In moving Amendment No. 1, I shall speak also to Amendment No. 9, which is grouped with it. I thank the noble Lord, Lord Phillips of Sudbury, for adding his name to my Amendment No. 1.
The Minister and other noble Lords who participated in the Grand Committee on the earlier Bill will recognise the thrust, if not the precise wording, of my first amendment. Taking advantage of earlier comments from noble Lords on my amendment to the earlier Bill, I have dropped "efficiency", which is used in the excepting SI 1056 of 1965, and used instead,
"effectiveness and welfare of the armed forces of the Crown".
I hope that that formulation will appeal to those Members of the Committee who criticised the use of "efficiency". Some said that it was a rather nasty little word; others objected on the grounds that it caused confusion with military efficiency, which is clearly a matter for government to underwrite. The detailed drafting apart, I shall remind the Committee why I think that this addition to the descriptive charitable purposes in Clause 2 is important.
The Bill is a new beginning for charities. It specifically removes the presumption that currently exists—that bodies advancing religion and education or relieving poverty benefit the public. No mention is made of charitable military connections, although those, like education and religion, owe that status to the 1601 Act. I asked at Second Reading whether the omission was important to, or had a bearing on, the public benefit presumption for Armed Forces funds. I have not yet had a response. My two amendments seek to address this omission.
As noble Lords are aware, my concern is primarily for the 15,000 or so service non-public funds—SNPFs—which have been grouped as excepted charities. I shall not repeat what I said at Second Reading and in Grand Committee about the spread of activities covered or the value to servicemen and women of these funds. For decades they have had charitable status as advancing the efficiency—now I shall say effectiveness—and welfare of the Armed Forces of the Crown.
The Minister and other Ministers have told me that these SNPFs will neither lose their charitable status nor their present tax advantages as a result of this new legislation. Ministers have pointed to subsection (4) and to the catch-all subsection (2)(l), which says that everything now recognised as having a charitable purpose will continue to do so. So, they say, SNPFs are covered. However, that is just for the charitable purpose test. What about the public benefit test? Ministers can give no assurance about that. It will be for the Charity Commission, not the Government, to adjudicate on public benefit.
The Charity Commission's commentary on the description of charitable purposes in the Charities Bill confirms in paragraph 36:
"The defence of the realm . . . such as . . . promoting the efficiency of the armed and emergency services" remain a charitable purpose. Some may argue that that is good enough to safeguard SNPFs. But that is not the same as having it on the face of the Bill. Others, even the Charity Commission, may find it hard to reconcile the broad sweep and intricacies of the public benefit tests for every charitable SNPF. That possibility could arise. Optimistically, I hope that this would not be the case today. But this legislation will stand for years. Views or public perceptions could change.
Specifically, on Amendment No. 1, why, I ask myself, are the Government so averse to listing any purpose that is so closely tied to the defence of the realm, surely the prime responsibility of any government? The Minister said that the list is designed to include,
"best established and recognisable charitable purposes, but is short enough to be a memorable list".—[Official Report, 3/2/05; col. GC 36.]
I do not find that a very convincing case for ignoring the armed services and their contribution to the defence of the realm.
In summary, my case for my first amendment is that it specifies purposes directly related to the defence of the realm. Because the Bill is a new beginning for recognising charitable status, it is right to include the military charitable purposes. If it is there on the face of the Bill, it will carry forward in legislation the original military concepts of the 1601 Act, from which, given their assurances, Ministers are not attempting to resile. Let them agree this amendment as an earnest to that position, and to help to underwrite the public benefit test that the Charity Commission will set.
Turning to Amendment No. 9, I have already explained my concern that there is no guarantee in this Bill that SNPFs, which presently enjoy charity status, will continue to do so under the additional concept of a public benefit test. In the round, if it is argued that any of the 15,000 SNPFs, by advancing the efficiency of any of the Armed Forces of the Crown, thereby meet the public benefit test, then I shall, of course, be content.
Ministers infer that the Charity Commission would invariably agree that there is a public benefit for all SNPFs with an eligible charitable purpose. But reading the Charity Commission's views on public benefit tests, particularly its thinking about the judgments that will be called for on identifying a direct or indirect public benefit—the number of members of a particular trust, and so on—I wondered if it might not be better to avoid a possible difficulty rather than deal with it post-legislation, by statutory instrument. Other amendments are intended to tighten the public benefit test for a whole variety of reasons. The commission itself says that perceptions of public benefit can change over time. At some future date, SNPFs may find that they are caught in the adjustments to the definition of the public benefit test.
I am taking it as common ground in the Committee that service non-public funds merit passing the public benefit test. Amendment No. 9, which also relies on the agreement of my previous amendment, would achieve that. I beg to move.
I support the amendment, to which I have added my name. When we went through the Bill last time round at great length and deliberation, I was marginally inclined against adding a further specific purpose to Clause 2. However, on reflection I was persuaded by the arguments advanced by the noble and gallant Lord and others for these reasons.
First, the original 1601 preamble on which, somewhat paradoxically, modern charity law is still based, referred to the setting out of soldiers. The support of the military has been a charitable purpose since time immemorial and it seems slightly odd, therefore, that one has a whole series of new charitable heads specifically set out in Clause 2. I think, for example, of animal welfare or the saving of lives and various others—not that I have any objection to them, but it seems somewhat quixotic that they should find a specific place when military charities, which have been at the heart of our charity system for ever, are not mentioned specifically.
The other point is that the effectiveness and welfare of the Armed Forces of the Crown is a different genus to most other charities; it is a rather particular breed of charity, if I may put it that way. One needs to bear in mind that, in this day and age, the role of the Armed Forces of the Crown is principally the preservation and sustenance of peace—not just in these islands, where there has been too much to do in Northern Ireland, but all over the world, sometimes on their own and sometimes as part of UN peacekeeping forces.
So, by the end of reconsidering our previous debate, I was sufficiently moved towards the position of the noble and gallant Lord to add my name to his amendment.
I have some sympathy with the amendment moved by the noble and gallant Lord and supported by the noble Lord, Lord Phillips. We went through this in some detail in the previous Committee and I suspect that the Minister's speaking note will tell him that the Government believe that the Armed Forces' charities will always be included for charitable purposes and refer us to Clause 2(2)(l), which mentions,
"any other purposes within", the subsection. If that is his speaking note, it is a rather unheroic response and I am inclined to support the noble and gallant Lord if the Government cannot do better than that, but I look forward to hearing from the Minister.
I wish strongly to support the amendment. The previous legislation, starting with the 1601 Act, which merely stated purposes but did not enact law, went pretty wide. It is remarkable that it lasted for all those years from 1601 to 1958; if I may say so, I had some responsibility for helping to pilot the 1958 Act. Since then, the legislation has always kept the purpose of charitable donation and establishment in very wide terms. But now we find that there is an attempt to pin it down to the specific purposes mentioned in Clause 2(2), under the heading of "charitable purpose".
The Government, no doubt trying very hard, have attempted to list all the charitable purposes that could arise. But, as the noble and gallant Lord, Lord Craig of Radley, has pointed out, it does not contain what he has suggested it should contain; namely,
"the advancement of the effectiveness and welfare of the armed forces of the Crown".
Therefore I hope that the Government will realise that they have a left a gap which simply must be filled.
I have not previously taken part in the Bill, but perhaps I may very briefly support these amendments. The issue appears to be whether the provision should be in the Bill or not. Having listened to this debate and to my noble friend Lord Renton, I cannot see any argument or justification why it should not. It is a protection which is worthy of protecting. I cannot see what the objection should be.
It has always been my understanding in legislating that when a list of purposes is given in detail, as we have here, other purposes are, ipso facto, excluded. On that basis, it is extremely important that this particular purpose be included. Therefore I support the amendment of the noble and gallant Lord, Lord Craig of Radley.
Before I get into the meat of the arguments that have been advanced in support of these two amendments, I ought first to issue a "welcome back" to everybody who has contributed to this Bill over the many hours, days, weeks and months that we considered it very carefully before the election. I am looking forward to conducting our very courteous discussions as we go through the Bill once again.
I have listened very carefully to what has been said in advance of these two amendments. I must reiterate the views that we set out when we gave this Bill first consideration because there is perhaps a misunderstanding as to the Government's intent.
I aim to be as clear as I can on the status of charitable service non-public funds—the SNPFs. As the noble and gallant Lord, Lord Craig of Radley, has very carefully explained, these are charitable funds within the Armed Forces whose objects are, broadly speaking, directed to providing for the welfare of serving personnel and their dependants. By doing that, they contribute greatly to the efficiency of the Armed Forces of the Crown and thus to the defence of the realm. I said in Grand Committee on this Bill prior to the election, and I repeat, that promoting the efficiency of the Armed Forces has been a charitable purpose for a very long time; is now a charitable purpose; and under the Bill as drafted will continue to be a charitable purpose. Legally, that is absolutely secure and there is not a shred or scintilla of doubt about it.
As ever, the noble Lord, Lord Hodgson of Astley Abbotts, correctly anticipated part of our argument. I explain again, for the benefit of Members of the Committee, that, as the noble Lord anticipated, the legal position is achieved by Clause 2(2), which lists the descriptions or headings of charitable purposes. There are 11 specific headings and a twelfth general heading, which is paragraph (l) Clause 2(2). One of the effects of the twelfth, general, heading is to secure the charitable status of everything that is recognised under existing charity law as a charitable purpose but that does not come under any of the preceding 11 specific headings. That answers the point made by the noble Lady, Lady Saltoun.
It is achieved by Clause 2(4)(a). Needless to say, the Ministry of Defence has been carefully and fully consulted. I can advise Members of the Committee that it fully supports the Charities Bill. The Ministry believes that it is workable for service charities and is not, ultimately, unduly onerous. For that reason it is fully content with the Bill as drafted.
The Bill abolishes the current presumption of public benefit enjoyed by poverty-relief, religious and educational charities, to put all charities on an equal footing for the first time in having to show public benefit to qualify for charitable status. The noble and gallant Lord's Amendment No. 9, which I will continue to resist, would go against the grain of that by introducing, in effect, a new presumption of public benefit. The new presumption would be for the exclusive enjoyment of charities promoting the effectiveness and welfare of the Armed Forces. The noble and gallant Lord is effectively saying to Members of the Committee and, through your Lordships' House, to all other types of charities, "You have to pass the public benefit test to qualify as a charity, but Armed Forces charities ought to be a special case. They ought to be excused from ever having to pass a public benefit test". I question whether that is right.
The Government have ensured that the charitable position of service non-public funds is fully and properly protected by the Bill. There is no doubt about that. For those reasons, I invite the noble and gallant Lord to withdraw his amendment.
Perhaps the noble Lord will let me finish.
I listened to the force of the argument made by the noble and gallant Lord. I want to reflect a little more on the first of his amendments, but I also wish to make it plain that I will have to continue to resist Amendment No. 9 on grounds of consistency. If he will think further on Amendment No. 1, I am prepared to say that I will give it further consideration and that there could perhaps be discussion on the point. As it is, the Bill is entirely workable and supportable.
The noble Lord appears to be dealing with this as a matter of construction. His argument is based, apparently, on the advice that he has received from the Ministry of Defence. I assure him that that advice is very often wholly misconceived and totally deficient.
Before the noble Lord answers my noble friend, would he be so good as to point out which part of Clause 2 covers the first amendment moved by the noble and gallant Lord, Lord Craig of Radley, which states:
"the advancement of the effectiveness and welfare of the armed forces of the Crown", of which there is no mention in Clause 2?
Perhaps I can deal first with the point raised by the noble Lord, Lord Campbell of Alloway. I am not at the Dispatch Box to question the advice that we are given by the Ministry of Defence. It has had an entirely consistent position all the way through, supporting and aiding our consideration of the Bill.
I have made it plain—and I think that the noble Lord, Lord Hodgson of Astley Abbots, agrees—that Clause 2 accurately lists the descriptions and headings of charitable purposes. The twelfth heading, paragraph (l), answers the noble Lord's point on service charities.
I do not think that this is a trivial matter. I can understand fully the seriousness of the points that are being made. I do not believe that it is trivial; it is an important consideration.
The noble Lord said that what the noble and gallant Lord wants could happen anyway under Clause 2(2)(l). Looking down the sweeping list of advancements which can be considered "charities", may I suggest that the advancement of peace would be consistent? Why does not the Minister simply include that if he is to continue doggedly defending the Government's position on such a small matter?
Towards the end of my comments, I said that I thought that there was some scope for further discussion. Although I was not going to say from the Dispatch Box this afternoon that I would positively offer up an amendment, I am prepared for us at least to give some further small consideration to this before Report.
I thank the Minister for his response and all Members of the Committee who have supported me in this amendment. From what the Minister said, I take it that he is prepared to give Amendment No. 1 further consideration and, on that basis, I am happy to withdraw it.
Amendment No. 9 is very much a probing amendment. I recognise that it is perhaps asking for too much, but at the same time I do not believe that we have covered the point that is really at issue: whether the public benefit test is applicable in the round to service non-public funds or has to be applied to every single one. Although at this stage I shall be prepared not to move Amendment No. 9, the position will need to be very much clearer before I am happy.
In moving Amendment No. 2, I should like to speak also to Amendments Nos 4 and 5 which are grouped with it. I say at once that I regretted that the suggestion made by the committee that considered the draft Bill—that the question of charitable purpose should be divorced from the financial issue of tax exemption—was not accepted by the Government. However, as that is the case—and obviously will not change—there is no escape from issues of social policy in the first part of the charity law debate.
Our amendment pursues the question of policy which would make one paragraph of the list that has been referred to—the descriptions of charitable purposes—read, "for the advancement of religion or belief". There are three main headings to that argument. First, it was argued on the previous Bill—I need not repeat it—that the Bill as it stands, which refers to "the advancement of religion" fullstop, arguably does not comply with Articles 9 and 14 of the European Convention on Human Rights on the right to manifest one's religion or belief and to have that right secured without discrimination. Amendment No. 5 offers the Government a second thought on the question of cross-reference to the European Convention.
Of course, it is true that our law has in many areas come to regard freedom of religion and freedom of non-religious belief on a par. In the recent Communications Bill, the recent employment regulations and, above all, in the Equality Bill, which is going through your Lordships' House at the same time as this Bill, a key concept is that there should be a ban on,
"discrimination on grounds of religion or belief"— those words being explained as including lack of religion or lack of belief. In our submission, it is quite impossible that those words, which no doubt have a meaning, should not have the same meaning in this Bill—not by reading across from Bill to Bill, but because the object of there being no discrimination in regard to religion and belief, as the Long Title of the Equality Bill states, is the same as the object being discussed in this amendment.
The gap in the new Charities Bill is in leaving the advancement of religion not to be balanced by the advancement of non-religious belief. Of course I understand, as I am sure my noble friend will say, that the list in Clause 2(2)(a) to (k), which has been referred to in previous debates, does not exclude things that are analogous, as we shall come to.
There is new doubt in the Bill which is relevant to the argument on Amendment No. 2. Earlier this year on
"To qualify as a religion under charity law, there has to be a belief in a supreme being and acts of worship of it".
My noble friend cannot advance that argument now under the new Bill, which has very many differences from the old Bill. The old definition is no longer applicable because a new clause or a new paragraph of Clause 2 in this Bill expressly includes within "religion" a religion that does not involve belief in a god—one that does not have a supreme being. So that when it is said—and this is the second heading of our argument—that "belief" is a vague term, that is now matched in the new Bill by the term "religion", which receives no definition. To say that something is included adds to one's knowledge, but in this case it makes for more doubt about what "religion" can include.
The same terms "religion" or "belief" are not only used with the same meaning in the Equality Bill; there is even a clause in the Equality Bill which expressly protects charities which benefit persons of a particular religion or belief. The parallel is quite clear.
In the new Charities Bill, non-religious belief is still excluded from mention in the list of descriptions—I say "descriptions" advisedly—that get you halfway to the automatic tax-exempt status. That exclusion is in itself a material discrimination. The treatment is not even separate and equal.
It has also been argued that the term "belief" is unacceptable because some beliefs might be evil, irrational and offensive. Again, that argument belongs not to the test of charitable purpose but to the question which is now the second hurdle in proving you are a charitable purpose—that of public benefit. Public benefit must now be proved, and we ask for no privilege from that. But offensive purposes would not normally be for the public benefit.
Another objection has been that "belief" might include political beliefs. The Charities Commission has helped enormously in its paper RR12. It recently told charities promoting human rights that charities may properly adopt campaigning—it lists a number of things which are, broadly speaking, political methods—so long as these do not become "dominant". That perhaps is sufficient to exclude the argument on political beliefs, but Amendment No. 6 was meant to adopt that formula. However, because the amendment is defective in the form in which it appears, for which I am responsible, I shall not speak to it today.
More importantly, the Government have hitherto argued that all those arguments, even if they are wrong, are irrelevant, because an association to promote non-religious belief will always be charitable in practice under Clause 2(4), which was mentioned earlier. That is the so-called rag-bag clause, which validates any purpose
"regarded as analogous to, or within the spirit of" an explicit purpose in Clause 2(2)(a) to (k).
If a fund is expressly stated to be not for the purpose of promoting religious beliefs, but for the promotion of secular beliefs, which are not "within the spirit of" or "analogous to" religion, it is manifestly impossible for the commission, the court or anybody else to declare that it is. One has to look for something else to which it can be analogous.
Whether it is analogous to something else in the list (a) to (k) depends on the facts. In the 1980 case of the South Place Ethical Society, it was found that further purposes were analogous to education.
This is the kernel of the case. If such a purpose for the promotion of non-religious belief is always at risk of being found not to be analogous to any express description in the list, it will not be for "charitable purpose". That is a risk that "religious purposes", however they are defined, do not run. Those purposes proceed automatically across the first hurdle on to the second test of public benefit.
The balance of risk is manifestly unequal between religious and non-religious purposes. Our amendments invite the Government to remove that discrimination from the Bill.
I thank the noble Lord for giving way, as I am trying to help the debate, which is a difficult one. I wonder whether he has taken full account of the fact that there is a well-established branch of charity law, under what is called the fourth head, which is equivalent to Clause 2(2)(l), which is the promotion of moral or spiritual welfare, or the improvement of the community. There are many cases that validate that as an independent, stand-alone head of charity. Does the noble Lord not think that there is a secure basis on which philosophies of belief or ethics that are not traditionally religious can found and retain with confidence their charitable status?
I am grateful to the noble Lord as two points arise immediately from his argument. I was about to sit down, but I shall answer them now.
First, the noble Lord begins with the proposition that a charitable purpose or the purpose in a fund, document or association that is not for religious belief explicitly, and which is not within his moral improvement formula, must prove in some other way that it is analogous. That may be very difficult to do. The noble Lord has put a limit on the analogy to suit his argument, finding it in the original deed.
It follows that there is an extra risk for the advancement of non-religious belief. It is that extra risk that creates discrimination. It is impossible not to see that there is something extra—a hoop that the purpose must go through—than what is expressly stated in the list. I beg to move.
When the noble Lord referred to a supreme being, was he implying that charity law applies only to religions that are monotheistic, or does it include Hinduism, which obviously is not? Does it exclude the present law of something like the National Secular Society? Perhaps he could tell me that for my education and possibly that of other Members of the Committee.
I intervene on this amendment, although it might have been better had I intervened on Amendment No. 3 instead because I received a letter two days ago from a Mr Pravin Shah who is a Jain. I gather that he wrote to the noble Lord, Lord Bassam of Brighton, on the same day. It would be useful if the noble Lord's answer were recorded in Hansard for the benefit of all.
Mr Pravin Shah wrote to me that he was,
"particularly concerned to see that there is no discrimination against Jains and other religions which are similar to Jainism, but less well known in this country. I note that the new Charities Bill, while stating that one can have a religion that does not involve a belief in a god, does not actually contain any definition of religion or explain what criteria the Charity Commission are going to use in deciding whether something is a religion or not".
He says that he is deeply worried about that.
In his letter to the noble Lord, Lord Bassam, which he was kind enough to copy to me, Mr Pravin Shah says that he is pleased that the Bill includes a belief in more than one God. He continues:
"I was naturally therefore very pleased to see that the government have now put into the new charities Bill a provision that says that a religion does not have to involve a belief in a god. However I was surprised that there was no definition of a religion".
He goes on to say:
"I would be grateful if you would kindly let been know how it is intended that the Charity Commission will now decide if something is or is not a religion?
"Is Jainism to be considered to be a religion after the passing of this Bill? What will happen to religions which are similar to Jainism, but are perhaps less well known in this country? What criteria will the Charity Commission apply?"
I would also like to know the answer to those questions. I have intervened at an early stage so that, if the Minister needs advice, he has time to get it.
I know next to nothing about Jainism except that the very strict Jains wear masks over their noses and mouths in case they should accidentally breathe in a living organism. Very often, the strict ones sweep the path in front of them so that they do not accidentally kill anything.
There is also the question of animism. I do not know whether anyone in this country at the moment practices animism, but it is practised in some parts of the world, in many different forms. Perhaps when he winds up at the end of this short debate, the Minister will be able to answer the questions posed to him and to me by Mr Pravin Shah and also my points on animism.
I put my name down to this amendment to add my support. As we all know—or at any rate, as those who took part in the Grand Committee on the Bill before the election will know—the Government have since then sought to broaden the meaning of the vital phrase "the advancement of religion" in the Bill by stating in the present drafting, which is different from before, that religion includes:
"(i) a religion which involves belief in more than one god, and
"(ii) a religion which does not involve belief in god".
I welcome that to some extent, but I do not welcome the fact that the only belief that is specifically recognised is religious belief. The word "belief" appears twice in the amended version, but only in the context of the word "religion". That is clear to all of us.
What is created for the advancement of non-religious systems, philosophies of belief or ethics should also be recognised as charitable, provided that they are for the public benefit, because one must establish those two points.
I particularly wish to mention the reference in Amendment No. 4 to the Equality Act 2005—which is a Bill at present, but we anticipate that it will be passed. It is provided because Part 2 of the Equality Bill forbids discrimination on the grounds of religion or belief.
Clause 45 of the Equality Bill very simply defines "religion" as "any religion". It goes on to define the word "belief" as,
"any religious or philosophical belief", and adds,
"a reference to belief includes a reference to lack of belief".
I favour the great simplicity of those phrases in the Equality Bill. It seems to me to be very odd, in two Bills that are likely to be passed in the same parliamentary Session, that one expressly recognises "belief" only if it is a religious belief and the other expressly recognises the significance of both religious and non-religious beliefs. I could refer to Article 9 of the European Convention on Human Rights but my noble friend Lord Wedderburn has already done so. I could also refer to the employment regulations 2003 in which religion or belief means,
"any religious belief or similar philosophical belief".
It may be said, and I believe has already been said by the noble Lord, Lord Phillips of Sudbury, in his intervention—I hope he will speak further—that indirectly this Charities Bill recognises as charitable a body set up to advance non-religious beliefs by virtue of Clause 2(4)(a). That refers to current case law. As I understand it, current case law allows as charitable those bodies that are set up to improve the mental or moral welfare of the community, which is pretty broad. It is said that the Charity Commission must follow existing case law, but that can be so only because since the nineteenth century—let alone more recently—the courts have been imaginative under the residuary head of charity described by Lord Macnaghten in the leading case of Pemsel in 1891 as,
"other purposes beneficial to the community".
Clause 2 of the Bill—this was also in the version of the Bill that we had before the general election—no longer prescribes the three well known specific purposes of charity that have been with us since the seventeenth century; namely, the relief of poverty, the advancement of religion and the advancement of education, and then a general clause. As Members of the Committee can see from Clause 2, we now have another eight specific heads of charity added on to those three. I shall not read them out as they are in the Bill.
My point is, as no doubt the Committee will have anticipated, why not expand slightly the head of charity "the advancement of religion" by adding the words "or belief" or have a separate specific head similar to that which my noble friend Lady Turner of Camden wants to discuss under an amendment soon to be moved? If we had a slight expansion of the head of the advancement of religion to cover belief more generally as proposed in this amendment, the amendment would be very simple. It would help many of those who may be puzzled when they look at this Act, as it will be shortly, and wonder what is allowed as charitable and what is not. In years to come that would assist the endeavours of many bodies.
I have a couple of points to make on the amendment which I support for all the reasons so eloquently deployed by my noble friends. That is because it seems to me that the law is not only, and perhaps not even primarily, for lawyers; it is for the citizens who intend to abide by it. Ordinary people, like me, do not understand that non-religion is included in the term "religion". It flies against sense. However, I am comforted by the fact that the Government share that view in numerous other pieces of legislation. I believe that we need joined-up government here.
"We remain of the view that protection of Article 9 rights on an equal basis could most effectively and clearly be ensured by provision on the face of the Bill, expressly extending clause 2(2)(c) to cover all religious and non-religious organisations which promote systems of belief".
Finally, there is a question of parity: non-religion should be on a par with religion. It will not be so unless we adopt the internationally-recognised language of "religion or belief".
I am sympathetic to what I take to be the general thrust of argument of those in whose names the amendment stands. I would have supported it if the Bill had not contained the introduction of the public benefit test, which in future has to apply to all charities. Until it comes into force I concede that there is a discriminatory difference between religious charities and organisations such as the South Place Ethical Society mentioned by the noble Lord, Lord Wedderburn, which is not a religion in any conventional sense but is a body committed to the promotion of ethical principles.
As I said, at present there is discrimination against that sort of body because it has to prove public benefit, whereas religions of whatever sort—they are now extremely wide in the definition—do not. We are dealing with a Bill that is going to level that playing field. I am left wondering what advantage there is in the amendments. I agree with the noble Baroness, Lady Whitaker, that the Bill must be for laypeople and citizens, not for lawyers.
Ironically, as both a citizen and a lawyer—and indeed a charity lawyer—I think that the amendments will make life more rather than less confusing. As I said, there is a general public sense of what is and what is not a religion. If we asked 100 men and women in the street about an organisation such as the South Place Ethical Society, whose objects are "the study and dissemination of ethical principles and the cultivation of a rational religious sentiment". I doubt that most people would view it as a religion. So to try and equate it with that is more confusing than clarifying.
The South Place Ethical Society was able to convince the court that it was charitable, not because it was a religion but because it advanced education. Because it happened to be able to do that it was charitable. Other societies for the promotion of beliefs in ethical conduct and so on may not have any educational role but they are there to advance a belief in good ethical conduct on a non-religious basis. Do they not appear to be excluded by the wording of the present Bill?
The noble Lord carried forward the argument that I was on the point of making: that the South Place Ethical Society was given charitable status, as he correctly says, not because it advances education but because by analogy—it reels off the cases: Re Price, Re Hood, Re Scowcroft; well known cases in this field—it was charitable under the fourth head as promoting the moral and spiritual welfare or improvement of the community.
It does not matter one whit whether one obtains charitable status on that basis or if it is a conventional religion under the religious heading. There is no difference. There is no extra hurdle to be leaped in getting charitable status on that basis. That is why I believe that the Bill moves the whole thing on and why I do not believe that the amendments will help at all.
Finally, many Members are aware of the Scientology case. After a particularly difficult application to the commission, the commission produced an extremely long and, I believe, well reasoned judgment, which was getting on for some 50 pages, in the course of which it said that,
"the Commission has regarded the concept of moral or spiritual welfare or improvement as a flexible basis upon which a wide range of purposes beneficial to the public may by analogy be recognised as charitable, particularly where it was apparent that the benefit flowing from the organisations' purposes and activities is readily and easily accessible to the public".
The noble Lord, Lord Borrie, will recollect the case of Public Concern at Work, in which he was involved as chairman of the trustees and I as the solicitor. Eventually we got registration on the basis of the flexible head.
As I say, I would have taken a different view but for the public benefit introduction in the Bill. But given that it is coming, there is a solid, well established, broad-based and flexible ground on which all the organisations engaged in ethical issues—rationality and the rest of it—can find their charitable status.
My Lords, can the noble Lord educate me? He says that in the Bill, religion is promotable whether it has a public benefit purpose or not. Does that not lead us to the case of West African witchcraft, which is a religion of some sort and which is in my book morally reprehensible because it involves chopping people up? Are we allowing that sort of thing to have charitable status and consequential tax benefit, because there is no public benefit issue?
My Lords, I thank the noble Earl for his intervention. The point that I was making was that in future that sort of charity will not be a charity because it will not be able to satisfy the public benefit test, which in future will apply to religions just like everything else. I believe that that makes my point.
My Lords, I believed that this would be a lengthy discussion and I was not disappointed. I have listened very carefully to what my noble friend Lord Wedderburn and supporters of his amendments have said, and to other contributions during the course of the debate. It is important, not least because of that, that I explain as fully as I can the Government's position and thinking on this point.
First, non-religious belief systems which promote moral and spiritual welfare have been for some time, are now, and will continue under the Bill to be charitable. That is secured beyond doubt by subsections 2(l) and 4(a) of Clause 2. It is just worth reminding ourselves of the importance of the Southplace Ethical Society registration. It is more than some 40 years ago—or certainly 20 years—since the British Humanist Association was registered similarly. Since then, a number of other charities promoting humanist, rationalist and ethical and other non-religious belief systems have been registered.
Secondly, the Government do not accept that the Bill has any discriminatory effects between charities promoting religious or non-religious belief. The noble Lord, Lord Phillips, addressed that issue very well, with his usual forensic understanding of charity law and the intent behind this Bill. Again, this is something that we have looked at very carefully. If there were any discrimination we should have had an obligation under the European Convention on Human Rights to remove it, because the convention does not allow discrimination between religious and non-religious beliefs. In fact, an important effect of this part of the Bill is to level the playing field between religious and non-religious belief, as the noble Lord, Lord Phillips, said.
At the moment, religious organisations enjoy the presumption that they are for the public benefit, while all other organisations promoting non-religious beliefs do not. The Bill simply removes that presumption. This will mean that, after the Bill is enacted, religious beliefs and non-religious beliefs will be in exactly the same position of having to demonstrate public benefit in order to qualify for charitable status.
Thirdly, several Members of the Committee, including my noble friends Lord Borrie and Lord Wedderburn, have pointed to the Equality Bill, in which the Government have specifically mentioned non-religious belief alongside religious belief. It has been suggested that it is inconsistent of the Government to argue that non-religious belief need not have a specific reference in the Charities Bill while conceding that it needs a specific reference in other legislation. However, there is a good and, we believe, simple reason why a charge of inconsistency will not stick. It is that, without a specific reference in the Equality Bill, non-religious belief would be excluded from the scope of that legislation. In the Charities Bill, non-religious belief is present in the list of charitable purposes by virtue of subsections (2)(l) and (4)(a) of Clause 2. Those subsections bring in, from the underlying common law, everything which has already been recognised as charitable but which does not come under any of the other headings listed in Clause 2(2).
The noble Lord, Lord Wedderburn, described it as a "catch-all ragbag", as if to suggest that it is somehow a second-class method of inclusion. We do not see it that way at all. They are not; and there is no sense in which the law gives belief systems any lesser treatment than any other charitable purpose.
The purposes covered by subsection (2)(l) are many and varied. The Charity Commission's commentary on the description of purposes in the Bill gives 15 examples, including not only moral and spiritual welfare, under which non-religious beliefs qualify, but also defence of the realm; preservation of public order; relief of unemployment; rehabilitation of ex-offenders; promotion of industry and commerce; promotion of agriculture, and so on. Those are all very important areas of charitable endeavour today. But we cannot give everything that is charitable its own specific heading without making the list ummanageably long. Even if we had a very long list, we would still have to have a final category consisting of purposes which had not been specifically mentioned—to avoid the risk of removing, by default, charitable status from any other recognised purpose which was not mentioned in our long list.
No one, to my knowledge, has argued as a matter of principle that we should try to have a comprehensive list so that we did not need that final category. Once you have accepted that we should not go down the comprehensive route, either you must also accept that some existing charitable purposes will have to be placed together under a heading consisting of all the purposes not specifically mentioned, as the Government have done, or you must accept the risk that some current purposes might, by default, be excluded.
The Government do not want to run that risk. Nevertheless I entirely understand the very human tendency to want to see the forms of endeavour which are closest to your own heart given prominence, even if, as here, they would have only a symbolic prominence and would have no legal or practical effect at all.
Fourthly, by including the word "belief" in the list in the terms proposed by my noble friend's amendment, we would bring in all sorts of beliefs—from, I would argue, the frivolous to the bizarre—that should have no place in charity. I am sure that many of these beliefs are sincerely held, and I do not propose to disparage anyone's sincerely held belief by naming any of them. I have heard the argument that it is safe to allow all belief systems or philosophies into the list, because those which really had no place in charity would be excluded from it by the public benefit test.
If that argument held water, we should be going for a definition of charity that did not have a list of headings of charitable purposes but simply said that anything that was for the public benefit was charitable. The great drawback of that approach is that it produces legislation that gives no clue as to the sorts of endeavour that are charitable purposes. For that reason, it was rejected both by the Strategy Unit in 2002 and by the Government since then. There has not at any stage been an appetite shown for it in any of the consultations that have taken place on the subject; nor has anyone, including the Government, yet been able to formulate a definition of "belief" that would achieve what we wanted—by including those that should be included and excluding those that should not.
I hope that what I have said has persuaded Members of the Committee that we have thought about the issue seriously. I conclude by repeating that the Bill as currently drafted provides every possible assurance and safeguard that it will remain a charitable purpose to promote moral and spiritual welfare through non-religious belief.
I come to the points that were raised by the noble Lord, Lord Swinfen. I have received a letter from Mr Shah on Jainism. We wrote at least once to Mr Shah some months ago confirming in terms that Jainism qualifies as a religion under charity law. That holds good under the Bill as now drafted. Clearly, we shall have to respond in similar terms, perhaps with some lengthier explanation, to Mr Shah following his latest correspondence. Of course, I shall share a copy of that response with the noble Lord, Lord Swinfen, and place a copy in the Library of the House.
The noble Lord, Lord Swinfen, also raised the question of Animism. As we see it, Animism could qualify as a charity if it is for the moral and spiritual welfare of humankind. Obviously, it needs to pass the public benefit test. No analogy with religion is needed for non-religious beliefs to be charitable, as I carefully explained. That is because they may already be recognised as charitable, and continue to be charitable, under Clause 2(4)(a).
The noble Lord did say that it could qualify. I am not trying to catch anyone out or be difficult; I am genuinely seeking after knowledge. It is an interesting debate, so will the Minister please help us? Other religions must now prove the public benefit test which, to my slightly quizzical mind, would fail at all counts before they got to the starting gate.
I am grateful to all noble Lords who have contributed to the debate. What my noble friend Lord Bassam has said must be studied carefully. I shall make two final points. The Minister said that we cannot have a long list, or a longer list. We are suggesting only a word; we are not suggesting a longer list. Our suggestion is for this Bill to be alongside other Bills where the word "belief" apparently is acceptable and not too long; the Equality Bill has been specially stressed.
In regard to that and to what the noble Lord, Lord Phillips, said, which I understand well, it is no answer to a suggestion that there is discrimination by omission on a charitable purpose list of descriptions. That is to say, "Well, everyone is equal on public benefit". If everyone is equal on public benefit, there is no discrimination at all. The discrimination inheres in the omission of a word that is acceptable everywhere else except in charity law. That is a prima facie case that has not been answered. The noble Lord wishes to intervene.
I am grateful to the noble Lord for giving way. The point surely is that which was made by the noble Lord, Lord Bassam—either you have the list that we have—which is 12 items long—or you go for a long list because there are lots of headings, of which he has mentioned one, that are not there expressly but are there by analogy. That is the important point; that they are there, whether expressly or by analogy, and you certainly are there by analogy.
I do not want a longer list; I have not asked for a longer list. I am asking for a level playing field—I almost said a level praying field. It is a fact that discrimination can be committed by omission; there are hundreds of examples. It is also a fact, if I may just address the point—I am sure the noble Lord, Lord Phillips, will agree—that Mr Justice Vaisey did find an analogy with education in the case of the South Place Ethical Society, as well as the other phrases that he used about moral improvement, which was analogous to the advancement of education. I do not have the judgment with me. If you have a fund or association which is explicitly not analogous to the list, then an extra barrier has been raised against you from a religious fund or association, because religion is expressly there and you are not. You have to rely on something extra, and that is an extra buffer which amounts to a discriminatory test.
I almost feel invited to go to the authorities that we discussed in Grand Committee on the earlier Bill, but I will not do so. However, that proposition is the kernel of the case. We will have to look carefully at what the noble Lord, Lord Bassam of Brighton, said to see whether the matter is closed. I have seen copies of the correspondence about Jainism and so on. I understand the point that is being made, but it is being made to the Government, not to my amendment. I beg leave to withdraw the amendment.
My Lords, I support the amendments being made in this Bill to rationalise the law on charities and to define specific categories of charitable purpose to be covered by it. I have listened carefully to the preceding argument and, as we know, among the purposes listed is the "advancement of religion". Frankly, I still want to put this amendment before the Committee because it seems to me that, once again in this Bill, religions are sorted out as presumably deserving while non-religious bodies are not.
Here I must state my own interests. I am a vice-president of the Humanist Association and an honorary associate of the National Secular Society, formed as long ago as 1866 by Charles Bradlaugh MP—a well-known free thinker of his time. Most secularists adhere to a system of ethical beliefs. We believe that this life is the only one of which we have any knowledge and that human effort should be directed to improving it for humankind. We believe that morality is social in origin and application. Secularism aims at promoting the happiness and well-being of our fellow citizens. We also believe in the abolition of special privileges granted to religious organisations.
We accept that there may be some difficulty in arriving at a suitable form of wording. That is apparent from the discussion we have had this afternoon. It is difficult to define precisely what is meant by "religion", and we have sought to come to terms with that argument. Our amendment seeks to spell out that,
"other systems or philosophies of belief or ethics which are not included in subsection (3)(a)", should be covered by this section. Subsection (3)(a), as we have heard, says that,
(i) a religion which involves belief in more than one god, and
(ii) a religion which does involve belief in a god".
This attempts to define secularism in a more precise way.
In our amendment, we have sought to come to terms with the argument that we could be opening the door to frivolous or unworthy beliefs. Our concern is that without some amendment to the list of charitable purposes set out in Clause 2, we shall once again be in the position where theistic religions have a respected and acknowledged place in the scheme of things, but secularists and humanists do not.
Nor is it acceptable in my view to refer to previous case law as an indication that the secularist case is covered. In some of the cases already quoted in the debate this afternoon, the circumstances were entirely different—a different environment, and different circumstances existed, circumstances in which religion was differently considered and always held to have an educational purpose. This is a new Charities Bill, and the position of secular organisations such as the NSS should be respected and acknowledged. I beg to move.
We covered the ground introduced through the amendment thoroughly in the previous debate. Those arguments hold good for this amendment, as they did for the earlier one. I do not accept that secularism, as opposed to theistic beliefs, has second-class status in terms of this piece of legislation. We see them very much on an equal footing. I argued that case earlier and was supported very ably, as ever, by the noble Lord, Lord Phillips. In some respects, the Bill is groundbreaking and helps to create the level playing field.
On a personal level, I obviously have some sympathy with what the noble Baroness has to say. Clearly we do not want any form of discrimination in the way in which beliefs or non-beliefs are treated, but we have to ensure that we properly protect the charitable legal structure from applications by the frivolous and the bizarre. I am sure that she fully supports that; she made reference to it. The way in which we have organised and framed the legislation fully covers what she is arguing for.
A question was raised in the previous debate that is touched on in this one. I support my noble friend Lady Turner on clarity in the Bill. However, when the old Bill was with us, my noble friend on the Front Bench offered a definition of religion, as I said in my speech. Is he not now offering the same definition in view of the new features of the new Bill?
I thank my noble friend for that explanation. As he rightly says, the ground was covered substantially in the previous debate. Of course, we will look carefully at what he has to say when it appears in Hansard but, in the mean time, I beg leave to withdraw the amendment.
moved Amendment No. 7:
Page 3, line 3, at end insert—
"(5A) Any reference in any enactment or document (in whatever terms)—
(a) to charitable purposes, or
(b) to institutions having purposes that are charitable under charity law, is to be construed in accordance with subsection (1).
(5B) Subsection (5A)—
(a) applies whether the enactment or document was passed or made before or after the passing of this Act, but
(b) does not apply where the context otherwise requires."
In moving Amendment No. 7, I shall speak also to Amendment No. 86. The amendments are intended to make it absolutely clear that references to charitable purposes, or to institutions with charitable purposes in any enactments and documents, are to be taken as having the meaning given by the Bill in Clause 2(1). The amendments are belt and braces measures, and do not change the law.
An example of where the amendments would be helpful in interpretation is where a charity's trust deed states that the objects of the charity are,
"any charitable purpose in England and Wales".
The amendments make it clear that the charity can carry out anything charitable under the Bill. I beg to move.
I seek knowledge from the Minister. In the previous Committee, we discussed some issues put to us by Christopher McColl QC, an expert in charity law. He had been concerned about whether the Bill would have proper effect on charities established before it was passed. Do the amendments address that point, which was technical and difficult, or are we in a different area addressing a different issue? Reading it, it seems that there are Christopher McColl-type points. I would welcome his opinion as to whether I am on the right track or not.
While the Minister is cogitating on that fast ball from the noble Lord, Lord Hodgson of Astley Abbotts—and I think the answer is "no"—I ask him whether he might reconsider the wording of this amendment. It is an entirely meritorious attempt to make things clearer, but does not take account of the fact that there are some quite large charitable trusts that are oral, with no enactment or document. I think, for example, of Children in Need, which operated for several years on an oral trust. The Penlee lifeboat disaster fund was an oral trust. This only deals with enactments or documents.
I would also recommend that, in reviewing the wording, the amendment should start by saying "any direct or indirect reference in any enactment or document". Those are my two, hopefully helpful, comments.
As ever, the noble Lord, Lord Phillips of Sudbury, is, I am sure, trying to be helpful. I do not know the answer to his question, but I will ensure we have a look at it before Report. Clearly, it may well assist us.
moved Amendment No. 8:
Page 3, line 19, at end insert "and, where the charitable purpose is claimed to be the advancement of education, the Commission shall, in determining the public benefit—
(a) have regard to the need to provide significant and continuing benefits to the educational, cultural, social or economic needs of the national or local community;
(b) consult relevant central or local interests before framing guidance in relation to paragraph (a) above;
(c) review the public benefit provided at regular intervals; and
(d) ensure that every such charity registered by the Commission shall publish annual reports on the public benefit it provides."
The purpose of this amendment—to which my noble friends Lord Wedderburn of Charlton and Lady Turner of Camden have attached their names—is to ensure that if a fee-paying school is to continue to enjoy charitable status after this Bill is passed, the school must establish that it generally gives something back to the community on a continuous basis. It must show that it provides a clear, significant benefit to the local or national community.
It is a welcome feature of this Bill, already referred to, that any body established for the advancement of education—or, indeed, under the various other headings of charitable purpose—will no longer automatically be presumed to be for the public benefit and therefore charitable. As the Bill stands, however, it is entirely left to the Charity Commission to determine what is for the public benefit. I am concerned that, without my amendment, charitable status may well be given to all fee-paying schools except those that exist simply for profit-making purposes, like a cramming institution.
A page on the Charity Commission's website, which I found very profitable to look at, entitled "Public benefit: the legal principles", says that public:
"benefit must be to the public at large, or to a sufficient section of the public".
"A sufficient section of the public" is, to my mind, a very loose phrase, allowing charitable status when the educational benefits may be virtually confined to a relatively well-off section of the public, amounting across the country to roughly only 7 per cent of the total school population.
My amendment will simply give the commission a measure of guidance by setting out some specific, significant criteria to which the commission must, in the time-honoured phrase, "have regard" when considering whether to confer charitable status on any particular school.
Many fee-paying schools currently provide a variety of benefits to the wider community—for example, making bursaries available to pupils from less well-advantaged backgrounds; and a range of what might be called outreach work, linking with the local community through sport, music, languages and programmes for gifted children. There are also educational improvement partnerships between independent and state schools, such as those report in last Friday's Times involving Millfield Preparatory School and Malborough College. There are many other examples.
It is sometimes argued that it is quite appropriate that all fee-paying schools—at any rate, those that are non-profit making—should continue to enjoy charitable status because their existence saves the taxpayer the money that it would otherwise cost to educate their pupils at state schools. I have no doubt that in a free society, parents should be free to send their children to fee-paying schools and that, if they so choose, there is an element of saving to the taxpayer. But I do not think that that justifies the cachet and privileges of blanket charitable status for fee-paying schools, or the incentives provided for tax-exempt covenants for grandparents and others, irrespective of whether the school can demonstrate significant community benefit.
Fee-paying schools continue to create or exacerbate social division in this country. They inhibit equality of opportunity. They involve a considerable distortion of educational resources available to the public generally in premises, grounds, libraries, laboratories and, perhaps above all, teaching resources. Unless, that is, such schools enter into arrangements for the significant sharing of facilities by the sort of outreach programmes to which I have referred. That should be the benchmark against which justification for charitable status or its continuation should be assessed. I beg to move.
I added my name to the amendment tabled by my noble friend because it seemed to me a sensible way to start the debate. If we began with a blank sheet of paper, I very much doubt that we would suggest introducing the system or structure which history has given us. I very much doubt whether we would desire to place 7 per cent of the pupils to be educated in separate schools and in institutions which, in general terms, set fees at a level that only a small section of the public can afford.
Choice against such a system would not necessarily be lessened by a programme to call those schools charities because they give benefit to the community. That would not be our first choice. Nor would it be to subsidise those institutions by donations drawn from tax resources, which fall indirectly on everyone. The social demerits of such a divisive system, where, as my noble friend said, pupils enjoy resources that in most cases are more expensive particularly in teachers and in smaller groups, and where, thinking of my experience, they can be trained and refined to leap over admission gates prepared by tutors in universities, we would think desirable.
To move from where we are to a more democratic system of education must necessarily be a long process. The first step suggested here is that "public benefit"—whatever that will mean—should be tested from time to time against the prevailing system. In the Guardian a month or so ago, my noble friend Lord Hattersley wrote that these proposals, or ones like them, were so moderate that opponents of public schools might worry about the consequences. He said:
"But there is no reason in law or logic why fee-paying education cannot be reduced—with the removal of charity status as a first step—to a level at which its products are no longer influential in society".
No doubt such a process will not be acceptable to many Members of the Committee, but it illustrates what I said on the first amendment today; that, perhaps unfortunately, social policy issues are at the heart of this part of the Charities Bill. It is a pity that the position has to be discussed, as if it were really a debate about charitable purpose, when in fact it is a debate about educational policy. The proposals in my noble friend's amendment aim, as a first step, to open up the debate on public benefit in respect of the fee-paying educational system, whatever other merits it may have. I hope that as things develop the Charity Commission will see for itself the need to apply the kind of tests which are proposed in the amendments.
It will probably come as no surprise to the noble Lords, Lord Borrie and Lord Wedderburn, that I have considerable difficulty with the amendment as proposed. The noble Lord, Lord Wedderburn, appears to be advocating a degree of social or educational engineering. He is entitled to do that, but I am not sure that we should start it via the Charities Bill.
What we have achieved in the Bill is a delicate balance as regards the public benefit issue. Therefore, for the noble Lord, Lord Borrie, to talk about blanket advantages in the circumstances in not right. As the noble Lord, Lord Phillips, said, we are in fact creating a level playing field here, in which all charities have to meet a public benefit test, no matter what their purposes are, and must do so on a continuing basis. The responsibility for this is passed to the Charity Commission by Clause 4(1) and we have made the Charity Commission independent of government in new subsection (1A)(4) of Clause 6. It may not be independent enough—we shall come to that later—but we have made a big step towards it and I thank the Government for that. In Clause 4(3), we require the Charity Commission to revise the public benefit objectives from time to time. Although I know that the noble Lord, Lord Wedderburn, wishes to make that "must" rather than "may", it is nevertheless an obligation on the Charity Commission.
I oppose the amendment on three grounds. First, the amendment shatters this delicate balance and does so in respect of only one charitable activity—that of education. Secondly, the wording adopted by the proposers of the amendment is open ended, to say the least. In paragraph (a) of their amendment, they refer to,
"significant and continuing benefits", and in paragraph (b) they say that the Charity Commission shall,
"consult relevant central or local interests".
Who defines what is significant and continuing and who defines what are central or local interests seems to me to open up a Pandora's box in which politics and prejudices could be paraded on either side of the argument. Finally, paragraph (d) seeks to ensure that every such charity publishes an annual report.
We do not need more paperwork. This Bill will increase considerably the amount of paperwork required to be filled in by charities considerably. The Charity Commission is in charge. It will set the public benefit test and enforce it. There is no reason why one section of the charitable sector should be asked to produce an additional annual report. It would be unfair and prejudicial so to do, besides being expensive. I hope that the Government will resist the amendment.
I support my noble friend Lord Hodgson of Astley Abbotts. I am speaking to matters which were spoken to in Committee before the election by my noble friend Lord MacGregor of Pulham Market, who, unfortunately, has to be in the United States and therefore is not here to make the same points that he made previously.
In responding to the points made by the noble Lord, Lord Borrie, it seems to me important that the data should be on the record. The benefits that Independent Schools Council schools receive from charitable status are just under £100 million, as my noble friend Lord MacGregor said. In rounded figures, business rate relief accounts for £72 million; tax on investment income is £7 million; tax relief on donations is a further £7 million; IHT relief in legacies is just under £4.5 million; stamp duty exemption is £1 million; and CGT exemptions are £8.5 million. That comes to a total £100 million.
Those fiscal benefits, against a turnover in the schools in excess of £4 billion, represent rather less than 2.5 per cent of the total turnover. In fact, that figure has shrunk from 2.9 per cent in 2000 as a result of the changes to ACT rules. The benefits given back are fee reductions of £276 million; grants and prizes of £14.5 million; and external charitable activity of just over £11 million, giving a subtotal of more than £300 million. Therefore, the ratio of benefits given back to benefits received is of the order of 3:1.
In addition, because of the nature of tax law, VAT of £127 million is to be paid on school operations and £69 million on capital expenditure, which is of course irrecoverable VAT, constituting another £200 million that the sector is paying to the Treasury. There again, the ratio is 2:1 against benefits received. Adding the two subtotal contributions gives a ratio of 5:1. That excludes the £2 billion on education that independent schools save the Government in the service that they provide—which is obviously of the order of 20:1. Therefore, if you take the 5:1 ratio for which I provided subtotals a moment ago and the cost of education which the independent schools are shouldering on behalf of the state, you have a ratio of 25:1 overall.
The noble Lord, Lord Borrie, may think that the charitable status is of great public relations significance to the schools. It does not seem to me to be an exceptionally good bargain in purely financial terms. However, I also endorse most strongly what my noble friend Lord Hodgson of Astley Abbotts said about seeking to provide a whole series of sub-distinctions and subsections in the context of public benefit, when the whole purpose of the legislation is to make matters clearer rather than more opaque.
I declare an interest. As I said on a previous occasion, my education at Eton was rather a waste of money. But I am a governor of the Royal Grammar School at Guildford, which is an absolutely star educational establishment. Its board of governors is made up of local businessmen, solicitors and lawyers, and the mayor of Guildford and such people, who put an enormous amount of voluntary time into it. We provide bursaries and subsidised fees for various people.
Our pupil intake was made rather more narrowly based when we were taken out of the state system, where the school was open to anyone without any form of monetary hurdle to overcome. It was a great instrument of social mobility, as grammar schools were. Now we try to do that as much as we can not only by selling education to those who can afford it but also by trying our level best to provide as much as we can afford through bursaries and so forth. To upset that sort of balance in any way would be a bad thing.
When this issue has been discussed over the years there has been a misunderstanding on the opposition Benches about the position taken by many on this side of the House. The issue is not so much that one is opposed to the taxpayer making a contribution to children in private education. The problem is the use of charity law. It is not credible to tell the general public that Eton is a charity, because everyone in Britain knows that it is not. However much the noble Earl may dress up the contribution made by individual schools such as the grammar school that he has just referred to, that does not deal with the central problem of the credibility of charity law which provides that schools that ring-fence provision for young people who have been brought up in conditions of privilege can be described as charities.
My solution is simple—private schools should be taken out of charity law all together. Subsidies should be paid, but out of provisions in the Finance Bill. Parliament should be required to decide the level of subsidy that it wishes to pay into private education. It is clear that people who put their children into private education save the taxpayer money, so there can be no question but that some element of subsidy should be paid through the tax system. But it should not be done under charity law, because that brings the whole system and principle of charity into gross disrepute.
The noble Lord, Lord Hodgson of Astley Abbotts, made the important point that we have sought to achieve a delicate balance in the Bill. That is exactly what we have tried to do. I have heard what my noble friend Lord Campbell-Savours and others have said in setting out the rationale behind the amendments, but many of the issues raised go wider than the Bill. As my noble friend Lord Campbell-Savours effectively pointed out, in some respects this debate is in the wrong place.
The amendment would single out organisations with an educational purpose from all other types of charity. It would seem to apply to all organisations with an educational purpose that sought to register with the Charity Commission, from the small inner-city pre-school playgroup to the British Council, the Wellcome Trust and many of our largest charities that have educational objectives among their purposes.
I cannot see that singling out educational charities in that way would be of great value. If it is to ensure that the Charity Commission takes a different view of what "public benefit" means for education purposes as opposed to others, the law already provides for that. One of the beauties of the common law definition of "public benefit" is that, within a framework of principles that apply across the board, it recognises that in practice the things that charities have to do to provide public benefit differ greatly according to their purposes. It does that across different headings—say, between the advancement of education and the relief of poverty—and within headings; for example, between two educational charities, one of which helps illiterate prisoners to learn to read and write and the other of which puts on public exhibitions of great art.
I am not sure that allowing the commission to take account of cultural, social or economic needs when assessing the public benefit of an educational purpose is right. Would it perversely allow a charity that claimed to be for the advancement of education to provide little or no educational benefits as long as it provided other benefits? That is an important question. Nor is it right to put educational charities under an additional burden of explaining and justifying their public benefit credentials. For the integrity of the charity itself, all charities should be under a common duty in that respect.
We are levelling the playing field by taking away the presumption of public benefit that poverty relief, religious and educational charities currently enjoy. The amendment would put rocks and boulders, craters and molehills, into the part of the field occupied by educational charities.
May I press my noble friend on this matter? It is quite a simple question. Does he really believe that Eton fulfils all the purposes that we, as socialists, believe a charity should be dedicated to?
My recollection is that the noble Earl, Lord Onslow, is a graduate of Eton, so perhaps he knows more about it. Or perhaps I have got that wrong.
In that case, perhaps the noble Earl can offer me better advice on the matter than others.
We have a delicate balance. It is a formula that we should rely on. I understand that my noble friend Lord Campbell-Savours is endeavouring to be very helpful, and I rest on that.
If one of the aims of the amendment is to give the regulator the licence to look more closely at any group of charities over which doubts have arisen regarding their public benefit, the law already allows for that. I have seen no evidence to suggest that educational charities, as a whole class, are under any such doubts. For these reasons, the amendment could be damaging, and I suggest that it would be wise to withdraw it.
I am most grateful to all those who have taken part in this debate. I am particularly grateful to my noble friend Lord Campbell-Savours who made the extremely powerful point that the credibility of charity law continues to be in doubt so long as Eton—excuse one for the inevitable picking on one school—continues to be regarded as deserving of charitable status.
I, too, was very attracted by what the noble Lord, Lord Campbell-Savours, said. I think that he was advocating education vouchers, which is a welcome innovation from that side of the House. The difficulty with picking on Eton—I rather agree with him about that—is that you are also picking on every little PTA around the country. Most of these school-oriented education charities are essentially parents helping their own children. If you do not allow it for Eton, then you do not allow it for your local primary school.
I think that my noble friend was concerned with the credibility of the whole charity system so long as it allows certain—let me not name any—schools to be regarded as charities when any common use of the language would strike people who did not know about the law or the history of this as an amazing concept.
Although I particularly favoured the speech of my noble friend—naturally—I also appreciated the other speeches. In talking about the school in Guildford with which he is connected, the noble Earl, Lord Onslow, said that when it ceased to be a state school there was created a monetary hurdle to social mobility. I entirely agree with him. The extent to which these difficulties are partially made up by bursaries is fully in line with the points I made. If bursaries are provided, it is one way in which a school can properly demonstrate that, although it is a fee-paying school and the highest proportion of its pupils come from privileged families, none the less, it gives something to the community.
I say to my noble friend—if I may call him that—the noble Lord, Lord Brooke, in referring to some of the points that his colleague the noble Lord, Lord MacGregor, made earlier, neither I nor my noble friend Lord Campbell-Savours has disputed that parents should be free to send their children to fee-paying schools. Nor has one disputed the benefits and the fiscal points that have been made. But that is a different matter from a particular. The noble Lord talked about fee-paying schools collectively, but that does not deal with the point that each particular school claiming to have a charitable purpose has to provide some public benefit under the new law, even without my amendment. My amendment would simply give the Charity Commission guidance, which would otherwise have no parliamentary guidance at all.
I take the simple view that it is rather odd that Parliament, which is debating charities for the first time in a long time—apart from the immediate period before the election—has no role in determining what kinds of things should be provided by schools, in this instance, to demonstrate pubic benefit, but that that should be left to the discretion of the ladies and gentlemen of the Charity Commission. I beg leave to withdraw the amendment.
In a sense this amendment does not follow the end of the previous discussion.
In the light of what has been said this afternoon, why does Clause 4 put the Charity Commission under an obligation in law to do certain things, but does not oblige it to revise its guidance? Under Clause 4 the commission must issue guidance; it must carry out such consultation as prescribed; and it must publish guidance issued or revised. The Charity Commission has the power to revise guidance but there is no obligation in this legislation for it to do so.
I should think that everything we have heard this afternoon should make it absolutely clear that there is an obligation to keep charity law up to date on public benefit and that the commission should realise that that is a legal obligation. That suggestion is greatly reinforced by the commission's document, Public Benefit Checks—how we will carry them out? Noble Lords may have seen that document, which states that,
"different criteria will apply to different charities in different ways".
The obligation to check public benefit appears to be interpreted in such a flexible way that one wonders what revision will really take place.
I agree that that goes beyond my amendment, but if it were an obligation there would have to be further words about how it should be done and the time period involved. Why, in the legislation, have the Government leave that so completely for the Charity Commission? I beg to move.
If the amendment moved by the noble Lord, Lord Wedderburn, had included a substitution of the word "review" for "revise", I would have found it tolerable. However, on the principle of, "if it ain't broke don't fix it", it would be perverse for us to insist that the Charity Commission from time to time "must" revise its guidance if the guidance that it inherited is perfectly satisfactory.
The Bill as it stands is right:
"The Commission may from time to time revise any guidance issued".
Under the noble Lord's amendment, the Bill would read:
"The Commission must from time to time".
How often is time to time? Is it on a monthly or annual basis, or every 10 or 20 years? Putting in "must" does not change the meaning of the subsection at all unless a time limit is included.
I am very much drawn to what the noble Lord, Lords Swinfen, had to say on this issue. The construction proposed by the noble Lord, Lord Wedderburn, might leave us in a less flexible situation and make it more difficult for the Charity Commission in certain circumstances.
I am advised by the Charity Commission, which is entirely happy for me to place this on the record, that its intention is to revise its guidance on the operation of the public benefit requirement whenever there has been a material change in that requirement justifying a revision. Such a change could, for example, arise or take place after a decision of the new Charity Appeal Tribunal or a court.
The commission might also want to revise its guidance when there has been no such change—to amend the wording, layout or presentation of the documentation to make it easier to read, more accessible and more comprehensive, for example. Therefore, to compel the commission to revise not just review its guidance in unspecified circumstances—that is how the amendment would leave it—and at unspecified intervals, to take up the point made by the noble Lord, Lord Swinfen, is neither necessary nor helpful.
The noble Lord, Lord Wedderburn, can be assured from what I said about the commission's intention that the guidance will be kept appropriately up-to-date. I am sure that the commission will examine it frequently to ensure that that is the case. Clearly, it is in the commission's best interests to ensure that people involved in making applications and so forth have access to common and easily understood guidance. Because of that, I invite the noble Lord to withdraw his amendment.
In moving the amendment I suggested that, if the principle were accepted at Committee stage the amendment would require further specifications. My noble friend on the Front Bench has pointed out that, as it stands, the commission may carry out some revision. In fact, its document states:
"We will carry out research exercises on fee charging charities and these exercises will include gathering information on their fee-charging policies and practices. [It] will also take account of other factors".
I am glad to see that, but an obligation should be included. The Minister has explained why it is not and I beg leave to withdraw the amendment.
This amendment was the subject of some considerable debate in Committee last time. I do not know whether it is permitted to read into the record what was said on the previous Bill, but I will try. The report of the second day of Committee on
The point of the amendment is to put beyond doubt the right of the Charity Commission, in drawing up guidance as to the meaning of "public benefit"—that is a hugely important part of the Bill, as everyone agrees—to consider the extent to which public benefit is affected by fees charged by charities for their services. Members of the Committee may think that that is obvious and that they are bound to do that in any event, but it is not obvious. In this regard, the law is not set out on the face of the Bill and as Hubert Picarda, Queen's Counsel, extremely learned in charity law, put it,
"the mere reversal of the presumption of public benefit", which is what this Bill effects,
"cannot change the declared law on this point".
The declared law on this point is extremely sparse. Those in the charity world are all agreed that it rests on a single case, Re: Resch, which was a Privy Council case of 40 years ago concerning an Australian hospital run by a religious order. There, and only there, does one have detailed consideration by the High Court of what "public benefit" means in relation to what is a fourth head charity. That would not be too bad if Re: Resch were clear, but it is wonderfully unclear.
The head-note, which, as lawyers will know, is the summary of the judgments given in a case, of which there were several in Re: Resch, states:
"it would be a wrong conclusion to draw from the cases that a trust for the provision of medical facilities would necessarily fail to be charitable merely because by reason of expense they could only be made use of by persons of some means".
In effect, that says that the failure of poor and poorer people to have access to the facilities of the hospital was not a matter determinative of its charitable status. That is very relevant today to charitable hospitals in this country and it is relevant to independent schools, to name another category of charities.
The finding in Re: Resch was that the hospital was a charity, but the head-note continues:
"the element of public benefit was strongly present since the evidence here showed that the need existed for the type of accommodation and treatment provided by this hospital".
What type of accommodation and treatment was provided by that hospital? Lord Wilberforce, who gave the leading judgment, said that the need was satisfied by reason of the fact that the hospital provided,
"medical treatment in conditions of greater privacy and relaxation than would be possible in a general hospital".
In effect, all one needs is to provide what Lord Wilberforce spoke about—greater privacy and relaxation—and one is through the public benefit hoop.
The point I want to make, the point made by many charity lawyers and the point urged on the Committee by the National Council for Voluntary Organisations, for example, is that to rely on that case and those circumstances is a pretty unsatisfactory basis on which to interpret the public benefit test in this Bill. My amendment is extremely modest, rational and not radical. It puts beyond doubt the right, and indeed the duty, of the Charity Commission, when drawing up its guidelines, to look at the extent to which, if at all, public access to the public benefit is affected by the charging policy of the charity.
The only other point I want to make concerns independent schools. The Independent Schools Council, through the extremely eloquent witnesses who came before the joint scrutiny committee which considered the draft Bill—I see the noble Lords, Lord Campbell-Savours and Lord Best, in the Chamber—told us that independent schools have moved on in the past decade. They said to us that the majority were now anxious to provide public benefit to more than merely the pupils at their schools; to share facilities; in some cases to share teaching; in some cases to share playing fields, theatres and the rest of it. We all said, "Hurrah for that".
The point is that not every such school is making an effort to spread the benefits to the wider public. I am anxious—and I think many of your Lordships will be—that in this case the better and more progressive schools should provide the yardstick and not the laggards. I do not want to find in two years' time that when the Charity Commission seeks in its scoping survey to determine what public guidance shall mean with regard to independent hospitals it has the case of Re: Resch thrust at it with the argument, "It is quite sufficient, we're providing conditions of greater relaxation and privacy, and on top of that we're relieving the NHS of the cost of treating the people who come to the London clinic, and that's that, no further requirements".
None of us would want that to be a sufficient response to an inquiry made by the Charity Commission as to the impact on public access of its fee-charging policy. That is all that the amendment is designed to ensure. I hope that it will appeal to the Government now in a way that it did not in Committee last time, although just before the election the Government were minded to allow the amendment had the Bill proceeded through its stages.
I hope that the noble Lord, Lord Hodgson, who had some quizzicality about some aspects of the Bill last time, will be less quizzical today. I beg to move.
My name is down in support of the amendment. I rise briefly to place on the record how modest I think it is and how much support it enjoys throughout the voluntary sector. Also, I want particularly to remind your Lordships that the public benefit test will become more and more important as we move towards more public services being provided through the charitable sector.
I want briefly to intervene because my colleagues and former colleagues in the House of Commons should closely watch the debate that takes place in this Committee on these matters over the next few days and weeks. This issue will become central to consideration of the Bill in the House of Commons. I would like to press this amendment on my colleagues in the other place, because while the noble Lord, Lord Phillips, used the words he used in the previous debate in Committee, to put beyond doubt the right of the Charity Commission, I read it a little more strongly.
The amendment reads,
"In carrying out such consultation in relation to charities which charge for their services, the Commission shall consider the extent".
Many elected Members of Parliament will want to see the word "shall" because—if I may be frank—they are not altogether confident that the Charity Commission has either the will or the bottle to confront organisations which claim charitable status and which are the beneficiaries of tax concessions. I suspect that elected Members of Parliament will want to feel that somewhere enshrined in the law there is a duty on the Charity Commission to do something, more clearly set out in the amendment than in the legislation that we are being asked to approve.
Finally, I would say to my honourable friends in the other House when they are considering this debate, that they should know that the noble Lord, Lord Phillips, who has moved the amendment, is a practitioner in law and specialises in this area of the law. He specialises in charity law and brings to our debates his specialist knowledge, and I think that they would do well to consider that and take that into account when they are asked to consider these amendments at a later stage.
My name appears in support of this amendment. I echo the words of the noble Lord, Lord Campbell-Savours, about the proposer of this amendment and all that he has done for us in the pre-legislative scrutiny committee and the previous Committee stage of this Bill.
I spoke about this aspect of the public benefit issue during Second Reading. The fee-paying question comes to a head with the charities that provide education, as was demonstrated by the discussion between Members of the Committee this afternoon. In Second Reading I stressed, on the one hand, the value of educational provision by independent bodies in the voluntary sector—that is, not in the public sector, nor in the private sector. But I also stressed that if voluntary bodies register as charities, they have an obligation to demonstrate that their work does not—to quote the fourth principle indicated by the court in the case of the famous Re: Resch—
"wholly exclude poor people from any benefits, direct or indirect".
In the case of independent schools, charging fees does not of course mean that the operation does not operate for public benefit. Lots of other charities charge fees for services, but a line is drawn when a charity's work confers absolutely no benefit on the wider society.
I am keen to see sustained the delicate balance that we have created. I hope that that delicate balance, to which the noble Lord, Lord Hodgson of Astley Abbotts, referred, will be maintained as the Bill moves through its next stages. But that requires that delicate balance to be reinforced by an amendment along the lines of the one before us.
In discussing the matter during the Second Reading debate, the noble Lord, Lord Dahrendorf, spoke eloquently for civil society and for the role of the voluntary sector to be supported for its intrinsic value, even when it was not doing good works or benefiting the wider community in a very obvious way. Accordingly, he commended a very broad definition of "public benefit". While I fiercely support him in his advocacy for a strong, independent and even anarchic third sector, a distinction must be drawn between those voluntary bodies that do not seek the fiscal privileges and tax concessions that go with charitable status, and those that do. If a voluntary organisation makes a commitment to become a charity and claims its financial rewards, even if those are a relatively small part of its total income, the nation's taxpayers are entitled to some return on their investment.
Meanwhile, schools outside the maintained sector can be set up as purely private businesses. We know that private sector provision of education is growing. The former Chief Inspector of Schools, Chris Woodhead, has established one such private company, Cognita, launched with funds of £475 million. The Independent Schools Council has drawn attention to the dangers that these purely commercial schools will bring if they ignore local communities. Chris Woodhead has made clear that partnerships to help state schools will not be part of the remit of his new schools. This is where the difference lies between a charity and private sector profit-making companies. Those independent schools that accept the advantages over the commercial position faced by purely private education companies must also accept some duties toward the wider community.
In the field of health, some of the same considerations apply. BUPA is not a charity but a mutual society; Nuffield hospitals are a charity and they get the benefit from that status. In return, some public benefit will need to be demonstrated if the good name and integrity of charity is to be preserved. All that seems to mean that the Charity Commission, in its consultations on public benefit, needs to consider the basis for the delicate balance that we have achieved so far, and to sustain it. That would seem to mean looking with particular care at the position of charities that charge high fees for their services. I support the amendment.
I should just like to put in a tiny caveat here. I was very influenced by what the noble Lord, Lord Brooke, said about the numbers involved. I suspect, knowing what human nature is, that it does things under stimuli—and that a lot of the public schools and hospitals and so on have gone out of their way to do charitable things to get charitable status, totally failing to take into account that what they are providing is costing them far more than the tax relief that they obtain. If you take away that slight frisson of worry that those institutions feel about doing charitable things, you might reduce the amount that they give.
The noble Lord, Lord Campbell-Savours, was mocking the concept of Eton as a charity. It was founded as a charitable school for poor scholars, and the scholars are subsidised. It involves itself in a very considerable amount of charitable work and always has done, both in the East End of London and for its own pupils. Funnily enough, although the great public may not recognise it as such, Eton could be genuinely regarded as a charity—and would pass the test involved in the amendment proposed by the noble Lord, Lord Phillips of Sudbury.
Implied worries can work extremely well as stimuli for the good, and I suspect that what charitable status has done for a lot of these institutions is that it has provided a stimulus for them to be more charitable. They think, "Oh, we don't want to lose charitable status"—whereas if they did lose their charitable status, they might even be slightly better off because they would not have to do the charity. I enter that slightly cynical point of view into your Lordships' discussion.
My Lords, I welcome the amendment, which I think is a good idea, but if it became part of the Bill the Charity Commission would have to take on a considerable number of additional staff to do the additional work that is required and give very sound and good training to those staff to make certain that the work was done well.
I am not going to mention schools, as enough of your Lordships have already spoken about schools with regard to this amendment. But I am going to mention local authorities and their legal duty to provide homes for people with disabilities and for the elderly. An awful lot of that work is not in fact undertaken by the local authorities; they buy it in from charities and private enterprises. Some of those charities are, I suspect, doing very little more than the bare minimum.
We still need those charities that extend and increase the quality of the homes that they provide for disabled people and the elderly. In that respect, I know that one of the leaders is the John Groom's Association for Disabled People, because it has for a very long time concentrated on doing what it can to make disabled people as independent as possible. It has not been able to do that purely on the money paid to it by local authorities to house their disabled people. But not everyone is doing that.
We need to make certain that those charities that are just doing enough to get their payment by the local authorities do more to justify their charitable status. The tax that they can claw back from some of the donations that they receive should be used to advance the work that they are doing. They should not just tread water and stay where they are the whole time.
I had not intended to take part in this debate but, having listened to those who have contributed, I thought that I should say a few words. For 13 years I was the chairman of the governors of Bedford School. I am not now, and so I am not declaring an interest.
The key dimension in an educational establishment of between 600 and 1,200 pupils—whether a boys' school, a girls' school, or a mixed school—is that the expertise is in education. There has been much discussion about whether these schools should be involving the local community. Frankly, I think that is nonsense. It is not using the expertise that lies within the independent sector. You could argue that independent schools should be involving local schools, particular disadvantaged local schools, or pupils who may wish to follow a particular course which is not on offer within their school, so that those pupils could benefit. You could also argue that traditionally these schools have offered bursaries to relatively poor individuals, because it is seen that those pupils have an aptitude for whatever environments or courses are created in the independent schools.
My plea, therefore, is that those who are carrying out this assessment recognise where the expertise lies within the independent sector, for its public benefit element to be applied to other pupils within the environment that they serve, and to forget about the local community.
I have been impressed by the debate and I have listened carefully to the arguments. The noble Lord, Lord Best, has quoted what I said at Second Reading. My concern then was, and to some extent still is, that as we talk about public benefit we think solely of people who are poor or disadvantaged. In my view, that would be too narrow a notion of public benefit—even for the relatively narrow definition of charitable status which the noble Lord, Lord Best, has used.
I do not rise to speak against the amendment, which the noble Lord, Lord Phillips, called a cautious amendment—an amendment which does not go too far—but I would be concerned if an atmosphere were to be conveyed by this debate to the Charity Commission that public benefit is limited to those who are disadvantaged. In my view, there could be public benefit in supporting, for example, the highly gifted in certain areas, or those with special talents. That is why I am still slightly concerned about the tone of the debate more than about the specific amendment.
I go back to when I was chairman of a local education authority of a large rural area of Scotland, which had a population of 400,000 and where there were six fee-paying schools. All those schools contributed enormously to the local community. As the noble Lord, Lord Dahrendorf, suggested, it was to the community in general, not specifically to poor people necessarily. They did it through bursaries, through the sharing of premises and many other things.
I understand that colleagues in Scotland of the noble Lord, Lord Phillips, inserted an amendment in the Charities Act in Scotland which said precisely this. Those schools which gave most to the local community are saying that they will now find it very difficult indeed to do so. They do it because they charge fees at a certain level. Parents are willing to pay slightly higher fees in order that such local benefits should be provided. They like the idea. People in Scotland are very community-minded and they want this. However, I understand that this is regarded as enormously damaging—particularly in one of the schools in the area where I was chairman of the local education authority.
I do not think that the Liberal Democrats have the best idea here. It sounds a very modest amendment, but I do not think that it is. The argument could be used, "Your fees are too high. You can't be a charity because you are not doing a proportionate amount in the community". This is a balance that a school has to strike.
I understand the feeling of the noble Lord, Lord Campbell-Savours, that charity is the wrong approach in relation to a fee-paying school. However, it is something that the law has done and an arrangement that is made. It seems to me that this balance is crucial. I am sorry that we go on talking about Eton. I know that those on the other side have a huge prejudice against what is, in the experience of those who have been there, one of the best and most innovative schools in the country. I am not particularly wedded to the concept of these schools being a charity, but that is the way it is.
Having discussed it with my friends in Scotland and although I do not know the wording there—I am therefore perhaps speaking somewhat off the top of my head, which one should never do with a lawyer—the general concept is contained within the Act in Scotland and, in the area where I live, is regarded as considerably damaging.
Before the noble Baroness sits down, may I reassure her that in my view her colleagues in Scotland are right. That is because the wording of the Scottish Act is radically different from the wording of this Bill.
It was pressed upon me that it might assist our deliberations to introduce some of the Scottish wording around this very issue. However, I rejected that out of hand because in this instance I believe that the Scots have got it plumb wrong and have introduced a series of measures which are worthy of the commentary made by the noble Baroness; but they have no bearing on this amendment.
My only comment—and again I am speaking without having gone into the issue very carefully—is that the matter which is being complained of in my area is precisely this one. Whatever the wording is in the Scottish Act—I know that there are many areas in which it is quite different—people are very worried about it. We are not discussing that here.
However, the Liberal Democrats were very keen on this concept. It has been put in and it is regarded as damaging. That is my only comment.
We have had some expert, persuasive and honeyed words from the noble Lord, Lord Phillips, in introducing this amendment. From the noble Lord, Lord Campbell-Savours, we had equally persuasive words, with perhaps just a hint of menace underlying them. However, I remain unconvinced of the appropriateness and value of this amendment.
I will not repeat what I said in the debate on Amendment No. 8, but the issue of the delicate balance remains. In my view, we have made the Charity Commission responsible for the public benefit definition. We have made it responsible for its revision; we have given it independence; we have told it that it must ensure compliance. It seems to me that if we have said that we should adopt a hands-off policy and we pass it over to the Charity Commission, it should be left as uncomplicated as possible.
It is as if we were saying, "Yes, we wish to create a level playing field"—I hate to use the phrase "level playing field" in an analogy about a school—"as far as concerns all charities and public benefit but, by the way, we would like you to tip the playing field a little when you consider the public benefit as it affects charities which charge for their services". I therefore believe that the Government should resist this amendment.
We have certainly had a wide-ranging debate on this amendment, with support for the proposal made by the noble Lord, Lord Phillips, coming from interesting quarters.
The Bill requires, through Clause 4, the Charity Commission to publish guidance on the operation of the public benefit requirement. The public benefit requirement is the requirement that a purpose falling within the list in Clause 2(2) must be for the public benefit if it is to qualify as a charitable purpose. The commission has published a draft document, Public Benefit: The Charity Commission's Approach, to illustrate how it would be likely, once the Bill is enacted, to go about its task of ensuring that charities meet the public benefit test requirement. That document contains a section entitled "Public Benefit—the Legal Principles", which describes the legal underpinning for that task. In that section, the commission makes it clear that it will apply the general, overarching principles derived in "Legal Principles" to carry out public benefit checks on new and existing charities.
It is obviously of paramount importance that the commission should be able to carry out effective checks on the public benefit of charities, both on new organisations applying to register as charities and to existing registered charities. Indeed, the integrity of the charity, and thus public confidence in charities, would be put at risk if the regulator was not able to do that because the Bill failed to provide it with an adequate legal platform.
Clearly, the contents of the document would be taken into consideration if there were some form of legal challenge.
The commission's document makes it clear that it can carry out public benefit checks under the Bill as drafted. In describing how it would approach an apparent lack of public benefit in a charity, the commission says:
"Where charities are not delivering public benefit but are able to, our action might include helping the charity change its stated purposes or its activities so that it is benefiting enough of the public to show and demonstrate public benefit. We might also use our regulatory powers to enforce change if the trustees are not co-operating with us, although we anticipate that we would need to do this in only a few cases . . . However, in extreme cases where the trustees are co-operating with us but the organisation simply cannot in all the circumstances provide public benefit, our action might include removing the charity from the register and making a legal scheme where necessary to ensure that any charitable assets of the organisation will in the future be applied for other charitable purposes close to any purposes that have ceased to be charitable. This would only happen where it was not possible for an organisation to meet the public benefit requirement".
The commission's words hold good both for charities that charge fees to people who use their facilities and services and for charities that do not charge. The Government believe, and the Charity Commission accepts, that the Bill, together with the underlying common law on public benefit that the Bill preserves, provides a sound legal basis for the commission to go forward with public benefit checks on all types of charity.
I am not sure that the amendment proposed by the noble Lord, Lord Phillips, would add anything in that respect, since the commission's "Legal Principles" section makes clear that it can already take into account the effect of fee-charging on an organisation's ability to meet the public benefit requirement. It can already undertake the exercise in the way in which the noble Lord understands under its own terms and the legal principles that are set out in the document.
However, I have listened carefully to the points made in the debate. Since the draft Bill was published about a year ago, the Government have shown ourselves willing to respond to the concerns raised in debate by making changes to the provisions in Part 1, of which the requirement on the commission to publish its guidance is one example. Another is the provision requiring charity trustees to have regard to the commission's guidance where relevant. I am sure that noble Lords would accept that that demonstrates that the Government's mind has not been closed to sensible adjustments, and we have been praised for that.
Many noble Lords' interventions today will repay closer study on our part, and we of course intend to do that before the Bill returns for the next stage. I cannot at this stage give a commitment that the Government will put forward our own amendment. However, we will continue to set ourselves against anything that might undermine the adequacy of the legal underpinning for the Charity Commission's public benefit checks or anything that might fetter its ability to carry them out as an independent regulator on the basis of the flexible and adaptable common law of public benefit. Having heard that, I am rather hoping that the noble Lord, Lord Phillips, will feel able to withdraw his amendment.
I was not quite clear what the noble Lord, Lord Swinfen, was getting at. The fees are treated as the income of the charity and would be subject to the ordinary tax regime as it affects charities. I do not think that there is another particular benefit, but if the noble Lord is happy to sharpen and perfect his question, if I cannot answer it today I shall happily write to him, or perhaps we can deal with it at a later stage of the Bill.
What I was getting at was whether the charity would be able to claim back income tax that had been paid by the fee-payer in the form of Gift Aid or some other form of that sort. I wanted it on the record that that was the case. It is my belief that if you buy something from a charity, the charity cannot then claim Gift Aid on the amount that you pay and so increase its income.
I think that the answer to the noble Lord's question is "No", but I would like to set that out more clearly. Of course, I will as usual ensure that the letter is circulated to those who are interested.
I venture to suggest that the noble Lord, Lord Bassam, meant to say, "The answer to the noble Lord is 'Yes'". You cannot use Gift Aid for the purposes of paying school fees. That is correct.
I am grateful to the noble Lord, Lord Bassam, who in his traditional courteous and helpful way has done the best that he could with his brief, if I can put it that way. The noble Lord, Lord Best, made a useful contrast between private and charitable schools, which is important for us to remember. As regards the tone of the debate, I say to the noble Lord, Lord Dahrendorf, that I absolutely accept that public benefit must be given its full breadth, which includes gifted pupils.
The noble Baroness, Lady Carnegy, mentioned the Scottish Charities Bill. I repeat that the language in the Bill there, whether it was inserted at the recommendation of the Liberal Democrats or not, is utterly different from this, and in my view is inappropriate for our Bill. The noble Earl, Lord Onslow, made an interesting point about the quiet spur to continue charitable activity on the part of schools, which I agree with. The noble Lord, Lord Hodgson, made his point around the fact that we are giving the Charity Commission the job of deciding what public benefit is, and we should let it get on with it.
The whole of my argument—and this was not replied to by the noble Lord, Lord Bassam—hinges on the fact that the common law, which is undisturbed by the Bill, is antithetical to the very issue that we have been talking about—namely, whether the Charity Commission can look at the impact on public access of fee-charging by the charity concerned. If the noble Lord, Lord Bassam, would go away from this House today and get the Attorney-General to instruct his counsel on charity matters to give an independent view of the impact of Re Resch on the issue, that might be helpful to the House. My view would undoubtedly be amended if counsel were to disagree with the view that I and many other charity lawyers hold. If on the other hand he comes back and says, "Yes, I think that the noble Lord, Lord Phillips, is broadly right", then I fear the whole basis on which the noble Lord, Lord Bassam, advanced his response is fallacious, and the amendment is needed. I am going to sit down now, and I am grateful to all those who spoke in the debate.
moved Amendment No. 12:
Page 4, line 18, at end insert "unless and until it registers as such, in which event it shall cease to be a registered sports club"
This amendment is similar to but significantly different from one advanced on
The Government introduced the community amateur sports scheme (CASC) as an alternative to charitable status for amateur sports clubs in 2002. As the noble Lord, Lord Phillips of Sudbury, knows, it gives qualifying clubs many but not all of the tax reliefs that charities enjoy from both direct taxation and property rates. For those reasons, it has proved to be a popular and successful scheme.
The provisions in subsections (4) and (5) of Clause (5) of the Bill are to ensure that a qualifying club can choose to be a registered CASC or a registered charity, but cannot do both at the same time. If a CASC did want to become a charity, it could create a new club in charitable form, pass all the CASC's assets to the charity, and then wind up the CASC. During the previous sessions, as the noble Lord rightly recalled, we did offered to consider the proposal he put forward as its intentions are to provide for a simpler process for the transition of a CASC into a charity. Having thought about it some more, we have concluded that although the amendment achieves a perhaps slightly smoother passage from CASC to charity, there is a risk that the deemed disposal by the CASC of its assets during the process would give rise to a chargeable gain that might not be exempt under the charity exemptions. For that reason, we think it is wisest, though we can see merits in the proposal, to resist the amendment.
I thank the noble Lord, Lord Bassam, for his response. I do not think that that fear of a deemed disposal for tax purposes is well-founded, and I would suggest that there be discussions outside this Chamber. If it is ill-founded, then perhaps the matter can be resolved positively next time. I beg leave to withdraw the amendment.
moved Amendment No. 13:
Page 77, leave out lines 35 to 42 and insert—
"5 (1) The Commission shall appoint a chief executive and may appoint such other staff as it may determine.
(2) The chief executive and other staff of the Commission shall be appointed with such remuneration and on such other terms as the Commission may determine.
(3) Employment as a member of the Commission or the staff of the Commission shall be included among the kinds of employment to which a superannuation scheme under section 1 of the Superannuation Act 1972 can apply."
This amendment concerns Schedule 1, which is the details relating to the Charity Commission and in particular the Charity Commission's staff. It is of course concerned with the buttressing of the Charity Commission's independence—a matter on which many noble Lords have today stressed importance. The amendment replaces the current wording, which states that any appointments by the commission require the approval of the Minister for the Civil Service. The new wording gives the commission the ability to appoint members with complete independence.
I said in my remarks at Second Reading that the structure of the committee was a topic that we intended to continue to probe because we felt that more could still be done to achieve an entirely independent Charity Commission. It is important to reiterate that we seek to be reassured that the Charity Commission will be truly insulated from political pressures of any kind. We are very grateful to the Government for having taken on board some steps toward achieving this independence by accepting the amendment which now appears in new Section 1A(4) in Clause 6, by ensuring that:
"In the exercise of its functions the Commission shall not be subject to the direction or control of any Minister of the Crown or other government department".
However, Schedule 1 still stipulates in paragraph 5 on page 77, that:
"The appointment of a chief executive requires the approval of the Minister for the Civil Service as to the chief executive's terms and conditions of service".
So, as an "independent" body—note I put the word independent in quotes—the commission must still go to the Minister for the Civil Service and ask for permission to take on new members, and it remains tied to the Minister's rates of pay on staffing levels and conditions of work. Is that really independence? One can easily envisage a situation where a political Minister—of whatever colour—could seek to influence the commission by giving or withholding assent to various staffing decisions. In my view, the commission should have the organisational and structural freedom to make its own way and attract men and women of quality to work for it.
We have already argued this case extensively in earlier Committee sittings on the previous print of the Bill, before the general election. I do not propose to weary the Committee with further repetition. All I ask is for the Government to take this one last step to achieve a truly independent Charity Commission. I beg to move.
In the Joint Scrutiny Committee, one recurring theme was the need to allow the Charity Commission to have more latitude in the appointment of staff and particularly in the remuneration of the staff so appointed, in order to enable the commission to have at its command that quality of personnel without which, the Joint Scrutiny Committee felt, no Bill could achieve its optimum outcome. On that broad basis, I lend my support to Amendment No. 13 moved by the noble Lord, Lord Hodgson. I await with interest to hear what the Minister says about the constitutional proprieties of the amendment. I hope that, although the Treasury is now the responsible department of state for the commission, this is within the conventional arrangements—in that it will allow the commission the freedom, within their allocated budget, in terms of numbers and levels or remuneration.
We return to the issue of independence. I thought we had already got ourselves to a good position during the debates on the Bill prior to the election, but I am not surprised that the noble Lord, Lord Hodgson has come back to this in another form, and I congratulate him on his wit in so doing.
The Charity Commission already has significant flexibility in the appointment of its staff, under its existing delegated authority. Except for senior civil servants, of whom there are currently only six at the Charity Commission—that excludes the commissioners, who will cease to be civil servants under the Bill—there are no restrictions as such on how the commission determines pay and grade structures. Instead, it is required to work within its overall pay remit to employ the right mix of staff to deliver its objectives.
Senior Civil Service pay and grade structures are determined by the Cabinet Office, but departments including the Charity Commission have flexibility to make their own arrangements for determining individuals' pay by reference to performance. Therefore, except for a small number of its most senior staff, the Charity Commission already effectively has control over the terms and conditions of service of staff within it.
The current regime for pay and grading of staff is set out in paragraph 2 of Schedule 1 to the Charities Act 1993. That refers to the Treasury because, at that time, there were standard national grade and pay structures for all civil servants across government. Subsequently, the Treasury made all departments responsible for deciding their own pay arrangements within overall Treasury limits.
The commission has discretion in how its total pay budget is divided up. It also agrees its arrangements annually with the Treasury to ensure that they are broadly in line with other departments. Paragraph 5(2) and (3) of Schedule 1 does not mean that the Minister for the Civil Service or officials at the Cabinet Office acting on his behalf have to approve the detailed terms and conditions of service of either the chief executive or Charity Commission staff in general. In practice, for the Charity Commission as for other departments, they approve only the broad framework within which detailed decisions on terms and conditions are taken by departments themselves.
The commission has recently made several successful appointments, not least that of Andrew Hind, appointed last year as chief executive following open competition. That competition attracted a good field of high-quality candidates, which does not suggest that the Civil Service framework in which the commission currently operates prevents it recruiting staff with the skills and experience that it needs. The commission reviewed its recruitment procedures as recently as 2003 to ensure that it was able to recruit and retain high-quality staff. In addition to its performance-related pay system, the commission makes good use of starting-pay flexibility, recruitment and retention allowances and non-pay rewards to both attract and retain high-calibre people.
The commission has developed a workforce strategy that sets out a comprehensive approach for achieving the changes needed to meet financial, structural and cultural challenge, and the challenge of future delivery needs. Key priorities identified include further modernisation of its pay and reward structures to support a high-performing, highly skilled and flexible workforce, and effective investment in the training and development of its staff to maximise retention.
The amendment would affect the commission's status as a non-ministerial department. We thought long and hard about the commission's status, and decided that the most appropriate status for it remained that of a non-ministerial department—not least because no suitable alternative had been identified and described to us. The commission fully supports the continuation of that status.
However, we listened to the points made by noble Lords on the matter in the previous Session, so have made provision in Clause 70 for the commission's status to be considered as part of the review of the impact of this legislation. A person must be appointed to carry out the review within five years of the Bill receiving Royal Assent, and a copy of the report produced as a result of the review must be laid before Parliament. As a result of that review, some alternative status and perhaps an alternative strategy for the Charity Commission may well be identified outside the Civil Service. For as long as it remains a non-ministerial department staffed by civil servants, it is in our view essential that government should retain some control of staff terms and conditions. For that reason, the Government cannot accept the amendment, and I invite the noble Lord to withdraw it.
I am grateful to the Minister for a very worthy reply and for his encouraging words about the future remuneration policy of the Charity Commission. As he will know from our earlier debates, an issue that came up from representations made to us was the inadequacy of experienced staff and the fact that staff had changed a lot, which undoubtedly was linked to how they were paid and remunerated. It is therefore good to know that that point has been taken on board.
I appreciate also the change to Clause 70, which enables the situation to be reviewed in future. I note all the points, but will have one further thought about the issue, consult externally, and see whether I wish to have a final throw of the dice and persuade the Minister that he should take the last step. In the mean time, I beg leave to withdraw the amendment.
I begin with an apology because the amendment is worded rather awkwardly. What was intended by it was that the charitable resources objective should be to promote the effective use of charitable resources, and to increase them—to increase the amount of resources, as well as their effective use. With the leave of the Committee, I hope that I may be permitted to speak to the spirit of the amendment rather than the actual wording.
This is a short but potentially significant amendment that I tabled because of the response that I received when I said, at Second Reading, that the Bill had not taken sufficient opportunity to encourage giving—to promote philanthropy. As I pointed out, in this country we have a long way to go in philanthropy compared with, for example, the United States. The Minister was kind enough to say in his response that my comments were helpful, and I have since received further encouragement from the noble Lords who have added their names to the amendment; I am grateful to them. The amendment would commit the Charity Commission not only to promoting the effective use of charitable resources, but to taking opportunities to increase them.
As Members of the Committee will know, the voluntary sector gets approximately 30 per cent of its income from individuals and grant-making charities. Increasing charitable resources in the form of philanthropy and income from individuals would, in turn, increase the capacity of the sector. What is important about that form of income is not only that it gives the voluntary sector greater capacity overall, but that it may come with fewer strings attached. It so enables charities to address issues and situations that may not be possible with other forms of income, such as those that they get from government sources or business.
Philanthropic income gives the potential for charities to be creative, flexible, and sometimes unorthodox or risky in the use of their funds. It allows them to innovate, often with benefits that may emerge only over the long term and are difficult to quantify or may be unfashionable. All those are important elements in a healthy and mature society. There is value in encouraging the supply of such income and, notably, in providing a supportive environment for individuals who wish to give substantially or to create grant-making trusts.
At present, that is not necessarily the situation. That is because all charities broadly have the same regulation, whether they raise money in the street and provide services, have an endowment or a single sum donated by a philanthropist, or provide grants for other people or institutions. The purpose of the regulation of charities is primarily to safeguard the interests of those who entrust resources to charities, or the interests of recipients of services. In the case of grant makers, however, there is rarely any solicitation of funding from either the public or the Government. Nor are services directly provided to the public. Leaving grant makers to fulfil regulations and reporting criteria that are focused on operating charities and do not fit them well is a burden and a disincentive for individuals to give further.
The research study by the Association of Charitable Foundations among people of substantial means found that,
"a fifth of those who had set up grant-making charities had serious reservations about one or more aspects of doing so, the majority of which were related to the burden of bureaucratic regulation".
General regulation may have adverse effects on the charitable sector as a whole. The report by the joint scrutiny committee on the original draft Charities Bill recognised the vital role of grant makers to the sector, and saw appropriate regulation as imperative to ensure that,
"the regulatory burden on grant makers does not discourage philanthropy".
While I am certain that the present leadership of the Charity Commission is aware of this, it would still be helpful to give the commission a specific direction to be conscious of developing philanthropy. Therefore, I am proposing this strengthened objective to increase charitable resources. This would be an incentive for the commission to be more supportive of regulation that would encourage philanthropy and facilitate the work of grant-making trusts. That would in turn increase the funds coming into the charitable sector and enable more good work to be achieved by the sector as a whole. I beg to move.
My Lords, my name appears in support of this amendment. Although its substance is only the single word "increase", it is a very important amendment for the charities sector as a whole.
I declare an interest as the former chair of the three-year Giving Campaign which had the objective of further developing the culture of giving in the UK and ended last year. That campaign was jointly funded by the Inland Revenue, at the request of the Chancellor of the Exchequer and the voluntary sector.
The charitable sector relies for its very existence on effective fundraising. It cannot expand, nor will it even be able to maintain, its existing level unless additional funding is found in the years ahead. There is an illusion that the British give generously to charities, which tends to be enhanced by the incredibly generous response to catastrophes such as the tsunami.
However, the statistics show that, disappointingly, over the last 10 years or so—during a period when incomes have risen by approximately 25 per cent in real terms and when personal wealth has more that doubled—the level of giving has actually fallen in real terms. That is partly due to the fact that the wealthy, on average, tend to be relatively less generous than poorer members of our society.
Against this background, it is not enough for the charity commissioners to promote only the effective use of charitable resources, which are reducing in real terms as a percentage of GDP. It must surely have the additional objective of promoting an increase in charitable resources, and this is what this amendment, which I support, would achieve.
As the noble Baroness, Lady Pitkeathley, mentioned, I am talking to the spirit of the amendment, rather than the actual wording.
My Lords, I am delighted to support the amendment of the noble Baroness, Lady Pitkeathley, as it is supported by other Members of your Lordships' House. I well remember the debate on charitable giving which the noble Lord, Lord Joffe, initiated a year or two ago—an extremely rich experience.
I believe that in one of Wavell's books or lectures on leadership he says that nobody is going to get into that book or lecture unless he has led an army in defeat. That is itself an admirable criterion. I have recently been unable to find the reference and, if anybody can point me towards it, I shall be grateful.
There is no question that it is easier to lead a growth organisation than one in retreat, which is perhaps why Wavell set the test. It is just as easy to say that one is pro-philanthropy as it was for President Coolidge to say that the preacher was against sin.
We recently had a debate about museums, to which it is possible that the noble Lord, Lord Davies of Oldham, replied. Exactly the same issue came up in that context. As I recall, one of the questions the noble Lord, Lord Davies, was asked—both by my noble friend Lord Eccles and, wholly incidentally, by myself—was when the Government were going to produce a reply to the Gooderson review, which the Government had asked Sir Nicholas Gooderson to produce on this very subject: how we increase the flow of gifts into the museum sector.
The issues which the noble Baroness, Lady Pitkeathley, has brought forward, as supported by the noble Lord, Lord Joffe, are exactly the same and analogous. It is important that pressure on the Government to respond on these issues remains just as strong in this case as it does in the other. For that reason, I am happy to be a signatory to the amendment.
My Lords, I had originally proposed to oppose this amendment, because it seemed to me that putting "and increase" in line 4 was a potential increase in the regulatory burden. Indeed, I had been trying to persuade the Government, under new Section 1B(3)1—
"The public confidence objective is to increase public trust"— to remove "increase" and put "maintain". I failed to achieve that earlier in Committee. I could hardly support the idea of increasing the effective use of regulatory burden implied thereby.
If we are trying to find ways to increase the quantum of charitable resources by moving "and increase" to line 5, however, that seems to me to be a thoroughly praiseworthy objective. I am happy to support the amendment.
My Lords, I am delighted to respond to this amendment because, although I ultimately have to resist it, it is one that has usefully focused on an important part of the Charity Commission's work. We certainly agree with the principle and the spirit behind the amendment; that is, that charities should be using their resources in the most effective way. For that reason, we have continued this objective from the Charities Act 1993, which states on the first page that the commission must promote,
"the effective use of charitable resources".
We do not think the amendment is necessary. The commission is not in control of charitable resources; the trustees command them. It would therefore be inappropriate to require the commission to increase the effective use of charitable resources. I am not quite sure how they would achieve that objective.
We cannot think of a way in which the commission's performance against this laudable objective could be properly measured. While I can certainly understand why the noble Baroness, Lady Pitkeathley, has moved this amendment, and why it has received such warm support, I cannot ultimately accept it on behalf of the Government.
It is worth directing our attention in considering this matter to Clause 7(2), at the top of page 7 of the Bill, which gives the commission a statutory duty to act in a way compatible with the encouragement of all forms of charitable giving. This was added to the Bill as a product of the debate which I think the noble Baroness contributed to, before the general election, in Grand Committee. We thought it would be a useful addition to the Bill, so we feel we have already met the spirit behind the amendment.
The noble Baroness also made quite understandable reference to the burden of regulation. We certainly accept the Joint Committee recommendation for a review of the burden of regulation. We are developing proposals for such a review to be carried out by the Better Regulation Task Force, as I have probably made clear before. We understand the force of argument behind the need, as the noble Lord, Lord Hodgson of Astley Abbots, has reminded us on a number of occasions, to minimise the burden of regulation at all times. It is certainly our intention to ensure that we fulfil that—the task could be carried out by the Better Regulation Task Force.
I know that is a slightly tangential subject. We endorse the spirit of the amendment, but have probably already met it in the way we have framed the legislation brought forward in that new amendment.
This amendment follows in the spirit of the amendment moved by the noble Baroness, Lady Pitkeathley. It adds a further function to the commission's general functions listed under new Section 1C of Clause 7. That added function requires the commission to facilitate development and innovation in the charitable sector.
As I explained on the fourth day of our previous Committee stage, we believe that the role of the commission should not be limited to regulation. It must not be merely a box-ticking entity created to issue guidelines and act as a policeman to the sector. Although, unarguably, the commission's status as a regulator is its central function, the flexibility and dynamism of the third sector may be at risk if the commission's purpose becomes one of restrictive finger-wagging. The list of its general functions given under new Section 1C(2) are: determining whether it is used for charities; encouraging better administration; identifying misconduct; determining whether public collection certificates should be issued; obtaining information; and giving information and advice. Those are the six.
They all seem rather negative. In our earlier debate on
At the first Committee stage, the noble Lord, Lord Bassam, described the Government's stance on the issue in the following words:
"We want to see the facilitation and development of the charitable sector—certainly the Government want that. However, it is not right to describe it as a function of the Charity Commission, which is at its core a regulatory body".—[Official Report, 23/2/05; GC 289.]
I have some difficulty seeing how adding "Facilitating development of and innovation in the charitable sector" to the list of the commission's functions would undermine its role as a regulator.
If, as the noble Lord, Lord Bassam, explained, the Government really want development and innovation in the sector, why not make it a function of the commission to facilitate that? The noble Lord went on to explain that the commission could operate only within the confines of the law. He suggested that it would be beyond the remit of the law for the commission to commit any of its energy to facilitating development and innovation. I do not see why that should be the case. He argued (at col. GC 289 of the Official Report of
Putting that additional function on the face of the Bill, and thereby encouraging the commission to "facilitate"—a word that I argue is very different in meaning from "encourage"—development and innovation is an important safeguard against the commission becoming too risk-averse and thus inhibiting the ability of the voluntary sector to meet the needs of our rapidly changing society. I beg to move.
We had an interesting debate in Grand Committee on this proposal. I went back to read the closing remarks of the noble Lord, Lord Hodgson, after the Minister had spoken. He said that the Charity Commission should have a proactive, facilitatory and helpful role. I agree about the facilitatory and helpful role, but the noble Lord has not let go unnoticed that general function 2, a few lines above where his amendment would be inserted on page 6, refers to:
"Encouraging and facilitating the better administration of charities", which seems perfectly reasonable. Clause 24, which the noble Lord has not mentioned, refers to the power of the Charity Commission to give advice and guidance, which I should have thought was a useful supplementary role, and which is given special mention.
However, I doubt whether it is the job of the Charity Commission—a regulatory body, as the noble Lord agrees that it is—to go further than being helpful and become proactive. I know that the noble Lord wants the Charity Commission to be proactive in various respects, but I think that being proactive—which must mean promoting charities—is not a suitable job for the Charity Commission, so I doubt whether we should pass the amendment.
I must confess that I have two minds about the amendment. I hear what the noble Lord, Lord Borrie, says, and there is much force in it. On the other hand, the noble Lord, Lord Hodgson, made a good point when, looking at new Section 1C—"The Commission's general functions"—he pointed out that it is a pretty arid list, especially when you realise that Clause 6 concerns the giving of advice not to the sector as a whole but to any Minister of the Crown. If we take the objectives and the general functions together, I wonder whether it does not add up to too dry and regulatory a menu, especially as the commission is proud of its dual function of regulator and friend of the charity sector. I shall be interested to hear what the Minister says in response, because we have another opportunity to consider this point at the next stage.
I take the amendment as one encouraging the Charity Commission to look in a friendly manner on the new ideas proposed by charities and would-be charities, rather than being obstructive—saying, "It's not been done before; you can't do it". When I set up my charity, the Charity Commission had absolutely no idea what telemedicine was. It asked, "How does it help anyone?" With the aid of several articles, those dealing with our registration as a charity were taught what telemedicine is and how it works. That was about seven or eight years ago. Today, few people in the country do not know what telemedicine is; then it was very new.
I would not want the Charity Commission automatically to say, "It's not been done before; you can't do it". I want it to think, "That's new; let's see how it can be done and how it helps people—how it helps the public generally". With a bit of persuasion, in our case, that was done. I am grateful; the charity has been growing exponentially since then because the demand has been so great and it has helped hospitals in remote places in the developing world in post-conflict situations.
That is how I read my noble friend's amendment and I hope that the Minister will support it.
I support the amendment. The very essence of the charitable sector is innovation and creativity—doing things that governments cannot do. The normal tendency for regulatory authorities is to become very risk-averse, as the noble Lord, Lord Hodgson, pointed out. It is important that in this case the regulatory authorities should take the view that innovation in charity should be encouraged.
This has been a useful short debate on the amendment. In the end, I very much come down on the side of the argument advanced by the noble Lord, Lord Borrie, who has picked his way through where we, the Government, are on this issue and has accurately summarised our position.
The noble Lord, Lord Phillips, makes the point about legislation sometimes being rather arid in its description. Behind the way in which we have set out our approach to this in the Bill there is a general encouragement—perhaps more than that—to see the Charity Commission as being more facilitative and innovative, in so far as the charitable sector is concerned.
In some respects the Charity Commission is a rather unique regulator; we do want to see it as an encouraging regulator. We want to see its characteristics develop so new ideas for solving old problems in the charitable world are apparent. Where we perhaps part company with the noble Lord, Lord Hodgson, is that we take the view that the Bill already allows, enables and equips the commission to be an innovative regulator. It is for that reason that we do not think that the amendment is required.
The commission has five objectives. They are not particularly in an order of priority, but for the purposes of debate on this amendment the most important one is the fourth: the charitable resources objective. The wording of this objective, which is carried over from the 1993 Act, is designed to promote the effective use of charitable resources. It is our expectation that the commission will adopt an imaginative approach towards that. There are already signs that that is the case.
In support of its objectives, the Bill gives the commission six general functions, of which I single out in this context the function of encouraging and facilitating the better administration of charities. Again, I interpret that as being an encouragement to be more imaginative in approach.
I am clear that the objective of promoting the effective use of charitable resources, and the function of encouraging and facilitating the better administration of charities, together give the commission full scope and opportunity to encourage development and innovation in the charitable sector. In fact, the commission has already signed up to working in that way. It is part of the commission's new mission statement, published in March, that it will work by "encouraging innovation and effectiveness".
Clearly the commission is confident that it can legitimately work by encouraging that innovation and effectiveness, whether or not the Bill goes through in its current form, and without needing to be given a specific function in terms of the amendment tabled by the noble Lord, Lord Hodgson. I entirely agree with the commission in that approach.
It follows on from that that, while I certainly can see merit in what the noble Lord said, we feel that the way in which the legislation is drafted and the way in which the commission has already responded to that, the amendment is not necessary.
Taking account of the main strand of the Minister's argument, which is that the Charity Commission does not really have the staff and so forth to engage in facilitation of development and innovation, I wonder whether he would think over the possibility of shifting this to the next clause, "The Commission's general duties". In Clause 7, paragraph 1 of new Section 1D(2) reads,
"So far as is reasonably practicable"— which is important—
"the Commission must, in performing its functions, act in a way", which is compatible with the encouragement of its objectives. My new paragraph (c) would refer to "innovation in the charitable sector". Innovation is nowhere in this important clause; there is a lot of stuff about effectiveness but nothing about innovation. The noble Lord, Lord Joffe, made that point very strongly.
Innovation is very much allied to being effective, because to be effective one must innovate and get ahead of trends and anticipate what is coming around the corner. I understand the point that the noble Lord has made and I am never a closed mind on these issues but I am not really prepared to go further than that. The Commission is demonstrating that it is providing a response to the challenges that new charities and new ideas coming from the charitable sector are likely to throw up and it is likely to anticipate.
The noble Lord, Lord Borrie, referred to administration, which is almost the direct opposite of innovation. I do not think that administration covers innovation in any way whatever.
I am grateful to the noble Lord, Lord Joffe, for that intervention. It was a very disappointing response. The Minister said that the noble Lord, Lord Borrie, got it about right, which is praise indeed. The noble Lord, Lord Borrie, gave three reasons for wishing to reject the amendment. The first was that new Section 1C(2)(2), in Clause 7, is about facilitating better administration. However, as the noble Lord has just said, that is not what my amendment is about. My amendment is about looking forward and encouraging the emergence of new forms and not being risk averse.
The second reason given by the noble Lord was that Clause 24 gave the Charity Commission,
"Power to give advice and guidance", but that is a completely different sort of activity from being part of its general functions.
Thirdly, the noble Lord quoted back to me my remarks from the previous Committee stage. He said that I had used the words, "facilitatory", "helpful" and "proactive" and that I was to be hung on the fact that I had used the word "proactive". He accepted that the first two words were in accordance with the meaning of the word that I used, but that I had been unguarded enough towards the end of the debate to use the word "proactive".
The noble Lord, Lord Phillips, was right when he said that this is an "arid" list of functions. The Minister went on to talk about being an "encouraging regulator". I see nothing about innovation here. The Government's answer on this point is not good enough and I wish to test the opinion of the House.
I must advise the Committee that there have voted Contents: 93, Not-Contents: 93. There being an equality of votes, in accordance with
Before calling Amendment No. 16, I must advise the Committee that there is a misprint on the Marshalled List. The amendment should not include the word "from". It should read:
"Page 7, line 6, leave out ", in performing its functions,".
In moving Amendment No. 17, I should also like to speak to Amendment No. 18.
The purpose of the amendments is to require on the face of the Bill that the commission must act at all times, and not merely when it thinks it advisable, in accordance with the principles of best regulatory practice, and must act fairly and reasonably. Omitting the words "so far as relevant" would prevent the commission choosing when it is expedient to act in accordance with best practice.
The requirement for fair and reasonable conduct by the commission has had much support in the House. Many noble Lords, such as myself, believe it should be on the face of the Bill because the commission has not always behaved this way, as I mentioned at Second Reading. In the Little Gidding Trust case, the High Court refused to consider the behaviour of the Charity Commission, even when that was identified as a central issue. If the High Court had not recognised that as law, it might be wise to include these words in the Bill so that both the High Court and the commission do so in future.
During the debates on the previous Charities Bill before the election, I and others asked for "fair, reasonable and proportionate" behaviour of the commission. In spite of the claims that it was already the law and therefore did not need to be on the face of the Bill, the Minister has now allowed "proportionate", and I am grateful for that. But it does not go as far as "fair and reasonable".
The charity sector is the only one which is founded on morality, and charities expect a standard of regulation likewise founded on a moral bedrock. The commission, as I said at Second Reading, has not always met this high standard, and it is necessary that it should.
I quoted a number of examples at Second Reading, and I am distressed to say that since then, I have heard from a charity that there are still similar problems. I have been specifically asked by the charity not to mention its name or to give details, because it is frightened that that would adversely affect its standing with the Charity Commission. It is a sorry state of affairs if any charity thinks that.
A recent survey by the commission revealed that 44 per cent of its stakeholders think that it is not doing a good job. Why would charities utilise the commission for advice if they lack confidence in it? How is the commission's enhanced advisory role to be delivered while charities continue to lack confidence in their regulator?
The new management at the Charity Commission have committed themselves to acting fairly and reasonably in their recently published policy document, but that is not something that it can be held to. Future management could reverse or ignore this. I urge the Minister to bolster the commission in its reforming process and accept that both the commission and the courts need to be told explicitly that fairness and reasonableness are legal requirements, thus enabling charities to have confidence in their regulator. I beg to move.
I support the noble Lord, Lord Swinfen, in his Amendment No. 18. In his generous and helpful letter, the noble Lord, Lord Bassam, explained his reasoning, and that of the Government, in including "proportionate" but not "fair and reasonable". His main argument was that if the words were included in the Bill it would seem that we were trying to criticise the commission and its past behaviour. The noble Lord, Lord Swinfen, has done so and has given evidence for what he has said.
Even apart from such criticism, however, I argue that the Bill is not written to please the Charity Commission—or any other authority, for that matter. That is not the Bill's purpose. It is written, if anything, to encourage charities—large and, above all, small. If there is the slightest reason to believe that charities would be encouraged by including the words "fair and reasonable" in the Bill, it is a good enough reason to do so. I therefore hope that it is still possible to include these words.
I, too, support the noble Lord, Lord Swinfen, in his amendment. I spoke on the same subject at Second Reading and in Committee before the Bill was amended. The case for the amendment has been put brilliantly not only by the noble Lord, Lord Swinfen, but also my noble friend Lord Dahrendorf.
It is important to encourage charities. There have been comments about past behaviour, and this would be one way to reassure charities that the future will be different. We have had a firm assurance from the Charity Commission and the new chairman about future behaviour, but including these words in the Bill would do a great deal to reassure everybody. I do not see the logic of refusing the amendment.
I support my noble friend in his Amendment No. 17. Indeed, I rang the Public Bill Office yesterday to ask to add my name to it but was told that unless another amendment was tabled, it would not, quite rightly, reprint the Marshalled List merely to add my name in one place. So my name does not appear, but it is there in spirit.
The Government are to be congratulated on having added subsection (4) of new Section 1D on page 7, covering best regulatory practice. However, the insertion of the words, "so far as relevant" seems to introduce a weasel factor, which we could do without. It would be much better and clearer if the phrase "so far as relevant" was removed and we made it clear that these regulatory practices have effect peradventure and that there is no way that anyone can ease out of them.
I support Amendment No. 18. While I think that Amendment No. 17 is unnecessary, Amendment No. 18 is important for all the reasons advanced by those who have spoken thus far. Let me add to the point of the noble Lord, Lord Dahrendorf, by saying that this is a citizens' Bill; it will not, I hope, be confined to the legal profession and other specialists.
A great many voluntary organisations and thousands of small charities will have recourse to the Bill. We can be quite sure that the Charity Commission, quite rightly, in the vast amount of guidance and literature that it pumps out on its website, will emblazon the words of the Bill on crucial parts of its guidance and advice. Although it is always difficult to alight upon the particular collection of adjectives that you want to embody the virtues that you are seeking to uphold, I think that to omit "fair and reasonable" is a bit perverse. If it is said that the words are implied—which is true—my answer is that as so many other virtues are implied but are on the face of the Bill, these should be included as well. Including these words will support confidence in the Charity Commission, not dent it. I hope that the Government will be minded to do so, although I sympathise with the problems of drafting this part of the Bill, which must have been taxing.
I support my noble friend Lord Swinfen in introducing the word "reasonable". When the Bill was discussed previously in Committee there was a certain reluctance by the Government to include that word, and it is difficult to understand why it should not be included if, as the Government claim, there is already a duty to be reasonable. There are many small charities and the Charity Commission is always quite free and easy in telling them what to do. The presence of the word "reasonable" would give charities the confidence to stand up to an organisation that has an inclination to do its own thing rather than support those who are giving.
I am happy to return to the fray and to find ourselves just where we were when I left it.
I see the intent behind Amendment No. 17, and I reassure the noble Lord, Lord Hodgson, that those are not simple weasel words, or the weasel factor. We entirely agree that when the commission is regulating it must apply the principles of best regulatory practice in performing its functions, as the noble Lord, Lord Swinfen, has made plain. We have, however, added this new duty to do precisely that, and to make it absolutely clear.
The qualifier of "so far as relevant" is necessary because the commission's functions go wider than its regulatory functions. It is worth noting that the word "functions" in new Section 1D has a wider meaning than the phrase "general functions" in new Section 1C.
Among its functions the commission prepares an annual report, recruits staff and performs other functions that are not regulatory in nature but ancillary to regulation. I assure noble Lords, and I hope that the noble Lord, Lord Swinfen, will agree, that it would not be appropriate to apply the principles of best regulatory practice in those kinds of instances. That is why additional words have been added.
I hope that I have reassured noble Lords that the Bill is drafted to ensure that the commission applies best practice principles to all its regulations. The amendment is therefore not needed. I know that that issue was given support by the noble Lord, Lord Dahrendorf, and the noble Baroness, Lady Howe.
I now turn to Amendment No. 18, which drew the most support—particularly by the noble Lord, Lord Howard of Rising, who added his voice last. We have debated the two little words "fair" and "reasonable" on several occasions—most recently on Second Reading on
I shall summarise. We are in no doubt that the commission, like other public bodies, already has a duty in administrative law to use its powers reasonably. They are as affected by that wide body of jurisprudence as any other public body. We do not think that there is any need to include a statutory provision to give the commission that duty.
If Parliament felt it necessary to give the commission that duty through the Charities Bill, the implication would be that Parliament did not see the commission as being under that duty at present. It is not a question of feelings; the duty exists now. The commission must behave reasonably. We do not think that adding the words "fair and reasonable" to the words,
"proportionate, accountable, consistent, transparent and targeted", which are already in the Bill would add anything helpful.
Indeed, if the noble Lord, Lord Lester, were here, he would probably give us an exposition of what "proportionate" means. If you have to behave proportionately, a fortiori the facts speak for themselves and you have to behave reasonably.
The words already in the Bill are powerful. We listened to the concerns last Session and amended the Bill accordingly. I thank noble Lords for the compliment in relation to that, but we do not see the need to amend it further. Because the matter is already covered, we are not minded to accept the amendment.
I hear, too, what the noble Lord, Lord Swinfen, said about the dissatisfaction with the commission. Those figures are certainly new to us and we do not recognise those issues. Ninety-three per cent of charities that have use of the commission's services are satisfied according to the commission's figures. It was right for me to put that on the record.
I thank all those who spoke in this short debate—particularly those who supported my amendments. The noble Baroness, Lady Scotland, is of course doing her duty as a Minister. I note from being in your Lordships' House for the past 28 years that Ministers in this House are never allowed to give way on any single point. That seems to be a rule, especially in Committee.
In this Bill there have been innumerable instances of the Government giving way. We have listened very carefully, and the amendment gives voice to the fact that we gave way last time. There comes a point, however, when we must say that this is now a reasonable accommodation and that the facts are well supported. It is just that that is where we are now.
Fair enough. The Government have moved some way on the Bill. As the noble Lord, Lord Phillips of Sudbury, said, it may be perverse not to include the words "fair and reasonable", particularly as that would give a great deal of comfort to a large proportion of the charity world.
With regard to the comments of the noble Baroness on "relevant", I am not a lawyer, but they sounded a little pedantic. It may be a nice legal point that, as a non-lawyer, I do not understand. My father who was a barrister probably would have understood, and my grandfather, who was Master of the Rolls, probably would have understood even better. I am not a lawyer and I have no intention of becoming one. I would probably not be accepted or pass the exams in any case.
I feel that "fair and reasonable" should be on the face of the Bill. It is not my intention to divide the House tonight, but I reserve the right to return to the matter on Report. In the mean time, I beg leave to withdraw the amendment.
moved Amendment No. 19:
Page 7, line 22, at end insert—
"6. In managing its affairs, the Commission must differentiate clearly its regulatory from its advisory functions."
To avoid repeating arguments from the discussions that we had on the advisability of including the amendment from the first Committee stage, I shall summarise the main points.
The distinction of the Charity Commission's advisory and regulatory functions was subject to rigorous investigation and discussion during and after the Joint Scrutiny Committee's hearing of evidence on the draft Bill. The need for separation was the subject of recommendation 20 of that committee, yet nothing requiring such a distinction has so far been written into the Bill.
Supporting the Joint Scrutiny Committee, the Association of Charitable Foundations, the Charity Law Association, the National Council for Voluntary Organisation and the Association of Chief Executives of Voluntary Organisations have all highlighted the need for the commission to distinguish its regulatory from its advisory functions.
This is particularly relevant in light of the fact that many small charities are dependent upon the advice of the commission. Such charities do not have the resources of the larger charities, which might have a strategy unit or a legal department. The advice these charities seek from the commission might become confused with regulations administered by the commission.
The commission's central task—we agree—is as a regulator. Therefore, its central interaction with charities will be in a regulatory context. Advice from the commission needs to be clearly distinguished from any regulation as it might be wrongly assumed that the latter was intended and, in consequence, a suggestion misinterpreted as a command, hence the term "regulatory creep", which is what this amendment battles against.
Everyone seems to be in agreement about the value of this amendment being included in the Bill so it seems strange that this is one that the Government have not accepted. The noble Lord, Lord Bassam, said:
"I understand why noble Lords want to see this included on the face of the Bill. In seeking that objective, they wish to compel the commission to take forward the recommendation. But both the commission and the Government have accepted the recommendation and, in the sense of changing practice—which is what this is all about—the noble Lord is pushing at an open door".—[Official Report, 23/2/05; col. GC 313.]
So it appears that the only reason the Government wish to exclude this important duty of the commission's from the face of the Bill is that it is "as good as done" already. That is an argument we hear too often and, needless to say, I do not see it as a strong one. My point is this: if this distinction is as good as done, why not incorporate it into the Bill? I beg to move.
The noble Lord, Lord Hodgson, rightly said that we debated this amendment in Grand Committee last Session, on
As we have said before, the Government and the Charity Commission wholeheartedly agree with the principles behind this suggestion. But the Government believe that it is more appropriate to leave its implementation to management action by the commission rather than deal with it in statute.
The commission aims to differentiate clearly between advice and regulation. For example, at the beginning of its publications, it states that the words "recommend or advise" are used where the commission is suggesting to trustees actions which it considers to be good practice, but which do not represent a legal requirement, and the word "must" is used to refer to actions that trustees, or their agents or employees, are obliged to take by law. The commission has been working to make this as clear as possible. In its recent publication, The Essential Trustee, a clear symbol is used to help readers easily identify those sections which contain a legal or regulatory requirement. The commission is continuing to review its structure and communications to this end.
I am sure that the noble Lord, Lord Hodgson, and others would agree, we want to ensure that the practitioners, especially the small charities, when they come to look at the commission's documentation, can say, "This is what I need to do and this is advice that I can take seriously in terms of good practice". That is what we need to do on a pragmatic basis and we believe that that is where the focus should be.
I am grateful to the noble Baroness for those further reassurances. I have taken care to read the letter from the noble Lord, Lord Bassam, and to note what he said there. We have taken this matter about as far as we can. Although some residual concerns remain, I beg leave to withdraw the amendment.
The purpose of this amendment is to require the Charity Commission to have regard to the interests of the people involved in charities as well as a charity's material assets. These people include the beneficiaries, who are often singularly unable to defend their own interests.
The commission has sometimes acted without any thought for the consequences for a charity's people. Indeed, I am told that one head of the investigations department notoriously said that any casualties among the trustees were an inevitable result of the investigations process. This approach can lead to an abuse of its position, which not only discourages the people concerned and others like them, but damages the charity in question and undermines the voluntary principle itself.
There is a significant gap in the regulation of charities which has historically been concerned only with the material assets of a charity and ignored the charity's people, whether they were assets such as trustees, volunteers and donors, or liabilities in the form of beneficiaries. As charities exist for their beneficiaries, it is rather odd that charity law allows the regulator to ignore their interests. I feel sure that, with the examples that I gave at Second Reading—which I shall not repeat now in order to save time—this was an unintended consequence of the way in which the commission had acted. This amendment is designed to make members of the commission look before they leap and think how best they can deal with the matter without damaging those whom the charity is trying to support. I beg to move.
Again, we discussed this issue at Second Reading, as the noble Lord rightly said. The Committee discussed this matter earlier today and we are in agreement with the general intention behind this amendment, but we do not think that it is necessary. There is no doubt that the commission should take into account the interests of those affected by its actions. Two of the principles of best regulatory practice on the face of the Bill are that regulatory action should be "accountable" and "transparent", and these will involve the commission having regard to the interests of stakeholders.
The commission already takes customer service seriously. Last year, it established a group called the Customer Network for people from across the sector, including but not limited to trustees. Members of the group are invited to give feedback, suggestions and views on a wide range of policy issues. There are currently 65 members, but the commission hopes to increase this to 150, reflecting the diversity of the sector in terms of income levels, charitable activity and location and there is more information on the commission's website about the network.
The commission also has a devoted customer service section led by a senior member of staff and there is a customer service champion at board level. And the commission's strategic review emphasised that it wants to continue taking into account the interests of its stakeholders. In the review, it states that it will,
"encourage greater dialogue with charities and trustee, becoming better listeners and being more collaborative, outcome-focussed and"— the noble Lord's word—"proactive".
So again, we see that the amendment is well-intentioned. We absolutely understand why it is there, but there is no need for it in the Bill. I hope that I have been able to reassure the noble Lord that the commission—indeed, the Government—takes this issue as seriously as it is clear he does.
I thank the noble Baroness for her response. However, I find it rather disturbing. She talks about customers. Charities are about beneficiaries. She is referring to customers as being the charities that are trying to help the beneficiaries. I may be wrong, but that is my impression. However, I will take the matter away and read carefully what the noble Baroness has said. I reserve my right to return at a later stage. In the mean time, I beg leave to withdraw the amendment.