HL Deb 20 January 2003 vol 643 cc516-32

8.12 p.m.

Lord Patten rose to ask Her Majesty's Government whether they intend to create a charities ombudsman.

The noble Lord said: My Lords, I wish to ask the Government why there is not a charities ombudsman. I make it clear at the outset of the debate that I do not like endless interference, over-regulation and regulators as a matter of principle, but, alas, they are part of the way in which we live now. It has long struck me as an oddity that there is an institutional asymmetry, in that there is someone who can act in the role of ombudsman over the actions of the Charity Commission in the person of the distinguished independent complaints reviewer, Mrs Jodi Berg, but there is no one to whom individuals may turn to complain or to seek redress over the actions of individual charities.

Mrs Berg points out in her most recent annual report that the Charity Commission is a regulatory body with wide and far-reaching powers but that the use of those powers would generally be disproportionate in most cases of complaint.

I had some valuable discussions with Mrs Berg about this issue in the autumn, and then later with the chief charity commissioner, Mr John Stoker, who was good enough to talk to me about it. He told me, to my pleasant surprise, that he had come to the same view that I had come to—that we needed an independent ombudsman concerned with charities—and that I should look out for an expression of this view in the commission's response to the Government Strategy Unit's report entitled, Private Action, Public Benefit.

Well, I duly looked out and not long before Christmas the response appeared. It said: The Commission believes that the opportunity should be taken to strengthen the accountability of charities … We believe in particular that there is a place for a charity ombudsman". The commission went on to observe of its own powers: They are not designed, and they are not well-adapted, for use to give redress where a charity has fallen short of acceptable standards of administration in a single case or in its dealings with a particular individual". I certainly say, "Hear, hear", to that. The noble Lord, Lord Filkin, will sense that my next sentence will be that there is a vacuum here that we are looking for him to fill.

Charities are an important part of our national life. Most charities do excellent work most of the time, but there have been well-reported lapses. Some charities, such as the NSPCC, have duties laid on them by statute. Some, such as the National Trust, have been set up by Act of Parliament. A number of charities—such as the National Trust, which is the nation's largest landowner—have become very big business. Others have become major campaigning bodies, sometimes with a covert or overt political slant. Many of the bigger charities receive substantial grants from public funds.

All that growth has meant that there are some big charitable bureaucracies as well. There are charities with large staffs and highly paid chief executives. Like all bureaucracies, alas, they can sometimes become a bit unresponsive—not all the time, but some of the time. That has led to a lot of frustration and complaints. The complaints fall into two categories: first, broad-brush complaints based on a dislike of a charity's national policies and, secondly, the complaints of aggrieved people who do not feel that they have an avenue of redress.

In the former class, with regard to the big issues that catch the public attention and have an impact on a charity's national perception, there have been several well-known scandals. The wise counsel of a charities ombudsman might, for example, have prevented the eccentric and unseemly shenanigans within the RSPCA over the recent appointment of a chief executive to that body or the extremely undesirable electoral practices of the National Trust.

The National Trust has already been widely criticised in that context by several speakers in your Lordships' House in previous debates. I am told that the corporate governance of the National Trust is going to be subject to a forthcoming report, which will be conducted inside the trust, come from the trust and report to the trust. Some people believe that it is going to be a whitewash, but I hope that that is not the case.

We might also cite the Royal Society for the Protection of Birds, whose behaviour my noble friend Lord Blake, who cannot be with us this evening, has asked me specifically to tell the House gives him considerable cause for concern.

All three of the charities to which I have referred have been widely criticised for their attitudes to the countryside, to country people and sometimes to their tenants. They have also been criticised for their attitude to country sports—the last being an issue over which I really can take an objective view as I am not a participant in any of them.

At the local individual level, there are examples of charities allegedly behaving in an uncaring way to tenants or to neighbours of their properties and activities. With most charities being run from urban head offices, it has been difficult for country people in particular to get their voices heard. We might take, for example, the local residents in and around the Golden Cap estate area in Dorset. In that case, and the scandal connected with it, the National Trust was remote and in London and behaved with an hauteur towards local people that was worthy of some 18th century Whig magnate. The trust did not understand the relationship between those people and the management of local land.

Having aired some criticisms, what can be done? First, the Government should listen to the advice that they have been given by the Independent Complaints Reviewer and the Charity Commission and set up as soon as possible an independent ombudsman scheme. A good model for that is the housing associations' independent housing ombudsman scheme for tenants.

The new scheme for the charities ombudsman should be a statutory one. It should be funded by a graduated de minimis levy, as is the case with the housing association scheme. That would enable it to look into complaints of maladministration exactly as though the charity were a public body, which is the right way of doing it. The ombudsman could thus provide an avenue of complaint and in some cases recommend a change of policy or order compensation.

Best of all, behind the scenes, by good advice, a body such as a charities ombudsman could give great help to those that have fallen below normal high standards in charities—to which I pay tribute—through oversight or inadvertence. Of course, I would also look to a charities ombudsman to report annually. It is worth while reflecting on what Mrs Berg told me. She wisely observed that responding to complaints can be a very good way for organisations to learn about themselves and how they behave and how they proceed.

In addition, I think that the charities world could usefully learn from the corporate sector in dealing with alleged abuses and governance issues. In the corporate sector, we have had the Cadbury report, the Greenbury report and the Turnbull report, as well as today's report into non-executive directors and their role issued by Mr Higgs. So we now have a combined code for how publicly listed companies should behave. Equally, charities should develop a combined code for charities themselves modelled on that process, so that there is transparency, regularity, predictability and certainty in their behaviour. On the farther horizons, the larger of our charities—which play such an important role in our public life, and all of which I hope seek to observe the crucial seven Nolan principles—may well have to come under the remit of a committee on standards in public life. They are effectively in public life and supported by public money and should behave in the best possible way.

As I come to the end of the 10 minutes allotted to me, I know that the Minister, with his reputation, will seek in the 12 minutes allotted to him to find at least a minute to answer one specific question. Do the Government intend to promote the concept of a charities ombudsman? If not, why not?

8.22 p.m.

Lord Plant of Highfield

My Lords, in the four minutes allotted to the rest of us, it is very difficult to say anything very coherent or compelling. However, I am sure that we will all be very pleased that the noble Lord, Lord Patten, has raised this important topic.

I should declare some non-remunerative interests because I think that they are important to the way in which my argument develops. First, I am the chairman of the trustee board of two charities. One is a national charity, Centrepoint, which provides accommodation and services for homeless young people not only in London but across the country. More locally, I am chairman of the board of trustees of Hope, which raises money for research in Southampton University medical school. More importantly in this context, however, I have just finished five years as president of the National Council for Voluntary Organisations, a job that I am very pleased to have passed over to the noble Baroness, Lady Rawlings, who is a member of the Front Bench opposite. I hope that she enjoys the job as much as I have.

Although I think that the points made by the noble Lord, Lord Patten, are impressive, I do not find them wholly convincing. I should like to try briefly to explain why, and this reflects many of the discussions that we have had in my time at the NCVO. I think we believe that, at least at this stage, a sharpening up of the role of the Charity Commission and the regulatory framework of charities, in addition to what is going on within the charity world and the voluntary sector themselves, is sufficient and that to go for an ombudsman is to go too far. Of course, it is the role of the Charity Commission as a regulator to pursue cases where a charity breaches charity law. In that context, we cannot see the benefit to the public of both a regulator and an ombudsman.

What would an ombudsman do? An ombudsman would monitor or intervene in "unacceptable standards of administration", a phrase which the noble Lord, Lord Patten, mentioned. However, I think that there are lots of ways in which this can already be done without the ombudsman. I cite the various charities in which I am involved. If the medical charity gave money to a scheme that had not been externally peer reviewed, we would fall foul of the Association of Medical Research Charities, which is essentially the Kitemark of excellence in the medical field. If Centrepoint behaves badly towards its tenants and clients, they can present their case to the internal complaints procedure within Centrepoint, to the Housing Corporation or to local authorities with which Centrepoint has concluded contracts. All kinds of horizontal arrangements surround the behaviour of charities as opposed to a vertical arrangement with an ombudsman.

The NCVO has played a major role in the issue of transparency. When I was president of that body many discussions were held and various reports were produced to try to ensure greater transparency and accountability in the way accounts are delivered to boards of trustees and in the way they are publicised and so on. We are keen to develop best practice in that field. We believe that it is possible to improve methods of regulation and fundraising, partly through greater transparency of accounts. The Institute of Fundraising has made some interesting proposals with regard to a co-regulatory mechanism for regulating fundraising which would comprise people with experience of fundraising but would be chaired by a lay person. Complaints could be made to that body.

The important point to emphasise is that the Charity Commission needs to be strengthened and to stick to its main function of regulating charities—that needs to be clear and obvious—and not be so much involved in advising charities. It has a slightly mixed role in that respect at present which does not do it a lot of good. I refer to the combination of an enhanced capacity for the Charity Commission and the reform that is already taking place in the voluntary sector. The voluntary sector has links with local authorities. I refer to the medical research charities in that respect. Such matters can impose constraints on the behaviour of charities. Given the intermeshing of the role of the Charity Commission and that of the voluntary sector, I do not think that we need an ombudsman at this stage.

8.27 p.m.

Lord Prys-Davies

My Lords, I am grateful to the noble Lord, Lord Patten, for introducing the debate although I may go a little wider than the Question.

The charities sector is of tremendous importance to the country's economic and social well-being. It is a sector which is continuing to grow. I note that in the year 2000–01 the Charity Commission registered 6,000 new charities. I also note that about 2,000 applications did not proceed to registration. The reasons for that do not appear to me to have been recorded.

It seems to me of central importance that there should be an accessible, affordable and speedy means of appealing against the decisions of the Charity Commissioners or of registered charity trustees where the complainant reasonably believes that the decision is not in the best interests of the charity.

One accepts that historically there has been a culture of the Charity Commission paying inadequate attention to complaints against itself. That is brought out in reports of the National Audit Office and the Public Accounts Committee. But in fairness to the Charity Commission, in the past two or three years there have been improvements, which have already been referred to. The Charity Commission has introduced an internal procedure to examine complaints and also an external review by the independent complaints reviewer.

I am also mindful that in addition there is the combined mediation service established by the Centre for Dispute Resolution and the NCVO to resolve disputes within a charity. To complete the picture, although I am not sure how each part of the picture fits together, we have a Parliamentary Ombudsman who is also authorised to examine complaints which fall within the limit of his authority.

A concern that has not been mentioned is the difficulty that arises where a charity or beneficiary believes that the commissioners have used or misused their powers. There is no means of reviewing that decision, except by the High Court route, provided that the authority of the commissioners or a Chancery judge has been obtained.

That arrangement gives rise to many complaints, because the overwhelming majority of registered charities have an annual gross income of no more than £10,000. That means that the path to court is closed for many charities, which tends to offend one's sense of fairness and justice.

For the reasons given by the previous speakers, it is important to consider where we go from here. The proposal that there be an ombudsman for charities certainly has its attractions. The Parliamentary Ombudsman already investigates some complaints, so there is precedent. However, I am not so sure that the ombudsman for charities would have the resources to examine the exceedingly complex issues sometimes involved in the commissioners' exercise of their statutory powers.

Nevertheless, I am among those who hope that the Minister can assure the House that the Government intend to introduce, possibly as part of the reform of the governance of the voluntary sector, a better way to resolve disputes within the charities sector. I am therefore grateful to the noble Lord, Lord Patten, for giving us the opportunity to discuss the issue.

8.32 p.m.

Lord Mancroft

My Lords, I too am most grateful to my noble friend for giving us an opportunity to look at this important issue. My interests are that I chair three charities, am a trustee of two others and am a member of a number of others and have been for some years.

There are two groups of problems. Smaller charities have problems in that the Charity Commission's rules can often be applied in too bureaucratic and intrusive a manner. Quite recently, I had a problem in one of my small charities, in that we wanted to take out indemnity insurance. As noble Lords will know, charity trustees have unlimited liability, unlike directors, so it seemed prudent and our professional advisers advised us to do it. The commission told us that that was an inappropriate use of charity funds.

That may or may not be so, but the reality is that it is a serious disincentive to trustees' taking on a charity, which is one of the most important things nowadays. It is difficult to get people to be trustees of very small charities and do enormous amounts of work. If they have to take huge financial risks for no pay, it will become even more difficult. There is a danger that the commission, by sticking too tightly to the very detailed rules on small charities, will hamper them. I would like to see a more supportive role from the commission.

That is not the same for some of the larger charities. My noble friend talked about the National Trust and the RSPCA, of both of which I am a member. They are important charities, because they are both virtually national institutions and are in a great deal of trouble. They have been for some time, and there is nothing controversial about saying so.

Large charities can be very rich and therefore very powerful. Most of them are now democratic. Rather like most democratic institutions in the western world, their members or electors, as it were, are a little lazy. In charity terms, it is quite easy to get involved and take them over. Certainly, parts of the council and the chairman of the National Trust have manipulated the electoral process—perhaps with a very small "m"—to control it. In a way, they did so to try to avoid a political problem, but in that case they walked into another political problem. That is no way for a large national charity to behave. We have previously discussed that in your Lordships' House. I remember before that debate that those of us who were due to speak were all courted by the director-general: we all got telephone calls and letters asking whether we should like to meet. I very much wanted to meet the director-general of the National Trust as soon as the debate was over but I am afraid that the director-general declined to return my telephone calls. That sort of arrogance in a large institution is very dangerous and unattractive.

The RSPCA raises a rather different problem. It has an immense amount of money and, not unreasonably, it is allowed to lobby politically. It therefore became a target and a small group of activists has taken it over to the detriment of the central charitable objectives of the organisation and is leading it along a difficult and dangerous path. That is very worrying; it has caused splits in the council and between professional staff and the council and there has been much unhappiness about the choice of the new director-general, which was clearly an awful mess. That was a bad way for it to conduct its affairs. What is important is the fact that the Charity Commission knows that and has been approached but has seemingly been unable to do anything about it; it has been unable to deal with the problem.

I do not know whether the solution to those problems involves a charitable ombudsman or, as the noble Lord, Lord Plant, said, improving the abilities of the Charity Commission to take such actions. He may well be right; I was very interested in what he said, as I was by my the remarks of my noble friend Lord Patten. I make it clear that at the smaller and the larger levels there is a significant problem, which does not appear to be going away. Currently, whatever the Charity Commission can do, it is not doing it. The problem must be addressed. I look forward to the Minister telling us what the Government will do to address the problem.

8.36 p.m.

Baroness Gibson of Market Rasen

My Lords, I begin by welcoming the debate and thanking the noble Lord, Lord Patten, for instigating it. I also declare an interest as the chair of the Andrea Adams Trust.

I speak with a background knowledge that I gained when working with those members of my union—MSF, now Amicus—who work in the voluntary sector, including charities. The great strength of that sector is its diversity. Most who work in it do so because of their genuine commitment to their charity. Those workers are dedicated and hard working and are often among the lower paid in the workforce.

Those who work in the charity sector recognise that there is room for change in that sector. The need to modernise the way in which charities are managed and organised is recognised. Charities need constantly to renew standards, to become more accountable, more transparent and thereby more effective. Charity workers recognise that currently the Charity Commission, which gives such welcome support to charities, cannot cover all of the areas of complaint that arise. It may not be able to investigate complaints by individuals adequately. For example, it cannot investigate service users, user groups or supporters groups:, the policies of the charity or disputes about refusal or removal of membership; or the use of community facilities or the terms that apply to the use of a charity's facilities.

It is against that background that the appointment of an ombudsman to adjudicate when an individual believes that his or her complaint has not been satisfactorily resolved has arisen. Those who support an ombudsman believe that he or she would prove to be fairer, more accountable, more transparent and capable of redressing all complaints and thereby would be more effective. Those who oppose it believe that such an appointment would be unnecessary and that it would add no value to the current or future regulation of charities.

There are formidable organisations on both sides of the debate. As has been said, the Charity Commission supports the concept of an ombudsman, believing that such an appointment would be welcomed by the public, whose perception of openness and fairness of any procedure is vital. On the other hand, the National Council for Voluntary Organisations opposes the appointment of an ombudsman. It is the umbrella body in the voluntary sector, to which the majority of voluntary organisations belong, and it describes itself as, the voice of the voluntary sector". The NCVO believes that it would act as a further layer of unnecessary bureaucracy. It cannot see the benefit to the public of having both a regulator and an ombudsman.

The NCVO stresses that it is committed to raising standards in the voluntary sector and to making charities more effective, more accountable and more transparent. To that end, the NCVO is undertaking a programme of work to develop performance management mechanisms, along with others in the sector, including the Charity Commission.

I suggest that some questions need to be answered. For example, are there enough complaints to justify an ombudsman; how much would such an appointment cost, and can the cost be justified; would an ombudsman be seen as more independent than the current procedure; and are there other ways of bridging the current gaps—for example, by extending the powers of the Charity Commission?

Whatever the decisions taken in the future, I ask the Minister to ensure that the views of those working in the voluntary sector are listened to so that any moves forward can be generally supported.

8.41 p.m.

Baroness Mallalieu

My Lords, like others. I declare interests, both as a former chairman of the Susie Lamplugh Trust and as a trustee and member of a number of other charities. I also have direct experience of ombudsman schemes, having chaired the independent council of one of them—that for estate agents—as a result of which I am a strong supporter of ombudsmen generally. I strongly support the call of the noble Lord, Lord Patten, for an ombudsman in this area.

In my experience, legitimate complaints about the way that charities conduct themselves not unusually fall outside the remit of the Charity Commission. When that happens, redress lies either through the charity's own governance procedures, which have sometimes proved to be woefully unsatisfactory, or through the courts and litigation, which is a drain on the financial resources of the charity itself and may well be beyond the means of people with a valid complaint.

By contrast, an ombudsman scheme could provide an independent, relatively simple, inexpensive and swift alternative dispute resolution procedure. Additionally, by providing guidance through, for example, codes of practice, an ombudsman could do a great deal to improve standards of trusteeship generally.

Two of the charities of which I am a member, although not a trustee, have been mentioned. Both are examples which have led me to believe that there is a need for such an ombudsman. One is the National Trust, and something has already been said about what has happened there. It has taken five years of hard work by a group of determined members to expose the way that the electoral system of the trust was being, as I believe, misused by the chairman, who is shortly to retire. At the end of that time, the trust no longer seeks to defend that position and has set up a review of its own governance, of which we have guarded hopes.

But how much better, quicker and less damaging to the trust it would have been had there been an independent ombudsman. He would have been able to examine all the material concerning the complaints, including that which is still being withheld from members, despite continuing requests. The matter could have been resolved years ago had there been such a scheme in place.

I am also concerned, as others are, about the RSPCA, of which I am also a member. Britain's number one animal welfare charity has a history of superb work, with a vast amount that needs to be done. Whether one agrees or disagrees with the society's current campaign to ban hunting—it is little secret that, as a supporter of hunting and president of the Countryside Alliance, I do not—the way that the council has begun to refuse membership to those who differ on that single issue of its policy, has expelled an acknowledged equestrian expert and former council member, Mr Richard Meade, from membership and has imposed increasingly stringent conditions for council candidature has caused the quality of those standing for council in terms of relevant experience and expertise, with some notable exceptions, to fall way below what is required by a charity of this importance.

The continued and, indeed, increasing emphasis on political campaigning contrasts unfortunately with the closure of welfare facilities, a worryingly small membership, damaging internal disputes and a major budget deficit. All that is causing serious concern to members and staff alike, not to mention the damage to the ability of the RSPCA to perform its essential role as effectively as possible.

The Charity Commission has so far proved either unwilling or unable to help. Surely, an ombudsman scheme for charities could be beneficial not only to ensure that complaints are properly investigated and upheld where justified, but also to enable charities to do a better job. Let us have one, and as soon as possible.

8.45 p.m.

Lord Bhatia

My Lords, I am grateful to the noble Lord, Lord Patten, for bringing this subject for debate today. I declare my interest as chairman of the Ethnic Minority Foundation and as a trustee of a number of other charities in the United Kingdom.

I draw the attention of your Lordships to the fact that within the charities sector there are mainly two divisions. The first is that of voluntary organisations which deliver services to the communities, and the second, those charities which provide grants and funding. These trusts and foundations are the main funders, along with local and central government, to the sector as a whole.

Having worked in the sector for over 20 years both as a grant giver and grant taker, I have come to realise that it is not a level playing field for those who seek grants. I have often debated in my own mind as to where the grant-giving charities would be if the grant takers decided not to apply for grants. The sole reason for existence of a grant-giving trust is to give grants for charitable causes. Therefore, their main or only customers are the other part of the charity sector which applies for funding.

The Charity Commission is a regulatory body which provides the legal framework for all registered charities and plays a useful part for the sector. It has no authority to interfere in the work of the grant-giving trusts and foundations, particularly as to which charities should be given grants. Unlike government departments such as the Active Community Unit at the Home Office or the community fund, which are both open to scrutiny by Parliament and are doing, perhaps I may be permitted to say, an excellent job in their grant-giving programmes, the trusts and foundations are a law unto themselves.

I approach this subject from the direction which says that the trusts and foundations are distributing part-public funding. All income from their fundraising or endowments is tax free. This means that some 30 or 40 per cent of their funding is public money.

I emphasise that there are many good grant-giving trusts and foundations which do an excellent job in their grant-giving work. They are open and transparent and have outside trustees and grant-giving committee members. But my experience has shown that there are some—I am glad to say not many—whose grant-giving processes are not fair, clear or transparent. In some cases the old boy network syndrome rides supreme. The words one occasionally hears are, "We are the grant-givers. Our decision is final and not subject to any review".

It is precisely for that reason and to remove that unfairness that there is a need for a charities ombudsman to whom complaints can be lodged by those grant applicants who feel that they have been treated unfairly. Currently, there is no redress for them. There may be other reasons why there should be an ombudsman. I hope that the Minister will respond to this particular requirement in the charities sector so that the trusts and foundations become more accountable.

8.49 p.m.

Lord King of Bridgwater

My Lords, I join in congratulating my noble friend on introducing the debate. Perhaps I may say in parenthesis that it seems entirely appropriate that this short debate takes place in advance of a two-day debate on Lords reform. It gives a quintessential illustration of the quality that this House can bring to a subject. It has been a great privilege to listen to the debate so far. The depth of experience among noble Lords has been impressive. I declare a modest interest as a patron president involved in certain charities.

I want to talk of my experience. As a Minister I had the responsibility of allocating funds to charities and voluntary bodies. It came as a slight shock sometimes to discover what was classified as a charity and the kind of people who were applying for funds. My noble friend referred to the "great bureaucracies". One got the impression from some of them that their main purpose was to keep themselves in employment and that public funds paid a major part in that achievement.

There has been a significant improvement in checking up on the amount of money used in the administration of some charities to try to ensure that the main body of funding goes to their objectives.

I am impressed by the work done by the Strategy Unit, which produced a very important document in connection with the debate, and the points that it made. It deals with the issue of bureaucracy. It deals also with the importance of need. I am inclined towards appointing an ombudsman, but I recognise that something needs to be done.

I saw one extreme example of how a charity can be misused during my time in Northern Ireland. I spent a great deal of time trying to tell decent god-fearing Americans, who thought they were giving charitable funds towards helping decent god-fearing Irishmen, that in fact their funds were going straight into the procurement of weapons for terrorist activities. That is an extreme example, but it is a warning that unless there is proper control and monitoring of what happens, it is very easy for some of these charities to go badly off the rails.

It is particularly worrying because a substantial part of some charities' income comes from legacies and the donors are not in a very good position to ensure that the objectives are being properly observed.

I was interested that both my noble friend and the noble Baroness, Lady Mallalieu, referred to the RSPCA. I had some constituency involvement in that. I represented a constituency where the issues of hunting became quite strongly felt and in which the RSPCA were much involved. I had total support for the RSPCA. My understanding was that its objectives were to promote kindness and to prevent or suppress cruelty to animals. I became concerned to find that this admirable and long-established charity suddenly seemed to be taking a rather divergent path in certain areas. One noticed—rather parallel to some problems occurring in the Labour Party called "entryism"—that it seemed to have been infiltrated and, as I understand the current chairman, happy to be called Britain's leading animal rights activist.

We know that the animal rights connotation is rather different. Apparently, it was opposed to the keeping of pets and to animal husbandry. It is absolutely entitled to hold those views, but it is not entitled to receive donations from a lot of people on an entirely different agenda. Many pet owners are the biggest supporters of the RSPCA, which shows how far an organisation can diverge. It is certainly not entitled to receive tax relief.

This difficult subject illustrates, because it is the warning that must exist in many other areas in the charitable programme, that there needs to be better monitoring, whether by an ombudsman or by more active involvement of the Charity Commission, I certainly think that action needs to be taken.

8.53 p.m.

Lord Phillips of Sudbury

My Lords, like other noble Lords, I thank the noble Lord, Lord Patten, for this "oh too brief" debate, and in four minutes I shall try to make a few useful points.

I was struck by the remarks of the noble Lord, Lord Plant of Highfield—which were echoed by the noble Lord, Lord Mancroft, and the noble Baroness, Lady Gibson of Market Rasen—that no clear case has been made for the ombudsman scheme for charities and that the Charity Commission might be given an additional remit to take up the slight vacuum that exists at present between the commissioners and the independent complaints reviewer.

One needs to proceed extremely cautiously before creating another piece of bureaucracy, however benign it is supposed to be and however much it is designed to help the sector. We forget at our peril that 99 per cent of charities have no professional staff at all. Charities are the voluntary sector, which is astonishingly diverse. Comparisons with what is done in the private sector and reference to governance in the private sector are inappropriate in all but a few cases.

We should also bear in mind that a great deal of frustration is evident these days because of the rising tide of bureaucracy. Some of that was caused by the Charities Acts 1992 and 1993, but a great deal more is in the pipeline if the Strategy Unit's report is to be implemented, with its 31 proposals for new legislation. It is too easy for us, while being properly concerned with the tiny number of abuses and always wanting things to be better, to forget that sometimes, in trying to make things better, we make them worse.

With all the talk about better standards, trustee training, tests before people can become trustees and huge questionnaires to fill in and comply with before they can be registered, the evidence from the sector is that fewer and fewer people from what one used to call the lower classes are now thought fit to take their places as trustees of small charities. That is tragic. Many people now feel a sense of incompetence about doing the job of trustee. It is not a magic job. It requires knowledge of the problems, nearness to mother earth and compassion. That is one reason why I should proceed with the greatest caution towards a statutory scheme for an ombudsman.

I noted that the noble Lord, Lord Plant, suggested that the Charity Commissioners should remain more the policeman and less the friend and advisor. I take issue with him on that; their dual role is essential to their balanced impact on the sector. The noble Lord, Lord Prys-Davies, said that there should be a better right to appeal. That is coming, if the Strategy Unit's proposal for a tribunal is implemented. Many people think that that would be an improvement.

I noted that a good deal of concern was expressed about the large charities engaged with hunting, such as the National Trust and the Royal Society for the Prevention of Cruelty to Animals. If the noble Lord, Lord Mancroft, and the noble Baroness, Lady Mallalieu, really think that an ombudsman would solve that problem, they should think again. Only if there was direct impropriety could such intervention take place.

If there is a membership battle royal, as some such charities have had, an ombudsman cannot come along, wave a little wand and say, "You have scored but they have not". It would be totally inappropriate for issues of policy, which are often keenly felt and strongly fought in membership charities, to be the subject of purported resolution by an outside referee called an ombudsman. Such things must work their way out organically and naturally.

So I do not rule out an ombudsman, but the case is not nearly proven. Much more work and consultation must take place before one could be established, bearing in mind that the independent complaints reviewer handled only 43 complaints in year one and 31 in the nine months to last August. As I said, it is not altogether out of the question to give the Charity Commissioners more scope.

Lastly, in this age of trustlessness, we should take note of the remarkable level of honesty, propriety and selflessness that continues to characterise the charity sector and be cautious about intruding on it.

8.59 p.m.

Lord Hodgson of Astley Abbotts

My Lords, I begin by joining other noble Lords in congratulating my noble friend Lord Patten on having given us the chance to discuss this important matter and having laid out such a powerful case. That charities occupy a special place in all our minds is evidenced by the wide range of speakers from all parts of the House to whom we have had the pleasure of listening.

I have direct experience of establishing an ombudsman scheme, and there may be some read across to this debate. I was a founder director of the Securities and Investments Board, the first statutory financial regulator, and subsequently a director of the Securities and Futures Authority, which regulated City firms.

Although the main thrust of our work was to oversee firms, we received complaints from members of the public. Broadly speaking, the complaints could be seen as arising from three main areas: inadvertence, incompetence and malice aforethought. If there was malice aforethought—deliberate malfeasance—it was an issue for the regulator. The same applied, largely but not entirely, to incompetence. Such cases often required re-training, as opposed to punishment. Inadvertent errors were hardly part of the regulator's remit. "Errare humanum est", my Latin teacher used to tell me. That did not mean, however, that the individual concerned felt any less strongly about what had happened to him or her. It was out of that debate that the financial services ombudsmen were created. They have proved outstandingly successful.

What were the key elements in the success of the schemes? As the noble Baroness, Lady Mallalieu, said, they were quick. Taking too long a time meant that problems would fester. The systems were simple, non-legalistic and independent. As my noble friend Lord Patten said, the whitewash was always a danger. I must say to the noble Baroness, Lady Gibson of Market Rasen, and to the noble Lord, Lord Plant of Highfield, that with an insider regulator, there is always that concern. Lastly, the schemes were cheap, in the sense that they were free to people who sought to complain. Sometimes, however, one wondered whether it would be better to have a small payment in order to deter the compulsive complainant.

Those are the powerful arguments in favour of an ombudsman. What were the points against? First, there was the problem of the interface with statute law, particularly as regards insurance and the vitiation of insurance. Many complainants look only for someone to say, "I'm sorry. We got it wrong". In the modern world, those are difficult words to utter because of the insurance implications. If someone admits a mistake and the complainant decides to sue, that person's indemnity insurance will almost certainly be nullified.

Secondly, there was the problem referred to by my noble friend Lord Mancroft—the "one size fits all" approach. The range in the scale of charities is vast, as was made clear in the Strategy Unit report. Can we devise a scheme that encompasses that range, without being too superficial, at one end of the scale, and too bureaucratic, at the other? Thirdly, finally and most importantly, many of the complaints to an ombudsman will come from the volunteers in the charities. They will have a close and, at times, emotion-packed relationship with the charity in question. Will they be prepared to accept the implications of an adverse decision by an ombudsman, no matter how reasonable or well founded?

I suspect that such points can be addressed in further debate. In the mean time, the House must be grateful to my noble friend for having initiated a discussion of this important aspect of an important sector of our national life. We look forward to hearing the Government's response.

Lord Phillips of Sudbury

My Lords, before the Minister replies, I want to declare an interest that I failed to declare at the start of my speech. I am a solicitor in practice in the charity field and trustee of several charities.

9.3 p.m.

Lord Filkin

My Lords, in the approximately seven minutes left to me, I shall try to deal with what has been an excellent and important debate. I commend the noble Lord, Lord Patten, for initiating it. I should declare that I am a trustee of the Parliamentary Choir and a member of the RSPB.

The central question is the nature of the problem or problems. In one respect—perhaps in many—the noble Lord, Lord Patten, is right. We have about 19 ombudsmen, but none of them focuses specifically or solely on the charities themselves. That may be a problem, or it may not.

We have heard a lot about the RSPCA, the National Trust and the RSPB. I shall not go into details, as I am not knowledgeable about what has been happening in those organisations, but I mark a central issue with which we must engage. The Charity Commission looks into complaints about unconstitutional practice within charities, as well as breaches of charity law. Therefore, if any of those organisations appear to have acted in unconstitutional matters, it is rightly a matter for the Charity Commission to investigate. They have a power and locus to do so.

By comparison, ombudsmen are for complaints about poor administration causing harm or suffering to individuals. That is what they have always been, to date. I shall double-check, but I am sure that those are the terms of reference of the 19 ombudsmen that we have now. No doubt I shall reflect on this, but on first flush the complaints and issues raised concerning the RSPCA, the National Trust and the RSPB appear to fall into the first category—matters for the Charity Commission and whether there has been unconstitutional practice or not—rather than into the category of administration.

To put it another way, although I take no view whatever on the previous examples, it seems that charities are entitled to take up a policy position subject to it being within the terms of their constitution and n o doubt having had proper processes for reaching that position. Clearly, we shall need to reflect whether the examples which have been advanced fall within that ambit.

Although it may irk some members, the RSPCA can refuse membership to those who do not agree with its position. As I understand it, subject to that being legitimate in terms of charity law, a charity can exclude from membership people opposed to its policies. Again, those processes must be carried out fairly.

Where does this take us? First, we need to unpack the nature of the complaints we are discussing. Some complaints are clearly legitimate matters for the Charity Commission to investigate. Time does not allow rue to define their scope, but clearly it has power and locus for some of the issues raised.

Secondly, some complaints raised may get redress through other regulators—for example, through a whole range of bodies that regulate standards of conduct in public life. Again, time does not permit me to bore the House with more detail. There are a range of complaints which might be dealt with by other regulators in some cases.

The noble Lord, Lord Phillips of Sudbury, is right in terms of his response to the interesting speech of the noble Lord, Lord Prys-Davies. In essence, the Strategy Unit review recommends the creation of a tribunal for the purposes that he advanced. The Government are considering those recommendations as part of the whole consultation exercise that is coming to a conclusion.

Because we are debating ombudsmen, we should be concerned with issues of maladministration. The first question we should ask ourselves is: if there should be a case for an ombudsman to look at maladministration, not issues of policy with which we might or might not disagree, what are the options?

There are probably five options: a new charity ombudsman; to give the function to one of the existing ombudsmen; to extend the function of the Charity Commission; to extend the remit to the independent complaints reviewer; or to ask the charitable sector to set up its own ombudsman scheme. If a convincing case was made for the scale and volume of complaints, there could be pros and cons for each of those options.

There are other options available immediately. It is crucial that charities themselves have effective internal complaints procedures to deal with as many complaints as possible at source. That is a principle of basic good ombudsman procedure in the first instance. Clearly, trustees have a particular duty to act as long-stops in those processes and to take part in overseeing them.

My next point is that a range of existing ombudsmen also have scope over charities. The Local Government Ombudsman, the Parliamentary Ombudsman, the Health Service Ombudsman and the Independent Housing Ombudsman can all intervene in charities when the charity is carrying out functions for local government, central government, in housing matters, and so forth. In certain circumstances, existing ombudsmen can investigate maladministration by a charity when it is carrying out functions for other bodies.

I cannot go into the debate concerning the Independent Housing Ombudsman because I have only one minute left. Clearly, that was a particularly interesting example. It was set up with the support of the sector. What is interesting about the housing ombudsman's role is the scale of the bodies we are discussing, dealing with 1.75 million tenanted dwellings a year and therefore a big service business.

I shall write to the noble Lord, Lord Bhatia, on the point he made about grants. In conclusion, I shall instance where we would like to go forward on the matter. First, we have to obtain facts and evidence about the nature and scale of the problem. I say that in no criticism of the debate. We have to obtain some numbers in order to see the extent to which there are charities which are a legitimate discretion of the charity itself, although we might disagree with it. Secondly, we have to establish that they are legitimate and can be dealt with by the Charity Commission; thirdly, that other regulators can deal with the matter; and, fourthly, that other ombudsman can deal with it. When we have identified the scale of those categories, we are left with a fifth, which is the heart of the issue. How many are legitimate issues of potential maladministration which have no other home to go to? That is the nature of the reflections and analysis I shall be asking officials to undertake in conjunction with the Charity Commission.

In the light of those discussions and that analysis, which may take a period of time, I shall have further discussion on these issues and no doubt it will be a privilege to respond to questions from this House. In conclusion, I commend the House for the stimulus to government thinking that the debate has provided.