Charities Bill [H.L.]

HL Deb 06 February 1992 vol 535 cc399-446

Consideration of amendments on Report resumed.

Clause 18 [Dormant bank accounts of charities]:

Earl Ferrers moved Amendment No. 16: Page 18, line 2, leave out ("one that") and insert:

1. ("(i) a transaction consisting in a payment into the account, or
2. (ii) a transaction which").

The noble Earl said: My Lords, I beg to move Amendment No. 16 and speak to Amendment No. 17. In Committee the noble and learned Lord, Lord Brightman, expressed concern that the powers which were given to commissioners by Clause 18 did not go far enough. This amendment addresses that concern. It will allow bank or building society managers to volunteer information to the commissioners about any charity account which has received payments into it in the last five years but which would otherwise be dormant for the purposes of Clause 18.

I should explain that this new provision is not expressed as a duty on a bank or building society or its managers because such a duty would be unenforceable. However, it will greatly assist the commissioners in their programme of local reviews of charities. In the course of such reviews the commissioners will provide lists of charities in a particular area to local banks, which will then be able to provide information on dormant bank accounts.

The amendment will not enable the commissioners to require banks and building societies to provide them with information about this wider category of account. The reason for that restriction is that the banks and building societies themselves use a definition of dormant account which is very similar to that in Clause 18(8) (a); it does not take account of payments in. If the commissioners were able to require information about this larger category of account, as they will be able to do in respect of accounts which are dormant within the present definition of Clause 18, it would place a much greater burden on banks. Identifying relevant accounts would necessitate substantial alteration to banks' and building societies' existing record-keeping and computer systems. This would be expensive and time-consuming and I doubt whether the likely return would justify it.

I have also considered very carefully the proposal that Clause 18 should give the commissioners power to deal with an investment which generates income paid directly into a charity's bank account. I said in Committee—and after consideration I think it is correct—that the commissioners already have a range of powers to deal with moribund charities and whatever property they may have. For example, they can appoint new trustees or make a scheme to give new life to the charity or to vest its property in another charity. As they have these existing powers, I do not think it necessary to provide parallels to them in Clause 18.

I hope that these amendments will meet the concern expressed by the noble and learned Lord, Lord Brightman.

Lord Brightman

My Lords, I am most grateful to the noble Earl for moving this amendment. It takes the place of the amendment which I moved and withdrew before the Public Bill Committee, and it meets the point which I had in mind.

Lord Morris of Castle Morris

My Lords, these Benches also welcome this amendment. We are grateful for the care and concern that the Government have given to it since the Committee stage. However, I am not entirely satisfied that I fully understand the wider implications of Amendment No. 17 which has been grouped with this amendment, especially the second paragraph of it. I should welcome any clarification of what would now be defined as a dormant account.

I have one particular instance in mind—I apologise to the House and to the noble Earl for bringing it up without having been able to give him advance notice. The reason for that is quite simple: its relevance struck me only this morning. The case is that of the Gillingham Bus Disaster Fund which, as your Lordships may recall, was a tragic event which took place on 4th December 1951. In darkness, a column of Royal Marine cadets was marching down Dock Road in Gillingham on the way to a boxing tournament. A double-decker bus ploughed into them, killing 24 and injuring others. The mayors of Gillingham, Chatham and Rochester set up a fund, whose given objects were: to defray the funeral expenses, to care for those who had been disabled and to assist such worthy cause or causes … as the mayors may determine". Donations came from all over the world and several things were done. But since the boys had no dependants, the money could not be used up and there was a great deal of wrangling over it. At a High Court hearing, Mr. Justice Harman ruled that the fund was not a valid charitable trust and that the money must be returned to the donors. Thus, he started what has been described as the biggest manhunt in British legal history. It is said that there were something like 3,000 individual payments to the fund and the total number of subscribers was put at 250,000.

Today, that fund stands at £7,702.70, without interest. Claimants for their money back would receive interest calculated back to the year of the High Court judgment. The snag could be that, since Mr. Justice Harman ruled that the fund was not a valid charitable trust, it could be said that the Charities Bill cannot be applied to it. Morally and for all practical purposes it was a charity and present publicity for this Bill has renewed concern in all the Medway towns after all these years.

Is that a dormant account? Can it come in any way within the scope of this clause or Clause 19? I apologise again for bringing up this matter without notice. It is an important issue and this seems to be the only time that I can bring it up. I should be grateful for any clarification which the Minister can give, either now or by letter or at a later stage.

Earl Ferrers

My Lords, perhaps I can try the first two of the noble Lord's options. I shall certainly consider his point and it would probably be best to write to him in detail about it. The short answer is that it is probably not a charity but was set up for benevolent or philanthropic purposes, which excludes it from being a charity and the rigours of the Charity Commission.

The noble Lord asked what was a dormant account. A dormant account is something out of which there has been no payment for the last five years. Banks have that régime and can locate the account easily. However, where payments are made in, it is also possible to find examples of accounts which have had payments in but not payments out. The reason that the amendment is so expressed is so that the banks can readily identify dormant accounts and yet can supply to the commissioners, if they wish, the information on the accounts into which money has been paid without obviating their professional charge not to divulge information.

I hope that I have explained the position to the noble Lord but I shall write to him about the Gillingham matter.

Lord Brightman

My Lords, perhaps I may just interject briefly. I remember the Gillingham bus disaster case very well indeed. It was found not to be a charitable trust. It is not a dormant fund. It does not come within the Charities Bill at all. Mr. Justice Harman found in effect that it was not a valid trust at all. He did not consider whether it could have been validated on the basis that it was merely a mandate to pay out the money to the persons who fell within the terms of the appeal. That point was not dealt with at all. It is questionable whether the decision was correct in the light of later cases. However, it does not enter at all into the consideration of this clause.

On Question, amendment agreed to.

Earl Ferrers moved Amendment No. 17: Page 18, line 24, at end insert: ("( ) For the purpose of determining the matters in respect of which any of the powers conferred by section 6 or 7 of the 1960 Act (power of Commissioners to institute inquiries or obtain information) may be exercised it shall be assumed that the Commissioners have no functions under this section in relation to accounts to which this subsection applies (with the result that, for example, a relevant institution shall not, in connection with the functions of the Commissioners under this section, be required under section 6(3) (a) of that Act to furnish any statements, or answer any questions or inquiries, with respect to any such accounts held by the institution). This subsection applies to accounts which are dormant accounts by virtue of subsection (8) (a) above but would not be such accounts if sub-paragraph (i) of that provision were omitted.").

On Question, amendment agreed to.

8.15 p.m.

Clause 20 [Annual statements of accounts]:

The Deputy Speaker (Baroness Lockwood)

My Lords, I should point out that if Amendment No. 18 is carried, I cannot call Amendment No. 19.

Earl Ferrers moved Amendment No. 18: Page 19, line 23, leave out ("£10,000") and insert ("£25,000").

The noble Earl said: My Lords, there was a certain amount of discussion in Committee about the fall in the content of accounts and about the annual income figure which should separate those charities which are allowed to prepare simpler accounts, such as a receipt and payment account, from those which are required to produce a full income and expenditure account.

Several Members of your Lordships' Committee felt that the present dividing figure of £10,000 was too low. I was urged to increase it to £25,000. At the time I did not undertake to reconsider the matter but I thought that, in view of the concerns that had been expressed, I should nevertheless do so. After careful consideration, I have come to the conclusion that an increase in the figure from £10,000 to £25,000 is justified. The amendment therefore effects that increase. I beg to move.

Lord Ennals

My Lords, my interest in this matter is as a member of the council of the National Association of Almshouses. The amendment subsumes the much more modest amendment which stands in my name. It will be widely welcomed and I greatly appreciate the noble Earl's consideration.

Viscount Mountgarret

My Lords, as the mover of the amendment in Committee, perhaps I may say to my noble friend how grateful I am for this amendment. We had a very interesting debate in Committee and I had the impertinence to put the amendment to a Division, which was lost by one vote. I am very grateful to my noble friend for reviewing the matter. In the light of the arguments put forward he has decided to table this amendment. I am sure it will commend itself to the House.

Baroness Hilton of Eggardon

My Lords, I merely add that the amendment is warmly welcomed on this side of the House. I am grateful to the Minister for acceding to our arguments in Committee.

Lord Swinfen

My Lords, I also am grateful for the amendment. I had a similar one at Committee stage but the figure was £35,000 as opposed to £25,000. It is extremely difficult to find the right figure and I am happy with this one. I am sure that the charity finance directors' group, which briefed me at Committee stage and at this stage of the Bill, will also be happy. I thank the noble Earl for considering the matter.

On Question, amendment agreed to.

The Deputy Speaker

My Lords, Amendment No. 19 is pre-empted.

Lord Benson moved Amendment No. 20: Page 19, line 42, leave out subsection (7) and insert: ("(7) Requirements prescribed under subsection (1) shall, where so specified, apply to a charity which is a company in addition to any accounting requirements applicable to the company under the Companies Act 1985.").

The noble Lord said: My Lords, this amendment stands in my name and the names of three other colleagues in this Chamber. It can be dealt with quite quickly. I am told that nobody knows how many charities there are in the country and that there are believed to be 171,000, of which approximately 150,000 are unincorporated, and approximately 20,000 are charities which are companies. In speaking to this amendment I speak not only on my own behalf; I represent the views of the Institute of Chartered Accountants in England and Wales, of which body I am a member, the Institute of Chartered Accountants of Scotland, the Institute of Chartered Accountants in Ireland (Ireland includes the northern Province and the Republic of Ireland), the Chartered Association of Certified Accountants, the National Council for Voluntary Organisations and the charity finance directors' group. All those bodies are in daily touch with charities. They represent the views of the charities with which they are in communication every day of the week. The troops under my temporary command are normally docile and amenable. However, on this issue they are militant and armed to the teeth with every known equipment. They are unanimously in favour of the amendment.

In the dialogue which has preceded the hearing today, the Government have made it clear that they are not prepared to budge and they do not wish to approve the amendment. It appeared as though a confrontation situation was arising. However, in the dialogue that has taken place recently it seems that some consensus may be found.

The Government have accepted the position that there must be level playing fields for charities which are companies and charities which are unincorporated. I understand that the noble Earl, Lord Ferrers, will make a statement that there is power under Section 257 of the Companies Act 1985 to make regulations which will require charities which are companies to provide the same information as will be provided by unincorporated charities under Clause 20 of the Bill. If the statement which the noble Earl is able to give is firm enough to assure us that those regulations under Section 257 of the Companies Act will be brought into play, I shall beg leave to withdraw the amendment.

It is important that the regulations made under Section 257 of the Companies Act are contemporaneous with regulations which will be made under Clause 20 of the Bill. If not, there will be chaos in the interregnum period and that will be damaging to everyone concerned.

Lord Harris of Greenwich

My Lords, I have put my name to the amendment. I agree with everything that the noble Lord said. I understand that we shall have a helpful statement from the noble Earl. I have a copy of the letter which he sent to the noble Lord, Lord Benson, in particular in relation to Section 257 of the Companies Act.

I hope that the noble Earl will address himself to the crucial question raised at the conclusion of the noble Lord's contribution. Will the Government take contemporaneous action with regard to any regulations which may be made under the Bill? As the noble Lord, Lord Benson, rightly said, it is essential that that should be done, otherwise there will he a high state of confusion. The Government have indicated that they are prepared to move in that direction, but we want an assurance on that specific point. I hope that the noble Earl will be in a position to give it.

Lord Swinfen

My Lords, I too have put my name to the amendment. I defer to the noble Lord, Lord Benson, on the accounting side because he has far more experience and much greater skill on that aspect.

It is extremely important that there is a level playing field for charities. Under the Companies Act charitable companies do not have to give any details as to their administrative expenses or their fund raising and public relations costs. Under the Charities Bill, charities that are not incorporated as companies have to give that information. It therefore makes it extremely difficult for the donating public to be able to judge between the work and efficiency of a charity that is unincorporated and one that is incorporated.

The charity world in general—I include incorporated and unincorporated charities—all want a level playing field. It is essential. I hope that my noble friend will be able to give a satisfactory undertaking on the point.

Lord Morris of Castle Morris

My Lords, on these Benches we support the amendment for all the reasons that have been given.

Earl Ferrers

My Lords, I have never before been more apprehensive when making an intervention in a debate than when it is held that I shall make a statement.

First, I understand the anxieties of the noble Lord, Lord Benson, because he was kind enough to come to see me, as did my noble friend Lord Swinfen. The anxiety is that the law should not allow charities which choose to become companies to report on their accounting and financial affairs in a less vigorous way than that which is required for unincorporated charities. There is nothing between the noble Lord, Lord Benson, or indeed anyone else, and me on that point. Where we differ is on how that consistency in accounting standards is to be achieved.

The amendment before your Lordships subjects charitable companies to two sets of accounting requirements—those which are contained in regulations made under the Bill; and those which are contained in the Companies Act—even where that double requirement serves no useful purpose. We do not believe that that is satisfactory. Some charitable companies may choose to prepare their accounts as required under the Companies Act but in a form which takes account of the statement of recommended practice (which is commonly known as SORP 2) for charity accounts. But that is quite different from being obliged to comply with the Companies Act requirements and with the requirements of the Bill, and to be subject to two sets of penalties for failure to comply.

It is possible that once the regulations which are required under the Bill have been made, they may prove to be broadly similar to those governing charitable companies. But we could not guarantee that they would always remain so. Future changes could lead to conflicting requirements and therefore to considerable extra burdens on charitable companies.

I believe that there is an alternative means of achieving our common end. It is to use existing powers in the Companies Act 1985 to create an accounting regime which could be tailored specifically to charitable companies and which would be equivalent to that for unincorporated charities.

There are already certain types of company to which the common accounting requirements of company law may not be suited, and the law recognises that. For example, banks and insurance companies prepare their accounts according to a modified regime which is provided by the Companies Act 1985 as amended by the Companies Act 1989. The Secretary of State has power under Section 257—to which the noble Lord, Lord Benson, referred—of the Companies Act 1985 to modify the accounting provisions of that Act in order to establish special accounting regimes for different classes of company. There is no reason in principle why such a modified regime could not be established for charitable purposes.

The Secretary of State will consider sympathetically any detailed proposals which may be put forward to ensure that charitable companies are subject to accounting provisions which are just as rigorous as those for unincorporated charities.

Once the regulations for unincorporated charities have been drafted, as they will have to be, we shall look carefully at the two sets of requirements to see whether a modified regime for charitable companies would then be desirable. I can assure the noble Lord, Lord Benson, that I shall be looking at that as a matter of urgency. But he will understand that that cannot be done until the regulations for unincorporated charities have been drawn. If there is found to be a need for that regime, I shall ensure that the two regimes are brought in contemporaneously. I hope that that will satisfy the noble Lord and others who are anxious. I believe that that is the best route to take.

Lord Benson

My Lords, I am grateful to the noble Earl, Lord Ferrers, for making that announcement and that concession. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8.30 p.m.

Clause 21 [Annual audit or examination of charity accounts]:

Lord Allen of Abbeydale moved Amendment No. 21: Page 19, line 44, leave out ("(or both)").

The noble Lord said: My Lords, as this is a drafting amendment I rise to move it with diffidence. However, it is a matter on which I feel fairly strongly. Under the clause a charity is caught if its gross income exceeds £100,000, and its total expenditure exceeds £100,000. One would have thought that if both items exceeded £100,000 the charity would be caught twice over. That makes one wonder what on earth the words, tucked away as they are in brackets, actually mean.

In Committee the noble Earl explained that a charity whose income and expenditure exceeded £100,000 in the same year might argue that the audit requirements did not apply. The noble and learned Lord, Lord Brightman, promptly said that he believed that he could say on behalf of his fellow Law Lords that such a construction would stand no chance of success whatever in this House. Notwithstanding that positive opinion—I am sure that the noble and learned Lord still holds that opinion—these words remain in the Bill.

I can imagine some court sitting in the future puzzling over why the words were included and perhaps reaching the conclusion that the intention of the clause, however crudely put, was that the income and expenditure added together should equal £100,000. I believe that far from putting the matter beyond doubt, as the draftsman claims, the provision introduces a note of ambiguity. I cannot see that the words add anything. On the basis that we should not put into the statute provisions that are unnecessary I wish to see them deleted. I hope that the Government will pay attention to the points made. I beg to move.

Baroness Hilton of Eggardon

My Lords, we on these Benches agree entirely with the noble Lord, Lord Allen. The construction appears to be exactly as he stated. The provision is more misleading as it stands than it would be if the words were removed.

Earl Ferrers

My Lords, I am bound to say that I have dreaded dealing with this amendment. We dealt with it in Committee and I must agree that one needs a wet towel around one's head in order to understand it. Perhaps I can do my best to explain it to the noble Lord, Lord Allen. The Bill reads: Subsection (2) applies to a financial year of a charity … if the charity's gross income or total expenditure (or both), fulfil certain conditions. The idea is that if the income is more than £100,000, or if the expenditure is more than £100,000, or if both are more than £100,000 the charity must prepare different forms of accounts. Without the words "or both" it might be construed that as both items have exceeded the limit and not just one item the charity need not be subjected to that regime.

I have taken the proposal back and considered it. I am persuaded—indeed, the parliamentary draftsman is persuaded, which is more important—that the words are desirable because they remove the ambiguity. I hope that I have satisfied the noble Lord, Lord Allen of Abbeydale. I can see a look of enormous satisfaction on his face and I hope that he will agree with me.

Lord Swinfen

My Lords, before my noble friend sits down I wish to ask whether it would be better English if in order to achieve the aim the final line were to read: if either the charity's gross income or total expenditure", leaving out the words "or both" which appear in brackets? I believe that the way in which the Bill has been drafted is extremely convoluted.

Lord Allen of Abbeydale

My Lords, I am totally unpersuaded by the reply. The omission of the words leave no ambiguity whatever, whereas their inclusion leave open the possibility of ambiguity. However, I shall not waste the time of the House and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 22 not moved.]

Lord Allen of Abbeydale moved Amendment No. 23: Page 20, line 11, at end insert ("or who is eligible in accordance with regulations made by the Secretary of State.").

The noble Lord said: My Lords, the aim of the amendment is not to contest the principle of professional audit but to increase the flexibility of the regulators to decide who may carry out such audits. It appears to me that the case for the amendment is put in the 1989 White Paper rather better than I can put it. It states: The Commissioners would also have a power to make regulations allowing exceptions to the audit requirements where they were satisfied that adequate audit arrangements already existed. An exception could be made, for example, where there were corporate trustees such as the trust companies of the major banks, which have their own internal inspection and audit arrangements, or where one of the trustees was a local authority and the accounts were audited by an auditor appointed by the Audit Commission". I understand that some of the audits concerning, for example, Action with Communities in Rural England are carried out by retired accountants or local authority qualified auditors. It is a pity that we should change the law so that in future they could not have such audits carried out by perfectly competent people without charge or for only a modest fee but would have to find the thousands of pounds which would be needed to carry out professional audits. I beg to move.

Viscount Astor

My Lords, I understand that there may be auditors who for some reason are not eligible to audit company accounts but who may be qualified to audit charity accounts. On the understanding that the amendment will be withdrawn I am happy to give the noble Lord, Lord Allen, an undertaking to introduce at the next stage a government amendment that has the same effect as his amendment.

Lord Allen of Abbeydale

My Lords, with that assurance I am happy to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Viscount Astor moved Amendment No. 24: Page 20, line 17, leave out from beginning to ("or") in line 18 and insert ("have the requisite ability and practical experience to carry out a competent examination of the accounts,").

The noble Viscount said: My Lords, the amendment introduces a different definition of an independent examiner. The independent examiner is the person who must examine the accounts of those charities which are not required to have their accounts audited by a professional auditor. In Committee criticism was made of the present definition in Clause 21(3). A number of noble Lords considered that it was drawn so as to require the examination to be carried out by a professional accountant or auditor. That was not our intention and my noble friend undertook to see whether the definition could be altered to remove any possibility of misunderstanding. The kind of person we are aiming at is, of course, the bank or building society manager, the local authority treasurer, the retired accountant and similar persons. I hope that your Lordships will agree that the new definition fits the bill, and I beg to move.

Lord Allen of Abbeydale

My Lords, that entirely meets the point raised in Committee. I am most grateful.

On Question, amendment agreed to.

Clause 22 [Supplementary provisions relating to audits etc.]:

Lord Benson moved Amendment No. 25: Page 21, line 17, leave out sub-paragraph (iii).

The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendments Nos. 26, 27 and 28 because they deal with the same subject.

These are technical matters of wording and from the dialogue preceding Report stage I understand that the Government will accept the principle set out in those four amendments. However, as is the way of things, they would like to use their own wording in expressing the principle. If I have correctly stated the position as regards those four amendments, I shall ask the leave of the House to withdraw Amendment No. 25 and I shall not move Amendments Nos. 26 to 28.

Earl Ferrers

My Lords, I am aware that the mention of a "certificate" issued in relation to the audit of accounts may have alarmed members of the accounting profession. Perhaps I should explain, as I did in Committee, that it was never our intention to require an auditor or an independent examiner, to certify as to the accuracy of the accounts which he has audited. That would place an inappropriate task on him. He would simply have been certifying to the fact of having carried out the audit or examination. However, I accept that the use of this terminology has caused anxiety in some circles and may be misleading. I am pleased to say therefore that I accept the amendments in principle.

I understand that there is a small drafting change necessary to the amendments on Clause 22. Therefore, if the noble Lord will withdraw the amendment, I shall make the necessary changes at the next stage of the Bill.

Lord Benson

My Lords, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 26 not moved.]

Lord Richard moved Amendment No. 26A: Page 21, leave out lines 23 to 26 and insert: ("(d) entitling such an auditor or independent examiner to require, in the case of a charity, information and explanations from past or present charity trustees or trustees for the charity, or from past or present officers, auditors or independent examiners or employees of the charity;").

The noble Lord said: My Lords, this is a modest amendment to add a provision to paragraph (d) of Clause 22(1). At present that states that: The Secretary of State may by regulations make provision … entitling … an auditor or an independent examiner to require … information and explanations from past or present charity trustees or trustees for the charity, or from past or present officers or employees of the charity".

It has been put to me that in the course of his work an independent examiner may need to request information from a past, or indeed present, independent examiner. The clause needs to be amended to incorporate that entitlement.

It may be that the income of a charity may increase or decrease. Accordingly, it is possible to progress from an independent examination to an audit and vice versa. Therefore, provision should be made for an auditor to request information from a previous independent examiner. I beg to move.

Lord Morris of Castle Morris

My Lords, I only wish to add that we could envisage that there may be situations in which an auditor does not enjoy a wholly constructive relationship with the charity's trustees who, we accept, should be the primary source of his information. It would be helpful for an auditor of that kind to have a statutory right to ask for information from past auditors or examiners. By adding the words "auditors or independent examiners" to this subsection, we are striving to do no more than to add to the belt and braces with which he is already equipped, a piece of rope just in case.

8.45 p.m.

Earl Ferrers

My Lords, obviously, we want auditors or independent examiners to have access to as wide a range of information as possible about the charity which is being audited or examined. I do not believe that the inclusion of past auditors or examiners in the list of people set out in Clause 22(1) (d) is right.

The duties of an auditor or an examiner relate to the accounts for the year which he is auditing or examining. He should obtain information and clarification about those accounts from the charity trustees either directly or via the employees. They áre responsible for the accounts and the accounting records. They should answer the questions. The auditor or examiner is not entitled, when looking at the accounts which are being audited or examined, to look behind previous years' accounts. Those earlier accounts are not his responsibility unless he has audited them also.

However, if the auditor or examiner cannot obtain proper answers from the trustees, he should report the matter to the Charity Commissioners. Their information-gathering powers enable them to obtain any information in relation to a charity, other than an exempt charity, from any person who may have relevant information. Therefore, it would be not be right for the Bill to include past auditors.

Lord Richard

My Lords, I hear the noble Earl's explanation and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 23 [Annual reports]:

[Amendments Nos. 27 and 28 not moved.]

Clause 24 [Special provisions as respects accounts and annual reports of exempt and other excepted charities]:

Lord Harris of Greenwich moved Amendment No. 28A:

Leave out Clause 24 and insert:

("Special provision as respects accounts of exempt and other excepted charities

. Nothing in sections 19 to 23 applies to any exempt charity or any charity excepted by section 4(4) of the 1960 Act (charities not required to be registered); but section 32(1) and (2) of the 1960 Act (general obligations to keep accounts) shall continue to apply to any such charity.").

The noble Lord said: My Lords, we spent some time on this issue in Committee. On many of the issues which we debated on that occasion I understood the Government's position even when I did not agree with it. However, on this matter I found it quite difficult wholly to understand the line which they took.

The purpose of the amendment is to deal with the smallest charities which exist; that is, charities with perhaps an annual income of £300, £400 or £500 per year up to a maximum of £1,000. The amendment is designed to remove the obligation on those exceptionally small charities with an income of less than £1,000 per year, first, to keep accounting records in accordance with Clause 19; secondly, to produce an annual statement of accounts in accordance with Clause 20; thirdly, to have an annual audit or examination in accordance with Clause 21; and fourthly, to prepare an annual report in accordance with Clause 23. In other words, the purpose of the amendment is to leave those exceptionally small charities under the present and far lighter regime of the Charities Act 1960.

The arguments in favour of the amendment are self evident. First, the bureaucratic implications of the Bill as it stands are truly remarkable. As I have indicated, we are talking about thousands of charities with perhaps a total income per year of £200, £300 or £400. Why do we require this massive bureaucratic regime to be imposed upon them?

There is already widespread anxiety about the obligations on trustees of charities and there may be some reluctance—I do not wish to overstate the matter—by people to volunteer. That would be greatly exacerbated if the smallest charities, of the kind which I have described, were brought within the new regulatory framework.

Furthermore, small charities with an income of less than £1,000 per year which have registered voluntarily will not be able to comply. I take one example. That will affect a large number of branches of the Women's Institute. What conceivable public advantage can there be in imposing requirements of that sort on small branches of the Women's Institute, particularly when, if there is not compliance, criminal sanctions would apply for a breach of the Act.

Lastly, and perhaps most important of all, what will happen when those thousands of returns begin to arrive at the Charity Commission? Who will read them? Will officials be given the responsibility of carefully analysing the returns of a small branch of the Women's Institute in the North-East of England or wherever it may be? As we are well aware, the problem is that the Charity Commission has been scandalously under-resourced for a substantial period of time. The noble Earl will no doubt say, as he said in Committee, that the Government have increased the resources available by a substantial amount. That is true. But that is in the context of a situation where major new responsibilities are being imposed on the Charity Commission.

In my view, the consequence of allowing the Bill to remain in its present form is that those thousands of returns will have to be submitted, with the consequent risk in regard to the trustees of a breach of the criminal law if they fail to do so. There will be no machinery within the Charity Commission to analyse the returns.

The amendment would represent a substantial improvement in the Bill. I hope that the noble Earl, notwithstanding the position he took in Committee, will see the advantage of proceeding in this way. We all want a satisfactory regime for large charities. The question here is different. It is whether we insist on the same regime for charities with a minuscule annual income. That is why I tabled the amendment. I beg to move.

Lord Richard

My Lords, I share the bewilderment of the noble Lord, Lord Harris of Greenwich, in regard to the Government's attitude to the amendment. When one looks at Section 4 of the 1960 Act one sees that subsection (4) says, The following charities are not required to be registered, that is to say—

1. (a) … exempt charity;
2. (b) any charity which is excepted by order or regulations;
3. (c) any charity having neither any permanent endowment … nor the use and occupation of any land",

and whose income does not exceed in aggregate more than £1,000 a year. The Government have already accepted that charities with an income of less than £1,000 a year are in a separate category and are to be classed with exempt charities. We see in Clause 24 of the Bill that exempt charities are indeed relieved from the obligations in Clauses 19 to 23 but those whose income does not in aggregate amount to more than £1,000 a year are not relieved. For the life of me I cannot see why not. It is absurd that there should be erected this enormous bureaucratic edifice in relation to charities whose income in some cases will be minuscule.

Perhaps I may add an additional point to those made by the noble Lord, Lord Harris. If the Government have their way, small charities—those with an income of under £1,000 a year—will have to pay for the privilege of filing returns which, as far as I can see, will be put into a cupboard, if one large enough can be found, to gather dust. Not only does that seem to be an imposition but it is verging on impudence.

I hope that the noble Earl will say that it is an issue he will reconsider. Logic and common sense are on the side of the amendment and I am happy to support it.

Lord Moyne

My Lords, I simplistically support the amendment but only with the practical knowledge of a small trust for a scouts' hall in the local village of which I am, whether I like it or not, a trustee because I own the house. With me as a trustee is the chairman of the parish council and the rector, who is kind enough to act as secretary. We have a few investments bringing in a few hundred pounds—under £1,000. It would be absurd for any complication to rest on us and our poor rector as a result of the Bill.

Earl Ferrers

My Lords, Clause 24 does three things. Exempt charities which are not within the commissioner's jurisdiction but are subject to other, often statutory, regimes are relieved of the accounting requirements provided by the Bill. Excepted charities, which are not registered voluntarily, are relieved of the duty to prepare an annual report and submit it to the commissioners, but they are subject to the rest of the accounting regime. Excepted charities which have chosen to register must prepare and submit an annual report and they are also subject to the rest of the accounting regime. The amendment would have the same effect as regards exempt charities but it would relieve excepted charities, whether or not they have chosen to register, from all the duties of the accounting and reporting regime.

The purpose of this part of the Bill is to ensure that there is an adequate accounting regime for all charities and one which is appropriate to their circumstances. Exempt charities are outside the jurisdiction of the commissioners and have their own, usually statutory, framework for their supervision. Excepted charities are subject to the commissioners' jurisdiction. The only difference between them and other charities is that they do not need to register. It is right that they should keep detailed accounting records, prepare annual accounts, comply with the requirements as to the form and content of those accounts and be subject to audit or independent examination. If an excepted charity is not registered, there is no reason for the commissioners to receive an annual report or accounts. Excepted charities which are not registered are therefore relieved of that requirement unless the commissioners so request.

That is the philosophy behind the clause. I understand the anxiety expressed by the noble Lords, Lord Harris and Lord Richard, about charities which have an income of less than £1,000 a year. We are willing to look at the matter again. If an excepted charity chooses to register, then in my view it should do what other registered charities do and report to the commissioners. If it does not opt for registration then perhaps that is a different matter. I shall certainly reconsider the point to see whether we can meet the anxiety expressed.

Lord Harris of Greenwich

My Lords, I am grateful to the noble Earl. That is most satisfactory. I believe he recognises that there is anxiety in many parts of the House over the point. Apart from anything else, given the many new major responsibilities which will be picked up by the Charity Commission, it is desirable to remove from them a wholly unnecessary burden of work. I welcome the noble Earl's reply. If he would like informal discussions between now and Third Reading I am sure—I was going to say "my noble friend" Lord Richard, but that may place us in difficulty—the noble Lord, Lord Richard, and myself will be glad to meet the noble Earl to discuss the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 29 [Divestment of charity property held by official custodian for charities]:

Lord Simon of Glaisdale moved Amendment No. 28B: Page 25, leave out lines 18 to 33.

The noble and learned Lord said: My Lords, if your Lordships look at page 25 it will be seen that this is a point we have covered before and I can therefore deal with it shortly.

If one says that such-and-such a body may direct X and Y and then go on to say, "without prejudice to the generality of what has gone before", the same body may, I repeat, direct A, B and C. Then it must follow that the particularity falls within the generality. It is unnecessary to set out the particularity here running to 16 lines. In this Bill I believe that runs to several pages and in the statute book the formula runs to dozens of pages.

I do not expect the noble Viscount to believe me because I said, although in the Pickwickian sense, that he had been speaking in the tones of a gauleiter ordering the destruction of Lidice. He was told the same thing by the noble Viscount, Lord Brentford, and by the noble Lord, Lord Jenkin of Roding. Therefore, I emphasise that what I have said really must follow. I beg to move.

9 p.m.

Viscount Astor

My Lords, here we are again on a similar amendment to one that was dealt with before. Although my noble friends Lord Brentford and Lord Jenkin may have seemed to agree with the noble and learned Lord, luckily for me they did not use quite the same terms as he did. As I said before concerning an earlier amendment, the list of what directions may be included by the commissioners under this clause is not exhaustive; it is not the point to make it exhaustive. The noble and learned Lord may well consider that it is unnecessary to amplify the general power to give directions by the inclusion of such specific examples.

I do not agree. It is important to put beyond doubt that the commissioners may authorise the Official Custodian for Charities in this way to take steps which will be essential to the orderly and efficient divestment of charity property held by him. I hope that I have addressed the point made by the noble and learned Lord, as indeed I hope that I have addressed the point made by him on an earlier occasion. I suspect that he is not going to agree with me. I say again that it is not our intention to clutter up the Bill with unnecessary lines. However, we thought it important to spell out what the directions are. As I have said before, the list is not exhaustive.

Lord Simon of Glaisdale

My Lords, it is quite obvious that we are going to go on inflating the statute book. On a previous occasion, but not on this point, I mentioned Lidice. On this occasion another military situation comes to mind. Oliver Stanley once described Glenville Hall as showing that indomitable courage in defence of an indefensible situation that has led to some of the most glorious disasters in the history of the British Army. The dear shades of Glenville Hall have come to inform the noble Viscount. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 30 [Provisions supplementary to s.29]:

Lord Simon of Glaisdale moved Amendment No. 28C: Page 26, line 22, leave out ("the appropriate part of that amount") and insert ("such part of that amount as they may specify.").

The noble and learned Lord said: My Lords, this is a different point, but a very short one. It concerns a question of drafting. The amendment is to make paragraph (b) read: to pay such part of that amount as they may specify to each of two or more other charities so specified". That is shorter and, as far as I can see, it means exactly the same thing. I beg to move.

Viscount Astor

My Lords, the noble and learned Lord, Lord Simon of Glaisdale, has suggested that the Bill as drafted can be simplified by the amendments that he has moved. Clause 29(8) (a) and (b) is drafted in such a way as to make it clear that the commissioners' direction may specify both the charities to benefit and the amount each charity is to receive. The wording also makes it clear that the amount to be distributed under the direction need not be divided in equal shares between the charities concerned.

In making directions under this provision the commissioners will have regard to the purposes of the dormant charities and the purposes of the recipient charities. In some circumstances it may not be appropriate for each recipient charity to receive the same amount. The wording of the noble and learned Lord's first amendment does not make entirely clear that the commissioners may give each of the charities mentioned in paragraphs (a) and (b) a different proportion of the total amount.

Nevertheless, I accept that the subsection may be simplified. I am prepared to take the matter away and tidy up the drafting before the next stage of the Bill. I hope that that will show the noble and learned Lord that I can be easily persuaded by reasonable argument. Therefore, I hope that the noble and learned Lord will withdraw the amendment. We shall bring one forward at the next stage.

Lord Simon of Glaisdale

My Lords, I did not quite catch what the noble Viscount said. Did he say that he accepted the amendment in principle and that he would himself bring forward an amendment?

Viscount Astor

My Lords, I apologise to the noble and learned Lord; I did indeed say that.

Lord Simon of Glaisdale

My Lords, I agree that the drafting makes clear exactly what the noble Viscount said and so does my draft. It achieves exactly the same object and effect but much more shortly. The noble Viscount said that the draft I put forward does not make clear that the commissioners may distribute in unequal shares.

Lord Stanley of Alderley

My Lords, will the noble and learned Lord give way? My noble friend on the Front Bench has accepted your amendment in principle.

Lord Simon of Glaisdale

My Lords, I am very much obliged to the noble Lord. I apologise to the noble Viscount for my deafness. I am very much obliged for his response. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 28D not moved.]

Clause 32 [Restrictions on dispositions of charity land]:

Earl Ferrers moved Amendment No. 29: Page 29, line 37, after ("(3)") insert ("or (4A)").

The noble Earl said: My Lords, in moving this amendment I shall speak also to Amendments Nos. 30 and 34. In Committee there was some anxiety that the regime which was imposed by Clause 32 on trustees for disposals of charity land should be more flexible in the case of short leases. I accepted then that the arguments in favour of relaxing the regime to short leases were strong. I have no wish either to be inflexible or to saddle trustees with undue and burdensome requirements which are simply not justified by transactions at hand. These amendments therefore introduce a less strict regime for those kinds of leases.

On the other hand, we need to ensure that trustees act responsibly in the administration of their trust. Therefore, their duty to get the best rent available on the grant of a lease is properly reflected in these new provisions which will replace Section 29 of the Charities Act 1960. For leases of seven years or less these amendments will allow trustees to take advice more appropriate to the transaction concerned from someone who need not be a qualified surveyor but who they reasonably consider has the appropriate expertise to give them advice before deciding whether the terms are the best available. Such advice need not be in the form of a written report.

We have had to settle on a length of lease to which a less strict regime will apply. I have suggested seven years. Any longer period will attract the need for advice from a qualified surveyor and the need to advertise if so advised. Leases of charity land range enormously in their variety. They may be very simple, such as an occasional letting, or a temporary letting for residential purposes to a very complex building lease. Leases of quite short duration may also attract statutory security of tenure which may endure for a period well beyond that which was originally granted. The term of a lease may therefore not necessarily be a good guide to the quality of the advice which is required in a given case.

I consider seven years to be about right, taking all these factors into account. A lease of more than seven years represents a disposition of a substantial interest in a charity's property which would continue to attract the stricter regime. I beg to move.

Baroness Mallalieu

My Lords, we on these Benches welcome the concession that these amendments represent. In the spirit of brevity which is now prevailing I shall say no more.

On Question, amendment agreed to.

Earl Ferrers moved Amendment No. 30: Page 29, line 39, leave out ("Those requirements are that") and insert ("Except where the proposed disposition is the granting of such a lease as is mentioned in subsection (4A),").

The noble Earl said: My Lords, I beg to move.

On Question, amendment agreed to.

Earl Ferrers moved Amendment No. 31: Page 29, line 48, at end insert ("and").

The noble Earl said: My Lords, in moving Amendment No. 31 I shall speak also to Amendments Nos. 33 and 35.

In Committee some concern was expressed that charities with large bodies of trustees, who may meet infrequently and may also carry out large numbers of property transactions in a year, might have difficulties in complying with the requirement in subsection (3) (d) of Clause 32 for a disposition to be approved in advance by a duly constituted meeting of the trustees.

I can see the weight of that argument. I have no doubt that it is right that trustees must have the final responsibility for approving the terms of any sale and in seeing that the new statutory requirements have been complied with. But this need not be at a meeting of the trustees. The governing instrument of the charity may contain powers to delegate certain functions of the trustees to a committee of their number. We see no reason why the trustees should not set the policy for disposals and then delegate decisions in this area to a committee of their number who would report back to the trustee body at regular intervals.

I see no difficulty in removing the requirement in subsection (3) (d), and this amendment does that. I beg to move.

On Question, amendment agreed to.

Earl Ferrers moved Amendment No. 32: Page 30, line 2, leave out ("of the proposed agreement") and insert ("on which the disposition is proposed to be made").

The noble Earl said: My Lords, the noble Lord, Lord Allen of Abbeydale, questioned during the Committee stage whether the provisions of Clause 32 are intended to cover sales by auction. My noble friend Lord Swinfen asked whether it covered sales by tender. The answer to both those questions is in the affirmative.

My amendment to Clause 32(3) (c) is designed to put this beyond doubt. In practice it will allow trustees or a sub-committee of the trustees under delegated powers, when selling by auction or tender, to set a reserve selling price on the property which is to be sold. I beg to move.

On Question, amendment agreed to.

Earl Ferrers moved Amendment No. 33: Page 30, line 3, leave out from ("charity") to end of line 5.

On Question, amendment agreed to.

Earl Ferrers moved Amendment No. 34: Page 30, line 18, at end insert: ("(4A) Where the proposed disposition is the granting of a lease for a term ending not more than seven years after it is granted (other than one granted wholly or partly in consideration of a fine), the charity trustees must, before entering into an agreement for the lease—

1. (a) obtain and consider the advice on the proposed disposition of a person who is reasonably believed by the trustees to have the requisite ability and practical experience to provide them with competent advice on the proposed disposition; and
2. (b) decide that they are satisfied, having considered that person's advice, that the terms on which the disposition is proposed to be made are the best that can reasonably be obtained for the charity.").

The noble Earl said: My Lords, I beg to move.

The Lord Bishop of Newcastle

My Lords, I should like to thank the noble Earl for his action on these matters. This amendment is related to an amendment proposed in Committee by the right reverend Prelate the Bishop of Worcester concerning short leases. I am certain that the new clause before us now and that which we shall consider in a few moments will be of real practical benefit to Church trustees and to others besides. I thank the noble Earl for his kind assistance in these matters.

Earl Ferrers

My Lords, I am grateful to the right reverend Prelate.

On Question, amendment agreed to.

Earl Ferrers moved Amendment No. 35: Page 30, line 19, leave out subsection (5).

On Question, amendment agreed to.

Earl Ferrers moved Amendment No. 36: Page 30, line 35, after ("if") insert: ("(a)").

The noble Earl said: My Lords, in moving this amendment I shall speak also to Amendment No. 37. In Committee, in response to an amendment moved by the right reverend Prelate the Bishop of Worcester, I agreed to look at whether we could mitigate the provisions of subsection (6) of Clause 32 in the case of short temporary lettings by trustees. That provision requires public notice of a disposal of charity land which is held under its trusts subject to some specie use. I have considered this suggestion carefully and I have concluded that the balance of the argument is in favour of disapplying the requirements of subsection (6) in the case of short leases of less than two years. This amendment therefore excludes leases of up to two years from the effect of subsection (6).

The principle that public notice should be given in these cases is a right one and trustees should be required to consider representations if made. However, I do see that where such property is only temporarily vacant pending the appointment, say, of a new beneficiary or for some other reason, to insist on the rigour of public notice could be counterproductive. I beg to move.

On Question, amendment agreed to.

9.15 p.m.

Earl Ferrers moved Amendment No. 37: Page 30, line 37, at end insert ("; or (b) the disposition is the granting of a lease for a term ending not more than two years after it is granted (other than one granted wholly or partly in consideration of a fine).").

On Question, amendment agreed to.

Lord Chorley moved Amendment No. 37A: Page 30, line 37, at end insert ("; or (bb) the Charity Commissioners are satisfied, on the application of any charity, that it is requisite that public notice should not be given to such dispositions of land by that charity as may be specified in an order made by the Commissioners and such an order may:

1. (i) include such conditions as the Commissioners think fit;
2. (ii) be expressed to have effect without limit of time, or for a specified period only;
3. (iii) be revoked or varied by a further order.").

The noble Lord said: My Lords, the purpose of this amendment is to provide a mechanism for dealing with an unreasonable and unnecessary burden that Clause 32(6) will impose on certain types of large property-owning charities, but without destroying the purpose of the subsection.

I have particularly in mind the case of the National Trust. As its chairman, I therefore have an immediate interest to declare even though it is of a distinctly non-pecuniary nature. At this stage I should like to thank the noble Earl and his officials who have helped us at earlier stages of the Bill on a number of points. However, there remains this one issue which I hope we are on the way to resolving. It would appear that not only the National Trust is concerned about Clause 32(6); the Royal Society for the Protection of Birds would also be adversely affected.

The problems so far as concerns the National Trust can be put quite simply. The statutory objects of the trust are to own and manage property for conservation. The great bulk of that property is held inalienably; that is to say, it may never be sold. In this respect the National Trust and the National Trust for Scotland are unique in this Bill. The trust is now a very large landowner and I feel that I should give some figures to demonstrate the problem. We own, for example, more than 6,000 inalienable cottages; we have more than 1,200 farm tenancies and there are wayleaves, easements and so forth. Altogether we estimate that we have about 10,000 separate let properties that would be affected by subsection (6). Properties are let for relatively short terms—the cottages, typically, for eight years.

What all this means is that we are dealing with up to 1,000 dispositions, to use the phrase, a year. In other words, we would be required to issue about 1,000 public notices every year. That would involve heavy expenditure in advertising, in staff time, which is expensive, and in management delay. And one is bound to ask: to what end? These are matters—I emphasise this—of routine property management in almost all cases of modest size; for example, cottage lease renewals. I find it hard to believe that advertising would serve in this respect any useful purpose.

I submit that the requirement is unreasonable and surely not what was intended when drafting this part of the Bill. Its administration would be onerous and, perhaps more to the point, would divert resources from our proper charitable objects. I repeat, all that is in respect of inalienable property which is property which cannot be sold in any event.

I do not seek to challenge the principle of subsection (6), nor am I seeking special treatment. I am concerned that this degree of detail—and subsection (6) is only one example—in primary legislation is a rather awkward strait-jacket. It prevents the evolution of regulation according to changing circumstances and social attitudes. After all, it may be another 30 years before we have another Charities Bill.

I suggest that my amendment will help to introduce a modest degree of flexibility on one particular but vexatious point. On application by a charity, it would allow the Charity Commissioners to exercise a discretion to modify subsection (6) on whatever terms and conditions they see fit to impose. Nor, so far as I can see, is the amendment breaking new ground. All it does is to echo the provisions of the Bill, in much the same wording, regarding public collections where Clause 72 gives similar discretionary powers to the Charity Commissioners. That is, I submit, a proper function of a regulatory body. I beg to move.

Baroness Mallalieu

My Lords, we on these Benches support the amendment of the noble Lord, Lord Chorley. It seems that impracticability and expense are the unwanted side-effects of Clause 32(6). In light of the detailed argument put forward, I hope that the noble Earl will feel able to reconsider the matter and allow a degree of flexibility.

Earl Ferrers

My Lords, I am grateful to the noble Baroness, Lady Mallalieu, for putting forward that point. I shall certainly consider what she said. I shall also consider the remarks made by the noble Lord, Lord Chorley. However, I should like, first, to congratulate the noble Baroness on her position on the Front Bench. I believe that this is the first occasion upon which she has spoken from the Dispatch Box. Her reputation has gone in advance of her. We know of her great expertise in the legal sphere. All I can say is that I am even more alarmed at finding her with the noble Lord, Lord Richard, than I was when it was just the noble Lord on his own; and, indeed, that was a frightening enough experience for any one person. Nevertheless, we are delighted to see the noble Baroness operating from the Dispatch Box.

Perhaps I may just explain the point behind subsection (6) of Clause 32. It provides additional requirements to be undertaken by charity trustees in disposing of land held in specie; that is, on trusts which specify the purposes for which the land must be used within the overall objects of the charity. Such land is often central to the existence of the charity and the disposition could therefore radically alter the nature of the charity and its ability to provide continuing benefits.

It is right that trustees should be subject to additional safeguards to ensure that the charity's property is not disposed of in an improper way. That is what subsection (6) sets out to do by ensuring that trustees give public notice of their intention to dispose of the property in question, and so on.

I understand the concerns expressed by the noble Lord, Lord Chorley. However, I can tell him that we have no wish to create an additional safeguard in Clause 32(6) to smother legitimate property management by charity trustees in red tape. The noble Lord was kind enough to forewarn me some two days ago of this amendment; indeed, we talked about it. However, I hope that he will understand that in the time available I have been unable to give full consideration to his concern. Nevertheless, it is a matter of importance and I shall see that the matter is addressed before the next stage of the Bill.

Lord Chorley

My Lords, I thank the noble Earl for his reply. I certainly accept at least the spirit of subsection (6) and the argument about land in specie. I should also apologise for not being able to converse with him earlier on the matter. However, that was not entirely my fault.

If it is thought necessary for good administration to sort the wheat from the chaff, I cannot believe that it is beyond the wit of the Minister's draftsman to find a formula. Various possibilities spring to mind. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Earl Ferrers moved Amendment No. 38: Page 31, line 2, at end insert ("; or (c) to the granting, by or on behalf of a charity and in accordance with its trusts, of a lease to any beneficiary under those trusts where the lease—

1. (i) is granted otherwise than for the best rent that can reasonably be obtained; and
2. (ii) is intended to enable the demised premises to be occupied for the purposes, or any particular purposes, of the charity.").

The noble Earl said: My Lords, I shall speak also to Amendments Nos. 40 and 41. The amendments will exclude from the provisions of Clause 32 leases of property to beneficiaries of a charity for occupation under its trusts. They address concerns raised by your Lordships in Committee and by a number of charities which provide subsidised accommodation for their beneficiaries.

I undertook to consider those representations.

A number of charities have trusts which provide for leases to be granted to beneficiaries who occupy charity property in furtherance of its objects. Such charities may provide charitable relief housing for the poor or others disadvantaged in society. Very often such leases are for less than a market rent.

It would be entirely inappropriate for the provisions of Clause 32 to apply to those cases. The clause is designed to ensure that the trustees obtain the best price when disposing of charity property. Where the lease is to a beneficiary of the charity, that criterion clearly should not apply. I beg to move.

Lord Moyne

My Lords, I hope that I may again be forgiven for asking a simplistic question, but as a trustee of a large charitable housing trust whose duty it is to provide houses for people on low incomes at the lowest possible rents and which has to walk on the knife edge between secure rents and assured rents, the situation can often be complicated because by trying to provide houses at low rents we may have to go below market prices. The wording of the provision fills me with alarm, although in its context it may not mean what I believe it to mean.

Earl Ferrers

My Lords, the wording should not fill my noble friend with alarm. The amendment would allow the beneficiary of a trust to pay a rent which is lower than the market rent.

On Question, amendment agreed to.

Viscount Mountgarret moved Amendment No. 39: Page 31, line 8, at end insert: ("( ) Nothing in this section shall permit the sale, lease or other disposal without an order of the court or of the Commissioners of any land and buildings held in trust for use as and for almshouses unless such land and buildings are held by or in trust for a charity which is a registered housing association.").

The noble Viscount said: My Lords, I turn now to the question of the disposal of land in relation to almshouse charities. I should like to speak also to Amendment No. 42. I agree in principle with Clause 32 as it stands in relation to charities as a whole, but almshouses are in a rather special category. Their assets—their sites, buildings and so forth—could on paper be extremely valuable, but the income derived therefrom is probably small by virtue of the fact that their endowment is probably not as great in real terms today as the originator intended.

Secondly, the retired people who live in the almshouses are not called upon to contribute as much in weekly maintenance as they might otherwise do because they would be caused financial hardship. The result is that the trustees of such charities find themselves in a difficulty because they have valuable assets but little income with which to maintain the buildings.

There are some trustees who have known, lived, loved and worked among almshouses and for whom they are their raison d'être. However, one can foresee a possibility that in the future trustees who are there by definition under the deed of trust or who are appointed ex officio have little connection with the place. They may say, "We would be doing ourselves a great service if we were to dispose of our buildings and our assets. We will collect a large capital sum and generate an enormous amount of income which we can distribute among the poor and needy". It all sounds right and proper in some ways and people would benefit financially.

Nevertheless, I suspect that many residents of almshouse charities would far rather have a secure roof over their heads and pass the remainder of their days in the area where they were brought up and which they have known all their lives than find that there is a risk of having to move elsewhere. They may have to live in what to them would be a rather impersonal building and they would merely benefit to the tune of filthy lucre which would supplement their existence.

I believe it would be good if the Charity Commissioners were not only empowered but were directed under the Bill to keep a watching brief over the actions of trustees who might wish to sell or put up for mortgage—which is one stage before selling—property in relation to almshouse charities. There is no great onus; the trustees have a duty and within the law they can do all kinds of things. Nonetheless, it would be helpful if the provision could be continued, under the system that exists at the moment, where the Charity Commissioners need to keep a watching brief and need to give their approval to such proposals. I beg to move.

9.30 p.m.

Lord Ennals

My Lords, I wish to add a few words to the cogent arguments put forward by the noble Viscount, Lord Mountgarret. When looking just at almshouses, the first point to take into consideration is that the residents are especially vulnerable because of their age and financial circumstances. Secondly, almshouses provide independent homes, usually for life or until a resident goes into a nursing home, hospital or some other place.

The amendment seeks to provide a degree of security on which the almshouse resident can rely. It is an essential feature that the residents do not have security of tenure and therefore the sale of a building or the acquiring of a mortgage, with which the second amendment deals and which inevitably involves the risk of a sale, is threatening to the security of almshouse residents. It is from the point of view of the residents of the almshouses that I put forward the argument in favour of Amendment No. 39 and the second amendment dealing with mortgages.

Lord Morris of Castle Morris

My Lords, I have listened carefully and, I hope, sympathetically to what has been said. However, with regret, I have to say that I find it less than easy to accede to the arguments put forward by the noble Viscount and my noble friend. Almshouses have special and peculiar problems. Almsmen and almswomen are vulnerable and frequently aged people, and are especially at risk in terms of charity law. But so are many other categories of charities. Church schools, for example, present difficult problems and whole categories of housing associations have special difficulties.

I am afraid that this evening I have heard nothing that convinces me that in respect of this part of Clause 32 almshouses have established a unique claim for special treatment.

Lord Harris of Greenwich

My Lords, I take the same view. As the noble Viscount knows, I warmly supported him when this general issue came before the Public Bill Committee. However, I am uneasy about establishing a special statutory position for almshouses as distinct from the many other worthy bodies who could claim the need for some special statutory assistance. I do not wish to close the door on this approach, but I start from a position of being more than a little sceptical. I shall be interested to hear the noble Earl's comments.

Earl Ferrers

My Lords, I appreciate the anxiety that my noble friend Lord Mountgarret and the noble Lord, Lord Ennals, feel as regards almshouses and the residents within them who are the people for whom the almshouses were in the first instance provided. However, I agree with the noble Lord, Lord Morris of Castle Morris, that no argument has been put forward this evening to suggest that the trustees of almshouse charities should be considered differently to any other charitable trustees.

In these amendments we are being asked to treat the trustees of almshouse charities as people who cannot, unlike other trustees, be trusted to deal with their property in accordance with the requirements set out in Clauses 32 and 34. The amendments will not prevent the trustees from disposing of almshouses. They will merely require that the Commissioners give consent to the disposal. The Commissioners cannot prevent trustees from dealing with their property in the way that they consider best serves the interests of the charity. If the disposal of the almshouses would best serve the interests of the charity, the Commissioners cannot prevent the trustees from disposing of the almshouses. The Commissioners can only prevent the trustees from disposing of the almshouses if, in so doing, the trustees are transgressing the legal duties of their charitable trust. If the trustees have decided to sell then they cannot, and ought not to, be interfered with in exercising their discretion as trustees.

The requirements in Clauses 32 and 34 have been designed to replicate as far as possible the requirements that the Commissioners currently insist on from trustees. Indeed the purpose of these clauses is to allow trustees, when they dispose of land, to continue doing what they now do but without the need to involve the Commissioners as supervisors of every transaction. Most trustees are competent to be left to their own devices in this way and I do not believe that there is any reason why almshouse trustees, among all trustees—the noble Lord, Lord Morris of Castle Morris, mentioned this—should be singled out as needing the continued supervision of the Commissioners. I do not believe that there is any real danger of the trustees of an almshouse charity acting in a way, with respect to their property, which would fundamentally prejudice the interests of their beneficiaries.

Property of any charity which is held upon trusts stipulating that it is to be used for the purposes of the charity will in any case be subject to subsection (6) of Clause 32 where it is sold or leased for more than two years. This subsection requires the trustees to give public notice of any disposal, inviting representations to be made to them. The trustees must consider the representations before proceeding with the disposal.

As most almshouses will be subject to this requirement, almshouse trustees will already have to go through more hoops than other trustees.

One of the fundamental themes of this Bill is that wherever possible trustees should be allowed to exercise the duties of their office without undue bureaucratic interference. I fear that my noble friend Lord Mountgarret is pushing in the other direction with this amendment. I hope therefore my noble friend will appreciate that this matter is best left unaltered.

Viscount Mountgarret

My Lords, I am grateful to my noble friend for such a concise and detailed reply to the point I tried to make. I am not entirely sure that I quite follow the point that at present almshouse trustees can dispose of their properties without the positive agreement of the Charity Commissioners. However, I stand to be corrected on that point. I am sorry but I have forgotten exactly the point the noble Lord, Lord Morris of Castle Morris, made. It is clear, however, that this matter has not found favour in all quarters. In Committee we discussed other aspects of this matter and my noble friend has considered the arguments we made. Perhaps there could be a further reconsideration of this issue. It is a safety valve which I think is necessary, However, at the end of the day if the House and my noble friend in particular and his advisers feel that this point is unnecessary I will not push it. Therefore I withdraw the amendment. I am grateful to my noble friend for his kindness in looking into it.

Amendment, by leave, withdrawn.

Clause 33 [Supplementary provisions relating to dispositions of charity land]:

Earl Ferrers moved Amendments Nos. 40 and 41: Page 31, line 18, leave out ("subsection (8) (a) or (b)") and insert ("paragraph (a), (b) or (c) of subsection (8)"). Page 31, line 21, leave out ("either of those provisions,") and insert ("any of those paragraphs,").

On Question, amendments agreed to.

Clause 34: [Restrictions on charging charity property]:

[Amendment No. 42 not moved.]

Clause 35 [Removal of requirements under statutory provisions for consent to dealings with charity land]:

Lord Stanley of Alderley moved Amendment No. 43: Page 34, line 14, at end insert: ("(2A) For the purposes of section 2(1) of the Education Act 1973, "new provision" may, on the application of the relevant diocesan authorities, or of the trustees, or former trustees, of the school concerned, or of not less than six persons over eighteen years of age residing in the relevant area of benefit include—

1. (a) the sale of the school at less than the best price obtainable in the open market to a charity operating in that area of benefit and whose purposes serve it;
2. (b) the use of part of the proceeds of any sale for a charity operating in that area of benefit and whose purposes serve it.

(2B) Subsection (2A) above shall apply only where the purposes of the charity referred to in paragraphs (a) and (b) above include the provision of a village hall or community centre, the education or development of those of pre-school age, activities for the development of young people or other educational purposes for local benefit and where the Secretary of State is satisfied that—

1. (a) the local community would be disadvantaged as a result of the sale of the school at the best price obtainable in the open market, and
2. (b) the premises had been used for charitable purposes other than purposes of a school for the benefit of the local community, or
3. (c) there are charitable educational purposes, other than use as a school, for the benefit of the local community that could continue to be served by the premises.

(2C) The amount of any discount or proceeds of sale to be so used shall be determined in the light of the circumstances above and the original nature of the trust.").

The noble Lord said: My Lords, I hope—perhaps I should say pray—that it will be a privilege to move this amendment on behalf of those who have put their names to it but who are unable to be present tonight.

The purpose of the amendment is to make it possible that when a village school becomes redundant and is put up for sale some of the proceeds can, if the Secretary of State is so minded, be kept in the village for similar purposes. If my noble friend is able to accept that objective, I should be happy to accept redrafting.

A similar amendment to this was moved by my noble friend Lord Renton on 10th December. To sum up that discussion, my noble friends Lord Renton and Earl Ferrers agreed to disagree on the grounds that it was too widely drafted. If I had been allowed my way—and I suspect I would have been supported by the noble and learned Lord, Lord Denning—I should have stuck to the hard line, keeping all the money for any cause whatsoever in the village; but I was persuaded, not least by my noble friend Earl Ferrers, that such a line was unreasonable. I should like to put on record the time and trouble that my noble friend has taken and the number of letters that he has written to try to explain the problems of the Home Office over this amendment. I am grateful to him.

The amendment before your Lordships this evening is a very moderate one. It spells out quite clearly that any benefit remaining in the village would have to be for similar educationally based charities; and that the local community would be disadvantaged by the sale of the school; and that the school had previously been used for charitable purposes other than as a school. Those conditions are contained in items (a), (b) and (c) of the amendment. I hope that your Lordships will read them carefully. They are very narrowly drawn.

The original money for many, if not most, church village schools was raised in the village for the benefit of education in that village. Broadly speaking, the trusts are of three kinds: one, those that were for education only and for no other purpose; two, those that were for education in the village; and three, those that were for education and for other purposes for the benefit of the village.

As far as the last is concerned, I accept that the Charity Commissioners may, if they wish, divert all—the word is "all"—of the proceeds of that sale back to the village. I believe that that fact of all or nothing is a deterrent, and that it perhaps frightens the church education authorities who feel they are going to lose all so they have to keep everything. My amendment would rectify that all-or-nothing approach. However, because of the Education Act of 1973 it is not possible to keep in the village any of the proceeds of the first two types of trusts which this amendment also addresses.

In practice that results in all the money leaving the village, maybe for the capital cost of some faraway school which no member of that village does or even can attend. That just cannot be right. That was just not in the mind of the original donors, many of whom, I suspect, are your Lordships' ancestors. I suspect that they are listening now from below—who knows but that some of them may be listening from above.

This amendment would correct that blatant injustice by allowing the Secretary of State for Education to sell the school at less than its market price to a similar village charity—I have already spelt out the meaning of the word "similar"; it cannot be the local disco club—or allow some of the proceeds of the sale to be retained, again for similar purposes, in the village.

I suggest that this is a very mild amendment which only allows and does not force the Secretary of State to direct that some of the proceeds should remain in the village, so helping to prevent further rural decay and allowing the village to become a viable, living, working unit. That point was forcefully made by the report Faith in the Countryside which my noble friend Lord Prior so ably produced. This amendment is in line with the recommendations of that report, but milder.

I hope therefore that your Lordships will feel able to support this modest amendment, not least because the loss of a village school can be the final blow to a village that may already have lost its pub, its farm, its shop, its church and its rector, so leaving no place for people to meet and get rid of their problems. I beg to move.

9.45 p.m.

Lord Houghton of Sowerby

My Lords, this is not only a mild amendment, it is a virtual giveaway. I do not think that the indulgent tones of the noble Lord are justified when one considers that the Church has had the school for probably a century. An enormous amount of maintenance has come from the state and yet it has been a denominational school. The Church of England has cornered religion to its own advancement and then required the state to maintain its schools. When they are sold, like a property developer the Church retains all the proceeds for some purpose removed from the village. Surely to heaven—should I say heaven?—it can spare more than a little for the good of the village which it is about to leave. I do not suggest that it is a voluntary leaving, but the school will be left behind and presumably some people will be disadvantaged on that account.

Certainly I support the amendment very much. I wish that the noble Lord who moved it had shown a little more aggro in his claim.

The Earl of Gainsborough

My Lords, like the noble Lord who spoke to it so eloquently, I should like to support the amendment. No doubt some of your Lordships have been in the situation of owning property in villages and have been associated with those villages going back many generations. It is very important to remember that, if we are not careful, nice country communities will be left to become entirely dormitory areas.

Some of the buildings have been in use for many years for educational purposes. If they are now redundant because they are not adequate for those purposes, they will be lost to the villages unless some such provision is made. The noble Lord, Lord Stanley, indicated that the wording of the amendment may have to be changed. If some wording could be found to achieve his aim, which was so well supported by the noble Lord, Lord Houghton, I feel that this House and the noble Earl will do well to give it some consideration.

The Lord Bishop of Guildford

My Lords, I have considerable sympathy with the amendment. I was rector of a small country village at the time when the village school was closed. The result was not only a shift in transport arrangements with children being bussed to another village, but the removal of one of the last focal points in the village. It irretrievably changed the dynamics of that local village. I am quite clear that the amendment touches a raw social nerve.

However, I do not believe that the amendment as it stands is acceptable. In moving it the noble Lord, Lord Stanley, stated that it was in line with the recommendations of the Archbishop's Commission's Report Faith in the Countryside. However, in some regards the amendment goes far beyond what is recommended in that report. The details of the report have not necessarily been accepted by the Church of England. However, the report recommended that such provision should apply to rural areas. The amendment as drawn applies across the board and is as applicable in inner cities as in plush suburbia.

The report suggested that the diocese, which includes the parish, should put forward certain proposals. The amendment suggests that the procedural ball could be set rolling by six local people. The report recommended that the sale proceeds might in part be made available for the continuance of Christian mission. However the amendment goes well beyond that by stating that the sale proceeds might go to a charity. With due respect to the noble Lord who moved the amendment, it does not state that it should be only for educational charities. I believe that it allows for social charities, commendable though those are.

I have a further anxiety. The Secretary of State for Education will be required to exercise a responsibility which goes well beyond what he might consider appropriate to his office.

I believe that there is more flexibility in the present arrangements than is often recognised. When the Secretary of State makes a Section 2 order a proportion of the sale proceeds of a redundant school quite properly goes to the continuation of education elsewhere in the locality. Where it can be shown that the former school was used for Sunday school, or other such activities, the Secretary of State is normally likely to approve that 3/14ths of the sale proceeds —which sounds to me rather like what used to be called a vulgar fraction—can be used for a local Sunday school charity which can be created at the time of the closure. When the trust deeds or the previous practice allow, and when there is no urgent need for additional money for church schools in the diocese, it is possible for the diocese to put forward proposals which release quite a proportion of the proceeds to the local community. That has been done in a number of cases. One way forward, where the trust deeds make it possible, is for the building to be leased to the local community.

There is more flexibility than is often recognised. But at the end of the day most cases are governed by the trust deeds which make it clear that the assets are for church educational purposes or, as the 1973 Act puts it, to enable the Church of England or any other religious denomination to participate more effectively in the administration of the statutory system of public education. That need remains because Church and state are in partnership in the education system of this country. I do not wish to see money given for educational purposes being alienated for other uses, however laudable.

Noble Lords may like to know that discussions have been taking place about the matter. A forthcoming publication from the Church of England Board of Education will draw attention to the flexibility that often exists in the present arrangements and will make suggestions about how those concerned can make approaches in the hope of moving towards a settlement which more readily meets the educational requirements of trust deeds and local aspirations. That may not always be possible because of the trust deeds. However, we are trying to ensure that where there is flexibility that is more widely known. I have no doubt that the issue is real. But, for the reasons that I pointed out earlier, the amendment as drafted is far too wide and would land us in considerable difficulties. I hope that for those reasons, and for others, it will be resisted.

Lord Richard

My Lords, I rise to support the amendment. At one stage I approached the whole subject with a fairly open mind. However, the more I have listened to the debate the more—I shall not say the more convinced I am—there appears to be considerable merit and force in the argument put by the noble Lord, Lord Stanley. It appears to be right that in the circumstances which the amendment covers some provision should be made to ensure that at least part of the money raised should remain in the village for the benefit of the villagers. I should find unacceptable a contrary view.

Perhaps the drafting of the amendment is not as felicitous as it could be. I see the noble Lord, Lord Stanley, nodding his legal head in agreement. However, the noble and learned Lord, Lord Denning, is the second signatory to the amendment. If it were drafted by the noble and learned Lord I should not have one word to say about it, yea or nay.

The amendment is important. In some ways it is one of the more important that we have discussed tonight. I hope that the noble Earl will help the House. If not it may be an occasion on which the opinion of the House must be sought.

10 p.m.

Earl Ferrers

My Lords, I could not help being amused when the noble Lord, Lord Richard, said that perhaps the drafting of the amendment is inadequate and that my noble friend Lord Stanley nodded his head in assent. Earlier my noble friend advised your Lordships to read the wording of the amendment most carefully because it had been drafted most carefully. One cannot have it both ways.

I understand the problem. It is a vexed question. I understand the views of those people who believe that if a school built some years ago by a benefactor for the education of the children of the village is no longer required and must be sold then the people of the village should profit from the sale. There are two points to be made; two strands of charitable feeling. The first is that the school was built to educate the children and the second that the school was built for the village. One must therefore ask: what is the trust under which the charity operates? It is for educational purposes. The argument goes that if the village or the authorities cannot maintain the school in the village and the school must be sold, the proceeds should be put towards the education of the children who will no longer be educated in that village but in some other village. Therefore, the proceeds of the sale of the school ought to go to the continuance of the children's education.

My noble friend's amendment takes a different slant. If, for instance, the school must be sold it will be up to the trustees who sell it to obtain the best possible price. If they do so the school can be sold to anyone inside or outside the village. In his amendment my noble friend suggests that there could be reasons for the trustees of the school to accept a price lower than the market price. If such a price is offered, and it is proposed to accept it, by a charity which has the same purposes as the charity which owns the school the school can be purchased by that new charity at less than the market price with the consent of the Commissioners. However, if it is to be purchased by a charity which does not have the same purpose as the original charity which owns the school, the Charity Commissioners cannot give their permission.

My noble friend seeks to say, "Here is a school which is to be sold. It is to be sold for less than the market price so the charity originally set up for educational purposes will receive less than it should do and, another charity, which is used for purposes other than educational purposes, can benefit from that."

My noble friend's amendment states that provided the new charity has education as one of its purposes, it should be allowed to purchase the building at a price which is lower than the market rate. I do not believe that is fair. My noble friend may wish to consider the example of an organisation in the village which uses the church or school as a day-care centre for the elderly. That may be the purpose of the building during the day, but it may be used later For educational purposes. It is not right that that charity should be allowed to purchase the building at below the market rate.

I understand the anxiety that it should be possible to sell a discontinued school at less than the market price to a charity which serves that same locality but which does not have the same, although it could have similar, purposes. The difficulty is that whereas at present the school must be sold for educational purposes, this amendment provides that the charity which would benefit by virtue of the purchase at less than the full value may have purposes other than educational ones.

The amendment refers to a charity whose purposes include: The provision of a village hall or community centre, the education or development of those of pre-school age, activities for the development of young people or other educational purposes for local benefit". The children who formerly attended the discontinued school must of course be educated elsewhere locally. It is in their interests and the interests of the locality generally that the sale proceeds of their former school should be used as far as possible for educational purposes and that the amount of those proceeds should be as large as possible.

The amendment raises complex issues which I do not believe should be tackled in the Bill. Even if that were to prove desirable in the future, it would be necessary to ensure that the interests of the church bodies are fully taken into account and that proposals are drawn up in consultation with them.

The right reverend Prelate the Bishop of Guildford pointed out in a carefully argued speech that the Bill does not have the general agreement of the Church. Moreover, although the Archbishop's Commission's report suggested this provision, that does not mean that the report has been accepted by the Church. He quite correctly drew attention to the fact that if my noble friend's amendment is accepted, it will give the Secretary of State for Education powers which greatly exceed those which he has at present by virtue of the fact that the amendment would allow the proceeds of sale of a building presently used for educational purposes to be used for educational and other purposes.

There is no evidence that the Church authorities support the amendment. The right reverend Prelate does not support it. The Diocesan Board of Education is worried that without an increase in the sums raised from the sale of former church schools, their ability to provide education in rural areas will be severely affected.

For all those reasons, my noble friend's amendment would be a mistake. I can see why he has tabled it, and I understand his anxieties as regards those people in the past who have given money for the purposes of village education. However, to suggest that the sale of a village school should be permitted at less than the market rate in order to provide the village with a building to be used for other than educational purposes, and that therefore it would be possible to benefit from the purchase at less than the market rate, would not be fair. I ask my noble friend seriously to consider that.

Lord Stanley of Alderley

My Lords, I thank noble Lords for their support. I did not go far enough for the noble Lord, Lord Houghton, but too far for my noble friend on the Front Bench. With regard to the drafting, I must say to the noble Lord, Lord Richard, that the amendment was looked at by the noble and learned Lord, Lord Denning, who thought it was brilliant. Whether that makes it so is another matter.

I must deal with the points raised by the right reverend Prelate. If he believes that the diocese is prepared to send money back to the village, as he said, then I cannot see why he opposes the amendment. It would make it much easier. It would also make it easier that it does not have to take all or nothing. If he wants to exclude the towns, I do not mind; let him table an amendment at Third Reading and exclude towns.

I do not believe that the right reverend Prelate has read Faith in the Countryside. Page 268, under "Recommendations", states, Projected Charity legislation should amend Section 112 of the Education Reform Act 1988 to permit the Department of Education and Science on application by a diocese to allow a school to be sold for a sum lower than the market price to a charity whose activity serves the area originally covered by the school, or to allow part of the proceeds of sale to be used for other charitable purposes for the benefit of the locality". I do not understand what the right reverend Prelate is saying.

The Lord Bishop of Guildford

My Lords, perhaps the noble Lord will allow me to intervene. I have read the report. If he looks back to the text, of which the recommendation at the end is a summary, he may agree that the words I quoted are in the text of the report and the brief summary does not include all the matters in the text.

Lord Stanley of Alderley

My Lords, I have no intention of delaying the House by going into the whole of the report. However, if the right reverend Prelate wishes, I shall be more than happy to do so. I suggest that the recommendation and summary was rather longer than the point he brought out in the text.

My second point, in response to the right reverend Prelate and your Lordships, is that the Churches are not of one mind. The right reverend Prelate may say that, but not all the bishops agree, let alone the clergy. I do not believe that he speaks on behalf of the Bench of Bishops; if so, where are they? Perhaps we shall see later.

The right reverend Prelate may not like me saying this but I fear that his attitude is selfish in the extreme. It ignores the needs of local people on the ground. That is why the pews are empty. It may be that the right reverend Prelate does not mind. I happen to mind. I am a former church warden and believe that this is one of the reasons it is happening. It is failure to understand the situation at the grass roots. That may be an unkind comment to make to the right reverend Prelate, but it must be said occasionally. The pews are empty.

I am minded to divide the House because there is no way forward unless my noble friend on the Front Bench is prepared to consider bringing the matter back at Third Reading. I still believe that there is a difference of opinion. Many of the remarks my noble friend made in regard to the way the provision may be used are covered in (2B) (b) and (c) of the amendment. They also cover the point made by the right reverend Prelate.

Perhaps my noble friend will indicate whether he is prepared for me to bring the amendment back at Third Reading.

Earl Ferrers

My Lords, my noble friend asks whether I am prepared for my noble friend to bring the amendment back at Third Reading. My noble friend can bring it back if he wishes. I am happy to talk to him between now and then. However, I cannot give him any guarantee that I shall change my mind—not because I am obstinate but because I believe my noble friend is wrong.

The amendment says, the Secretary of State is satisfied that— (a) the local community would be disadvantaged as a result of the sale of the school at the best price obtainable in the open market". When a building is put up for sale, and involves an educational charity, it is not for the Secretary of State to determine that that charity should receive less than the market price. I can understand that my noble friend is concerned about this matter. If there is a way in which I can satisfy him and his requirements I shall do so. I shall be happy to talk to him about it. However, I am bound to tell him that he is wrong. His sentiments are entirely worthy; he wants to see the village helped. One has to deal with the matter of trust law. If the trust is for education, one cannot very well put the funds towards something that deals with day care for the elderly, although it might also deal with education. I am prepared to talk to my noble friend if that is what he wishes.

Lord Stanley of Alderley

My Lords, that is a better answer. I believe that our interests are the same. If my noble friend talks to me between now and Third Reading I believe that he will see that my amendment always brings the subject back to education but he says that the amendment does not. We are on the same side. We must get the position right. Bearing in mind that it is very late and that I do not wish to divide the House because it would not be a good show, I shall bring the matter back at Third Reading. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 [Amendment of Trustee Investments Act 1961]:

Earl Ferrers moved Amendment No. 44:

Leave out Clause 37 and insert the following new clause:

"Relaxation of restrictions on wider-range investments

.—(1) The Secretary of State may by order made with the consent of the Treasury—

1. (a) direct that, in the case of a trust fund consisting of property held by or in trust for a charity, any division of the fund in pursuance of section 2(1) of the Trustee Investments Act 1961 (trust funds to be divided so that wider-range and narrower-range investments are equal in value) shall be made so that the value of the wider-range part at the time of the division bears to the then value of the narrower-range part such proportion as is specified in the order;
2. (b) provide that, in its application in relation to such a trust fund, that Act shall have effect subject to such 433 modifications so specified as the Secretary of State considers appropriate in consequence of, or in connection with, any such direction.

(2) Where, before the coming into force of an order under this section, a trust fund consisting of property held by or in trust for a charity has already been divided in pursuance of section 2(1) of that Act, the fund may, notwithstanding anything in that provision, be again divided (once only) in pursuance of that provision during the continuance in force of the order.

(3) No order shall be made under this section unless a draft of the order has been laid before and approved by a resolution of each House of Parliament.

(4) Expressions used in this section which are also used in the Trustee Investments Act 1961 have the same meaning as in that Act.

(5) In the application of this section to Scotland, "charity" means a recognised body within the meaning of section 1(7) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990.").

The noble Earl said: My Lords, in moving this amendment I shall speak to Amendments Nos. 45, 152, 153, 156, 157 and 158. Amendments Nos. 44 and 45 introduce my own versions of Clauses 37 and 38. Amendments were moved in Committee by the noble Lord, Lord Harris of Greenwich. I hope that these versions will meet the concerns expressed in Committee.

Amendment No. 45 replaces Clause 38. It is no more than a refinement of the existing Clause 38 and achieves substantially the same effect. The regulations may prescribe limits on the proportion of a charity's property which may be invested in particular investments; and the regulations may require that trustees obtain advice before investing in particular investments, as they may now be required to do under Section 6 of the 1961 Act. The power in the new Clause 38 is a special power for the purposes of Section 3 of the 1961 Act. As such it attracts the modifications to Section 2 of the 1961 Act set out in the second schedule to that Act.

The second schedule to the 1961 Act modified Section 2 of the Act so as to allow charities or other trusts having special powers of investment to divide their funds into three parts: a narrow range, a wider range and a special range. Funds from both the narrow and the wider range parts can be converted into special range property and then invested in accordance with the special powers of investment. Once regulations have been made by the Secretary of State, charity funds can be converted into special range property and invested in accordance with those regulations.

Orders and regulations made under Clauses 37 and 38 respectively will be made by statutory instrument subject to the affirmative resolution procedure. The provisions of both clauses extend to Scottish "recognised bodies" within the meaning of Section 1(7) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990. It seems to me only right that charities in Scotland should be able to take advantage of the new arrangements too.

The amendments made to Clauses 77 and 79 are consequential, the ones to Clause 79 being occasioned by the change in the extent of the new provisions. I hope that the new clauses will meet with your Lordships' approval. I hope that they will also meet the concerns of the noble Lord, Lord Harris of Greenwich, which he expressed in Committee and for which he produced an amendment.

Lord Harris of Greenwich

My Lords, it would be ungracious were I not to say that I welcome the fact that the Government have now accepted the decision of the Committee which was taken against the advice of the Government. I believe that we had the noble Lord, Lord Peyton, with us on that occasion. I believe that by a significant majority the Committee came to the conclusion that the restrictions that had been imposed on trustees for many years as regards the issues covered in these amendments had been extremely damaging. They had cost the charities several hundred millions of pounds. The fact that the Government have now accepted the decision of the Committee is a matter that we should welcome.

The noble Earl had the rather unhappy task at Committee stage of appearing as advocate for the Treasury because it is their business and not that of the Home Office which we are discussing. Therefore, in addition to thanking the noble Earl, as I do, I should also like to thank the Economic Secretary. Without his support we would not be having these amendments before us today. The entire charity world will be delighted that the decision of the Committee has been accepted by the Government. I am most grateful to all concerned for having made this important amendment to the law.

Lord Peyton of Yeovil

My Lords, I should like to confirm that I did indeed agree with the noble Lord, Lord Harris, on that occasion. I agree with him now and join with him in thanking my noble friend.

Baroness Mallalieu

My Lords, we too on these Benches join in thanking the noble Earl and welcome the new Clauses 37 and 38.

On Question, amendment, agreed to.

10.15 p.m.

Clause 38 [Regulations for investment of property of charity]:

Earl Ferrers moved Amendment No. 45:

Leave out Clause 38 and insert the following new clause:

"Extension of powers of investment

.—(1) The Secretary of State may by regulations made with the consent of the Treasury make, with respect to property held by or in trust for a charity, provision authorising a trustee to invest such property in any manner specified in the regulations, being a manner of investment not for the time being included in any Part of Schedule 1 to the Trustee Investments Act 1961.

(2) Regulations under this section may make such provision—

1. (a) regulating the investment of property in any manner authorised by virtue of subsection (1), and
2. (b) with respect to the variation and retention of investments so made,

as the Secretary of State considers appropriate. (3) Such regulations may, in particular, make provision—

1. (a) imposing restrictions with respect to the proportion of the property held by or in trust for a charity which may be invested in any manner authorised by virtue of subsection (1), being either restrictions applying to 435 investment in any such manner generally or restrictions applying to investment in any particular such manner;
2. (b) imposing the like requirements with respect to the obtaining and consideration of advice as are imposed by any of the provisions of section 6 of the Trustee Investments Act 1961 (duty of trustees in choosing investments).

(4) Any power of investment conferred by any regulations under this section—

1. (a) shall be in addition to, and not in derogation from, any power conferred otherwise than by such regulations; and
2. (b) shall not be limited by the trusts of a charity (in so far as they are not contained in any Act or instrument made under an enactment) unless it is excluded by those trusts in express terms;

but any such power shall only be exercisable by a trustee in so far as a contrary intention is not expressed in any Act or in any instrument made under an enactment and relating to the powers of the trustee.

(5) No regulations shall be made under this section unless a draft of the regulations has been laid before and approved by a resolution of each House of Parliament.

(6) In this section "property"—

1. (a) in England and Wales, means real or personal property of any description, including money and things in action, but does not include an interest in expectancy; and
2. (b) in Scotland, means property of any description (whether heritable or moveable, corporeal or incorporeal) which is presently enjoyable, but does not include a future interest, whether vested or contingent;

and any reference to property held by or in trust for a charity is a reference to property so held, whether it is for the time being in a state of investment or not.

(7) In the application of this section to Scotland, "charity" means a recognised body within the meaning of section 1(7) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990.").

On Question, amendment agreed to.

Clause 39 [Powers to delegate trustees' powers]:

Earl Ferrers moved Amendment No. 46: Leave out Clause 39.

The noble Earl said: My Lords, with this amendment I am seeking to remove Clause 39. I do not want to appear cavalier but there are good reasons why the clause should not appear in the Bill. It is a general rule of equity that trustees must act in person and that decisions concerning the charity must be taken by the trustees acting together. They can always invite some of their number, or an employee or agent, to look into particular matters connected with the charity and to make recommendations to them, but the decision as to whether or not to act on the recommendations is for the trustees to take together.

In the context of investments, responsibility for the management of a charity's funds rests with its charity trustees alone. Under the existing law the trustees may, perfectly properly, enter into suitable arrangements for the provision of investment management services by stockbrokers or other agents who specialise in this field and who can pay any reasonable charges for these services out of a charity's income, but the final responsibility remains with the trustees and cannot be delegated.

By suitable arrangements I mean that the trustees decide, in consultation with their investment agents at the outset and at regular intervals thereafter, what the charity's investment objectives are. They agree a general strategy for achieving them. It is then for the agents to decide upon particular investments, and appropriate times, for purchase and sale (acting in accordance with the trustees' investment policy and within the discretion which the trustees may have given them). They must report at regular intervals on the current state, past performance and future prospects of the fund as a whole.

I think that these existing arrangements provide for a sensible and appropriate degree of delegation of trustees' responsibilities in the sphere of investments. To go further would be to undermine the fundamental responsibilities of trustees for the administration of their trust. For those reasons, I think that Clause 39 is both undesirable and unnecessary.

Lord Richard

My Lords, I should not like to put it as high as saying it is undesirable and unnecessary, but in view of the noble Earl's previous concessions it would be churlish and rather foolish of us to insist upon the inclusion of Clause 39.

Lord Harris of Greenwich

My Lords, that represents my view as well. I speak for an all-party majority in this respect in Committee; we have won 90 per cent. of our case and it would be unreasonable for us to insist on the other 10 per cent. On the basis of that I do not oppose this amendment.

Earl Ferrers

My Lords, I am indeed grateful to the noble Lord, Lord Harris, for his generosity in granting 10 per cent. I am glad that I have been able to meet your Lordships over the concern that has been expressed. I hope that, on reflection, your Lordships will agree that Clause 39 is best taken out for the reasons I have given. I beg to move.

On Question, amendment agreed to.

Clause 43 [Small charities: power to transfer all property, modify objects etc.]:

Viscount Astor moved Amendment No. 47: Page 37, line 10, leave out (", by a unanimous resolution,").

The noble Viscount said: My Lords, in moving this amendment I shall speak also to Amendments Nos. 48 to 51. Amendments Nos. 47 and 48 fulfil an undertaking which I gave in Committee. The provisions in Clause 43 allowing the trustees of most charities with an annual income of £5,000 or less to transfer their property to another charity or charities or to modify their objects or trust provisions will play an important part in improving the effectiveness of local charities. As the Bill stands, a unanimous resolution is required if the trustees of a charity are to be able to act as I have just described.

There was much debate in Committee about the effect of this requirement where a single trustee can in practice exercise a veto over the plans of his colleagues. I accept the strength of this argument and agree that such a scenario would be unacceptable. These amendments therefore change the requirement to one of a two-thirds majority of those trustees who vote on the resolution in question.

Amendments Nos. 50 and 51 achieve exactly the same result in respect of resolutions made under Clause 44, which provides for the expenditure of permanent endowment by charities with an annual income of £1,000 or less. Amendment No. 49 is purely to improve the drafting of Clause 43. The phrase "any such charity" is used in subsection (3) and it is not entirely clear to what description of charity the word "such" refers. It refers in fact to any charity to which Clause 43 applies by virtue of subsection (1). My amendment will make this plain. I beg to move.

Lord Harris of Greenwich

My Lords, as the noble Viscount rightly said, we spent a fair amount of time on this issue in the Public Bill Committee. I welcome the fact that the Government have accepted what I think was the overwhelming majority view that it would be quite wrong to allow a situation to arise whereby a single recalcitrant trustee could in fact prevent action of the kind that is dealt with in the clause. We have accepted for many years majority verdicts in criminal trials, so it would seem to me bizarre if a single trustee could negative the views of his colleagues. On that basis I very much welcome the amendment.

Baroness Faithfull

My Lords, I thank the noble Viscount for bringing forward the amendments. Like the noble Lord, Lord Harris, I am grateful for what the Government have done.

Lord Morris of Castle Morris

My Lords, never let it be said that the Government—gauleiters or not—are unable or unwilling to take note of good arguments presented to them and to change their mind. Early in the progress of the Bill, particularly in Committee, we talked about this issue long and hard and the arguments about the perils of demanding a unanimous decision were powerfully put. I am happy that they have been found acceptable. It is true, is it not, that one dissenting voice can wreak havoc disproportionate to its influence?

I once had the job of preparing a government report on libraries. Librarians are even more contentious and difficult people than most. Never until I was obliged to try to get a unanimous decision out of them had I felt the full force of the tyranny of the threat by one stubborn backslider to present a minority report. Charities, and small charities in particular, will welcome these amendments. We thank the Minister for the consideration that he has given to them.

On Question, amendment agreed to.

Viscount Astor moved Amendments Nos. 48 and 49: Page 37, line 30, at end insert: ("(2A) Any resolution passed under subsection (2) must be passed by a majority of not less than two-thirds of such charity trustees as vote on the resolution."). Page 37, line 31, leave out ("any such charity") and insert ("a charity to which this section applies").

On Question, amendments agreed to.

[Amendment No. 49A not moved.]

Clause 44 [Small charities: power to spend capital]:

Viscount Astor moved Amendments Nos. 50 and 51: Page 39, line 27, leave out (", by a unanimous resolution,"). Page 39, line 30, at end insert: ("(2A) Any resolution passed under subsection (2) must be passed by a majority of not less than two-thirds of such charity trustees as vote on the resolution.").

The noble Viscount said: My Lords, I spoke to these amendments with Amendment No. 47. I beg to move.

On Question, amendments agreed to.

Clause 47 [Limitation of liability of trustees]:

Earl Ferrers moved Amendment No. 52: Leave out Clause 47.

The noble Earl said: My Lords, this amendment was considered in Committee. It deals with limiting the liability of trustees of unincorporated charities. I said then that I fully appreciated the concerns in the charity world that had led to its introduction. However, I also said that it raised complex and controversial issues. For a number of reasons, I think that it should not continue in the Bill.

The intention of Clause 47 was to limit the personal liability of the trustees of unincorporated charities in a similar way to that which exists for trustees of charitable companies. However, I am not sure that it adds much, if anything, to the existing law. Provided that they act properly, the trustees of unincorporated charities are entitled to meet any debts and liabilities of their charity from any assets of the charity which do not form the permanent endowment. The question of the trustees being personally liable only arises, therefore, where the charity does not have enough income to meet its liabilities and where they can only be met by using funds which are part of the permanent endowment of the charity.

Under the present law, trustees may use a charity's permanent endowment in that way by order of the commissioners or of the court. Therefore, the trustees are protected now. The question of trustees becoming personally liable only arises where, even taking into account the permanent endowment, there are insufficient assets to meet the liability in question; in other words, where there is still a balance owing to creditors even after all the assets have been exhausted. There are, however, other ways in which the existing law protects trustees over this point.

Trustees can, for example, specifically limit their personal liability under any contract into which they enter so that their liability does not exceed the extent of the assets of the charity. Provided that the obligations under the contract have been properly met, the liability of the trustees will be confined to the assets of the charity.

The law allows charity trustees to take out insurance, at the charity's expense, against liability for acts which are properly undertaken in the administration of a charity or which may be undertaken in breach of trust by honest mistake. That kind of insurance would allow the liabilities of a charity to be met without the trustees becoming personally liable for them.

I do not think that Clause 47 will add to these existing protections. Indeed, it may make things more difficult for trustees. For example, the clause limits the liability only of those trustees who have met all of the statutory requirements which have been placed on them. That would include the new provisions for accounting and reporting to the Charity Commissioners which are in the Bill. If a trustee was in breach of any of those requirements, whether that was due to oversight or even honest mistake, his liability would no longer be limited. That would certainly not be in the trustee's interest.

The new clause is also undesirable because it would adversely affect the position of third parties who enter into contracts with charities. Insolvency and bankruptcy law provides protection to third parties who deal with companies which cannot meet their proper liabilities. It enables competing claims against the company's assets to be marshalled and prioritised. Creditors of an unincorporated charity have no such protection. To create it would involve considerable consultation both within government and outside it. Third parties would not willingly see that final avenue of redress closed. It would be very complex and would be by no means uncontroversial.

I realise the understandable anxiety which lies behind Clause 47. But it raises very complex issues and does not fully address all of the implications of what it sets out to achieve. It may actually prejudice the position of trustees and would certainly prejudice that of third parties dealing with charities. All of these issues need to be tackled in a more considered way, and the Government intend, after the Bill completes its course, fully to examine the nature of the existing problem and to try to explore the options and implications of addressing it. I beg to move.

The Lord Bishop of Newcastle

My Lords, I hope that the House will bear with me if I set out the background to the clause, the deletion of which has just been moved by the noble Earl, Lord Ferrers. Clause 47 has its origin in an amendment to the Bill tabled in the name of the right reverend Prelate the Bishop of London. That amendment was moved in Committee by the right reverend Prelate the Bishop of Worcester. In the Public Bill Committee it was recognised that an important question of principle had been raised. That issue of principle is by no means confined to charities connected with the Church of England but it applies to charity trustees generally.

After full discussion, the Committee voted to accept the clause. I am grateful to the noble Earl, Lord Ferrers, for his courtesy in writing to the right reverend Prelate the Bishop of Worcester to explain in detail why he proposed to move the present amendment to delete the clause from the Bill. I have studied his letter with care, and I listened with equal care to his speech; nevertheless, I still feel obliged to speak against the amendment.

The clause does not affect the liability of trustees for breach of trust or in cases where they have acted improperly or imprudently in some way. The problem it addresses is that of the unlimited personal liability of charity trustees who contract or deal with third parties, even where the trustees have acted properly and reasonably in all respects, and have fulfilled all their statutory obligations. I shall give an example. The trustees of a charity, after taking proper professional advice, enter into a building contract of some kind, and a problem arises over the site or other difficulties occur which result in the cost being much greater than was expected. The trustees may then be personally liable to the contractor for the whole sum involved, even if it means that they have to realise their personal assets or become bankrupt as a result.

Another hypothetical example is that of the trustees of an inner city project which employs staff and depends upon a government grant. Application for a grant is made in, let us say, February; in March indications are given in good faith that the grant will be available; but in June it happens that the grant is not, after all, forthcoming. I gather that there have been such cases. The trustees are then liable in full for salaries, overdrafts and redundancy payment; that is, as with the previous example, if the charity has no means to meet them.

Nowadays, charitable trustees are expected to undertake programmes, employ people, enter into commitments from one year to the next, provide homes for the homeless, and so forth. They enter into major commitments to further their charity's objects. The unlimited personal liability from which they suffer means that people with the necessary skills, experience and other personal qualities are increasingly reluctant to accept office as trustees. The position is often much more difficult for people of modest means who are charity trustees by virtue of some other office that they hold.

Where people have accepted office as charity trustees they may well be deterred from entering into ventures which may put them at serious risk, even where such ventures would be of great value in promoting the charity's objects and would benefit the community which the charity exists to serve. The trustees of unincorporated charities should surely have the same protection as that enjoyed by the trustees of charitable companies.

It has been contended that where trustees incur such obligations they may well be able to claim an indemnity from the charity's assets. However, the real issue arises where those assets are insufficient. It has been suggested that the trustees might insure against that risk. However, even if that were possible at the charity's expense—I gather that there are technical problems here in some cases—it would involve an extra drain on the charity's resources. What is more important, I understand that it may well be difficult, at any rate in the case of smaller charities, for trustees to obtain suitable insurance cover.

Another possibility mentioned was that the trustees might exclude their personal liability by a contract with the third party. Whether that is a real option in practice must depend upon the strength of the trustees' negotiating position. Surely the central question is, as the Public Bill Committee recognised, who is to bear the loss in such a case. Is it to be the charity trustee who, in the nature of things, is likely to be acting for the good of the community, or is it to be the third party? The third party will normally be acting, perfectly reasonably, on a commercial basis in order to make a profit. The third party, under the Bill, will be able to discover the charity's financial position beforehand so that he enters into dealings with it with his eyes open. The third party will often be in a much better position to insure against the risk.

Clause 47 is intended to answer that question in favour of the trustee. It may well be that the precise wording could be improved, that supplementary provisions could be added and that the whole matter deserves much more thorough reconsideration. But I hope it will be possible for the noble Earl and his colleagues to bring forward amendments to deal with these points, if necessary in another place, during the passage of the Bill. Failing that, perhaps he would be willing to give a firm commitment on the Government's behalf to the principle behind the clause and to engage in consultation during the passage of the Bill on how to overcome any detailed problems.

Today charities are being urged as never before to play an active role in furthering the good of the community in many ways. The Bill helps towards that end. To do that, charities need suitably qualified men and women who are willing to act as trustees and to make positive decisions to further the charities' aims.

In my opinion, Clause 47 would overcome or provide a way of overcoming a considerable obstacle to achieving these objectives. Therefore, subject to any undertaking given by the Government of the kind that I suggested, I must, with regret, remain opposed to the amendment.

Lord Peyton of Yeovil

My Lords, I should like briefly at this hour of the night to congratulate my noble friend on shortening the Bill to this extent. I understood him to say that any trustee who behaves honourably and properly and without gross negligence will have sufficient protection without Clause 47. I should like him to repeat what I thought he said. Perhaps the right reverend Prelate did not entirely catch it.

I only add that I cannot believe that anyone contemplating taking on the duties of trustee of a small charity would be likely to be encouraged into taking on those duties simply because of Clause 47. I doubt whether he would even read it.

Viscount Mountgarret

My Lords, despite the excellent speech of the right reverend Prelate, I have to say that I support my noble friend in suggesting that this clause should be removed from the Bill. That is notwithstanding the interesting fact that it was put in during the Committee stage. It is interesting because I always thought that it was the custom that once something was decided in Committee it was not right to overturn it. However, I understand that procedures are slightly different when the Bill is taken in Committee off the Floor of the House.

I believe I am right in saying, but I am open to correction, that the accountability of trustees is covered by the Trustee Act 1925. Therefore I see no reason why any different accountability should be written into this Bill when, after all, if someone is a trustee they are a trustee. Whether it is of a charity or anything else, it is the same. A trustee must always behave in a prudent fashion. He must always ask himself what a prudent man or woman would do under certain circumstances.

If something is to be done outside the trustees' knowledge in a specialist sphere, they go to professional advisers who are paid substantial sums of money for their advice, by which they stand. Presumably the trustees are insured against taking that advice but the advisers give their advice to the trustees. If the trustees act upon it in good faith, there is no way in which they can be endangered by it. Therefore I do not see that if the trustees behave in a prudent fashion, taking sound advice on the matters put before them, there is any need for this clause, having regard to the Trustee Act which covers all matters of trusteeship.

Lord Brightman

My Lords, I also support the amendment. It is a well accepted principle of our law that if persons carrying on an activity wish to limit their personal liability they should incorporate a company with limited liability to engage in that activity, which they can readily do at minimum expense. In the case of a charity, it will be a company limited by guarantee. I do not see any reason why charity trustees should be an exception to that principle.

Earl Ferrers

My Lords, I am most grateful to the noble and learned Lord for that brief and penetrating intervention. He is entirely right. I say that with the greatest respect. Trustees are in the end liable. If the trust is not incorporated to limit liability, in the end the trustees are liable. I remember the amendment that was moved in Committee by the right reverend Prelate the Bishop of Worcester and the concern that was expressed at that time. A number of people have expressed concern to me at either the inclusion or the deletion of Clause 47 since then.

The right reverend Prelate the Bishop of Newcastle is quite justified in expressing those fears again today. He referred to a building contract that trustees had entered into which might prove to be more involved than they had expected and which might bankrupt them. However, it is the duty of trustees to act prudently. The right reverend Prelate correctly said charities are being urged to play a wider role in the community nowadays than ever before, but they still have to act prudently. If they incur liabilities they cannot meet, it is slightly unfair to suggest that the poor unfortunate third party who has undertaken the building work, the wiring or whatever has no recourse as regards recouping the expenditure he has incurred because the right reverend Prelate would like the liability of trustees to be limited.

Consideration has been given to the rights of redress of third parties. My noble friend Lord Peyton asked me to reaffirm that a trustee who operates prudently has nothing to fear. I did not use those words and those are not the words my noble friend used. But I could not even use them in a general way because in the end, if all the liabilities are not met by the assets, if the charity concerned is unincorporated the trustees are liable.

However, these are complex matters and I have considered them carefully between Committee and this stage of the Bill. They raise issues which contain implications that cannot be clarified between Report and Third Reading or the Bill going to another place. The Government intend, after the Bill has completed its course, to examine fully the nature of the existing problem and to explore the options and the implications of addressing it to see whether we can surmount the problem to which the right reverend Prelate has referred in such a way as is not deleterious or offensive to other people who have an interest in this matter. It is a complicated matter but I can assure the right reverend Prelate that it will be considered.

Lord Richard

My Lords, before the Minister sits down, I hope I may make one point. Clause 47, as currently drafted, has two parts as it were. Clause 47(1) states that the total liability of the trustee, shall be limited to the value of all assets of that charity". That is one point and I have heard what the noble Earl has to say on that. However, subsection (2) states that any charity trustee, shall be entitled to be indemnified in respect of any claim … arising out of any obligation incurred as trustee, out of any assets of the charity". Subsection (3) states: Subsections (1) and (2) hereof shall only apply where— (a) the conduct of the trustee was … reasonable; and he had at all times, complied with all statutory requirements of a registered charity". The Minister may well say—as he has done—that he does not think liability should be limited to the value of all assets of a charity in the case of a legitimate claim of a third party against the charity. I hear that argument and there is some force in it, but what of subsection (2) and the indemnity? For the life of me I do not see what is wrong with that. If a trustee has been reasonable and has behaved properly, honourably and prudently—one may use whatever desirable adverb one wishes—why should he not be indemnified out of the assets of the charity? Even if the noble Earl will not look at subsection (1), will he not look at subsection (2)?

Earl Ferrers

My Lords, subsection (2) as it is represents the existing law. This is provided in the Trustee Acts of 1925, and the only exception is on endowment. That can be dealt with by the courts and the commissioners; so that particular part is already covered by the existing law.

On Question, amendment agreed to.

Clause 51 [Contributions towards maintenance etc. of almshouses.]:

Viscount Mountgarret moved Amendment No. 53: Page 44, line 2, at end insert: ("( ) The trustees of an almshouse charity shall not, however, be authorised without the approval of the Charity Commissioners or the court to charge to any duly appointed resident of an almshouse such sum by way of contribution as, taken with the contributions payable by other residents, exceeds the amount required in order to meet the costs of maintaining the almshouses of the charity concerned and essential services therein.").

The noble Viscount said: My Lords, this amendment and Clause 51 relate directly to weekly maintenance contributions made by residents of almshouse charities.

I entirely accept the clause at it stands in so far as it relates to the amount of contribution being required from trustees or administrators of an almshouse charity to meet the costs of overheads, running maintenance, repairs, and so on. I am not sure that this clause goes quite far enough in that it gives a free hand to the trustees or the administrators to make whatever charge they so wish in their wisdom, for whatever purpose, to the inhabitants. At present, one can increase weekly maintenance contributions only by reference to and with the approval of the Charity Commissioners.

Again, I sing my old song: I still believe that the Charity Commission has an enormous part to play in the assistance and guidance, or as watchdog - call it what you will - of the administration of almshouse charities. But we have reached the hour of the night when it is becoming very plain to me that my noble friend does not really want to accept the fact that the Charity Commission is going to overrule or try to direct the actions of trustees. That may be so, and I am probably a lone voice crying in the wilderness, but I think there should be some safeguard to protect inhabitants of almshouses from trustees who may on the face of it be perfectly erudite, honest and above-board, but who could be viewed as being somewhat opportunist in putting on unnecessarily high contributions in order ostensibly to improve their property beyond what is actually necessary.

I should like to think that the Charity Commission is involved, and an increase in the weekly maintenance contributions over and above that which is necessary for the basic upkeep should not be allowed without its approval. I beg to move.

Lord Morris of Castle Morris

My Lords, having been unconvinced by the previous arguments made on behalf of the almshouses, I am now very happy to find myself much more sympathetic to the proposals in this amendment.

The intention of the amendment seems to be to defend the weak and the vulnerable from any possible exploitation. That is a principle to which we should all agree if possible.

Earl Ferrers

My Lords, my noble friend is very keen on almshouses, and we return to them again in this amendment. When the noble Lord, Lord Morris of Castle Morris, rose and said that last time he was not convinced by my noble friend's argument I thought he was going to say "Nor am I this time". I was disappointed that he did not do so.

Almost all almshouse charities are governed by schemes which are made by the Charity Commissioners. Where an almshouse charity has power to require residents to pay maintenance contributions, that power is contained in the scheme; otherwise the trustees would not be able to impose the charges in the first place. Almshouse schemes contain a standard form of wording—I shall not weary your Lordships by quoting it at length—which empowers the trustees to require residents: to contribute a weekly sum towards the cost of maintaining the almshouses and the central services therein". It is quite clear from that that the contribution of each resident must be put towards the maintenance cost. That means that the trustees have no power at present—let alone in the future—to require contributions in excess of the amount needed for maintenance costs. My noble friend's amendment is therefore not necessary because it seeks to prevent the trustees doing something which they are not allowed to do anyway.

Almshouse schemes usually go a step further. They specify that whatever the amount charged to a particular resident may be, it is to be put towards the maintenance and the amount shall not be such as to cause hardship to the resident. Almshouse charities are basically charities for the relief of poverty. This provision is necessary to prevent any possibility that a resident's poverty may be increased rather than be relieved through residence in an alsmshouse.

On a wider point, there is no earthly reason why the commissioners should continue to be involved in approving the level of almshouse maintenance contributions, unless one believes that almshouse trustees cannot be trusted to set the level of contributions themselves. I do not believe that. Almshouse charities at present are unique among charities in being subject to the commissioners' control over charges or fees which are payable by the beneficiaries. The need for the commissioners' approval was introduced in 1951 and is now quite out of keeping with the principle that trustees should be given the freedom to manage their charities without excessive bureaucratic interference. The commissioners will always be pleased to advise the trustees of any charity on any matter which affects that charity. I do not think that my noble friend's amendment is necessary.

Viscount Mountgarret

My Lords, I am grateful to my noble friend for his reply but I am not 100 per cent. happy with it. If what he says is right and it is not necessary to prohibit any increase in weekly maintenance contributions, because in a scheme the deed lays down that it is purely for maintenance and so on, I begin to wonder whether there is any need at all for Clause 51.

It is now too late at night to go into this matter in detail, or indeed to test any opinion. I shall read what my noble friend has said. I note the support given by the noble Lord, Lord Morris of Castle Morris, and I ask leave to withdraw the amendment for the moment, reserving the right to come back perhaps at Third Reading when there has been an opportunity to digest what has been said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 54 not moved.]

Viscount Astor

My Lords, I beg to move that consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.

House adjourned at seven minutes before eleven o'clock.