HL Deb 17 October 1995 vol 566 cc732-8

7.8 p.m.

Baroness Rawlings

My Lords, I beg to move that this Bill be now read a second time. I am very pleased to introduce this Bill to your Lordships' House following its consideration in another place. The Bill arises out of the recommendations of the deregulation task force and seeks to add one subsection to Section 96 of the Charities Act 1993. This is a small but very worthwhile change. It has the support, too, of the National Council for Voluntary Organisations. The effect will be to enable the Charity Commission to direct that for all or any of the purposes of the Act two or more charities with the same trustees shall be treated as a single charity.

This country can rightly be proud of its long tradition of charitable work and of charitable giving. As Saint Paul said in his First Epistle to the Corinthians: Faith, hope and charity, but of these three, charity is the greatest. But charity, like anything else, must be efficient to be effective. So an effective framework of law which sets a sensible balance between regulation and freedom from requirements is necessary, taking into account the widely differing circumstances of different charities.

What is now the Charities Act 1993 represents an important updating of that framework, including as it does some strengthening of the powers of the Charity Commission to protect charitable property and to put charity accounts and their scrutiny on a modern statutory footing. That accounting framework will shortly be brought into force. My noble friend may wish to comment at a later stage of this debate to bring your Lordships up-to-date on the Government's progress.

Change is by no means confined to the statutory framework in which charities operate. The Charity Commission is also undergoing a significant programme of modernisation with increasing effort going into the support of good, charitable practice. New procedures are being put into place to monitor the accounts and other information that will be submitted under the new accounting framework. There will also be a new senior management structure following a recent review. It is against that backdrop that this Bill seeks to make a slight change to the way in which the Charity Commission can operate in relation to charities and the way in which trustees can report to the commission.

In most cases charities are operated as a self-standing organisation by a group of trustees who do not meet to run any other charity. However, there are circumstances where the same group of trustees are responsible for a number of charities and some measure of joint administration would be entirely sensible. It is exactly for such circumstances that this Bill is envisaged. When a group of trustees see it to be appropriate, they will be able to approach the Charity Commission and ask it to make an order—let us call it a unifying order—to fit the particular circumstances. This has the potential to avoid a lot of unnecessary work where it could not be justified. The provision is not specific to any particular class of charity other than the requirement for all those concerned to have common trustees. But I understand that the new power would be of particular advantage in relation to charities administered within the National Health Service.

There are over 60,000 such charities in the hands of the health service bodies; health authorities, trust hospitals and similar. Such bodies are trustees for all the charities they administer, which can be as many as several hundred. The need for this provision will become particularly important once the requirements of the charity accounting framework are in force because, as matters stand at present, a separate annual report and accounts would have to be submitted to the Charity Commission for each and every charity in the care of the health service body.

Under the new power proposed in this Bill each body would be able to submit a single report and set of accounts in respect of all the charities in its care. This will save everyone a great deal of work, time and money. However, I hasten to reassure your Lordships that the separate accountability for the funds of each component charity in a group formed under this power would remain. Indeed, use of the power would not form a combined charity at all, but would simply enable each group to be treated as a single charity. No change would be made to the legal status of each charity in the group. Money raised or donated to a particular component charity would have to remain there or spent by the charity in accordance with its own trust deed and the terms of the donation under the provisions of the general law on trusts.

There is an important if not complicated point on excepted charities. The Charity Commission has given an assurance to charities which are excepted from the need to register. They would not be forced, under a unifying order, to link them with a non-excepted charity and thereby requiring the excepted charity to register. Indeed, that is a matter of law since the power to register an excepted charity is only exercisable by the Charity Commission at the express request of the excepted charity.

During the debate on this Bill in another place a question was raised about whether this Bill would allow for the situation where one charity is administered by another charity as trustee. The view taken by the Charity Commission was that this circumstance is covered by the existing power in Section 96(5) of the 1993 Act. The commission will be pleased to respond to any individual inquiries from charities who might consider seeking to have the power in Section 96(5) or the power that this Bill proposes to create, as Section 96(6).

It was said that F. E. Smith, later Lord Birkenhead, after a very complicated case, which he summed up brilliantly as usual, flashed back when the judge admitted that he was none the wiser than when he started. "Possibly not, my Lord, but far better informed". I have tried this evening to explain with some care a rather complicated matter why this Bill has been drafted and how it will be used to the clear advantage and benefit of charities and therefore of their beneficiaries. It is a very short and straightforward measure. If I can reassure your Lordships further on any matter, I shall be pleased to do so. I beg to move.

Moved, That the Bill be now read a second time.— (Baroness Rawlings.)

7.16 p.m.

Lord Meston

My Lords, we all thank the noble Baroness for her introduction of this Bill which has left us all better informed. It is particularly helpful to have a proper exposition at Second Reading of what this Bill does, and does not, seek to achieve since it did not have a Second Reading in another place, only a Committee stage, which it is not altogether easy to follow.

I am not a charity lawyer: they are few and far between and tend to be very clever people. The only case which I had concerning a charitable trust required me to carry so many books to court that I resolved never to touch that area of the law again.

The understanding of the House is that the Bill is merely enabling and will allow for a limited but useful rationalisation of the treatment of certain charities; namely, only those which have common trustees. It is a Bill which appears to have the support of the NVCO and, as the noble Baroness explained, it is intended to reduce the administrative burden on the Charity Commission.

Faced with such an innocuous and simple Bill, one tries hard to resist any suspicions of hidden motives and to dismiss any fears of potential abuse. I believe that that is quite easily done in this case, but it is not altogether possible to escape completely some anxiety which comes perhaps merely from ignorance as to how the powers in this Bill will be used in practice. There is no guidance on the face of the Bill, but I gather that its main use will be to allow for the consolidation of accounts without, it is hoped, diminishing the accountability of trustees or diminishing proper scrutiny of the operation of charities.

I found reassurance from the clear statement made by the Minister in another place that a unifying direction under this Bill would still require two separate funds to be held for their separate purposes as is required by ordinary trust law. It is also reassuring to appreciate that any direction made under this Bill would be variable or revocable under Section 90 of the 1993 Act. I also assume that any direction made under this Bill will lapse as soon as the charities concerned cease to have common trustees.

Until I heard the noble Baroness explaining how it is expected that this matter will work in practice, I had understood that the initiative for a direction under it would come from the Charity Commissioners. I was going to express the hope that they would establish a procedure for giving advance notice of any proposed direction. However, it seems more likely that in practice the trustees themselves will initiate a request for a direction. That leaves one wondering what criteria they will have for assessing whether or not to exercise the discretion they will be given under the Bill, if it is enacted. There is no guidance on the face of the Bill and I have not read any so far. I hasten to say that those remarks are not in any way meant to be criticisms of the Bill. From these Benches, we wish the Bill well on its way to the statute book.

7.20 p.m.

The Earl of Kinnoull

My Lords, I apologise for not having put down my name to speak. I congratulate my noble friend Lady Rawlings on the clarity with which she outlined the Bill. One is, indeed, far better informed.

My reason for intervening briefly is that, like many Members of your Lordships' House, I am a trustee of a charity. I am a trustee of a fishermen's mission. I know from experience that quite a few very old charities have gone into abeyance because there are no longer any beneficiaries who would be entitled to benefit from the charity. The funds therefore stand static. It is difficult and costly to merge one charity with another.

I wonder whether the Bill is a clever way of enabling the trustees of a very vibrant charity, such as that which I am happy to represent, to become (with the permission of the Charity Commissioners) the trustees of a charity in abeyance. The charities could therefore merge. That would be a tremendous development for charities because in practice some charities with an ancient history no longer operate.

7.21 p.m.

Lord McIntosh of Haringey

My Lords, clearly the Bill's objectives are admirable. I am strongly influenced not only by the excellent introductory speech of the noble Baroness, Lady Rawlings, but also by the fact that the National Council for Voluntary Organisations is very much in favour of the Bill. The desirability of avoiding multiple small applications and their control by the Charity Commission is clear and is an admirable concern. I have had experience of merging one charity with another. Despite the speed with which we wished to proceed and the expertise available to us, it took a couple of years from beginning to end before we achieved it—and that was with the complete agreement of everybody concerned. If that process can be made easier by the Bill, so much the better.

A few questions occurred to me only during the debate because I have been somewhat occupied on other matters until now. Clause 1, the substantive clause, provides that the commissioners may direct that two or more charities shall be treated as a single charity. However, it is not clear whether they will be encouraged to do so on the application of those charities or whether they may do so off their own hat. Who initiates the process of a direction in such a case?

We are told that this is fundamentally a Bill about charitable funds managed within the National Health Service. It allows charitable funds managed by a National Health Service trust, health authority board or board of special trustees within the NHS to be registered collectively. The history of the health service under this Government has been one of constant reorganisation, with the creation and abolition of regional, district and area health authorities, and the creation of trusts. Whatever one may say about the National Health Service, it certainly has not been administratively stable. Indeed, some of the things that have happened within the NHS will not, I hope and believe, survive a change of government after the next general election.

What is the position when the composition, authority, area or responsibility of an NHS trust, board of special trustees or health authority changes at any time, whether under the present Government or any other government? In other words, is this an irreversible process of amalgamation or is it reversible at any time and, if so, on whose initiative and by whose authority? Those are not exactly small points but they are the points that occur to me after a rather cursory examination of what is a simple and no doubt desirable Bill.

7.25 p.m.

The Earl of Courtown

My Lords, I wish to compliment my noble friend Lady Rawlings on bringing this Bill before the House and on speaking so persuasively in its support.

The Government support this measure. We see it as an entirely helpful improvement to the powers of the Charity Commission. Many charities will have no need of the new power proposed in the Bill; but many should benefit from its use. I do not believe that any interests will be damaged by the Bill. While making things easier for charities, use of the power should not damage the most important interests of proper accountability of charities. Indeed, in that a group of charities treated as a single charity under this power will amount in total to a larger whole, they may be subject to more effective scrutiny once the new charity accounting framework in Part VI of the Charities Act 1993 is in force.

Your Lordships may appreciate a brief report on progress in implementing that measure. It is now intended that Part VI will come into force on 1st March next year, and my noble friend Lady Blatch will very shortly be laying regulations as to the form of accounts and reports that will be required from charity trustees, auditors and independent examiners. This follows very careful preparation, including detailed workshop discussions with many practitioners and a large-scale consultation in which over 15,000 copies of the consultation document were sent out. In questionnaire responses, 71 per cent. of respondents said they supported the proposed charity accounting framework as a whole and only 13 per cent. opposed it. We have also taken very careful account of the recommendations of the deregulation task force on charities, and we have accepted its proposals on increases to the financial thresholds within Part VI and to introduce a new "light touch" reporting regime for the smallest charities, which is those under £10,000 income or expenditure.

The noble Lord, Lord Meston, mentioned the unifying direction. That is a matter for the Charity Commissioners' direction. It might not be suitable if, for example, charities need separate registration to facilitate fundraising or if the objectives of the charities are totally different.

The noble Lord, Lord McIntosh of Haringey, made the same point and I hope that I have answered his question. In addition, the noble Lord also asked whether the directions would be irrevocable. Under Section 90(1) of the 1993 Act any direction given by commissioners may be varied or revoked by a further direction. It is my understanding that that can come either from the trustees or the commissioners. If I am incorrect, I shall let the noble Lord know.

The Bill now complements the new accounting regime and makes a most useful improvement to the powers of the Charity Commission which the Government are happy to support.

Baroness Rawlings

My Lords, I am most grateful for the support that has been expressed for this measure. I am grateful to both the noble Lord, Lord Meston, and the noble Earl, Lord Kinnoull, for their contributions. I hope that with such encouragement the Bill will achieve a successful passage. I commend the Bill to the House.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

House adjourned at twenty-nine minutes past seven o'clock.

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