Charities Bill [Lords] – in a Public Bill Committee at 12:00 pm on 4 July 2006.

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The “public benefit” test

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I beg to move amendment No. 71, in clause 3, page 3, line 21, leave out from ‘whether’ to end of line 23 and insert—

“a body provides or intends to provide public benefit, regard must be had to—

(a) how any—

(i) benefit gained, or likely to be gained, by members of the body or any other persons (other than as members of the public), and

(ii) disbenefit incurred, or likely to be incurred, by the public in consequence of the body exercising its functions, compares with the benefit gained or likely to be gained by the public in that consequence, and

(b) where benefit is, or is likely to be, provided to a section of the public only, whether any condition on obtaining that benefit (including any charge or fee) is unduly restrictive.

(2A) It is presumed that a charity established to benefit the natural environment, or the living species within it, exists for the public benefit.’.

I should like to raise what is almost a point of order. We submitted two different amendments that have emerged as one. The first part of the amendment, which clearly relates to public benefit and the insertion of the Scottish guidance on its implementation, was separate from the last subsection (2A). I shall deal with that second provision first.

Our new subsection (2A) is intended to close what I think is a loophole in the Bill, so that the preservation of, or concern for the welfare of, species or elements of the natural environment, which cannot automatically be assumed to be for the public benefit, would nevertheless be considered charitable. Charities that are for the protection of the environment clearly qualify under clause 2, under the heads of charity. However, under the Bill, by contrast to previous charity legislation, they must also now pass the public benefit test. It is not clear to me how the preservation of an area of wilderness, such as the Antarctic or the Arctic, would be easily defined as for the public benefit. Likewise, we can imagine that the work of a charity such as St. Tiggywinkles, which looks after the welfare of hedgehogs, has no great implications for biodiversity or pet care that might indirectly benefit the public. What I wanted to achieve by the provision was to put the issue beyond doubt.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

I am most sympathetic to the hon. Gentleman’s arguments. In a sense, to go back to the discussion that we had about religion, he is saying that we have moved on from the idea that the world is here simply for our pleasure and that we can exploit and use it. He is right if he is talking about whether all the value of the natural environment is to be measured in terms of the pleasure that we derive from it. Is that the point that he is making?

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I am grateful to the hon. Lady, who has made the point far more eloquently than I was doing. She is entirely right. The amendment is also intended to reflect the simple humane instinct to be charitable, which is relevant to the simple care of animals such as hedgehogs, where not even environmental benefit is at stake.

Photo of Alun Michael Alun Michael Labour, Cardiff South and Penarth

I am interested in the hon. Gentleman’s response to my hon. Friend, because it seems to me that the list in clause 2(2) very much reflects the developments that he was referring to. Paragraph (i), for instance, refers to

“the advancement of environmental protection or improvement” and I also particularly welcome, as I did on Second Reading, the inclusion of animal welfare. It is clear that animal welfare cannot directly be the welfare of people. Is not it essential, however, that there should be a test to prevent an organisation’s simply saying, “We exist to serve the arts”—to take the arts as an example—“and therefore we are charitable”? There must be a test of whether the organisations will operate for the wider public benefit, and that is what the public benefit test is about. However, clause 2(2) surely covers the hon. Gentleman’s point.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

The right hon. Gentleman is right up to a point. The point about the list in clause 2(2) is that it is necessary but not sufficient to achieve charitable status. A charity must fall within it and be for the public benefit. Falling within the categories listed in subsection (2) and being for the protection of the environment is not sufficient for the achievement of charitable status. However, I agree that it is right that there should in addition be a public benefit test. Indeed, the rest of the amendment clearly shows that I should like a stronger public benefit test. I am simply trying to put beyond doubt certain categories of charitable activity that would not immediately show themselves to be for the public benefit, and to make it clear in the Bill that they are to be treated as being for the public benefit. I hope that that reassures the right hon. Gentleman.

Photo of Alun Michael Alun Michael Labour, Cardiff South and Penarth

Yes, I think that there is not a great difference between us, but we need to be careful about amending the Bill, because inclusion in clause 2(2) suggests that there is a public benefit in improving the environment and in animal welfare and so on. We regard those as part of what my hon. Friend the Member for Bishop Auckland called those we share the planet with. That brings those activities specifically within the ambit of charitable activity. We must not go the further stage of saying that because environmental benefit or any other aspect of the amendment is presumed, someone would be treated as a charity and no more questions would need to be asked.

Photo of Joan Humble Joan Humble Labour, Blackpool North and Fleetwood 12:15, 4 July 2006

Order. May I take this opportunity to remind all Members that interventions should be brief?

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I take the right hon. Gentleman’s point, but the point is worthy of an amendment to clarify it and to put it beyond doubt. I shall leave it at that.

The larger part of what has ended up as the amendment would insert into the Bill word for word the definition that has been adopted by the Scottish Parliament in the Charities and Trustee Investment (Scotland) Act 2005. That has a number of things to recommend it, as I said in my speech on Second Reading. First, there is the obvious benefit of consistency. The point was made in that debate that, with the devolution of powers, we do not have to have consistency—it is not necessary or compulsory in any sense—and I quite agree with that. I am a great supporter of the decentralisation of power and would  not seek to impose either the English definition of public benefit on Scotland or vice versa. Nevertheless, there is an advantage to consistency where it can be adopted.

Since Scotland has gone through that process and adopted what seems to me to be a good set of guidance on how public benefit is to be implemented by the Office of the Scottish Charity Regulator, it would be an advantage to charities that operate both north and south of the border to have the same definition and guidance reflected in our Bill. There is also an argument in principle in favour of the Scottish test. I shall not repeat everything that I said on Second Reading, but I would like to make it clear that some of the attacks made on the clause at the time were not justified.

The measure certainly does not seek to attack private schools or other institutions that might be seen to be subject to it more than charities in general. It is about encouraging the best possible practice. That became clear in the Scots debate, when Donald Gorrie MSP set out the desired outcome, which I would recommend as well. He said:

“The position that I take, and which Liberal Democrats and, I hope, other people take, is that it should not be a blanket yes-or-no question as to whether fee-paying schools can be or must be charities. Each fee-paying school should have to demonstrate...that, in all the various ways in which it works, it provides a genuine public benefit—through its scholarships, through use of its facilities, through the training that it gives trainee teachers and through the work that it does in the community as a whole.”—[Scottish Parliament Official Report, 9 March 2005; c. 15113.]

Those sentiments were echoed by Labour Members and Ministers in the Scottish Parliament and were clearly not intended as an attack on the sector as a whole.

Now that the Scottish Act is law, OSCR has issued guidance on the public benefit test and its interpretation of it. That guidance makes it quite clear that the amendment is a moderate and reasonable proposal. It states:

“It is worth noting that the Act draws a distinction between disbenefit and unduly restrictive conditions (including any charge or fee). The mere imposition of charges or fees is therefore not to be considered a disbenefit: rather, the level of charges or fees must be considered in the context of the provision of benefit to a section of the public and the relative impact such fees, charges or other restrictions have.”

It goes on to say:

The Act, in stating that a condition may not be unduly restrictive, accepts that there may be a certain level of restriction. The issue is whether any condition is unduly restrictive: in other words, whether it is excessively restrictive or restrictive in contradiction of moral or legal standards. The fact that a (prospective) charity provides benefits that will be charged for and will be provided mainly to people who can afford to pay the charges does not necessarily mean that the organisation is not set up for and does not operate for the benefit of the public.”

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

Can the hon. Gentleman tell me whether he thinks, in view of the fact that there is a reducing number of applications for higher education, that the fees charged by higher education institutions are unduly restrictive according to the definition that he has just read out?

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I think that I have spotted the trap that the hon. Gentleman has laid for me. I am not in favour of top-up fees of any description in higher education, but I did not say that they contradicted moral or legal standards in the way that OSCR describes. Top-up fees would certainly not exclude a British university from charitable status.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office)

The hon. Member for Isle of Wight asks an interesting question, and the hon. Member for Cheltenham has given his answer. Perhaps he could say why he believes that top-up fees are not unduly restrictive.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

That is something that I happily leave to the court, the Charity Commission and the tribunal.

The purpose of the amendment is clearly simply to set a higher bar for the public benefit test. In a briefing to its members, the Independent Schools Council gives exactly the kind of advice that I would have wanted it to give on that point. It says that that is not actually a great risk to private schools that are seriously attempting to promote public benefit, and says:

The Commission is primarily there to help charities stay within the law, rather than to penalise charities which are having difficulty delivering enough public benefit. If the Commission considers that a school is not delivering enough public benefit its first course will be to advise the trustees. The aim will be to repair the public benefit deficit within a reasonable timescale, and the Commission will advise the trustees in this process.”

It goes on:

“Loss of charitable status is very much the last resort. In most cases it would require two sets of intransigent trustees (which is hardly likely) for the Commission to invoke this ultimate sanction.”

It is clear that the Independent Schools Council, while lobbying against that stricter definition or guidance on public benefit, acknowledges in its advice to its members exactly what we are saying: that a stricter public benefit test will result in more public benefit, and in organisations such as public schools seeking to advance the public benefit more obviously and demonstrably.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

How would the hon. Gentleman view this extract from the Charity Commission’s document, “Public Benefit—the Charity Commission’s approach”? Where charities are not delivering public benefit, the commission says more or less the same thing as the Independent Schools Council, but the document goes on to say:

“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”.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I am surprised by what the hon. Gentleman has read, and it would be useful to know the context of the extract, but presumably it applies to the law as it stands now. Is that correct?

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I certainly assume so—save, of course, for the important distinction that the hon. Gentleman  is supporting the abolition of the presumption of public benefit in education, which I find somewhat more difficult.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I do not think that the hon. Gentleman’s quote from the Charity Commission necessarily invalidates what I have been saying. In fact, there are plenty of quotations—from the National Council for Voluntary Organisations, various representatives of the voluntary sector and, indeed, other commission documents—to suggest that there is still confusion under the current law; that, if the new public benefit test changes things at all, that confusion will remain and perhaps increase; and that therefore much more clarity is needed in the Bill. It is that clarity that I seek to provide through this amendment.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

This is an interesting amendment, not least for the fact that it has two separate elements. When I read clause 3, I must say that I found it hard to believe in light of what the hon. Gentleman said on Second Reading. He asked me:

Am I right in thinking that the hon. Gentleman is therefore retreating even from the position of his noble Friends in another place? They said that ‘all charities’ should ‘have to meet a public benefit test, no matter what their purposes are’.”—[Official Report, 26 June 2006; Vol. 448, c. 38.]

I misunderstood the hon. Gentleman completely because I thought at the time that he was concerned because he thought I was wrong to resist the abolition of the public benefit presumption. Now I know that it was not that he objected to the public benefit presumption—indeed, he is in favour of it in the appropriate circumstance—but that he was merely concerned about my welfare in the junior ranks of the Opposition Front Bench, in case I might inadvertently have stumbled and disagreed with my noble Friend Lord Hodgson.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I think the hon. Gentleman is getting his presumptions mixed up and I apologise for the poor drafting of the amendment if that is the case. The presumption that I was attacking on Second Reading was a presumption that attaches to any specific one of the 13 heads of charities. I do not suggest that, under this amendment, any of them should not have to pass a public benefit test.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I am not sure that that statement is consistent with the amendment, which states:

“It is presumed that a charity established for the benefit of the natural environment, or the living species within it, exists for the public benefit.”

That is exactly the public benefit presumption—[Interruption.] The Parliamentary Secretary makes my point more quickly than I could. It’s a fair cop. I am pleased that the Liberal Democrats have gone away from their assumption that all presumption is bad presumption.

If I may assist the hon. Member for Cheltenham in answering the right hon. Member for Cardiff, South and Penarth who intervened in his speech, the mere fact that there is a presumption does not mean that that is the end of it. It means that it is the beginning of it; if a charity misbehaves, it can lose the benefit of that presumption as I believe happened at the Finsbury  Park mosque. I am very pleased indeed that the hon. Gentleman has accepted that there is nothing wrong with presumption. I would find it difficult—he is shaking his head, so presumably I have misunderstood him.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

The hon. Gentleman has misunderstood me. I know there is a slight temptation when in a hole to stop digging, but I will attempt to explain the difference to him. If the amendment were accepted, a charity that qualified under clause 2 (2)(i), which refers to

“the advancement of environment protection or improvement”,

would still have to prove that it passed a public benefit test. It is the term “public” that my amendment sought to clarify, not “to unduly restrict”.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

The lawyers would have a field day when they tried to tie up the words in the amendment with the words uttered in Committee. I suspect that the words in the amendment would take precedence, which is the normal procedure.

I was about to say that many charities and organisations in the Isle of Wight are, in my view, entitled to charitable status—for example, the Isle of Wight donkey sanctuary and the Isle of Wight bat hospital—which may not be charities, but which deliver exactly the kind of benefits, whether public or otherwise, that the hon. Gentleman seeks to secure. I am very glad that he does so and were the two parts of the amendment separate, I would be happy to support him. I hope he will be happy to support me when we come to amendments Nos. 4 and 54.

I would like clarity about what the rest of the amendment means. First, I assume that “members” in the phrase “members of the body” in the amendment does not mean the same as members in the sense of members of a company, but I am not quite sure. The members of a company are the directors; the members of a charity are the trustees.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I am grateful for the intervention, but the hon. Gentleman is wrong. Members are not equivalent to trustees. There are membership organisations—such as the Alzheimer’s Society, the Multiple Sclerosis Society, the Royal Society for the Protection of Birds or the National Trust—whose membership is substantial but is not at all the same as the trustees, who are the governing body of the organisation. That is the distinction.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight 12:30, 4 July 2006

That was exactly why I raised the issue. I was not sure whether the hon. Gentleman meant members in the sense of the members of a company, who are the directors of the company, or members in the sense of members of the National Trust, who pay their five shillings or whatever and receive a glossy magazine every couple of months. Now I understand what the hon. Gentleman means by “members”. The amendment goes on to say

“or any other persons (other than as members of the public)”.

I think that he is saying that the Charity Commission should consider, in relation to whether a body is providing a public benefit, whether the members of the body gain more than other persons—that is, members of the public.

The hon. Gentleman argues that the Charity Commission should also consider

“disbenefit incurred, or likely to be incurred, by the public in consequence of the body exercising its functions”.

In introducing the amendment, he did not really say anything about that. I wonder exactly what kind of disbenefit he has in mind. What kind of disbenefit can a charitable nursing home confer on the rest of the world? What kind of disbenefit does a school confer on the rest of the world? Perhaps he could go into more detail. He said on Second Reading that he would be quite generous towards the independent sector, and I am trying to work out what exactly is covered up by the words “disbenefit” and “compares with the benefit gained, or likely to be gained, by the public in that consequence”.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I can reassure the hon. Gentleman that there is no cover-up. In fact, a very public document, the guidance from the Office of the Scottish Charity Regulator, explains the matter in enormous detail. I shall not test your patience by reading it out now, Mrs. Humble, but perhaps in my closing remarks I can quote any passage that the hon. Gentleman is interested in that explains exactly how disbenefit is to be interpreted.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I look forward to that, as I am sure the rest of the Committee does. With any luck, we will then be ready for lunch. Before then, however, I would like to raise some other issues relating to the amendment, because the behaviour of the Charity Commission, the National Council for Voluntary Organisations and one or two other organisations in respect of this principle has been pretty odd. They started by saying that amendments were not needed. They now seem to have gone head over heels—I think that is the polite phrase—and decided that there is a reason for the principle.

In the Committee that scrutinised the draft Bill on 9 June 2004, Lord Foulkes, who was then a Member of this House, said that

“you have not suggested any definition of public benefit”.

Mr. Etherington, for the NCVO, said:

“Because there is an established common-law definition of public benefit in relation to the four existing heads of charity.”

Mr. Foulkes, as he then was, said:

“But that has been discredited” and Mr. Etherington said:

“I do not believe it has been discredited.”

Later, under question 59, Mr. Etherington said that

“my own view is that public benefit established through case law has worked well in relation to the fourth head of charity. It is a flexible mechanism, it is a common-law mechanism and it prevents the common law from becoming sclerotic”— that is a lovely word for someone who has lost their teeth—

“provided that there are adequate appeals mechanisms against which to check it”.

I am interested in why the NCVO and the Charity Commission have changed their position. I understand, of course, that one of their functions is to give advice, but it is odd that they are giving advice without explaining why they have changed their position in an  area that is clearly the subject of substantial controversy. It would be helpful if they had explained why they changed their position. Initially, the Charity Commission took the view that the reversal of the presumption of public benefit would have no effect and then they changed their position.

I understand that there was a memorandum agreed between the hon. Member for Slough (Fiona Mactaggart), who was then a Home Office Minister, and the Charity Commission, which set out in some detail that the current law on public benefit would be preserved by the draft Charities Bill. It explained something else that I found particularly interesting, which was that the test of public benefit is not the same for each of those categories in clause 2(2). Where there is already a presumption of public benefit, is it the case that a new public benefit test has to be created? If not, what is the public benefit test given that it is not necessarily the same as the other public benefit tests? That may be why the Charity Commission has changed its position. The problem is that it does not say so. It says that the law on public benefit will evolve and develop over time.

The Charity Commission also says in the memorandum that

“the principles in Re Resch are sufficiently clear to enable them”

—that is, the Charity Commission—to determine whether a particular educational charity is charitable. It then changes its position and we all get confused. Therefore, will the hon. Gentleman, in his summing up, speculate as to why the Charity Commission has changed its position?

I was most disappointed that a circular letter was sent round that the Red Cross signed. I thought that the Red Cross was above politics and political controversy, but Sir Nicholas Young signed that controversial document. At least, I thought it was controversial until the Liberal Democrats supported it. Now I realise that there is unity across the rest of the Committee and that it is probably not controversial at all. However, it sets out a position that few hon. Members appear to support, which is that we need a tighter definition. I speculate as to why that might be.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

The hon. Member for Cheltenham has tried several times to explain his complete inconsistency over putting forward a public benefit test, but has failed to do so in my mind. I will not be supporting the amendment. I would support it if it was part of a broader agreement by the Liberal Democrats to include the presumptive benefit for poverty, religion, education and health that previously existed. However, as they are throwing out those, I see no reason to bring in a public benefit test specifically for the natural environment, however worthy it is.

There has been much debate about large fees. In every case, there has been a leap from fee-paying to schools and education. I am interested to know from the Minister whether any significant organisations outside the education sphere will also be covered because I have not seen any real debate about fee-paying institutions above and beyond the education sector.

It is disappointing that the Government have taken a stance against independent schools. On Second Reading, Labour Back Benchers pressed the Minister to go further and be more restrictive of the education sector. [Interruption.] Did the hon. Gentleman want me to give way?

Photo of Tom Levitt Tom Levitt PPS (Rt Hon Hilary Benn, Secretary of State), Department for International Development

I may have looked as though I was raising my hand, but I was indicating that only one Labour Back Bencher made the argument that the hon. Gentleman is describing.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

I forgive the hon. Gentleman. I have got Hansard, but—I thought the hon. Member for Stroud (Mr. Drew) and another hon. Gentleman made the point and they referred referring to a larger level of support. However, I am more than happy to look at Hansard and talk to the hon. Member for High Peak after the debate.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

Have not the Government missed a trick? Should they not be encouraging private education rather than restricting it?

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

I agree. Given the wonderful new Labour phrase “direction of travel”, it is entirely inconsistent that there should be a blurring of the lines between the public and private sectors but that more is not being made of the charitable sector in independent schools and in the health sector. My hon. Friend makes a good point; the Government seem to be going in the opposite direction.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

The hon. Gentleman continues to portray the amendment as an attack on private schools, despite my assurances to the contrary. Will he explain why the head teacher of Dean Close school in my constituency, whom I quoted on Second Reading, supports stricter guidance on public benefit and says that his school has nothing to fear from it?

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

I welcome that intervention, but I speak for myself not for the head teacher of a particular school. I am aware that the Independent Schools Council has taken a certain view. It has written to hon. Members saying:

“For each £1 of fiscal benefit, schools give back £3 in help with fees and other charitable giving, plus a further £2 in irrecoverable VAT”.

All that is on top of some £2 billion that the Government would have to spend to educate people in the public sector. Although I am not a lawyer, re Resch touched upon that issue. It seems that public schools have a clear public benefit, and the biggest benefit is that £2 billion.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I have never spoken to the head teacher of Dean Close school, but I recall that when the hon. Member for Cheltenham mentioned that institution on Second Reading, the public benefit appeared to be the use of its theatre. Similarly, the public benefit to be gained from other independent schools appears to be the use of their sports facilities—or even the rowing trenches that were built at huge expense near Slough. Is not the really important public benefit that is to be  derived from public education that people are taught and that they learn—and that they and the nation are better as a result?

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

My hon. Friend makes the point incredibly well. I agree that that is the overwhelming public benefit. However, that is not to say that there are not other public benefits.

I congratulate the Government on their general push to encourage fee-paying charitable organisations to demonstrate greater public benefit. Withdrawing the presumed public benefit is not right; there are other methods over and above the presumed public benefit that could encourage, if not compel, those schools to be more involved in the community. A number of points were made in the Chamber on those questions and what I have described would be a much better way forward than withdrawing the presumption of public benefit.

Photo of Tom Levitt Tom Levitt PPS (Rt Hon Hilary Benn, Secretary of State), Department for International Development

I was fascinated by the suggestion of the hon. Member for Wellingborough (Mr. Bone) that, because a group of organisations pays tax, they contribute to the public benefit. He said that the money that private schools contribute to the economy should be regarded as a public benefit. I therefore look forward to being classified as a charity because I too pay tax, although not to the same extent. The hon. Gentleman would extend public benefit rather further than do the clauses on charitable purpose that we have already considered.

During the 20 minutes of that six-and-a-half hour Second Reading debate that I was out of the Chamber, my hon. Friend the Member for Stroud spoke. I therefore accept that two Labour Back Benchers were expressing that view, not one. Another, whom I heard loud and clear, was my hon. Friend the Member for Selby (Mr. Grogan), although we seemed to reach some sort of compromise in our exchange. I shall return to that in a moment.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East 12:45, 4 July 2006

Does the hon. Gentleman agree that Labour Back Benchers are pressuring the Government to do more in their attack on independent schools? That is one reason why the Parliamentary Secretary would be so clear, forthright and assertive towards that sector. Indeed a number of people hold similar views.

Photo of Tom Levitt Tom Levitt PPS (Rt Hon Hilary Benn, Secretary of State), Department for International Development

The hon. Gentleman should not believe everything that he reads in the newspapers. Certainly there are people who are opposed to public schools in principle. I was disappointed by the number of my colleagues who set their face so firmly against trust status arrangements for local authority schools, but I do not think that there is a one-to-one correlation between those two points of view.

As I said on Second Reading, I have been in the Labour party for 30 years and I am uneasy about the idea of private education. It seems to be intended to bring about privilege rather than pure educational value. That privilege is bought in a way that others cannot afford. Teachers who are very often trained at the public expense are then taken out of the state  system and used in the private sector. Those are things that have worried people in principle on our Benches since time immemorial. But we are where we are. In the big church that we advocate on the Labour Benches we take many views on board.

Indeed, the private education system has produced some excellent and senior members of the Labour party. I am sure that it will continue to do so. But that does not mean that we all have had Pauline conversions. I accept that the private sector, especially in the field of special education, provides facilities that the state sector then buys into. That is very valuable. I think in particular of institutions such as the Mary Hare school in Berkshire that are provided on a scale which it perhaps would not be cost effective for the state to fund. The state then buys in so that people whose special needs necessitate it can be educated in the private sector. We are seeing the same in health with operations being bought from the private sector in order to fulfil public need and on a public service basis. In other words it is at no cost to the individual.

All those examples of partnership are valuable. This part of the Bill had a hugely disproportionate amount of scrutiny when it was in another place. I hope that we will not spend the same proportion of our time discussing public benefit. But this Bill is not about the status quo as far as public schools are concerned. I believe it is right to end the presumption that anything that has education in its purpose is automatically a charitable purpose. There has to be a demonstration of public benefit. I pay tribute to those schools in that sector that have already started taking those moral responsibilities seriously. Some public schools are allowing and encouraging the joint use, community use or shared use with other schools of drama facilities, sports facilities or wider school facilities. It may be for summer clubs during the holidays or to help students on pre-university courses. I welcome those examples of partnership.

If the Bill goes further along the road of promoting those partnerships and making sure that the use of those facilities which have hitherto only been the prerogative of the few and the wealthy few, by and large, it is, dare I say it, almost socialist in action and is therefore to be welcomed. The Bill is right that where the public benefit cannot be demonstrated and where there is total exclusion of the public from the use, then charitable status should be withdrawn. But I note that even if every public school were to fail on the public benefit criterion, only something like 4 per cent. of the income of public schools would be removed from them.

While 4 per cent. is useful for them to have and encourages them into the partnerships that we are advocating, it is not a death blow to them should it be removed. Nevertheless, it is important to have the opportunity to say that there is no public benefit from an institution and that its charitable status should therefore be removed.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I am enjoying much of what the hon. Gentleman is saying and I agree with a great deal of it, but he might have been wrong on one point of detail. If a public school were by any chance to lose its charitable status, that would be a much more serious matter than just losing 4 per cent. of its income,  because, as a non-charitable institution, it would not be able to use the charitable assets that it had accumulated. Charitable assets must remain charitable.

Photo of Tom Levitt Tom Levitt PPS (Rt Hon Hilary Benn, Secretary of State), Department for International Development

Yes, I had not thought of that aspect. I do not know what happens to an organisation’s assets when it loses its charitable status or whether they are affected in that way, but I am willing to take the hon. Gentleman’s word for it. I am not advocating that we should remove the 4 per cent., but that schools should behave in a way that guarantees that they continue to get it.

On this issue, I regard the Bill as progressive. I shall not dismiss the amendment tabled by the hon. Member for Cheltenham as upholding the Cheltenham principle, because it is important that we air these matters. Although we should not adopt the words that he has proposed, we have had a good debate on this subject. We should acknowledge the fact that the issue has undergone particular scrutiny in the other place, adopt the clause as it stands and move on.

Photo of Alun Michael Alun Michael Labour, Cardiff South and Penarth

I am grateful for the opportunity to make a couple of brief points, and I hope that we can use the debate to clarify beyond doubt the issue of the public benefit test. There has been a great deal of scrutiny of the provisions, and I hope that the Minister will be able to confirm my understanding of what is happening in them.

I understand why the hon. Member for Cheltenham has tabled the amendment. Essentially, he is saying that having included environmental benefit, for instance, in the list in clause 2(2), there is a danger that the consideration given to the public benefit might lead to it being ruled out again. I can see the point of that, and if we deal with these issues in everyday language, there would appear to be such a danger.

However, my understanding is slightly different. We are muddling up two issues. First, there is a series of specific benefits, which are recognised in the list of charitable purposes in clause 2(2). Environmental benefit, animal welfare and so on are clearly understood as charitable purposes. The public benefit test, therefore, must be a test of the extent to which those purposes are delivered and of whether the way in which the charity is acting is appropriate to delivering them.

However, it would be wrong—this is the fear that the hon. Gentleman is expressing—to return to the list and say, “You cannot identify individuals and groups in the community that get that benefit, so we can overturn its inclusion in the list.” That cannot be right and it cannot be the intention. The public benefit test does not, and cannot, allow the Charity Commission to question whether the charitable purposes listed in clause 2(2) are indeed charitable. From this point on, that must be a given.

The public benefit test relates to the extent to which the charity delivers charitable purposes consistently and appropriately, as against all the other tests of what is charitable, which is very clear, having been set out in previous legislation and in case law.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

Perhaps the right hon. Gentleman will correct if I am wrong, but he is saying that if a cause occurs under clause 2(2), it is not only a purpose that has the potential to be charitable if it demonstrates that it is to the public benefit, but affects the way in which the Charity Commission will test whether it achieves the public benefit. The Chancellor of the Duchy of Lancaster has said that there has always been a view that public benefit ought to be able to be demonstrated. How does the hon. Gentleman think that the charity concerned could demonstrate that it is to the public benefit in this purpose; that is, to the advantage of environmental protection?

Photo of Alun Michael Alun Michael Labour, Cardiff South and Penarth

Let me put it in terms of animal welfare, since that has been the subject of debate over many years. The argument against animal welfare would be that it does not produce a public benefit, because it does not benefit people. The other side of the argument is that there is actually a public benefit to being concerned about the welfare of those with whom we share the planet. Therefore, a public good comes out of animal welfare that may not benefit human beings individually or as a group. That also applies to some of the charities on Isle of Wight, to which the hon. Gentleman referred earlier. Surely, by listing animal welfare, the definition has put beyond doubt the fact that there is a public benefit in pursuing it.

Similarly, there could be consequences in terms of the environment and national parks, with people going out for recreation and enjoyment, and so on, but the environment is mentioned in clause 2(2), which puts it beyond doubt that landscape and environmental benefit is a charitable purpose. Therefore, it cannot be said, using the test of public benefit, that that is not charitable. It would be wrong to have a presumption that any organisation that sets itself up, saying, “I am environmental”, is not subject to question through the “public benefit” test. Such organisations have to be asked, “Are you pursuing that charitable purpose appropriately and efficiently and have you passed all the other tests that are traditionally accepted as the ones that check whether a charity meets its purpose?”

The amendments may result in a danger that clause 2(2) could be revisited and overturned by the public benefit test. Surely, that cannot be the purpose. I am discussing the matter in that way because I hope that my hon. Friend the Parliamentary Secretary’s response might help us kill off that fear, which has created an enormous amount of the debate that took place in another place.

Debate adjourned.—[Liz Blackman.]

Adjourned accordingly at two minutes to One o’clock until this day at Four o’clock.