HL Deb 12 February 1985 vol 460 cc167-76

7.4 p.m.

Report received.

Clause 2 [Resolution by trustees of old charity to alter objects]:

[Amendment No. 1 not moved.]

The Deputy Speaker (Lord Aylestone)

Amendment No. 2, page 3, line 26. The word "transferor" is deleted and therefore the words to be inserted are, "founder of the charity".

Lord Airedalemoved Amendment No. 2: Page 3, line 26, leave out ("donor") and insert ("founder of the charity").

The noble Lord said: My Lords, I beg to move Amendment No. 2 and perhaps we can discuss Amendments Nos. 2 and 3 together because the same point is involved. Amendment No. 3: Clause 3, page 5, line 20, leave out ("donor") and insert ("founder of the transferor charity").

I should apologise to the House for the manuscript amendment, which strikes out the word "transferor" from Amendment No. 2, though not out of Amendment No. 3. I think it is agreed that the "donor" in subsection (3) and the "founder" in subsection (4) are the same person; and it is surely important in a single statute that the same person should be described by the same words: otherwise people will strain to find a difference where no difference exists. That is the purpose of these two amendments, and I beg to move.

Viscount Colville of Culross

My Lords, the noble Lord, Lord Airedale, has always been very good at English and at logic. He is absolutely right and I am happy to accept the amendments, one in manuscript form.

On Question, amendment agreed to.

Clause 3 [Power for certain charity trustees to transfer whole property to another charity]:

Lord Airedalemoved Amendment No. 3:

[Printed above.]

On Question, amendment agreed to.

Lord Airedalemoved Amendment No. 4: Page 5, line 27, leave out ("charity").

The noble Lord said: My Lords, this amendment, to leave out the word "charity" in the Charities Bill, is not intended to be a wrecking amendment. It is simply that Clause 3(1) refers to the trustees of a registered charity and subsections (2), (3) and (4) refer to them simply as "the trustees", in accordance with good drafting practice. However, subsection (5) goes back to square one and calls them "the charity trustees". The word "charity" at this point is, I submit, quite unnecessary and ought to be left out. I should say that it was not I who spotted this but the noble Viscount. I am merely taking some of the workload from his shoulders. I beg to move.

Viscount Colville of Culross

Yes, my Lords; but it was the noble Lord, Lord Airedale, who spotted the point in the first place, and I think he should have the credit for it. I am very happy to accept the amendment.

On Question, amendment agreed to.

Clause 4 [Power for very small charities to spend capital]:

Lord Maude of Stratford-upon-Avonmoved Amendment No. 5: Page 7, line 3, leave out ("£25") and insert ("£l00").

The noble Lord said: My Lords, I beg to move Amendment No. 5. It may be for the convenience of your Lordships if at the same time we discuss Amendment No. 6, which quite clearly hangs together with it. Amendment No. 6: Page 7, line 7, leave out ("£5") and insert ("£l0").

I do not wish to go over in wearisome detail the same arguments which were deployed in Committee. It is, I think, well known that Clause 4 in this Bill and my amendment to it spring from the original Small Charities Bill, which was carried without amendment through another place with the support of the Home Office and the Government. It was then, together with the Bill sponsored by my noble friend Lady Faithfull, sent to a Select Committee of your Lordships' House, which discussed on a fairly wide-ranging basis the various reforms which might be made in charity law.

It seems to us that on Clause 4 the Select Committee has behaved in a rather peculiar way. The Select Committee said that they were much impressed by the evidence submitted to them, that there were many people who objected in principle to the idea that any charity ceased to exist and that the capital of the charity should be spent as income. It is a fact that this was a recommendation made first by the Goodman Committee and then by the Select Committee of another place and it was then, as I said, with the support of the Government, carried through in a Bill in another place.

The Members of the Select Committee gathered in serried ranks at Committee stage to attack this amendment which my noble and learned friend and I put forward; and I see quite a few of them gathered here today. I suggest, however—in case your Lordships should think that, because there may be half-a-dozen of them and only two or three of us, this represents a considerable number of independent judgments by noble Lords—that they are of course all, quite rightly, defending a collective decision which was made by a Select Committee and, to use a popular phrase, "If you've heard one, you've heard 'em all."

The arguments which were adduced—and, since I concede that much the same ammunition is likely to be deployed today, I should like to try to defuse some of it in advance—were several. First, we were accused of not having taken sufficient account of the provisions of Clause 3 of this Bill, which would enable small charities to offer themselves to be taken over by a larger charity. Of course, we did take account of this, which is why the original capital figure off £1,000 in the Small Charities Bill was reduced in this amendment to £100, which seems to us a reasonable figure.

But it still seems to us that the Select Committee's figure will leave a considerable number of small charities, dealing with only minuscule sums, who might find it extremely difficult, in view of their terms of reference, the terms of the trust and the nature of their assets, to find a larger authority who would be willing to absorb them. It therefore seems to us that some more charities should be brought within the ambit of Clause 4 than the very restrictive figures of £25 capital and £5 income would allow.

The Members of the Select Committee said that they were enormously impressed by the weight of evidence, which suggested that there was violent disagreement with the principle of the expenditure of capital, but what they did as a result seems to us to have been very strange. It is, of course, a fact that much evidence was produced by individuals and various bodies to the Select Committee, which was in favour of the expenditure of capital for very small charities, and some of them actually said that they would have liked to see a small charities Bill introduced and carried. But the point is that, though they were impressed by the weight of the evidence against it, they nevertheless decided to ignore this and to breach what was alleged to be the principle that no charity should be allowed to die and its capital to be expended. Having breached the principle, they then proceeded to make this concession virtually ineffective by fixing figures which it seemed to us were far too low.

Perhaps the most superficially attractive argument which was produced in the Committee stage was that of the noble Lord, Lord Airedale, who said that because the £10 Christmas bonus was a significant and welcome addition to the income of old-age pensioners, a £10 figure from a charitable trust was equally significant and equally to be preserved. But this analogy is absurdly wide of the mark, because the noble Lord was talking of an operation through which millions of old-age pensioners receive £10 at Christmas, simply because somebody programmes a computer in Newcastle to add £10 to a cheque which they were going to receive anyway, using a machinery which is in use all through the year and where there is no extra administrative hassle involved in adding a £10 Christmas bonus.

I do not think the noble Lord, or any other noble Lord, would really suggest that it would be a cost-effective operation, if every one of these millions of old-age pensioners had to get his £10 through the operation of a separate trust which had to manage a small endowment to produce £10 a year, and if each one of these hundreds of separate trusts then had at the end of the year to prepare accounts, to send copies to the Charity Commissioners and to the local authority and to publish the accounts. It is quite obvious that we are talking about two quite different things.

This brings me, finally, to the point which is really at the basis of this amendment. As it stands, the Bill condemns hundreds, perhaps more, of small charities to go on with the paraphernalia of a trust fund, with the management of a very small endowment, with the preparation of accounts each year, with sending them to the Charity Commissioners and to local authorities, with the publication of the accounts and so on. I had always thought that the object of this Bill was to simplify the operation of the law of charities, to simplify the work of the Charity Commission, to remove unnecessary work and to make it easier for small charities to be absorbed, and so on. But the Bill as it stands will condemn these hundreds of small charities to go on working under extreme difficulties to very little effect.

I hope, therefore, that the House will be willing to accept this amendment, even though I fear that my noble friend who is responsible for the Bill may not feel inclined to accept it. Nevertheless, since we received some support from the Government at the Committee stage, I hope that if the House decides to reject this amendment the Secretary of State may nevertheless feel when the Bill becomes law that he could take an early opportunity by statutory instrument, using the powers which are in this Bill, to increase the figures to a reasonable sum. My Lords, I beg to move.

Viscount Colville of Culross

My Lords, I wonder whether it would be to the convenience of the House if I said a word now, although I quite appreciate that I shall then not be able to answer any other speeches. The fact of the matter is that my noble friend Lord Maude has not left me feeling very defused, and I have to tell him more in sorrow than in anger that he is quite right. I do not think I can accept this amendment, and we shall have to take the view of the House upon it. But I should like to give the reason, because it is not a matter of antagonism; it is a matter of judgment, and it is quite an important matter of judgment, as I hope I shall be able to persuade the House in a moment.

Yes, my Lords, the figure is very small and it is small for a reason. For instance—and this is on page 10 of the report of the Select Committee—we have some figures for the end of the last decade, 1978–79, for the charities for the relief of the poor in Oxfordshire. Of a total of 288, 64 had an income of less than £5, which was 22.2 per cent. of all of them. If one puts that up to the £10 income that my noble friend is suggesting, it brings it up to more than 30 per cent. of all the charities for the relief of poverty in Oxfordshire. It is a matter of judgment; 22 per cent. is not an insignificant figure and some might think that 30 per cent. is going a rather long way.

The whole of this Bill is a trial run. For instance, the noble Lord, Lord Hooson, wanted to extend it in the way which his amendment would have done if he had moved it, and I have great sympathy with this; but the fact of the matter is that, had he moved it, I should have had to talk about resource indications and the probable death of the Bill at the hands of my noble friend Lady Trumpington. But there will be other opportunities to look at the ways in which these various provisions work once the Bill, as I hope it will, gets on to the statute book and starts to be used.

This is a trial run. The figure that we are fixing is a matter of judgment. It is not immutable. If this proves to be the wrong figure. it can be changed. But the point is that, although I have to agree with the noble Lord that there is an illogicality in having Clause 4 in the Bill at all—perhaps some might have said that it would have been better to leave it out—in the figures that the Select Committee chose we are talking about a sum of money which is so small that trustees might legitimately say to themselves "It is not worth going through the rigmarole of trying to alter the objects or trying to amalgamate with another charity".

The great difference between the situation when my noble friends Lord Maude and Lord Renton took the Small Charities Bill through Parliament and the present day is that in this Bill we have the two alternative routes, at least with regard to charities for the relief of poverty, in that they can change their objects under Clause 2 or amalgamate under Clause 3. Those alternatives were not in the Bill that went through Parliament before, up to the stage that my noble friend mentioned. They are in this Bill and one of the things that impressed me as a member of the Select Committee was that there was a great deal of evidence to show that charitable money can still be put to very good use indeed to meet needs which are not being met by the Welfare State and by other methods of dealing with poverty and other deprivation. In other words, there is a very real mischief which charitable money can go to meet and there is therefore a substantial argument for minimising the amount of capital that is going to be dissipated through the machinery in Clause 4.

So there is an arguable case for keeping this figure low, at any rate to start with, in order to see to what extent it will be used. If it is put high it might be very attractive to the trustees to think, "Oh, it is much easier just to allow our capital to be used as income; wind the whole thing up", rather than to go through even the modest do-it-yourself provisions of Clauses 2 and 3. Then the money would be lost to charity and I quite see that there could well be people who would object to that as a matter of principle.

A Private Member's Bill going from this House to another place is a fragile vessel. This is no exception. If it is objected to in another place, it will be dead. I have indications that the higher figure is more likely to cause objections in another place than the figure that is in the Bill at the moment. I happen to know because I have discussed it with them that neither of my noble friends behind me agrees; but that is the information I have and I consider that to be of significance which I ought to impart to the House. This was a compromise. There were members of the Committee who were against the whole question of capital being used for income and spent in that way. In the judgment that we collectively exercised, we thought that these figures were the correct figures for the trial that we now envisage ensuing.

My noble friend said, "If you hear one of us, you hear us all." But that is the nature of a compromise that had been agreed after a good deal of discussion. I should have thought that it gained weight because many points of view were put forward and they all came together in the figures that are in the Bill. As I say, it is not a matter of antagonism but, according to my own judgment, it would be better to leave it as it is.

Lord Denning

My Lords, I hope that your Lordships will support this amendment. Running through this report of the Select Committee is the stress they lay on their principle that a charity established in perpetuity should continue to exist in perpetuity. Just think of the founder of the charity two or three hundred years ago. He founded the charity with, let us say, £200, which would be a substantial sum in those days, the income from which was to be used for the relief of the poor year after year. Now, he would not have in mind at all the position today when that £200, not having been invested properly, as many charities have not, has been reduced to 20p.

In other words, the principle is wrong. It is not right that a charity established in perpetuity should continue to exist in perpetuity because, if one looked at the intention of the original founder, one would see that he would never have intended it to apply when it became ridiculously small. So, in a way, the principle should be invaded to do away with all these small charities which were never intended at the beginning. Indeed, the original proposal—the Bill of my noble friends Lord Maude and Lord Renton in the Commons—supported by the Government, supported by all the local associations and the Churches and passing as it did, through the Commons, would have enabled all those small charities up to £1,000 to be dealt with.

Now the Bill reduces the figure to the insignificant level of £25 permanent endowment and £5 income. That is ridiculously small—de minimis non curat lex, it is said; de minimis non curatthis Bill. Sensible figures, very small in terms of the figures given in the amendment, of £100 and £10 are much more realistic than those which are already inserted. I would support the amendment.

Lord Hooson

My Lords, I wish to support the amendment. In my view—and it is a question of judgment—the figures even in the amendment are still extremely modest and small. In fact at the Committee stage, I moved an amendment which proposed considerably larger figures but I do not think that if we accepted the present figures in the amendment this Bill would in any way be imperilled in another place—quite the contrary, I believe. I think there is much greater danger of the Bill being objected to in the Commons because, although in Clause 4 the principle is accepted that small charities shall be entitled to spend capital, the limits imposed by the Bill as it is at present drafted are ludicrous. What we are talking about in the clause as it is presently drafted is the power to spend capital where, the value of the endowment is £25 or less and … the charity's gross income in the preceding accounting period was £5 or less". The noble and learned Lord, Lord Denning, must be absolutely right that the original donors never envisaged the value of money falling to this extent. At least we ought to try to put a realistic base to this clause.

Lord Renton

My Lords, this is a very narrow point, and I shall therefore not detain your Lordships for long. May I say that I entirely agree with what the noble Lord, Lord Hooson, has said about reactions in another place. I agree with my noble friend Lord Colville that we should keep the figure low, but, goodness me, the figures proposed in these two amendments are as low as I would have thought judgment and conscience would allow. I feel that a gross annual income of £5 for a charity is so small as to be absurd. It is the sort of sum for which now no solicitor would write the simplest letter. It is the sum for which most skilled workers would be just about willing to agree for one hour's work. For us to say that if we agree with the principle of this clause we will have it operative at a level of endowment of £25 a year only, which does not apply to an endowment in land, and a gross income of £5 a year, does not seem to be within the realms of reality.

I hope that my noble friend will divide the House on this amendment. It is important that we should have a decision and I am quite convinced in my own mind that it would be more acceptable in another place if we had the slightly higher figure, which is still, I submit, far too low.

Lord Brightman

My Lords, may I add one word against this amendment. The noble Lord, Lord Maude, said, if I heard him correctly, that the effect of Clause 4 would be to condemn hundreds of small charities to a useless existence. Under Clause 3 the trustees of every small charity are open to transfer their tiny fund to another larger and effective charity. I suggest that it is preferable that small charities should be encouraged to transfer their funds to a large charity rather than that we should give them the power to disperse their funds and thus lose them to charity.

Lord Maude of Stratford-upon-Avon

My Lords, I am most grateful to the noble and learned Lord for giving way. I did not say that it would condemn dozens of charities to uselessness because they could not take advantage of Clause 3. I said that there would be a number of charities with endowments and incomes so small that either because of the nature of their trust deed or the nature of their assets they would find it very difficult to get a larger charity to take them on. I am convinced that is true.

Lord Brightman

My Lords, I apologise to the noble Lord for having misunderstood him. In my respectful submission there would be no difficulty in a small charity, however small, transferring its funds to a large charity. The small fund which is transferred is not, under the terms of the Bill, kept as a separate fund. It becomes an accretion to the existing fund. From the point of view of accounting it is lost forever. It causes no trouble whatever to the transferee charity. I suggest that the figure which appears in Clause 4 should be left as it is. There is really no reason to raise the level in Clause 4 as it stands.

Baroness Ewart-Biggs

My Lords, there is very little that I can add but I should like merely to support what the noble Viscount and what the noble and learned Lord, Lord Brightman, have said. From my way of seeing it, the figure was set by the Select Committee after a very great deal of consideration. It was in two minds as to whether to keep this clause in at all, and therefore the very fact that it arrived at this figure gives it, in my view, a considerable strength.

I am also very impressed by what the noble Viscount said, that this Bill is a trial run. Therefore, surely the figure arrived at by the Select Committee must be the one that is the best for a Bill which is having its trial run.

Finally, I agree with the noble Viscount that the Bill in its present form has the most hope of survival. Therefore, those of us who believe in the usefulness of the Bill and in the general purpose it is trying to carry out will wish it to survive and to prosper. Therefore, is it worth risking its being blocked merely for this very small sum of £75? I oppose the amendment.

Lord Prys-Davies

My Lords, I wish to resist the amendment. There is one argument in support of Clause 4 which has not been mentioned this evening. We have heard about the intentions of the donor, perhaps 100 years ago, and we have heard about the role of the trustees, but we must also have regard to the beneficiaries and the potential beneficiaries of a charity, however small it may be.

I happen to know of a small charity in a rural parish in Gwynedd which gives away no more than £5 a year but there are parishioners in that parish who know that the money is being donated every Christmas. Therefore, it will be interesting to know how, if trustees rely on Clause 4, the beneficiaries and potential beneficiaries will respond to the exercise of this power if they wake up one day and find that their charity, without consultation with beneficiaries and potential beneficiaries and without consultation with a local authority or public notice, has suddenly wound itself up. I should have thought that if we give this measure five years' trial we shall see how people will respond. It might be that our judgment is mistaken, but I believe that we should move cautiously, as has been indicated in the Bill.

Lord Airedale

My Lords, I follow very much what the noble Lord has just said. I want to be brief because I am conscious of having spoken very much on this point, both in Committee and at Second Reading.

The Select Committee was impressed by evidence that a great many of these old charities were established in memory of some person or some event. They might have stuck up a stone memorial, and if they had they could have been certain, or reasonably certain, that it would last virtually for ever. However, in many cases—and I think that today we would have applauded them for this—instead of putting up a memorial of stone they established a charity to do good works: but they hoped that the charity would be as perpetual a memorial to the person or event as a memorial in stone.

Therefore, before we interfere at all with one of these old charities we have to ask ourselves what the founders would have said about our proposals had they been here today. Let us suppose that the founders could be brought here today. It would have to be explained to them that the welfare state has taken over a great deal of the charitable work which used to fall upon charities but that the welfare state does not provide everything and that here and there in the villages there are deserving cases of poor people who need comforts of one kind or another which the welfare state is not able to provide. It would then have to be explained to them that their endowment had fallen to £100 and that this might produce £10 a year. I would say to them, despite being in trouble with the noble Lord, Lord Maude, that an example of what can be done with £10 today is that £10 is an accepted Christmas present for an old-age pensioner in 1985. One must then ask them this question: are you happy, with £ 10 a year to spend, that this is worthwhile? And are you happy that the charity be wound up and the memorial element shall disappear? I cannot believe that one can say with any certainty at all that the founders would have been happy about that. I believe that many of them have said. "Let it carry on". When it gets down to a £25 endowment, I can understand that they might well say, "It's too much trouble to go on with this very small figure": but they would not say that with a figure of £100. For that reason, I oppose this amendment.

Baroness Trumpington

My Lords, as I explained in Committee, the Government take the view that the limits in Clause 4 could, without serious disadvantage, be raised. However, the Government would not wish to take such a strong position on this issue so as to place in jeopardy the Bill itself—a Bill whose provisions the Select Committee worked so hard to achieve and whose provisions the Government fully support. Now that we have heard that if an amendment to increase the limits is passed by your Lordships' House, it will mean that the Bill will be challenged in another place—and of course we cannot anticipate what will happen there—I have to say that the proper course for me would be to abstain on this issue.

To turn to the final point made by my noble friend Lord Maude with regard to my right honourable friend the Secretary of State raising the limits at a later date, I must reply that he can increase the value only in line with inflation as in Section 5(2) of the Bill.

Lord Melchett

I have not had an opportunity to take part in earlier debates on this Bill, which I regret because I was a member of the Select Committee. I felt very strongly that the provision for winding up charities was wrong in principle. It seemed to me that the important part of a charitable gift was that it was going to last in perpetuity, and we would be justified in interfering with that in only the most exceptional circumstances. I was persuaded by colleagues on the Select Committee that for a number of reasons we would be justified in including the clause which is in the Bill, allowing such a winding up and the spending of capital, but only for cases where the amount of money to be spent was very small.

It seems to me that two arguments have not been taken into account in supporting this amendment. First, the views of the potential donors to charity. I have no doubt that the fact that charitable trusts exist in perpetuity is an important factor with potential donors. That point has been made in other ways, and I do not think that those who suggest supporting this amendment have taken that point on board or indeed attempted to argue against it. The second point—and the noble Lord, Lord Maude, in an intervention raised this—was the question of transferring funds to another charity. I cannot believe that that would be more difficult than finding a worthy cause on which to spend the capital of a very small charity whose objects were almost by definition seriously out of date.

It is clearly going to be much easier for trustees in practice to find the name and address of a larger charity whose objects subsume that of the small charity, and transfer their capital to that charity. That is the route that the Select Committee believe that most small charities will take. It will be simple, easy, and the funds will be retained for charitable expenditure in future. It is one of the things which the original donors clearly intended when they made the donation. That is something that I believe should weigh very heavily with your Lordships' House, as well as I believe the very real risk of serious opposition to this Bill if the amendment is carried. Certainly, for my part. the Bill would cease to he one which I could support, and I hope that Members in another place will share that view and the Bill will not make further progress if the amendment is carried.

On Question, amendment negatived.

[Amendment No. 6 not moved.]