Clause 7

Charities Bill [Lords] – in a Public Bill Committee at on 6 July 2006.

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The Commission’s objectives, general functions and duties

Amendment proposed [this day]: No. 67, in clause 7, page 7, line 11, at end insert—

‘1A. So far as is reasonably practicable the Commission must, in performing its functions, act in a way which maximises the benefit to the users and beneficiaries of charities’ services and activities.’.—[Martin. Horwood.]

Question again proposed, That the amendment be made.

Photo of Roger Gale Roger Gale Conservative, North Thanet

I remind the Committee that with this we are discussing the following amendments: No. 9, in clause 7, page 7, line 25, at end insert ‘and act in a fair and reasonable manner,’.

No. 10, in clause 7, page 7, line 31, at end insert—

‘(7) So far as is reasonably practicable the Commission must, in performing its functions, distinguish between—

(a) its regulatory role,

(b) its advisory role, and

(c) its investigatory and remedial role.’.

No. 76, in clause 7, page 7, line 31, at end insert—

‘7. The Commission must, in appropriate cases, have regard to the desirability of providing extra support, advice, guidance and encouragement to new and developing charities from a diverse range of communities.’.

No. 103, in clause 7, page 7, line 31, at end insert—

‘7. In performing its regulatory functions the Commission must act fairly and reasonably, and with regard to the interests, of charity beneficiaries.’.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

May I say how pleasant it is to see you once again in the Chair, Mr. Gale? The sun is coming out. I do not think that it will be as hot as it was on Tuesday, and I am advised that we expect thunder later—outside, that is.

When we rose for lunch, not that I had any, I was in the middle of a quotation. Lord Bassam of Brighton said that the commission

“would not change its behaviour as a result of the addition of these words”.

It is only proper that I should conclude the quotation, which is

“and so the amendment would have no practical effect.”—[Official Report, House of Lords, 12 October 2005; Vol. 674,c. 335.]

I was speaking to amendment No. 9, which would place an obligation on the commission to act in a fair and reasonable manner. The amendment has some history. Paragraph 161 of the Joint Committee report on the Bill said:

“Under current charities legislation, there is no specific objective set out for the Charity Commission to act proportionately and reasonably, but such a requirement is placed on all public bodies by common law.”

Ministers rested their case in the House of Lords on that responsibility. The National Council for Voluntary Organisations and other organisations gave evidence that they were not satisfied with that, and the right hon. Member for Darlington (Mr. Milburn) said effectively on Second Reading that he was not satisfied with it. He said that

“‘proportionate’ appears in the measure. However, ‘fairly’ and ‘reasonably’ do not.”

He thought that one out of three was not bad; I think that he was being generous. However, I suppose that getting one out of three votes in a general election that one wins is not bad. He went on to say that

“given the genuine concerns that were expressed in another place and the continuing need to reassure especially the smaller charities that they will not face some sort of Big Brother Charity Commission with extensive new powers at its disposal, I hope that my right hon. and hon. Friends might be able to go a little further.” —[Official Report, 26 June 2006; Vol. 448, c. 49.]

With that in mind, I tabled amendment No. 9. I thought that it would be right to give the Minister the opportunity to satisfy his right hon. Friend by accepting the amendment.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

Through me, yes. I am sure that that would be just as good as tabling it himself.

Other organisations, such as the Association for Charities, have emphasised small charities’ need for reassurance because of the additional powers and responsibilities that the Bill will give the commission. They point to the strength of feeling expressed across the political spectrum in another place for the inclusion of such a measure as mine, and they think that it is appropriate to introduce one.

I shall refer directly to what happened in another place. Lord Phillips of Sudbury said that it was

“probably the most important recommendation which the Government declined to accept.”—[Official Report, House of Lords, 23 February 2005; Vol. 669, c. 298.]

My noble Friend Lord Swinfen and Lady Howe of Idlicote queried the provision’s omission of the words “fairly” and “reasonably”. The Minister, Lord Bassam, said:

“We are clear that this qualifier means that the commission must have regard to these principles”.

He assured Lord Phillips that the words “fairly” and “reasonably”

“add nothing to the legal duties which the commission is already under. We have no doubt that the commission is under a duty in administrative law to use its powers reasonably.”—[Official Report, House of Lords, 12 October 2005; Vol. 674, c. 334-5.]

 However, that was not the view of the High Court judge in the Little Gidding case to which the hon. Member for Cheltenham (Martin Horwood) referred, because the judge said that he would not take into account whether the commission had acted fairly and reasonably. The Minister shakes his head. Perhaps he has further information about the decision-making process in the Little Gidding case.

It is the contention of the Association for Charities, with which I see no reason to disagree, that had the Charities Act 1993, or indeed any other legislation, placed that duty on the commission, the judge would have been obliged to take it into account. That is why I move the amendment.

Amendment No. 10 covers a different area. The commission, in performing its function, should distinguish between its regulatory role, advisory role and investigatory and remedial role. The latter is sometimes called its policing role—indeed, its policing and judge and jury role. By proposing the amendment, I merely follow the precedent set by the Lord Chancellor in the reforms that he has initiated in another place. Clearly, there is, or there has been, a great deal of confusion about the activities of the commission in those different areas. The strategy unit said that

“the blurring of boundaries between the Commission’s advisory and regulatory roles continues to cause confusion among charities and other key stakeholders.”

It went on to say:

“Nor does the Commission have the resources to sustain an advisory capacity as extensive as the statutory phrasing...suggests. It should retain an advisory role, but this should be more precisely defined.”

Clause 20 of the draft Bill went in exactly the opposite direction. It allowed the commission to give advice not only to trustees but to any employees of a charity, and even unsolicited. Like any good quango, that is what it is doing. However, the consequence, according to a large number of—

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

For clarity, are we referring to clause 20 of the present Bill?

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

No, we are referring to clause 20 of the draft Bill, and I am sorry to say that I do not know which clause it is in the current Bill. I do not suppose that it is far from clause 20, however.

The Joint Committee wrote:

“Charities—particularly small charities—were unclear whether they were being advised to do something by the Commission or directed. The result was that, to be on the safe side, they treated advice as if it was direction. This was significantly eroding the autonomy of the sector and increasing the degree of regulation.”

The NCVO, quoted in the Joint Committee’s report, weighed in in support, saying that

“we would not want to see spontaneous, citizen-led activity stifled by a regulatory regime which actually, when it gave advice, implied that you could or could not do certain things which had the force of statute when it did not”.

The Association of Charitable Foundations is also quoted. It feared that the powers in the Bill might

“end up blurring the boundaries between the Charity Commission’s advisory and regulatory roles even more than to date”.

There was then a discussion about whether the responsibilities should be separated either by taking the advisory role outside the commission, or by retaining it within the commission and separated by a Chinese wall. After some considerable intellectual and consultative argy-bargy, which is covered in paragraphs 201 to 205 of the report, the Joint Committee, supported by the Select Committee on Public Accounts, which found that the commission’s advice and support is generally well regarded, concluded that

“the Charity Commission should take steps to differentiate between its advisory and regulatory functions and make clear in all its communications the distinction between advice and instructions.”

The Government accepted the conclusion. It was their reason for rejecting this and similar amendments in another place. Baroness Howe nonetheless felt:

“We can see a more powerful Charity Commission emerging... To have the same body regulating with those very strong powers and advising on what must be done is dangerous.”—[Official Report, House of Lords, 10 February 2005; Vol. 669, c. GC172.]

But Baroness Scotland said that

“the Government and the Charity Commission wholeheartedly agree with the principles”— and—

“believe that it is more appropriate to leave its implementation to management action”.—[Official Report, House of Lords, 28 June 2005; Vol. 673, c. 192.]

That course of action seems perfectly sensible. The problem is that it has not happened; the Baroness made her statement last year, yet the letter to me about the performance of the Charity Commission in respect of that small charity after a visit in August last year, after the Baroness made that commitment, shows exactly that confusion between regulation and policing. I quote:

“The trustees of the charity were advised that they must review their procedure for the award of such gifts, to ensure that they fulfil a charitable purpose and in particular to consider introducing standard criteria...The advice which we gave was that, without making an assessment of need, they could not ensure that the giving of gifts was achieving the object of the charity”.

That is exactly the confusing message that my amendment seeks to clarify. I thought that the promise was to make things clear; having “advice”, “ensure”, “must” and so on in the same sentence does not do so. If it really was advice, the trustees would have been told that they “should” review their procedure for the award of such gifts. It is simple to get the issue right, but the commission did not do so, even after all those assurances, promises and recommendations.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

I shall speak briefly. It might be helpful and save time if the Minister hears from my hon. Friend and me at the same time.

My hon. Friend has opened up an interesting area. The relevant clause is clause 24—“Power to give advice and guidance”—although the issue may turn up elsewhere as well. The advice referred to is with a capital A, because it relies on an application from a

“charity trustee or a trustee for a charity”,

although I am not sure about the difference between the two. The clause goes on to say that if that advice were relied on, the trustee would not be open to a fault  being found with their behaviour as long as the Charity Commission had the relevant information. I have summed that up reasonably well.

That advice is different from the ordinary advice with a small “a” given by the Charity Commission; I hope that that will not be interfered with. If the Charity Commission feels that it can say in any communication, “You must do this because it is a regulation and we require it”, or, “This is our advice and you must have a pretty good reason to do other than take it”—I leave aside the commission’s investigatory or remedial role—there will be a clear division in respect of what it can do.

Clause 25 is entitled “Power to determine membership of charity”. Will the Minister, now or later, clarify whether determining membership of a charity means to end membership, or whether someone can be a member if they have been disqualified from the charity itself? The word “determine” has a number of meanings, and it would be interesting to know which one it bears in this case.

I hope that my final point will mean that it will not be necessary to have a clause stand part debate. Will the Minister clarify something, preferably soon? If the Charity Commission, by regulation or by giving advice, said that an organisation that had been a charity was no longer to be one under the provisions of the Bill, and if that organisation did not bring itself into compliance with the new definition of “charity”, would that organisation’s assets have to be passed to another charity, or could they stay with the organisation in its non-charitable status?

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

It is nice to see you back in the Chair, Mr. Gale.

The debate has been entertaining and interesting and the amendments cover a range of issues. I start with amendment No. 67, which stands in the name of the hon. Member for Cheltenham (Martin Horwood). I remind the Committee that the amendment is essentially about the need to take account of beneficiaries’ and users’ interests in the performance of the commission’s functions.

The amendment—dare I say it—follows the Cheltenham principle. The sentiment behind it is perfectly reasonable, but the Government consider it unnecessary because it will not add to the existing law. The current law is set out in the Charities Act 1993, which describes the relationship between what the commission does and its impact on beneficiaries. The Act states that

“It shall be the general object of the Commissioners so to act in the case of any charity...as best to promote and make effective the work of the charity in meeting the needs designated by its trusts”.

The phrase

“the needs designated by its trusts” means the needs of the beneficiaries.

In addition, the Bill itself sets outs the interests of the beneficiaries. The fourth objective requires the commission to promote the effective use of charitable  resources, which will result in charities being able to help their beneficiaries in the most effective way, and the fifth objective requires the commission to enhance the accountability of charities to beneficiaries. If the amendment is about the need to have regard to the interests of beneficiaries, we believe that the Bill already does so.

There is also a difficulty with the amendment in that it would require the commission to act in a way that

“maximises the benefit to...beneficiaries”.

That would take the commission into an area of decision making that is properly a matter for trustees, because decisions about how a charity carries out its purposes—how it operates its activities and how it identifies beneficiaries and seeks to meet their needs—are part of administration, not a role for the commission. Proposed new section 1E of the 1993 Act, as inserted by the clause, is clear on that. It states that:

“nothing in this Act authorises the Commission...to exercise functions corresponding to those of a charity trustee in relation to a charity, or...otherwise to be directly involved in the administration of a charity.”

If the intention of the amendment is that regard is be had to beneficiaries’ interests, we think that the amendment is unnecessary, because that requirement is already set out in the 1993 Act and is supplemented by the Bill. Maximisation goes beyond the responsibilities of the commission.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs) 1:15, 6 July 2006

On the commission’s carrying out of the roles of trustees, I think that the Minister is slightly misled by the legislation. Although the commission itself never performs precisely that role, it certainly appoints people to such roles—in the form of receivers and managers. That has been the crux of many of the cases presented by the Association for Charities. The exercise of powers equivalent to those of trustees is clearly a consequence of the commission’s actions. There are many consequences. If great legal expertise is required to determine what the current law is, it is desirable and necessary to amend the Bill to remove the doubt and make the law more accessible to those who administer charities.

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

The problem is with the word “maximisation” or “maximises.” The hon. Gentleman is right that it is in the commission’s power to appoint receiver managers to run charities that have run into trouble, but the commission does not prescribe the balance between the different interests that charities might have. [Interruption.] The hon. Gentleman is asking, from a sedentary position, where the amendment says “maximisation”. It states

“So far as is reasonably practicable the Commission must, in performing its functions, act in a way which maximises the benefit to the users and beneficiaries of charities’ services and activities.”

I hope that that satisfies him and I hope that he will withdraw his amendment.

That brings me to the amendments standing in the names of the hon. Member for Cheltenham and the hon. Member for Isle of Wight (Mr. Turner) on fairness and reasonableness. It is important to be clear on those issues. Let me start with the case that has  already been mentioned—the Little Gidding Trust case. My understanding reflects what Lord Bassam said in another place. Lord Bassam was correct. There was agreement between the Attorney-General and the judge in the case to set aside the question of reasonableness so that the specific merits of the case could be considered and a judgment made on its merits. It is not that the judge said that reasonableness was not something that he should consider; there was simply an agreement to set aside the question of reasonableness to shorten the time that the case would take so that specific consideration could be given to the case’s merits. That was what was done and the judgment was made.

We can be certain that all public bodies are under an obligation to show fairness and reasonableness—the basis of the Government’s argument that the amendment is unnecessary—because of a principle: not the Cheltenham principle, but the Wednesbury principle. The Wednesbury principle, which dates from 1948, states that public bodies are required to be reasonable in the decisions that they make. It is the criteria used by the court when a judicial review case is taken to it—it is the basis on which public bodies are taken to judicial review. For the benefit of Committee Members, the Wednesbury principle of unreasonableness is used to determine whether the decision taken was one that no reasonable person could have come to.

Without question, therefore, reasonableness is in the body of law and is an obligation on public bodies. As for why it should not be included in the Bill when doing so would make everyone feel happy and meet the Cheltenham principle, there is a good reason for that, which is—

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

Which is that we do not want to. [Laughter.] That is one of the good reasons. The other, even better, reason is that if we put it in the Bill in this case, it would send a signal to the courts that where the demand for fairness and reasonableness is not in the legislation, there is an implication of a lower standard for other public bodies. For every public bodythat exists, we would have to put fairness and reasonableness requirements in every piece of legislation concerned with that public body. I do not think that the Committee would consider that a good use of time.

I happen to have experience of that. I sat next to my colleague, the other Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Wolverhampton, South-East (Mr. McFadden), when he took the Legislative and Regulatory Reform Bill through the House of Commons. Again, there was a request to put reasonableness into the Bill, and the same debate arose.

I am in favour of fairness and reasonableness, which are important. To reassure hon. Members so that they have no sleepless nights thinking about whether the commission is under a duty of fairness and reasonableness, I will make one more comment. The commission’s strategy and review document, “Charity working at the heart of society”, states:

“any actions we take will be proportionate, fair and reasonable”

It is clear that the commission recognises that it is under that obligation. It is a duty on all public bodies. I hope that the amendment will be withdrawn.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I was about to say that the Minister dealt jolly well with “reasonably” but what about “fairly”? We have not heard much about that.

The commitment from the Charity Commission goes some way toward meeting my concern, but is the failure to fulfil that commitment something on which an appeal can be made to the tribunal, a complaint can be made to the independent complaints reviewer, or the commission can, in due course, be taken to the parliamentary ombudsman?

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

I am pleased that the hon. Gentleman asks me that question, and I am happy to respond. The Bill refers to the fact that the criteria for the tribunal considering a case is similar to that used for judicial review in the courts. Reasonableness is therefore clearly applicable. As soon as I find the reference, I shall furnish the hon. Gentleman with the details. I hope that I have dealt with fairness and reasonableness. The fact that the commission mentioned it in its document creates an onus on it to act reasonably, which is something that the courts can take into account.

Amendment No. 10 covers the commission’s regulatory, advisory and investigatory roles. We are again sympathetic to the motivations behind the amendment. The Joint Committee recommended that the commission should take steps to differentiate advisory and regulatory functions. The Government endorsed that recommendation. The commission accepted it and has embarked on a review of its operations. As I understand it, the commission is already putting the recommendation into practice. To take the example of recently published guidance, the commission has begun to rewrite all its guidance in clearer language that helps to differentiate those passages that describe what is required of trustees by law and those that set out what is expected of them as a matter of good practice.

The guidance will explain that, when the word “must” is used, it shows a specific legal or regulatory requirement affecting trustees or a charity and trustees must comply with that requirement. Sections that contain a legal or regulatory requirement are clearly identified. When “should” is used, it indicates items that are regarded by the commissioners as minimum good practice, but for which there is no specific legal requirement. Trustees are advised that they should follow the good practice guidance unless there is a good reason not to do so.

In the Better Regulation Task Force report, “Better Regulation for Civil Society”, it was acknowledged that the commission had made

“an important move towards greater clarity with the publication of their new guide for trustees, which separates legally binding obligations on trustees from guidance on how they should fulfil their role.”

The report makes a further recommendation about extending that approach to all its written advice to charities, and the commission fully intends to take that work forward.

Although we agree with the sentiments behind the amendment, it attempts to draw a distinction between the different functions of the commission. The truth is that the regulatory role can encompass a range of activities, including investigation and the giving of remedial advice. Let us consider what the hon. Member for Worthing, West (Peter Bottomley) said earlier about the commission giving advice to organisations to help bring themselves back within the framework of regulation of charity law and public benefit. In the performance of the commission’s functions it is hard to draw the very clear distinction between its different duties that the hon. Gentleman seeks.

We are sympathetic to the sentiments behind the amendment. The commission has started to respond to the Joint Committee and intends to go significantly further. However, putting such a provision in the Bill in the way in which the hon. Member for Isle of Wight proposes is sensible.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I am grateful to the Minister for what he has said. I take it that failure to comply with the obligations will be “tribunalisable.” There must be a clear understanding that advice is advice and that failure to take advice is not in itself an offence. The consequence of failing to take advice may be an offence and the consequence of failure to observe guidance may be an offence—I use the word in a broad sense—but just because someone does not want to do what the Charity Commission advises is not a reason for it to come down with a heavy hand.

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

I share the hon. Gentleman’s sentiments; he used the phrase “heavy hand”, and I was about to use the same phrase. There should be no excuse or alibi for heavy-handed behaviour towards those who do not follow the commission’s advice; I agree with him on that. Those are presumably some of the steps that the Joint Committee encouraged the Charity Commission to take, and which it seems happy to take.

We recognise the sentiment behind amendmentNo. 76, but I found the remarks made by the hon. Member for Cheltenham, in defending his amendment, slightly odd. If I may say so, he is confusing the Charity Commission’s role as regulator with some other role that it might play. He cited the example of organisations that are dominated by those in twin sets and pearls. I am sure that we can think of some political parties that, certainly until recently, had that reputation—indeed, in some of our minds, they still do. None of us would propose that the Electoral Commission should have responsibility for intervening in the activities of such an organisation and ensuring that the twin set and pearls brigade opened itself up to much greater diversity; that is a matter for the organisation. I make a similar point in relation to the hon. Gentleman’s speech, in which he identified precisely that sort of characteristic in certain charities.

Having said that, the substance of the hon. Gentleman’s amendment is actually slightly different to what he said in his speech. He talked about new and  developing charities in a diverse range of communities. We are sympathetic to that, but we do not think that that needs to be in the Bill. Let me say something briefly about what the commission is doing in that respect. It has developed contacts with a broad range of communities, especially those brought together by a shared ethnic background or faith. It has a network of 65 organisations from across the sector, created with targeted recruitment in Asian, Afro-Caribbean, Jewish and Muslim communities, which reflects the sector’s diversity, income and location. The commission provides advice in other languages and provides a translation service for customers. Also, it is listening, through a particular project, to faith-based charities and has hosted seminars in Hindu and Muslim communities.

It is also worth saying that the Race Relations (Amendment) Act 2000 obliges public authorities such as the commission to promote racial equality in the way that they act towards their staff, develop policies and improve their services. The commission must produce a race equality scheme, setting out its action plans with meaningful and measurable targets. It must produce a similar scheme for disability and, as set out in the Equality Act 2006, gender equality. Whatever the Charity Bill says, as a public authority, the commission will have responsibilities imposed on it through other pieces of equality legislation.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs) 1:30, 6 July 2006

I am somewhat reassured by what the Minister says, and especially by his reference to other legislation, but he is wrong to say that the amendment pushes the commission beyond its remit. Its remit is not the same as that of the Electoral Commission, which is a purely regulatory body. Among the general functions of the commission, No. 6 is “Giving information or advice”. The first of its objectives is the public confidence objective, which is

“to increase public trust and confidence”.

That clearly takes the commission into the area of giving encouragement and advice, and trying to develop the sector beyond providing simple regulation—a point eloquently made by the hon. Member for Isle of Wight.

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

That is why I distinguish between the hon. Gentleman’s speech supporting his amendment and his amendment itself. I actually agree with him about his amendment, but in his speech, he somehow gave the impression that it was the Charity Commission’s job to ensure diversity within particular organisations and to break up the twin set and pearls brigade; I wanted to correct that, because I just do not think that that is the commission’s job. It is true that it has functions that go beyond those of the Electoral Commission. As I said, it is fulfilling its functions well in relation to diversity—indeed, it is under an obligation to do so—but it is not the commission’s job to tamper with the existing structure of organisations. The hon. Gentleman’s amendment does not suggest that it is, but I thought—I may be wrong—that he implied that in his speech. On that basis, I hope that the hon. Gentleman will withdraw his amendment.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

The Minister has not explained why he is willing to have innovation written into the Bill,  but not what the hon. Member for Cheltenham suggested. Perhaps we will leave it on one side for those people who want to read the words. Does the Minister have a note, or will he say a word about my last point?

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

I beg your pardon, Mr. Gale. I should have responded to the hon. Gentleman’s point. It is an important point for the Committee to register.

The process of becoming a charity is a one-way street. I would not say that there is no going back, but it is hard to go back. We are dealing with two situations. First, a charity or an organisation is institutionally incapable for some reason or other of fulfilling the test of a charity. Secondly, it does not for whatever reason comply with the requirements of a charity. In the second case, it is the commission’s job to work with the charity to ensure that it can return to meeting the tests of charitable status.

When a charitable trust ceases to be charitable and it cannot institutionally become charitable, it is then for the commission to alter the trust’s purposes by scheme in accordance with the cy-près rule, which we will come to, so that the new purposes on which the assets are held continue to be charitable. Again, the issue is about a return to charitable status, but it may require more extreme or draconian action.

As I understand the situation from talking to the Charity Commission, there are very few if any recent examples of cases in which it has not been possible to conduct that process co-operatively. We should not give the impression that the commission seizes assets in dawn raids; the process is undertaken co-operatively. Sometimes, the situation will simply be that the original purposes for which the charity was set up have been fulfilled, but assets remain and they need to be transferred to another purpose. The commission will work with the trustees to do so. I hope that answers the hon. Gentleman’s point.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

We should leave it like that for the time being. We can accept that when it is possible to return a charity to compliance, and when a charity’s purpose can be modified so that the assets can be used for something charitable, there is no problem. The problem occurs with a change, perhaps following a change in the law as we propose, when purposes that are presumed to be charitable now are no longer charitable, but people want to continue, and assets have been given to them for the original charitable purpose. That worries me, and if the Minister does not have a straightforward answer, he might wish to return to the issue on Report.

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

I am not convinced that there is a straightforward answer. However, with respect, I should like to correct the hon. Gentleman. All purposes that are charitable now will remain so after the passage of the Bill. That is an important part of the Bill. The 12 purposes set out in clause 2 and the 13th catch-all category cover all existing charitable purposes. The scenario he envisages will not arise.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

I had thought that this issue would come up later when we considered the clauses on endowment funds and  changing the purposes for which property had originally been given. However, the type of incident described by the hon. Member for Worthing, West might be understood more clearly with the following example. I remember an occasion when funds were given for the sons of cobblers in Leicestershire. Particular monies were given for that purpose, but now of course, there are not many sons of cobblers in Leicestershire and they are no more needy than any other group in the community. That is the kind of problem to which the hon. Gentleman refers.

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

I am grateful to my hon. Friend—she raises an important point. I gather that there has been an issue on almshouses, which were originally set up to house destitute people. In certain cases the Charity Commission has worked with almshouses in order to vary their purposes through cy-près, so that they remain charitable but can also use their assets to the full. I suspect that the same practice would arise in relation to the cobblers. We shall reach the clauses on cy-près later, if we ever make progress. They allow charities to vary their purposes and they are directly about this issue.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

It might be more appropriate to address the issue that I wish to mention when we come to the cy-près provisions, but the Minister may be able to obtain some information in advance. I understand that learning the use of weaponry used to be a charitable purpose, because it was felt to be beneficial to the defence of the country, which was itself charitable. There were charitable shooting clubs. Will the Minister tell us what happened to the assets of such shooting clubs when the commission decided that that activity was no longer charitable?

Photo of Roger Gale Roger Gale Conservative, North Thanet

Order. I am going to make two points which I hope I shall not have to make again. The first is that interventions are becoming longer and longer and longer. There is a case for a slightly longer intervention if it saves an even longer speech later, but interventions should be just that. Secondly, will hon. Members please stick to the amendments under discussion.

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

Thank you, Mr. Gale. What were the amendments? The answer to the hon. Gentleman’s question was that it was concluded that there had been a mistake in the original licensing of such clubs, and therefore that particular class of clubs has been allowed to keep its assets. To be fair to the Charity Commission—it would seem that I am its champion in the Committee—it showed a flexible, reasonable approach in concluding that there has been an oversight in the original licensing practices, so that the clubs were able to keep their assets. With that I conclude.

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

I thank the Minister for many of his comments on the three amendments that have been tabled in my name. On amendment No. 76, I am reassured by the Minister’s statements and I beg leave to withdraw it. On amendments Nos. 67 and 103, I still believe that there is a pretty fundamental principle at stake. The Minister seemed to object to the use of the word “maximises” in amendment No. 67, on the  ground that it would elevate one group of stakeholders over the interests of others. In the context of charities, however, it seems to me that it is quite right to elevate the rights of a particular group of stakeholders, because charities exist for the very purpose of benefiting their beneficiaries. I appreciate, however, that there might be a technical legal difficulty with the amendment and I am content to withdraw it.

That criticism does not apply to amendment No. 103. That amendment simply repeats the injunction to act fairly and reasonably and requires the commission to have regard to the interests of charity beneficiaries. The legal technical argument that the Minister made against amendment No. 67 does not apply to amendment No. 103. He made a defence against the inclusion of the words “fairly and reasonably”—or at least of “reasonably”—and referred to the Little Gidding trust case, in which the judge was able to set aside consideration of the reasonableness of the commission’s actions in order to consider the merits of the case. That judgment might have been reasonable in that particular case, but the mere possibility that a judge could set aside reasonableness in that way concerns me.

The Minister quoted the commission’s documents in defence of its intention to act reasonably, but we have seen that there is considerable disquiet in certain parts of the sector about whether the commission always acts reasonably in practice. It is one thing to say, “This exists particularly in statute if you follow the legal trail through various pieces of legislation,” but it is quite another to be able simply to refer to the aims and objectives of the regulatory body and say that a clear and transparent obligation set down in statute instructs the commission to act fairly, reasonably and with regard to the interests of charity beneficiaries.

It seems to me that those things are eminently reasonable and obviously in the interests of the charity’s beneficiaries, who are the principal stakeholders and should be the people whose interests the whole framework exists to benefit. It would be reasonable to put the measures into the Bill, and I shall not withdraw amendment No. 103. I beg leave to move it.

Photo of Roger Gale Roger Gale Conservative, North Thanet 1:45, 6 July 2006

Order. It does not work like that. Let me explain to the Committee, for everybody’s benefit, that when you debate a group of amendments, you move only the lead amendment. None of the other amendments has yet been moved, nor would they normally be. If any Member wishes to move an amendment that is grouped and is not the lead amendment, they are required to give notice to the Chair in advance. The Chair will then decide whether he or she will accept that motion.

The hon. Gentleman is clearly unaware of that, so if he seeks leave to withdraw amendment No. 67, exceptionally, I will then call amendment No. 103 formally, but it will be the last time that I do so.

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

Thank you very much for your indulgence of my inexperience, Mr. Gale. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 103, page 7, line 31, at end insert—

‘7. In performing its regulatory functions the Commission must act fairly and reasonably, and with regard to the interests, of charity beneficiaries.’.—[Martin Horwood.]

Question put, That the amendment be made:—

The Committee divided: Ayes 4, Noes 9.

Division number 2 Nimrod Review — Statement — Clause 7

Aye: 4 MPs

No: 9 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Photo of Roger Gale Roger Gale Conservative, North Thanet

It will not surprise the Committee to know that I have already decided that we shall not debate clause stand part. If anyone has anything to say, they had better say it, with one caveat—they had better say it in order; otherwise I shall stop them.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I beg to move amendment No. 12, in clause 7, page 7, line 43, at end add—

‘(5) The Commission has power to award compensation when a complaint is upheld against its actions.”.’.

I shall refer briefly to amendments Nos. 14 and 16, which would give the tribunal the same powers.

The Charity Commission has its own complaints procedure and the tribunal, which we will discuss later, will be only a process for determining legal challenges to the activities of the commission. It will not be a place for determining whether the commission has mistakenly gone down the wrong road, has been guilty of maladministration or has handled things in an unfortunate manner. Those decisions will remain within the remit of the commission and its independent complaints reviewer and, in due course, of the parliamentary ombudsman.

My noble Friend, Lord Swinfen proposed in another place to set the independent complaints reviewer on a statutory footing. He said that that would create

“a truly independent mechanism for charities, trustees andothers to challenge the Charity Commission when it is apparently guilty of maladministration or acting unfairly, unreasonably and disproportionately”—[Official Report, House of Lords, 12 October 2005; Vol. 674, c. 379.].

He supported that assertion by pointing out that the independent complaints reviewer is forbidden to recommend to the commission the payment of compensation. The independent complaints reviewer can, I understand, recommend the making of a consolatory payment—that is, a payment for distress or possibly for inconvenience caused by the commission’s conduct. I am told, however, that the reviewer cannot make awards of compensation for financial loss. The amendment would permit it to do so.

The amendment fits into the larger picture in that a number of cases go to the ombudsman from time to time, and the ombudsman must consider whether the respondent, which is the commission, has acted—I suppose one might say—even fairly reasonably within its terms of reference. However, in cases in which the commission is not entitled to make a payment of compensation, it cannot consider making such a payment, so it is not possible to take the commission to the parliamentary ombudsman when it makes no such payment—although it can be taken to the ombudsman for failure to make a consolatory payment.

I am concerned that the absence of power to pay compensation filters through to the ombudsman. The ombudsman can require compensation when maladministration has been demonstrated, but injustice does not always follow maladministration. Sometimes it does, and sometimes it does not, but the ombudsman can require compensation only when there is a finding of maladministration. Anyway, why should one have to go to the ombudsman for compensation? It might be that the commission would admit that there had been maladministration, but would not admit—because it is not entitled to do so—to an obligation to pay compensation. It would be perverse if one had to go to the ombudsman to say, “Well, the commission admits maladministration, but only you can award us compensation.” That is why I tabled the amendment.

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

I think that the amendment comprehensively fails the Cheltenham principle in that, although it might express a desirable objective of some sort, it does not seem to me to be necessary or necessarily harmless. It puzzles me on three counts. First, there seem to be a lot of other bodies, quite apart from the ombudsman, who could more appropriately award compensation if complaints were upheld against the Charity Commission than the commission itself. The Bill provides for the charity tribunal, and there is also the independent complaints reviewer and the courts. Secondly, it would be a uniquely charitable act to award compensation against oneself, as in effect the amendment would require the commission to do.

On a more serious level, there is an obvious risk of conflict of interest that would offer a field day for lawyers who might wish subsequently to challenge a compensation award. Finally, it is a bit odd for a regulator to award compensation. I am not sure what the precedents are for that. I know that Ofwat can fine water companies, although it seems extraordinarily reluctant to do so most of the time, but the idea that it can pay them is not a precedent that I would want to set. The amendment is rather mistaken.

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

The hon. Gentleman and I can find a common cause on the amendment. Did he also note that the hon. Member for Isle of Wight rightly said that compensatory payments were likely to be more than consolatory payments had been in the past? The proposal seems to be an uncosted commitment by the Conservative party. Is not making uncosted commitments normally the role of the Liberal Democrats?

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

The hon. Gentleman caught me to make a political point just before I sat down.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

The argument can go further than the case made by my hon. Friend the Member for Isle of Wight. Let us remember the Thomas Coram Foundation, which was given many valuable objects by its creators. It became, in effect, a museum as well as a child care and family support organisation. The trustees wanted to separate off the art and, all bar one of them, came to an agreement. The Charity Commission agreed with the majority of the trustees and the dissenting trustee then went to the Law Officers and a Law Officer interfered. I think that it was the Solicitor-General , although I am open to correction.

It is difficult to imagine that a Law Officer would get something wrong or unnecessarily cause expense to people in respect of the power of consolatory payment or compensation payment, but would the Government feel able to make a payment of either compensation to put the trustees back to where they were in respect of the costs to which they were put? The Minister might want to mull over that with his advisers.

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

The hon. Member for Worthing, West always seems to ask a difficult question just before I am about to stand up. I shall consider it further. It does not sound like a good idea, but I shall find more justification for why that is so.

The commission already has the power in common with other Departments to pay compensation for losses suffered by members of the public or organisations as a result of maladministration in its work. As members of the Committee have said, the public or organisations can pursue complaints about maladministration through the commission’s internal complaints procedure, the independent complaint reviewer and the parliamentary ombudsman. As the hon. Member for Isle of Wight said, the independent complaint reviewer has the power to recommend a consolatory payment in recognition of the anxiety and distress caused by maladministration. It is worth saying that the commission has never yet refused a recommendation from the ICR to make a consolatory payment.

Complainants are not required to use the ICR service and can seek referral to the parliamentary ombudsman. There are no restrictions on the ombudsman in terms of recommending compensation for actual financial loss, save that she would have to be satisfied that a quantified loss resulted from maladministration on the commission’s part. Overall, the amendment would not be necessary. Guidelines and the powers already exist for the commission to take such action and there are a set of established complaint mechanisms under clause 8 to make it happen. I hope, on that basis, that the hon. Gentleman will withdraw the amendment.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

The Parliamentary Secretary has given a clear assurance that the commission has the power to pay compensation. That was not my understanding and, on the basis of that assurance, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 ordered to stand part of the Bill.