HL Deb 29 November 1990 vol 523 cc1117-28

6.52 p.m.

The Earl of kinnoull rose To ask Her Majesty's Government what steps are being taken to ensure that charities in Britain will be able to play a full role in Europe and that a unified policy is adopted not only in the European Community but also including a wider Europe.

The noble Earl said: My Lords, the Business of the House today has covered a good range of subjects and perhaps charities is a worthy subject with which to conclude. I am most grateful to those who have indicated their intention to take part in the debate this evening. There is first the noble Lord, Lord Meston, whose father I believe was a strong charitable man, and we shall also hear from the noble Baroness, Lady Ryder, whose charitable work has few equals; her husband's work may match hers, but very few other people can equal her great success in the field. The noble Baroness, Lady Ewart-Biggs, will also be speaking on the subject. She will be giving her second performance today. I am sure it will prove to a tour de force.

I am sure too that my noble friend will understand that, although the Question on the Order Paper may look obtuse, it has a very real relevance as we approach 1992. The British charitable movement is one of the proudest cultural jewels which we bring to the European table. No one needs reminding of how the farsighted and generous businessman of the early Tudor days set up trusts for the poor and needy, and indeed for education, and how those trusts were enshrined in the statute of Queen Elizabeth I in 1601; nor of how today our charities range from local and national organisations to the great international charities, from the mighty Oxfam and the very successful Save the Children Fund to the medical bodies whose researchers carry out such great work. There is also the work carried out in animal welfare, which forms a very active section of charitable activity all over the world. All these need to raise huge sums of money annually from generous individuals, from companies and of course from institutions.

No one in the House needs reminding that the charities in Britain are among the biggest gross businesses or industries which we have. I believe that 165,000 new charities were registered last year—some, of course, giving a certain sense of duplication. However, all are administered with care and efficiency by the Charity Commission, which is a small dedicated body of civil servants with little more than 400 people to carry out its work.

One may perhaps ask what is the fuss and purpose behind the Question. It has nothing to do with the White Paper on charities which was published by the Government a few years ago, because that did not mention Europe. I find that fact somewhat amazing and worrying. The purpose underlying the Question is that as we approach 1992 there is developing in Brussels a dangerous back of awareness about how the charitable system in Britain works. That is mainly because 10 of the 12 countries of the Community have a much narrower system. Therefore, any proposals to harmonise charities in Europe could prove harmful to the system in this country unless more is done to explain the British case and indeed our system.

There are two recent examples which will perhaps illustrate the point that I am trying to make. They cause small pinpricks of worry, but those worries are genuine. There was a case involving teddy bears. For many years they were hand made by volunteers for small charities and they created a most valuable income. However, a directive issued by the Community effectively put a stop to that kind of income and to such endeavours. There was also the case of the minibus. This is a vital source of transport to charities which help the handicapped and the elderly. Again, new rules issued by the Commission meant that drivers were apparently not competent to work for charities and so yet another considerable problem was caused. Those are small problems but I believe they ring warning bells about what will happen when the commissioners seek to harmonise—to use that terrible word—charities in Europe in 1992.

As I tried to explain, there is a large gap between what charities stand for in the 10 countries of the Community and what they stand for in Britain and Ireland. The British system, with its legal framework, its vigour and its inventiveness, is admired in Europe by those who know what it achieves. I believe that we can bring a great asset to the Community by way of this movement. It could prove to be the Community model. However, to achieve this we need a positive approach from Her Majesty's Government to educate the thinking of the Commission, of the directors general and of the commissioners. But we appear to be running out of time.

Certain dangers which have appeared on the horizon have been identified by the Charity Commission. I give praise to the commission and to its able chairman, Mr. Robin Guthrie. The main danger centres around the proposed interpretation of Article 58(2) of the Treaty of Rome. That proposal would give a more narrow interpretation not affecting the 10 member states which could lead to a very large number of large British charities falling outside the umbrella of comfort secured by Section 58, with quite damaging consequences. It could affect such charities as bible societies, museums, fee-paying schools and even the National Trust.

Therefore, what is the European Commission saying about the situation? Herr Heinrich von Moltke of Directorate General XXIII Enterprise Policy, Commerce, Tourism and Social Economy is of course sympathetic. He does not seek to be hostile. He states that the Commission's objective is to include all associations under the Economique Sociale so that they enjoy the benefits of the European single market.

The Commission sees the need to create a new European charitable statute so that a charity can operate anywhere in the Community but be liable to the laws of the parent country. That seems to be an encouraging step forward. When my noble friend replies, perhaps he will tell us whether the Government support that suggestion.

The Government need now to take positive action—a pro-active policy—and a useful start would be to second an expert from London to Brussels to advise the Commission and to help any British charities which seek advice. We should have a booklet, which we do not have at the moment, to explain how the 12 countries operate charities. We should be drafting suitable amendments to the Article 58(2) proposals while they are still at the consultative stage.

All those actions need to be taken now. I hope that my noble friend's brief is encouraging and positive. The question relates to a wider Europe. I am thinking of what assistance and support the Council of Europe can give and what role it can play. The secretariat in Strasbourg is keen to promote charity support in a wider Europe beyond the Community. I hope that my noble friend will be able to enlighten us on current government thinking and on whether they will set up discussions with the Council of Europe.

No opportunity should be lost to remind Her Majesty's Government of the acute anxiety felt by charities which benefit from the VAT concession. There is deep concern that with any 1992 harmonisation those concessions may be sacrificed for the sake of achieving a wider goal.

My noble friend would do a great service tonight if he were to reaffirm that the Government have no intention of penalising such charities. For example, the RNLI would lose £3 million a year on the concession it enjoys on the purchase of boats, launch equipment and slipways. That of course is only a single charity. There are many more with stronger arguments to make. I hope that my noble friend will use firm and resolute words to remove any lingering doubts on the issue.

7.3 p.m.

Lord Meston

My Lords, this is an opportune moment for the Question to be raised. There was nothing obtuse about what the noble Earl said or in his valuable suggestions. It has become a matter of concern that the European Commission is preparing to bring charities—that is to say, the non-profit making voluntary sector—within the ambit of the Treaty of Rome. I question the appropriateness of bringing British and Irish charities under the unfamiliar regulatory control of what is essentially an economic community.

I claim little knowledge of and no expertise in European law, but I am aware, and presume that the Government are aware, that there is a genuine question about the legality of the proposals. Article 58 of the treaty seems clearly to exclude non-profit making organisations. Autonomous British and Irish charities are different creatures from the nearest equivalents elsewhere in Europe, such as the French co-operatives and other institutions which can and do undertake commercial activity for its own sake.

To include our charities would seem to depend upon a strained interpretation of Article 58. Given the real doubts about the position, surely the legality should be tested before the European Court before matters go any further. Perhaps the Minister will tell us how far harmonisation measures have gone and whether the Government are concerned about any such measures being prepared in advance of an authoritative judicial interpretation.

The Question posed by the noble Earl is expressed in a positive fashion, and he made some positive suggestions. The matters that I have raised may suggest a negative point of view. I do not intend to be insular about this matter. It is for charities themselves to assess the benefits and disadvantages of what is under consideration and of their future in a European context with suitable assistance from central government and the Charity Commission. There clearly is concern that the valuable and hard-won VAT relief will be sacrificed to European harmonisation. I end where the noble Earl ended, by asking: what is being done and what can be done to protect the charities' zero-rated concessions?

7.6 p.m.

Baroness Ryder of Warsaw

My Lords, I am especially grateful to the noble Earl, Lord Kinnoull, for bringing this serious matter to our attention. We are working against the clock because by 1991–92 we, the charities in Britain, may find ourselves being told that decisions have already been taken. As your Lordships are aware, Britain and Ireland have the largest number of charities in Europe. Many are unique in what they do and in the countless ways they work to relieve human suffering.

We have a long tradition going back over the centuries and we must surely be safeguarded. It is an appalling and frightening thought that we may receive orders from the Commission in Brussels. I refer as an example to VAT on donated gifts sold in the shops that bear my name. The shops aim to keep a high standard of appearance. They have four broad functions: first, to raise desperately needed funds for the foundation's work; secondly, to make better known the needs of the sick and handicapped of all age groups in Britain and overseas; thirdly, to bring together people from all walks of life; and, fourthly, to serve the local community.

The shops are the life-blood of the foundation in all aspects of its work, especially as we receive so little in government grants. For instance, it costs over £500 a week to nurse and care for a sick or handicapped individual. The foundation is lucky to receive merely £245 per week per patient on average.

I speak with some feeling on the subject, because many other countries have different traditions with charities. They also operate differently. In Germany and, I believe, in Austria, after the Weimar Republic collapsed in Germany and the Nazis took over, all forms of charities were forbidden. Today, in 1990, they have still only five to seven main charities. Their income is from individuals who pay a tax through their pay packets or pensions towards the church charity or one of the other five or six charities. They do not have our tradition of different forms of fund raising. Donations come almost entirely from that tax. That is just one example of how differently we operate here. I know from hard and long experience over 40 years how different and how difficult it is to operate in other European countries.

Those of us whose lives are spent in trying to relieve human suffering beg the Minister and the Government to appoint a representative in Brussels as soon as possible. I again stress the urgency, for we as a sovereign state cannot lose all our traditions of giving and running sound charitable foundations. It really could be a disaster for thousands of the sick and handicapped both in Britain and overseas unless suitable action is taken now.

7.11 p.m.

Baroness Ewart-Biggs

My Lords, all of us—and perhaps in particular those of us who have been involved with the voluntary sector and charities for a long time—will be extremely grateful to the noble Earl for bringing forward this important subject and putting interesting and pertinent questions to the Government this evening. The noble Earl said clearly how charities in Britain hold an important place in not only the life of the country but also in the culture of the country, and that there is a particular ethos attached to our voluntary sector and to our charities which is really quite different from that to be found in any other country.

One has seen how in recent years the work of our voluntary agencies has increased very much as state provision for the needs of certain sectors of society has diminished. At the same time the work of the voluntary sector has tried to replace it. This would be a good opportunity to pay our great respect to the talented and enormously dedicated people who work in Britain in those organisations. Their work is vital to the life of so many people in this country. Therefore obviously any kind of threat to the work of this particular sector is of enormous worry. It is for that reason that the points that the noble Earl, Lord Kinnoull, and the noble Lord, Lord Meston, have made this evening are of great importance.

We have been told that the first major area of concern for charities in Britain is the definition of charities, because our charities fear that moves towards a common definition of charities throughout the EC will result in a much narrower definition than that which we currently enjoy. This is of great concern. The second major area of concern is tax approximation—namely, as the noble Earl has said, the fear that the European Commission's proposals for approximation of VAT rates will result in a loss of zero rates. We could give many examples of the difference that this would make to the fortunes of many of our major charities in this country.

I should just like to spend a couple of minutes drawing the debate a little more widely, as the noble Earl has included in his Question "a wider Europe". I should like to point out that there are now many more charities seeking to develop a role across the continent, to find partners in other countries, and themselves to operate in other countries. What they need to facilitate this process is a common legal structure. That would enable them to run integrated operations across frontiers, to offset profits and losses in different countries, and to use a single accounting system for all operations.

We welcome the ratification by Her Majesty's Government of the Council's convention on the recognition of the legal personality of international NGOs. However, it is generally thought that this does not go far enough, and what many charities, and the NCVO in particular, have requested is the establishment of a common legal structure. Perhaps I might ask the Minister in that connection, and with respect to European cross-border fund raising, whether the proposals that I have suggested are being considered by the European Commission. Could the noble Lord say whether organisations based in Britain will be able to apply for grants from other European countries' overseas aid funds? Could he also say whether a charity wishing to raise money in another European Community country would have to register? That would be an important point for them.

I should also like to ask one question of the Minister about the know-how fund. I hope that he will not think that I am going outside the debate, but the recent announcement by the Government that the know-how fund is to be increased and extended to new countries in Eastern Europe is welcome. I should like to ask the Minister whether there will be scope, within the provisions of this fund, to assist and advise governments, charities and NGOs in Eastern Europe as to how to establish legal frameworks in which their new charities can best operate. Also, can the know-how fund be extended to cover the social provision work of new charities and voluntary organisations operating in Eastern Europe? Of course they often operate in partnership with British charities.

After all, there are many people in those countries who would like to play their part in the social reconstruction of the countries of Eastern Europe. There is little doubt that this is critically needed, and surely this is an area in which Britain can help. Britain is extremely experienced in how to structure and set up charitable organisations, and this could well be done through the know-how fund.

My last point relates again to a European fund which is close and helpful to our voluntary organisations, and that is the European Social Fund. The objective of this fund is to increase training places in the United Kingdom, and the Commission has recognised the special ability of the United Kingdom voluntary sector in delivering the kind of training that the fund seeks to promote. Therefore, our agencies have been very successful in acquiring funds from the European Social Fund. Indeed, the British voluntary sector receives some £18 million from the European Social Fund, which comprises over 7.5 per cent. of the total United Kingdom budget. As I say, it is spent on vital training work, including transnational training exchanges.

However, it is the role of the Department of Employment to co-ordinate British applications, and unfortunately the Department has been doing this in a dilatory fashion, which has endangered the effectiveness of the scheme. For example, when the Commission handled co-ordination the voluntary organisations were notified by April. Now that the Department of Employment handles it, voluntary organisations are not receiving funding notifications. This has created a great funding crisis for many providers of training, and some may be forced to close down their operations. Would the Minister undertake to make changes in the European Social Fund unit in the Department of Employment to ensure that delays do not occur next year?

There is little doubt that we are fortunate in this country in possessing such a vibrant and wholly professional voluntary sector, and it is an area in which we could take the lead in Europe. The noble Baroness, Lady Ryder, spoke with a voice of great authority in this debate and, as other noble Lords and the noble Baroness have said, I believe that it is important for the Government to make sure that any harmonisation should be to the level of the best possible practice. Although I am not usually a great nationalist, I believe that our practice in this country is at a very high level.

7.20 p.m.

Lord Reay

My Lords, developments in Europe offer the charitable and voluntary sector in this country a challenge. There are opportunities but there are also hazards. The Question which my noble friend has brought before us this evening affords us a most welcome chance to take a look at this challenge.

The system of charities which has grown up in this country is unique and much prized. I agree with the noble Baroness on that point. As my noble friend told us, we have a charity system of considerable scope. It has been estimated that the turnover of the charitable sector amounts to about £15 billion.

Charities are bodies whose property and income must be entirely applied for public benefit and under their constitutions no part of their funds may be distributed for private or personal purposes. Their trustees receive no personal benefit from them. Charitable property receives special protection from the law.

The Government make a considerable contribution to the well-being of charities. Charitable status brings with it substantial tax benefit. The Charity Commission protects and assists charities.

The word "charity" has a narrower meaning in other European states. It tends to be confined to bodies whose purposes are the relief of poverty and distress. There are of course bodies corresponding to the range of our charities doing comparable good in other European countries but their structure is different.

The creation of a single market in Europe has prompted the European Commission to consider how the benefits of the removal of barriers to trade may be extended to bodies in the voluntary and charitable sector. It has considered how obstacles to voluntary and charitable bodies that wish to operate in other member states may be removed. The charitable sector will, I have no doubt, learn from a greater involvement in Europe. I am equally sure that Europe can learn from the best elements of our arrangements.

We know that some charities are alive to these opportunities; indeed my noble friend participated in the seminar which the Charity Commission recently held on developments in Europe which was attended by a large number of representatives of government departments, charities and voluntary bodies.

However, the fact that charities are unique to this country means that their position under European Community law needs to be carefully protected. At present the provisions of the Treaty of Rome and the Single European Act do not cover charities specifically. There is some discussion in Brussels about the possibility of creating a statute to cover the voluntary sector. This would include our charities. Bringing voluntary bodies under Community law in this way may be a good way of facilitating operations by charities and voluntary bodies in other member states. However, it would need to protect their special position. The development of a statute is at a very early stage and thus far no specific proposals have emerged. But I can assure noble Lords that Her Majesty's Government are keeping a close watch on developments.

We have taken account of the position of charities in the context of another European Commission proposal to bring charities into the sphere of Community law; that is, a proposal to interpret Article 58 of the Treaty of Rome in such a way as to bring the charitable and voluntary sectors within the scope of Community law.

Several noble Lords referred to Article 58. That has hitherto been understood as excluding from Community law all non-profit making organisations. The Commission's proposed interpretation would exclude only those bodies not engaged in economic activity; that is only a small number of UK charities. We do not think that this is the best way to preserve the role of charities. Community law drawn up along the lines of such an interpretation may not be compatible with our charity law. We have resisted and shall continue to resist that interpretation. However, discussion on possible interpretations is still under way. We shall, of course, maintain a close involvement in that discussion.

We do not believe that the European Commission has any current legislative proposals in mind which would have an undesirable effect on United Kingdom charities. But charities may in the future be exposed to the possibility of legislation which may inhibit activities in pursuit of their objects, albeit that this may be unintentional. We are discussing this with the Commission at the moment. The Commission is, because of our representations, coming to realise that the charitable sector here should be distinctively recognised by, if necessary, special provision. The voluntary sector here and equally in other member states has distinctive qualities which, if they are to be effective, should be recognised by special provision.

We have sought also to protect our charities' position in the face of other proposals from the Commission which affect charities indirectly. We have for example worked to protect the favourable VAT position of charities and we have corrected the EC directive on driving licences to preserve the valuable role played by voluntary minibus drivers. My noble friend referred to that matter.

My noble friend's Question goes wider, however, than the European Community. I know that he plays a valuable role in the UK delegation to the parliamentary assembly of the Council of Europe. The Council of Europe brings the European nations together on a broader basis than the Community. In particular it provides a context in which contacts with Eastern European countries can be developed. The Council of Europe is not a law making body in the same way as the European Community, but its function in developing common standards and principles is invaluable.

British charities are not, of course, dependent on government in order to participate in Europe. There are indeed a number of networks bringing together charities and voluntary bodies in Europe to help them co-operate at a European level. This co-operation involves a desire to exchange ideas with European counterparts and has also underlined the need for the voluntary sector to be better informed as to developments in Community law. Perhaps I might mention one such network, the European Committee of General-Interest Associations, CEDAG for short. The National Council for Voluntary Organisations, NCVO, here is actively involved in this developing voice in Brussels. Indeed the NCVO representative is one of the vice-presidents of CEDAG.

Finally, I wish to acknowledge the developing role which British charities are playing in Eastern Europe. One well publicised example of that is the contribution to the Romanian orphanages. Another example has been the assistance given to the victims of the Armenian earthquake. In our view a flourishing voluntary sector is important to the development of a pluralist democracy and a market economy. However, we should not forget that we are looking at societies that are involved in great change which have their own ideas and their own traditions and to whom we can offer valuable assistance and insights.

A voluntary sector, in the sense we understand it, cannot be imposed from without, or conjured up from within. But what we can do, and what individual organisations in the UK are already doing, is to share knowledge, advice and expertise to help develop an infrastructure for the voluntary sector in Eastern Europe.

I shall try to reply to some of the questions that were put to me. My noble friend Lord Kinnoull and the noble Lord, Lord Meston, asked about VAT. I can reassure noble Lords that we intend to protect the zero rate for charities where charities enjoy it today. I was asked whether we would consider sending an expert to Brussels to help charities in their relations with Brussels and to establish a contact with the Commission. We have a permanent representative's office in Brussels which represents our interests. However, on this specific matter we have been invited by the Commission to consider taking the step I have mentioned. We are looking for a suitable person who might enable us to take up this proposal.

My noble friend asked whether we would produce a booklet to show our charities how charities operate in the different member countries of the EC. We would be happy to consider that step in consultation with the charities' organisations which make up the European groupings. I cannot promise that we shall do this as it has resource implications, but we are happy to consider it. My noble friend also asked whether we would conduct discussions with the Council of Europe with a view to the council becoming some kind of focus for charities in their involvement outside the Community. That is what I understood by my noble friend's comments. We would be perfectly happy to discuss that with the relevant organ of the Council of Europe.

The noble Baroness, Lady Ewart-Biggs, asked about the know-how fund. The know-how fund does not include the voluntary sector in its remit and is obliged to concentrate on priority sectors agreed with the Eastern European governments concerned, namely, those of Poland, Hungary and Czechoslovakia so far. The noble Baroness asked other questions but, if I may, I should like to write to her with the answers.

In conclusion, I am grateful for my noble friend's reminder that we must not be parochial in considering the interests of charities and that charities themselves should be prepared to look towards the opportunities that are on offer in Europe. The Government are engaged in active dialogue with the European Commission, as I indicated, to ensure that the special position of our charities is preserved. That will enable them to play their full role in Europe. We also watch with interest developments further afield. Although it is perhaps too soon to speak of a unified policy for a wider Europe, it is not too soon to confirm that we are working to ensure that our experience of charity law in the United Kingdom is made known to our fellow Europeans.

House adjourned at half-past seven o'clock.