Oral Answers to Questions
Rob Wilson Excerpts(8 years, 4 months ago)
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Steve Double (St Austell and Newquay) (Con)
5. What assessment he has made of the performance of the National Citizen Service.
The Minister for Civil Society (Mr Rob Wilson)
The National Citizen Service is helping to build a more responsible, cohesive and engaged society. The latest annual figures show a 46% increase in participation, making it the fastest growing youth programme for a century. Every £1 spent on NCS generates nearly £4 of social benefits—something that everyone in the House and the country should be proud of.
Mr Wilson
My hon. Friend will be aware that NCS was not specifically designed to tackle extremism in our communities. However, the programme plays a significant role in promoting tolerance by breaking down barriers between communities. NCS helps young people to learn about other cultures and creates positive bonds between people from different backgrounds. In 2014, 27% of NCS participants were from non-white backgrounds compared with 19% of the general population.
Steve Double
Through my involvement with NCS in Cornwall I have seen first-hand the truly life-changing experience that the programme provides. Will the Minister join me in thanking and congratulating all those people across the country who deliver the programme successfully, and does he agree that NCS is a clear example that this Government are truly a one nation Government?
Mr Wilson
My hon. Friend is a strong advocate of NCS in Cornwall, where 580 young people have recently benefited from a life-changing experience on the programme. A one nation Government helps everyone to reach their full potential. That principle is at the heart of NCS. We support everyone who participates regardless of background, and provide bursaries to those who need financial support. NCS achieves a diverse mix of young people, working together to develop new skills and giving back to their community.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
The Minister will be aware that many Labour Members are great supporters of the programme, but can we be sure that the content has real, hard substance, such as democratic values and the equality of women in British life? Are those emphasised enough to young people on the programme?
Martin Vickers (Cleethorpes) (Con)
11. In Cleethorpes and north-east Lincolnshire the NCS programme has been doing a lot of work in the local St Andrew’s hospice, which has had a great impact on young people. Will the Minister join me in congratulating Lee Stephens, Graham Rodger and their team in north-east Lincolnshire, who do tremendous work?
Mr Wilson
Of course I join my hon. Friend in congratulating the people in his constituency and across the country who take part in NCS. To date NCS participants have volunteered an estimated total of 8 million hours in their local communities, developing vital skills in the process. The programme benefits the participants and the local community.
Charities (Protection and Social Investment) Bill [Lords]
Rob Wilson Excerpts(8 years, 4 months ago)
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The Minister for Civil Society (Mr Rob Wilson)
It might be helpful if I clarify one of points that the hon. Lady raised about the power to direct. An official warning is not the same as a direction power. I am aware of the potential confusion regarding the explanatory notes that she mentioned. If it is helpful to her, I would be happy to ensure that the explanatory notes are updated to make it absolutely clear that the warning power cannot be used to direct charities.
Anna Turley
That is very helpful indeed. I really appreciate the Minister being so quick and forthcoming with his clarity on that, which will give the sector a lot of reassurance.
I now move on to our new clauses 2 and 3. New clause 2 seeks to replace a clause that was put into the Bill during its passage through the other place but removed in Committee. I pay tribute to our noble Friends in the other place who successfully added the clause to the Bill. As with so much legislation at the moment, we are finding them to be great defenders of social justice and fairness.
New clause 2 would support trustees in carrying out their existing duties by ensuring that they can adhere to their charitable aims and objectives, and it would protect them from being compelled to undertake an action at odds with their charitable purposes. As we have always made clear, especially in Committee, the provision is particularly relevant to housing. It aims to protect charities and housing associations if the Government mandates them to sell their charitable property under the right-to-buy proposals.
Labour Members want those who desire to be homeowners to achieve their aspiration. While the number of homeowners has fallen by more than 200,000 under this Government, the number rose by more than 1 million under Labour between 1997 and 2010. I want to be clear that we support people’s aspiration to own their own home.
Mr Rob Wilson
Before getting into the detail of the proposed amendments, I would like to make a few quick points that frame the Government’s position in this afternoon’s debate. I reiterate the really important point that the overwhelming majority of charities are well run, and they are run by hard-working, dedicated people whose motivation is to help others and do good. They perform a vital role and we should never forget that. The protections and strengthened powers that we have set out will protect public trust and confidence for the vast majority, and that is the reason behind the Bill. As a result of the engagement and scrutiny by Members of both Houses, the Bill has most certainly been improved in a number of places. I would like to put on the record my thanks to all those involved in those improvements.
Let me turn to new clause 1. I thank the hon. Member for Redcar (Anna Turley) for her explanation of the new clause. We think that judicial review is more appropriate than a specific right of appeal to the charity tribunal in the case of an official warning. In cases of low or medium-level misconduct or mismanagement, a right of appeal to the tribunal would be disproportionate.
Furthermore, the Charity Commission has said that such a right of appeal to the tribunal would render the power unusable. It anticipates many appeals being made as a means of frustrating the regulatory process. The resources required by the commission to defend tribunal proceedings would be disproportionate to the issues at stake in official warning cases, which are, by their nature, low and medium-level. There is no point giving the commission a power that it would not use.
Judicial review is a well-established means of ensuring that genuine wrongs are put right. Unlike the tribunal system, it discourages unmeritorious cases and those who calculate that delay through litigation is the best tactic to avoid robust regulation. Furthermore, costs are usually awarded against the losing party, providing a financial disincentive to those who might otherwise pursue a weak case.
Some Members have raised concerns about the potentially harsh implications, including adverse publicity, for charities in receipt of an official warning. Let me say this in response: charities exist for the public benefit and should therefore be accountable to the public. One of the Charity Commission’s statutory duties is to promote that, which is why the official warning power will be an important new tool in relation not only to promoting charities’ compliance with their legal obligations, but to improving charities’ public accountability. The concern about adverse publicity is an attempt to avoid accountability to donors, beneficiaries and the general public.
Some have suggested that the warning power would allow the Charity Commission to direct charities. Let me be absolutely clear that it will not. The warning must specify the breach and may provide guidance on how the charity can rectify it, but the decision on how the breach is to be rectified is a matter purely for the charity’s trustees. Others have said that the trustees run the risk of significant regulatory action without a right of appeal, but I disagree. Were the commission to escalate from a warning to a statutory inquiry, the opening of the inquiry would be subject to a right of appeal to the charity tribunal, as would the use of any inquiry powers.
Finally, the Joint Committee that undertook pre-legislative scrutiny of the draft Bill agreed that, provided the power is framed in the right way and with the right safeguards, judicial review was the appropriate means of challenge, rather than an official warning. That was also the view in the other place and we agree, so I cannot accept new clause 1.
I will now speak to amendments 8, 9, 10, 11 and 12, tabled by the hon. Member for Redcar. I group the amendments in that way because all of them, except amendment 9, would serve to weaken a number of important provisions relating to the warning power. However, I will lay out my arguments against each amendment in detail.
Let me start with amendment 9, which seeks to bind the commission’s power to issue a warning to a requirement to notify the charity and charity trustees. I absolutely agree that that is a sensible and proportionate provision, which is why it is already required under the existing drafting of clause 1. Amendment 9 is therefore superfluous.
Amendment 8 seeks to stop the Charity Commission from publishing a warning to a wider audience than just the charity and its trustees. Similarly, amendment 10 would also restrict transparency and accountability by requiring the commission to publish warnings only in such a manner that did not identify the charity or trustees involved. I am afraid that I cannot agree with those proposed changes: charities exist for the public benefit and must be accountable to the public for their work.
The Charity Commission’s ability to publish an official warning will enhance transparency, which is entirely in line with the commission’s objectives of increasing charities’ accountability and promoting public trust and confidence.
Mark Field
Given my earlier contribution, the Minister may recognise that I am slightly concerned about the notion of the Charity Commission having a view at all. Surely the important things are what Parliament has to say and the establishment of the objectives of any particular charity. We should all have concern about the notion of the Charity Commission imposing its will over the objectives of a charity.
Mr Wilson
My right hon. Friend need not worry about the Charity Commission imposing its will on charities; there are many safeguards, including the referral to a charity tribunal, to make sure that that does not happen. Ultimately, the Charity Commission relies on the support of the sector itself to make sure that it can function properly.
The commission already publishes details of its non-inquiry compliance cases when it is in the public interest to do so, and it does that without a specific statutory power. When the regulator has to intervene and issue an official warning, it is right that that should be placed in the public domain, although it should be made clear that when the issue that gave rise to the warning has been addressed, it should be archived after a period. The commission has a published policy on how it reports on its regulatory work, and it is available on gov.uk. The commission would need to update the page with regard to official warnings, so that there would be a clear policy. Charities can and do make representations to the commission about the publication of particular information.
Amendments 8 and 10 would undermine the increased transparency and public accountability of official warnings, turning them into an ineffective tool without real impact. Amendment 11 seeks to limit the Charity Commission’s ability to issue a warning, so that it could do so only after a minimum notice period of 14 days. On the surface, that would ensure that, in all cases, the trustees had sufficient time to consider the notice of intention to issue a warning and co-ordinate any representations that they might wish to make.
I am sympathetic to the aim of ensuring proper notice, but I believe that that should be addressed in the Charity Commission guidance. It is already clear that if the Charity Commission decides to issue a warning, it must give notice of its intention to the charity and the trustees. The warning power may be appropriate in some circumstances when the commission needs the flexibility to act more quickly than 14 days. Following debate in Committee, the Charity Commission has recognised the concerns raised and it has reassured me that it will normally apply a minimum notice period of 14 days. That will be made clear in its forthcoming guidance, which will be published ahead of these powers coming into effect.
Finally, I believe that the changes proposed by amendment 12 are unnecessary as they aim to remedy a problem that does not exist in the current draft form of clause 1. It is already clear that any remedial action that the Charity Commission may suggest in response to a warning does not amount to a direction. The Government have been consistently clear that the commission could not use the official warning power to direct charities, and I am happy to reiterate that position again for the record. What the power does enable the commission to do is provide advice and guidance to the charity on how it can remedy a breach that has been identified in the warning. This gives the offer of support to a charity so that issues can be resolved in a timely and adequate manner. It will also help charities to understand in more detail what processes or actions led to the issuing of a warning and what type of conduct could avoid this in future. I hope that I have laid out in detail to the House and to the hon. Member for Redcar why I do not support her amendments to clause 1.
I turn to Government amendment 2, which relates to clause 1. Previously, the power to issue a statutory warning did not include a provision that would specifically enable the Charity Commission to vary or withdraw an official warning once it had been issued. Amendment 2 rectifies that. Withdrawal could be necessary if it came to light that the warning should not have been issued in the first place or, in some cases, where the charity has addressed the issues set out in the warning. The power to vary a warning would likewise enable the commission to do so where the issue has been partly addressed by the charity, if the commission considered that to be appropriate. This is a sensible amendment and I commend it to the House.
Amendment (a) is unnecessary, because where the Charity Commission does withdraw a warning it will, as a matter of policy, set out the reasons for doing so when it notifies the recipient of the warning and publicises the withdrawal. I am sympathetic to the aim of the second part of the amendment, but do not support it. There could be a host of reasons why a warning is withdrawn, and some of them may warrant the details remaining on the public record for a period of time. The inclusion of this amendment could lead to unintended consequences that are detrimental to charities and to the commission. If a warning is withdrawn, there may still be press articles or other information referring to it, but if a member of the public then went to the register of charities, as the official source of information, they would find no mention of it there. In some cases, it may be better to keep a record of the warning there but explain that it has been withdrawn. The commission has already said that it would address these matters in guidance, which is the right place to consider them in detail. On that basis, I see no need for amendment (a).
The hon. Member for Ilford North (Wes Streeting) expressed concern that official warnings should not be used to force people to follow good practice. I agree. The explanatory notes make this clear, saying:
“Failure to follow good practice could not automatically be considered to constitute misconduct or mismanagement.”
I hope that helps the hon. Gentleman.
I now turn to the disqualification powers in clauses 9 and 10. Government amendments 3 and 4 are relatively modest, but we consider them to be necessary to ensure the proper operation of clauses 9 and 10. Clause 9 extends the effect of automatic disqualification to the most senior executive roles in a charity—that of chief executive officer and, where there is one, chief finance officer. In our discussions with the Charity Commission on this provision and how it would operate in practice, it became clear that there was a risk that a person employed by a charity who did not exercise any management function could be caught by the clause as it stands. This may be the case in a small charity that employs only one or two operational staff who may report directly to the board but do not perform management functions since those are fulfilled by the trustees. In those circumstances, the employee ought not to be caught by the disqualification provision as they are not involved in the management of the charity. Our amendment 3 ensures that this will be tightened up through drafting. Government amendment 4 makes exactly the same provision in relation to the power of the Charity Commission to disqualify under clause 10. I hope that hon. Members agree that these are sensible provisions to add to the Bill.
I am extremely grateful to my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) for tabling his amendment as it gives me the chance to provide some reassurance on the record. He is a strong supporter of and advocate for charities involved in the rehabilitation of ex-offenders, which is an extremely commendable cause. Charities and the voluntary sector play a significant role in the support and rehabilitation of ex-offenders, and we should recognise and encourage their important contribution to reducing reoffending and helping former offenders to reintegrate into society.
I want to ensure that the Bill’s provisions do not have an undue impact on that very important work.
The disqualification provisions are important. Although the existing system has worked well, it needed to be updated. The Bill seeks to extend the disqualification provisions as an important way of protecting charities from individuals who might seek to abuse their position of trust, whether for personal financial gain, to abuse beneficiaries or for some other purpose.
Peter Kyle
Will the Minister join me in congratulating the charity Unlock on working with the right hon. Gentleman? That partnership between a party politician and a charity produced a fantastic speech. He made some very important points, and that is clearly having an impact on legislation on the Floor of the House of Commons. Is that not to be welcomed?
Mr Wilson
I can see the trap that the hon. Gentleman is setting for me, and I am not going to walk into it. I have further comments to make on the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act, but I thank him for his attempt, lame though it was.
Some people who are currently trustees or senior managers will be caught by the extension of the disqualification provisions. Although the number of waiver applications is likely to increase, we do not think that a significant number of people will be affected by the changes. I would be surprised if it ran to more than the low hundreds, based on the commission’s experience under the existing disqualification regime.
I recognise the concerns that have been raised by my right hon. and learned Friend, and I am happy to commit to producing a report on our assessment of the impact of the disqualification changes. I will deposit it in the Library of the House before the commencement of the automatic disqualification provisions in clause 9. I cannot promise that we will cover every point listed in amendment 1, but I will ensure that we provide a very detailed assessment, as he has requested.
I want to ensure that the disqualification powers in the Bill protect charities from individuals who present a known risk, while at the same time providing for the rehabilitation of offenders and a way back into charity trusteeship or senior management on a case-by-case basis. That strikes me as both fair and proportionate.
Sir Edward Garnier
I thank my hon. Friend for his very welcome assurances. I much look forward to the discussions that will follow this debate, as do those I have been speaking with and for today.
Mr Wilson
I thank my right hon. and learned Friend for those kind words. We will certainly work very closely with those organisations.
Amendment 13 seeks to empower the Charity Commission to disqualify several trustees in cases of collective failure. In Committee, I explained that the Charity Commission already has the power to act in such circumstances and, indeed, has done so in cases relating to systemic governance issues. There is no reason why the Charity Commission could not take action against all the trustees of a charity where it was appropriate, proportionate and in accordance with the principles of best regulatory practice to do so. For that reason, I do not support amendment 13.
Amendment 14 would give the Charity Commission the job of consulting on and publishing guidance on how it assesses “unfitness” in relation to the power to disqualify, as set out in clause 10. We discussed a similar amendment in Committee and, although I agree with its intended effect, I do not believe that it is necessary. When the Bill was introduced in the other place, the Charity Commission published a well-received document setting out its initial thoughts on how it would exercise the disqualification power. The document highlights the broad categories that the commission would consider, namely honesty and integrity, competence and credibility. It gives various examples of the sorts of specific conduct that it would take into account. I explained a number of those examples in Committee and do not propose to repeat them today.
The Charity Commission has further committed to develop and consult on its initial thinking in draft guidance on how it would operate the power to disqualify. All of that will happen before the power to disqualify is commenced. As with any commission guidance, it will be kept under regular review to reflect changes in legislation or tribunal findings. On that basis, I do not see that amendment 14 is necessary.
Amendment 15 was previously proposed in Committee by the hon. Member for Redcar. The Charity Commission already considers only conduct that is “relevant and serious”. If it were to take account of other conduct, I would expect any resulting disqualification order to be thrown out by the charity tribunal on appeal. Besides that, the amendment should not be passed because the inclusion of the words “relevant and serious” in condition F would pose potential unintended consequences.
Including those words in the disqualification power could cast doubt on all the Commission’s other powers that do not contain them. The exercise of those other powers, such as the power to remove a charity trustee or the power to direct a charity, already depends on conduct that is both relevant and serious, even though those words are not included in the criteria for exercising the powers. I do not want there to be the risk that the other powers could be interpreted as not requiring relevant or serious conduct in order to be exercised. Although I understand and sympathise with the aims of amendment 15, I hope the House will understand why I do not believe that it is necessary and how it could inadvertently reduce the bar for the exercise of the commission’s other powers, which I would not support.
Amendment 5 is another relatively modest Government amendment that was suggested to us by rehabilitation charities. As I said in relation to the amendment tabled by my right hon. and learned Friend the Member for Harborough, we are keen to work with rehabilitation charities to ensure that the Bill does not undermine their important work.
To make a disqualification order against a person, the Charity Commission will have to meet one of six conditions, from A through to F, alongside a number of other things. Condition B is that the individual has been convicted outside the UK of an offence against a charity or involving the administration of a charity which, had it happened in the UK, would have automatically disqualified the individual. As it stands, the commission can take into account only an overseas conviction that is not spent under the law of the territory where the conviction took place. It was pointed out to me that it would be fairer and more proportionate if the limitation related to the UK rehabilitation period for an equivalent UK sentence, rather than the rehabilitation period of the overseas jurisdiction. I agree that that would be more proportionate, and amendment 5 makes the necessary change.
My right hon. Friend the Member for Cities of London and Westminster (Mark Field) ingeniously managed to speak about independent schools. He made an important point about the variety of ways in which independent schools provide public benefit. There is not one single way to achieve public benefit and the Charity Commission would certainly not direct any independent school that there was.
New clause 2, proposed by the hon. Member for Redcar, represents an attempt to reinsert a provision that the Government removed in Committee. Let me explain why the Government oppose it. It was described by several peers in the other place as sending a signal of opposition to the Government’s plans to legislate to extend the right to buy to tenants of housing associations. That message has been received, considered and responded to. Extending the right to buy to tenants of housing associations is a manifesto pledge on which the Government were elected and are committed to deliver. It will mean that up to 1.3 million more families in England get the chance to own their own home while at the same time ensuring the replacement of housing stock.
We listened to the concerns raised. Rather than legislating to implement the policy, we reached a voluntary agreement with housing associations which will implement the policy while protecting the independence of housing associations.
Mark Field
It is important that the Minister reflects that that was a manifesto commitment—even some of us on the Government Benches had concerns about it, but it was a manifesto commitment. It was rightly brought up in the Housing and Planning Bill, and it is disrespectful to the House, and a dangerous precedent, when one Bill is used to undermine another Bill that is part and parcel of a manifesto commitment. That also happened in the previous Parliament on the boundary changes, when a measure in an entirely different bit of legislation was used to oppose that policy. The House of Lords is abusing its position if it thinks it can do that in that form.
Anna Turley
To take up that point, the right to buy affects charities, and we are debating charities legislation. The right to buy affects the ability of housing associations to control their assets, which is a fundamental change to the balance of the relationship between their role and the Government’s ability to tell them what to do. That is why we have debated it today.
Mr Wilson
The Opposition are obviously entitled to propose whatever amendments they want as long as they are in order, but the problem is not just that new clause 2 is completely unnecessary; it would also be damaging, although I am sure that that was not the hon. Lady’s intention.
Many of the rules that apply to charities’ investments in, and their disposal of, assets, derive from case law that has been built up over hundreds of years. Proponents of the new clause argue that it reflects the existing case law, but I simply do not accept that. A simple statutory provision such as the new clause cannot hope to reflect the accumulated detail of case law derived from many hundreds of judgments.
Case law already requires charities to use and dispose of their assets in a way that supports the delivery of their charitable purposes. That provides flexibility for certain circumstances that a statutory provision cannot provide. For example, how would the new clause affect compulsory purchase orders in relation to charity land? How would it affect the existing rights of more than 1.4 million housing association tenants under the preserved right to buy or the right to acquire? How would it affect the exercise of Charity Commission powers such as its power to direct charity property in the course of a statutory inquiry? There are simply too many questions about the measure to which we have not had satisfactory answers either this afternoon or during the course of the Bill’s proceedings.
New clause 2 would give the Charity Commission a new and very broad role in policing the use and disposal of charity assets. That is inconsistent with our current aim of helping the commission to focus on its core regulatory activities.
New clause 3, which is also in the hon. Lady’s name, is at best unnecessary and at worst damaging. Charity law already sets out clear rules on what charities can and cannot do in relation to campaigning and political activity. I explained those in detail in Committee and do not propose to do so again today. New clause 3 might seek to reflect existing law, but it does not. In a similar way to new clause 2, new clause 3 attempts to include in a statutory provision the existing case law. That seriously risks changing the boundaries of what is permitted.
New clause 3 would allow charities to undertake political campaigning or political activity, but does not define what that means.
Would it, for example, allow partisan political campaigning? If that were the case, it would represent a real shift in the law and I would strongly object to that. In particular, I think the public would be very surprised and disappointed to see charities taking part and campaigning on a party political basis. Existing case law does not allow charities to engage in political campaigning to such an extent that it calls into question whether in fact they are a charity or, rather, a political campaigning organisation. Again, it is not clear to me that new clause 3 would incorporate that crucial limitation, potentially opening up charitable status to organisations with a political purpose.
Mr Wilson
What the hon. Gentleman says is quite extraordinary. We had this debate in Committee. It was quite clear, from the reaction to the concerns about the Badger Trust, that the hon. Gentleman and those on the Opposition Front Bench agreed that party political campaigning was actually a good thing. Even today that has been repeated, with regard to the Badger Trust. The hon. Member for Redcar disagrees with the Charity Commission finding that it was party political.
In Committee, my hon. Friend the Member for Newark (Robert Jenrick) gave us a very strong warning about new clause 3, which sums it up well and bears repeating. He asked us to look across the Atlantic to America, where charities can engage in party politics and support political candidates, and where wealthy philanthropists can set up organisations with blurred aims. He said we should be careful what we wish for. I agree with that sentiment entirely. The new clause would risk setting us off down a very slippery slope of involving charities in party politics. For that reason alone, I strongly encourage the House to oppose it.
On fundraising, I am sure all hon. Members will be aware of the poor fundraising practices uncovered over the summer. They present a real risk to levels of public trust and confidence in charities. I asked Sir Stuart Etherington to review how fundraising had been regulated in the past and to suggest improvements. The Government accepted his recommendations for a new, stronger self-regulatory body, backed up by the statutory powers of the Charity Commission. This new fundraising regulator is currently being set up by Lord Grade of Yarmouth and his chief executive Stephen Dunmore. The new regulator will establish the fundraising preference service, which will give people who feel overwhelmed by the sheer volume of requests they receive a simple way to opt in. I am grateful to the working party, led by George Kidd and supported by the NCVO, which has already started to draft proposals on how the FPS will work in practice.
As I made clear in Committee, this place owes it to the generous British public to ensure that they are not coerced or bullied into giving their hard-earned money to charity. It is because of this that we brought forward Government amendments in Committee that would enable the Government to step in and compel charities to register with the self-regulator should they fail to do so voluntarily and in significant numbers. Should this still prove insignificant, the Government would have the power to mandate the Charity Commission with the regulation of fundraising.
I truly hope that I and my successors are not put in a position to have to resort to those reserve powers, and that charities seize this last chance to make an independent self-regulatory system work. If self-regulation does fail, however, we need to make sure that we are equipped to step in quickly with effective statutory regulation. In that respect, I warmly welcome Opposition Members’ support for the Government’s approach to addressing fundraising regulation. I give particular thanks to the hon. Member for Redcar for her supportive comments on Second Reading and in Committee.
I thank my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) for his work as Chair of the Public Administration and Constitutional Affairs Committee. His Committee has played an important role in investigating the poor fundraising practices we saw last summer. I welcome the Committee’s report, which was published yesterday, and I will give it careful consideration before responding fully in due course. As it highlights, the public rightly expect the highest standards from our charities. Like the Committee, I believe that charities should get a last chance to put their own house in order to restore public trust and confidence.
Lady Hermon (North Down) (Ind)
The Minister will know that people in Northern Ireland give generously to charities. Regrettably, the Bill has been designated as exclusively English. If constituents of mine are oppressed by requests from charities, can they legitimately complain to the Charity Commission and the new regulatory body?
Lady Hermon
The Minister does not seem to grasp the point. There are national charities across the UK, of which Northern Ireland is a part. Thousands of people voted in the referendum on the Good Friday agreement—the Belfast agreement—to remain part of the UK. The donors and supporters of national charities, such as the Salvation Army, the Royal National Lifeboat Institution and others, are also in Northern Ireland, so the first port of call should be here, not Northern Ireland.
Mr Wilson
The hon. Lady makes her case strongly, and it is absolutely right that she should do so here in the UK Parliament. I hope that she will also make her case strongly to the devolved Administration, which many people in Northern Ireland wanted, and got as a result of the actions of subsequent Governments.
New clause 4 would fundamentally change the division of responsibilities between the new fundraising regulator and the Charity Commission. If we were to propose that the commission hold public hearings on matters of charitable fundraising, this would effectively amount to a form of statutory regulation. The commission does not believe that it currently has the resources effectively to exercise the power to hold hearings on fundraising, as suggested in the new clause. It can, in theory, already hold hearings in relation to statutory inquiries under section 46 of the Charities Act 2011, but it does not do so because it would not be an effective means of undertaking its casework. Unlike with other powers in the Bill, the commission does not ask for this ability.
I understand that my hon. Friend the Member for Harwich and North Essex may have intended in new clause 4 to offer to witnesses giving evidence to the Charity Commission in public hearings on charity fundraising the protection of not having their evidence used against them in other proceedings, rather than legal professional privilege. Legal professional privilege protects the lawyer-client relationship and is not what I think he is looking to achieve. However, the proposed hearings would be proceedings undertaken by the commission, not proceedings in Parliament, so parliamentary privilege would not be appropriate, either. The reserve power to regulate fundraising in section 64A of the Charities Act 1992 is a power to make secondary legislation that is necessary or desirable or in connection with regulating charity fundraising. If the commission were to assume statutory responsibility for the regulation of fundraising and this included holding public hearings, we would need to consider, at that point, what protection for witnesses would fall within the scope of the power.
My hon. Friend’s new clause 5 would prematurely task the commission with becoming the primary regulator for fundraising activities. The Government have provided for this already, but through the stronger reserve powers we introduced in Committee. We would also risk undermining public confidence, if self-regulation were to fail while under the oversight of the commission, particularly if the solution to that failure was statutory regulation by the commission. We would also need to do a lot more detailed thinking about whether, and if so how, witnesses could or should be protected by an equivalent to parliamentary privilege, which is what I think he might have been seeking with the new clause.
However, I completely agree with the finding of the Select Committee on Public Administration and Constitutional Affairs that
“It would be a sad and inexcusable failure of charities to govern their own behaviour, should statutory regulation became necessary.”
Perhaps I can reassure hon. Members that, under the reserve powers in the Bill, it would be possible for the Charity Commission to be given statutory responsibility for the regulation of fundraising, but to deliver that through a third party such as the fundraising regulator. New section 64C(2) of the Charities Act 1992, as introduced by clause 14, already specifically enables that.
Martin John Docherty
I am sure the Minister recognises the comments that the hon. Member for North Down (Lady Hermon) made in relation to Northern Ireland, which I also raised during the general debate in relation to fundraising. This legislation should not impact on the right of the Scottish Parliament to legislate on fundraising for charities. Will the Minister reiterate that here on the Floor of the House?
Mr Wilson
The representatives for Scotland were at the fundraising summit recently. This is a devolved matter, and it is up to them what rules they set for Scotland. They do not have to follow; this is an England and Wales Bill, which does not affect Scotland. It is therefore up to the Scottish regulator how they wish to proceed.
I maintain that it is important to keep a clear division between statutory and self-regulatory powers to ensure better regulation of fundraising. The best way to achieve that is to support the new fundraising regulator and, if it should fail, make a decisive and clear move to statutory regulation. Should self-regulation fail, the Government will not hesitate to intervene, which could include tasking the Charity Commission with the regulation of fundraising. However, we think it is too soon to commit the Charity Commission to an enhanced statutory role in fundraising, so I hope my hon. Friend the Member for Harwich and North Essex will understand why I do not support his new clauses 4 and 5.
Let me turn finally to Government amendments 6 and 7. It would not be fair to ask the taxpayer to carry the cost of fundraising regulation if it is the result of a failure by charities to protect the public from their own poor practices. Government amendments 6 and 7 would therefore enable the fundraising regulator or the Charity Commission to charge fees to those it regulates for that purpose. Many of the charities signed up to and paying for the old system of self-regulation were those that followed best practice, and there was a problem of free riders. To guard against that risk, the Etherington review suggested that any charity with fundraising expenditure beyond a certain level should be subject to a levy, requiring the large and medium-sized fundraising charities to pay for regulation.
Should the Government need to compel charities to register with the charity fundraising regulator, it is important that the fundraising regulator is able to levy fees for registration. That is exactly what amendment 6 would enable. Government amendment 7 deals with fees, should the reserve power be exercised for the Charity Commission to regulate fundraising. It would ensure that regulations could provide for the Charity Commission to charge fees across the range of bodies that it would regulate as the fundraising regulator.
I hope my explanations suffice to convince hon. Members that these amendments are an important part of the backstop to self-regulation and will help to ensure the effective regulation of fundraising in future, but I would of course be happy to provide more detailed responses. The main point is that I hope that these amendments are not needed and that charities will support the new, tougher self-regulatory system being established under the leadership of my noble Friend Lord Grade of Yarmouth. I commend these Government amendments to the House.
Anna Turley
For the sake of colleagues, I will be brief. I thank everybody for their contributions this afternoon. There is a wealth of experience from the charity sector in the Chamber, which has added a richness to the progress of the Bill.
Let me turn straight to new clause 1. Although I do not share the Minister’s view that judicial review will be more cost-effective—that may be the case for the Charity Commission, but perhaps not for charities that are appealing, many of which will not be able to afford to go to judicial review—I am willing to work with the Charity Commission, the sector and the Government to monitor the use of warnings outside of primary legislation. Therefore, I do not wish to press new clause 1 to a vote, although I wish to test the House on new clause 3 and amendment 8, because I do not feel our concerns have been met on either issue. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 3
Power to make representations
“(1) A charity may undertake political campaigning or political activity in the context of supporting the delivery of its charitable purposes.
(2) A charity may campaign to ensure support for, or to oppose, a change in the law, policy or decisions of central government, local authorities or other public bodies.”—(Anna Turley.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Mr Rob Wilson
The House will be pleased to know that I intend to keep my comments brief—I had a long session a bit earlier, so I feel that I have been spoiled today.
I am grateful to all hon. Members who spoke today and who contributed their extensive knowledge and expertise to the Bill throughout its development and passage. I thank all members of the Public Bill Committee for their particularly important contributions. After getting off to a bit of a slow start, we got into some lively, engaging debates as we progressed. I also thank the Chairs of the Committee, my hon. Friend the Member for St Albans (Mrs Main) and the hon. Member for Leeds North East (Fabian Hamilton), who I again congratulate on his promotion to the shadow Cabinet, for keeping us on the straight and narrow.
I would like to single out the hon. Member for Redcar (Anna Turley) for thanks. We have not agreed on everything, as she well knows, but we have agreed on many of the Bill’s provisions and, overall, on the importance of an independent regulator for charities—with the right tools to do the job, obviously. Even where we have disagreed, our debates have been good natured and constructive—at least I thought they had been, until Third Reading.
My right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) made an important contribution to ensure that we do not inadvertently damage the important work of rehabilitation charities. I agree with him and thank him for making his points so well.
I should mention the important contribution to the debate on fundraising made by my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) and the Select Committee on Public Administration and Constitutional Affairs. Its timely report yesterday highlights the need for action, but I welcome its conclusion that charities should get one last chance for self-regulation. Also on fundraising, Sir Stuart Etherington is owed a debt of gratitude for his review and report, supported by Lord Leigh of Hurley, Baroness Pitkeathley and Lord Wallace of Saltaire. Their report sets the future landscape for fundraising regulation and gives charities a chance to put things right.
I give particular thanks to my officials from the Cabinet Office and to officials from the Charity Commission who have supported the progress of the Bill throughout its development and parliamentary passage. We are very fortunate indeed to have such high-quality public servants.
I also thank all charities and their representative groups who have contributed their views on the Bill as it has been developed. I particularly single out the Charity Law Association, the NCVO and the Charity Finance Group, along with several rehabilitation charities, for their considered comments and representations. We have not accepted all their points, but the Bill has been improved as a result of their contributions. It now falls on the Charity Commission to implement its provisions in a proportionate and effective manner. I am sure that under William Shawcross’s leadership that will be the case, but of course there is provision for the Bill to be reviewed in three years’ time—something that I am sure we are looking forward to immensely.
I am sure that there are many others I have missed out who have had an important hand in this Bill and who ought to be thanked, in which case I apologise for not giving them a mention. This is a Bill that has been improved following scrutiny in its draft form and following the scrutiny of this House and the other place. It will help to underpin public trust and confidence in charities, ensuring that they continue in their place at the heart of our society. I commend this Bill to the House.
Question put and agreed to.
Bill accordingly read the Third time and passed, with amendments.
Charities (Protection and Social Investment) Bill
Rob Wilson Excerpts(8 years, 4 months ago)
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The Minister for Civil Society (Mr Rob Wilson)
I am today placing in the Library of the House the Department’s analysis on the application of Standing Order 83L in respect of the Government amendments tabled for Commons Report stage for the Charities (Protection and Social Investment) Bill.
Attachments can be found online at: http:// www.parliament.uk/writtenstatements
[HCWS477]
Historical Cabinet Papers
Rob Wilson Excerpts(8 years, 4 months ago)
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Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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The Minister for Civil Society (Mr Rob Wilson)
It is a pleasure to serve under your chairmanship, Mr Bailey. I congratulate the hon. Member for Leeds East (Richard Burgon) on securing this debate. I start by saying, as he did, that this Government are committed to being the most transparent ever and take their commitment under the Public Records Act seriously.
A key plank of our commitment to transparency is our work on releasing files after 20 years, rather than 30 years as was previously the case. I acknowledge openly that this is a really big, major challenge for the Government, which unfortunately we fell short of in December 2015. I hope it will be helpful to the hon. Gentleman and others here today if I respond to their points by setting out first how the Cabinet Office is working to meet its obligations under the Public Records Act, which sets out how and when Government records should be transferred to the National Archives, and explaining why some may sometimes need to be retained.
The Constitutional Reform and Governance Act 2010 shortened the period before which files are released from 30 years to 20 years. This means that for a transitional period, two years of files are being reviewed each year, a doubling of the information in scope. In this process, each file undergoes a series of detailed checks to protect, for example, national security and sensitive personal data. This in no way lessens our commitment to transparency but takes time to do properly. This is a significant challenge for all involved. For Departments, it is a doubling of the workload, and the same considerations need to be made before papers are sent to the National Archives.
The National Archives are meeting these challenges head-on, which means extra papers coming through to them with high public demand as the subjects covered are relatively recent. By 2023, this process of reviewing two years of records in one year will be complete.
In December, we transferred a number of 1987 and 1988 files and this formed part of a press event arranged by the National Archives. We will be transferring more shortly, with the aim of completing the transfer of our 1987 and 1988 files as soon as possible. Files up to 1990 will be released throughout the year.
Louise Haigh
I am a little confused. The Paymaster General wrote to me a couple of weeks ago saying the delay in the release of Cabinet papers was due to a change in policy by releasing some earlier in 2015, some in December 2015 and some at an unspecified date later this year. Now the Minister is saying that it was due to lack of resources or an increased challenge. Will he confirm whether it is due to a specific change in policy that will occur next year, or lack of resources?
Mr Wilson
I thank the hon. Lady for her intervention. If she will bear with me, all will become clear because I will set out in painstaking detail the process by which we are handling the matter.
The Cabinet Office was due to transfer all information from 1987 and 1988 by the end of 2015 but, as is clear, we did not manage to do so. Both 1987 and 1988 were eventful years, as we have heard from the hon Gentleman, and this impacted on the Department’s ability to get these files reviewed as quickly as we wanted. Each file is painstakingly checked before transfer, which is not about withholding secrets and covering up inconvenient facts, as the hon. Gentleman alleged. Let me inform hon. Members about the sort of information that must be checked.
Files emanating from No. 10 will cover the whole range of issues that the Government deal with, from benefits to defence spending, overseas trade, support for community groups and a whole host of other things. They will include things like personal information relating to individuals involved, even home addresses, and everything to do with relationships with other countries and national security. On every appearance of such information a careful consultation process takes place, which may result in documents being redacted or retained.
The transfers that have already taken place mean that nearly 70,000 Cabinet Office files or volumes are held by the National Archives, an amazing repository holding over 1,000 years of iconic national documents, which the public can access free. Its online catalogue is the single point of access to 32 million descriptions of records. In 2014-15, there were approaching a quarter of a billion downloads from its collection.
When files reach the National Archives, a number of processes are involved to make information available to as many people as possible—for example, through digitisation. This means an inevitable time lag between the Cabinet Office transferring files to the National Archives and their appearance in the collection. This is why the Cabinet papers for 1987 and 1988 have not yet appeared in the public catalogue although they have been transferred to the National Archives. Another factor is that files are not always transferred in the year that one might expect as they are not assessed for transfer until the date of the last paper on the file. This explains why papers sometimes appear in the National Archives later than expected.
We are aware of the changing landscape of records management. The National Archives, as trusted experts in information and records management, will help to ensure that in an age when more and more of the Government’s records are born-digital, we open more records to the public as soon as possible. To that end, our intention is now to release files more frequently throughout the year, rather than in a single annual event. This means that, from later this year, we will start to release records from 1989 and 1990 in advance of the traditional release at the end of December. Cabinet Office officials are working closely with the National Archives to strengthen the entire process of how and when Cabinet Office files are released to the public.
Throughout 2016, there will be a number of releases from the Cabinet Office to the National Archives, catching up on the 1987 and 1988 records and then working through the 1989 and 1990 papers. I believe this is consistent with our overall transparency objectives, and that the regular releases will be a more effective way to work, particularly in the context of a doubling of the amount of information in scope.
The hon. Member for Leeds East asked several questions about the Cabinet minutes for 1987 and 1988, and papers from the Prime Minister’s Office for the same period. The Cabinet Office has transferred the Cabinet papers and minutes for the period 1987-88 to the National Archives. Some of the Prime Minister’s papers are already with the National Archives, including those made available at the press event in December. Our aim is for the remainder of those that can be transferred to be with the National Archives as soon as possible.
The hon. Gentleman asked about freedom of information, and he mentioned Hillsborough in his opening comments. No Government have done more than this one to shine a light on the truth, after 13 years of a Labour Government who failed to do what was necessary to open up the facts of Hillsborough to the public in the Merseyside area who were demanding access to them. He said that the Government were pushing for a review of freedom of information. Actually, I think the first person to push for such a review was Tony Blair, who mentioned in his autobiography that he was keen to change freedom of information.
The hon. Gentleman mentioned the series of statements that appeared at the end of the last Session. I have to remind him that it was a Labour special adviser who, when the party was in government, described a particular day as
“a good day to bury bad news”.
I hope he remembers that phrase; it certainly did not come from the Conservative Government. I know that there is a new Mulder and Scully “X-Files” series out, and I do wonder about the conspiracy theories that sometimes run riot around this place, because in this case, there are no conspiracy theories to be had.
Louise Haigh
The Minister has mentioned conspiracy theories. One of our main conspiracy theories is about the advisers that have been involved in both Conservative Governments, whom the Minister has not mentioned. He mentioned a consultation process. I wonder whether the right hon. Member for West Dorset is involved in that consultation process, and whether he has any say over the documents that are retained or released.
Mr Wilson
I thank the hon. Lady for her intervention. The consultation process is one that officials handle. As far as I am aware—I think I am as aware as I can be on these matters—I do not believe that my right hon. Friend the Member for West Dorset (Mr Letwin) has vetoed any of the files that I think the hon. Lady is referring to in her question. But if there is more information that we can provide her with, obviously I would be very happy to write to her to update her.
I will move on to some comments about freedom of information. Freedom of information remains at the heart of transparency and accountability, and it goes hand in hand with the Public Records Act. The Government fully support freedom of information, but after more than a decade of the process in operation, we think it is time that it was reviewed to make sure that it is working effectively for hard-working taxpayers while allowing free and frank advice to be given to decision makers. That is why we have appointed an independent panel to look at the issue and assess how the practical processes of freedom of information can be improved. The commission will publish a report, as the hon. Gentleman knows, as soon as possible after its oral evidence sessions have been conducted. It would not be appropriate for me to pre-empt its work by getting into discussions today about the relative merits of the different parts of the Act.
I will end by making a few comments on the broader question of transparency. The Government take great pride in the fact that the UK leads the world in transparency and open government. I am not the only one who says so. The World Wide Web Foundation’s open data barometer and Open Knowledge’s global open data index ranked the UK No. 1. Over the past five years we have opened up more than 20,000 Government datasets to the public. We publish an unprecedented amount of data about everything from procurement to the gifts received by Ministers, and we continually strive to go even further.
Releasing open data makes the Government more accountable to citizens, helps to improve the efficiency of public services and drives social and economic growth. We have made expenditure data covering more than £188 billion of Government spending available for public scrutiny, and through our renewed Government data programme and our leading role in the international Open Government Partnership we will continue to be one of the most open and transparent Governments in the world. Those are not insignificant achievements, and we want to go even further. In our next Open Government Partnership national action plan, which is due to be published in the summer, we will develop an offer on transparency—including freedom of information—that strengthens the Government’s commitment to open government overall.
In conclusion, this Government are the most transparent Government ever, and we are a world leader in the quantity of information available from a range of sources. I acknowledge that, in common with other Departments, the performance of the Cabinet Office in transferring papers from 1987 and 1988 has not been perfect, as I said at the outset. I am, however, confident that more of that historical information will be available to the public shortly, including the Cabinet Office papers that have already been transferred to the National Archives and will be available very soon. The aim is to complete the transfer of the 1987-88 papers as soon as possible. In future, we will move to release files more frequently throughout the year rather than in a single annual event. That means that before the end of the year, there will be 1989 and 1990 papers in the National Archives.
Question put and agreed to.
Charities (Protection and Social Investment) Bill [ Lords ] (Fifth sitting)
Rob Wilson Excerpts(8 years, 5 months ago)
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The Minister for Civil Society (Mr Rob Wilson)
I beg to move, That the clause be read a Second time.
May I begin by congratulating you, Mr Hamilton, on your promotion to a shadow foreign affairs post? I know that you will put your enormous experience to good use on behalf of your party.
Most people will be familiar with the issues surrounding charitable fundraising by large charities that surfaced last summer, and which I referred to in some detail in relation to clause 14. As I said, I accepted Sir Stuart Etherington’s recommendation to give charities a final chance to make the self-regulation of fundraising work. The new system has my complete support, and the public are eager to see improved fundraising and signs that charities are listening to and acting on their concerns. It is now up to the sector to make the improved system of self-regulation work in a timely and effective manner, and I will keep a close eye on the progress being made.
Charities rely on the generous charitable giving and voluntary work of the British public and so need to deliver on the public’s expectations. Otherwise, we must be prepared to step in and act. I do not want to have to do that, but I want to be prepared in case it becomes necessary. Public trust and confidence in charities has already been rocked because of the poor practice uncovered last summer. In a survey last year, only 48% of people—less than half—said that they trusted charities. A more recent survey found that 76% of the public wanted tougher regulation of charity fundraising. We cannot allow further damage to public trust, which is why it is imperative that we have the right tools to act if it becomes clear that the new system is not sufficiently supported by charities. For that reason, I propose an amendment, through new clause 7, to the existing reserve powers in the Charities Act 1992. This will act as a safeguard should self-regulation fail.
Proposed new section 64B of the 1992 Act will extend existing powers in relation to fundraising regulation to compel charities to comply with the requirements and guidance imposed by the fundraising regulator. It will also allow the Government to require charities to be registered with a body for the purpose of regulating charitable fundraising. Under this provision, Ministers will have the discretion to mandate with the regulation of charity fundraising any body whose principal function appears to be in line with that purpose. The provision makes it clear that that may not be a body maintained out of money provided by Parliament. That will be the case with the new fundraising regulator currently being established by Lord Grade of Yarmouth, the interim chair, and Stephen Dunmore, the interim chief executive, which will be funded by the sector itself.
Most of the largest charities have already committed to registering with the new body once it is established, and I am sure that any charity showing initiative and commitment in that way will be a welcome sign to both the public and Parliament. However, should any charities be found to be dragging their heels, this power could be used to compel them to register with the fundraising regulator. It could be used as a first statutory step should charities prove insufficiently proactive in their support of the new self-regulatory system.
Self-regulation will not work if charities decide to wait and see what the finished system looks like before pledging their support. It would be starved of both the necessary mandate and the financial resources even to begin its work. This power will therefore be a vital safeguard to ensure that self-regulation is given a proper chance to succeed. If needed, the power would further act as an early warning sign to charities, flagging it up to them that they are falling behind the expectations that the public, Parliament and the Government have of what is necessary to make self-regulation work. I would challenge any fundraising charities and, in particular, large, sector-leading charities that did not sign up to the new self-regulator to consider their obligation to safeguard the public and their trust in charities more generally. It would certainly be a poor reflection on what is largely a dedicated, compassionate and well-run sector if the Government were forced to invoke this power. However, I will not hesitate to do so if that becomes necessary.
The new clause also introduces proposed new section 64C into the 1992 Act. The new section extends the existing reserve power to regulate fundraising, to enable the Government to confer the function of regulating charitable fundraising on the Charity Commission. That is a significant power, which would change fundraising regulation completely.
Tom Tugendhat (Tonbridge and Malling) (Con)
For clarity, may I ask a brief question on the Minister’s slightly earlier point, which he has just moved on from? Is it only charities that will have to opt in, or will other organisations have to?
Mr Wilson
I thank my hon. Friend for raising that really important question. Charities—particularly education charities—rely on the special relationship they have with their membership. The data protection legislation that has just been passed in Europe means that all sectors will need to move to an opt-in system in the next 18 to 24 months. That means that any organisation will require unambiguous and affirmative consent before being able to process any individual’s data. Workarounds such as assumed consent or pre-ticked boxes will simply no longer be good enough. A change is therefore coming, and it will affect all sectors, not simply the one we are discussing.
Peter Kyle (Hove) (Lab)
The Minister has repeatedly asserted in his opening speech that charities need to heal the wounds resulting from the challenges they faced last year and from the public dismay that greeted some of what happened. However, would it not be more honest to acknowledge that the Government also played a role in undermining public confidence in charities last year? Will he take this opportunity to reaffirm that the Cabinet Office will no longer put millions of pounds in funds into charities that are trading insolvently—something that greatly undermined public confidence in not only one charity, but the Government themselves?
Mr Wilson
That really is a very strange point to make. What we saw over last summer was a number of large charities clearly targeting vulnerable and elderly people in the most immoral way and on a scale we had not seen before. The Government had no role in making that happen or even allowing it to happen. Since we discovered the scale of what was going on, we have acted extraordinarily swiftly. We have set up a new single regulatory body in a very short time, given it the powers to be successful and made sure it is funded sufficiently. We have got the sector’s backing, and a whole series of other things are now happening to make sure that that body is up and working so that the sector does not make the terrible mistakes it has made in the past.
It is also important to recognise that it is a small number of large charities that have let the whole sector down and that, by and large, small charities have had nothing to do with this. We are therefore having to focus on a fairly narrow section of the sector, but that work is important, because we have seen the figures for those who trust charities go down to below half the population—it was previously much higher—and that has had an impact on how people feel about donating to charities. A lot of the work that the Government have done over the past five or six years has been about building the idea that people should give of their time and money to volunteering and charities, and that has been a big success for the Government.
Peter Kyle
I am grateful to the Minister for giving way again. He spoke with great passion about solving the problems that a small number of charities faced, and indeed created, with some of their fundraising practices last year. However, he also quoted figures for the damage done to the voluntary sector’s reputation, and I invited him to face up to the fact that the Government also played a role in damaging the sector’s reputation last year by overriding officials’ recommendations not to put more money into Kids Company. In doing so, the Government put millions of pounds into a charity that was trading insolvently, creating a national scandal that was reported throughout the media, which damaged the sector itself. Yes, the voluntary sector needs to own up to its challenges, but will the Government take a lead? Will the Minister say that the Government will no longer fund charities that are trading insolvently?
Mr Wilson
Look, there are at least three separate investigations into what happened at Kids Company, two of which are due to report by the end of this month, I think. It is important that we all wait to see what those reports say. If lessons can be learned, the Government will certainly learn them and do what we can to ensure that such things do not happen again, but to pre-empt that in this Committee would be wrong.
I was talking about the change in the nature of fundraising regulation if we had to invoke this power. It would no longer be governed by a self-regulatory system; instead, the Government would be able to invoke statutory regulation by mandating the Charity Commission with that task. Were that function to be passed to the commission, clearly it would require additional funding or would charge fees under section 19 of the Charities Act 2011.
I hope that I will never feel compelled to use this power, as it would mean that the self-regulatory system had failed. More importantly, it would mean that large charities had failed to put their house in order. However, the seriousness of the abuse in the past year or so and the impact it has had on public trust in charities has made it clear that a robust backstop is needed to ensure that the public feel that they can give with confidence and to prevent the same sorts of scandals being repeated.
Mr Alan Mak (Havant) (Con)
One area of charitable practice that helped to undermine confidence in the sector is the behaviour of so-called chuggers—charity collectors who collect direct debits on behalf of charities. Can the Minister assure the Committee that the new regulatory system will clamp down on such bad practices and increase confidence in the sector by way of regulation?
Mr Wilson
I thank my hon. Friend for raising an issue of great public interest. Many people have raised such concerns in recent years. Personally, I am not convinced that that method of fundraising is beneficial to the sector’s reputation. Many people dislike being approached in the street or on their doorstep. On the other hand, I appreciate that it represents an important source of income for the sector, and it would be churlish not to acknowledge that there have been some improvement in the regulation of face-to-face fundraising—it is known as that, rather than chugging—in recent years. It was highlighted as a problem as far back as 2012 by Lord Hodgson’s report. However, I expect that the new fundraising regulator will pay very close attention to chugging. Charities and the new regulator need to ensure that it is done respectfully and responsibly, and that the methods used to solicit donations are not the next big scandal waiting to happen.
Let me return to section 64C, if that is not too geeky for the Committee, which sends a clear signal about the Government’s intention for better regulation of fundraising in the future in one way or another. The charity sector feels compelled to ensure that that is achieved through the Etherington system, rather than statutory regulation. I think that everybody here wants fundraising to be better regulated in future to ensure that it protects the vulnerable, is not governed by vested interests and does not allow free riders to abuse the system. The new clause provides a robust back-up to the system of self-regulation currently being implemented. It will also act as a deterrent to those who are still in denial about the seriousness of the issues that the sector faces.
In some ways, it is odd that I hope that I and my successors will never have to invoke the reserve powers to regulate fundraising. Ultimately, whether or not that happens is in the hands of the charities themselves, which need to ensure that the self-regulation of fundraising works in the public interest. I hope hon. Members will agree with me and back this important new clause, which will help safeguard the future of fundraising and the reputation of charities in the long term.
Anna Turley
I beg to move, That the clause be read a Second time.
The new clause would enshrine in legislation the right of charities to undertake political campaigning activity. We are clear that this is a direct attempt to challenge the unfair and poorly applied Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014—the gagging Act, as it is commonly known.
Campaigning is an important part of democracy and civil society. One of the fundamental principles of a thriving and healthy democracy is that individuals and organisations can speak out about the issues they care about. Charities, in particular, have a long-established role in educating and informing the public, campaigning and securing positive social change throughout our history and, crucially, holding the state to account. It is the sign of a mature and confident democracy that we allow dissent and ensure that we have wide-ranging and representative public debate. Charities not only have the right to campaign, but are often best placed to provide important insights that can inform and improve policy making. They are so often the ones on the frontline seeing the gaps in provision, the duplication of services, inefficiency and waste, and indeed spotting the best ways of solving problems.
Many charities can often make a bigger impact with their limited resources through campaigning than through service delivery alone. Campaigning often saves taxpayers’ money in the long term as issues can be addressed at their roots, rather than having to address their costly aftermath. For example, is it better to care for victims of crime in the aftermath of an event or to help prevent crimes in the first place? It is good to help care for patients with long-term conditions such as cancer, but is it not better to push for more effective treatments, awareness of symptoms and support for diagnosis?
Anna Turley
I thank the Minister for his intervention but, as I will say, the sector has made it clear that it feels stifled, particularly in the lead up to general elections, when there are serious debates about the future of Government policy. That is what this new clause seeks to prevent.
The lobbying rules affect charities because of their non-partisan campaigning activity. Organisations can campaign for changes to law or policy where such a change would support their charitable objectives. Although under charity law campaigning cannot be the continuing or sole activity of a charity, it is an entirely legitimate activity for charities to pursue. Under the current rules of the Political Parties, Elections and Referendums Act 2000, some of that activity is already regulated by the Electoral Commission when an organisation has been deemed to produce election material. For many charities and voluntary organisations, raising awareness of the issues affecting the people and causes they support is a routine and important part of their work and central to their charitable objectives.
In a letter leading up to the general election last year, more than 160 signatories from the charitable sector, including Save the Children, the Salvation Army, Oxfam, Greenpeace, Age UK and Amnesty International, said that the legislation should be scrapped and that it is having a “chilling effect” on charities’ work.
Anna Turley
I thank the hon. Gentleman for raising that suggestion. I wonder whether he would have had the same concerns had that been done for his political party. Surely consultation is a positive thing. If a charity’s aims and objectives are welcomed and taken forward by a political party, it is surely right for it to welcome that success for its charitable objectives and its efforts to have influence, shape policy and change society. That is something to be welcomed, and the hon. Gentleman is on a difficult line with that.
Anna Turley
I think that is perfectly acceptable, if people want to go to any party political event and offer their views. They may go to it and disagree with the party and challenge it. As far as I am concerned, we are in danger of separating politics from the realities of campaigning and policy making. Politics has to be open and accessible and must not exist in a vacuum. Many people are deeply involved in politics, from councillors and MPs to activists; there is not a small box for people to sit in because they are in one category but not another.
Wes Streeting
I am simply citing the representations I have had from my old colleagues at the National Union of Students about the impacts of the gagging law. It is important to put that forward. I was the head of a charity at not one but two general elections. First, I was president of my university’s students union back in 2004, where our “Get out the vote” campaign in Cambridge undoubtedly contributed to the loss of an excellent Labour MP, in the form of Anne Campbell—she had abstained on the Second Reading of the Higher Education Act 2004, which I am sure contributed to that. Secondly, during the 2010 general election, I was president of the NUS.
At that time, charities were well constrained from party political activity and endorsing political parties, and there is unlikely to be a single charity campaigner in the country who cannot cite CC9 of the Charity Commission’s guidance chapter and verse, which is clear about the restrictions on charities in party political campaigning. The gagging law passed in the previous Parliament was a solution in need of a problem. There were no previous problems; it was just that the Liberal Democrats got scared of the consequences. Alas, even the gagging law could not save them.
Finally, on the general attitude to the voluntary sector’s political representation and campaigning, too many Members of Parliament seem to be happy to turn up and have photographs with guide dogs at party conferences, pop along to their local Barnardo’s outreach and have photographs with service users and be there for photographs, leaflets and press releases, yet when it comes to being confronted with the consequences of the decisions this place has made under successive Governments, they do not like the hard truths.
We need to think about the voluntary sector’s reach and its broad focus on speaking up for and serving the most disadvantaged in our society—people who do not know how to find their way into the corridors of power. Incidentally, those in the sector are not like the many commercial organisations that have also had significant amounts of public money, but which can none the less exercise their muscle in Committees, in the corridors in this place and on the Floor of the House. These are charities that speak up for some of the most dispossessed and disadvantaged in our society, and when they say that the gagging law has had a chilling effect, it is incumbent on us to listen and to take this simple, uncontroversial measure to ensure that every charity knows that they are empowered to make political representations to speak truth to power on behalf of their beneficiaries.
Mr Wilson
Let me begin by putting things right and congratulating the hon. Member for Cardiff Central on her promotion to shadow Justice Minister, which is something I should have said earlier. My heartiest congratulations to her. Things have warmed up a bit in the Committee this morning. I am glad to see that pulses are racing and faces are reddening: that is a good sign for healthy debate in Parliament.
I happily repeat for the Committee’s benefit what I said in our first sitting, as well as many other times in public: I support charities’ right to speak up for their beneficiaries, whether I, as the Minister with responsibility, or the Government like it or not. I cannot be clearer than that. Charity law already permits charities to undertake non-party political campaigning that furthers the charity’s purposes and that the trustees consider to be an effective use of its resources. That can legitimately involve campaigning to change the law or a policy, and non-party political campaigning to support such a change. That is absolutely clear. Charities must not support a particular political party. That is established by case law. It is defined widely, and it includes a charity promoting a political party event to its members. A charity cannot be used as a vehicle for the expression of the political views of its trustees or staff members.
Perhaps the hon. Member for Redcar got mixed up in what she was trying to say earlier, but she has the chance to put it right. It is clear that what she was suggesting is outside the law. If the Badger Trust were promoting an event for all political parties, that would be different, but promoting one party above another is clearly outside the rules and the definitions.
Wes Streeting
Is the Minister seriously saying that there are not charities up and down the country that have put on events hosting senior politicians of all parties and invited beneficiaries? Is he saying that charities should not do that?
Mr Wilson
It is astonishing how easily the hon. Gentleman gets the wrong end of the stick. I was clear that it is permitted if it is all parties, not one party. He said that that those charities invite Members of all parties to events, and that is the important distinction. If, as the Badger Trust did, a charity emailed its members to invite them to one political party’s event, that would be considered a very close association with one political party. If it did the same for all political parties, as the hon. Gentleman said without understanding the implications of that, that would be okay.
Wes Streeting
I cannot speak with authority about that specific case, but with the notable exception of big set-piece events, such as the Citizens UK events that were attended by the party leaders, we do not seriously expect the Prime Minister to turn up to an event hosted by a national charity and find people such as Natalie Bennett, Nigel Farage and all sorts of other people who will never have his job standing alongside him being given equal weight. Which other random parties should appear with the Prime Minister at charity events?
Mr Wilson
I think we are straying into the realms of electoral law rather than charity law, and I am sure you do not want us to stray too far in that direction. The Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014 applies to all third-party organisations campaigning for a particular electoral outcome. It does not specifically target charities or prevent them from campaigning to further their charitable purposes. The Charity Commission’s guidance CC9 makes that absolutely clear.
The Hodgson review, which is under way and will report in the next couple of months, will look at all those issues and consider in detail all the representations that are made to it. I think the Opposition should have waited for the review to see the detail of the representations made and whether there is evidence that things are going wrong and that the so-called chilling effect is taking place.
There is no bar to charities or student unions holding husting events, provided they do so in a balanced, even-handed way that furthers the charity’s purposes. Like many other Members, I am sure, I attended the student union debate in my constituency. I am very surprised that any student union was worried about putting on an even-handed debate, open to all parties.
The Charity Commission’s guidance is clear and comprehensive. Unlike primary legislation, guidance can be relatively easily updated, with proper consultation to ensure that it reflects current case law and other developments, such as the rise of social media. In recent years, there have been cases where charities, inevitably, have strayed on to the edges in what they are doing in social media. The guidance on that is obviously fairly new, and it is important that it is there.
I would say simply that the new clause is unnecessary, unless the hon. Member for Redcar and her colleagues are arguing that charities should be able to engage in party politics, in which case I very strongly object. What we heard about the Badger Trust emailing its members asking them to go to a single party political event and sort of supporting the manifesto elements that had been introduced would fall into the category of party political activity. We should keep charities and party politics completely separate. Where charities engage in non-party political activity, they should take extra care to protect their independence and to ensure that they do not give the impression of being politically partisan in any way, and that is the category that would apply with regard to the Badger Trust.
It is right that we have an independent regulator in the form of the Charity Commission to investigate concerns where charities may have overstepped the mark of what is acceptable, and some have done that in social media in the last couple of years. Where the dividing line between charitable and political becomes blurred and charities come to be seen as politically biased or aligned with a particular party, there is a real risk of public trust and confidence in charities being degraded. One of the charities’ strengths is their independence and their ability to stand outside politics, and I would really hate to see that undermined by the new clause.
Louise Haigh (Sheffield, Heeley) (Lab)
In the last Parliament, before I was an MP, I had a little back and forth with a charity known as the New Schools Network, which was set up by a former special adviser to the present Secretary of State for Justice deliberately to implement Government education policy on free schools. To me, there is a clear clash there between charitable status and implementing a particular political party’s policy stance, but this Government have made no effort to address that. Given that that was a clear breach and that the Charity Commission actually had to investigate the charity in question, I do not feel that the Minister’s point about making sure that charities are separate from party political activity stands.
Mr Wilson
As far as I am aware, there was no finding of any inappropriate party political activity against the New Schools Network. People can make complaints about all sorts of things, but whether those are found to have any evidential base is quite another thing. There are lots of examples of think-thanks and other organisations that are charities that want to put forward new ideas in the educational sphere, and as long as they have an educational purpose and they stay outside party politics, there is absolutely no reason why they should not do that. Just because, in the early days of the new free school network, the Labour party opposed free schools, that does not mean that that particular organisation did not have the right to exist. The fact that the Labour party did not like what it was saying is neither here nor there; it had a right to express its views freely, as I and others here—[Interruption.] As long as they are not party political—I have made that absolutely clear.
Peter Kyle
The Minister talks about the importance of independence and the fact that beneficiaries need to see charities being independent-minded. They absolutely do, but does he not accept that to be independent, charities need to be able to choose the terms on which they engage with public policy? It is interesting that the hon. Member for Worthing West (Sir Peter Bottomley), who sits on the Government Benches, has invited Donald Trump to his constituency because he thinks it will be an important statement of free speech in our country. Is it not strange that we live in a world where Donald Trump and billionaires are invited here to demonstrate the principle of freedom of speech, while we are discussing charities’ freedom of speech being inhibited in the run-up to a general election, when the voices of the disempowered are needed the most?
Mr Wilson
I simply do not agree with the hon. Gentleman’s characterisation of the law as it stands, because charities can and do campaign on policy and political issues today. Members of my party are particularly charitable people, although they are not charities themselves, and if, on the basis of promoting freedom of speech, they want to invite people to come and speak in their constituency, they should be free to do so.
Tom Tugendhat
Speakers on both sides of the Committee have been extremely generous in giving way, so I will be as brief as I can. Will the Minister identify that there is a difference between executing Government policy, such as free schools, and lobbying to achieve political party aims? They are two separate things. Will he also identify that there is a difference between freedom of speech for individuals, which we all enjoy in these islands, thank God, and have done for many hundreds of years, and the freedom of organisations that receive taxpayers’ money—money taken by force, I remind the Committee —to lobby in a different way? The two are necessarily different.
Mr Wilson
My hon. Friend makes the points powerfully. He has returned a number of times to a point that is relevant and of huge public interest: charities should not use Government funding for political activity. That should be clear from the terms and conditions attached to any Government funding of a particular charity. For political activity, charities can use other funding, such as voluntary donations or earned income from trading. I understand what he says, and I have set out clearly the Government’s view .
Peter Kyle
The hon. Member for Tonbridge and Malling makes an important point. Empowered individuals absolutely have the right to speak for themselves, as does any citizen of this country. The problem we have is that some citizens in this country do not have the ability to be heard or to voice their concerns—the disempowered people, who are often hidden away from general discussion and from public policy. That is why civil society organisations need the power to speak vocally on behalf of the people who do not represent themselves equally in a democracy. Does the Minister not agree?
Mr Wilson
Whatever time of year it is. The hon. Gentleman singles out elections. We have Lord Hodgson looking at this. The Charity Commission has looked at the incidents that took place during elections. So far, I have seen no evidence of any chilling effect, and I await Lord Hodgson’s report to support the hon. Gentleman’s case.
Attempting to put into statute a provision of case law risks changing the boundaries of what is permitted. It just is not feasible to encapsulate all the nuances of case law in a simple single statutory provision. We have already explored those risks in the context of clause 9 and the protection of charity assets, and it would be no different here.
It is not clear whether new clause 2 would permit charities to support political parties, for example, by allowing charities to undertake political campaigning without defining exactly what that means. Given our earlier conversation about the Badger Trust, I think even the hon. Member for Redcar is not clear about what constitutes political campaigning and what does not. The new clause is just one example of where a well meaning attempt to codify case law in a statutory provision can go badly wrong, resulting in potentially significant unintended consequences.
There is also a risk that the new clause would permit charities to overstep the current mark in another way: under the law as it stands, charities cannot engage in campaigning to such an extent that it calls into question their charitable status. If the only thing the organisation does is non-party political campaigning, one would question whether it is an organisation with political rather than charitable purposes. That is already encompassed in case law, but it is not clear to me whether new clause 2 would encompass that restriction, potentially opening up charitable status to political organisations. That would clearly damage public trust in charities, which I am sure the hon. Lady does not intend.
Tom Tugendhat
Forgive me for intervening once more, but on that point, does the Minister believe that it would be wise for charities to identify how much they spend on their core activity and how much on campaigning?
Mr Wilson
My hon. Friend raises a question of enormous public interest. Only last year the Charity Commission looked at whether charities should be required to submit details of their campaigning spend as part of their annual return process, details of which would have been published on the register of charities. The commission concluded that such a requirement would create a significant amount of work for charities and decided not to include that in the annual return for 2015. However, the commission did note the huge level of public interest in the issue and said it would look at the matter again. I welcome that and encourage the commission to keep the matter under review. I hope that clearly answers my hon. Friend’s question.
Even in the unlikely event that the boundaries of law were not shifted by an attempt at statutory definition, one would still expect legal challenges to test whether the law had in fact changed, by design or otherwise. There is further risk in putting this in the Bill since it would risk politicising charities’ right to campaign. Ministers, rather than the independent regulator and the courts, would be responsible for the provision, which could leave it open to political interference over time.
I hope the Committee will agree that one advantage of case law provision is that it is in the hands of an independent regulator and the courts and is not subject to ministerial intervention. As I said, my noble Friend Lord Hodgson of Astley Abbotts is currently reviewing evidence of the impact of 2014 Act on charities and other organisations in the run-up to the election. I understand his report is expected reasonably soon, and I look forward to seeing the findings and whether there are lessons to be learned.
I also point the Committee to the Charity Commission’s recent publication of the cases it investigated in the run-up to the 2015 general election. From looking at those cases, one gets a good impression of the independent regulator properly exercising its regulatory role in this area in a very proportionate way.
I hope that I have given the reassurances that Opposition Members seek about charities’ right to speak out for their beneficiaries, while cautioning against the dangers of statutory provision, and hope they will not press the new clause.
Anna Turley
I thank the Minister for his explanation, although he has not convinced us—he will be surprised to hear that. We will not press the new clause to a vote now because we want to return to it on Report. I am sure hon. Members look forward, as I do, to further discussion on the Floor of the House.
I was struck by the Minister’s passionate defence of the independence of the charitable sector and his desire to protect it from the overbearing oppression of political campaigning forced on it by the new clause. I would love to know how many charities begged and pleaded with the previous Government to bring in the gagging Bill to protect them from overbearing political parties forcing them to campaign. In fact, the feeling from the sector was quite the opposite: they were asking for independence from being gagged and being told they could not. I fundamentally disagree with the Minister’s claim that he is trying to protect the sector’s independence. Its independence to speak with its true voice and commitment is what the new clause is about.
I hope I am not naïve in saying this, but for me the basis of politics is to try to make a difference and to find solutions to problems. So many of the aims and objectives that we in this room all share are completely concurrent with those of the charitable sector, so it is inevitable that on many of the issues we try to address and change, charities will feel just as strongly and passionately as we do. They will try to influence us because we are in a position of power to make decisions.
Mr Wilson
I would appreciate it if the hon. Lady gave me three quick evidence-based examples of charities being stopped from pursuing issues on behalf of their beneficiaries. I hope that her party has given examples to Lord Hodgson to show where that has already happened. It would help me and other Conservative Members to understand.
Anna Turley
I gave examples during my speech. I will be happy to resurrect them on Third reading and to submit them. Going back to the point about the independence of student unions, a university in my area cancelled a hustings because it was extremely cautious. It had sought expensive legal advice and did not proceed because it was not sure that it was sufficiently meeting its charitable status in the number of people and different parties it was inviting. That is a clear example from my constituency.
The 2014 Act is a classic incumbency piece of legislation from a political party that has gone far from its roots and become immersed and entrenched in Government, pulling up the drawbridge and becoming separate from the ideals that drive politicians and the sector. I believe that it is incumbent on all political parties, but particularly in Opposition, to listen right through to the day of a general election to the challenges that civil society sets out to us, its problems with the policies we make and how it exposes to us the challenges facing society. We do not have all the answers, but it is important that, as I said, right up to the day of a general election we continue to listen. That Act had, as the sector has identified, a clear effect on its ability to do that.
Anna Turley
I thank my hon. Friend because she is absolutely right. Every political party comes into Government with the best ideals—we heard from the coalition that they would be the most open, transparent and accountable Government ever. Suddenly the fear sets in, and when they start to hear from the public things they do not like it is easy to pull up the drawbridge. We are seeing that with a range of measures from the Government.
Turning briefly to badgers—we have heard a lot about them today; I am very fond of them. I have not seen the email, but despite what Government Members have said, I am still struggling to understand the issue—[Interruption.] The Minister sighs in despair. I will try to explain and perhaps he will show some tolerance for those of us who are struggling to keep up.
If a charity has aims and objectives such as saving badgers, it might write to all political parties setting out what it would like to see in their manifestos, setting out its aims, ambitions and aspirations. One of those political parties might write back saying, “Fantastic; we love badgers too. We want to put that in our manifesto and to have an event to launch it. We want it to be part of our rural ambitions.” Would it not be understandable if that charity engaged with that political party, attended events, and discussed, debated and challenged that manifesto to promote its cause?
Anna Turley
The Minister shakes his head, but I do not know why that is unacceptable. I admit that I do not know the individual case, so I cannot comment on the specifics, but judging by what has been set out, I do not have a fundamental problem with a charity that emails its members to advise them to go to a political event. It could advise them to go to three party events—if another party had accepted its views on badgers, it would have done the same thing with that party. This is about putting badgers first—badgers before politics.
Anna Turley
Please do. To go back to the hon. Gentleman’s point, I am delighted for his sake—if not for ours—that so many of his constituents voted Conservative, but if many of them care passionately about badgers and see such measures in the Labour manifesto and not the Conservative manifesto, surely they can challenge that party’s views, because views can be changed. There will always be things that a political party stands for that we will disagree with—I am sure that many of us on both sides of the Committee feel that. Things are not set in stone and this measure does not seem inflexible and against the grain. I am happy to explore that case in more detail, but I remain to be convinced.
Mr Wilson
In the spirit of co-operation that we have had in the Committee, perhaps I can help the hon. Lady. The Charity Commission will send her a copy of its report on the Badger Trust so that she can see the details of the case. I hope that will help inform her for Third Reading and Report.
Anna Turley
I very much appreciate that, but, on the principle set out, I do not see an explicit problem with a charity emailing its members about attending a meeting of a political party. That is my baseline, but I look forward to hearing more about that case, because I cannot make a decision without seeing all the details.
I want to make another comparison. Many charities attend political party conferences to lobby, influence and try to shape political thinking. Many of them will say, “Actually, we can’t afford to go to every party conference,” so they may go to only one, whether that of the party in government or in opposition or the party that most shares its views on whatever its issue of the day is—I will not say badgers again. Is it at odds with its political neutrality if it attends just one party conference to try to influence and shape thinking? Those are difficult issues for charities to think about.
Anna Turley
I am sure that Members will be sick of my voice today, not the Minister’s! I rise to speak in support of new clause 3 and, for ease, I will also speak to all the new clauses in the group. New clause 3 would ensure that independent schools that wish to benefit from charitable status engage actively with local communities and state schools with a view to sharing resources and facilities. Again, I must pay tribute to the noble lords in the other place who supported the new clauses, particularly Lord Moynihan, sports Minister under Margaret Thatcher and chairman of the British Olympic Association between 2005 and 2012. For that reason, I was surprised to hear the new clauses criticised as “prejudiced and outdated” by the Secretary of State for Education in the media last night.
The vast majority of independent schools in this country—more than 2,000—benefit from charitable status, meaning that independent schools are effectively publicly subsidised by taxpayers whose children do not attend such schools to the tune of £700 million a year in the form of charitable rate relief. Charitable status for private schools may have made sense when many were established prior to the introduction of compulsory education. Many of them were set up to educate “poor and indigent boys”. Harrow, for example, was set up as a grammar school by instinct of charity to educate the needy, but the world has changed.
Seventy years ago, after the Education Act 1944, Conservative Education Minister Rab Butler reflected:
“The public schools are saved and must now be made to do their bit.”
I argue that that bit has not been sufficiently done. Sadly, despite the fantastic work taking place in many of our state schools and the strong investment and reform programme put in place under the previous Labour Government, which transformed state school achievement, the reality is that the gap is still too broad.
Independent schools remain one of the most significant bulwarks of social inequality in this country and continue to entrench privilege and hamper social mobility. Young people from independent schools, who make up 7% of their age group, take up nearly 50% of the places at Oxford and Cambridge, with the subsequent statistical likelihood of earning more and being more likely to be in professional employment within six months. Within the professions, 71% of senior judges, 62% of our senior armed forces and 55% of civil service departmental heads attended independent schools, compared with just 7% of the population.
Anna Turley
I appreciate the Minister’s intervention. I am a realist and a pragmatist in all things. I recognise the huge contribution made to this country by many independent schools, faith schools and other schools that would not necessarily be my first choice for my children. I am not advocating their abolition, but rather that they should deliver over and above what they currently do and justify taxpayers’ money supporting them through their charitable status.
Jo Churchill
That is not actually the case. With the extension of provision to two-year-olds and three and four-year-olds, there will be considerably more than I was granted.
After many years as a school governor at a high-achieving secondary school in the state system and a primary school for those with special educational needs, I believe that independent schools have to abide by the obligations placed on them, and the Charity Commission is there to do a job. To prescribe their behaviour further is not only unnecessary but may well force small specialist schools out of existence due to the red tape and cost of administration. It is nothing to do with what they deliver.
These proposed new clauses are ill considered and should be rejected. They will not give any of us what we all desire, which is an excellent education for all our children, so they become well rounded individuals who can contribute to society and have an equal chance of doing what they wish.
Mr Wilson
I start by congratulating my hon. Friend on her excellent speech, which was clearly based on an enormous amount of personal knowledge. I also thank all Members of the Committee for their contributions over the past four or five sittings. We have had an excellent Committee stage, where we have given the Bill a rigorous check on what it should and should not do. I look forward to Third Reading and Report.
I agree that we should do more to promote stronger partnerships between independent and state schools. Where I differ from Opposition Members is in how we go about that. We should recognise that many strong partnerships already exist, as my hon. Friend and other hon. Members have said, and they are growing in number and impact.
Before I go into detail, I want to clear up a point the hon. Member for Redcar made about Lord Moynihan’s views. Lord Moynihan actually agreed with us that encouraging charities to do more to share facilities was a better approach than legislating to force them to do so. That ought to be on record so as to make clear Lord Moynihan’s views.
Peter Kyle
When I was an adviser at the Cabinet Office I had the benefit of working on the 2006 Charities Bill, later the Charities Act 2006, which brought in the public benefit test. We discussed public schools then and considered drafting and implementing an amendment not dissimilar to the new clauses at that stage of legislation. At that point, we had representations from independent schools, which strongly said that they would improve community relations and that self-regulation and actions from within the sector would deliver demonstrable change. Can the Minister tell the Committee the degree by which the sector has improved in the intervening years and whether that will extend further without the need for legislation?
Mr Wilson
I thank the hon. Gentleman for that point. I will come to it later in my speech, rather than deal with it up front.
There are both principled and practical reasons why legislating to force charitable independent schools to do more is wrong and could be counterproductive. Let me start with the principled argument against these new clauses. Public benefit is a requirement at the centre of the definition of a charity. All charities, regardless of their size or charitable purpose, must exist for public benefit. Public benefit itself is not defined in statute, but has a meaning given by a body of case law that has been built up over several hundred years, which sets out clear principles but gives the definition the flexibility needed to deal with a wide range of types of charities. The way in which a charity demonstrates its public benefit and the extent to which it does so is for its trustees to decide, taking into account the circumstances of the charity and other relevant factors. It is not for the Charity Commission to interfere unless charities fail to meet the requirement.
An Upper Tribunal ruling in 2011 set the parameters for charitable independent schools. Public benefit must be real and not tokenistic, but beyond that it is not for the Charity Commission to dictate to schools the type or amount of public benefit they provide. That should be a matter for the trustees of the charity, who must take into account the charity’s circumstances.
There is a wide range of ways in which charitable independent schools can and do provide benefits, including academic partnerships with state schools, sharing sporting or other facilities and expertise, and providing bursaries and other financial assistance to those who cannot afford the fees. There is also the important indirect benefit of relieving the taxpayer of the cost of educating 7% of the nation’s children. It is for the trustees to determine the way in which their charity provides a public benefit. The law places the decision on which approach or combination of approaches the charity takes in the hands of the charity’s trustees.
It would be wrong to single out one type of charity in legislation and stipulate one particular type and the extent of public benefit that it must provide. No other type of charity is treated in that way, and it would set a very dangerous precedent. What would be next? Religious charities, overseas aid charities or campaigning charities? Once the precedent has been set, the risk is that the temptation to interfere would be too great for some to resist, and specific legislative requirements could creep in over the years for different types of charities. If unchecked, there is a real danger that over time charities would be opened up to significantly increased state interference—whether or not politically motivated—which could seriously undermine the charity sector’s independence. In this Committee, all parties have sought to protect the independence of charities and trustees.
Anna Turley
On the point about setting a precedent, the difference is that independent schools provide a service over and above state provision. There is statutory universal provision, but people choose to go in over and above that and send their children to independent schools. We should question the right of those schools to receive taxpayers’ money. It is a unique situation in education, so we cannot simply say that it would set a precedent.
Mr Wilson
As I said, parents pay for education at independent schools, which relieves a huge burden on the state. It is very easy to dismiss the fact that private schools provide more than 500,000 places, but as I said to the hon. Lady earlier in our proceedings, abolishing independent schools would immediately create the huge problem for the state of how to educate those children.
Anna Turley
There is a short-sighted financial view about the cost of educating children and the saving to the state sector of educating children in the independent sector. We are dismissing some of the value that those children, their parents and families would put back into the state system, were they to be educated there. One should not see children simply as a financial burden on the state; they will contribute greatly to the state system.
Mr Wilson
I worry that the hon. Lady, along with a number of Opposition Members, has a mindset that the independent sector is better than the state sector. That might have been true under a previous Labour Government, but state schools have improved enormously under this Government. It is important to make the point that independent schools do not necessarily offer a better, more advantageous education for our young people than state schools any more. That view is being degraded year by year by the reforms and protected investment that we have put into our education system. It is very sad that the Opposition do not recognise or welcome that.
Anna Turley
May I take the Minister up on that point? He has made a sweeping statement that is not the case. He does a disservice to the reforms made by the Labour Government under the Building Schools for the Future programme—since cancelled—following 18 years of neglect that left many schools with leaking roofs. He does a disservice to our record. Why does the Minister think people send their children to independent schools, if there is no difference from the state sector? What is it that they are paying for?
Mr Wilson
There are many different reasons why people send their children to independent schools. I would not like to intrude on the decisions that families make up and down the country for the good of their children. Some may base the decision on distance, if they live in a rural area and the school is close.
Mr Wilson
If the hon. Lady is painting the situation as simply one of privilege, she is straying into territory she should not stray into. Many independent schools offer bursaries and many other ways to ensure that people who cannot afford to send their children are able to do so. We might want to pick up on that debate outside the Committee.
What is currently meant by public benefit has been determined by the courts over several hundred years. While not perfect, the current case law definition has served us well and we start interfering with it at our peril. In addition to our principled objection to these proposed changes, there are practical reasons why we do not support them. Over recent years, many independent schools have embarked on successful partnership projects with local state schools. Those have arisen from local needs and reflect good relationships between head teachers in the state and independent sectors. Forcing schools into particular types of partnership will not work in the long term and could undermine much of the good work that has already been done.
Legislation is not needed to make those partnerships happen. They are already happening and are growing in number. In answer to the earlier question from the hon. Member for Hove, according to the Independent Schools Council, 93% of its member schools—1,073—are already involved in partnerships with state schools. Of those, more than 900 are involved in sporting partnerships, more than 600 in music partnerships, almost 600 in academic partnerships, about 400 in drama partnerships and more than 200 in governance partnerships.
As my hon. Friend the Member for Bury St Edmunds said, when people think of independent schools they often think of the largest and most well known, but the reality is very different. More than half have fewer than 300 pupils, and in many cases they might have more limited resources than the local state school. For example, some may not have any sports facilities to share with local state schools. It would seem odd to legislate for something that some schools simply might not meaningfully be able to do. The measures proposed focus on sports, music, drama, arts and careers and higher education advice. They omit perhaps the most important category of partnership between independent and state sectors: academic partnerships.
Let me give an award-winning example. King Edward’s School in Birmingham aims to improve teaching and learning for pupils in local state junior schools across the city. Its outreach programme has doubled in size in each of the past three years so that the school is now in contact with more than 11,000 state-educated children and more than 450 teachers from 130 different junior schools. More than 50 members of staff and 300 pupils from the school are involved, and activities have included a city-wide maths competition entered by teams from 110 state primaries, which has proved so successful that it now hopes to run annually.
Wendy Morton
I am grateful to the Minister for sharing those examples with us because they really show the breadth of partnerships that have evolved over time in different communities across the country. Does he therefore agree that the new clause would be so prescriptive—such a one-size-fits-all approach—that it would stop that really good way of working at a community level? I was brought up in an area where there was one school; the nearest school was probably about 15 miles away and there was no independent school. People like me would never have benefited from such a clause.
Mr Wilson
My hon. Friend makes her case powerfully. I would not seek to add anything because I agree with her. She is absolutely correct.
It is not just the largest schools with the most resources that are engaging in such partnerships. Belmont Preparatory School near Dorking has, for over a decade, provided facilities and resources for a local community pre-school music education group to meet twice a week, enabling early years children and their parents to enjoy music making and to form links between the local community and the school.
In order to show that strong partnerships already exist, the Independent Schools Council has created and is managing a “Schools Together” website that launches this month. I hope that everyone will have the chance to look at it. As well as showcasing existing examples of best practice, the website will act as a vehicle for the development of new partnerships between the independent and state sectors, enabling schools to register their interest in developing a partnership. So far, more than 175 schools have registered and reported on more than 400 partnership projects. I encourage the Committee, particularly Opposition Members, to review the growing number of projects on the website and support the development of new partnerships in their constituencies.
The ISC will undertake a census of all partnership activities and will promote partnerships among its member schools. The Charity Commission has updated its guidance on ways that trustees of charitable independent schools can ensure they run their charities for public benefit.
Anna Turley
We discussed earlier today what happens when self-regulation fails. Does the Minister have in mind a framework of what improvement he would like from the sector? At what point will he intervene or look for some kind of back-up powers, as we discussed today, to try to ensure that further activity is made?
Mr Wilson
As the hon. Lady knows from the contributions made in the Lords, an agreement was reached on what independent schools will be doing. That agreement will need time to bed in, to ensure that it can progress in an orderly way. We have no intention of introducing any back-up powers, for the reasons I have stated; in principle and in practice, the hon. Lady’s proposals simply would not work. I expect independent schools to do more through partnerships, as I said at the start of my speech.
The updated guidance encourages trustees of charitable schools to comment on their individual approaches to public benefit in sport, drama, music and other arts in their annual report, and the guidance includes new examples of sharing sporting facilities. The commission also gives new examples relating to the sharing of sports, arts and music facilities in its example of a good trustees’ annual report. The ISC has disseminated new guidance to its member schools.
The commission has committed to follow up with a research project that will begin in 2017, when enough time will have elapsed to assess the impact of the new “Schools Together” initiative and the updated guidance provided by the commission. That research will draw upon data from charitable schools’ annual reports, as well as aggregated data that the ISC collects through its annual report. The terms of reference will be developed by the commission with input from the ISC, and a report of the research will be published in 2017, which will enable us to get a much clearer picture of the extent of existing and new partnership activities between the independent and state sectors.
I have been encouraged by the willingness of the ISC and its member schools to engage constructively in this debate, and I expect that many people will be surprised by the volume of partnership activity that is already taking place between the independent and state sectors but that has perhaps gone unreported in the past. The ISC is keen to showcase best practice and to encourage more such partnerships, and it has shown its commitment through its actions. An inflexible legislative solution is the wrong approach and could damage the good will that exists in the independent sector. The best partnerships are not forced but evolve through local needs and provide mutual benefits. We should welcome the ongoing work to nudge and encourage such partnerships, but we should not make them a legal requirement.
To recap, there are several good arguments, both in principle and in practice, for not pursuing these new clauses. I therefore hope that hon. Members will decide not to press the new clause further.
Anna Turley
The Minister has been extremely generous with his time in responding to all our interventions, so I will not delay the Committee much further. I will just make a small point in conclusion. I appreciate that there are many examples of good partnership, which is to be encouraged, but words such as “nudge” and “encourage” are a little disappointing. Given that schools receive a financial rebate from the taxpayer, taxpayers have a right to expect some benefit from those schools. The pace has been positively glacial, so I am not convinced by the Minister’s arguments. However, we will not press the new clause to a vote today, but we may well reconsider it on Third Reading. We are not convinced that there has been sufficient progress that anything other than a statutory power will do anything to compel independent schools to justify the money they get back from the British taxpayer.
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Bill, as amended, to be reported.
Charities (Protection and Social Investment) Bill [ Lords ] (Fourth sitting)
Rob Wilson Excerpts(8 years, 5 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister for Civil Society (Mr Rob Wilson)
I welcome you to the Committee, Mr Chairman. It is a pleasure to serve under your chairmanship.
Clause 12 extends the duty of the Charity Commission to keep a publicly accessible register of people who have been removed from office by either the commission or the High Court. The register includes the name of the removed trustee, their address at the time of removal, the date when the order was made and the name of the charity concerned. It contains details of individuals who are disqualified only because they have been removed by the commission or the court; it does not contain details of those disqualified for reasons such as an unspent criminal conviction or bankruptcy.
The register can be searched by name on www.gov.uk. It is an offence to act as a trustee while disqualified, so all charities should have a vetting procedure in place to check that new and existing trustees are eligible to act, and checking the Charity Commission’s register of removed trustees is a good way to do that. It is also good practice for trustee boards to ask prospective trustees to confirm in writing that they are not disqualified. The Charity Commission provides a model declaration form that charities can download from the aforementioned website.
Under clause 12, the register of removed trustees would be extended to include details of persons who are subject to disqualification orders made under clause 11 and those disqualified trustees removed from office by the commission under clause 5.
Anna Turley (Redcar) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Hamilton. I welcome you to the Committee.
The Opposition support clause 12. We have tabled no amendments to it because it is an important measure in ensuring public scrutiny and accountability regarding the decisions taken by the commission and the court, along with the circumstances surrounding, and any learning that might come from, them. The clause provides that the commission must maintain a publicly accessible register of persons who have been removed from office by the commission or the High Court, and extends the register to include details of persons subject to a disqualification order.
My only question at this stage is whether the Minister envisages any scenarios in which it would not be appropriate to take that action. The clause states that “the register must include”, but the Minister mentioned exemptions in the case of bankruptcy and so on. Given that addresses and other details will be publicised, might he envisage a scenario in which, for reasons of public or individual protection, or any other reason, someone would not be included in the register?
Mr Wilson
I will give some thought to that question, but the commission already processes a vast amount of information in accordance with a number of legal obligations, including data protection legislation. It is important to mention that, because there might be concerns about publicly available information being in some way misused.
The commission currently maintains, in accordance with its statutory duties, including data protection considerations, a register of 164,000 charities. The commission fully accepts its responsibility to protect individuals from any unauthorised and unreasonable case for disclosure of personal information, while balancing that with legitimate considerations. The commission is overseen in its management of personal data by the Information Commissioner’s Office, as are all public bodies. I will write to the hon. Lady in answer to her question.
Question put and agreed to.
Clause 12 accordingly ordered to stand part of the Bill.
Clause 13
Participation in corporate decisions while disqualified
Mr Wilson
The provision is relatively straightforward and I hope to be able to provide the Committee with a quick and short explanation.
Trustees do not need to be natural persons; they can be legal persons. That means it is possible for a corporate body to be a trustee of a charity. This gives rise to a loophole relating to disqualified trustees. As the law currently stands, a disqualified trustee is not prevented from acting as an officer of a corporate body—where that corporate body is a charity trustee—and participating in decisions about the management and administration of the charity. This can potentially be used to circumvent disqualification. Clause 13 enables us to put this matter right. It prohibits disqualified individuals from participating in decisions about the administration of a charity where they are an officer of a corporate body and that corporate body is a charity trustee. It also extends the civil and criminal sanctions that apply where a disqualified individual acts as a trustee. It is a common-sense provision and I commend it to the Committee.
Anna Turley
I support the Minister’s view on the provision. It is technical, but important. The clause inserts into the Charities Act 2011 new section 184A, which sets out that where a person is disqualified either under section 178 or new section 181A of the Charities Act 2011, which we have discussed in some detail in Committee, and where they are an officer of a corporate body that is a charity trustee, the provision prohibits that person from participating in decisions relating to the charity’s administration. We think it is absolutely right that we abide by the decision that the Charity Commission has made and that the person is not able to continue to participate through that loophole.
It is right that new section 184A extends the existing criminal and civil sanctions to apply to officers who participate in decisions relating to a charity’s administration when they have been disqualified from being charity trustees, and we therefore support the provision.
Question put and agreed to.
Clause 13 accordingly ordered to stand part of the Bill.
Clause 14
Fund-raising
Question proposed, That the clause stand part of the Bill.
Mr Wilson
You have me working hard this evening, Mr Hamilton.
The clause introduces important new requirements that will greatly increase transparency in relation to a charity’s approach to fundraising. These provisions were added to the Bill in the other place following a series of media exposés of poor fundraising practices in which elderly and vulnerable people were targeted by charities or subjected to undue pressure to donate. Many of those poor practices are completely and utterly unacceptable. It is important to remember that although bad practice has been uncovered, most charities fundraise well. They need to be able to ask people to donate to raise funds, and we should not forget that many do so responsibly and in line with best practice.
The sorts of poor practices that we have seen in the media recently are mainly in the areas of mass marketing fundraising, such as direct mail or telephone fundraising. In these high volume data-driven areas, some charities have been treating donors as a means to an end, rather than focusing on the charity’s relationship with the donor as an individual. The first new requirement under subsections 7 and 8 will ensure that charities put in place explicit safeguards for potential donors when they wish to fundraise through third party contractors.
The provision prohibits a contractor from fundraising for a charity unless the written agreement between the fundraiser and the charity includes standards such as how it will protect vulnerable people from undue pressure and how the charity will monitor the contractor’s compliance. It has become clear that much of the poor practice we have seen over the past year or so occurs when there is a lack of accountability over how charity fundraising is conducted. The new requirement aims to make it absolutely clear that charities are responsible for ensuring that third parties who are paid to fundraise on the charity’s behalf act in a moral, respectful and responsible manner when asking the public for money.
The second requirement under new section 162A will introduce much greater transparency in relation to a charity’s track record in fundraising. It will require charities to publicly disclose information on how they conduct fundraising, whether they subscribe to appropriate self-regulation, and whether any good practice requirements have been breached. They will also need to publicise more details on the number of complaints that they have received, as well as what principles they follow in order to protect vulnerable donors and the wider public from poor practice. That will ensure that high-quality fundraising becomes a board-level issue and returns to the heart of a charity’s operations where it belongs. In that respect, I also warmly welcome the Charity Commission’s new guidance for trustees on their responsibilities to do with fundraising. The new guidance, which is being consulted on, should be a must-read for all trustees of charities that fundraise from the public.
To update the Committee on our progress in strengthening the self-regulation of fundraising, which sits alongside the provisions in the Bill and is arguably more important, not only did we amend the Bill in the other place, but I asked Sir Stuart Etherington to undertake a review of fundraising self-regulation over the summer. He was supported by a cross-party panel of peers. His report, published in September, recommended the establishment of a new, tougher, single self-regulator to oversee charity fundraising with universal coverage, high standards of best practice, stronger sanctions and close links to existing statutory regulators.
The review also recommended the setting up of a fundraising preference service so that people who felt inundated with charity fundraising requests would be able to reset their consent to be contacted. That has proved a popular concept with the public. Taken together, the proposals will provide a strong and comprehensive framework for the self-regulation of fundraising.
We are making good progress on implementation. I appointed Michael Grade, Lord Grade of Yarmouth, to be the interim chair of the new fundraising self-regulator. In December he appointed his interim chief executive, Stephen Dunmore. He also appointed a working party to develop plans to implement the fundraising preference service, led by George Kidd, who has vast experience in direct marketing regulation. In December the largest fundraising charities were invited to a summit, which was streamed live and at which Lord Grade set out his vision for the new self-regulator. The meeting was a success and I left with the impression that the largest charities accepted that things needed to change and were willing to throw their weight behind the new regulator.
Over the next few months Lord Grade’s vision will be turned into reality and we expect to see the new regulator up and running from spring 2016, with the fundraising preference service following shortly afterwards. Most of the largest charities have committed to fund the new self-regulator’s set-up costs and I am sure that the others will soon follow. This is an opportunity for the charity sector to demonstrate its leadership and maturity and to show that it can put its own house in order.
I have every confidence that, with charity support, the new self-regulatory system will succeed and, most importantly, consign poor fundraising practices to history. If the new self-regulatory system were to fail, however, we need a back-up plan, which is where new clause 7 on the Government’s reserve powers to regulate fundraising through statute comes in. I will explain those powers to the Committee in more detail at our next sitting.
Anna Turley
The Opposition welcome clause 14 and have tabled no amendments to it. However, it is important and deserves discussion, so I will take some time, with the leave of the Chair, to make a few points.
Due to the clause’s importance and, in particular, because of some of the public exposure that led to it, it is essential to explore some of the issues behind it. It amends section 59 of the Charities Act 1992 and prohibits commercial fundraisers from raising funds for a charitable institution unless the fundraising agreement between the commercial fundraiser and the charitable institution includes certain terms on fundraising standards that the commercial fundraiser undertakes to follow. That is extremely important, because many within and outside the sector have felt that what could be described as the outsourcing of a charity’s fundraising function can perhaps play a part in distancing that process from the charity’s original aims and objectives. People have also felt that the accountability of a charity itself could be somewhat loosened by the outsourcing of fundraising provisions. We therefore think the clause is an important amendment to ensure that a proper agreement is in place setting out a certain number of standards that must be followed.
Clause 14 also amends the Charities Act 2011 by inserting new section 162A, which requires charities whose accounts have to be audited in accordance with section 144(2) of the Act—currently, those with a gross annual income of more than £1 million, or those with a gross annual income of more than £250,000 and assets with an aggregate value exceeding £3.26 million—to set out in annual reports their approach to fundraising, including in particular whether they use commercial fundraisers and how they protect vulnerable people from undue pressure in their fundraising.
Mr Wilson
I did not note many questions in the hon. Lady’s speech, but I am grateful for her strong support for the clause. There have been some worries in the sector about the financial burden on charities as a result of the clause. Overall, we estimate the cost to the charity sector to be about £1 million over 10 years, which is marginal compared with the benefits of greater transparency about how charities will safeguard the public from poor practices. That is a very positive investment.
Tom Tugendhat (Tonbridge and Malling) (Con)
Having sat through sittings of the Select Committee on Public Administration and Constitutional Affairs and listened to stories of misery from various people, and seen the rapid reaction of the Government on this issue, I would like to pay a little credit to both the Government and the Opposition. They have worked closely together to produce what is a very effective response to the malpractice of various of our charities and what, I hope, will go far in securing the greater confidence that the public have the right to have in our charitable sector.
Mr Wilson
It is very kind of my hon. Friend to make those comments. It is true that the Opposition have worked effectively in the other place and, indeed, in this place. I deliberately set up the Etherington review as an all-party review because I wanted every party to be involved and to have a stake in ensuring we get this right. By and large, the Etherington review, all of whose terms I have accepted, has proved to have produced a very effective report, and we need to get on with implementing all parts of it.
Robert Jenrick (Newark) (Con)
I strongly support the changes in the Bill, but I want to press the Minister on the annual statement that the larger charities will have to make about how they conduct their fundraising. One question that it does not seem to ask is what percentage of the public money that is given to charities is spent on funding commercial fundraising operations. I have written to a number of charities on behalf of my constituents to ask that question, and on every occasion they have replied by saying that they cannot provide that information because it is commercially sensitive. The public want that information. They want to know how much of their money is spent on funding commercial fundraising operations, rather than on the charities. I would like that to be either in the Bill or the Charity Commission’s guidelines.
Mr Wilson
I understand what my hon. Friend says, and I believe there would be a level of support among the public for that. There certainly are commercial confidentiality considerations, in the same way as there are for Government contracts, but I will look seriously at what he said and come back to him.
To take that point a little further, there are questions about how extensive the problem of poor fundraising is for charities. The hon. Member for Redcar said that it is a small problem that affects a small number of charities. By and large that is true, but the Fundraising Standards Board received 52,000 complaints in one year, so the activity is deep-rooted. That is why it is important that we introduce these measures and try to do something about it. I believe that these two measures, coupled with the others, will help to stop some of the poor practices. They will ensure that there is oversight and accountability among the trustees and that fundraising is overseen directly.
Peter Kyle (Hove) (Lab)
It would be nice if the Minister said how many of the 52,000 complaints that he has mentioned were upheld. For context, we should bear in mind that the charitable sector, despite the very focused challenges in recent months, is still the most trusted sector in society.
Mr Wilson
The hon. Gentleman will have seen in the recent reports that trust has gone down to 2008 levels as a result of some of the stories that have been heavily profiled in the media. The issue is not whether 52,000 complaints were upheld; it is that 52,000 people felt that they had to complain about being inundated with telephone calls or direct mail containing information that, in many cases, they obviously did not want to receive. Clearly, the public are seriously concerned about the targeting of elderly and vulnerable people in particular. I believe we are doing the right thing in introducing these measures and changing the law to ensure that charities are directly accountable for the fundraisers that act on their behalf. They must ensure that those fundraisers act in a proportionate and moral way that reflects the best practices of the charity itself.
Peter Kyle
Does the Minister agree that the trustees of a charity are ultimately responsible for safeguarding the way that money is spent and for upholding the moral activity of the charity?
Mr Wilson
That is exactly what these measures are for. They will ensure that trustees look at the things they should be looking at: how their fundraising is conducted and how it interfaces with the public. The two measures will ensure they do that through the annual report and the contracts that they sign with third parties. It is for exactly those reasons that we are making these changes.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Clause 15
Power to make social investments
Question proposed, That the clause stand part of the Bill.
Mr Wilson
I am sure that everybody is getting bored of the sound of my voice by now. [Hon. Members: “No!”] That was half-hearted—try a bit harder.
Clause 15 introduces a new power for charities to make social investments. It is the first time the term “social investment” has been defined in legislation. I will briefly address the merits of social investment and why the Government have decided to bring forward the power of social investment for charities. Traditionally, charities with money to invest have taken one of two approaches. On one hand, they may invest the funds to maximise the financial returns from their investment and then spend the financial returns on furthering their charitable purpose. On the other hand, they may spend the funds directly to further their charitable mission. Social investment is different because it involves investments that do both.
A social investment furthers the charity’s mission and also generates a financial return, meaning that the capital can be recycled again and again, contributing to a sustainable model and reducing dependency on grants and donations. In the right conditions it can enable a greater long-term impact than traditional financial investment models, and there are further benefits from a focus on measuring and reporting on the outcomes that have been generated.
The UK already has the world’s most developed social investment market, having introduced the world’s first social investment bank and social investment tax relief. Last year, I launched Access, the new £100 million social investment foundation that will help organisations to become social investment ready. We have pioneered the use of social investment bonds and payment by results for delivering public services. There are now 32 social impact bonds in the UK, which is more than in the rest of the world put together.
My right hon. Friend the Chancellor of the Exchequer announced in the spending review that the Government would expand support for social impact bonds by allocating £100 million over the current Parliament to tackle issues including homelessness, poor mental health and youth unemployment. Despite growth over the past few years, the social investment market is still developing. It is estimated that charities currently have only about £100 million of social investments out of a potential investable asset base of about £80 billion, which indicates the scale of current activity and the future potential.
In response to concerns raised by the social enterprise sector about barriers to making social investments, the Government asked the Law Commission to undertake a review of charities’ ability to make social investments and whether the law should be clarified. The Law Commission found that most charities were able to make social investments under existing powers—a combination of their financial investment power and their power to spend in pursuit of their charitable mission. However, the Law Commission recommended introducing a new power of social investment to put the matter beyond question and send a strong positive signal to the sector. That was strongly supported by charities and social enterprises on consultation, and clause 15 is that new power.
The new power will make it easier for charities to make social investments, particularly by reducing uncertainty and transaction costs. The definition of social investment used in the Bill has been deliberately drafted to be as wide as possible. It covers a spectrum from investments that are mostly intended to further charitable purposes but involve some return of capital, through to those that are primarily financial but have a small mission benefit. Neither the furtherance of the charity’s purposes nor the financial return is required to take precedence. All that is required is that the elements of both a social and a financial return exist. The trustees will need to consider the combination of the mission benefit and the financial return together for a social investment to be made in the interests of the charity.
Let me offer an example of the practical benefits of stimulating social investment. Hackney Community Transport is a social enterprise that delivers a range of transport services from London red buses to social services transport, from school transport to park and ride, and from community transport to education and training. It reinvests profits from its commercial work into further transport services or projects in the communities it serves. In December 2014 it raised £10 million from investors, including social investments from charities such as the Esmée Fairbairn Foundation. HCT intends to use that capital to fund growth, purchase new vehicles and depots, improve infrastructure and deliver greater impact for the communities that it serves and in which it operates. I am sure that all Members will agree that it is a fantastic social enterprise and an excellent example of a social investment by a charity that both delivers on its charitable mission and delivers a financial return.
Anna Turley
I thank the Minister for setting out the views and values behind the clause, which we welcome. Social investment is an important part of the fabric of our community and voluntary sector. We have tabled no amendments to the clause, and we recognise that it will make an important contribution.
As the Minister set out, the Bill is the first attempt to define in statute social investment, which is
“the use of repayable finance to achieve a social as well as a financial return.”
Community and voluntary sector organisations are playing an increasingly large role in society. As such, demands on the sector will be higher than ever. However, the third sector faces a chronic lack of investment. Many organisations are constantly in a state of fragility and vulnerability, and many are urgently seeking the next source of funding rather than investing to create a sustainable and robust social business. The climate of cuts, particularly in local government, as well as increased pressures and demands on many of the services that community and voluntary sector organisations provide, mean that they are facing a difficult climate. Any opportunity to look at new and innovative ways of raising finance are therefore to be welcomed.
Often, when funding comes it is unsuitably packaged for the purpose. It might be aimed at short-term projects or something specific, with many strings attached. It could come with unrealistic expectations and may not always be support the core aims and objectives of the charity. Social investment is growing in response to those needs and challenges. Done well, it could not only create more capital for the sector but help to build long-term capacity and develop a movement towards early intervention and prevention, which the Opposition welcome as part of our approach to public services. That could result in a stronger third sector that is better able to play its important role in society.
The Bill’s helpful explanatory notes give examples of acts that might constitute social investments, and the definition is welcome. Such examples include a charity for the support of homeless people letting out housing at a low rent; an overseas development charity investing in fair trade tea production; a charity for the advancement of medicine making a high-risk investment in a medical research company; a diabetes charity investing in a company that is developing foods intended to reduce the impact of diabetes on sufferers; or a charity for the reduction of reoffending investing in a social impact bond to fund a project that supports individuals leaving prison. Those are all worthy and important aims and objectives, and we support efforts to put a social investment framework into statute.
Nevertheless, it is important that we continue to see the funding of the community and voluntary sector as diverse and variable. We do not want a one-size-fits-all solution to the funding crisis in the charity sector, as not all charities will be able to make social investments. Some charities need to be able to take risks and fail, which is in the nature of any charity or community organisation. Because of the kinds of people that they support and deal with, or because of their aims and objectives, some community and voluntary sector organisations will have to spend money just to manage or prevent decline or difficult scenarios. We must ensure that charities that support such social investment, which may never have a financial return, are not starved of the finance and support that they would traditionally get through a grant-based model.
The clause sets out an important framework for social enterprise, which we support and welcome as an important new means for charities to gain income and to be longer-term and more strategic in their approaches. It gives charities the reassurance that they need to feel empowered to undertake investment. Definitions will continue to change and evolve, but in the meantime, this is an important regulatory framework to encourage and support social enterprise.
Question put and agreed to.
Clause 15 accordingly ordered to stand part of the Bill.
Clause 16
Reviews of the operation of this Act
Question proposed, That the clause stand part of the Bill.
Mr Wilson
This is a review clause. We took on board the concerns raised in the other place that five years would be too long before the first review, and we have debated some of those concerns today. We amended the Bill so that the first review will have to start within three years of enactment and conclude within a year. Subsequent reviews will have to take place every five years. All the reviews will be reported to Parliament.
We must remember that the Charity Commission estimates that some of the new powers might only be exercised once or twice a year, so allowing time for the development and publication of guidance and, in some cases, public consultation before the provision can be commenced means that for some of the powers there may be a limited evidence base for the first review after three years. Nevertheless, this is a sensible provision that will enable us to determine whether the Bill has achieved its aims, and I commend it to the Committee.
Anna Turley
The Opposition support this clause because it is a simple and practical way of providing for the Minister to review the operation of the Bill. As he mentioned, we have had quite a lot of discussion and debate today about the timeframe for monitoring the Bill. We have had a lot of debate about the onus that much of the Bill puts on the Charity Commission, about many of the new powers and about many of the new expectations that will be placed on charity and community groups. It is right that we review those things.
The Minister has used the word “proportionate” many times when talking about the decision making and judgments that the Charity Commission will have to exercise in taking steps to raise standards within the charity sector. Continuing to review that will be important. We will also continue to assess the financial impact, particularly on the Charity Commission but also on the charity sector, of many of the new demands and powers.
As the Minister said, it is important that new guidance, new policy papers and new explanations, definitions and criteria for the Charity Commission will be set out, consulted on, established and reviewed consistently within three years of the enactment of the Bill. Three years, moving to five years thereafter, is a perfect timeframe to establish that, so we support the clause.
Question put and agreed to.
Clause 16 accordingly ordered to stand part of the Bill.
Clause 17
Short title, extent and commencement
Mr Wilson
I beg to move amendment 9, in clause 17, page 20, line 34, leave out subsection (6).
A technical amendment to remove the Privilege amendment that was inserted in the House of Lords.
This is a technical and procedural amendment to remove the privilege amendment that was made on Third Reading in the other place. The privilege amendment recognises that provisions in the Bill may infringe the privilege of the House of Commons with regard to the control of public money. Amendment 9 will leave out subsection (6), thus ensuring that the imposition of any charge resulting from the Bill is properly approved. In practice, the new powers that the Bill confers on the Charity Commission are expected not to result in additional costs for the commission. The commission itself has said that the new powers will help it to regulate charities more efficiently by ensuring that more proportionate and effective action can be taken at an early stage and by limiting the opportunity for delaying tactics, which can waste the commission’s resources.
The remainder of clause 17 addresses the Bill’s territorial extent, which is England and Wales. The Bill team has submitted a memorandum to the Committee’s Chairs for the purposes of Standing Order No. 83L covering the Government amendments that have been made today. It reflects the Department’s continuing view that the Bill, as amended, extends and applies to England and Wales only. We liaise with the devolved Administrations on cross-border charity law and regulation, and the Charity Commission similarly liaises with its counterparts in Scotland and Northern Ireland on matters of mutual interest.
The final provisions relate to the commencement of provisions in the Bill. We will work with the Charity Commission to publish an implementation plan for the Bill once it is passed. As I have mentioned, there are a number of provisions of which we will need to give charities, and those working in them, sufficient notice before we commence them. The extension of automatic disqualification is an important one. Other provisions will need guidance to be published before they can be commenced. I hope that my explanation suffices.
Anna Turley
We support the amendment. We agree with the Minister that it is a technical, procedural amendment to ensure the passage of the Bill, and we have no comments to make at this stage.
Amendment 9 agreed to.
Clause 17, as amended, ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned.— (Sarah Newton.)
Charities (Protection and Social Investment) Bill [ Lords ] (Third sitting)
Rob Wilson Excerpts(8 years, 5 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister for Civil Society (Mr Rob Wilson)
I wish you, Mrs Main, and all members of the Committee a happy and prosperous new year. I hope hon. Members did well from Father Christmas during the recess and that everyone has returned in good spirits.
After the conciliatory nature of the previous Committee sittings, it is a little sad to begin the new year on a slightly more divisive note. Clause 9 was an Opposition amendment inserted into the Bill in the other place. It was an undisguised attempt to undermine or even block the Government’s manifesto commitment to extend the right to buy to tenants of housing associations. At the very least it was to be a marker of concerns in the other place about that manifesto commitment. For several reasons, the Government believe that the clause is neither necessary nor desirable. It is now time to remove the provision from the Bill. It is important to note that the Charity Law Association agrees that the clause should be taken out.
Let me explain why the provision is not necessary. The clause was designed to attack and to frustrate the Government’s manifesto commitment to extend the right to buy to tenants of housing associations, most of which are charities. It was introduced into the Bill in the other place when there was concern about charitable housing associations being forced to implement the right to buy. Since then, however, we have reached a voluntary agreement with housing associations that renders the clause unnecessary, because there is no question of them being forced to dispose of their assets.
The Government believe that anyone who works hard and wants to get on the property ladder should have the chance to do so. The right to buy has already helped 2 million families to realise their dream of owning a home, but until now the discounts available under the right to buy have only been available to tenants in local authority properties and some former council properties. Extending the discounts to housing association tenants in England will end that unfairness and means that up to 1.3 million more families get a realistic chance to own their own home. At the same time, replacement of the housing stock will be ensured.
The National Housing Federation has worked with its housing association members to secure a voluntary deal that will give housing association tenants the opportunity to buy their home with an equivalent discount to the right to buy. The Government accepted the voluntary deal proposed by the housing associations, which will deliver the manifesto commitment to extend the benefits of the right to buy to 1.3 million tenants. Homes sold to tenants under the deal will be replaced one for one using the proceeds from the sale of the property. That will provide a significant increase to the overall supply of new housing.
So far, 93% of the total housing association stock is covered by those associations that have said yes to the deal. We want as many associations as possible to sign up to it, so that their tenants may access the same home ownership opportunities as other tenants, and the opportunity remains for more housing associations to do so. The deal includes examples of types of property that housing associations may decide that they do not want to sell to a tenant—for example, particular properties in supported housing, historic charity legacy stock or rural housing. In such circumstances, the tenant will be offered an alternative housing association property.
Housing associations are voluntary organisations and we strongly believe that they should continue to be independent of the Government. That belief is reflected in our decision to extend the right to buy to housing association tenants by accepting the voluntary offer from the sector, rather than implementing the policy through legislation. We have, however, included provisions in the Housing and Planning Bill to make the voluntary deal work, including financial powers to pay the housing associations for the cost of the discount and powers for the regulator to monitor and report on the terms of the deal.
Ahead of full implementation, a six-month pilot scheme is taking place with five housing associations, which will enable the new system and the voluntary deal to be road-tested properly in advance of full implementation. Tenants of those housing associations can already register their interest. This voluntary deal was achieved by working together with the housing association sector, resulting in a better outcome for landlords and tenants while delivering the Government’s manifesto commitment.
Of particular importance for the Committee today is that, under the voluntary deal agreed with housing associations, charities could not be compelled to dispose of their assets in a way that is incompatible with their charitable purposes. Under the deal, charities’ independence is preserved, and they continue to have their freedom to dispose of their assets in the way that they see fit and that is compatible with their charitable purpose. I would strongly argue, therefore, that the historic voluntary deal between housing associations and the Government renders clause 9 unnecessary.
I now turn to why clause 9 could have damaging unintended consequences for charities. When the clause was inserted into the Bill, it was argued that it effectively just stated the existing legal position. I disagree—it does not. Clause 9 is not a simple restatement of the existing law on the use and disposal of charitable assets.
As we have already said, charity law is a mixture of statute law and case law. Many of the rules that apply to charities’ investment in, and disposal of, assets derive from case law rather than statute law. Attempting to create a simple statutory provision for a large area of case law is fraught with danger. The problem is that a simple statutory provision will invariably fail to cover the many different circumstances and complexities that case law can provide for. It would be exceptionally difficult to find a satisfactory expression to properly cover the explanation and nuanced analysis that is often afforded in judgments in case law. As a result, there is a real danger that the clause will give rise to damaging unintended consequences, which I am sure all hon. Members would wish to avoid.
Charity Commission guidance on the disposal of land makes it clear that any disposal must be
“in the interests of the charity”
rather than “consistent with charitable purposes”. Those concepts have different legal meanings, with the latter being much wider in its potential application.
Clause 9 casts doubt on the power of the courts to direct charities to dispose of property—for example, under compulsory purchase legislation. It could also prove problematic to the Charity Commission in the exercise of its powers—for example, its powers to direct charities to take specified action, or to direct the use of property, in the course of a statutory inquiry. The commission can currently routinely use those powers under the appropriate safeguards, but the clause may mean that it would be unable to do so, and its compliance work may be frustrated. I am sure that that is not something the clause was intended to do when it was added to the Bill in the other place.
There will be some circumstances where what is in the charity’s long-term interests does not align with the application or use of assets for a particular charitable purpose—for example, where a charity must pay a contractual debt that puts its solvency at risk or where the charity’s purposes can no longer be met.
Furthermore, the clause covers all charity assets, which includes property other than land, such as investments. That raises the separate issue of the duties that apply in that context. For example, the clause could mean that trustees would be able to make an investment only where that investment was consistent with the purposes of the charity. Although that is sometimes the case, trustees can, and often do, make investments solely for the purpose of obtaining the maximum financial return consistent with commercial prudence. In that scenario, the charity’s purposes are furthered by the way in which the income from the investment is subsequently applied. Clause 9 as it stands could hamper trustees’ discretion to make such investments.
The clause also gives the Charity Commission a new and wide-ranging role in policing the use and disposal of charity assets that is inconsistent with our aim of helping the commission to focus on its core regulatory responsibilities. Requiring the commission to ensure that charities are not required to use or dispose of assets would be more than just an unwelcome distraction for the regulator at a time of very limited resources.
There is also the preserved right to buy in relation to housing associations, which 630,000 tenants already enjoy, and the right to acquire, which 800,000 tenants currently have. Those rights, when exercised, would compel the charity to sell its assets. Those pre-existing rights, which are set out in legislation, could be undermined by clause 9.
I hope I have been able to make a compelling case to the Committee for why we should remove the clause. As my right hon. Friend the Minister for the Cabinet Office and Paymaster General said on Second Reading, it is regrettable that a Bill with widespread support was used
“in a narrow attempt by the other place to undermine the Government’s manifesto commitment to extend the right to buy”.—[Official Report, 3 December 2015; Vol. 603, c. 561.]
For that reason, and because of the damaging unintended consequences clause 9 would have for charities, we cannot allow it to stand, and oppose its inclusion in the Bill.
Anna Turley (Redcar) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mrs Main. I would like to echo felicitations for a happy new year for everyone on the Committee. I would also like to thank everybody across the community and voluntary sector who spent time over Christmas and the new year, as we know they will have done, in their communities undertaking many hours of community and voluntary service, helping those who are most vulnerable and in need at what for most of us should be a happy time.
I appreciate the Minister’s words on clause 9, to which I listened with interest, particularly about the amendments to the Housing and Planning Bill. We believe the clause is extremely important and we will try to maintain it in the Bill.
I pay tribute to our noble Friends in the other place who added the clause to the Bill, where we believe it should remain. It simply and effectively states the existing legal position and supports trustees in their existing duties by ensuring that they are able to adhere to their charitable aims and objectives, and it protects them from being compelled to undertake an action that is at odds with their charitable purposes.
The clause is particularly relevant to housing, as the Minister mentioned, and aims to protect charities and housing associations when the Government later mandates them to sell their charitable property under the right-to-buy proposals. I will come back to his point about it being a voluntary proposal.
The debate in the other place saw Tories, Lib Dems and Cross Benchers line up to condemn the Government’s proposal. I am surprised they are persisting in trying to remove the clause. As the Minister knows, the Opposition are not against the right to buy. Indeed, we want those who desire to be homeowners to achieve that. While the number of homeowners has fallen under this Government by more than 200,000, under Labour from 1997 to 2010, the number of homeowners rose by more than 1 million. We support people’s aspiration to own their own home.
However, the problem is compulsion. We want to limit the power of the Government to direct a charity against its independent will, and contrary to its charitable purposes, to dispose of its assets according to the Government’s latest whim. That is an infringement of the independence of charity, community and voluntary sector organisations. For many housing associations, it will go against the grain of their aims and objectives.
The Minister mentioned the voluntary agreement, but it was not unanimous and many housing associations do not sign up to that principle. He also said that the amendments in the Housing and Planning Bill will protect charities’ right to dispose of assets as they wish. That may be the case for that individual policy in the Housing and Planning Bill, but the clause goes wider—it is about all assets, not just about housing and planning. We believe clause 9 is still required.
What after housing might be next on the Government’s list in requiring charities to purge themselves of their assets? The principle is broader than simply housing, although housing is the focus. Housing associations, most of which are charities, provide 2.5 million homes for 5 million people on affordable rents. They are rented privately and many enable vulnerable people, or those with disabilities or care needs, to live independently. Other properties are for shared ownership to help those on lower incomes buy their homes.
Housing associations build 45,000 homes a year and would ideally like to build 120,000, matching what private developers are able to do. That aim could be undermined if they are forced to sell off their stock.
At the same time as the Committee is sitting, the House will debate the Housing and Planning Bill on Report and Third Reading. We believe that the Bill will lead to a huge loss of affordable housing. The Office for Budget Responsibility confirmed in its November economic and fiscal outlook that Government policies since the election could lead to 34,000 fewer housing association homes being built over the next five years.
We believe that, at every opportunity, the Housing and Planning Bill restricts the ability and obligation of the public and private sectors to provide genuinely affordable homes, and that it will intensify the spiral of ever-higher housing costs. The right-to-buy proposals will contribute to that, which is why we seek to protect charities from being obliged or compelled to be part of that.
The Opposition have always said that the extension of the right to buy to housing associations through the Bill is unworkable and wrong. It will lead to a severe and irreversible loss of affordable homes at a time when they have never been more needed, because there is no genuine plan for a one-to-one, like-for-like replacement.
Moreover, the right-to-buy proposals are expected to cost a staggering £5 billion or even more. We know that civil servants have warned Ministers about the costs and the difficulties of replacing the homes sold, leading to a shortage of affordable homes. Shelter predicts that the right-to-buy proposals could lead to the loss of 180,000 affordable homes over the next five years, when we already have a well known crisis in our housing supply.
Wes Streeting (Ilford North) (Lab)
Happy new year to all members of the Committee. I support my hon. Friend the Member for Redcar in defending the inclusion of clause 9 in the Bill. In the Minister’s response to the inclusion of the clause and the debate in the House of Lords, he cited extensively the changes made to the Government’s approach to the disposal of housing association stock. That context is particularly important. Given the fact that the Government attempted an appalling land grab on housing association stock, to the extent of threatening housing association providers that did not comply with the objectives of public policy with taking their assets by force of statute, it is unsurprising that the Lords chose to include the clause, so that the assets of those housing associations could be protected. The Government’s approach may have changed—many housing associations have chosen to back down from confrontation with them—but the way in which housing associations were effectively press-ganged by the Government is totally unacceptable and not the way to do partnership.
I wonder whether as many housing associations would have rolled over if we were closer to the end of the Parliament than to the beginning, although I appreciate that many housing association trustees were placed in an invidious position. I might have wished them to take a stronger stance, but given the pressure they were put under by the Government perhaps it is unsurprising that they rolled over.
When I read the Lords’ debate on the clause, I was struck by the contribution from Lord Beecham, who said that although the clause appeared because of Government policy on housing associations, it could have wider application. For example, he cited charities running medical services and the National Trust. However, given that many parts of the voluntary sector are effectively involved either directly or indirectly in providing public services or picking up the slack when public services have been cut, it is not beyond the Government’s wit or imagination to find other areas where they might like to steamroller around and seize charitable assets.
At the heart of clause 9 there is an important principle that dates back to Elizabethan times: many people who give to charities make those gifts or bequests for specific charitable purposes. It should not be possible for the Government—not only this Government, but any Government—to direct charities to use those assets for different purposes, however well intended, desirable or, indeed, undesirable the Government’s objectives may be.
The clause is important because it provides protection not just in relation to housing associations—the Minister makes the case that that may be unnecessary given the change of approach—but more generally, so that if a Government, whatever their political leaning, want to use charitable assets for purposes for which they were not gifted or bequeathed, they will have to accept that those assets are protected. If not, they will have to amend legislation or provide a specific exemption, which would generate a very worthy debate in this House or in the Lords. For those reasons—and, as I have said, given the appalling way in which the Government conducted themselves immediately after the election—I strongly support the inclusion of clause 9 and support my hon. Friend the Member for Redcar in voting to keep it.
Mr Wilson
I will respond to a few of the points made by Opposition Members. On the issue that not all housing associations have signed up for the deal, as I said earlier, 93% of the total housing association stock is covered by those housing associations that have said yes to getting involved in this deal, which is voluntary. The message from the Opposition seems to be that the deal is not voluntary, but compulsory. It is quite the opposite; 93% of the housing stock in England has signed up for this deal.
Peter Kyle (Hove) (Lab)
The Minister cites the example of 93% of housing stock being covered by housing associations. Will he give the percentage of housing associations that are signing up to the Government’s plans?
Mr Wilson
I am glad to hear the hon. Gentleman say that he wants more homeowners in the country. One way to do that is to enable people to buy their own home in this way—1.3 million extra tenants will be able to have the advantage and security of owning their own home, which is a laudable ambition for any Government.
As for whether the right place to discuss the detail is here or on the Floor of the House, the Housing and Planning Bill is back before the House tonight and we are discussing a lot of things that relate more to housing matters and that Bill than to charitable matters. The right place to raise some of these issues would be later tonight on the Floor of the House.
On the Charity Commission’s powers, and in response to the point made by the hon. Member for Redcar, the Charity Commission did not ask for the responsibilities that have been inserted by this clause in the other place, but it did ask for many of the other responsibilities and powers that we are passing to it in the Bill.
The finances that will be released to housing associations through the sale of properties is substantial, as the hon. Member for Ilford North said. As it is a like-for-like replacement, the amount of affordable housing stock should increase substantially. We are undertaking a pilot with five housing associations. It is under way and should enable us to hone and inform the detail of the final scheme that we put in place.
I hope that that answers the main questions raised by Opposition Members. It is important to note that the Government have begun the process with the announcement yesterday of 13,000 new affordable houses, which we will build on Government land and contract directly rather than going through local authorities or housing associations. That is a big step forward to try to break the logjam that we have seen in affordable housing in the past couple of decades. By the end of the Parliament, we hope that we will have been able to deliver 200,000 new starter homes that are affordable homes for first-time buyers under the age of 40, which will give people with the ambition of owning their own home a first step on the housing ladder. That is a laudable aim for any Government to have.
Mr Wilson
After that excitement, we can get on with the proceedings of the Committee.
Under the current law, there are several criteria that disqualify a person from being a charity trustee. The automatic disqualification provisions date back to the Charities Act 1993 and represent an important way of protecting charities from those who might seek to abuse their position of trust, whether for personal financial gain or to access vulnerable people for abuse. The existing criteria for disqualification include any unspent conviction for an offence involving deception or dishonesty; where the person is an undischarged bankrupt or disqualified company director; and where the Charity Commission or court has removed the person from serving as a trustee.
Clause 10 does two things. First, it adds new criteria for a person to be automatically disqualified from being a charity trustee. Secondly, it extends disqualification beyond trusteeship to cover the chief executive and chief finance officer positions in a charity. The existing criteria for automatic disqualification remain unchanged.
In practice, the Charity Commission’s experience has been that the existing criteria are useful but too narrow, and that they do not cover several areas that ought to merit automatic disqualification, including convictions for serious terrorist offences, money laundering or bribery. Many people would be surprised that those offences do not already result in automatic disqualification, although in some cases there may be an overlap with existing disqualification if the offence involves dishonesty or deception.
I would like to say something about terrorist and extremist abuse of charities. The Charity Commission recognises that that type of abuse may not be relevant to most charities, but it is an increasing area of commission casework and an area of great concern. The commission has an important role in helping charities to prevent that type of abuse from occurring in the first place and in ensuring that abuse is reported and stopped and that charities are better protected in the future. It has detailed guidance for charities on how they can protect themselves from that type of abuse.
The Charity Commission also works closely with the police and other agencies where concerns are raised. In 2014-15, the commission made 506 disclosures of information to the police and other agencies as a result of concerns about charities involving terrorism or extremism—up from 234 disclosures in the previous year. It undertook 80 visits or monitoring cases to charities at risk of terrorist or extremist abuse. It also received 11 serious incident reports and undertook 32 pre-investigation assessment cases and 20 formal investigations. The new automatic disqualification provisions in the clause, along with case-by-case disqualification, which we will discuss shortly, will help to protect charities from terrorist or extremist abuse.
The extension of automatic disqualification in the clause covers other areas, such as money laundering, where added protections are needed. Let me give the Committee an example. A police investigation resulted in a number of convictions for fraud and money laundering offences, which related to funds applied by a charity in relation to contracts to house and support asylum seekers. Those convicted of fraud were disqualified from acting as trustees, because fraud is a crime involving deception or dishonesty. However, those convicted of money laundering were not disqualified, because the offence of money laundering does not fall within the existing criteria. The latter persons are no longer charity trustees, but as the law stands there is no bar on their becoming trustees again.
The new criteria for automatic disqualification proposed in clause 10 also include cases where a person has been found guilty of contempt of court in civil proceedings where a false statement or disclosure is made; cases where a person has been found guilty in the High Court of disobedience to a commission order or direction; and designation under terrorist asset-freezing legislation.
The existing disqualification provisions do not prevent individuals from being appointed to non-trustee positions of significant authority in charities. It is counterintuitive that someone can be disqualified from acting as a trustee of a charity, only to continue their abuse by taking up the post of chief executive, in which they could exploit that influence. The commission has seen that happen in some cases, with disqualified trustees taking up other senior positions in other charities and subsequently committing abuse. The clause would deal with that by preventing disqualified individuals from acting in top management positions, thereby reducing the risk of abuse. The top management positions covered by the extension of disqualification are the most senior executives—usually the chief executive officer, along with the finance director or chief finance officer, if there is one.
The clause also provides a power for the Minister for the Cabinet Office to make regulations to amend the list of criteria. The Minister is required to consult if the regulations add a new offence, and such regulations will be subject to the affirmative parliamentary procedure, requiring debate and approval before they can be made. We included the requirement to consult in response to a recommendation from the Joint Committee on the Draft Protection of Charities Bill, following pre-legislative scrutiny.
Finally, and perhaps most importantly, the existing regime of waiver under section 181 of the Charities Act 2011 will also apply to any persons disqualified under the new criteria, enabling such persons to apply to the Charity Commission for their disqualification to be waived in relation to a particular charity.
Wes Streeting
Will the Minister tell us how many waivers the Charity Commission has granted in the past 10 or 20 years?
Mr Wilson
Six waivers were granted between 2008 and 2014. Every application for a waiver in that period—six out of six—was granted.
The waiver provisions are important as they enable disqualified individuals who can show that they have turned over a new leaf to take up positions of responsibility in the charity sector. Of course, there is nothing to prevent disqualified individuals from volunteering or working for the charity in other roles, subject to disclosure and barring service checks where necessary.
As I said on Second Reading, waiver applications will be considered on a case-by-case basis. The Charity Commission will take into account the nature and seriousness of the conduct that resulted in the conviction and consequential disqualification. The commission has said that it will also take into account the type of charity concerned. In particular, it already accepts that charities working to rehabilitate offenders will often be able to make a compelling case for a waiver. The experience of someone with an unspent conviction might well be vital to the trustee body’s understanding of its aims and how best to pursue them. The commission will also take into account evidence that the person no longer represented any particular risk to charity. For example, if someone had a lifetime disqualification from an unspent conviction —say, 30 years ago—they might be able to show clearly that they had long since changed their life around. An application for a waiver would usually require the support of the charity’s trustees. A decision of the Charity Commission not to grant a waiver could be appealed to the charity tribunal, which would consider the matter afresh.
It is right that the Charity Commission looks beyond the benefits for the individual and considers the risk and benefits involved not only for any charity directly concerned, but for charities generally. The proposed disqualification powers will protect charities from individuals who present a known risk, while providing for the rehabilitation of offenders and a way back into charity trusteeship on a case-by-case basis. That strikes me as a fair and proportionate system.
As I have just told the hon. Member for Ilford North, in the past four years there have been six applications to the Charity Commission for a waiver from disqualification where the disqualification resulted from an unspent criminal conviction. All those applications were granted. I know that charities involved in rehabilitation have expressed some concern about the provisions, and I am keen to discuss with them how we can support charities involving ex-offenders through the waiver process while protecting the charity sector from known risks.
Jo Stevens (Cardiff Central) (Lab)
It is a pleasure to serve again under your chairmanship, Mrs Main. I wish all members of the Committee a happy new year.
I have a small number of points about clause 10. No amendments were tabled by the Opposition—the main substance of the clause is sensible and uncontroversial—but, as someone who worked previously as a criminal defence lawyer, I have some concerns about the process for obtaining a waiver to the automatic disqualification from being a charity trustee or holding a senior management position, and the impact on charities working in the field of rehabilitating ex-offenders.
At a time when the prison population continues to grow and the fragmentation of the probation service, post-privatisation, is seeing some private providers cutting jobs in probation by more than 40%, the rehabilitation of ex-offenders is more important than ever, and the pressure on charities working in this strand of the sector will be increasing all the time. Rehabilitation and reducing re-offending rates must remain a priority for the Government, and the work that charities such as the Prison Reform Trust and Unlock do—alongside incredibly hard-working and committed probation practitioners, who are under enormous pressure—is critical to this. Those charities have expressed concern about the waiver process and the impact it will have. I share many of those concerns.
As the Secretary of State for Justice has stated, we should not judge individuals by the worst moment in their lives. Instead of seeking to narrow opportunities for ex-offenders to reintegrate and contribute to society, we should be supporting their efforts to contribute to civil society, both through paid employment in the voluntary sector and as volunteers. The Committee may know that many charities that work to rehabilitate people with criminal records employ ex-offenders, either as trustees or, as my hon. Friend the Member for Redcar has pointed out, in senior management positions, because at the heart of the voluntary sector is the principle of working with service users, rather than doing things to them. This is no less important with people in the criminal justice system than with any other group. Any unnecessary barriers to the recruitment of people with convictions as trustees or into senior positions is, perhaps understandably, seen by charities working in this sector as a direct threat to their core mission.
I was struck by what the Staffordshire and West Midlands Community Rehabilitation Company said in its written evidence:
“Many of the people that we work with have no work history or any way of getting a reference through ‘normal’ employment routes but one of the areas that they can gain experience is by working with charities, particularly those that are service user led. If the Charities Bill makes it difficult or impossible for people with convictions to act as Trustees or paid employees of these organisations, and others, then it would be shutting down an opportunity for someone trying to re-establish themselves in society from getting a foot on the ladder. Working as a Trustee for example can give a person with a conviction(s) a sense of purpose, it can help them improve their confidence, increase their social circle, give them an opportunity to develop new skills, provide an opportunity to get a reference, to develop a work ethic, to feel that they are valued and can make an important contribution. All of these things are crucial to rehabilitation and desistance and if these opportunities are restricted or removed completely it makes the job of rehabilitating people more difficult.”
There are 1,750 voluntary sector organisations whose main client group are people in the criminal justice system, as well as a further 4,900 organisations that support them as part of their work. The Government have acknowledged the potential for waivers to be issued in cases where an appropriate individual seeks to be a trustee of, or a senior manager in, an ex-offender charity. The Minister has helpfully provided those statistics, although it is a very small number. The Government have said that they will ask the Charity Commission to review the waiver process and to consult charities.
Will the Minister tell us when the consultation is likely to take place? Is it the working group he has just mentioned? Has its work already started? When is the commission likely to issue its new guidance and the information requirements that it will be asking applicants to provide when they apply for a waiver? I have one further question, and I would be grateful if he answered it either today or in writing. Extending the waiver process to senior management positions will, of course, place additional burdens on the Charity Commission. What additional resources will be provided to the commission to meet the extra demands brought about by the inevitable increase—we are not yet clear how great it will be—in applications for waivers?
Mr Wilson
I thank the hon. Member for Redcar for supporting this clause. It is difficult to know where to begin, but I will try to address as many of the questions raised by hon. Members as possible.
I will begin with the questions raised by the hon. Member for Cardiff Central, who seems to be arguing that extending the disqualification provisions might undermine the work of some rehabilitation charities. I disagree with that because, as I said earlier, it is right that the commission looks beyond the benefits to the individual and considers the much wider risks and benefits not only to the charity directly concerned, but to the reputation of charities across the board. The proposed disqualification powers protect charities from individuals who present a known risk, which is the important thing. These are, in the main, people who present a known risk, which is why these powers and this safety net are important.
The hon. Member for Redcar asked how many people would be affected by the extension of the automatic disqualification. The truth is that we do not know the exact number of current trustees, chief executives or chief finance officers who could be affected by the extension of automatic disqualification, but our best estimate is that the number of people affected could be in the low hundreds. Compared with the number of people working in the charitable sector, it is a fairly small proportion, but as I said earlier, we will be giving those individuals a long period of time to make adjustments either by applying for a waiver or by resigning their positions, if that is what they need to do.
On the question about non-governmental organisations and wider counter-terrorism legislation, I recognise that that is a concern for some charities operating in some of the more difficult areas of the world. We need to develop a clear understanding of NGOs’ concerns and to see examples of where such issues occur. Several Departments, including the Home Office, DFID and the Treasury, have been engaging with NGOs to try to understand their concerns and to ensure that such concerns are covered in the guidance wherever possible.
Anna Turley
I beg to move amendment 7, in clause 11, page 10, line 5, after “person” add “or persons”.
This amendment aims to ensure that, where there has been a collective failure to act, a whole trustee board should be held accountable.
We support clause 11 in principle, but we seek to make some amendments to it. At present, the Charity Commission has no general power to disqualify a person from being a charity trustee on the basis of unsuitable conduct. It can remove a trustee only if it has instituted a statutory inquiry into the charity, it is satisfied of both misconduct and mismanagement in relation to the charity, and there is a need to protect the charity’s property or secure the proper application of that property. In those circumstances, the trustee who is removed is automatically disqualified. Clause 11 will provide the Charity Commission with a new power to disqualify a person from a charity trusteeship in relation to all charities, specified charities or classes of charity.
Amendment 7 would provide that the Charity Commission could take such action in regard to more than one trustee. If the conditions applied to more than one trustee—they could not be ascribed to one individual but were part of a collective failure—the amendment would allow the Charity Commission to act, particularly under conditions D, E and F. The amendment would enable action to be taken where there had been a collective failure on the part of the board to take any reasonable step to oppose misconduct or mismanagement of which the trustees were collectively aware. In the case of a serious child protection issue, for example, if a board is collectively aware of allegations of misconduct, or of misconduct itself, there is an argument for holding the board collectively responsible rather than singling out individuals. We believe that that could be important in situations where a conspiracy of silence may have led to behaviour being tolerated for fear of challenging it. That is why we have tabled the amendment, which would broaden out the clause so that it applied collectively to trustees rather than to specific individuals.
Mr Wilson
I hope it will help the Committee if I explain the purpose of clause 11 before I respond to amendment 7. The clause gives the Charity Commission a new power to disqualify a person from being a charity trustee or senior manager on a case by case basis. Most unfit individuals will be caught by the existing automatic disqualification criteria, which will be extended by the Bill, but the commission needs a power to act in cases where individuals are not excluded by automatic disqualification. The new power in clause 11 will enable the Charity Commission to disqualify an individual whose conduct clearly makes them unfit to be a charity trustee or senior manager, where, if the commission were not to act, there would be a real risk to charities or to public trust and confidence in charities.
There is no doubt that that is a tough new power for the regulator, but we made several changes to the provision as a result of pre-legislative scrutiny. More detail about the operation of the provision has been included in the Bill, and the commission must now apply a three-limbed test under the proposed power. First, one of conditions A to F must be satisfied. Secondly, the commission must consider that the person’s conduct makes them unfit to be a charity trustee. The commission has published draft guidance alongside the Bill on how it would operate that test, and it will formally consult on its guidance before the relevant provisions are commenced. Thirdly, it must consider that exercising the power is in the public interest to protect public trust and confidence in charities.
Although the power may be drawn relatively widely, its use would be targeted, and there are several safeguards. The commission has said that it expects to exercise the power on a relatively small number of occasions each year. In addition to meeting the three-limbed test, the commission will have to give notice of its intention to disqualify and give a period for representations to be made, which it must take into account before any decision is made. If a decision is made to disqualify, disqualification will take effect only after a period of 42 days has elapsed, during which the individual will be able to lodge an appeal with the tribunal. If the decision is appealed to the tribunal, the tribunal will determine the outcome. In making its decision it will consider the case entirely afresh, on the basis of all the evidence before it. It will not simply review the Charity Commission’s original decision. As I will not tire of reminding the Committee, in all its actions in the process the Charity Commission will have to abide by section 16 of the Charities Act 2011, which requires it to act proportionately.
A real case provides an example of when the disqualification power might be used. The police investigated concerns that a trustee had falsified charity invoices to claim public funding for their own personal use. The trustee accepted two police cautions for offences involving dishonesty or deception. The criteria for automatic disqualification refer only to convictions for such offences. Cautions are not considered to be convictions, so they do not result in disqualification. In the case in question the person resigned as a trustee but was free to take up trustee roles in other charities, and the commission is currently powerless to stop that. The disqualification power would enable the Charity Commission to consider disqualification of the individual on the ground that their conduct made them unfit to be a trustee.
Another example would be if a person had no relevant unspent conviction but had undergone a serious event such as being disqualified from a professional organisation while they were a trustee of a related charity, or if they had been subject to a judgment in the employment tribunal for repeated bullying of or racism towards staff members. That might mean that the person was unfit to be a trustee. Individuals often use the charity brand to reinforce their public status at the expense of the charity’s interest.
Amendment 7 would empower the Charity Commission to disqualify an entire trustee board if it was guilty of a collective failure. The commission already has the power to act and has done so, in cases of collective failure by trustees and systemic governance issues. The powers in sections 79 and 80 of the Charities Act 2011 to remove trustees do not explicitly or implicitly contain any restriction on removing trustees where that would leave one or none in place, nor does the proposed disqualification power in clause 11. There is therefore no reason why the commission would not take action against all of a charity’s trustees where that would be appropriate and proportionate and in accordance with the principles of best regulatory practice.
In most cases, however—I think the hon. Member for Redcar recognised this in her comments—the commission is likely to focus on the individuals who have been most responsible for any misconduct or mismanagement. That is in line with its much mentioned duty to act proportionately, which means that it would need to consider whether it would be fair and proportionate to hold all a charity’s trustees collectively and equally responsible for any misconduct or mismanagement. Often, in practice, some trustees are more directly responsible for the misconduct or mismanagement than others who may not have been directly involved, but who may have failed to identify it or act to stop it. Each case needs to be considered on its merits, but in most cases either there would be insufficient evidence or it would not be proportionate for the commission to take action against the entire trustee board on the basis of collective responsibility.
There is a secondary, practical point. Removing all a charity’s trustees would leave it with none, which would effectively create another quite different problem of finding and appointing appropriate new trustees. Often that is no easy task. It can take months or even years to find people who are willing to become trustees of a charity whose name has been tarnished through serious misconduct or mismanagement. We should remember that it is estimated that at any one time half of all charities have at least one trustee vacancy on their board.
Trustees who are directly responsible for misconduct must be held to account, but if there are trustees who were not directly involved in it and who are willing and able to help to get the charity back on track, it would be right for the commission to take that into account. In circumstances where there is an impact on the charity’s beneficiaries, the commission has tended to appoint an interim manager under section 76 of the Charities Act 2011, to ensure that the charity continues to operate and to get it back on track before new trustees can be appointed and take over full time. However, that can be a costly solution for the charity, as the costs of the interim manager are usually paid from the charity’s own funds, so in most cases, where there are trustees who are willing and capable of putting things right and who have not been directly involved in the misconduct or mismanagement, it is right that they be supported in getting the charity back on its feet.
Anna Turley
I beg to move amendment 5, in clause 11, page 10, line 31, leave out
“(either generally or in relation to the charities or classes of charity specified or described in the order)”
and insert,
“, as defined by the Commission in a specific document to be published after consultation and renewed every five years”.
Instead of removing this power altogether, this amendment ensures the Commission publicises its definition of “person unfit to be a charity trustee” following a consultation.
As we have discussed at length since the Committee first sat, the Bill gives a raft of new powers to the Charity Commission, on which we are placing a large burden to exercise good judgment in its decision making. I appreciate that the Minister has re-emphasised the word “proportion”, which we heard a lot during the first sitting, but again, it is a subjective word. If the Charity Commission is to be provided with discretionary powers to disqualify someone who is unsuitable, any test of unfitness should be robustly and clearly defined. Safeguards should be provided to prevent such a test from being used inappropriately.
Included in the clause is condition F, which allows the Charity Commission to disqualify a trustee on the ground
“that any other past or continuing conduct by the person, whether or not in relation to a charity, is damaging or likely to be damaging to public trust and confidence in charities generally or in the charities or classes of charity specified or described in the order.”
That is too broad and subjective. In effect it leaves the determination of who can be a charity trustee to the opinion of the Charity Commission’s board and management, rather than any due process. It opens up the possibility that the power may be used in relation to any past or continuing conduct, whether or not in relation to a charity. It seems unlikely that there is any conduct that would meet the alternative conditions A to E that would not also meet condition F. Many in the charity sector, including the National Council for Voluntary Organisations and the Association of Chief Executives of Voluntary Organisations, have asked to have condition F removed, because in the light of the other conditions in the Bill, it seems unnecessary and open to subjective interpretation.
The Charity Commission, however, has long argued for this power and welcomes its inclusion in the Bill. It says that the power will enable it to protect charities from being run by individuals who are clearly not fit to do so. We therefore believe that rather than being removed entirely, condition F should be amended so that it is subject to more rigorous definition. The amendment would ensure that the Charity Commission publicised its definition of what constitutes conduct that
“is damaging or likely to be damaging to public trust and confidence in charities”.
That could then be subject to consultation with the sector, which could help to define the kinds of scenario that could apply and play a role in exploring the word “proportion” and the decision making that we are asking the Charity Commission to undertake.
The Charity Commission has published a policy paper on how it would use the proposed disqualification power, which is a helpful guide. The commission acknowledges that this is a significant new power, and says that it is important to provide reassurance that it will use it only when there is a clear case for doing so and that it should clearly explain what it will take into account before using the power. The amendment is designed to provide that reassurance. We believe that the policy paper is a helpful draft, but it should be made a formal document, as mentioned in the Bill, published after consultation with the sector and revised every five years. For that reason, we hope the Government will accept the amendment.
Mr Wilson
I do not propose to repeat what I have said about the new disqualification power in clause 11, but I will focus on the specific details of amendment 5. I am grateful for the hon. Lady’s explanation of the amendment, which would give the Charity Commission the job of publishing at least every five years guidance on how it assesses unfitness. I recognise that this is an attempt to narrow the breadth of the commission’s discretion, as the hon. Lady said, but although I have some sympathy with the intention behind the amendment, I simply do not believe that it is necessary.
The Charity Commission has published details of its initial thoughts on how it would exercise the disqualification power, with positive feedback from charities and Members of the other place. It did so when the Bill was introduced in the other place. In the document, the commission recognises that this is a significant new power, provides reassurance that it will use the power only when there is a clear case for doing so, and says that it should explain clearly what it will take into account before using the power.
In the paper, the Charity Commission explains its initial thinking on how it would apply the first limb of the test—criteria A to F. It goes on to explain its initial thinking on how it would apply the second limb of the test—assessing a person’s unfitness to serve as a charity trustee. The commission’s assessment of unfitness, based on its regulatory experience, is that unfitness is likely to be a result of failure in one or more of the following broad categories: honesty and integrity, competence, and credibility. The commission goes on to set out, under each of those headings, the types of conduct that it would consider and examples of the conduct that in its view would demonstrate unfitness.
Under the heading “honesty and integrity”, the commission would consider evidence of abuse of a position of trust. That could be demonstrated by exploiting a position of trust for personal gain, misleading a public body, or other forms of dishonesty, deception or cheating that could give rise to concerns about the individual’s fitness to serve as a charity trustee. Dishonesty is well understood in charity law, and forms part of the 2011 Act, so this is not an entirely new or unfamiliar concept.
Under the competence heading, the commission would consider evidence that the person is incapable of or unwilling to fulfil the duties and responsibilities of a trustee. That could include, for example, failing to act
“in compliance with the governing document and rules of the charity”,
failing to keep proper accounting records for the charity, or showing
“a wilful disregard for management of conflicts of interests”.
Again, competence is a concept widely used by other regulators, so that is not entirely new either. By way of example, under section 61 of the Financial Services and Markets Act 2000, the Financial Conduct Authority may grant an application for someone to become an authorised person only if it is satisfied that the candidate
“is a fit and proper person to perform the function”
in question.
The Act does not prescribe matters which must be taken into account by the FCA in making the determination, but details are given in the FCA handbook.
Under the credibility heading, the commission would consider conduct that impacts on the individual’s personal credibility and reputation to such an acute extent
“that it calls into question their fitness to act in the quasi-public role of trustee”.
That could include, for example,
“support for and participation in discredited tax avoidance schemes”,
or
“actions in fundraising that gave them high personal benefits to the detriment of the charity or in which they used high-pressure selling or other discredited methods”.
Reputation is a key part of a charity’s assets under charity law, and a key part of the commission’s work in furtherance of its statutory objective with regards to public trust and confidence. Again, this heading is not an entirely new concept for the commission or the charity sector.
The final limb of the test is that the commission must consider whether exercising the disqualification power is
“in the public interest in order to protect public trust and confidence”
in charities. The commission’s draft paper explains that under this test it would consider whether disqualification
“will protect charities from those who would not carry out the role of trustee with integrity, honesty, capability or credibility in the interests of the charity and its beneficiaries, and ultimately be trusted by the public to do so”.
The commission sets out factors it would consider under this limb of the test, including
“the nature and seriousness of the conduct…the extent of the unfitness and whether it might be temporary or time-specific”.
I hope that hon. Members have had an opportunity to consider the commission’s draft paper, and that they take reassurance from it and from the commission’s commitment to work it up into proper draft guidance, and consult publicly on that guidance before the provision is commenced. Other regulators with similar powers are also given the responsibility, without defining the exact details in statute as this amendment proposes, to work up appropriate, proportionate and detailed guidance with regards to the use of this type of power. In addition, it is important to note that the commission keeps all of its guidance under review to ensure that it remains relevant and up to date.
As I have mentioned in previous sessions, the commission recently consulted on and launched an updated version of “The essential trustee” guidance. It is also consulting on an updated version of fundraising guidance for trustees, and there are other pieces of work under review. The commission can and does ensure that its guidance is relevant and up to date, and it will do so at the appropriate time. The whole Bill will be reviewed after three years, and subsequently every five years. This power will be looked at carefully, and the guidance will no doubt be important in the effective use of the power. On that basis, I do not think that amendment 5 is necessary. I hope that the hon. Member for Redcar will accept my explanation, and decide not to press her amendment.
Mr Wilson
I will be brief. I think I failed to answer one of the questions asked by the hon. Member for Redcar which has been raised again by the hon. Member for Cardiff Central. I will try to deal with the two areas.
One concern is that the disqualification power, in particular condition F, is too broad. The hon. Member for Redcar is right to say that it is a significant new power. The intention in clause 11 is not to use those powers frequently, as I said in my opening remarks. However, it is absolutely essential to have the criteria to enable the Charity Commission to address conduct that could seriously damage public trust and confidence in charities but would not be caught by conditions A to F.
The condition therefore needs to be considered in the context of the other criteria for the exercise of the disqualification power, namely the test of fitness and the fact that the disqualification is desirable in the public interest to protect public trust and confidence in charities. It is a tripartite matter: all three things have to be looked at together. The Charity Commission has published draft guidance on how it would exercise the powers. I have been through that in some detail.
On the other issue, I would say that there are excellent safeguards to make sure that the powers are not in misused in any way. There are six points to bear in mind that are all safeguards. First, an individual must meet new, tougher criteria to become a trustee in the first place. They are not automatically disqualified under clause 10 because we have broadened the automatic disqualifications, as we discussed in relation to the previous clause.
Secondly, if the Charity Commission then decides to disqualify the trustee, three new criteria have to be met. As I have said, those are conditions A to F. The individual has to be deemed unfit to be a charity trustee, as defined by Charity Commission guidance. Thirdly, the Charity Commission must be satisfied that disqualifying is in the public interest. Those are quite tough criteria, but then the commission has to give notice of its intention to disqualify and give a period for representations to be made, which it then has to take into account before any decision is made.
If the decision is made to disqualify, disqualification only takes effect after a period of time has elapsed, during which the individual can lodge an appeal to the charity tribunal. Another safeguard has therefore been slotted in. If the decision is appealed to the tribunal, the tribunal will be able to confirm or overturn the disqualification. A really important point is that in making the decision, the tribunal would consider the case afresh. It would not just go over what the Charity Commission looked at. It would look at it as a completely blank sheet of paper. I think those safeguards should reassure the hon. Lady that this is not a power that is going to be misused in any way.
Peter Kyle
School academies are often registered with the Charity Commission and are registered charitable entities and trusts in their own right, so some school governors of academies are also trustees. Both Ofsted and regional school commissioners can remove governors, so that will have implications for removing trustees. Clearly, different regulatory bodies have an impact on the governance arrangements of charities at the moment. Has the Minister had discussions with the Department for Education to see whether there is a conflict from this new set of regulations with other Government Departments, such as Education?
Mr Wilson
I have not had any direct conversations with the Department for Education, but my officials are in contact with that Department regularly across a number of these areas. I would be slightly surprised if that had not been discussed at some point, but the commission will be looking at all these things and taking them into account—[Interruption.] Ah, a note has appeared on my desk. Apparently, there is no conflict with other regulators’ powers and practices, so I hope that reassures the hon. Gentleman.
Jeremy Lefroy (Stafford) (Con)
I am very reassured by all these safeguards. If we come across cases where it seems that the tribunal is regularly in conflict with the decisions of the Charity Commission, will the Government then look at that to see whether there are problems in the interpretation by the Charity Commission or the tribunal about what constitutes good grounds for disqualification?
Mr Wilson
That certainly has not happened to date—there has not been a conflict between the decisions of the charity tribunal and the Charity Commission—and I do not expect it to happen, because the Charity Commission works on the basis of the trust placed in it by the charitable sector. If the Charity Commission is regularly getting decisions wrong, that will have an impact on its status within the sector. The Charity Commission does all that it can to avoid a downgrade in its status. I hope that reassures my hon. Friend that the Charity Commission would always act in the sector’s best interests, in terms of proportionality and section 16 of the Charities Act 2011, which I have constantly mentioned, and that it would always try to get its decisions right, so that it does not come into regular conflict with the charity tribunal.
Anna Turley
I thank the Minister for a thorough and helpful explanation of the steps involved and the safeguards that will be in place. To some extent, it sounded like there would be a triple lock through the commission’s criteria and the notice period for the tribunal, which is reassuring.
I thank my hon. Friend the Member for Cardiff Central for her helpful contribution. She made the really important point that the criteria have to be clear, unambiguous and properly defined. We look forward to continuing to work with the Charity Commission as it develops its explanation further. As I mentioned, we recognise the helpfulness of the policy paper that the Charity Commission published on how it would use the disqualification power. I was pleased to hear from the Minister that there will be further consultation with the sector and that the paper will be refined and published in full before implementation. That is reassuring, and we will continue to contribute to that. We look forward to working with the Charity Commission to ensure that it recognises the importance of the power, and we will work actively with the sector to refine it.
I also welcome the Minister’s reminder that the Bill will be reviewed in three years and in five years. We will seek to ensure that the Charity Commission regularly updates its guidance as well, particularly in the light of its experience in using it over the coming months and years. Given the Minister’s comments, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Anna Turley
I beg to move amendment 6, in clause 11, page 11, line 33, after “conduct” insert, “both relevant and serious”.
To ensure a more narrow and relevant definition of “conduct”.
This amendment builds on the previous one. Although I am reassured by many of the Minister’s explanations, we want to talk through the matter further and set on record our concern about the breadth of condition F. Amendment 6 would limit the definition within that condition, which allows the Charity Commission to disqualify a trustee on the grounds
“that any other past or continuing conduct by the person, whether or not in relation to a charity, is damaging or likely to be damaging to public trust and confidence in charities”.
The inclusion of the words “both relevant and serious” through this amendment is intended to put the onus on the Charity Commission to prove that it has interpreted that definition with sufficient gravity and sufficient evidence to justify the seriousness of the action, as the Minister sought to reassure me it would. We believe that the current definition is too broad and subjective, and that the amendment would help to narrow the definition and give the charity sector some reassurance.
Mr Wilson
Once again I find that I have a great deal of sympathy with the intention behind the amendment, but once again I do not think it is necessary, and I believe it could have unintended consequences.
Let me explain first why I do not think the amendment is necessary. I agree that the commission should only consider conduct that is “relevant and serious”; in fact, so does the commission itself. The commission has said that under clause 11, it would provide the individual involved with an explanation identifying the conduct in question and why it thought that conduct met condition F. If the commission took account of conduct that was not relevant to the person’s ability to act as a charity trustee or senior manager, I would expect that any such disqualification order would be thrown out by the charity tribunal on appeal. As I have just discussed with my hon. Friend the Member for Stafford, the Charity Commission would not want that to happen on a regular basis.
As I have said many times, the commission would need to act in line with the duty set out in section 16(4) of the 2011 Act, under which its regulatory activities
“should be proportionate, accountable, consistent, transparent and targeted only at cases in which action is needed”.
As a public body, the commission would also have to consider general human rights and equality duties.
The commission’s draft paper on its initial thoughts about how it would exercise its disqualification power provides some useful guidance. The commission recognises that condition F is widely drawn, but it gives examples of the types of conduct that it could take into account. For instance, if the conduct in question was by a trustee of a charity, it could consider whether it was misconduct or mismanagement, and whether it would put the charity’s property or reputation at undue risk. It could also take into account misconduct in another position of trust and responsibility; convictions relevant to the charity’s purposes, for example a conviction for animal cruelty by a trustee of an animal welfare charity; regulatory breaches that have been penalised by another authority, for example legal breaches on tax matters; a finding of misconduct by a professional body or regulator; or an adverse finding by a charity self-regulatory body or umbrella body.
I think the Committee will agree that those examples show the sorts of conduct that the regulator should consider. Whatever the conduct, which must be both relevant and serious, the commission would also have to meet the other two limbs of the test for disqualification: first, that the person is unfit to serve as a charity trustee; and, secondly, that making the disqualification order is in the public interest to protect public trust and confidence in charities. Under the disqualification power in clause 11, the commission would already need to consider conduct that was both relevant and serious.
Jeremy Lefroy
The Minister has already been helpful, but I would just like to get some clarification from him. Would somebody who has not yet served as a trustee of a charity be liable to be placed on the disqualification register, so that they would not be able to serve as a trustee of a charity, or does the register apply only to people who are already trustees or who have served as trustees? In other words, will the clause prevent people from becoming trustees in the future, or will it only apply to people who are either trustees now or who have been trustees in the past?
Mr Wilson
I think the answer to that question is “possibly”, and I would like to take some advice before I give a fuller answer. Hopefully I can get that advice fairly quickly, while I am going through the second half of my response.
I turn to the potential unintended consequence of including the words “relevant and serious” in condition F in clause 11, namely that it would cast doubt on other commission powers for which those words do not exist. At the moment, the exercise of other powers, such as the power to remove a charity trustee, depends on conduct that is both relevant and serious, even though those words are not included in the criteria for exercising the relevant powers.
I am very sympathetic to the aims of amendment 6, and hopefully, I can manage to answer the question that my hon. Friend the Member for Stafford asked. [Interruption.] Ah, yes. That is good news. The order could apply to people who are not trustees, but it would depend on the individual’s conduct. My original answer was right—“possibly”—but my hon. Friend asked a sensible and important question, and I will write to him in detail about it.
Jeremy Lefroy
I am most grateful for that. I am concerned that the provision will potentially give the commission an excuse for trawling to discover all sorts of people who commit offences and allow it to say, “Let’s get them disqualified as trustees, even though they have no desire to become a trustee.” That would cause a great deal of unnecessary work.
Mr Wilson
I see and understand the point that my hon. Friend makes. The best way for me to deal with it, as we have a period of time before Report in which we can consider the matter further, is to write to him in detail. If people were able to conduct trawling, as he calls it, that would be a worrying scenario.
I hope the Committee will understand why I believe the amendment is not necessary and could be counterproductive. I hope that the hon. Member for Redcar will withdraw it.
Anna Turley
I thank the Minister for his response and other members of the Committee for their interesting and thought-provoking questions, which help us and set out the benefit of going through a Bill line by line in Committee. It allows us to set out some of the issues that still need clarification.
In light of the Minister’s answer, and particularly the reassurance that he gave at some length on the steps that the Charity Commission will undertake to ensure that there are sufficient safeguards, we will withdraw the amendment. I am reassured to some extent, but we look forward to working with the commission in the coming months to ensure that the safeguards are sufficiently clear and agreed by the sector prior to implementation. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Charities (Protection and Social Investment) Bill [ Lords ] (Second sitting)
Rob Wilson Excerpts(8 years, 5 months ago)
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Anna Turley (Redcar) (Lab/Co-op)
I beg to move amendment 4, in clause 6, page 5, line 2, at end insert—
‘(4) An order under this section will automatically be discharged on the closure of the inquiry under section 46 which is referred to in subsection (1).’
To restrict the power to ensure that if a tribunal appeal is successful, a direction by the Commission as a result of the warning is no longer relevant.
I welcome the clause, which inserts a new provision into the Charities Act 2011 to enable the Charity Commission, after it has instituted an inquiry, to make an order directing a charity not to take or to continue certain actions that the commission considers constitute misconduct or mismanagement in the administration of the charity. The order has to specify the action that must not be made or continued, and has to set out the commission’s reason for making it. The commission will have to review any order at intervals of not more than six months and there will be a right of appeal against the order.
When the Joint Committee on the Draft Protection of Charities Bill suggested that it would be helpful if the Government chose to revisit proposal 13, it set out that the provision must be tightly drawn to clarify the circumstances in which the power can be used and the safeguards that apply, in particular the right of appeal. The previous Government accepted the Joint Committee’s recommendation and said that they would revisit proposal 13 for inclusion in the Bill—that is now clause 6. I look forward to the Minister setting out some examples of the circumstances in which the power may be used and any safeguards. I am pleased to see the right of appeal.
The new power in the clause is broadly similar to a power that the Office of the Scottish Charity Regulator has to direct that specific action is not taken. However, the OSCR’s power may take effect for a maximum of six months. There is no such limit under clause 6, although the Charities Commission must review the order at intervals of not more than six months.
The crucial issue, to which my amendment speaks, is that it is not clear whether the order may remain in place once a section 46 inquiry has been closed, so it could extend beyond the period of the inquiry. The amendment seeks to prevent that. The Charity Commission states:
“The purpose of an inquiry is to examine the issues in greater detail and investigate and establish the facts of the case so that the commission can ascertain the extent of any misconduct or mismanagement, establish the extent of the risk to the charity, its work, property, or beneficiaries, and decide what action is needed to resolve the concerns. If the allegations are not substantiated, the inquiry will say so. The ultimate aim is to stop abuse, ensure compliance and put a charity back on a secure footing. Where this is possible it may include restoring its reputation, protecting beneficiaries or assets and protecting and enhancing the reputation and public confidence in the charitable sector generally.”
That is all right and proper, and we agree with the Charity Commission’s view on the purpose of an inquiry. Once the inquiry has concluded, an order made under clause 6 should no longer be relevant and the findings of the inquiry, whether allegations are substantiated or not, should take precedence. Directions that have been given during the process of an inquiry, but which are not in keeping with the outcomes, should not be pursued.
The commission has recently clarified the fact that it has no power to require trustees to fetter the future exercise of their fiduciary powers under its general power to give advice and guidance, which appears in section 15 of the Charities Act 2011. That clarification followed judicial review proceedings in the High Court, where it was alleged that the commission had attempted to do exactly that. This is one of the concerns that we expressed earlier in the debate, and it could apply in particular to the commission’s powers to specify action that should be taken to rectify misconduct or mismanagement under clause 2.
There are situations in which the commission may direct trustees to act or not to act—clauses 6 and 7 introduce more such situations—but they are always carefully circumscribed. It is therefore extremely important that we are satisfied that the definition of such powers is carefully discussed, that their gravity is understood and that they do not continue beyond an exhaustive inquiry. That is why I moved the amendment.
The Minister for Civil Society (Mr Rob Wilson)
The clause is a sensible extension of the existing powers of the Charity Commission that are available to it when it is conducting a statutory inquiry under section 46 of the Charities Act 2011. At the moment, when a statutory inquiry is under way and the commission is satisfied that there has been either misconduct or mismanagement, or that there is risk to charity property, it may direct a charity to undertake certain actions under section 84 of the Act. The purpose of the existing section 84 power is to allow the commission to direct any action to be taken that it
“considers to be expedient in the interests of the charity.”
Legal precedent confirms that “expedient” in that context means advantageous or beneficial, so the action that the commission proposes will be of advantage or benefit to the charity’s interests, which in effect means the charity’s beneficiaries. However, the advantage or benefit must be viewed only in the context of the issues raised through the inquiry and not in the belief that it would be good for the charity in general terms. Specific examples of where the commission already uses that power include ordering a charity to undertake a governance review in a defined period; review a legal agreement; provide specified documentation by a certain date; ensure that a named individual is monitored on charity premises at all times; draw up a risk management procedure in a certain timeframe and implement that procedure; and take legal advice in connection with a matter concerning the charity and its funds.
Published figures in “Tackling abuse and mis- management: 2013-14” show that the commission used that power to direct charities on 38 occasions. As we have discussed, the commission has been exercising its power more often and more effectively, so we may well see that figure increase in the report for 2014-15, which will be published in the coming weeks.
The power to direct a charity to do something is long held and the commission has well-established procedures and policies in its armoury. The commission also has the power under section 76(3)(f) of the Charities Act 2011 to restrict a charity from undertaking certain financial transactions. That existing power can be exercised in a number of ways, including freezing a charity’s bank account; requiring the charity’s trustees to seek commission approval before entering certain transactions; and preventing specific transactions. That was used on 15 occasions in 2013-14.
The commission does not have the power to prevent a charity from undertaking actions or activities that would amount to misconduct or mismanagement during the course of a statutory inquiry. That is a loophole and the clause is a common-sense addition that will give it that power.
Some people have expressed concern that the commission could use that power to undermine freedom of association or freedom of speech, in particular for charities with religious purposes, but it is important to point out that it would be available to the commission only to prevent activities that would constitute misconduct or mismanagement were they to go ahead or continue. Therefore, if a charity engaged in unlawful political activity such as supporting a political party and holding partisan events, the Charity Commission could act to prevent further such activity from taking place.
It is worth pointing out, as the hon. Member for Redcar did, that the commission’s equivalent in Scotland, the Office of the Scottish Charity Regulator, has a similar power. Section 28 of the Charities and Trustee Investment (Scotland) Act 2005 enables the OSCR to
“direct any charity, body or person with regard to which it is making inquiries…not to undertake”
specific activities for a period of six months. The OSCR may seek a court order for longer restrictions.
The Joint Committee supported the inclusion of such a power, provided that it was tightly drawn to clarify the circumstances in which it could be used, along with the safeguards that applied, particularly the right of appeal. The new power in the clause will enable the Charity Commission to intervene to prevent misconduct or mismanagement from taking place rather than having to watch powerlessly, then take remedial action once the damage has been done.
The bar for exercising the power will be high and there will be six specific protections. First, the power can be used only in the context of a statutory inquiry. Secondly, the commission will have to be satisfied of the need to prevent misconduct, mismanagement or risk to charity property. Thirdly, the commission must set out a statement of reasons for exercising the power and review any order regularly—at least every six months. Fourthly, the making and every review of the order will be subject to a right of appeal to the Charity Tribunal and, like all its other protective and remedial powers, this power is subject to the Commission’s duty to act proportionately under section 16 of the Charities Act 2011.
Let me give the Committee two examples of cases in which the powers might be used. In recent years, there have been several cases of charities involved in the abuse of charitable business rates relief. In such cases, the so-called charity enters into multiple tenancy agreements with commercial property owners at reduced rents without any real evidence that the tenancies are in the best interests of the charity or are used meaningfully for charitable purposes. Once occupied by the charity, the property benefits from a reduction of at least 80% in business rates relief, which can be a substantial sum. The saving is often shared between the charity and the property owner. Local councils and honest taxpayers end up losing out. The commission has taken action in such cases, but it can do so only after the event. The new power would enable the commission to direct the charity not to enter into, renew or continue any further tenancies, in effect preventing the misconduct from continuing.
Another example in which the power could be used would arise if a charity had made significant loans to companies connected to the trustees. The trustees would seek to become insolvent and to wind up the charity, writing off the loans and resulting in significant financial benefit to the companies connected to the trustees. In that case, the commission would be able to use the new power to direct the trustees not to wind up the charity, buying time to sort things out by, for example, removing the trustees, or appointing new trustees or even an interim manager to act in the charity’s best interests, which could involve calling in the loans.
Jeremy Lefroy (Stafford) (Con)
It is a pleasure to serve under your chairmanship, Mrs Main. I am interested in the Minister’s example of charity shops having 80% or more discount on their business rates. I came across an instance recently of a thriving and popular business effectively being told by the landlord to move because they wanted to put in a charity shop which was offering a higher rent than that popular business. Part of me thinks that that might be the result of a charity being able to pay a higher rent because it does not pay any rates. How would the amendment affect that?
Mr Wilson
I take the point made by my hon. Friend, but I really do not think it is a matter for the Bill. He may want to raise it with the Chancellor or the Secretary of State for Business, Innovation and Skills. I do not think it is for me to deal with it today.
Some people have argued that it should not be possible for the power to extend beyond the life of a statutory inquiry, and I think that is what the amendment of the hon. Member for Redcar seeks to prevent. However, the hon. Lady may be seeking to do something slightly different, as her explanatory statement for the amendment suggests that she wants a direction to cease following a successful tribunal appeal. I can assure her that if such a direction were appealed it would be for the tribunal to decide what would happen—for example, whether the direction would be quashed, remain in place or remitted to the charity commission to be reconsidered. If the hon. Lady is concerned that the commission could exercise the power following an official warning, let me remind her that it could be exercised only when a statutory inquiry had been opened, which itself could be appealed to the Charity Commission.
Let me explain why I think that it should be possible for a direction to remain place beyond the life of a statutory inquiry, although not indefinitely. The power to direct action not to be taken is a temporary protective power for the Charity Commission. That is why it is subject to review at least every six months, so that the commission can confirm whether it considers it necessary for it to remain in force. That process would be subject every time to the commission’s duty to act proportionately and to the right of appeal to the charity tribunal.
The power is not a permanent, remedial one designed to address the underlying issues, which may need to be addressed by the exercise of other commission powers, including removal of trustees. It is designed to prevent specific further misconduct or mismanagement from taking place once a statutory inquiry has been opened, but those individuals need to know that the power can remain in place for sufficient time so that they do not simply decide to wait for six months before attempting the misconduct again or allowing the mismanagement to occur again.
Anna Turley
I thank the Minister for his helpful response. It was extremely important to hear his clarifications, particularly about the six protections that will be in place before the power is used, and the clear and helpful examples he gave of instances in which the power will be used.
The amendment relates not to the warnings and the tribunal dealt with in clause 1 but to whether the power will continue if it is used in the course of a formal inquiry, subject to the inquiry’s final outcome. I was reassured to hear that the inquiry’s outcome and the report’s findings will take precedence in the action going forward. It is extremely important that if allegations made in the course of the inquiry are unfounded, they are quashed and no further action is taken. We also wanted to know whether, if the inquiry report showed structural issues and there was a remedy that affected those issues, that would overrule the temporary protective amendments. The Minister clarified that issue, for which I am grateful. I am reassured by his response, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6 ordered to stand part of the Bill.
Clause 7
Power to direct winding up
Question proposed, That the clause stand part of the Bill.
Mr Wilson
We are progressing through the Bill at a rate of knots, so I will try not to delay the Committee too long. The Charity Commission’s usual practice, as many of us will know, is to try to restore a charity to health following a statutory inquiry and to ensure that funds dedicated for specific charitable purposes are used for those purposes. The commission’s current powers are based on that premise; that is as it should and, indeed, will continue to be. In practice, that may mean replacing some of the trustees, directing the charity to take certain actions or reforming its governance arrangements, but the principle is one of ensuring the continuation of the charity to deliver its charitable purposes.
There are, however, rare inquiry cases where it is more appropriate for the commission to take a different approach. In those cases, it is clear that attempting to restore the charity to health is unlikely to succeed and would not be the right strategy. A good example would be sham charities set up ostensibly for charitable purposes but really operating for private gain or some other non-charitable purpose. Such a body may never have had a genuine charitable aim in the first place and the commission is unlikely to be able to restore it to health.
In such cases, the Charity Commission can and already does act to transfer any remaining funds or assets to another legitimate charity with the same charitable purposes. It can do this under its existing inquiry powers. The commission can remove the trustees, ensuring their disqualification, provided that they do not resign before the commission can do so. What the commission cannot do under its current powers is tackle the empty shell that is left, so there is a risk that the empty shell could be reactivated at a later date to be used for further misconduct.
Wes Streeting (Ilford North) (Lab)
Will the Minister give the Committee a sense of the scale of this problem? How many charities does the commission intend winding up in any given year?
Mr Wilson
I will certainly ask the Charity Commission to make sure that the hon. Gentleman has those figures; I hope that that will happen by the end of my comments, but if not, it will be straight after. [Interruption.] That is quite impressive—I thank my officials. I can tell the hon. Gentleman that there will be one or two such occasions a year.
The new power in clause 7, which I admit is quite a straightforward power, will enable the Charity Commission, in the context of a statutory inquiry, to act to transfer any remaining assets of the charity under inquiry to another charity with the same charitable purposes, something the commission can already do under its existing powers, and then—this is the new provision—direct that the empty shell of the charity be wound up, which it cannot currently do. This power will be rarely used by the Charity Commission. The commission estimates it will be exercised on only one or two occasions each year, as I have just said, and it is subject to a range of safeguards.
The power to direct winding up will only be available in the context of a statutory inquiry and where the commission is satisfied that there is misconduct, mismanagement or risk to charity property. The commission must be satisfied that the charity does not operate or that its charitable purposes could be more effectively promoted if it were to cease to operate and that the exercise of this power is
“expedient in the public interest.”
As I have said several times, all the Charity Commission’s powers must be exercised in line with the commission’s duty in section 16 of the Charities Act 2011, which requires the commission to have regard to the principles of best regulatory practice, including the principles by which regulatory activities should be proportionate, accountable, consistent, transparent and targeted only at cases in which action is needed. So there is a high bar for the commission to make the case for winding up following an inquiry.
The commission is required to publish details of a proposed winding-up order and to invite representations from any interested party. The commission must take into account any representations it receives before making the order to direct winding up. In most cases, the commission will be expected to allow 60 days for the making of representations before it can make the order. It can shorten that period when it considers it necessary to make the order sooner to prevent or reduce misconduct or mismanagement, or to protect the charity’s property or property that may come to the charity. An order directing the winding up of a charity can be appealed to the tribunal by its recipient and the charity’s members, so ensuring proper judicial oversight.
The clause will enable the commission to direct the charity’s trustees, officers or employees to take action to wind up that charity. The commission itself cannot wind the charity up, as that would involve the commission acting in the administration of the charity—something that it is prohibited from doing by law. The Joint Committee welcomed the proposed winding-up power, saying:
“We are persuaded that the power to direct the trustees of a charity to wind it up in certain circumstances and transfer resources elsewhere would only be used in rare circumstances and that, in such circumstances, the Charity Commission would use it sparingly, given its significance. We therefore support the inclusion of clause 6 of the draft Bill”—
as it was then—
“subject to an amendment setting out the publication scheme for a notice of intention to direct the winding up of a charity.”
We amended the draft Bill to include the requirement to publish a notice and consider representations, as recommended by the Joint Committee.
Let me give the Committee an example of where this power could be used. The commission has information suggesting that one of only two trustees was acting while disqualified. The finances were being grossly misrepresented, funds were being misappropriated and the commission had been given false or misleading information. It reported its concerns to the police, highlighting potential criminal offences. The disqualified trustee left the charity, leaving only one trustee, who was unable to explain the position. The remaining trustee was potentially vulnerable and had not been privy to the disqualified trustee’s actions. The commission found that the charity had been used for years to personally benefit the disqualified trustee, who was later convicted and imprisoned for theft. It had applied only nominal amounts for its charitable purposes. The commission decided to remove the charity from the register, as it was not operating, but the remaining trustee did not take action to wind up the charity. The commission does not have the power to force the trustee to do so and cannot do so itself. In such cases, the use of the proposed power would clarify the position, provide for the proper application of assets and ensure that the charity could not later restart operations with a risk of further abuse. Although its use will not be common, I hope the Committee will agree that this will be a useful tool in the Charity Commission’s armoury.
Mr Wilson
Clause 8 should be fairly uncontroversial and, although I do not want to pre-empt the Committee, a fairly short one for us to consider. The clause amends an existing Charity Commission power in section 85 of the Charities Act 2011, which allows the commission to direct the application of charity funds or property when the person holding it is unwilling to apply the property for the charity’s purposes and the commission considers it necessary or desirable to make the order to secure the proper application of the charity’s property.
The purpose of the clause is to extend the power and enable the commission to make an effective direction in cases where the person holding the charity property may be willing but unable to apply the charitable property. The most commons example of this problem is considered to be where financial institutions, such as banks, hold a charity’s property but are unable to comply with a commission direction to transfer that property because to do so without the consent of authorised account signatories would result in a breach of their contract with the charity for which the bank could be held liable.
For example, a number of charities subject to a class inquiry ceased to operate but funds remained in their bank accounts. The commission’s powers relating to dormant accounts could not be used until a certain time had elapsed and there was a risk that the remaining funds could be misapplied by individuals on the mandate. Before the commission could use the power as currently worded, it had to establish that a number of banks were unwilling to apply the funds without an order of the commission. The banks were willing to apply the funds but were unable because of their contractual obligations to the account signatories. Amending section 85 to include “unable” as well as “unwilling” would allow the situation to be resolved swiftly and satisfactorily and the charitable funds to be properly applied for their charitable purposes.
Wendy Morton
I am grateful to the Minister for sharing with us some examples of what the Bill will mean in practice, as he did in our discussion of the previous clause. Does he agree that the clause includes some sensible and proportionate measures that, in the round, are all part of helping to restore the trust that charities have in the public domain?
Mr Wilson
My hon. Friend makes a very good point. The clause is partly about restoring trust. It is also about making the Charity Commission work better and more efficiently and focus its funds on the areas where it can really make a difference—day in, day out. She is absolutely right.
Other barriers may make a person unable to comply with a commission direction of this type, such as restrictions in the charity’s governing document, which may prevent otherwise willing trustees or members from complying with this type of commission order because they are legally unable to do so. The Joint Committee recommended that we consider the inclusion of some form of statutory protection for a financial institution in cases where compliance with the direction from the commission in those circumstances might constitute a breach of its contract with a charity. The clause seeks to remove any obstacles by allowing the commission’s direction to overcome a contractual obligation owed to a charity.
Importantly, clause 8 continues to provide the specific, statutory protection for a financial institution—or, for that matter, any person holding the charitable property—in cases where compliance with the commission’s direction in those circumstances might constitute a breach of its contract with the charity. It is always important to consider the practical application of legislation and the clause will help the Charity Commission make use of the existing power more effectively.
Anna Turley
I echo the Minister’s concluding comments. As well as supporting the Charity Commission, the clause will support many charities that often struggle with individual trustees who may have been unable to take necessary action. This will enable the commission to step in and essentially fill a void where no one has had the power to tackle the issue.
Again, we welcome clause 8. It will amend the power in section 85 of the 2011 Act, which enables the commission to direct the application of charity property, where it is satisfied that a person is unwilling to apply it properly for the purposes of the charity and it is necessary or desirable to make an order to secure the proper application of that property.
The clause will amend section 85 in two ways. First, the commission will now have the power to direct the application of the property, if satisfied that the person is unable to apply it properly, as opposed to being unwilling. I appreciate the Minister’s examples of where that will be applicable. It is helpful to understand the case studies that will ensue.
Section 85 will be amended to ensure that compliance with the order will not result in a breach of contractual obligations to the charity. The explanatory notes and the Minister have provided an example of banks that act on client instruction. That is the most common example of the problem, where financial institutions hold a charity’s property but are unable to comply with the commission direction to transfer that property because doing so would result in a breach of their contract with the charity. That closes an important loophole and enables the Charity Commission and charities themselves to progress with securing the property.
As the Minister showed with his examples, clause 8 will continue to provide the specific statutory protection for a financial institution, in cases where compliance with a Charity Commission direction in these circumstances might constitute a breach of its contract with a charity. We support the clause and welcome it as a useful addition to the Bill.
Question put and agreed to.
Clause 8 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Sarah Newton.)
Charities (Protection and Social Investment) Bill [ Lords ] (First sitting)
Rob Wilson Excerpts(8 years, 5 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Peter Kyle
The Minister is shaking his head. I look forward to his speech and to hearing his views, because he has kindly listened to mine. Trustees are cautious people: they are volunteers and they are not often law experts. They want to make sure that the organisation for which they voluntarily give up their time does not make headlines for the wrong reasons, which means they often become cautious. I cannot see exclusions in the legislation on the application of warning notices.
For example, I hope the Minister will say that tweets and public statements that criticise Government policies will be excluded from the issuing of warning notices. He might not be able to give an example, but if the practice is allowed to continue unhindered, it may well give the impression to boards of trustees that the Government criticise bold and forthright statements that are made by trustees when their client groups are challenged, or public policy is not rolled out in their best interests. We need a very clear and unequivocal statement from the Minister, on the record, that that is not the case and that warning notices will not be used to challenge the advocacy role of charities.
Charitable organisations reach right the way through our society. For example, many academy schools are charitable trusts registered with the Charity Commission. Schools, therefore, might well be issued with warning notices. There are many areas of public service that come under the remit and regulation of the Charity Commission. I am chair of governors of a school which is registered with the Department for Education as an academy school and with the Charity Commission as a charitable trust. Has the Minister looked at these complex registration challenges and regulatory circumstances and made sure that the right exclusions are put in place to reassure trustees that the Government will always protect their interests and their independence?
Wendy Morton
Absolutely. I was about to say that it is important that we have the powers to protect and safeguard charities and their reputations and to maintain the trust of the public, on whose generosity they depend. That also helps trustees, who usually do their job out of the goodness of their hearts, often for a cause that is close to their hearts. They deserve that trust, respect and support.
It is understandable that the mention of additional powers can raise concerns. It is important to ensure that smaller charities are not disproportionately affected. I do not believe they will be, but that is something to be mindful of. It is equally important to reassure the public that charities are more accountable and, in particular, that large charities are transparent about their fundraising and their activities.
In conclusion, in our drive to maintain and strengthen public trust in charities, we should be mindful that the Bill is helping, not hindering. I therefore support it and hope that clause 1 will stand part of the Bill.
Mr Wilson
It is a great pleasure to serve under your chairmanship, Mrs Main. This is a Bill on which there is a great deal of consensus across the House. I think we all accept that the regulatory powers of the Charity Commission needed to be brought up to date, to support the regulator in tackling cases of abuse in charities.
The Bill has already been through significant scrutiny. The previous Government first published their proposals for public consultation just over two years ago, in December 2013. Those followed criticism of the Charity Commission’s powers by the National Audit Office and were based on proposals put forward by the commission itself. There was broad support for the measures from charities, particularly small ones, although some measures received mixed reactions from charities and their representative bodies.
The proposals were refined as a result of consultation and a draft Bill was published in October 2014. The draft Bill was subjected to extensive pre-legislative scrutiny by the Joint Committee on the Draft Protection of Charities Bill, ably chaired by Lord Hope of Craighead, a former deputy president of the Supreme Court. I pay tribute to its detailed scrutiny, which led to a number of improvements and refinements being made. We should also note that the Bill has already been considered in detail in the other place, in a largely collaborative and consensual way. That, too, led to sensible refinements to the Bill. I very much hope that we can continue working together in that spirit of cross-party consensus on most aspects of the Bill for the benefit of the Charity Commission and the public.
Before moving to clause 1 and the amendments on official warnings, I want to make three more general points. First, I repeat what I said on Second Reading: the vast majority of charities are run well by decent, honest people who selflessly want to do good for the benefit of others. When considering these powers, it is important to remind ourselves that they will help to protect public trust and confidence in charities generally and will target only the minority involved in abuse.
Secondly, I want to place on record my thanks to the staff and the leadership at the Charity Commission, who are transforming the commission into a modern, proactive, risk-based regulator and who will use the new powers in a targeted and proportionate way. I was pleased to see that, when the National Audit Office returned to the commission just a few months after publishing its report, it found that it had made “good, early progress” against all its recommendations. That progress is down to the effective leadership and hard work of everyone at the commission.
The third point is an overarching one relating to the Charity Commission’s duty to act in line with the principles of better regulation, human rights and equalities duties, some of which have already been raised. These all require the commission to carefully consider a number of factors when exercising its powers. The duty is set out in section 16(4) of the Charities Act 2011:
“In performing its functions the Commission must, so far as relevant, have regard to the principles of best regulatory practice (including the principles under which regulatory activities should be proportionate, accountable, consistent, transparent and targeted only at cases in which action is needed).”
The Charity Commission also has a published risk framework that explains this regulatory approach to protecting the public’s interest in charity and how it assesses risks and manages its resources. The commission’s risk framework sets out the criteria it uses to determine whether it should open a statutory inquiry and where it is likely to use its temporary and/or permanent powers. In assessing regulatory issues that come to its attention by whatever means, the commission needs to be as sure as it can that the facts are correct and that it does not act on a false or unproven premise. It relies on information as evidence in its case work when making decisions.
The commission also has to act fairly and needs to be able to explain its actions to trustees and those directly affected by its decisions when it exercises legal powers. The commission may be called to justify its actions by the first-tier tribunal for charities or by the court. In doing so, the commission needs to show that its action has been taken on the basis that relevant issues have been properly considered. In assessing information and deciding to use it, it is important that the commission acts fairly and consistently in line with the principles set out in its guidance. The commission also considers its decision-making, as it is bound to, in accordance with the relevant statutory duties, namely those relating to the best regulatory practice, proportionality, human rights, the Equality Act 2010 and wider public law considerations.
I will now turn to clause 1 before responding to amendment 2. I will also try to respond to all the issues that hon. Members have raised during the wider debate on clause 1. The clause gives the Charity Commission an important new power to issue an official warning. This is one of the most important new powers in the Bill and is considered to be a normal power in the toolbox of modern regulators. It is already a staple tool of other regulators, such as the Care Quality Commission, the Financial Conduct Authority, the Pensions Regulator and the Solicitors Regulation Authority, to name a few.
An official warning could be issued to a charity trustee or to the charity itself where the Charity Commission considers there to have been a breach of trust or duty or other misconduct or mismanagement. The power would enable the Charity Commission to publish a warning, which it has said it would do in most cases. The commission has also said that it would not publish all warnings. The decision to publish would be in line with its current policy on publishing the announcement of statutory inquiries, which depends on whether publication is in the public interest. The Charity Commission would not publish an official warning if it considered that it would not be in the public interest to do so.
The Charity Commission does not expect to use the power too often. It is hard to put a precise number on it, but the commission estimates that it would be in the dozens of warnings each year, rather than the hundreds. Let me give two examples of when the Charity Commission might consider issuing an official warning—let us remember that these are low-level activities. One example is when a charity is consistently a little late in submitting its accounts. An official warning would remind the trustees of the seriousness of their non-compliance. We recognise that this is already a criminal offence, but it is rarely investigated or prosecuted as such. An official warning would be a much more proportionate response to encourage trustees to rectify the position.
The second example is when a charity makes unauthorised payments to a connected company or payments that benefit a trustee. If the size of the sums involved meant that it would be disproportionate for the Charity Commission to take firmer action, it could issue an official warning on future conduct. As one would expect, the power is subject to a number of important safeguards.
Peter Kyle
On its website, the Charity Commission already highlights in red those charities that submit their accounts late. The commission has said that this has had a significant impact on behaviour in the sector. Is the Minister saying that this is not enough? Can he give the precise number of charities where this is not working and where there will be an impact?
Mr Wilson
Clearly it is not enough, because the Charity Commission has asked for the additional powers. I am sure the Charity Commission would be only too happy to answer the detailed question about the number of affected charities.
I want to return to the safeguards, because there are a number of important safeguards on which we should focus our attention. First, the Charity Commission must give notice of its intention to issue a warning to a charity and its trustees. The notice must specify a number of matters, including the grounds for issuing the warning and any action the Charity Commission considers should be taken by the charity to rectify the breach that has given rise to the warning in the first place.
The notice must specify a period for representations to be made about the proposed warning, and the Charity Commission must take account of any representations before it issues any warning. An official warning could also highlight the likely consequences of any further non-compliance, which would be likely to require a more significant intervention by the regulator, such as the opening of a statutory inquiry and subsequent use of its temporary protective powers or its permanent remedial powers.
Anna Turley
I appreciate the Minister setting out those important safeguards. However, there is little evidence about the timeframe in the Bill, which means that charities have no control over their ability to present their arguments and let their trustees know. We will continue to press on this issue unless the Minister has some analysis of what is a reasonable time.
Mr Wilson
I will come to that exact point in the amendment in a few moments. I hope I can give the hon. Lady some comfort that we are responding to her request.
Let me return to the important safeguards. This measure is the one new regulatory power in the Bill that we and the Charity Commission expect may impact on more charities than any of the other proposed powers. Most of the powers in the Bill are targeted at serious, deliberate abuse of a charity or serious mismanagement putting charity assets or beneficiaries at risk. The official warning power would be used more frequently by the Charity Commission as a more reasonable and proportionate way of dealing with breaches where the risks and impact on charitable assets and services are lower.
The Joint Committee on the draft Bill gave its qualified support to the official warning power, saying:
“We are however persuaded that in principle it would be useful for the Commission to have at its disposal ‘something in between’ guidance and the opening of an inquiry”.
It qualified its support for the official warning power by recommending that several points be addressed in the Bill. The Government accepted all but one of these. The Joint Committee recommended limiting the scope of a warning to a breach of statutory provision or breach of Commission order or direction.
Jo Stevens
The Joint Committee was satisfied that the issue of a warning did not meet the further safeguard and appeal to a tribunal. It reached that conclusion on the basis that necessary details were added to the Bill. However, those details are not in the Bill. Will the Minister respond to that point?
Mr Wilson
The criteria for issuing an official warning are now clearly stated in the Bill—breach of trust or duty, or other misconduct or mismanagement. These are not as narrow as the criteria recommended by the Joint Committee, but we decided that limiting the warning power to a failure to comply with a limited range of statutory provisions, or order or direction of the Commission, would result in a power that was only half effective at best. Charity law is a mix of statute and case law, and the scope of the warning power needs to reflect that. It would be wrong to limit the warning power to just breaches of statutory provisions or commission orders or directions, as this would limit the regulator to issuing warnings on less than half the legal framework.
I recognise that a breach of duty might not always be completely clearcut, but it is right that the regulator of charities should be able to reach a view on whether a charity’s trustees have breached their duties, and should be warned about their conduct. It would be wrong to expect the Charity Commission to have to open a statutory inquiry and consider exercising its more serious compliance powers in cases where charity trustees have breached their duties but not a specific statutory provision.
Anna Turley
The Minister is being extremely generous with his time. Does he agree that there are things that lie between breaking a statutory definition and what we are talking about here, which is quite a low level of concern: a breach of trust or duty, or other misconduct or mismanagement? That is quite broad in scope. Should there not be further definition—not necessarily in statute, but perhaps from the Charity Commission—to identify the criteria for that?
Peter Kyle
We are all very grateful to the Minister, who has been generous with his time, for allowing us to probe for more detail. The Joint Committee also recommended a minimum notice period to make representations on a draft warning before it was issued. My hon. Friend the shadow Minister suggested a 14-day period, which seems extremely reasonable. Does the Minister agree?
Mr Wilson
I would like the hon. Gentleman to be a little patient. I know I am going on a bit—these are issues that need a detailed explanation—but I promise I will come to his point and answer all the questions that have been put.
On process, we have set out in proposed new section 75A(5) of the 2011 Act the matters that must, as a minimum, be included in a notice of an official warning. These include the grounds for issuing the warning and action that the Charity Commission considers should be taken to rectify the warning. The Charity Commission must give notice of a warning, set out a period for representations to be made and take account of any representations before issuing or publishing a warning. We consider these changes to significantly improve the official warning power and we were grateful for the Joint Committee’s recommendations.
Let me turn now to amendment 2, which seeks to require the commission to give at least 14 days’ notice of an official warning in every case. I can see why the hon. Member for Redcar is attracted to that, as it would ensure that trustees had sufficient time in all cases to consider the notice of intention to issue a warning and co-ordinate any representations they might wish to make.
The commission will set out in guidance how it will operate the official warning power. The Charity Commission has said it would give publicity about this and is keen to work with sector representatives on the implementation of the power. That would be done before the statutory warning power is commenced. The guidance will set out the commission’s normal approach. The commission has confirmed that it will ensure that a reasonable time for representations is given, as is the case currently when trustees comment on the content of inquiry or operational compliance case reports before publication.
The time period between giving notice and issuing warnings will vary in different cases, depending on the level and extent of previous engagement with the charity, and the subsequent level of compliance. As a starting point, I would expect that to be 14 days, but there may well be cases in which a shorter notice may need to be given.
Let me give some examples of where a shorter period may be appropriate. A charity may have been strongly advised on several occasions, both under compliance visits and in writing, about taking small but repeated amounts of cash overseas to buy supplies for a medical centre, with no audit trail and no evidence of expenditure, when an equally legitimate banking arrangement was in existence, and the centre was a registered facility. A disaster happens in the same area and as a result the demand for the charity’s services and funds rises sharply. The commission becomes aware on a Wednesday that a payment is due to be taken in cash overseas by that Friday.
In that context, the Commission would want to issue a warning to the charity regarding its financial practices to minimise the ongoing risk to charity funds. Its warning would set out what the issue was—unacceptable lack of financial controls—and how that could be remedied, such as by using the banking arrangements already in place, considering a branch transfer and also ensuring that receipts are obtained for supplies purchased to satisfy the trustees’ duty to account.
A second example is where the commission might become aware of a charity that is conducting fundraising activities—raising money from the public—in an aggressive manner or with poor financial controls. It thereby poses a risk to charity property and public trust and confidence, for example by not collecting in sealed buckets or by depositing money into personal accounts. The commission is then informed that the charity is due to participate in a fundraising event in the next seven days. Currently, in that situation, in order to protect the charity the commission would have to open an inquiry and issue directions, which would take up significant time and resources. An official warning could address the issue at an earlier stage. The commission would need to issue its notice and publish the warning within a seven-day turnaround period.
As a final example, the commission might receive a whistleblowing report providing evidence of a low-level property or asset transfer that the trustees propose to enter into. The information provided by the whistleblower and a meeting with the trustees includes evidence that the proposed property disposition or asset transfer is not being conducted in accordance with the requirements of the Charities Act and their duties as charity trustees. If the transaction proceeds, a breach of trust and loss to the charity will occur. The proposed deadline for entering into the transaction is five working days from the last meeting, and the commission would want to issue a warning about following charity law requirements when engaging in property acquisitions.
In those examples, the issues identified in the charity are limited and specific. Opening an inquiry would be time consuming and in a sense misleading, as it may suggest that there are wider or more serious issues in the charity that need addressing when this is actually not the case. It would be wrong to prevent the commission from issuing an official warning in those circumstances, where an official warning may be the most appropriate and proportionate response to the misconduct or mismanagement in question. It would not be practical for the commission to be limited to a particular timeframe. The commission would always intend to give trustees fair notice, but this period may differ depending on the nature of the case. The commission’s guidance will deal with other matters, including its policy on when official warnings will be archived or removed. Its current policy on inquiry reports is that they are archived after two years.
I hope that I have been able to explain to the Committee how the official warning power will be used by the commission and that hon. Members will agree that it represents an important new tool for the commission in tackling lower-level misconduct and mismanagement. We do not want to create a power that results in more bureaucracy and red tape where it is not needed.
I now want to return to some of the issues raised in the debate, many of which were raised by the hon. Member for Redcar. Let me begin with misconduct and mismanagement and whether there will be guidance on this. The commission’s statutory responsibilities allow it to investigate issues that pose a significant risk to charities and to check abuse. Abuse is misconduct or mismanagement in the administration of a charity. The words “misconduct” and “mismanagement” should be interpreted as they are commonly understood. The premise is supported by case law. Misconduct includes any act or failure to act in the administration of the charity which the person committing knew or ought to have known was criminal, unlawful or improper. Mismanagement includes any act or failure to act in the administration of the charity which may result in charitable resources being misused or the people who benefit from the charity being put at risk.
Concerns of abuse are always taken seriously, but the level of the commission’s response will be proportionate and determined by the risk factors attached to the specific circumstances of the case as required by the commission’s risk framework, which I mentioned in my original comments. The commission’s updated CC3 guidance already sets out what types of action could constitute misconduct or mismanagement—I am sure hon. Members will be going away quickly to read that.
Let me turn to operational compliance cases, which are likely to be regarded very differently from official warnings. The Charity Commission already publishes details of some of its operational compliance cases when they give rise to wider lessons for charities. It is difficult to see how publishing an official warning would be any different, or why it would carry more stigma for the charity or trustee concerned. Charities exist for public benefit, so there should be transparency and accountability to the public, who are their ultimate beneficiaries.
The issue was raised of the real danger of the commission being allowed to extend the scope of its powers in a disproportionate way, with reference to the recent high-profile case of the Joseph Rowntree Charitable Trust and Cage. The reference to the JRCT-Cage litigation is a bit misleading in this situation. The court made no finding that the commission acted disproportionately—in fact, the court made no finding at all; the case was settled. Proportionality was not even one of the grounds of the challenge in the case. Furthermore, at the conclusion of the hearing, the Lord Chief Justice expressly stated that, of course, nothing at all that we have done comments in any way whatsoever on the underlying issues. Using the case is therefore a little unfair, if I may say so. It is one out of more than 500 regulatory compliance cases over the first six months of this year, so it is not representative.
Peter Kyle
I am grateful to the Minister for giving way, and I hope that it gives him a chance to catch his breath, because he has been rattling through the issues.
The Minister said that he was addressing serious concerns within the organisation. However, the point about the warnings being issued is that they are low to medium-risk warnings. Does he accept that the public sometimes do not know the difference in the types of warning and see only that a warning has been issued against a charity, and that there might well be big brand repercussions for what is a minor warning.
Mr Wilson
It is important that we do not have a situation in which charities can do no wrong. If charities cross the line, even in a low-level way, it is right that the Charity Commission should proportionately and sensibly be able to issue an official warning. That is why I fully support the principle of such warnings.
Campaigning was mentioned briefly by the hon. Gentleman early on his comments. To be clear, charities may not engage in party political campaigning. Where they undertake any types of campaigning to support their charitable purposes, they must avoid adverse perceptions of their independence and political neutrality. In addition, charities may not embark on campaigning to such an extent that it compromises their legal status as a charity. Charity Commission guidance CC9—I can see Members scrambling for CC9—is clear about what is and is not permitted. It makes it clear that charity law recognises that non-party political campaigning may be a legitimate activity and it sets out the general principles.
As long as charity trustees act within the legal framework, they are permitted to undertake activities that may include statements, lawfully and properly. That is relevant across all media platforms.
Peter Kyle
Those of us who run campaigning charities are very familiar with the regulations to which the Minister refers—
The Chair
Order. The hon. Gentleman is making a speech. The Minister may decide not to indulge in discussion of knitting, if it so pleases him.
Mr Wilson
My daughter has just taken up knitting. She is only eight and is doing a fantastic job.
It is clear that party political activity is outside the bounds of what charities should be doing. I think everyone accepts that. Sometimes there is a grey area, and if something is reported to the Charity Commission, it would rule one way or the other. I have stated on many occasions on public platforms that it is right that charities should be able to speak up for their beneficiaries, whether the Government like it or not, and I stick to that principle.
Another issue raised was the risk that adverse publicity could result from the publication of a warning. As I have said, it is important that charities are accountable to donors, beneficiaries and the general public. Since the 2006 Act, one of the commission’s statutory objectives has been to enhance that accountability. The argument against the clause is effectively that charities should not have to be accountable for things that they have done wrong. That is not fair to donors, beneficiaries and the general public, and reduces the incentives for charities to make future improvements.
A point was made about whether the commission should be allowed to publish warnings at all. Charities exist for public benefit and depend on public support, so there should be transparency. Official warnings should be published if the regulator considers it necessary to intervene, unless there is good reason not to publish the details of an official warning. Publishing those details also encourages compliance, thereby increasing the efficacy of the power.
Any published details of warnings would have to be removed by the commission after a certain period—as I said earlier, the commission currently archives after two years. There would be an opportunity to make representations about the factual accuracy of a statutory warning before it is published. A process for representations is included in the clause, following the recommendations that came during pre-legislative scrutiny. The commission has said that it will consult on and publish guidance on how it will use the official warning power before the power commences.
The hon. Member for Hove asked about the balance between the Charity Commission as friend versus the Charity Commission as regulator. I think we all agree that the commission needed to improve its regulatory performance on compliance and enforcement—the National Audit Office made that point—but that is not to belittle its other important regulatory functions, such as registration, guidance and permissions. We agree with Stuart Etherington of the National Council for Voluntary Organisations that in the past the commission sometimes blurred the distinction between being the regulator and being a friend of the sector. Getting the balance right is not particularly easy, but I am confident that the commission’s current leadership will try. The lack of guidance would create risk for the sector, but the commission’s guidance is well regarded and much has been done to simplify it.
The hon. Member for Ilford North briefly mentioned the commission’s need for extra resources to do its job. It has said that the powers would help it to undertake its compliance and enforcement work more efficiently, which is one of the reasons why we are introducing them. Gaps and weaknesses in the commission’s existing legal powers have occasionally frustrated its efforts to tackle abuse, resulting in delays and wasted costs that the Bill will help to minimise. We are helping the commission to become more efficient and to use its resources better than in the past.
A wider point was made about the amount of money that the Charity Commission receives. Obviously, all parts of Government need to contribute toward efficiency, and that includes the Charity Commission just as much as everyone else. Nevertheless, we recognise the need for targeted additional resources. In October we announced an extra £1 million of funding for 2015-16 and a further £8 million in capital investment between now and March 2017. That will be spent on technology and front-line operations, which will allow the commission to deploy its resources more effectively to prioritise its work.
I am sorry, but I do not support amendment 2. I hope the hon. Member for Redcar will understand that in practice, in the vast majority of cases, the commission will give sufficient notice, which I would expect to be 14 days. That will be set out in guidance that will enable some flexibility for particularly urgent cases. On that basis, I hope that she will not push the amendment to a vote.
Anna Turley
I thank the Minister and everyone who participated in the debate. There is a wealth of experience in this room from within the sector and on the frontline, which does credit to this place and has informed the debate. I echo colleagues’ sentiments about charities’ fantastic work in local communities, in particular their work with the most deprived in some our most challenged communities. We appreciate the work that trustees do and the value that they provide while giving up so much precious time. In the spirit of working with the Government on the Bill, we hope that it will, through better support and guidance, allow trustees and charities to develop their role and create a better regulatory environment.
I am reassured by everything the Minister has said, but we will continue to want to iron out some issues throughout the Bill’s proceedings. While the vast majority of charities abide by the regulations and work incredibly hard to fulfil the criteria, I agree that our attitude cannot be that charities can do no wrong. Equally, our attitude cannot be that charities can do no right. Charities may have felt somewhat beleaguered over the past few months as a result of some media campaigns, so it is important that we send a message that we want to support them in doing the right thing. Some concerns remains, however. The Minister said “proportionate” a lot, and we are putting a lot of trust in the Charity Commission to decide what is proportionate. While I welcome his notification that the commission will set out in guidance the timeframe for issuing warnings, I look forward to seeing the detail.
Anna Turley
The hon. Gentleman makes an excellent comparison, but what happens if, at the end of that representation, the Charity Commission does not agree? Where is the right of redress or recourse after that? Judicial review is too large, bureaucratic and expensive. It is a complex, time and resource-intensive activity that is largely inaccessible without legal assistance. It is widely known as the remedy of last resort for public body decisions when all other avenues of appeal have been exhausted.
There may be a perception among the public that charities should not use their funds to pursue judicial review applications, in particular in the light of some of what we have seen in the media in the last few days about how charities spend their money, which goes against the grain of what we are trying to encourage. It has been said that if it were possible to appeal against a warning, the commission might be reluctant to issue warnings full stop, as there would be a risk that appeal after appeal would gum up the system. This implies an awareness that judicial review is not really a remedy, as it so much more costly, complex and inaccessible than an appeal to the tribunal. In any event, research suggests that of the 103 inquiries opened by the commission between April 2014 and April 2015, no more than 5% were appealed to the tribunal, which is not a significant proportion. If the warning power is meant to be only for low-level issues but could precipitate adverse publicity—we have already discussed that at some length this morning—and the exercising of the commission’s protective powers, it is illogical that it should be more difficult to challenge than the exercising of the commission’s more extensive regulatory powers, such as the power to remove trustees, which can be challenged in the tribunal.
It is also worth noting that there seems to be confusion over whether the warning power can be used for low-level or medium-level concerns. When the power was first suggested, the Cabinet Office said that it would be for medium-range abuses, for which the commission’s protective powers could be used but it is not likely to be proportionate to do so. Yet the explanatory notes to the Bill say that it will be used where the risks are relatively low. There is still a huge lack of clarity about the difference between a medium-range and a low-level concern. The possible implications of a warning, as we know, are harsh for low-level matters, so it is important that charities have a right of redress and recourse to a tribunal. Without it, they might be unable to disprove what could potentially be false allegations. We also want to ensure that the Charity Commission considers warnings extremely seriously before issuing them.
Mr Wilson
I am grateful to the hon. Lady for her explanation of this amendment. I have already explained our thinking behind the official warning power at some length, and I do not intend to repeat it now, the Committee will be relieved to hear. I will try to be brief, but I do want to explain our thinking on why we propose relying on a representations process and judicial review as the means to challenge an official warning, rather than a right of appeal to the tribunal.
To use a footballing analogy, I consider official warnings to be like a yellow card, whereas statutory inquiry and the corrective and remedial powers that follow are more of a red card. It is absolutely right that the commission’s protective and remedial powers are subject to rights of appeal to the charity tribunal, but I do not accept that the warning power is in the same category.
Clause 1 provides for the commission to give notice of its intention to issue an official warning and for a period for representations to be made, which the Charity Commission will be obliged to consider before deciding whether to proceed with issuing the official warning. There is then the option of judicial review of the commission’s decision. We consider that that is proportionate in the sort of low-level yellow-card cases in which an official warning would be issued. It is exactly the same as the current position when the commission publishes details of its operational compliance case reports into non-inquiry cases that have attracted public interest and highlight important lessons for charity trustees.
The problem the commission currently has is that in between 20% and 30% of those non-inquiry cases, its advice and guidance is simply ignored, or the issues are not rectified in full. We believe that a right to appeal an official warning to the charity tribunal would be disproportionate and could render the power impractical for its intended purpose, which is to enable the commission to respond proportionately to the low-level non-compliance, misconduct or mismanagement that sometimes take place. The commission has told me that the resources required to defend tribunal proceedings would be disproportionate to the issues at stake in official warning cases, rendering the official warning power unusable from the commission’s perspective. The last thing I want to do, as I have said, is to give the Charity Commission powers that it cannot use because they are too bureaucratic, and that it could be criticised for failing to exercise several years down the line.
The Joint Committee on the draft Bill looked at the issue in some detail and agreed with us, stating:
“Although we note the arguments by some that the issue of a warning should be subject to appeal to the Tribunal, we see the practical difficulty this would present to the Commission as disproportionate to the benefits of doing so. On the assumption that the Government agrees to our recommendation that the necessary details be added to the face of the Bill, we are satisfied that the issuance of a warning does not need the further safeguard of an appeal beyond the ability to seek judicial review.”
It is important to point out that if the Charity Commission sought to escalate matters when an official warning had been ignored, by opening a statutory inquiry, the opening of the statutory inquiry would itself be subject to a right of appeal to the charity tribunal. Similarly, if the commission were to exercise one of its protective or remedial powers, that would also be subject to a right of appeal to the charity tribunal, so there are already two layers of appeal rights when a statutory inquiry is involved. It would seem wrong to add another layer of appeal to the tribunal in the case of an official warning, which could be used to frustrate commission regulatory action.
The Charity Commission has a high success rate on appeal—there were no successful appeals to the tribunal against the commission’s decisions to open a statutory inquiry in 2014-15. That shows that the concerns that some have expressed about the commission’s decision making are not based on reality. The issue for the commission is the amount of work and time that each tribunal case takes, even when it does not have merit. In 2012-13 appeals were made to the tribunal in five cases, and in 2014-15 appeals were made in 32 cases. The judicial review system is much better set up for setting right genuine wrongs, while discouraging or disposing of cases that are unmeritorious or that have been brought with the calculation that delay through litigation is the best tactic for avoiding robust regulation.
The requirement in clause 16, which I urge members of the Committee to look at if they have time, for a review of the legislation to begin within three years of enactment, will provide a timely opportunity to review the commission’s exercise of the official warning power and any judicial reviews of its exercise of that power.
The hon. Member for Redcar made a couple of brief points, one of which was about judicial review being costly and inaccessible. The administrative court judicial review system is much better set up for dealing with the concerns that are expressed—for putting right genuine wrongs, as I have mentioned—because there is a filter system. The tribunal, unlike judicial review, does not have a filter system in which the court’s permission to go ahead is sought. Cage is a recent example. The High Court refused permission on two of the three grounds, avoiding the spending of significant amounts of time on complex human rights arguments that were not arguable.
As for costs, a system such as that of the High Court, where costs are usually paid by the loser to the winner, can act as a sensible deterrent, encouraging parties on both sides to act reasonably and in accordance with the overriding objective.
Another question from the hon. Lady was whether the provision amounts to a direction power. The answer is no, it does not. An official warning is not the same as a direction power. The Government agreed with the Joint Committee’s recommendation to set out more detail in the Bill about the content of an official warning, including that the commission should specify how a charity should rectify any breach.
In some cases, such as a failure to file accounts, it will be obvious how a breach can be rectified. In others it will be less clear, and it is important for the commission to be able to set out guidance on the actions it considers necessary to remedy a breach. Ultimately, however, it will be for the charity’s trustees to decide how they will remedy a breach and then to demonstrate that they have done so effectively. A warning cannot force charities to take a particular course of action.
I think I dealt earlier with why there is no appeal in relation to warnings, so I shall not do that now. I hope that the hon. Lady will be persuaded to withdraw the amendment on the basis of my response.
Anna Turley
I thank the Minister for his thorough and helpful response. Again, we will not press the matter to a vote, but we still have significant concerns. As a football fan I liked the Minister’s metaphor about yellow cards, but with a yellow card there is no immediate repercussion other than having to be a bit more careful about the next tackle. For a charity, there are potentially quite damaging repercussions of a warning, particularly given the public notification. There could be an impact on a charity’s ability to fundraise, its reputation and its ability to find trustees. Those are wide-ranging implications, and something of such seriousness needs to be able to be challenged.
We still have not come to a conclusion on that point. I take the Minister’s point about the lack of error making so far in the Charity Commission’s decisions, and I commend it for that, but that is not to say that it will always be perfect. The point about warnings is that they are more low-level, so the likelihood of error is going to be substantially lower. As yet, there is no means of redress, other than judicial review, if a warning has been incorrectly given or if it is subsequently found that the Charity Commission did not abide by due process. Judicial review seems hugely disproportionate, particularly in the case of smaller charities, for what seems like the small issue of a warning. There ought to be proper discussion about different means of redress and a way of allowing a charity to challenge the Charity Commission formally.
We will not press the amendment to a vote, and I appreciate the Minister’s point that the Commission will be setting out further information in its guidance. I also welcome the Minister’s acknowledgement that the Charity Commission cannot force charities to take a particular course of action on the back of a warning. That is a welcome message to the sector. Of course, people will want to rectify any errors or issues that have led to a warning being given. I am sure many will want to guard their ability to decide the future of their charity and not be directed on how to run it by the Charity Commission. I look forward to seeing more from the Charity Commission on how it intends to ensure that.
We look forward to working through further clarification away from the statute book, but on the basis of the Minister’s comments I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr Wilson
I hope it will help if I briefly explain the purpose of clause 2. As the amendment has not been moved, I will not respond to it.
Clause 2 does two things. Firstly, it puts beyond doubt that failure to comply with an order or direction of the commission, or failure to remedy a breach specified in an official warning, constitutes misconduct or mismanagement. Second, it enables the commission to extend a suspension pending removal by up to one year, subject to a two-year overall limit.
I will deal with extending suspension first. The commission requested the extension to its existing suspension power because in some cases it must await the outcome of a criminal investigation before it can proceed with its regulatory action, and in some cases that can take a significant amount of time. In giving evidence to the Joint Committee on the draft Bill, Detective Chief Superintendent Terri Nicholson highlighted a recent case where a suspension had come “very close” to expiring under the 12-month limit while a criminal trial was ongoing.
I will provide the Committee with two other examples of when the commission may be required to extend a suspension, as envisaged under clause 2. The first is where the commission is notified of serious regulatory concerns in a charity relating to significant governance failures and the failure to account for a large sum of charitable funds. An action for civil recovery is initiated by a debtor to the charity and takes more than one year to settle, during which time the commission is only able to suspend the trustees for up to one year and cannot take further regulatory action that could prejudice the ongoing litigation.
Another example is a trustee of a charity that looks after children being charged with multiple offences against the person, some of which include offences against young people. Due to the complexity of the case, the trial does not take place for 16 months after charge, after which the case is thrown out on procedural default. The commission would not be able to extend suspension of the trustee beyond 12 months as things stand, despite the clear risk the individual may present to the charity’s beneficiaries. This provision allows the commission fully to carry out its regulatory role, as it will not be restricted by waiting for the outcome of a prosecution, while the two-year overall cap on a suspension presents an appropriate safeguard.
I now come to the provision that effectively deems misconduct or mismanagement where there is a failure to rectify a breach identified in an official warning. The provision simply makes clear that certain failures will constitute misconduct or mismanagement, which enables the commission to move to open a statutory inquiry and gives it access to temporary protective powers. It will help the commission in escalating cases in which the trustees fail to address the issues, as the commission will no longer need to make the case every time that such failures constitute misconduct or mismanagement.
Where an official warning identifies a breach to be remedied, it will be for the trustees to determine how to remedy that breach. The commission can provide advice and guidance for trustees, but it will be their responsibility to decide how to remedy the breach and to demonstrate that it has been properly remedied. Let me at this point make it clear that simply failing to follow best practice cannot, in itself, constitute misconduct or mismanagement. However, trustees must be able to show that they have properly fulfilled their duties, and demonstrating adherence to best practice will sometimes be the easiest way to do so.
Originally, we did not include the provision deeming misconduct or mismanagement in the draft Bill, but the Joint Committee suggested that it be included, provided we accept its recommended changes to the official warning power—most, but not all of which, we accepted. The Joint Committee also recommended that the commission should not be able to rely on failure to rectify a breach set out in the official warning until the period for appealing against the warning has expired, which was the topic of amendment 3. As that amendment has not been moved, I will finish there.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3
Range of conduct to be considered when exercising powers
The Chair
The question is that clause 3 stand part of the Bill. As many are of that opinion say, “Aye”.
The Chair
I did ask; no one said anything, but we will go back.
Question proposed, That the clause stand part of the Bill.
Mr Wilson
My apologies, Mrs Main. I missed that—it was all too quick for me. I am a bear with a slow brain.
Clause 3 enables the Charity Commission to take account of a person’s other relevant conduct outside of the charity under inquiry. The provision will enable the commission to consider whether there is evidence of misconduct or mismanagement in other charities or conduct outside charities that could undermine public trust and confidence in charities and therefore ought to be taken into consideration before the commission determines how to act.
On the face of it, that appears to be a very broad power, but it is not. There are significant safeguards, which I will set out. First, there must be a statutory inquiry open into charity A of which the person is a trustee or employee and the Charity Commission must be satisfied that there is misconduct or mismanagement linked to that individual in charity A before it can consider any of their conduct outside the charity as a makeweight in its decision-making. Secondly, the commission, when exercising its powers, must provide a statement of reasons under section 86 of the Charities Act 2011, which would set out all the evidence it relied on in making the decision. This would include any evidence from outside the charity, which must, of course, be relevant evidence. Finally, there is a right of appeal to the charity tribunal in relation to the exercise of the commission’s compliance and remedial powers, ensuring judicial oversight of the exercise of the relevant power.
The Charity Commission could only take account of conduct that would be relevant to the management or administration of a charity and would have to set out in its statement of reasons, under section 86 of the Charities Act 2011 or under the new official warning power in clause 1, the conduct that it was taking into account in decisions to exercise any compliance powers. The Charity Commission would not be able to take into account any conduct that was not relevant to the management or administration of a charity.
Let me give an example of when the commission would expect to rely on this power in practice. Allegations are made against an individual who is a trustee of charity A about abuse of vulnerable beneficiaries in a charitable care home. The Charity Commission opens a statutory inquiry and determines that there has been misconduct by the trustee. During the course of the commission’s inquiry, other regulators provide the commission with evidence of past misconduct that resulted in the individual’s employment in a care home being terminated. The commission would be able to take this other evidence into account before making a decision on what action would be proportionate in the circumstances.
As things stand, the commission would be able to give no weight to this other evidence of unacceptable conduct. Another example could involve an individual who is a trustee of two charities, charity X and charity Y. He may have been involved in misconduct in charity X and the commission may have already taken action in relation to charity X. The regulator may then have concerns about similar misconduct taking place in charity Y but, as the law stands, the commission cannot take into account the individual’s track record from charity X. This provision would enable the commission to do so.
We made amendments to the Bill in the other place to modernise the language of this provision and others in the Charities Act 2011. These changes were suggested by Lord Hope of Craighead, who chaired the Joint Committee and is a former deputy President of the Supreme Court. He argued, rightly, that there is no place in the 21st century for the term “privy to”. It was used in the Bill and the 2011 Charities Act to identify trustees who knew about misconduct or mismanagement but turned a blind eye. We have now replaced the term “privy to” with,
“knew of the conduct and failed to take any reasonable step to prevent it”.
That is much better for the understanding of the lay reader of the legislation, which is something we must bear in mind when we consider that trustees are almost all volunteers. This clause makes sensible changes that will help the commission with its compliance casework, and I commend it the Committee.
Anna Turley
I thank the Minister for that thorough and detailed explanation. He will be aware that we have tabled no amendments to this clause because we fully support it. It has been through a great deal of pre-legislative scrutiny and scrutiny in the other place, so we support that the clause stand part of the Bill.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Clause 4
Power to remove trustees etc following an inquiry
Question proposed, That the clause stand part of the Bill.
Mr Wilson
Clause 4 basically does two things. First, it amends the existing power in section 79 of the Charities Act 2011 to allow the Charity Commission, in the course of an inquiry, to establish a scheme in relation to a charity. A scheme is a legal document made by the commission which can amend, replace or extend the trusts of a charity. It can set out new objects and purposes for a charity or amend or remove a prohibition or restriction.
Under the current law, the Charity Commission can make a scheme only where there is evidence of misconduct or mismanagement and a need to protect charity property or secure its proper application. Clause 4 would change that so that the Charity Commission can make a scheme where there is either evidence of misconduct or mismanagement or a need to protect charity property or secure its proper application. The commission considers this change to be necessary to enable it to take action in some cases where only one of the limbs can be demonstrated, but where commission action is necessary. Let me give two examples.
Mr Wilson
Clause 5 would insert into the Charities Act 2011 a new section 79A to enable the commission to remove a disqualified charity trustee if they continue to remain in their position once disqualified.
The clause aims to close a loophole in the current legislation. The Charity Commission does deal with cases where a trustee knows that he is disqualified, but that he does not commit a criminal offence unless he “acts” as a trustee and so remains on the charity’s books as a trustee, but maintains that he does not “act” as one.
Under the law as it stands, in those circumstances the commission sometimes has to put pressure on disqualified individuals to step down from their trustee position. An example of where that may be necessary is where a trustee is disqualified by virtue of bankruptcy pursuant to section 178 of the Charities Act 2011. However, disqualification does not automatically remove the person from the position of trustee. Similarly, the charity’s governing document does not remove the individual either. In those circumstances, the commission or trustee body has to try to secure the resignation of the individual.
Mr Wilson
I will finish this paragraph and then give way.
The individual might refuse to co-operate and not resign, which means that the trustees may not be able to operate quorately or appoint new trustees. If the disqualified individual continues to maintain their position, that will open them up to potential criminal and civil liability, but that does not help the charity to move forward. This new power would enable the commission to remove the disqualified trustee in order to allow the charity to continue to function.
Peter Kyle
I apologise for interrupting the Minister mid-flow; I thought he had reached the end of the paragraph. Perhaps those drafting his speeches are putting too much into one sentence.
I agree wholeheartedly with the intentions behind the clause. Will the Minister inform the Committee how frequently it is expected the powers will be used? It strikes me as being a rare occurrence that somebody would be declared bankrupt and yet not voluntarily stand down from a charity. I do not know of any such case.
Mr Wilson
I know that my officials like to pack a lot into my speeches, so they have longer paragraphs. Obviously it is important that we have proportionality. This is the sort of issue that arises dozens of times a year, so it is a regular occurrence and we need to take action to try to control and eradicate it.
Another example might be where a charity trustee is disqualified by virtue of having been convicted of theft. The person refused to resign his position, which was problematic for the charity because it affected their quorum for business and decision-making purposes and there was no power to remove a trustee within the charity’s constitution. The trustee board is already at its maximum size and is unable to act further. This new power would allow the commission to remove the trustee so that the charity can continue to operate quickly and safely.
The commission has estimated that the power would be used dozens of times each year to remove people who were refusing to stand down even when they had been told they were disqualified. This indicates that there is an issue to deal with. It is important to equip the commission with powers to take steps to remove a disqualified trustee from their role quickly and effectively. The new power was welcomed by the Joint Committee on the draft Bill and I commend it to the Committee.
Anna Turley
I thank the Minister for that full and thorough explanation. As trustees of charities—which many members of the Committee are—many of us feel it is important to fulfil our duties fully and with confidence, should a fellow trustee board member not fulfil their duties and be disqualified as a result. The Charity Commission’s standards for disqualification are high—it has set the bar at a good level. We wholeheartedly support the clause because we think it is in the best interests of trustees around the country. They want the integrity of their boards protected, and it is important that those who have been disqualified can be removed, because trustees often do not have the ability to do so themselves. The clause gives more powers to the Charity Commission, but we wholeheartedly support them and we know it will use them wisely.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Sarah Newton.)
Charities (Protection and Social Investment) Bill [Lords]
Rob Wilson Excerpts(8 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister for Civil Society (Mr Rob Wilson)
I thank all hon. Members for their excellent contributions to this debate. Clearly, these issues are very important to them and their constituents. May I add my welcome and congratulations to the hon. Member for Sheffield, Heeley (Louise Haigh) on her first outing at the Dispatch Box? I am sure that it is the first of many.
It is clear that the House has great respect and admiration for the good work currently being done by charities throughout the UK. I also know that hon. Members have much experience and expertise of charities in the voluntary sector, which was demonstrated during some of the speeches today.
There is also a strong desire to protect the privileged position that charities hold in the eyes of the public, as was demonstrated in the latest world giving index, which found Britain to be the most generous nation in Europe. We also have a strong, diverse and growing charity sector. Over the period of the last Parliament, the number of registered charities in England and Wales increased by more than 2,000 to 165,000. Their combined income has grown by more than £10 billion, and is now just short of £70 billion a year.
Before I address the remarks that have been made by hon. Members, let me take the time to echo a point that has been made throughout this debate. The vast majority of charities in this country do excellent work and are run by good, honest and generous people. They wish to help those most in need and make the world a better place. I particularly wish to pay tribute to charity trustees, without whose unpaid efforts there would be no charity sector. For their selfless passion and commitment, they have my respect and sincere thanks. However, their good work is threatened by a small minority who seek to abuse charitable status for their own ends. The Bill will help the independent regulator to take robust action against that small minority. By doing so, it will reinforce public trust and confidence and protect the reputation of charities as a whole.
The powers in the Bill have broad support from the charitable sector and the public. The charity commissioner has been involved throughout the process of developing these proposals. The sector has also been subjected to public consultation and pre-legislative scrutiny, both of which helped inform and refine the proposed powers.
Some have argued that the Bill would give the Charity Commission too much power, or that some of the powers are too broad. In response, I say that the Bill seeks to achieve a balance. The new commission powers need to be broad enough to make them useful. If they are too narrow they would be impractical and go unused or would leave loopholes to be exploited by the unscrupulous. Charities also need to know the circumstances in which the commission will use its powers.
Although this Bill achieves the right balance, I wish to draw the attention of hon. Members to a couple of key safeguards. The Charity Commission is subject to a general duty under section 16 of the Charities Act 2011. That means that the commission must be satisfied that the exercise of any of its powers would be in line with the principles of best regulatory practice, including that it is proportionate, accountable, consistent, transparent and targeted only at cases in which action is needed.
Fiona Bruce
I thank the Minister for drawing our attention to that section. It is a pity that it was not invoked when the whole interpretation of public benefit was being debated, and that the Charity Commission did not refer itself back to it then. My concern is that this Bill could be in force before there is a clear definition of non-violent extremism. The Government’s counter-extremism strategy says that this Bill would give the commission powers to disqualify trustees for wide reasons, including past conduct and a variety of other abuses, such as extremism. In the same strategy, there is also reference to non-violent extremism. Will the Minister address that point?
Mr Wilson
I thank my hon. Friend for her contribution this afternoon and her question. She raises some extremely important issues, with which I intend to deal in full. As she has asked, let me just deal with the public benefit and religion issue first. Religious charities play a hugely important role in our public life. Over 25% of registered charities have a religious purpose and are often working in some of the most hard-to-reach communities. The advancement of religion is one of the oldest charitable purposes, and there is no question but that it is under threat. There are more than 25,000 registered religious charities, almost all of which have no difficulty in demonstrating their public benefit.
My hon. Friend mentioned the Plymouth Brethren in her speech. Its case was an exception, and I am pleased that it was resolved in a sensible way, even though it took too long. I will come back to some of the other issues that she raised later in my comments.
All the proposed commission powers in the Bill have a right of appeal, in most cases to the Charity Tribunal, ensuring that there is independent judicial oversight of the exercise of the commission’s powers. There have also been some questions, notably from my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier), about the rehabilitation of offenders.
The Government believe that individuals with serious convictions should not be able to hold the position of charity trustee and have control over charitable funds and fundraising activities until those convictions are spent or a waiver from disqualification is obtained from the commission. The waiver regime exists to enable disqualified individuals who wish to be a charity trustee to apply to the Charity Commission for their disqualification to be overturned.
A waiver application would be considered on a case-by-case basis, and the Charity Commission would take into account the nature and seriousness of the conduct that had resulted in the conviction and consequential disqualification.
A decision by the Charity Commission not to grant a waiver could be appealed to the Charity Tribunal, which would consider the matter afresh. That strikes me as a fair and proportionate system that on the one hand protects charities from individuals who present a known risk, and on the other hand provides for the rehabilitation of offenders and a way back into charity trusteeship on a case-by-case basis.
People have also raised concerns about the official warning power and the fact that there is no right of appeal to the Charity Tribunal. There is a right of appeal, which is judicial review. That is the same position as now, where the commission publishes its operational compliance case reports on non-inquiry cases that have attracted public interest and that highlight important lessons for charity trustees.
The Bill provides for a period of time to allow representations to be made in relation to an official warning, which the commission would be obliged to consider. There is then the option of judicial review. We consider that proportionate.
A right to appeal an official warning to the tribunal would be disproportionate and could tie the commission up in red tape, rendering the power impractical for its intended purpose. The last thing that we want to do is give the Charity Commission powers that it cannot use, and for which it could be criticised for failing to exercise several years hence. The Joint Committee that undertook pre-legislative scrutiny agreed that, with the appropriate safeguards in the provision, judicial review was the appropriate route for appeals.
Let me turn now to fundraising. I was deeply disappointed to see the extent of poor practices by large charities in relation to their fundraising. That matter was widely exposed by the media earlier this year following the sad death of Olive Cooke. Since then, further damaging cases have come to light, and once again the reputation of charities has been put at risk by the actions of a small minority. Public trust and confidence in charities have not been this low since 2007, and charities now rank 12th in the list of most trusted institutions, below supermarkets and television and radio stations. Only 48% of people said they trusted charities.
In response to the fundraising scandals, we acted swiftly to amend the Bill in the other place to reinforce charity trustees’ responsibilities and accountability for the charity’s fundraising. Clause 14 will encourage charities to exercise greater control and oversight of those who fundraise for their organisation. It will ensure that there are proper processes for dealing with vulnerable people and will generally safeguard the public. Large charities will make this commitment public through their annual reports so that anyone can hold them to account for how they interact with them.
I asked Sir Stuart Etherington to conduct an independent review of how fundraising regulation could be improved to safeguard vulnerable people and better respect the public’s wishes about how and whether they are contacted. He was supported by a cross-party panel of peers. I have since accepted the review’s recommendations in full, and I am now encouraging the sector to move quickly and firmly to show that it gets the public’s anger and concern and is committed to making self-regulation work.
I also expect the sector fully to back the new fundraising regulator, both financially and through compliance with its rulings. In the past few weeks, I have announced that Lord Michael Grade has been recruited as the interim chair of the new body and will oversee the set-up and initial phase of operations. I am confident that he is the right man to lead this important task and that the sector will unite behind him to address these urgent issues and restore public trust in fundraising.
The new regulator will also host the fundraising preference service, a tool that will allow people to opt out of receiving fundraising requests and that will stop charities wasting resources on approaching those who do not wish to hear from them. A working group is currently being set up to establish how the service will work in practice. In addition to a simple reset button, there will no doubt be a few more nuanced options should people wish to opt into certain charities only. Crucially, it will provide everyone with a way to get off charity contact lists they no longer wish to be on.
Charities need to demonstrate that fundraising and its self-regulation can work in the best interests of the public. They will have the chance to do so at a summit tomorrow, when the next steps for implementing better self-regulation will be announced. I hope that this will be a constructive and collaborative meeting where charities show their commitment to the new self-regulator and to meeting the public’s expectations. Should they fail to do so, I stand ready to step in to safeguard the public and their trust in charities.
For that purpose, I will seek to add two reserve powers to the Bill: one to compel charities to sign up to the new regulator and a second to mandate the Charity Commission with regulation should the sector fail to rise to the challenge. I also welcome the commission’s revision of its guidance for charity trustees on fundraising, which it has published today. It reminds trustees of their duties and responsibilities in relation to fundraising, including the need to protect their charity’s reputation and that of the wider sector.
The Bill also provides support to social investment. As many will have seen in the autumn statement, the Government have shown a strong commitment to social investment, having invested £80 million to grow social impact bonds in the UK. For charity investors, the power of social investment enables them to increase their mission impact and sustainability by making investments that provide a financial return as well as furthering the purpose of the charity. Although most charities can make social investments under the current law, it can be complex and costly to do so. The new social investment power for charities in clause 15 was recommended and drafted by the Law Commission to overcome that complexity and reduce the costs of investment for charities. It was widely supported on consultation.
The UK is already recognised as a world leader in social investment, an area in which the Government have taken pioneering action. For example, we have set up Big Society Capital and stimulated the use of social impact bonds to deliver services to some of the most disadvantaged in society through initiatives such as social outcomes funds. With the power of social investment conferred on charities by the Bill, we take another step forward in building a sustainable social investment ecosystem.
I now turn briefly to interventions and speeches. My hon. Friend the Member for South West Wiltshire (Dr Murrison) asked about the transparency of direct debit fundraisers. Professional fundraisers are already required to state how much they are paid for asking the public to donate, but I would be happy to discuss the matter further in Committee. I was delighted by the contribution from the hon. Member for Edinburgh East (Tommy Sheppard), who spoke for the SNP and may well have set a precedent under English votes for English law: he said that the SNP would not be taking part in any other stages of the Bill. I hope that that precedent will now stand.
I thank my hon. Friend the Member for Erewash (Maggie Throup) for an uplifting speech and her comments about her inaugural volunteering day. I hope it sets a precedent for other MPs. It is great to see that that will now become an annual event, and I certainly wish it well. I also thank the hon. Member for Clwyd South (Susan Elan Jones) for supporting the fundraising preference service. For the sake of fundraising in the future, it is important that it works. I also thank my hon. Friend the Member for Aldridge-Brownhills (Wendy Morton), who told us the wonderful story about poppy knitting in one of her villages. It demonstrates the value of civil society and the contribution of charities. She is absolutely right that a small kindness can make a big difference.
For several reasons, legislating for a maximum trustee term does not appeal. The evidence is that 50% of charities are carrying at least one trustee vacancy, and we must be mindful that the role is a voluntary one. My hon. Friend the Member for Erewash mentioned the impact on small charities and made an important point about minimising the burden of regulation, as did the hon. Member for Clwyd South. We are keen to minimise the burden of regulation on small charities. For example, the new reporting requirement on fundraising in clause 14 will apply only to charities with incomes over £1 million, and the new fundraising self-regulator will need to consider exemptions for small charities from the fundraising preference service.
My hon. Friend the Member for Newark (Robert Jenrick) made a strong speech that clearly set out how big charities were causing great concern for some smaller charities. It is certainly our intention to try to protect them. The Opposition raised concerns about campaigning. To be clear, charities cannot engage in party-political campaigning, and where they undertake any other types of campaigning to support their charitable purposes, they must avoid adverse perceptions of their independence and political neutrality. In addition, they must not embark on campaigning to such an extent that it compromises their legal status as a charity. The Charity Commission provides clear guidance, in CC9, about what is permitted. It makes it clear that charity law recognises that non-party political campaigning can be a legitimate activity for charities and sets out the general principles.
A concern was raised about whether the commission should be able to publish official warnings. Charities exist for public benefit and depend on public support, so there should be transparency and publication of official warnings when the regulator considers it necessary to intervene, unless there is a good reason not to publish them. There should always be an opportunity, though, to make representations about the factual accuracy of a statutory warning before it is published, and a process for representations is included in the Bill. Concerns were also raised about the scope of official warnings being too broad. We consider the scope to be right and clear. Under the Bill, a warning can be issued in respect of a breach of a statutory provision, breach of a commission order or direction or breach of a trust or duty.
I will turn briefly to the concerns about extremism raised by my hon. Friend the Member for Congleton (Fiona Bruce). Extremism or the terrorist abuse of charities of any kind is very rare but must be addressed to protect public trust and confidence in charities. Although it may not represent most of the Charity Commission’s compliance work, it represents a serious risk to public trust and confidence. The reforms proposed in the Bill are not specifically focused on counter-terrorism or extremism—they would enable the commission better to tackle all types of abuse of charity—so the Bill does not seek to define extremism, nor should it. Charities and their work can be an important protection against extremism. We have no intention, as I said, of undermining freedom of religion or freedom of speech, and the Bill has been certified as compatible with the European convention on human rights.
Mr Wilson
I am going to finish there as I know that many Members want to get away from the Chamber today.
This Bill is about protecting charities and safeguarding their place in the public’s mind. It is about ensuring that charities will not fundraise in a manner that victimises the most vulnerable in our society, and it is about giving charities a new way to utilise their assets through social investment. Charities rely on the public’s trust and confidence. Abuse, where it happens, must be rooted out. These measures have broad support, as my right hon. Friend the Minister for the Cabinet Office said earlier: 83% of the public and 92% of charities support new powers being introduced for the commission.
Charities play a vital role in our communities and this Bill aims to bolster their position in the public’s trust and help them to continue the good works they have being doing for hundreds of years, continuing our country’s long and rich tradition of charity. On that basis, I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Charities (Protection and Social Investment) Bill [Lords] (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Charities (Protection and Social Investment) Bill [Lords]:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 7 January 2016.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and up to and including Third Reading
(4) Proceedings on Consideration and proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.
Other proceedings
(7) Any other proceedings on the Bill (including any proceedings on consideration of any message from the Lords) may be programmed. —(Sarah Newton.)
Question agreed to.
CHARITIES (PROTECTION AND SOCIAL INVESTMENT) BILL [LORDS] (Money)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Charities (Protection and Social Investment) Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided. —(Sarah Newton.)
Question agreed to.