Schedule 5

Charities Bill [Lords] – in a Public Bill Committee at 11:15 am on 11 July 2006.

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Exempt charities: increased regulations under 1993 Act

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

I beg to move amendment No. 98, in schedule 5, page 105, line 29, leave out paragraph 6.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss the following amendments: No. 99, in schedule 5, page 106, line 17, at end add—

10. All references in Schedule 5 of this Act to “the Commission” mean the “principal regulator”, as defined in section 13(4)(b).’.

No. 105, in clause 13, page 16, line 27, at end insert—

‘(3A) The body or Minister shall have the same powers and responsibilities as the Charity Commission under this Act in relation to the charities of which he is principal regulator.’.

No. 92, in clause 13, page 16, line 32, leave out ‘made by the Secretary of State’.

No. 93, in clause 13, page 16, line 32, at end insert—

‘(c) in the absence of any principle regulator under paragraph (b), above, the regulator shall be the Privy Council.’.

No. 22, in clause 13, page 16, line 33, leave out subsection (5).

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

We tabled the amendment because the Bill expands the power of the commission to act for the protection of exempt charities. That sounds wise, but given our discussion on the exempt status of universities any power to expand the rights of any body, including the Charity Commission, over our universities is a major step and should not pass without debate. Currently, following the institution of a section 8 inquiry the commission may suspend any trustee, officer, agent or employee of the charity, order any debtor of the charity not to pay the debts or appoint receivers and managers.

We are familiar with that in terms of the rights of registered charities. They have become used to such powers and the Bill deals with many of their worries about the Charity Commission exercising such extensive powers over them. However, it is new for those powers to have been acquired quietly over the aforementioned universities of Oxford, Cambridge and those throughout the rest of the country. In effect, that would give power to the Charity Commission to remove Oxford dons from their posts. That would be a major step and one that should not pass without full debate. I shall be grateful if the Parliamentary Secretary can reassure us that that is not the case. I cannot see how the powers of the commission could be  extended to exempt charities as set out in the Bill and for that not to apply. That is the reason behind amendment No. 98.

Amendment No. 99 and the other amendments tabled by the Liberal Democrats deal with some of the uncertainties under the Bill about who is regulated by whom. Parts of the 1993 Act refer to the commission in respect of regulatory functions, but it is not explicitly pointed out exactly how many of the powers extend to other principal regulators in relation to exempt charities. That is what amendment No. 99 addresses. The intention is to make it clear that references to the commission, in terms of the regulatory powers, also mean the principal regulators, as defined elsewhere in the Act. In other words, the amendment would make it clear that the regulatory powers that pertain to the commission in relation to non-exempt charities also pertain to principal regulators in relation to exempt charities.

Amendment No. 92 addresses the ability of the Secretary of State to decide who the principal regulator is for various exempt charities. The Bill gives him that power by regulation, and our amendment would take that power away. That connects with amendment No. 93; we assume that if no other regulator exists, the regulator will be the Privy Council. We tried to work out who was the current regulator of the Oxbridge colleges and halls, and it seems to be the Privy Council. Amendment No. 93 provides for the eventuality of the Minister and his advisers missing out a body, in terms of appointing a principal regulator. It leaves the Privy Council as the fall-back position, as we believe that it is the regulator in the case of one particular group of colleges and halls.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

We are examining a particularly important change to the way in which universities are regulated. I am completely astonished that universities that have lain on their backs with their feet in the air and have allowed themselves to be regulated even more by HEFCE. Anyone who remembers the huge row that took place in the 1990s, when the University Grants Committee was abolished and replaced by HEFCE, will be amazed that universities got so wimpish and so incapable of opposing. They are now so incapable of protecting their position that the hon. Member for Cheltenham is absolutely correct when he says that it is possible for the occupant of a teaching post paid for by the university to be removed at the instigation of HEFCE. In those circumstances, one wonders how long university dons can keep the protection of free speech.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

Exactly the same arguments were deployed by universities at the time of the abolition of the University Grants Committee. Will someone make a complaint against a university lecturer, saying that he erred in some direction or other—[Interruption.] The Minister refers to charities, but for the moment universities are exempt; they do not have a regulator because they are trusted to regulate themselves. We are imposing a new level of regulation. We can quite understand that those who research controversial subjects, such as vivisection, embryology or weaponry, may find repeated complaints being made against them to the Charity Commission or to HEFCE.

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

I have the utmost respect for the hon. Gentleman, and he has made many coherent arguments during Committee, but this is not one of them. We are talking about regulation for the purposes of charitable law. The idea that a don teaching a controversial subject would be slung out of his post because the institution was not within the confines of charitable law is simply fantastic and wrong.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

We will see. James II sent to a troop of horses to Oxford because it knew no argument but force and Cambridge knew no force but argument. He was trying to remove dons from the university because they were peddling theories with which he was not happy. In short, I have a great deal of sympathy with amendment No.98 and I am horrified that the universities have been so wet.

Amendment No. 105 is a probing amendment that fulfils the same function as amendment No. 99, which is to find out whether the responsibilities of the principal regulator are the same as those of the Charity Commission. If they are not, we are not creating the level playing field—equivalent regulation for all charities—which the Minister says is the whole purpose of the Bill. An increasing number of exempt charities are bodies that are the creatures of Government, yet the principal regulator has only one objective in respect of those institutions whereas the Charity Commission has five objectives in respect of all other charities. The Minister must explain why the level of regulation of exempt charities is less when one of the purposes of the Bill is to create a level playing field. If he is saying that the regulation will be exactly the same, at least that is consistent with the purposes of the Bill.

Amendment No. 22 is an attempt to deal with what I consider too broad a provision in clause 13 which, put simply, allows the Minister to amend the list of principal regulators and to make amendments subsequent to the enactment of the legislation which would change the powers of the principal regulator. Whether the powers are as I fear that they are, or they are as I suspect the Minister believes they are, there is no need for him to have the power to amend them.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office) 11:30, 11 July 2006

I think that we are getting hot under the collar about the idea of Oxford dons being sacked without any good reason at all. Let me try and explain why that is the case.

All the universities are required to follow charity law. However, they are not monitored in that respect. The Bill would introduce proper monitoring of the way in which universities and other institutions follow charitable law. That is the context in which we have to understand the amendments and the clause.

Let me say something about the relationship between the principal regulator where that is not the Charity Commission, and the Charity Commission. It is fair to say that the situation is complicated and it is difficult to get the arrangements right. The principal regulator where that is not the Charity Commission, such as HEFCE or the Department for Culture, Media and Sport in relation to some museums and galleries, will be responsible for monitoring compliance with charity law. What happens if the principal regulator believes that there is a problem in the charity? It is for the  principal regulator to say to the Charity Commission that, for example, an inquiry into the charity is needed. The Charity Commission then has all the powers at its disposal that it would have in relation to other charities to inquire into what is happening in the charity. The purpose of amendment No. 98 is to disapply those powers of the Charity Commission, but that would not be sensible because it would create the unlevel playing field about which the hon. Member for Isle of Wight is worried and which is implied by the amendment tabled by the hon. Member for Cheltenham.

It is then for the Charity Commission to conduct its investigations and to reach conclusions. What happens to those conclusions? Under the Bill as it stands, the Charity Commission can implement changes as it would implement in the case of any other charity, with one proviso. I draw the Committee’s attention to clause 14 which states:

“Before exercising in relation to an exempt charity any specific power exercisable by it in relation to the charity, the Commission must consult the charity’s principal regulator.”

If I may be so bold, I suggest that the useful discussion for us to have is of whether the requirement for the commission to consult the charity’s principal regulator is a sufficient safeguard.

As the Bill stands, the principal regulator where that is not the commission—HEFCE, in the case that we have been discussing—is in the driving seat of monitoring compliance with charity law. When HEFCE feels that an inquiry is necessary, it goes to the Charity Commission and says so. The Charity Commission then reaches conclusions, but before it can implement them, it must consult the principal regulator. I have not been asked to do so, but because I am a generous soul and we need the best Bill possible, I will consider whether consultation between the commission and the principal regulator is a sufficient safeguard. Although that is not what hon. Members were complaining about, I think that it is the most important aspect.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

I am following what the Minister says exactly. If the principal regulator thinks that something is wrong, it refers the matter to the Charity Commission, which investigates, and at present when it reaches a conclusion it only has to consult the principal regulator. Is he suggesting that the principal regulator should have a veto over what the Charity Commission says? What happens if the commission says, “We have investigated this, and this is what’s happened, but we don’t think any action should be taken,” but the principal regulator thinks that it should?

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

I do not think that a veto would be appropriate. The precise reason why we are giving the Charity Commission such powers in relation to exempt charities is that it has the expertise to work out what is happening in a charity, and it can do so only if it is commissioned to do so by the principal regulator. In addition, any decision that the commission makes is appealable by the charity concerned to our old friend the charity tribunal. However, I will consider whether the relationship between the commission and the principal regulator is a sufficient safeguard. I hope that that explains the background to the clauses that we are discussing and provides some reassurance on the amendments.

I do not think that amendment No. 98, which was tabled by the hon. Member for Cheltenham, is sensible, because it would remove from the Charity Commission powers relating to exempt charities that might be considered necessary by the principal regulator when it believes that there is a problem with that charity and that the Charity Commission should exercise its powers. I hope that on that basis, and in the spirit of achieving a level playing field, he will feel able to withdraw his amendment.

Amendment No. 99 it not sensible, either. We cannot give two different organisations the same powers over the same charities; that would make for a terrible mess. The amendment would move the powers listed in schedule 5 from the commission to the principal regulator. The problem is that the commission will be best able to inquire into and will have the expertise and resources to work out what is going wrong in a charity, when there is something going wrong, and to put it right. If it is the principal regulator that is to decide to put the commission in control, it is hard to say that the powers to take action should lie with the principal regulator rather than the commission. None the less, as I said, I think that we need to probe whether the commission’s relationship with the principal regulator is correctly drawn to provide the regulator with sufficient safeguards over what the commission does. I shall return on Report with the answer.

I am not sure whether amendments Nos. 92 and 93, which also stand in the name of the hon. Member for Cheltenham, are wise. Amendment No. 92 would remove the Secretary of State’s power to prescribe a principal regulator. I am not sure who would prescribe the principle regulator if the amendment were made, and in fact I fear that the amendment would have no effect, because elsewhere the Bill provides that references to regulations are normally to regulations made by the Secretary of State. It is right to provide that the Secretary of State should be able to say who the principal regulator for an exempt charity should be. I hope that the hon. Gentleman will not press the amendment.

Amendment No. 93 is about the Privy Council, which I do not think is an appropriate body, even as a backstop, for regulating. [Interruption.] My right hon. Friend the Member for Cardiff, South and Penarth (Alun Michael) clearly does not want the responsibility. The Privy Council is an august body. I take the point that we need to ensure that principal regulators are set out for all the different exempt institutions, but giving the power to the Privy Council, which advises Her Majesty, is not appropriate.

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

By confusing each other and sometimes ourselves, we have all demonstrated that this is a very complicated field. The niceties of who regulates whom are not always clear, nor are they set out in the Bill. In the event of an organisation being missed in the regulations that provide for regulators, who would be responsible? Who would be the principal regulator, if not the Privy Council?

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

I believe that the backstop would be the Attorney-General. However, I hope that such circumstances will not arise; I am sure that they will not, given the assiduousness of our officials.

Amendment No. 105 falls prey to the problem that I mentioned earlier: it would give dual powers to the Charity Commission and the principal regulator. However, it would not be sensible for two bodies to have the same powers over the same institution.

Finally, amendment No. 22 deals with Ministers’ ability to amend enactments. Essentially, that is to ensure that principal regulators can properly secure their functions. I should say to the hon. Member for Isle of Wight that clause 13(3) states that

“The compliance objective is to increase compliance by the charity trustees with their legal obligations in exercising control and management of the administration of the charity.”

That is now a job for the principal regulator. The part of the clause that the hon. Gentleman seeks to amend would simply ensure that if a principal regulator does not feel that it has the powers in statute to carry out those functions, we can make a technical amendment to allow it to have the powers set out in clause 13(3) so that it can promote compliance by the charity trustees with their legal obligations. I hope that, on that basis, the hon. Gentleman is satisfied.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

Will the Minister consider adding the words “at the request of the regulating authority”? I am not suggesting that the Government intend to have a coach and horses enactment, but the provision would give the Minister the power to make any change to any enactment, as long as it could somehow be hooked to a regulation. I ask the Minister to reflect on whether some limitation would be helpful.

Clause 13(1) reminds us that a Minister of the Crown can be

“the principal regulator in relation to an exempt charity.”

Will the Minister remind us of one or two of the exempt charities for which a Minister could be a regulator?

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

As always, the hon. Gentleman makes sensible points. I shall take the first one away and consider it.

The hon. Gentleman mentioned Ministers of the Crown. I do not think that I would be the principal regulator in relation to an exempt charity—at least I hope not. However, I shall give the Committee some examples, as the hon. Gentleman makes a fair point. The Qualifications and Curriculum Authority will be the responsibility of the Department for Education and Skills. A number of museums will be the responsibility of the Department for Culture, Media and Sport. The Royal Botanic gardens at Kew will be the responsibility of Ministers at the Department for Environment, Food and Rural Affairs. That generally covers the main areas where Ministers of the Crown will be involved.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

It might be perfectly obvious—if so, I have not found the right place in the Bill—but does that cover charities in England and Wales? What about charities that operate in other parts of the United Kingdom? Is there cross-regulation, duplicate regulation or a lack of regulation?

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

Separate legislation was passed for Scotland in 2005, and charities there will be covered by that legislation.

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

The Minister has made many reasonable statements; he is indeed a generous soul and a reasonable person. He has provided reasonable explanations for each part of the schedule that the amendments would change. The amendments would extend the powers of regulators to protect exempt charities. It seems to me that a dangerous combination of reasonable steps could still lead to an unreasonable outcome. I do not say that there is anything of James II about the Minister, but we have to allow for unreasonable successors or unreasonable Governments taking advantage of legislation. The very purpose of legislation to secure the liberties of bodies such as academic bodies which are a critical part of our democracy. As the hon. Member for Isle of Wight pointed out, their liberties are extremely important.

The Minister says that bodies such as the Higher Education Funding Council and the Department for Culture, Media and Sport may refer institutions that may have a problem under charitable law to the Charity Commission, which will then institute an inquiry. He implied that the commission already had the power to do that. He may intervene on me if I am mistaken, but I believe that section 18 of the 1993 Act does not apply to exempt charities. The specific power to intervene and to suspend a trustee, officer, agent or employee of the charity—it is a very broad power—did not previously apply to universities. A major step is being taken, which I want to remove.

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

I said that such bodies previously had to comply with charity law, but that they were not monitored. I agree that the powers are new. I am sorry to have to ask the hon. Gentleman to be consistent, but consistency is important. Why should such charities not have to comply with the principles of charity law and have the same powers exercised over them if they do not comply as other charities? It takes us back to the NSPCC-Eton issue. Surely, if provision good enough for the NSPCC, it is good enough for our universities.

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

I am grateful to the Minister. I shall return to the matter of level playing fields. I am not sure that the Bill sets out a level playing field for all charities. It certainly sets out different playing fields, and the logic of exempt status is that some bodies should have a different playing field.

It seems to me that if a good rationale can be advanced for treating a body differently, it should be treated differently. The academic freedom of our universities is important and needs to be defended. The Minister has conceded that the potentially draconian powers of section 18 of the 1993 Act did not apply previously to universities but that they will do so under the Bill unless the amendments are accepted.

As the Association for Charities has pointed out, the Charity Commission’s reputation among charities suggests that sometimes the powers can be used, if not abused, to an extent that can be upsetting or distressing and even unfair to many of the participants in charities; indeed, it may cause real grievances to arise. For the  Government to step into that territory with our great universities seems a brave thing to do.

The universities are of course subject to charity law at the moment. Processes are available through the courts to anybody to force their compliance with charity law, but not to remove dons from academic posts. The regulator for the Oxford and Cambridge colleges will be the Charity Commission, not the Higher Education Funding Council for England. We are talking about the Charity Commission not—according to the Minister’s description—having the expertise to step in and look into the administration of charities, but having the expertise to rule on whether an Oxford or Cambridge college is complying with charity law.

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

I do not know where the hon. Gentleman went to university—his defence of Oxford and Cambridge colleges is incredibly passionate—but the proposals are not about removing dons from posts. They are about trustees fulfilling the purposes of the charity and complying with charity law.

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

The Minister is quite wrong. The phrase is a

“trustee, officer, agent or employee”.

It is not simply a trustee who can be removed.

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

It may or may not be in relation to charity law, but the provision still extends that explicit power to Ministers in a way that was not there before. If we have mixed confidence in the Charity Commission’s ability to intervene in charities in the voluntary sector, giving it the power to intervene in colleges will stretch that confidence to breaking point. There is also a concern about a level playing field.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

Perhaps the hon. Gentleman could consider the issue the other way round. Instead of someone trying to require a university or college to do something with a member of its staff, is it not more likely that a university or college might have disciplined or dismissed a member of staff for reasons that somebody else—or even the person concerned—regarded as wrong and in need of challenge, upon which that person, whether the outsider or the insider, would go to the Charity Commission and say, “Will you please investigate?” That is a far more likely occurrence, to which the answer from the Charity Commission or regulating authority would normally be, “That’s an internal affair and it has no charitable effect.” Is that what the hon. Gentleman is worried about?

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

I am grateful to the hon. Gentleman, but I am not sure that that is exactly what I am worried about. As the Minister pointed out, a relevant case would have to relate overtly to charity law, but it is not entirely clear how a particular appointment would apply in that sense.

There is an issue concerning a level playing field. Having an exempt status and different regulators who can regulate with expertise that is appropriate to particular bodies does not necessarily provide a level playing field, but it does at least provide different playing fields for different areas of the new charity law. The logic of that is that those new regulators should not have inappropriate powers. However, the powers  given to the Charity Commission in relation to the colleges of the ancient universities is not appropriate. I shall therefore not withdraw the amendment.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

The Minister repeatedly asserts that the provisions are for the purposes of charity law but the problem is that, for purposes of charity law, the commission or HEFCE can intervene to require an institute to balance its books, for example, which means cutting staff. The commission or HEFCE might say, “Well, if you don’t cut staff, we will—and these are the areas where we will cut them.”

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

It is all very well for the Minister to say that, but if we give powers to organisations without properly constraining them, they will use those powers. They might not intend to use those powers malevolently, but they will use them.

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

The hon. Gentleman is exactly right. We can imagine circumstances, such as those that have previously existed with registered charities, where campaigning activities or publications that might stretch the limits of what is charitable could be considered dangerous by the Charity Commission and where, on the precedent of my experience with Oxfam years ago, those charities could be subject to political pressure. Those are the kind of minefields into the Government are treading with their legislation.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 8.

Division number 6 Nimrod Review — Statement — Schedule 5

Aye: 5 MPs

No: 8 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Schedule 5 agreed to.

Clauses 13 and 14 ordered to stand part of the Bill.