HL Deb 12 July 1983 vol 443 cc744-54

4.56 p.m.

Lord Renton

My Lords, I beg to move that this Bill be now read a second time. It is the same Bill, except for its short title, as was introduced by my right honourable friend Sir Angus Maude towards the end of the last Parliament in another place. He had 28 years of distinguished service there but he is not now in either House. Nevertheless, I regard this as very much his Bill. It passed through all its stages after thorough discussion in another place and was considered by your Lordships on 11th May when I moved the Second Reading but withdrew the Bill at the end of the short debate, Obviously it could not make further progress in the last Parliament. Today, however, I trust that your Lordships will give it a Second Reading. If you do so I shall move the Motion standing in my name: That the Bill he committed to the Select Committee to which the Parochial Charities (Neighbourhood Trusts) Bill has been committed". that Bill having been introduced by my noble friend Lady Faithfull, who moved its Second Reading on 30th June. It was given a Second Reading and it was committed to that Select Committee.

I have re-named the Bill the Small Charities Bill because I think that it is a more appropriate short title. It deals not with charities in general but only with the very small charities. It is a short, simple, modest, well-drafted Bill—not drafted by me—and it has the backing of the Government. Also I find that it has the approval of at least one of the principal and most respected practitioners in charity law of my acquaintance. The Bill's purpose, which is stated in the long title, is: to enable the property of certain small charities to he expended without regard to restrictions distinguishing between capital and income in their trust instruments.

As a background to the Bill perhaps I could again draw attention to the fact that there are altogether about 140,000 charities registered with the Charity Commission; and more than half of them, strange as it may seem, have an annual income of less than £1,000 a year. The Chief Custodian of Charities estimates that in 1980 less than £1 income was paid out on no fewer than 7,000 holdings of land held by charitable trustees. Others have only very small amounts of capital invested in trusts in which the trust property does not consist of land but consists of investments. Of course, most of these very small trusts are parochial, but they are not confined to the relief of poverty, with which the Bill of my noble friend Lady Faithfull is concerned.

This Small Charities Bill applies only to trusts which are at least 40 years old—and that period has been chosen because it was about 40 years ago that we had to learn to live with inflation on a scale not experienced by our predecessors—and it applies to trusts which have no more than £1,000 of capital, whether in land or in securities. However, I should mention that under the Bill the Home Secretary is given power to increase that amount of £1,000 if he lays an order to do so and if that order receives the consent of both Houses. That provision is necessary in case of further inflation, in spite of the magnificant results of this Government's policy in restraining inflation. I should stress that under the Bill the trustees would still have to apply to the Charity Commissioners if they wished to sell land, but as a result of the Bill they would have a discretion to expend the proceeds of sale, or any other capital, on their own responsibility.

The Bill applies only to England and Wales, because the Scottish law on charities is somewhat different. Of course, as regards Northern Ireland, we mostly legislate now by Order in Council, and the Bill does not apply to Northern Ireland.

I wish to stress that, to this extent and in this way, there is nothing compulsory in the Bill because the decision whether or not to use capital for fulfilling the purpose of the charity is entirely at the discretion of the trustees, and nobody can force them to use the capital. Trustees often suffer great frustration through the income of small charities being so small that it will not even cover the limited cost of administration. So they are unable to carry out the charitable purposes for which they were appointed unless they can use capital—either the whole or some of the capital—in order to do so.

I think that most noble Lords who are present here this afternoon will remember that, when we debated this on 11th May, when I moved the Second Reading in the last Parliament. I gave the example of a village clock which could not be repaired unless the whole of the small amount of trust capital was used for that purpose. It seemed to me that that was an obvious case for enabling the capital to he used and, indeed, a case for it to be used even though it exhausted the whole of the capital; otherwise the clock would become just a useless eyesore in the village. My noble friend Lady Faithfull then said to your Lordships that, if that trust had become part of a neighbourhood trust, the clock would still be repaired. Sometimes that might be possible. but not always. But I must point out that under my noble friend's Bill that could not happen, because her Bill applies only to trusts for the poor, for the relief of poverty.

The question also arose then, and is no doubt present in the mind of some of your Lordships, about the extinguishing sometimes of even small trusts. There is nothing new about the extinguishing of trusts. Indeed, Clause 6 of my noble friend's Bill envisages that possibility.

Although my noble friend and I each have misgivings about each other's Bill, as I said on 30th June, we have a "knock-for-knock" agreement not to oppose their Second Reading. I feel sure that, having considered both Bills, the Select Committee will gladly make the best use it can of each of them and suggest ways of improving them, perhaps even of blending them.

I also hope—as was suggested by the noble Lord. Lord Mishcon, on 30th June—that it will consider any further way in which the Charities Act 1960 might be improved in the light of experience gained since then. I do not suggest that a Select Committee of your Lordships' House should feel obliged to carry out a general review of the whole of the law of charity as, for example, was done by the Nathan Royal Commission in 1952; nor, indeed, quite such a wide review as has been carried out on several other occasions since then. However, I suggest that the Select Committee might feel that it should have power to consider, not only the precise terms of the two Bills, but anything within the Charities Act which comes broadly within the scope of the two Bills and has a bearing on it.

However, perhaps I may presume to issue a warning to the Select Committee and to your Lordships. I feel obliged to suggest that we should not confuse law and administration. Much of the criticism heard in our debates on these two Bills is really a criticism of delay or inaction on the part of the Charity Commission. It is delay or inaction for which those working in the commission or the commissioners themselves may not be to blame. The fault may lie in the fact that the commission has to be unnecessarily consulted. That in its turn may perhaps be due to the law, but it may simply be due to the commission having been required in some way or another—I do not specify which way—to do work which patently it is unnecessary for it to do. It leads to delays which may he to the disadvantage of the charity as, for example, when investments need to be changed and the stockbroker advising the trustees says, "Look here, there is a good opportunity. but you must not delay too long because if you do you will miss the market", but, by the time the matter has been referred to the Charity Commission, it is too late. On the last occasion, the noble Lord, Lord Mishcon, said that it could take months to get their consent, which is surprising, but I do not deny that he may he right. In my experience, it has taken weeks, which has been long enough to miss the market.

Therefore, the Select Committee should consider whether the Charity Commission is understaffed in relation to the burden placed upon it or, conversely, should consider whether the burden should be lightened in relation to the resources of the Charity Commission. Perhaps that is the better way to put it. So it will no doubt find that it should not only consider what amendments should he made to the law, but also the extent to which the law can be implemented administratively.

As I shall have the right to reply to the debate, I shall then be happy to try to answer any further matters which arise from the Bill. Meanwhile, I hope I have explained enough of the purpose and effect of the Bill to enable me to say, my Lords, I beg to move.

Moved, That the Bill be now read a second time.—(Lord Renton.)

5.10 p.m.

Lord Mishcon

My Lords, the hope expressed by the noble Lord, Lord Renton, in his last sentence has been amply justified. He has as he always does, explained to the House with great clarity the purpose of the measure. This is one that he has adopted as his child, having in fact told the House who the parent is, The House will feel that, as usual, he has looked after his child extremely well.

The House is really indebted to both the noble Lord, Lord Renton, and to the noble Baroness, Lady Faithful, for having drawn attention to the problems that involve smaller charities where all of us who are connected with them know that a terriffic amount of waste of effort and of money occurs. It is so good that on a hot summer's day the warmth that exists between two Members of the House who have the same object should have led to an agreement that neither opposes the Second Reading of the Bill of the other, and that both, with your Lordships' consent, will go to a Select Committee to see whether wisdom entirely lies on one side or the other; or whether some amount of admixture of wisdom is the best solution to this problem; or whether indeed a third alternative exists in regard to dealing with small charities.

The noble Lord, Lord Renton, was quite right his Bill encompasses a greater variety of charities than the noble Baroness, Lady Faithful, had in mind. She had in mind of course the idea, if I can put it this way, of enforced amalgamation to carry out a common good. We heard—and rightly—that there was some objection in principle, it could be, to something mandatory which affects the wishes of a settlor or a testator. On the other side you get the permission of trustees to wind up a charity provided the charity is 40 years old or more and that its funds do not consist of more than a £1,000 in the present state of inflation. Again one hears echoing from the past the tradition that has been in charity law that you do not upset ever the wishes of a settlor or testator unless there are very good grounds for doing so, and you can then try to keep alive the charity by possibly adapting it to the purposes and needs of the time.

However, it is a little bit of an innovation in our legal system in regard to charities, I would submit, to say that the settlor, having weary trustees some 40 years on, finds, possibly in another world when he looks at what we are doing here, the fact that his original wishes have been bypassed by the successor trustees who have decided to give up the struggle. It is so sensible that the Select Committee looks at both Bills, if it be your Lordships' will. I so much share the hope of the noble Lord, Lord Renton—and he was kind enough to associate my name with this hope—that the Select Committee could look at the side issues that arise—and I agree with him, possibly administrative side issues—from both these Bills.

One of those considerations, as I believe the noble Lord, Lord Renton, hinted, would be the position of the Charity Commissioners. I know that the noble Lord will forgive me if I dissociate myself from the thought which may be in your Lordships' minds as a result of something that the noble Lord said, which is that every time trustees of a charitable trust decide, on stockbrokers' advice, or that of an expert, to vary their investments they have to go to the Charity Commissioners for consent. That is not the position as I understand it, and there are many charitable trusts which do not in fact enforce upon trustees that duty. If the noble Lord wishes to correct me upon that I have no doubt he will wish to report me, as he should do, to the Charity Commissioners and everybody else for having broken that regulation many times as a trustee.

Lord Renton

My Lords, I am grateful to the noble Lord for giving way. I am sure that he and I are in agreement about this matter, and the facts are plain. It is not always necessary to go to the Charity Commissioners, but it is necessary in far too many cases for various reasons about which the noble Lord may know more than I do.

Lord Mishcon

My Lords, I am glad that the noble Lord concedes that of course it is not necessary on every occasion. I do not think that this would be the time and place to say where it is necessary or where not: but I should hate the House to think that this is necessary on every occasion, because it would be completely impossible to manage a trust properly if one had to wait a very long time. When I referred on the previous occasion to the very long time one had to wait. I was thinking in terms of guidance of the Charity Commissioners which is required on various matters, and certainly in regard to applications for registration where an awful long time elapses. It may well be—I hope so—that the Select Committee would not only look at matters that could be excluded from the Charity Commissioners but see really whether it is fair to put upon them, with their present personnel and establishment, duties which they frankly cannot fulfil promptly—it may well be because of their lack of numbers and of strength.

There is only one other observation that I should like to make, and I make it with the usual deference that Members of this House always pay to the noble Lord, Lord Renton, because of his precision in regard to his interpretation of statutes, instruments, and orders, and his punctilious way of adhering faithfully to every word. He said—and this is an important provision—that in this Bill there is the power to vary the amount involved, the £1.000, by a statutory instrument at the instance of the Minister and within the limits of increasing inflation. He said, and I listened carefully to his words, "provided the assent of both Houses is obtained". Of course there is the negative procedure in his Bill, and it is not the assent. Indeed, it would have to be a negative vote which would defeat the order. This is a small point and I know that the noble Lord would have helped me out if I had made that slight error, and I therefore hope that he will excuse me if I raise the point because of what he said.

Generally, if I may say so from these Benches, it is so sensible to give this Bill a Second Reading and to hope that the Select Committee will come back to us with guidance upon how we ought to deal with these measures, added to, I am sure, by the wisdom of the noble Lord the Minister who will answer this debate. I repeat my own personal thanks and those of my noble friends behind me to both the noble Lord, Lord Renton, and the noble Baroness, Lady Faithfull, for seeing that we deal with something that ought to be dealt with.

5.19 p.m.

Baroness Faithfull

My Lords, if in the field of national and international politics all those who disagree, as do my noble friend Lord Renton and I over this Bill, yet remain on the best possible terms I suggest that we would all live in a more pleasant and peaceful world. I do not agree with this Bill, but because there is controversy, because it is supported by Her Majesty's Government—and I thought that perhaps the noble Lord, Lord Elton, would be pleased to hear me say this—and that it was accepted in another place, I shall vote "Content" to Lord Renton's Second Reading to enable my noble friend to move his Motion to refer this Small Charities Bill to the same Select Committee which will deal with the Parochial Charities (Neighbourhood Trusts) Bill dealt with in your Lordships' House on 30th June.

I will not detain your Lordships, but I disagree with the Bill, first on grounds of principle. I contend that it offends the basic principle of charity law on which donors have relied; namely, that a charitable trust cannot be allowed to fail. The Charity Commission argues that the Bill enables trustees to act voluntarily, but the action which the Bill authorises breaks faith with the donor, who believes a gift to be made in perpetuity, altering the terms of the trust on a cy prés doctrine if the terms laid down became impracticable. I submit that trustees should not act voluntarily. They serve voluntarily, but should surely act within the orbit of the law.

I am sure that Clause 6 of the Parochial Charities (Neighbourhood Trusts) Bill, will be mentioned. This clause was written into the Parochial Charities (Neighbourhood Trusts) Bill. Clause 6 gives the power to wind up certain charities simply because the reviews carried out following the Charities Act 1960 showed there to be not more than two or perhaps three little charities in the country, which were miles from anywhere. They were mostly on the Yorkshire moors and could not possibly be amalgamated into neighbourhood trusts. Therefore, the clause was put in only as a matter of last resort. But in principle one does not agree that the law can be interpreted as winding up a charity unless it is absolutely a matter of last resort.

Secondly, so far as I can see, there is no knowledge of exactly how much money would be involved. If wisely administered on a continuing basis we do not know how much over the years would be lost to charity. Is there a classified comprehensive record of these charities?

Thirdly, I must press the Minister who said, on 30th June, in column 396, that most trusts had been adapted to present-day conditions and therefore trustees, the commission and the public would know exactly what they were seeking to destroy. Is that so? I have not been able to find up-to-date lists of the small charities.

Research workers have looked into the question of the number of small charities and the figures do not quite accord with those given by my noble friend Lord Renton. The research workers tell me that there are 30,000 small charities with an income, if amalgamated, of approximately £1 million.

I suggest, as I have suggested before, that these small charities would do well if they were amalgamated into parochial charity neighbourhood trusts. They consist of very small amounts, but wisely invested and amalgamated every mickle makes a muckle and over the years these trusts, amalgamated together, might well be profitable and give very constructive help which cannot now be given to those in need.

I agree with my noble friend, Lord Renton, that the Bill which I brought before your Lordships was for the poor, though not all these small charities are for the poor. This is something which the Select Committee would do well to consider.

During our last debate on 30th June I pointed out that for the local authorities to set up parochial charity neighbourhood trusts would cost the local authorities approximately £2,000 a year for two years. I have now before me the costing of this, which was carried out by a senior local government officer who also carried out a review in the area where he works. He has consulted other people who have carried out reviews and they have agreed with his costing. The only difference is that this was costed two years ago and therefore the figure may be a little more now because of rises in salaries, secretarial expenses, paper and so on.

If the Select Committee finally decides in some way to make joint use of both these forms of charity there need not be great expense, according to local authorities. My noble friend the Minister said that reviews would have to be carried out. I am not sure quite what he meant by that, because reviews have been carried out and have been dealt with. It is only a question of considering the work that the reviews have already done.

My noble friend Lord Renton made certain points about law and administration. They are two separate matters; nevertheless, the law cannot be administered without good administration. I believe he is quite right in hoping and thinking that the Select Committee, while looking at the whole question of these charities, will also, for the sake of the Charity Commission, look at administration. To pass good laws which cannot be administered seems to me to be a waste of everybody's time and causes frustration to all those concerned. I thank my noble friend Lord Renton for co-operating with me. I hope the House will give the Bill a Second Reading and will later agree to my noble friend's Motion.

5.29 p.m.

The Parliamentary Under-Secretary of State, Home Office (Lord Elton)

My Lords, it is very appropriate that the Bill should be introduced by my noble friend Lord Renton, a Member of this House who, in another place, was largely responsible for a major reform of charity law, the Charities Act 1960. I believe this Bill will command the more respect because it is sponsored by someone with a deep knowledge and understanding of the problems facing those who administer charities. He has rightly reminded us that it comes to us with a most respectable provenance.

My noble friend has set the provisions of his Bill very clearly before your Lordships and I do not intend to detain the House too long in setting out the Government's views. I believe they too are pretty well known to your Lordships' House. The House will be well aware that of the 144,000 charities currently registered with the Charity Commissioners, it has been estimated that well over half have an annual income of less than £100. We have heard how many who are unable to spend capital are unable to carry out the terms of trusts endowed perhaps hundreds of years ago. The fall in the value of money has meant that once-sizeable, and therefore useful, endowments can now be worth very little. There are some charities which have as little as £1 to dispense in a year.

Of course, small charities may seek to alter their purposes under the principles of cy-prés and to merge with other small charities within the parish, or in neighbouring parishes so that with their resources combined the new charity can make an effective contribution to the community. There are some charities, however, as my noble friend Lord Renton has explained, where the income is now so small that in whatever way it is administered or dispensed it can no longer serve a useful purpose. In these cases the objects of the charity could be as well served by a once-and-for-all recourse to capital.

This Bill, as we have heard, would enable the trustees of small charities, with a permanent endowment worth £1,000 or less to expend the property of their charity. The word "enable" is important here. The Government, as I have indicated to your Lordships on a previous occasion, believe that those who administer voluntary bodies, such as the trustees of parochial charities, should as far as possible be free to run their charities in the way they think best. It is not, nor should it be, for those outside the charity to tell the trustees their business. For that reason, I believe it is right that the Bill before us today departs slightly from the recommendations made by the Goodman and the Expenditure Committees when they looked at the possibilities of small charities winding themselves up in this way.

Both committees envisaged a more active role in the process for the Charity Commissioners. The Goodman Committee thought there should be a permanent local committee under the chairmanship of a representative of the Charity Commissioners to sanction this expenditure. The Expenditure Committee recommended that the enabling power should reside with the Charity Commissioners. It seems to me appropriate that this enabling power should rest with the trustees of the Charities (subject of course, to the safeguards already provided by the 1960 Charities Act) for the proper administration of their funds. I know, because we have consulted them that the Charity Commissioners agree with this view. It would be entirely at the discretion of the trustees whether they exercised the powers given to them under this Bill. At this stage, of course, we have no way of knowing how many would do so. I think, therefore, it is a mistake to speak, as some have done, of the potential destruction of all small charities.

I should be happy to commend this Bill unreservedly to your Lordships' immediate attention were it not for the views already expressed in this House on both this Bill and that introduced by my noble friend Lady Faithfull. Both Bills operate on areas of the same problem and, in one respect, by the same means. As I said when we were discussing her Bill, we therefore accept the arguments for referring both Bills to a Select Committee of this House where they can be given the serious and detailed attention that they deserve.

How I agree with my noble friend who said that the condition of the world would be greatly improved if we conducted our affairs in all international respects in that way—even the laws of Wimbledon. The terms of reference of that Committee will, of course be the two Bills themselves. It will be for the Committee to interpret their ambit and I am sure that they will take due note of the comments on this by both my noble friend and by the noble Lord, Lord Mishcon. I ought in addition simply to draw your Lordships' attention to an important distinction between the Bill introduced by my noble friend Lady Faithfull and that brought before us today by my noble friend Lord Renton.

Today's Bill is a simple measure designed to help those trustees who believe that the objects of their charity can be better served by a once-off recourse to capital than by spending a tiny income, or by merging with another charity if an appropriate one is available. Last week's Bill would, on the contrary take the responsibility for the administration of the individual charity away from its trustees and, after the intervention of the local authority and the Charity Commissioners, entrust it to the new neighbourhood trust. I believe that in that respect this Bill reflects the spirit of the original givers better than the other.

I ought, I think, to make one other comment. It has been suggested that this Bill will encourage a harmful dissipation of charitable funds. We do not think it will. We believe that the duties that trustees already have towards the property of their charity will mean that they would only use the power provided by the Bill, if the income available to them is not large enough to be of significant use. Of course, many will amalgamate with other charities, but there are circumstances in which amalgamation simply is not possible because no similar charities are available locally to amalgamate with, Even were they to amalgamate, in many of these cases the joint income of these trusts, now spread over a larger area than previously, could still be too small to be useful.

Also, I have to confirm to my noble friend Lady Faithfull that there is no complete and up-to-date catalogue available for her to refer to; and that answer really answers the next of her questions, which was why it would be necessary to carry out reviews. Reviews have been carried out, but by no means all of them are complete and there are many gaps in our knowledge which would need to be filled. As to the cost of carrying out those reviews, I can only say that I would be very interested to see it; as, no doubt, will other members of your Lordships' House. She asked me to substantiate something which I said in column 396. I am not absolutely certain what it was, but the substance of what I said that she could have questioned was founded on the annual reports of the Charity Commissioners year by year. The proper place to consider this Bill further is the committee room.

May I conclude by thanking all those noble Lords present for their unflagging interest in this subject and to thank both my noble friends for returning to the charge so frequently, so well, so courteously and so succinctly. I hope as they do, that with the benefit of the conclusions of the Select Committee, it will be possible to arrive at some sensible conclusions to the problems of small charities.

5.37 p.m.

Lord Renton

My Lords, in replying to this short debate, I should like to thank the noble Lord, Lord Mishcon, and my noble friend Lady Faithfull for the critical support which they have each given to the Bill. I should like to thank my noble friend Lord Elton for his enthusiastically positive support and for the way in which he has clarified some issues which have arisen. I should like to say to Lord Mishcon that I welcomed very much the expression he used when he said that the Select Committee would be wise to consider "the side issues" which arise on both Bills, including the administrative implications. I am sure that that sums it up well and is right. May I say that I am always glad to be corrected when I have made a mistake; but nobody corrects one with better grace than the noble Lord, Lord Mishcon. He is quite right that, although in effect both Houses would have to consent, the procedure is not that of the order and the affirmative resolution but that of the prayer and annulment.

So far as my noble friend Lady Faithfull is concerned, I would ask her to bear in mind that trustees of small charities are in a real dilemma. On the one hand, they are required to carry out the purposes of the trust and, on the other hand, find themselves unable to do so except by using capital. It is that dilemma which this Bill seeks to resolve—and so, in a smaller way, I gather, does Clause 6 of her Bill. So there is not so very much difference between us on that Surely my noble friend Lord Elton was fully justified on this point when he said that the Small Charities Bill better reflects the wishes of testators. Unless the capital is used, the wishes of the benefactor cannot be carried out at all. That is the situation in which some small charities find themselves and that really is the essence of this matter.

There is only one other point that I should like to mention: that is that the noughts have become a bit misplaced on several occasions during this debate. I learned from the noble Lord, Lord Elton, that it is not £1,000 of income from land which makes up half the charities in this country, but only £100. So I mistakenly added on a nought when I said it was £1,000. As to the reference made by my noble friend to £3,000 cost per local authority, the reference is two years old but even though it is two years old I think something has gone adrift there, because I can imagine some large counties in which as much as £30,000 might well be needed to carry on all the administrative work which could arise in working out the neighbourhood trusts on her Bill. However, be that as it may, this, among many other things, will be a matter for the Select Committee.

On Question, Bill read a second time.

Lord Renton

My Lords, I beg to move the Motion standing in my name on the Order Paper.

Moved, That the Bill be committed to the Select Committee to which the Parochial Charities (Neighbourhood Trusts) Bill [H.L.] has been committed.—(Lord Renton.)

On Question, Motion agreed to: Bill committeed to the Select Committee accordingly.