE has a detailed knowledge of the sector, which the Charity Commission does not. I understand from the noble Lord, Lord Dearing, that HEFCE intends to approach its new role with as light a touch as possible. A key issue is that the body is willing to use the new higher education SORP, to which we referred earlier, that is the statement of recommended practice, which would substantially reduce the scope for duplication of bureaucracy.
I hope that in some way I have answered the points raised by the noble Lord, Lord Borrie. Although having HEFCE as principal regulator would impose the least bureaucracy on English universities, a one-size-fits-all approach would not work across the sector. Different parts of the higher education sector have different existing regulatory practices and therefore need different regulators. As was discussed under earlier amendments, the colleges of Oxford, Cambridge and Durham universities will register with the Charity Commission, as potentially will Welsh universities. Under the Charities Bill currently before the Scottish Parliament, institutions there will register with the Office of the Scottish Charity Regulator, although many of the existing regulatory regimes will continue to be used.
I hope that I have been able to persuade the noble Lord, Lord Borrie—and of course I look forward to hearing from the Minister—that for those reasons, HEFCE would be the most suitable principal regulator for English universities. I hope that the Minister will endorse that approach.
§ 7.15 p.m.
§ Lord Phillips of SudburyIn speaking to these amendments, I am not speaking for Universities UK or for my university, of which, incidentally, the vice-chancellor is the current boss of Universities UK and has a great deal extra on his plate. But it seems to me that the whole area of charitable activity in relation to the universities needs no additional regulation at all. Universities are inundated with regulation. They are full of lawyers, accountants and managers, and I see no virtue whatever in their being subject to a principal regulator or, indeed, to the Charity Commission. They are fully aware of charity law; they are classically charitable organisations; and the Charity Commission has all the rights under this Bill and previous legislation that it needs to come down on them if they step out of line.
That said, we have a patchwork of arrangements, as we have just heard from the noble Lord, Lord Hunt. For example, the Welsh universities are to be regulated by the Charity Commission. My question to the Minister is: is it impractical or otherwise obnoxious to contemplate the circumstance where a university can choose whether to be regulated or to have a principal regulator, such as HEFCE or the Charity Commission?
I am less sanguine about HEFCE as principal regulator than some who have already spoken. It is true that it has a long-standing relationship with the universities, but it has no experience of regulating for charity law purposes. My fear is that, if this new function is placed on them, it will lead to a far heavier engagement between HEFCE and the universities than if the matter were left to the Charity Commission. The commission is extremely experienced in what I would call a "real light touch". Because it is the fount of charity surveillance, so to speak, it has much more confidence in exercising a light touch than HEFCE is likely to have. I should be grateful if the Minister could respond on that point.
Finally, I reiterate what the noble Lord, Lord Swinfen, and others said about the state of the Charities Act 1993, as reprinted in 2004. Most noble Lords will be clutching a copy of that because much of the present Bill harks back to the 1993 Act. It seems to me to be a most extraordinary state of affairs when the legislature cannot obtain from Her Majesty's Stationery Office or, indeed, from this House or the Printed Paper Office, a Bill which shows all the amendments that have been passed to it in the interim. Were we to have had that, some of the confusion and perturbation which has been expressed about, for example, a higher education corporation already being in the Bill would have been explained. As I understand it, the higher education corporation was taken out as a category of exempt charities in 1998. Therefore, although it is not strictly germane to this amendment, we shall have to take our chances.
I hope that the Minister will take back to the Government the fact that there is a need to equip those of us who try to legislate complex matters with Bills 301GC that are up to date and which do not involve us undertaking research which many have neither the time nor the expertise to pursue.
§ Lord Brooke of Sutton MandevilleI am very conscious of my fairly substantial absence from the deliberations of this Committee. This moment in a Parliament is one when diary conflicts are intense but, because I am returning after a long absence, I shall be extremely brief.
I cannot help remarking that progress on the Bill during my absence does not seem to have been exactly precipitous. In the very early days of motoring, Raymond Asquith, the Prime Minister's son, spent a weekend at a home in the Highlands and was driven to the station 16 miles away by his hostess's chauffeur. In writing his thank-you letter, he said that the chauffeur had driven with the passion of Shelley and the precision of Pope. It seems to me that there has been rather more of the latter than of the former in the progress of the Committee so far.
I declare an interest as Pro-Chancellor of the University of London. In the same way as the noble Lord, Lord Phillips, disclaimed, I am not speaking for that university. I am not proposing to add substance to the amendments admirably moved by the noble Lord, Lord Borrie, and the noble Baroness, Lady Howe of Idlicote, but I was already intensely interested in the reply that the Minister was going to give. My noble friend Lord Hunt of Wirral seems admirably to have paved the way for the Minister's response. But that has not lessened my interest, not least because his words will commit the Government to considering this matter for future reference and because of the speech of the noble Lord, Lord Phillips of Sudbury.
§ Lord Bassam of BrightonI am grateful to the noble Lord, Lord Brooke, for returning to the Committee and adding his usual high quality of levity to our proceedings. It has certainly lightened this late part of our urgent deliberations on such terrifically important matters. I am extremely grateful to the noble Lord, Lord Hunt, who has really done my job for me. I was almost inclined to say that he made the speech that I would have loved to have made, and he did so more eloquently and elegantly than I can make my observations, I am sure.
I want to deal with the point picked up by the noble Lord, Lord Borrie, in his commentary on Clause 11(4). He suggested that it repeated something that was already present. The subsection does not repeat anything. The higher education corporations were removed from Schedule 2 by the Teaching and Higher Education Act 1998. The amendment seeks to reinsert higher education corporations in the schedule of exempt charities.
§ Lord BorrieI was most interested in what the noble Lord, Lord Phillips, said. He was informative. I had not previously realised what he told us. Why does the top of Clause 11 state:
Schedule 2 to the 1993 Act … is amended as follows"?302GC It does not say, "the 1993 Act, as amended, is amended as follows". It suggests that I am to look—as I did—at the 1993 Act. I found the phrase that is then to be inserted. The fault is one of drafting. despite, as I have admitted already, my lack of study of what happened between the two dates. I did not think I had to study that.
§ Lord Bassam of BrightonPerhaps the drafting is not perfectly expressed, but it means the 1993 Act as amended. Members of the Committee, including the noble Lord, Lord Borrie, might have been looking at an out-of-date version of the 1993 Act that does not reflect the effect of the 1998 Act. I am treading on dangerous ground because I am bound to find that someone has consulted the right version.
§ Lord Phillips of SudburyOn the part of all Members of the Committee, I cannot resist. My copy of the Charities Act obtained from the Printed Paper Office this week was reprinted in 2004. Which Member of the Committee will assume something other than that it is what we need? That is a serious point.
§ Lord Bassam of BrightonIt is a fair point.
§ Lord SwinfenThere may have been an Act that amended the 1993 Act, but the 1993 Act has to be printed as passed by Parliament unless a consolidation Act has been passed in the mean time. There has been no consolidation Act for the 1993 Act. Once the Bill becomes law, I hope that the Government will bring forward a consolidation Act to make certain that, later on, we all sing from the same hymn sheet.
§ Lord Brooke of Sutton MandevilleTo give the Minister slightly longer to form a view, I shall say that I cannot help feeling that "the 1993 Act as amended" is either a correct description of the 1993 Act or it is not. For those of us trying to find our way through the matter, there would have been some virtue in the words "as amended" having been added rather than discarded.
§ Lord Bassam of BrightonOkay. I am advised that the copy is the 1993 Act as passed by Parliament, not as amended subsequently. That is so even though the noble Lord's copy was printed in 2004. I agree that there is a need for some consolidation; that would greatly clarify matters and would certainly be more helpful.
§ Lord Phillips of SudburyThis is the last interruption. I promise. Does that mean that the noble Lord is conceding Amendment No. 186 on "Consolidation etc."? It would save a lot of debate later on.
§ Lord Bassam of BrightonTempting though it would be—perhaps I would have an easier life—I would probably get hell elsewhere, so I am afraid not. I said that the noble Lord, Lord Hunt, had really made my speech for me, but it is important—
§ Lord SwinfenBefore the Minister goes on to deal with the universities, I should point out that he has not said whether he will accept the amendment. He ought to. When he answers that, will he answer my point on Clause 11(5), which is also unnecessary because the provision is already in the 1993 Act?
§ Lord Bassam of BrightonThe provision was taken out. We are reinserting it. I hope that that answers the noble Lord's point.
We should make some progress and complete discussion on this important amendment. I am afraid to say from the point of view of the noble Lord, Lord Borrie, that we are not minded to accept it. Exempt charities benefit from the same advantages as registered charities, with an exemption from registration with the Charity Commission and most of its regulatory powers. They must still comply with the basic principles of charity law. The Government's intention is to ensure that exempt charities' compliance with basic charity law is monitored and that they are properly accountable, while taking care to minimise any bureaucracy that that might entail.
The Bill would maintain the exempt status of charitable higher education institutions in England, subject to regulation by a principal regulator. The Higher Education Funding Council for England was identified as the most suitable principal regulator of the charitable higher education sector in England as it currently funds higher education, research and related activities, and already monitors institutions' management, governance arrangements, and financial health. In Wales, it is proposed by the Welsh Assembly that charitable higher education institutions should register with the Charity Commission.
I want to reaffirm that the Government are keen to keep to an absolute minimum any additional burden for universities as a result of the Bill, and appreciate the existing regulatory burdens on universities, as amply evidenced in Committee, particularly by reference to the 2002 Better Regulation Task Force report. However, the basic principles of charity law already apply to exempt charities, and we intend that the monitoring process should adopt the lightest possible touch, to enter into the relevant jargon.
The principal regulator approach has several advantages over registration with the Charity Commission. Principal regulators are in a position of knowing and understanding their sector, and the issues of importance to it. The principal regulator—in this case, HEFCE—would be able to use existing reporting mechanisms and monitoring processes so far as possible, to demonstrate compliance with charity law. Keeping the burden to a minimum could include the use of existing auditors to attest to compliance, or other ways of simplifying or automating the compliance monitoring process.
Higher education is a sector where Britain is world class, by any measure. Teaching, whether as an academic endeavour or delivering the range of professional skills—
§ The Deputy Chairman of Committees (Baroness Gould of Potternewton)I am instructed that the Committee has to adjourn immediately. I suggest that we come back, finish the amendment and adjourn the Committee for the day.
[The Sitting was suspended for a Division in the House from 7.30 to 7.38 p.m.]
§ Lord Bassam of BrightonThe higher education sector is world class by any measure. It is widely respected. The teaching is of a high standard. It has fantastic levels of productivity and the institutions have maintained leadership and creativity over decades of funding pressure. There is no suggestion that universities are currently failing to comply with basic charity law requirements, but without a monitoring process in place it is not possible for them to demonstrate that they are doing that.
Of course we will monitor the arrangements made for compliance and will intervene if any significant or unnecessary additional burdens are introduced for universities. The intended effect of the amendment is to remove higher education corporations' exempt charity status. As a result, higher education corporations would have to register with and be regulated by the Charity Commission, which would not provide the benefits of the principal regulator approach and would result in a greater regulatory burden, as universities would be subject to the monitoring and reporting requirements of both HEFCE and the Charity Commission—a double burden of regulation.
HEFCE already monitors the Government's financial help for universities. It already has the monitoring systems in place. It is effective in doing that. What we require here is a light touch of regulation and it would be much better to modify the existing monitoring processes than have a duplicate layer of monitoring through the Charity Commission route. For those reasons, we reject the approach that has been proposed by the noble Lord, Lord Borrie. The noble Lord, Lord Hunt, was absolutely right. This is the best way for us to make this work and it is understood and effective in those terms. For those reasons, I cannot accept the amendment.
§ Lord BorrieI feel like the speaker who immediately precedes the lunch break, because everyone wants to go away. I thank all those who took part in this debate and, in the light of the Minister's statement, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ Lord Bassam of BrightonI think that this would be a convenient moment for the Grand Committee to adjourn until Monday at 3.30 p.m.
The Deputy Chairman of CommitteesThe Committee stands adjourned until Monday next.
Committee adjourned at nineteen minutes before eight o'clock.