Clause 28

Charities Bill [Lords] – in a Public Bill Committee at 12:45 pm on 11 July 2006.

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Annual audit or examination of accounts of charities which are not companies

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

I beg to move amendment No. 133, in clause 28, page 29, line 41, leave out ‘£10,000’ and insert ‘£20,000’.

This is another measure to reduce the amount of bureaucracy that small or medium sized voluntary sector organisations have to deal with. The Minister said on Second Reading that the number of charities that will no longer have to have a full audit will be reduced by 3,000 by this section of the Bill. Since an audit costs about £5,000 on average, that will in effect inject £15 million into the sector. That is a number that we should be trumpeting from the roof tops.

The clause goes on to suggest that those charities with an income of between £100,000 and £10,000 will not need a full audit but an independent examination. The purpose of the amendment is to raise that limit of £10,000 to £20,000, which will mean that more organisations will not require even an independent examination and will manage without any independent check on their bookkeeping. It is another simple measure to reduce the amount of bureaucracy faced by small voluntary sector organisations.

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

I applaud the intention behind the amendment, but we have to be careful about always regarding something like an audit as an imposition on a charity that is not in its interests. As I have mentioned before, we are talking about a huge number of organisations; according to the National Council for Voluntary Organisations, 56 per cent. of the voluntary sector has an annual income of less than £10,000. We are talking about a huge area of the necessary regulation of charities. To exempt another large swathe of small charities might open the door for exactly the kind of difficulties that we have already discussed.

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

Does the hon. Gentleman agree that my hon. Friend has a point about deregulation and that the best way to deal with it would be a comprehensive review of all the thresholds in the Bill a year after Royal Assent?

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

I am pleased by that intervention by the Minister. I would say yes and am happy to leave it at that, but to complete the essential point, it can be in the interests of donors, charities and the reputation of the charity sector as a whole for necessary audit and examination of accounts to take place, and that guards against fraud.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

We have heard about the review before, and I think it is a good thing. Can the hon. Gentleman point out to me the power that the Minister will have to make decisions as a result of that?

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

I think that I am grateful to the hon. Gentleman for intervening. I cannot, but I will look forward to the Minister’s explanation of where that might be.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

I should declare an interest as a chartered accountant. I urge the hon. Lady to press her amendment. We are not talking about a set of accounts but about having to have them audited. An audit is frightfully expensive and is a great blow, in percentage terms, to the charity.

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

I thank my hon. Friend for giving way. As a chartered accountant—[Interruption.] I am not a chartered accountant. Will my hon. Friend, as a chartered accountant, give me a suggestion of the cost involved? In my experience, well over £1,000 is common and that would represent a significant percentage even of £20,000. I support my hon. Friend in asking the hon. Lady to press the amendment despite reassurances from the Minister that things will be reviewed a year later.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

That is exactly the point. In many other areas, the Government have recognised that fact and increased thresholds so that organisations do not have to have audits. It is an important point and a good amendment.

Photo of Stephen Williams Stephen Williams Shadow Minister (Education)

I am a chartered tax consultant rather than a chartered accountant. In my experience, lots of chartered  accountants—I am sure that the hon. Member for Wellingborough (Mr. Bone) is not an exception—do such audits for charities on a no-fee basis, as part of building links with the community. Would he not advocate that his fellow practitioners audit small charities on that basis? Then there would be no fee and no need to fear the high charges that he mentioned.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

The hon. Gentleman makes a point, but realistically, it is an unnecessary imposition on a charity with only £10,000 of income.

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

This has been a lively debate, with interesting views from all parties. My hon. Friend the Member for Bishop Auckland raises an important issue, and the hon. Member for Wellingborough spoke eloquently as an accountant about the costs that accountants can charge and the imposition that that might make on small charities.

We need to examine the measures properly, consulting all charities that might be affected. The hon. Member for Isle of Wight drew attention earlier to the relatively small number of responses on another threshold issue. I reassure him that there are order-making powers in the Bill to vary all the financial thresholds.

My final point, partly in answer to the hon. Member for Wellingborough, is that an examination can be done on charities. It is a lesser scrutiny than an audit and is done by someone competent but not professionally qualified, and an independent person must be involved.

The issue raises important points, but the hon. Member for Cheltenham cautions us against leaping too quickly into the dark. A thorough review is the right way to go. I hope that my hon. Friend will withdraw her amendment.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

I am grateful to the Minister. One of the nice things about the Bill is that because he has only just arrived and is not really responsible for it, we can be critical of it. Given that everybody keeps saying how much consideration has gone into the Bill, I think that the threshold should have been considered before. It is most unfortunate that thresholds will be established this year when there is going to be a review and everyone will have to find out what the new thresholds are in a year’s time. Despite that and notwithstanding the blandishments of Opposition Members, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 28 ordered to stand part of the Bill.

Clauses 29 and 30 ordered to stand part of the Bill.