House again in Committee.

Clause 8 [The Charity Appeal Tribunal]:

moved Amendment No. 21:

Page 8, line 23, at end insert—

"( ) requiring the Tribunal to publish its decisions without unreasonable delay"

Amendment No. 21, which concerns Clause 8 and the Charity Appeal Tribunal, inserts into new Section 2B the requirement that the tribunal publishes its decisions. One of the major difficulties faced by charities in recent years is that, though the Charity Commission has to date been the main forum where developments in charity law practice have taken place, despite the best efforts of the commission, it has not in every case publicised the changes of law practice instituted by it.

One such example concerns a landmark decision announced by the Charity Commission on 21 February 2005. The press release from the Government News Network, which is available at www.gnn.gov.uk, explained that the decision,

"means that charities can now deliver public services which public authorities have a statutory duty to provide. As a result, both the Trafford Community Leisure Trust and the Wigan Leisure and Culture Trust have been registered as charities".

It went on to explain:

"This decision changes our previous approach that charities could not usually use charitable funds to pay for public services—which a public authority had a duty to provide—but could only supplement them. This was reconsidered when the two organisations asked us to review our original decision to reject their applications for charitable status . . . In the course of the review, the Commission also looked again at the extent to which existing charities may carry out public services. It is now for the charity's trustees to decide if they should contract with a public authority . . . The published decision sets out our full guidance for charities".

This is a landmark case in charity law that has had significant ramifications for the third sector. The problem is that these published decisions that set out the full guidance were published, as mentioned, in February 2005. However, the decision that changed the law was made in April 2004, which was 10 months earlier. Charities need to be kept abreast of any change in charity law, particularly significant changes such as this. If the tribunal is to take on the official role of charity law implementer, rather than the quasi role that the commission now holds, it should be imperative for such decisions to be published as soon as they are made.

If charity law is to develop consistently and transparently, it is important that the commission, the charities themselves and their advisers should be aware of tribunal decisions. With such information, the sector can be kept informed about, and in touch with, developments in charity law. It can also significantly benefit the commission by reducing the time that it has to spend advising and updating charities, as greater transparency on tribunal decisions should result in fewer queries being directed to it.

We argue that it is dangerous to leave a loophole whereby it becomes possible for the tribunal either to delay publishing its decisions or not to publish them at all. As a major new institution in the charity field, there should be a statutory requirement for the tribunal to publish its decisions without delay. I beg to move.

We debated this Amendment in Grand Committee on 23 February, when I agreed to reflect further on what was said. Having done so, I remain—sadly, from the point of view of the noble Lord, Lord Hodgson of Astley Abbotts—of the view that there are merits in having some flexibility on the publication of the tribunal's decisions. It will be open for appellants to appeal to the Charity Appeal Tribunal on what I am sure Members of the Committee will agree are a wide range of issues, from the removal of a charity trustee to requiring a charity to change its name. There is already provision in the Bill for the Lord Chancellor to make rules about the recording and promulgation of decisions.

As I probably said previously, in our view the amendment is unnecessary and if, as seems likely to be the case, it would prevent rules dispensing with the requirement to publish decisions in particular circumstances, it is, in the Government's view, unnecessarily restrictive. Tribunals, of which the Charity Appeal Tribunal will be one, usually make arrangements for the public pronouncement of their decisions as soon as possible in the interests of those involved, whether by giving their decisions orally or at a public hearing or by publishing them in writing. Such decisions, which usually include a summary of the facts and reasons on which the decision is based, are placed on tribunals' websites.

The Government believe that it is right that tribunals should be able to exercise the power to exclude from public pronouncement or publishing particulars of any decision in special circumstances; for example, where publicity would prejudice the interests of justice. In those circumstances, it might be appropriate for tribunals to anonymise any decision, edit the text of any decision or decline to publish the whole or part of any decision. This is entirely in line with government policy on tribunal reforms and with the guidance laid down by the Council on Tribunals on drafting tribunal rules. This is the process envisaged for the Charity Appeal Tribunal. Of course, we endorse the general principle of transparency in these matters, but there may well be circumstances where sensitivities have to be very carefully thought through. That is why we think it more appropriate to approach the matter as we have.

I hope that the noble Lord can accept that the Bill as drafted allows for the promulgation of decisions—very much as he envisages—but in view of what he has said, I ask him to withdraw his amendment.

I am grateful to the Minister and I am sorry that we have had to go over this ground again. On this side, we were not happy that the Lord Chancellor's rules—the mechanism governing promulgation or the need to promulgate—were a sufficient safeguard. That is why we gave the example—admittedly, it has to be from the Charity Commission rather than the tribunal because the tribunal does not exist yet—of the delay in publicising a pretty important case where there was no issue of confidentiality or prejudice to the interests of justice. That is also why the words "without unreasonable delay" were included—so that if there was a reason why it should not be done quickly, it could be held up for the time being.

I accept the argument about prejudicing the interests of justice and the argument about confidentiality. On balance, we felt that those would be less important than transparency. However, we have probably sucked most of the juice out of this orange and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 22:

Page 9, line 17, at end insert—

"( ) The Lord Chancellor may, after such consultations as he shall think fit, establish a suitors' fund to widen access to the Tribunal by assisting with payment of applicants' costs and make rules for the purpose."

Amendment No. 22 would insert in the 1993 Act via Clause 8 a permissive power on the part of the Lord Chancellor, after consultation, to establish a suitors' fund. The purpose would be to widen access to the Charity Appeal Tribunal by assisting with the payment of applicants' costs. The amendment would provide that the Lord Chancellor may make rules for the purpose in accordance with the provisions already in Clause 8.

Some, and I am among them, think that the creation of the Charity Appeal Tribunal is arguably the most important single innovation in this measure. But it will be stillborn unless access to it is enabled. Access to the High Court, currently the only remedy outside the Charity Commission for an aggrieved would-be charity or charity, is not an accessible remedy. It has been a serious blot on the development of the common law definition of charity, for example, that the cost of access to the High Court being what it is, no one can afford to go there. I say no one—you may get one case every year or two, if you are lucky.

It is no accident that the National Council for Voluntary Organisations has made this one of its two most important issues for amendment at this stage of the Bill. It is as much in touch with the voluntary sector in all its parts, particularly the smaller elements, as any organisation in the country. It knows as well as I do from long practice that unless there is some costs provision to enable the smaller charities in particular to have access, the tribunal will be seriously under-used, as against the need to use it and our hopes for it. Without some provision for assistance with legal fees—the amendment does not prescribe what that assistance might be or how it might be delivered—the tribunal will not achieve the purpose intended for it.

It may be said that this will discourage lawyers making of the Charity Appeal Tribunal the sort of complex mess that some would say the employment tribunal has become and that if you keep the lawyers out, you keep common sense in. I dearly wish that were so, but charity law is as complex an area of law as any in our legal system. The issues that will go to the tribunal will, in the Majority of cases, need lawyers to enable the applicant to have a chance of succeeding against the commission, because that is effectively what it will be. The commission will of course have access to its own legal staff; it can bring in and pay for outside barristerial help when it needs it. We will have unequal combat unless some provision is made for worthy cases where the applicant is unable to foot the bill.

The Minister may say that this is a job for the Legal Services Commission. That is a long shot. Many of us have been saying for a long time that the Legal Services Commission should be doing a great deal more than it is vis-à-vis legal aid. I am afraid that legal aid is the great casualty of our welfare state. This is the place at least to have a longstop so that if the Government do not engage the Legal Services Commission in providing legal aid for these tribunal cases—and I do not think that they will because legal aid is not currently available for any charity case—then the Lord Chancellor can consult and establish a suitors' fund which will at least improve access. I would never expect it to be universal; I would always expect it to be of limited scope. But I cannot emphasise too strongly that without real access to it, the Charity Appeal Tribunal, which has huge merit, will be stillborn. With those sentiments in mind, I beg to move.

Perhaps it would be for the convenience for the Committee if I spoke to Amendment No. 24, which is in my name, and which deals with the same subject. I am rather surprised that it was not grouped with the amendment of the noble Lord, Lord Phillips. I do not mind which of the two amendments the Government accept, but they should accept one of them.

The noble Lord, Lord Phillips, being a lawyer, probably drafted his own amendment. I am fortunate in that I had another lawyer to draft mine. Not being a lawyer, I shall not try to judge between the two of them.

During the discussion of the previous Charities Bill in Grand Committee, the amendment was opposed by the Minister—at col. GC 342 of the Grand Committee proceedings on 23 February—on the ground that it was unnecessary as the Government had decided to propose a tribunal to resolve uncertainty in charity law.

The tribunal and the suitors' fund are not alternatives; they are complementary. The tribunal cannot set legal precedent any more than the commission, and there may be cases when the authority of the High Court is required. The charity sector has been bedevilled by uncertainty in charity law, the snail's pace at which it moves forward and the cost of taking cases to resolution in the High Court. It is often new charities without any money for lawyers that are at the boundaries of what is charitable and produce the applications which test charity law.

If the Minister is right that there will be no applications to the court after the creation of the tribunal, the amendment will become merely academic and cost nothing. But if there are cases that need the authority of the High Court, the tribunal can access a small fund that will enable a charity with a public interest application to obtain an authoritative answer.

I am happy to support the amendment of the noble Lord, Lord Phillips, and I am sure that he could support mine if we needed to get to it.

I am grateful to the noble Lord, Lord Swinfen, for coupling his Amendment with that of the noble Lord, Lord Phillips of Sudbury. My argument is the same so it is highly desirable to consider the two together.

As both noble Lords said, we have discussed the issue before. That debate took place on 23 February this year. On that occasion I said:

"We accept that there might be a small number of cases"— before the tribunal—

"in which the issues are of clear public interest . . . where the issues are . . . complex . . . [and] the appellant might not have the resources to engage legal representation".—[Official Report, 23/2/05; col. GC 342.]

I accept the point made by the noble Lord, Lord Phillips, that there will be occasions when that is highly desirable.

The Attorney-General will be copied in to all tribunal cases, and we envisage that in such complex cases he might want to exercise his power to be a party to the proceedings and to argue them before the tribunal. That would relieve the appellant of much of the cost of engaging legal representation. In addition, the Legal Services Commission will be able to grant exceptional funding before the tribunal in certain cases. The common reason for granting exceptional funding is because of cases in the public interest or for what is effectively a test case.

Given the existence of the Attorney-General's power to intervene and the ability of the Legal Services Commission to grant exceptional funding, the Government continue to believe that the case for a separate suitors' fund has not been made. It is for those reasons that we cannot support the noble Lord's amendment. I invite the noble Lord to withdraw the amendment.

Before the Minister sits down, he said that the Attorney-General might be drawn into the proceedings. Am I right in thinking that the Attorney-General would have to act on behalf of the Charity Commission and would not necessarily act on behalf of the charity? He also said that the Attorney-General would bear part of the charity's costs if he was able to act on behalf of the charity. A very small charity may still not be able to cover the cost of legal proceedings, or even a small proportion of them. A large number of small charities working on small incomes with little or no capital at all could be wiped out completely by having to pay their own costs or a proportion of their costs in court.

The Minister really ought to think again on the question of a suitor's fund. It may never be needed, in which case it will cost absolutely nothing.

I am grateful for the Minister's response. In fact, my Amendment and that of the noble Lord, Lord Swinfen—Amendment No. 24—are different. His amendment applies to cases being taken to the High Court from the tribunal. My amendment applies to cases before the tribunal only. The Government have made a concession from earlier arguments by inserting proposed new Section 2D into Clause 8 of the Bill, which gives power for the Attorney-General to intervene in proceedings—whether at tribunal or High Court level, whether of his own volition or on the direction of the tribunal or the court. We have got somewhere.

Perhaps I could make an Intervention at this point to respond to the point made by the noble Lord, Lord Swinfen. The Attorney-General will be able to act in the public interest, which will, on occasion, be on behalf of charities, small or large. That answers the first of the points raised by the noble Lord, Lord Swinfen.

The noble Lord's second point was that even small expenses may be beyond some small charities. I accept that. The Attorney-General will present cases at his own expense, so the consideration should not trouble us too much, but I accept the point that there may be difficulties for smaller charities. I hope that that answers his point.

I hope that the noble Lord, Lord Phillips, will forgive me for a moment. The Attorney-General would, of course, have to be persuaded to take the case. It may well be that the charity needs to take the case and cannot persuade the Attorney-General.

The point is that there is a public interest test. For that reason it would be desirable for the Attorney-General to be copied into all tribunal matters. Also, the office holder of Attorney-General is always alive to the public interest importance in such matters. I do not think that there is necessarily a difficulty to be considered.

That exchange does not take us anywhere with regard to my Amendment. My amendment is addressed to tribunal cases and what I would call run-of-the-mill tribunal cases, not ones of great national or public importance, where I concede that concessions have been made in proposed new Section 2D. However, run-of-the-mill cases—in legal terms—are of the greatest possible importance to the applicant charity.

I cast no aspersion or blame in this matter because there is no reason why the Minister or his officials should have any realisation of how hopelessly inhibiting it is for a charity to incur the legal costs necessary even to deal with a run-of-the-mill case before a tribunal. In the simplest of cases, for preparing a case and appearing before the tribunal, one is talking of a four-figure, sometimes a five-figure sum. These days it is not difficult to incur legal costs running into five figures. The kind of charities with which I am used to dealing have a severe dislike of incurring legal fees. That is about as far from their frontline purposes as one could imagine. Also, charities simply do not have the kind of reserves that enable them to put those sums at risk.

I ask the Minister to reconsider this matter as I believe that there is an unreal understanding on the government Benches about the reality of the position that I am trying to describe. I would also be most grateful if he would drop me a line on the access to the Legal Services Commission for important cases. I am not aware of the authority that allows the Legal Services Commission to warrant the costs of an applicant in a case before this tribunal. As I say, hitherto, the general position has been that legal aid for legal proceedings was not available for charities. I would be most grateful if the Minister would enlighten me on at least that limited point.

Perhaps the Minister would copy such a letter to me; I would be most grateful. When considering the costs that charities can afford, perhaps he would look at the income figures of charities which say what kind of accounting, auditing and reporting that they have to carry out. That will give him an idea of what the Government and the charity understand as the kind of incomes with which some small charities work.

I shall more than happily share the correspondence with all those who have taken part in the debate and with the Opposition front bench. I shall take up the request of the noble Lord, Lord Phillips, to respond on the position of the Legal Services Commission.

I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

had given notice of his intention to move Amendment No. 23:

Page 9, line 24, at end insert—

"( ) In addition to the appeals and applications which may be made to the Tribunal pursuant to the provisions of Schedule 4 to this Act, the Attorney General or the Commission may of their own volition refer to the Tribunal such issues relating to the application of the charity law as they may consider should be reviewed and determined by the Tribunal."

Amendment No. 23 deals with an issue that we have already debated quite extensively. We believe it is important and I am grateful to the noble Lord, Lord Phillips, for putting his name to it. I am sure that he will add elegance and legal sophistication to my rather crude opening shot.

The amendment inserts a new subsection into the proposed new Section 2B, entitled "Practice and procedure".

In the interests of speeding up the proceedings, I am more than happy to take this Amendment away for consideration. I want us to press on and we are happy to consider the amendment. We have debated it before and it may have been an oversight on our part that we did not wrap it up earlier. I apologise to the noble Lord, Lord Hodgson, for that.

If the Minister offers to take it away, he need not apologise. I gratefully accept that. I am just sorry we shall not hear the noble Lord, Lord Phillips, speak on it.

Judging by their effect, the few words of the noble Lord, Lord Hodgson, were of an eloquence that is rarely heard in the Chamber.

[Amendment No. 23 not moved.]

[Amendment No. 24 not moved.]

Clause 8 agreed to.

moved Amendment No. 25:

After Clause 8, insert the following new clause—

:TITLE3:"CHAPTER 2A

:TITLE3:THE CHARITY INDEPENDENT COMPLAINTS REVIEWER

THE CHARITY INDEPENDENT COMPLAINTS REVIEWER

After section 2 of the 1993 Act insert—

"THE CHARITY INDEPENDENT COMPLAINTS REVIEWER

2A THE CHARITY INDEPENDENT COMPLAINTS REVIEWER

(1) There shall be a complaints reviewer to be known as the Charity Independent Complaints Reviewer (in this Act referred to as "the Reviewer").

(2) The function of the Reviewer will be to investigate—

(a) complaints of maladministration and of failure in quality of service by the Charity Commission, and

(b) complaints of unfair, unreasonable or disproportionate conduct by the Charity Commission.

(3) The Reviewer shall be appointed by the Secretary of State.

(4) A complaint may be made to the Reviewer by or on behalf of any charity, charity trustee or other person or body who is or may be affected by the actions or decisions of the Charity Commission and there shall be no requirement that a complainant must use the Charity Commission's own complaints procedures first.

(5) The Reviewer will not have authority to investigate and adjudicate—

(a) complaints about the substance of legal decisions made by the Commission, although complaints about the way in which those decisions were made will be within the Reviewer's remit,

(b) complaints by Commission employees concerning their employment or by applicants for employment about recruitment procedures,

(c) complaints where legal proceedings before the Charities Appeal Tribunal or the court directly relating to the substance of the complaint have been initiated,

(d) complaints relating to matters which are under current investigation by the police or taxation authorities, and

(e) complaints under current investigation or which have earlier been the subject of a report by the Ombudsman but complaints which the Ombudsman has refused to consider may be reviewed.

(6) The Commission shall co-operate with the Reviewer by permitting the Reviewer—

(a) to inspect and take copies of all documents (including documents in electronic form) held by the Commission which the Reviewer considers relevant to the complaint, and

(b) to interview employees or agents of the Commission.

(7) The charity, the charity trustees and any receiver and manager appointed for the Charity shall also co-operate with the Reviewer by permitting the Reviewer—

(a) to inspect and take copies of all documents (including documents in electronic form) held by it, him or them which the Reviewer considers relevant to the complaint,

(b) to interview the charity trustees, the receiver and manager, their employees and agents and the employees and agents of the charity.

(8) The Reviewer may send or not send any draft report to the Commission and the complainant but shall not send it to only one of them, and may—

(a) dismiss a complaint,

(b) make a finding that the complainant has acted frivolously, vexatiously or unreasonably,

(c) require a complainant against whom such a finding has been made to pay the whole or part of the costs of the investigation,

(d) make recommendations to the Commission regarding the manner in which it discharges its functions, or

(e) make a finding of maladministration against the Commission.

(9) In cases where the Reviewer has made a finding of maladministration against the Commission he may—

(a) require the Commission to apologise to the complainant,

(b) make an award of compensation against the Commission, or

(c) make no award.

(10) The Reviewer shall report annually in writing to the Secretary of State and may publish reports on individual cases unless he considers that there are good reasons not to do so.

(11) The expenses of the Reviewer will be paid from money provided by Parliament.""

The purpose of the Amendment is to set on a statutory footing the position of the existing independent complaints reviewer who, at present, is appointed by the Charity Commission and to allow the reviewer to award compensation to a complainant for financial loss arising from any maladministration on the party of the Charity Commission. Together those changes will bring about a genuinely independent statutory alternative dispute resolution procedure which will provide, in addition to the tribunal and the High Court, a complementary route to access justice by charities trustees and others.

The reason for the amendment is to create a truly independent mechanism for charities, trustees and others to be able to challenge the Charity Commission when it is apparently guilty of maladministration or is acting unfairly, unreasonably or disproportionately and to obtain financial compensation for maladministration and for financial loss.

The Government have shown themselves unwilling to allow that role for the new tribunal. They have turned their back on arbitration. The Independent Complaints Reviewer is appointed by the Charity Commission on terms agreed with the commission. He can be removed by the commission and his recommendations set aside by the commission. It is important to public confidence that that alternative dispute resolution procedure is seen to be truly independent.

At present, the Independent Complaints Reviewer may recommend awards for consolatory payments only. He may not recommend or award payment for financial or other substantive loss as a result of unfair, unreasonable or disproportionate behaviour by the Charity Commission. There seems to have been some misunderstanding of that point by the Minister, so I will quote from the terms of the independent charity complaints reviewer compensation policy document.

In the introduction at paragraph 1.4 it states:

"The ICR will treat all recommendations of compensation as being of a consolatory nature".

At paragraph 1.5, it states:

"The ICR can recommend maximum compensation of £5,000 in any individual case".

In paragraph 2 under "Principles", it states:

"The ICR is committed to the following principles with regard to payments of compensation".

In sub-paragraph (ii), it states:

"The ICR will not recommend compensation to recompense complainants for financial or any other form of substantive loss".

In sub-paragraph (v) it states that,

"compensation will be in the nature of a consolatory payment".

That compensation policy makes it completely plain that the Independent Complaints Reviewer is prohibited from even recommending compensation for financial or other substantive loss. The Minister has previously stated in Grand Committee, that,

"in appropriate circumstances, she could recommend that the commission consider this".—[Official Report, 23/2/05; col. GC 317.]

The ICR's documentation from which I have just quoted makes it clear that the Minister's belief was misfounded. She cannot at present recommend compensation for financial loss. The sums of money that can be lost to charities, trustees and their beneficiaries by unfair, unreasonable or disproportionate behaviour by the Charity Commission can be substantial.

One might argue that the courts are the proper place to seek award for financial loss for unreasonable, unfair or disproportionate behaviour by the commission, but such behaviour is usually challenged in the context of appealing against the commission's orders or schemes. In many of those cases the commission's or the court's permission is needed to bring such proceedings. That is grossly unfair when the heart of the issue is the commission's behaviour.

When the case reaches the court the complainant will be faced with the Treasury Solicitor and the Attorney-General, acting not as defenders of charity but as defenders of the Charity Commission. Their presence ensures that the complainant, who is not eligible for legal aid, faces considerable costs if he loses, even if he represents himself. Furthermore, as illustrated in the Little Gidding case, the High Court identified the behaviour of the commission as a central issue at one hearing, but in later proceedings ruled that account need not be taken of whether the commission had acted fairly or reasonably in the making of its orders.

The only redress in such a case is to go to the Parliamentary Ombudsman, but he has repeatedly refused to take up cases where there is still a legal scope for challenging the commission in the courts.

Very few cases have reached the High Court since the 1992 Act, and in not a single case has the commission lost the substantive issue. When justice takes a long time to access, it is potentially bankrupting to the complainant and may be delivered with weighted scales; it is not justice. It is a denial of justice. It is that failure that creates the need for an effective alternative dispute resolution procedure to be in this Bill.

In Grand Committee, the noble Lord, Lord Phillips of Sudbury, described the problem as,

"an evil that needs redressing".

He went on to say that the Charity Commission holds the view that,

"the role of the Independent Complaints Reviewer should be amended", to give it,

"more teeth and more powers to avoid compensation".—[Hansard, 14/3/05; cols. 449–50.]

I do not consider it likely that the commission will be allowed by the Treasury to give the Independent Complaints Reviewer power to award substantial compensation for financial loss caused by the commission's occasional misbehaviour. It therefore follows that there must be a mechanism in the Bill if it is to deal with this evil.

The Government may well oppose this Clause because it has cost implications for the public purse. If any private citizen improperly harms another financially he can expect to pay. There is no reason why the Government's regulator should be in practice above the law. In practice, this clause would assist the new management of the commission to change the culture there, and we would see very few claims as a result.

As the House knows, it is in the business of developing law which conforms to commonly held concepts of justice, knowing that otherwise it will rightly be despised by those whose actions the law is intended to confine. The courts and the Government support alternative dispute resolution procedures as a means of levelling the playing field between citizen and state. Without such a mechanism in this Bill, we may deliver law but we may not deliver justice. I beg to move.

The noble Lord, Lord Swinfen, has made a strong case for substantial reform to enable charities in rare cases to obtain the compensation to which, on any normal criteria, they are entitled. I believe that the present arrangements are highly defective, especially with the Parliamentary Ombudsman's inability to intervene unless High Court remedies have been exhausted. As I endeavoured to persuade the Government in an Amendment that I moved recently, charities are extraordinarily loath to pursue remedies through the courts, not only because lawyers' fees are these days extremely high and demanding but because most boards of trustees feel that even when they have suffered a wrong, to risk substantial charity funds in pursuit of it is somehow against the spirit of their whole enterprise.

I am entirely with the noble Lord, Lord Swinfen, and congratulate him on his persistence in this matter. He has ploughed quite a lonely furrow. As I have always said, I am not castigating the Charity Commission, which on the whole does a very good job in extremely difficult circumstances. But the fact that that is the case is no mandate whatever for present arrangements, which leave charities, in rare cases, with no effective remedy and very substantial losses.

I shall listen with great interest to the remarks of the Minister in response to the amendment. It quite likely does not fit the Bill as well as one might like—and I can think of a number of aspects of it that I would wish to see changed. However, I hope that he will not dwell upon the inadequacies of the drafting but, rather, address himself to the underlying defect which really does need to be addressed—by the award of proper and not just consolatory compensation.

I argue that there is already a statutory body which will investigate complaints of maladministration against the Charity Commission, and that is the Parliamentary Ombudsman. In my view, the statutory independent complaints reviewer proposed by this Amendment is very similar to the ombudsman. For example, the proposed remit of the ICR is similar to that of the ombudsman.

There are three main differences. First, the statutory ICR would be appointed by the Secretary of State whereas the ombudsman is appointed by the Queen on the recommendation of the Prime Minister. Whereas the proposed ICR would report annually to the Secretary of State, the ombudsman must report to Parliament. In this respect, I argue, the ombudsman's arrangements seem preferable to us, guaranteeing a greater degree of independence and accountability—something which noble Lords have argued for throughout the course of this Bill.

Secondly, the proposed statutory ICR would be able to require the commission to apologise to the complainant. The ombudsman has the power to recommend that the commission make an apology where she finds that something has gone wrong. It seems to me that if the commission is required by a complaints investigator to make an apology, the value of the apology is somewhat reduced.

The third main difference is that the proposed ICR may make an award of compensation against the commission, whereas the ombudsman can recommend that payment should be made for a financial loss or for the inconvenience or worry that the complainant has been caused. The ombudsman can recommend any level of compensation, if the complainant has evidence to show that he or she has experienced quantifiable financial loss directly as a result of the commission's maladministration.

We should remember here that very few cases reach the ombudsman, and the commission will almost always accept her recommendations. If the commission did not accept a recommendation to pay compensation, the ombudsman would report the commission to the Select Committee on Public Administration. The ombudsman's powers have sufficient teeth in this respect, and we see no need to change the current complaints procedure in statute.

In terms of the existing, non-statutory independent complaints reviewer there are a number of advantages in her non-statutory status. Changes are made by agreement and I think that it would be fairly acknowledged that there is a spirit of co-operation between the ICR and the commission. The process of going to the ICR is more informal than the ombudsman's process and complainants always have recourse to the ombudsman if they are dissatisfied.

In summary, therefore, I cannot see any advantages in having a statutory independent complaints reviewer and, indeed, I think that there are a number of disadvantages, to which I have given voice. The present arrangements work well and, for those reasons, we cannot see that this amendment has any additional merit. I think that to have two statutory processes working in a similar way, without the authority that the ombudsman naturally carries, overly complicates the situation. The current informal and, on the other side, formal arrangements work quite well in tandem.

Before the Minister sits down, how does he answer what seemed to me to be the main point made by the noble Lord, Lord Swinfen: that the present arrangements for the Parliamentary Ombudsman are simply ineffectual, because the Parliamentary Ombudsman will not act until High Court remedies have been exhausted? In reality, remedies in the High Court against the Charity Commission, by their very nature let alone the fact that we are dealing with charities, are not pursued.

I am thinking aloud here, but I wonder whether an ICR of a statutory nature would work any differently in that regard. Would they not also want to see the full legal process exhausted before giving consideration to the complaint in the way in which the noble Lord, Lord Swinfen, envisages? Perhaps it is best in those terms that the ICR is there in an informal capacity.

The noble Lord can answer his own Amendment, but as he has drafted the amendment you do not have to go through the High Court, because that kills the purported remedy.

I thank in particular the noble Lord, Lord Phillips, for his support. He said that he should like to see a number of aspects of the Amendment changed. Perhaps we could meet to talk about that between now and the next stage of the Bill.

As the noble Lord, Lord Phillips, pointed out in his second Intervention, the Parliamentary Ombudsman will not act until all the procedures through the courts are completed. Small charities physically cannot afford that; they do not have the money. Therefore, justice will not be done, and it certainly will not be seen to be done.

The noble Lord, Lord Bassam, said that there was co-operation between the independent complaints reviewer and the commission—of course there is. The independent complaints reviewer, as I said before, is appointed by the Charity Commission on terms agreed with the commission. The independent complaints reviewer can be removed by the commission, and his recommendations can be set aside by the commission. That just does not seem right.

However, the noble Lord, Lord Bassam, gave a long and detailed response to the amendment. Therefore, as a matter of good manners, I shall withdraw the amendment now so that I have a further opportunity to study what he said. I am very likely to come back at the next stage, and I may even consider pressing it to a Division if the Minister is still as recalcitrant as he is this evening. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 3 agreed to.

Schedule 4 [Appeals and applications to Charity Appeal Tribunal]:

moved Amendment No. 26:

Page 85, line 29, leave out from beginning to end of line 11 on page 86 and insert—

"1 (1) Except in the case of a reviewable matter as set out in paragraph 3, an appeal may be brought to the Tribunal against any decision, direction or order made or given by the Commission under this Act (including any decision not to give a direction, make an order or otherwise act under this Act.

(2) Such an appeal may be brought by—

(a) the Attorney General, or

(b) any person from the following—

(i) the persons who are or claim to be the charity trustees of the institution or who otherwise have control or management of the institution,

(ii) (if a body corporate) the institution itself, and

(iii) any other person who is or may be affected by the decision, direction or order (as the case may be).

(3) In determining such an appeal the Tribunal—

(a) shall consider afresh the decision, direction or order appealed against, and

(b) may take into account evidence which was not available to the Commission.

(4) The Tribunal may—

(a) dismiss the appeal, or

(b) if it allows the appeal, exercise any of the following powers—

(i) quash the decision, direction or order (as the case may be), in whole or in part, and (if appropriate) remit the matter to the Commission,

(ii) substitute for all or part of the decision, direction or order (as the case may be) such other decision, direction or order as could have been made or given by the Commission,

(iii) give such direction to the Commission as it shall consider appropriate,

(iv) substitute for all or part of any direction or order any other direction or order which could have been made by the Commission,

(v) add to the decision, direction or order (as the case may be) anything which could have been contained in the original decision, direction or order."

The Minister will be aware that I have had Schedule 4 in my gun sights. I rise to speak to Amendments Nos. 26 to 31. The amendments seek to remove the current table under Schedule 4, which is a jolly long table at that, and reword the details of how appeals and applications can be made to the Charity Appeal Tribunal. The table provided in the Bill makes it clear which Charity Commission decisions will be subject to appeal, who will be able to submit an appeal in each case, and the powers of the tribunal in relation to those decisions.

That is a clumsy, ineffective and wordy approach. The effect of the amendments taken as a whole is to open the tribunal to all appeals rather than to restrict the tribunal to appeals as listed in the current overly prescriptive format in the table under Schedule 4. The Strategy Unit report, Private Action, Public Benefit, in recommending the introduction of a tribunal, envisaged that it would, first, hear appeals against legal decisions of the commission (paragraph 7.79); and, secondly, be able to make determination in the case of delay or impasse in the commission's decision-making process (paragraph 7.8). The Charities Bill instead includes at present a right of appeal that is restricted to the specific decisions and orders of the commission. In being so specific in the Schedule 4 table, there is a danger of significant omission or inappropriate provision that may only be corrected by the order of the Secretary of State approved by each House of Parliament as in Schedule 4 paragraph 6. That is an inflexible model for a major new institution and decision-making procedure, and the right of appeal still does not extend to instances of delay or impasse.

The noble Lord, Lord Bassam, explained at the previous Committee stage why the Government chose to specify each matter that is appealable to the tribunal. He said:

"While it would have been possible to group some of the decisions together, we believe that it is simpler to list the decisions in the order in which they appear in the Charities Act 1993. In that way a lay person can quickly identify whether the decision they are concerned about falls within the jurisdiction of the tribunal and whether they are eligible to appeal. It is necessarily long and complicated in order to be effective".—[Official Report, 23/2/05; col. GC 345.]

So it appears that the Minister believes that all the commission decisions that are listed under the 1993 act have been lifted and put into Schedule 4 of this Bill as decisions which can be appealed against. However, the Charity Law Association has pointed out that that is not the case by any means. It has already identified two examples: neither the provisions of Section 29 nor those of Section 33 of the 1993 Act had been listed in the table.

Section 29 of the 1993 Act specifies that the commissioners may, on the written application of any charity trustee, give him or her their opinion or advice on any matter affecting the performance of his or her duties. This is an important consideration. If a charity wishes to do something which it is not positive is fully within the confines of charity law, it can write to the commission and receive advice which would make any actions the charity was subsequently to carry out bomb-proof. There is nothing in Schedule 4 that allows an appeal to be made to the tribunal against the commission for failing to provide advice.

Similarly, with no reference to Section 33 of the 1993 Act, a charity cannot appeal against a decision of the commission which does not authorise the taking of charity proceedings. Nor, in either of these two cases, can the charity appeal against any lengthy delay in coming to a decision on either proceedings or providing advice. These are just two examples of how this prescriptive method of listing the commission decisions which could be subject to appeal is highly restrictive. Who knows what other similar lacunae may not appear after the Bill has become law?

These amendments would solve this by establishing in its place a full general right of appeal, including a right to request the tribunal to make a determination in the event of undue delay on the part of the commission. This approach also has the desirable by-product of reducing the length of the Bill by some six pages—that is Amendment No. 31. I hope that all noble Lords who share my view of the desirability of reducing the volume of legislation will support these amendments. I beg to move.

I generally support this Amendment and the group of which it is part. As the noble Lord, Lord Hodgson, said in moving the principal amendment, when this was put to the noble Lord, Lord Bassam, last time, the word that he used to describe the Government's approach was, I think, "simpler". On reflection, I do not agree. I accept that in some circumstances it can be simpler for the user to have matters set out precisely rather than under general headings, but I do not think this is such a case. One would be saving how many pages?

Six.

The fact that one would be saving six pages gives the lie to the notion that the Government's approach is more user friendly.

I also applaud the fact that a right of appeal would be given under these amendments for unreasonable delay on the part of the commission. I moved an Amendment to that effect separately at the previous Committee stage, and I think that it is worthy of a place in this part of the Bill. Unless there are some aspects to the debate that have so far avoided me, I am certainly inclined to support what the noble Lord, Lord Hodgson, proposes.

We debated the Amendment on 23 February. Thinking back, I think that we must have debated a lot on 23 February; we have had a lot of references to it today. I shall pretty much repeat what I said then, word for word. I am sorry that that is the case, but I cannot see that things have changed at all since.

The Charity Appeal Tribunal will provide a less formal means of challenging the decisions of the Charity Commission than pursuing a case in the High Court. That is accepted. It is intended that appellants would be able to represent themselves in person should they wish to do so, although the noble Lord, Lord Phillips, thinks that there will be instances where it is necessary for them to employ lawyers to do the work of the charity.

As I said before, the table in Schedule 4 is not only simpler but clearer about which Charity Commission decisions would be subject to appeal, who would be able to submit an appeal in each case, and the powers of the tribunal in relation to those decisions. We decided on a course of action that sets out how we feel that the mechanism will work, rather than leaving it open-ended. We think it best that way.

Members of the Committee are right that it would have been possible to group some of the decisions together, but we think that the table, with the decisions listed in the order in which they appear in the Charities Act 1993, is clearer than the proposed amendments. It will provide the opportunity for a lay person to identify whether the decision about which they are concerned falls within the jurisdiction of the tribunal.

There is something that I do not think that the Minister has tackled so far. The Charity Law Association has identified two legitimate bases for appeal to the tribunal that will not be allowed because they are not included in the list. None of us is confident that those are the last two that will be found. They were Sections 29 and 33 appeals, which are not appealable at present. The Charity Law Association believes that they should be. The Minister's comment that the 1993 Act's appealable provisions have all been lifted wholesale has not been fulfilled. I do not say that he gave the undertaking in anything other than good faith, but we need to address the issue.

I shall try to address those two points. I want to make it clear to Members of the Committee that the position as we have set it out is better than the proposed amendments, because it will enable the lay person more quickly and readily to identify whether the decision about which they are concerned falls within the relevant jurisdiction and whether they are eligible to appeal.

I realise that the Minister is working his way through the argument, but I simply do not understand that it is simpler for the lay man to wade through six pages of schedules with three columns in them than to give the lay man, trustee or charity a general right of appeal against the decision, direction or order emanating from the Charity Commission. How can it be simpler? Seriously, that is counterintuitive—it is counter to common sense.

It is like this—

Noble Lords:

Oh!

Judgment has already been passed, I fear. If you have, set out in terms, the situation in which you can appeal, the way in which that appeal will work and how you can make that appeal, that is plain and not vague—not undescribed or amorphous in its scope. The noble Lord, Lord Hodgson, makes a fair point—

I am sorry, but this is so important. How is it vague in scope to say that you have a general right of appeal against any decision, direction or order? That is not vague.

The noble Lord was referring to a general ability to appeal. What does that then cover? How does the lay person understand what that general right is?

If it affects any decision, direction or order of the Charity Commission.

I would have thought that the lay person would like to have some sort of steer on how that works. That is what our approach effectively provides.

The noble Lord, Lord Hodgson of Astley Abbotts, provided us with the examples of the Charity Law Association. With Section 29, on the question of advice, it is not appropriate to appeal to tribunal. The commission would give authority, if appropriate, for directions to be given by the court.

As to Section 33, any refusal of a certificate to take charity proceedings is already, in any event, subject to review by the court, which is the appropriate body to determine that matter.

As for things which have not yet been thought of as relevant, and are perhaps unlisted, there is the facility to add to the list by virtue of paragraph 6 on page 95. So there is that element of flexibility.

On balance, we prefer our approach of describing, setting out and showing what the appeal right covers for the lay person. I accept the point that it is there, and at length. The lay person, however, would at least have the opportunity to see quite plainly what it is that they are unable to appeal against, and how the appeal process works.

The Minister has made a gallant attempt in the face of some powerful arguments. I am afraid I do not find his argument persuasive, however. While I am all for our trying to make this Bill comprehensible, the thought that I, as a charity trustee, am going to go off and read between pages 88 to 94 without a lawyer, work out where I am, what Clause I can appeal under and who may actually make the appeal, flies in the face of common sense. If I may borrow the phrase of the noble Lord, Lord Phillips of Sudbury, the Government's approach is counter-intuitive.

The hour is late, I will not belabour the luckless Minister, who has had no dinner, any longer. I reserve the right to come back to this one. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 27 to 31 not moved.]

Schedule 4 agreed to.

Clause 9 [Registration of charities]:

moved Amendment No. 32:

Page 11, line 37, leave out "£5,000" and insert "£10,000"

My Lords, we come to the first of a series of amendments we have tabled which seek to reduce the regulatory burden for both charities and the Charity Commission, and to make the framework of charity law more easily comprehensible by charity trustees.

This Amendment seeks to raise the level at which a charity must register with the commission, from £5,000 to £10,000 per annum.

I want the Committee to note that I use the word "must" not "may". This was not the case in the original Bill. There, the Charity Commission could refuse to register a charity if its annual income was below £5,000. This was clearly wrong. If a charity, any charity, wants to register with the Charity Commission, it should be able to do so. We tabled amendments to ensure that this would happen by changing "may" to "must" in line 25 on page 12 of the Bill. We were extremely grateful to the Government for accepting that amendment.

There are many reasons why even the smallest charity might want to be registered—notably that many grant-giving charities and local authorities will give grants only to charities that are registered. But why should small charities have to register? Equally important, what risk is there if they do not? At an annual income of £5,000, a charity will have total assets of just over £100,000, if they are all invested at the current benchmark gilt rate. That is a ludicrously small sum at which to require a charity to be registered. No one can argue that such charities present any systemic risk to the charitable sector or public confidence in charities generally.

So, for once, let us take a positive step to lift the regulatory burden. In Grand Committee, I argued that the minimum threshold should be lifted to £25,000. I accept that that did not find favour with the Committee, but the noble Lord, Lord Shutt of Greetland, whom I am now sorry to see in his place, said that he would be tempted to support a figure of £10,000. So here is temptation. I beg to move.

I support my noble friend's Amendment. He said that a charity would need gross assets of £100,000. That may be the case. It would be the case with a grant-making charity that was going to give £10,000 away to other charities. But very small charities with an income of £10,000 can be doing a lot of good work. They may not want to register. They may have no need to register if all their income is coming from local sources who know and approve of what they are doing and support them. However, if they are working on a bigger scale and need to get their money from the grant-making trusts, they will need to register—and will register of their own volition because the Majority of grant-making trusts will not give to charities unless they are registered.

So my noble friend is granting relief to those small, local charities, supported by local people, that do not need to register. I fully support him on the figure.

I hate to break ranks on this, but I am not entirely persuaded about increasing the figure for registrations from £5,000 to £10,000. Registration is rather different from some of the other limits—for audits and so on. I think that we all said at different points during our debates in February and March that maintaining the probity of the sector was an overriding demand or requirement, because loss of public faith in charity is infectious and one of the great glories of the system at present is that the word "charity" still resonates extremely positively almost everywhere.

Given the simplicity of the reporting and accounting regime for charities with an income of, let us say, £5,000 a year, I do not see why one should raise that threshold by 100 per cent, or at all. As the noble Lord, Lord Hodgson, said, a charity with an income of £5,000 can have capital of £100,000. That may be small fry compared with Oxfam or Save the Children, but it is a lot of money for a small, local charity. Sometimes, slapdash and, occasionally, worse than slapdash, conduct can almost be encouraged by the sense that they are outside the regulatory net—they are not even registered as a charity. These days, it is not a great hassle to get registered—unless you have unusual objects—and it is not a hassle, once registered, if you are small, to keep the show on the road. So I must confess that I am not persuaded—I am persuadable but not persuaded.

Just as the noble Lord, Lord Phillips, was getting to his feet, temptation in the form of the noble Lord, Lord Shutt, had just come through the door. What he will make of this debate, I do not know, having thought about it before.

The proposition made by the noble Lord, Lord Hodgson, that the current threshold be lifted from £5,000 to £10,000 is of course a cunning one because that is the level at which the Strategy Unit made its recommendations in its report—a well chosen threshold indeed. We simply propose £5,000, with the option of registering under that threshold. The Majority of evidence submitted to the Joint Committee indicated support for that approach; in fact the Joint Committee's report mentions evidence from only one charity which supported a threshold of £10,000.

During the last series of debates on this I mentioned that raising the threshold would remove a large number of charities from the commission's scrutiny. This was the point made by the noble Lord, Lord Phillips: the guarantee—or near guarantee—of probity that comes with that and how that may prove to be a disbenefit to charities if they are removed from the obligation. I also said that the regulatory impact on small charities is not onerous—a point supported by the noble Lord, Lord Phillips—and I think that is true. It was true then and is true now.

We can see that there is some merit in raising the threshold to £10,000. But it is not a step we should take without there being full consultation because the figures in the Bill have been consulted on and there has been a broad measure of agreement on them and it would be wrong of us to break that. The Government plan to do a review of all of the thresholds which charities are subject to a year after Royal Assent. That would be a more appropriate time in which to conduct a further consultation as time will have passed. This figure will certainly be included in that review but I would not want to single out one financial threshold in the Bill for change at this stage.

I hope that this is a helpful contribution to the debate. I respect the point that the noble Lord, Lord Swinfen, makes about regulatory burdens but I think in this instance there is more of a benefit in this threshold than a disbenefit and the option is there for us later, after the passage of the legislation, to review the figure and come to a fresh conclusion if that is required.

I am tempted. The reason why I am tempted is because of other experiences with thresholds. I asked a question in your Lordship's House almost 18 months ago now about intestacy rules—it is an entirely different subject. Eventually a paper will be produced; there will be a long consultation period and it was even suggested that there might be a gap before the figures come in. It is a long time from the period when I raised the issue, but there was a problem with intestacy rules for about eight or nine years prior to that.

What worries me about any form of threshold is that they seem to hang around for too long. I hear the point about it being reviewed a year after we get an Act. I think it would be a good thing if the threshold levels are constantly under review every three or five years, or something like that. The problem with thresholds is that they just seem to hang around for too long and become out of date.

The noble Lord, Lord Shutt, is quite right. The threshold gets worn and as it is walked over it becomes shallower; time will do the same with this. Listening to the debate, we have got the question of a small charity that struggles to raise an income of £10,000 locally, but with nothing in the way of capital. We have also got the charity that has an income of £10,000 from what in my book is a substantial sum of capital—£100,000. It may not be substantial to some people but to me it is very substantial.

I wonder if we can work something out on the income threshold combined with the capital, so that those with a large sum of capital have to register. If they have capital assets of £100,000 they would have to register but you would not have to register until your income was £10,000 if you had no assets at all. I am not asking the Minister to give any sort of decision tonight because this has been thrown at him in the dark from behind, so to speak, and he will need time to think about it.

My response to the noble Lord, Lord Swinfen, is much as it will be to the noble Lord, Lord Shutt. We have got a fair consensus and measure of agreement about where those thresholds should fall, which is why they have been built into the legislation and framed in the way in which they are. We have given a clear commitment to a review of the thresholds a year after the legislation is put in place.

That is the time, I suggest, that the points made by the noble Lord, Lord Swinfen, should be properly considered as part of a review. It is also the time when it may be right and appropriate to take a fresh view of thresholds. I have quite a measure of sympathy with the point made by the noble Lord, Lord Shutt. A lot of those thresholds hang around for a long time. Matters of self interest, such as councillors' expenses and so forth, never seem to catch up with inflation. But the noble Lord made the point better than I am.

My answer is that we should stick with what has been agreed. Where there is a consensus let us have a review; let us conduct it more broadly perhaps than we are thinking today; and let us stick to the timetable that we have set out for the review vis-à-vis the legislation.

I thank my noble friend Lord Swinfen for his support and for his interesting suggestion that he made in his Intervention towards the end of our short debate. I also thank the noble Lord, Lord Shutt of Greetland, who made the point that, by their very nature, threshold levels are always behind events and always will be. I am disappointed that I have not been able to persuade the noble Lord, Lord Phillips. I never thought that there was much of nursie about the noble Lord, Lord Phillips. I always thought of a freer spirit than that.

We need to do something to trust our fellow trustees of smaller charities. While, obviously, we have a review in 12 months, I am tempted to think that tomorrow never comes. The review will be closer to events, but it will still be a bit behind schedule. Then there will be a longer period before we are able to review it again. My feeling is that, as is so often the case, we talk in this House about wishing to reduce the regulatory burden, but when it comes to taking that vital step to do something, we shy away from it, which is a shame. I do not propose to take this matter any further today. I therefore beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 9 agreed to.

Clause 10 agreed to.

Clause 11 [Changes in exempt charities]:

moved Amendment No. 33:

Page 14, line 20, at end insert—

"( ) After paragraph (a) insert—

"(aa) a charity wholly or mainly concerned with the advancement of the effectiveness and welfare of any of the armed forces of the Crown;"."

In moving Amendment No. 33, I thank the noble Lord, Lord Hodgson of Astley Abbotts, for adding his name to it. I will not be long as the hour is late. Noble Lords will have noted that the Government have revised their approach to exempt charity status since the earlier Bill. I welcome that and would like to see all SNPF-type charities grouped in an exempt category.

I have three reasons for putting this forward; namely, the complexities that the services will face because charity is a devolved issue; the extra costs; and the additional bureaucracy that SNPFs—initially the 2,000 or so with annual incomes of more than £100,000, but, ultimately, all those with limited incomes of perhaps £5,000 per annum—will have to face.

The new Charities and Trustee Investment (Scotland) Bill is complete and is due to receive Royal Assent next month. That Act will not require SNPFs to be registered with the Office of the Scottish Charity Regulator at all, regardless of size. I first thought that it would be perhaps a simple process to propose a parallel amendment to this Bill to achieve the same end for SNPFs in England and Wales.

However, the Scottish Bill's approach is to register any organisation established in or controlled from Scotland which the Inland Revenue has already recognised as a charity under current legislation. There will thus be two categories of charitable SNPFs in Scotland. Thanks to the Act, those on the Inland Revenue books will have the statutory right to deregister immediately, whereas those, presumably smaller, ones that have not had dealings with the Inland Revenue will not be automatically registered.

The effect will be that all Scottish-based SNPFs may be treated the same and not burdened with additional cost or bureaucracy. Their accounts and audits will still, of course, have to be carried out by the service authorities. Alongside these, in England and Wales, there will be three further categories within the services—those above the £100,000 or reducing threshold; those below that cut-off; and a further group of SNPFs known as military Crown charities.

The Armed Forces will face a complicated mix of legislation and registration requirements unless Her Majesty's Government are prepared to take account of the Scottish legislation and agree to treat English and Welsh SNPFs in a similar way to those originating in Scotland—in effect, not requiring them to register with the Charity Commission.

A further point arises from subsection (14), which gives the Secretary of State the power to mitigate the risk of dual accounting requirements. Even if the SNPFs do not register with the Charity Commission, they will still have to account to their own services. If they do register, they will in effect have a double accounting regime.

One solution within the structure of the Bill would be to put all service SNPFs originating in England and Wales into an exempt category. That is the purpose of my amendment. I beg to move.

My name is attached to the Amendment and I am delighted to be able to support the noble and gallant Lord. We have been through the arguments extensively in the previous Committee stage of the Bill, so I shall be extraordinarily brief.

Too often the Government have failed to distinguish between external and internal service charities—that is, between the Poppy Day appeal and an internal regimental charity. Internal service charities are a different category because they do not interface with the public. That interface is the main area of concern in the Bill.

I recognise that the Government opened the door to SNPFs in accepting our amendments to Clause 11(12), which now permits the Secretary of State to add to categories of exempted charities in the future, not just to delete them, as originally proposed. I thank the Government for that change.

Given the special nature of the internal service charities, there is no down side or danger to the sector as a whole in making the change now and accepting the noble and gallant Lord's amendment.

I, too, support the Amendment. There is no issue of public probity or trust here. These are special charities that are well run. As the noble Lord, Lord Hodgson, has said, they are internal service charities. I very much hope that the Government accept the amendment.

The Government have included a power in the Bill under Clause 11(12)(b) allowing my Right Honourable Friend the Home Secretary to make an order giving exempt status to charities which are not currently exempt.

The Government's current policy is that no new classes of charities—the charitable service non-public funds would count as a new class—should be converted from registered or accepted charities into exempt charities. That policy is in the interests of accountability and transparency. The power I mentioned is needed because there is at least one class of charities—the higher education institutions—within which the Majority are already exempt but a minority are not. The power will be used to put the minority on the same exempt footing as the majority—a matter of common sense.

The power could, however, be used to exempt an entire new class of charity should the Government's policy change in future. However, I should make it clear that there is no immediate prospect of a change in policy.

Charitable service non-public funds are excepted charities at present. Excepted charities do not have to register or submit accounts but are otherwise within the Charity Commission's regulatory jurisdiction. Clause 9 will require excepted charities with income over £100,000 to register with the commission. Of the 15,000 or so SNPFs in existence, that would, in rough terms, catch the largest 1,500, leaving the remaining 13,500 to continue as they are at present.

The £100,000 threshold can be lowered by statutory instrument, but there is now a provision—subsection (8) of new Section 3A—to prevent it being lowered before a five-year review of the operation of the Act has been reported to Parliament. So 90 per cent of SNPFs are protected from any prospect of being required to register within at least the next five years. Even for the 10 per cent that are required to register, the process of registration and the year-to-year requirements consequent on registration will be genuinely minimal in the extra work that might fall on those who administer SNPFs.

The main challenge for SNPFs is to bring their accounting procedures into line with the Statement of Recommended Practice. That is something which the three services accept must happen and which they have been working on for some time with the Charity Commission. I can report that excellent progress is being made.

Changing the status of SNPFs from excepted to exempt will not alter their position under SORP. SORP applies to all charities, whether registered excepted or exempt. Making SNPFs exempt will not help them at all in that regard.

Perhaps the main question to be answered if SNPFs were to have exempt status is who would regulate them. Exempting them would take them out of the Charity Commission's remit. Under the Bill's arrangements for exempt charities in Clause 13, a new "principal regulator" would have to be prescribed for them by the Home Secretary. The principal regulator would also have to be given, by regulations, the objective of promoting compliance by SNPFs with charity law.

It seems perverse to take SNPFs out of the hands of the Charity Commission—a regulator which is fully equipped for regulating charities—and place them under the oversight of an as yet unidentified alternative regulator—the MoD being the most obvious candidate—which almost certainly has no experience of regulating for charity law compliance. That seems like an administrative nightmare for the new principal regulator. And it is not offset by anything like comparable reductions in bureaucracy for the SNPFs themselves.

To sum up, I can see no material advantage for anyone in making SNPFs exempt charities. Again, the Armed Forces have been consulted, and I should say that the Ministry of Defence is content with the Bill as drafted.

I am grateful to the noble and gallant Lord for bringing his Amendment before your Lordships' House. It has provided me with the opportunity of explaining in some detail and depth our approach to these matters and why we have what might be described as a principled Opposition to the position advocated by the noble and gallant Lord.

I thank the Minister for what he has said and the other two noble Lords who spoke. The Minister did not address one of my concerns, which is that in Scotland quite a large number of service non-public funds will not have to register at all. The mix of registration rules is very unsatisfactory from the service point of view.

I have a response for the noble and gallant Lord. The charity base in Scotland, as he says, does not have to register with the Office of the Scottish Charity Regulator. If it chooses not to register it cannot call itself a charity, although it still gets the tax relief. It still has to comply with charity accounting rules, which is the case for charities in Scotland generally. SNPFs, it can be fairly argued, have no special treatment in the new Scottish law. I hope that that explains the position in Scotland.

I thank the Minister. As the clock is pointed to 10, this is the moment to say that I shall carefully read and consider what he has said. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clauses 11 and 12 agreed to.

Schedule 5 agreed to.

Clauses 13 to 17 agreed to.

Clause 18 [Cy-près schemes]:

moved Amendment No. 34:

Page 18, line 37, leave out from "effective" to end of line 38.

I think that I can dispose of this Amendment quickly. It is a variation on one that was debated last February. The cy-près Clause, introduced by Clause 18 to the 1993 Act, sets out the basis on which the Charity Commission or the court can make a scheme. It details the matters that they must take into account in drawing up a cy-près scheme. It is to the third of those matters, as specified in subsection (3), that my amendment relates.

The first refers to

"the spirit of the original gift".

The second refers to the desirability of making sure that the original purposes are close to the new ones. The third—subsection (3)(c)—refers to,

"the need for the relevant charity to have purposes which are suitable and effective in the light of current social and economic circumstances".

My amendment would strike out those last words so that it would read,

"the need for the relevant charity to have purposes which are suitable and effective".

The reason why I and others object to the words,

"in the light of current social and economic circumstances", are that they are prescriptive. They do not cover the circumstances of a cultural or sporting charity, or an archaeological or religious charity. Those words are not appropriate to those sort of charities and many others. On reflection, it seemed to me that those words added nothing at all. All that the Charity Commission or court need to be satisfied about is that the relevant charity has purposes that are suitable and effective. We need qualify that no further, any more than

"the spirit of the original gift" needs to be qualified. It is clear enough what it means. The amendment is a small but significant improvement to the Bill, which I hope commends itself to the Government. I beg to move.

I say briefly that we on these Benches support the Amendment. We discussed the inappropriate nature of the words,

"current social and economic circumstances", several times in the earlier Committee, and I hope that the Government will see fit to accept the amendment.

Noble Lords are right; we discussed and debated this issue back on 14 March at col. 419. At that time the Bill required the commission when making a cy-près scheme to have regard for the need for charities to make a significant social or economic impact.

As has been said, several noble Lords spoke against the concept and we have listened to those arguments. As a result, we have amended the Bill. In the Bill that we have introduced this Session, one of the matters to which the commission must have regard when making a cy-près scheme is,

"the need for the relevant charity to have purposes which are suitable and effective in the light of current social and economic circumstances".

We believe that that is more flexible than the previous wording. The requirement is in terms of the new purposes being "suitable and effective", which is wording already used in the Charities Act 1993 in relation to cy-près schemes.

The commission is simply required to take into account the current social and economic circumstances when considering whether proposed new purposes will be suitable and effective. That would allow the commission to be more accommodating to the differences between charities. It requires the commission to consider the circumstances of the present day when making a scheme to take the charity forward, without requiring the charity to be able to make a significant social and economic impact. I do not see that a requirement for the commission to assess whether purposes will be suitable and effective,

"in the light of current circumstances", could be problematic.

The noble Lords, Lord Phillips and Lord Hodgson, may not entirely agree with where we have moved on this issue, but we can fairly say that we have listened to concerns and tried to improve on what was in the original Bill.

Before the Minister sits down, and to prevent me dividing the House, will he answer my point about the complete irrelevance of notions of social and economic circumstances with regard to, for example, a religious or archaeological charity, or, as I mentioned, a sporting charity? What is the relevance of "social and economic"?

"Social and economic" is a term that can be used to provide context and to reflect the fact that things change over time. Those things are important for us and for public administrations to reflect on from time to time. Surely the noble Lord would agree with that?

The noble Lord does not, but he is not so brutal as to divide the House at this late hour. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clauses 18 and 19 agreed to.

I beg to move that the House do now resume.

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

House resumed.

House adjourned at eight minutes past ten o'clock.

Correction The Written Answer to the Question in the name of the Baroness Wilcox in col. WA 2 of yesterday's Hansard attributed to the Chairman of Committees was in fact answered by the Lord Bassam of Brighton.