Schedule 8

Charities Bill [Lords] – in a Public Bill Committee at 1:30 pm on 13 July 2006.

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Minor and consequential amendments

Amendment made: No. 180, in schedule 8, page 133, line 17, at end insert—

14A (1) Section 5 of the Police, Factories, &c. (Miscellaneous Provisions) Act 1916 (regulation of street collections) is amended as follows.

(2) In subsection (1) for “the benefit of charitable or other purposes,” substitute “any purposes in circumstances not involving the making of a charitable appeal,”.

(3) In paragraph (b) of the proviso to subsection (1) omit the words from “, and no representation” onwards.

(4) In subsection (4) before the definition of “street” insert—

““charitable appeal” has the same meaning as in Chapter 1 of Part 3 of the Charities Act 2006;”’.—[Edward Miliband.]

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

I beg to move amendmentNo. 181, in schedule 8, page 138, line 24, at end insert—

‘Sex Discrimination Act 1975 (c. 65)

In section 21A of the Sex Discrimination Act 1975 (public authorities) in paragraph 14 in the Table of Exceptions in subsection (9), for “Charity Commissioners for England and Wales” substitute “Charity Commission”.’.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss Government amendments Nos. 182, 59 to 61, 63 and 64 and 184 to 187.

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

The group consists entirely of minor or technical amendments.

Amendment agreed to.

Amendments made: No. 182, in schedule 8, page 143, leave out lines 21 to 29.

No. 183, in schedule 8, page 144, line 31, at end insert—

‘91A In section 79 (short title, commencement and extent) omit—

(a) in subsection (6), the words “(subject to subsection (7))”, and

(b) subsection (7).

91B In Schedule 7 (repeals) omit the entry relating to the Police, Factories, &c. (Miscellaneous Provisions) Act 1916 (c. 31).’.

No. 59, in schedule 8, page 144, line 33, at end insert—

‘92A In the heading for Part 1, for “CHARITY COMMISSIONERS” substitute “CHARITY COMMISSION”.’.

No. 194, in schedule 8, page 145, line 32, leave out ‘COMMISSION’S’.

No. 195, in schedule 8, page 146, line 32, leave out paragraph 99 and insert—

‘99 For section 10 substitute—

“10 Disclosure of information to Commission

(1) Any relevant public authority may disclose information to the Commission if the disclosure is made for the purpose of  enabling or assisting the Commission to discharge any of its functions.

(2) But Revenue and Customs information may be disclosed under subsection (1) only if it relates to an institution, undertaking or body falling within one (or more) of the following paragraphs—

(a) a charity;

(b) an institution which is established for charitable, benevolent or philanthropic purposes;

(c) an institution by or in respect of which a claim for exemption has at any time been made under section 505(1) of the Income and Corporation Taxes Act 1988;

(d) a subsidiary undertaking of a charity;

(e) a body entered in the Scottish Charity Register which is managed or controlled wholly or mainly in or from England or Wales.

(3) In subsection (2)(d) above “subsidiary undertaking of a charity” means an undertaking (as defined by section 259(1) of the Companies Act 1985) in relation to which—

(a) a charity is (or is to be treated as) a parent undertaking in accordance with the provisions of section 258 of, and Schedule 10A to, the Companies Act 1985, or

(b) two or more charities would, if they were a single charity, be (or be treated as) a parent undertaking in accordance with those provisions.

(4) For the purposes of the references to a parent undertaking—

(a) in subsection (3) above, and

(b) in section 258 of, and Schedule 10A to, the Companies Act 1985 as they apply for the purposes of that subsection,

“undertaking” includes a charity which is not an undertaking as defined by section 259(1) of that Act.

10A Disclosure of information by Commission

(1) Subject to subsections (2) and (3) below, the Commission may disclose to any relevant public authority any information received by the Commission in connection with any of the Commission’s functions—

(a) if the disclosure is made for the purpose of enabling or assisting the relevant public authority to discharge any of its functions, or

(b) if the information so disclosed is otherwise relevant to the discharge of any of the functions of the relevant public authority.

(2) In the case of information disclosed to the Commission under section 10(1) above, the Commission’s power to disclose the information under subsection (1) above is exercisable subject to any express restriction subject to which the information was disclosed to the Commission.

(3) Subsection (2) above does not apply in relation to Revenue and Customs information disclosed to the Commission under section 10(1) above; but any such information may not be further disclosed (whether under subsection (1) above or otherwise) except with the consent of the Commissioners for Her Majesty’s Revenue and Customs.

(4) Any responsible person who discloses information in contravention of subsection (3) above is guilty of an offence and liable—

(a) on summary conviction, to imprisonment for a term not exceeding 12 months or to a fine not exceeding the statutory maximum, or both;

(b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine, or both.

(5) It is a defence for a responsible person charged with an offence under subsection (4) above of disclosing information to prove that he reasonably believed—

(a) that the disclosure was lawful, or

(b) that the information had already and lawfully been  made available to the public.

(6) In the application of this section to Scotland or Northern Ireland, the reference to 12 months in subsection (4) is to be read as a reference to 6 months.

(7) In this section “responsible person” means a person who is or was—

(a) a member of the Commission,

(b) a member of the staff of the Commission,

(c) a person acting on behalf of the Commission or a member of the staff of the Commission, or

(d) a member of a committee established by the Commission.

10B Disclosure to and by principal regulators of exempt charities

(1) Sections 10 and 10A above apply with the modifications in subsections (2) to (4) below in relation to the disclosure of information to or by the principal regulator of an exempt charity.

(2) References in those sections to the Commission or to any of its functions are to be read as references to the principal regulator of an exempt charity or to any of the functions of that body or person as principal regulator in relation to the charity.

(3) Section 10 above has effect as if for subsections (2) and (3) there were substituted—

“(2) But Revenue and Customs information may be disclosed under subsection (1) only if it relates to—

(a) the exempt charity in relation to which the principal regulator has functions as such, or

(b) a subsidiary undertaking of the exempt charity.

(3) In subsection (2)(b) above “subsidiary undertaking of the exempt charity” means an undertaking (as defined by section 259(1) of the Companies Act 1985) in relation to which—

(a) the exempt charity is (or is to be treated as) a parent undertaking in accordance with the provisions of section 258 of, and Schedule 10A to, the Companies Act 1985, or

(b) the exempt charity and one or more other charities would, if they were a single charity, be (or be treated as) a parent undertaking in accordance with those provisions.”

(4) Section 10A above has effect as if for the definition of “responsible person” in subsection (7) there were substituted a definition specified by regulations under section 13(4)(b) of the Charities Act 2006 (regulations prescribing principal regulators).

(5) Regulations under that section may also make such amendments or other modifications of any enactment as the Secretary of State considers appropriate for securing that any disclosure provisions that would otherwise apply in relation to the principal regulator of an exempt charity do not apply in relation to that body or person in its or his capacity as principal regulator.

(6) In subsection (5) above “disclosure provisions” means provisions having effect for authorising, or otherwise in connection with, the disclosure of information by or to the principal regulator concerned.

10C Disclosure of information: supplementary

(1) In sections 10 and 10A above “relevant public authority” means—

(a) any government department (including a Northern Ireland department),

(b) any local authority,

(c) any constable, and

(d) any other body or person discharging functions of a public nature (including a body or person discharging regulatory functions in relation to any description of activities).

(2) In section 10A above “relevant public authority” also includes any body or person within subsection (1)(d) above in a country or territory outside the United Kingdom.

(3) In sections 10 to 10B above and this section—

“enactment” has the same meaning as in the Charities Act 2006;

“Revenue and Customs information” means information held as mentioned in section 18(1) of the Commissioners for Revenue and Customs Act 2005.

(4) Nothing in sections 10 and 10A above (or in those sections as applied by section 10B(1) to (4) above) authorises the making of a disclosure which—

(a) contravenes the Data Protection Act 1998, or

(b) is prohibited by Part 1 of the Regulation of Investigatory Powers Act 2000.”’.

No. 60, in schedule 8, page 148, line 41, after ‘was”,’, insert—

‘(ba) for “they act” substitute “it acts”,’.—[Edward Miliband.]

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

I beg to move amendmentNo. 104, in schedule 8, page 149, line 14, after ‘manager’, insert

‘(who will otherwise be known as an interim trustee as appropriate)’.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss the following: Amendment No. 106, in schedule 8, page 149, line 14, after ‘manager’, insert ‘or interim trustee as appropriate’.

Amendment No. 107, in schedule 8, page 150, line 6, after ‘manager’, insert ‘or interim trustee as appropriate’.

Amendment No. 108, in schedule 8, page 150, line 11, after second ‘manager’, insert ‘or interim trustee as appropriate’.

Amendment No. 109, in schedule 8, page 150, line 13, after ‘manager’, insert ‘or interim trustee as appropriate’.

Amendment No. 110, in schedule 8, page 150, line 15, after second ‘manager’, insert ‘or interim trustee as appropriate’.

Amendment No. 111, in schedule 8, page 150, line 19, after second ‘manager’, insert ‘or interim trustee as appropriate’.

New clause 3—Reasons for appointing an interim manager of a charity—

‘In section 19 of the 1993 Act, after subsection (1), insert—

“(1A) Within seven days of an appointment under subsection (1), the Commission must communicate in writing to—

(a) the persons who are or claim to be the charity trustees of the institution concerned; and

(b) (if a body corporate) the institution which is the subject of such an appointment; the reasons why they consider such an appointment necessary and appropriate.”’.

New clause 4—Remuneration of an interim manager of a charity—

‘In section 19 of the 1993 Act—

(a) in subsection (5) leave out “the charity concerned” and insert “the commission”;

(b) in subsection (6) leave out “out of the income from the charities concerned” and insert “by the commission”.’.

New clause 5—Amendment of section 19 of the 1993 Act—

‘Section 19 of the 1993 Act in subsection (3) is amended by inserting after “as they think fit”, the words “, who may, where appropriate to the size of the charity and expertise required by the charity, act in a voluntary capacity.”’.

New clause 9—Appointment and payment of the Receiver and Manager—

‘(1) In section 19(1) of the Charities Act 1993, at end insert “subject to a public tender exercise conducted in line with best practice from the Office of Government Commerce.”

(2) In section 19(6)(b) of the Charities Act 1993 (c. 10), after “the income of the charities concerned”, insert “subject to a public tender exercise and up to a sum agreed in such an exercise, any additional costs to be met by the Commission.”’.

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

Amendment No. 104 is extremely important. It deals with an issue about which much concern has been expressed by certain charities: the title of receiver and manager that is used when the Charity Commission steps in and changes a charity’s administration.

Receivers and managers have a very wide remit, and the proposed title of interim manager is a misleading one. Only a small proportion of receivers and managers who have been appointed have had the kind of narrow remit to which the term “interim manager” might be appropriate. Using the Freedom of Information Act 2000, the Association for Charities has obtained details of 51 receiver and manager appointments between 1993 and the end of June 2005. The vast majority of those appointments excluded trustees: in effect, the existing trustees were taken out of the charity’s administration and the temporary receiver and manager was inserted. To all intents and purposes that is an interim trustee appointment.

The importance of the phraseology is twofold. First, it makes the real status of such persons clear, and removes the confusion that has undoubtedly existed in the past, sometimes among trustees and former trustees of the charity and sometimes even among the receivers and managers, if the evidence from the Association for Charities be believed. The association has even cited evidence of confusion among commission staff. Secondly, and perhaps more important, is the message that is sent to people who support the charity. In any circumstances, beneficiaries’ interests are best served by an organisation that is properly administered, either by the original trustees or by an interim receiver and manager, and that can carry on its legitimate charitable activities with the maximum possible funding. That depends absolutely on public confidence and often depends also on continuing public donations. If the public are told that a receiver, or even an interim manager, has been appointed, a confusing signal is sent that might cast doubt over whether the charity is in crisis, and that doubt might deter them from donating. The term “interim trustee” is much less value-laden and much less threatening.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

Many members of the Committee have had the chance to read the schedule produced by the Association for Charities, but will the hon. Gentleman tell us for how long, on average, such people remain in post? Will he confirm whether any of them were appointed because there was not a crisis?

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

I cannot answer the hon. Gentleman’s first question. I am sure that most receivers and managers were appointed because of real concerns, and even the Association for Charities document cites cases that I would describe as being arguable either way. In some cases, there are legitimate arguments for the commission having to intervene. However, that does not mean that it is right unnecessarily to damage public confidence in a charity, especially since, if the commission is really worried about how it is being administered, the very act of appointing a receiver and manager is done with the intention of bringing the charity back into line. The idea is that it will then be properly administered and that the receiver and manger will continue to administer it in the best way possible.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East 1:45, 13 July 2006

The hon. Gentleman is eloquently making the case for the title of “interim trustee”. However, I am worried that the use of “trustee” might confer additional legal responsibilities for the organisation that people would not be willing to accept, especially financial responsibilities. While it sets the right tone, is there not a tight legal definition of a trustee? It would cause confusion.

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

That is a valid point, but if the existing trustees have been displaced and excluded, which is what has happened in the majority of cases, the person appointed to be the receiver and manager, interim manager, or interim trustee—whatever we call him—might be taking on the legal responsibilities of trusteeship and certainly the responsibility to comply with charity law that applies to the trustees who have been excluded. I cannot see who else would take on that responsibility in such circumstances.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

The hon. Gentleman seems to be asserting, as I believe the Association for Charities does, that we cannot have a charity without trustees and that the most senior person who appears to be administering the charity becomes the trustee, whether they want to or not, for the charity’s purposes and its resources. Therefore, an interim whatever is a trustee in law even if he did not intend to be.

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

The hon. Gentleman may well be right, although I am not necessarily asserting that the individual becomes a trustee. My legal qualifications are not such that I could say whether the person would become a trustee in law, but in that appointment he would certainly seem to carry the responsibilities of a trustee and, thus, be acting as if he were a trustee. That is why the amendment is sensible. It would protect the interests of beneficiaries by maintaining public confidence in the charity and stop the confusion and dispute over the role of receivers and managers that has been present in the past.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I am pleased to support the amendment. The role of the proposed interim manager, who has hitherto been called the receiver and manager, needs to be bottomed out and made more clear in respect of  when the trustees are removed or when that individual has power to override them. That is clearly the purpose of such an appointment. To be neutral for a moment, if a chief executive is appointed to a charity and that person either has the practical power to override the trustees or the commission removes the trustees and leaves a gap before appointing new trustees, someone must have legal responsibility for the trust. Whether or not my assertion is correct that that person takes on that responsibility under law, he does so in practice. That cannot be gainsaid. It seems absolutely correct that we should make it clear that that person is an interim trustee or perhaps even the interim trustee.

I am worried about the practice of the appointment of interim mangers and trustees. Before I speak to the new clauses, I should say that amendments Nos. 106 to 111 are merely consequential on amendment No. 104. I am anxious about three aspects of the appointment of trustees or interim managers, each of which is neatly covered by my new clauses.

First, the charity trustees or corporation—if the charity is incorporated—must be notified in good time of the reasons for the appointment, otherwise it will be impossible for them to appeal against it. Apart from anything else, that is good practice, common sense and a courtesy. Furthermore, they will be unable take advantage of the tribunal if they do not know the reasons for the appointment. I suspect that unless that requirement to notify is placed in the Bill, or the commission makes an undertaking that it will always do so, there will be lots of appeals to the tribunal.

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

I am the bearer of good news. That has been placed in Bill following a debate in another place. Paragraph 108 of schedule 8 inserts a new section into the Charities Act 1993 to achieve precisely that purpose.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

The sun has indeed got his hat on—hip, hip hooray.

New clause 4 deals with my second concern—the remuneration of trustees. My hon. Friend the Member for Worthing, West referred to appendix 2, which I think was circulated to all members of the Committee. It is headed “appendix 2”, but I am not clear on what it is an appendix to. However, it is the outcome of a list of appointments of receivers and managers over the period from 1993 to 2004. It runs to seven or eight pages and covers the appointment of 51 receivers and managers.

The problem is that such people have to be paid. A bigger problem is that they can be paid, and usually are, by the charity on the orders of the commission under the 1992 Act. When I list the first page of the companies that furnish those trustees, hon. Members will be able to imagine the sort of the sums that we are talking about. The list reads as follows: Coopers and Lybrand, Coopers and Lybrand, Arthur Andersen, Arthur Andersen, Coopers and Lybrand, KPMG—then there is one that I have never heard of—BDO Stoy Hayward and Coopers and Lybrand. That is just the first page. Those are big companies that cost a huge amount to retain, as the Government know because they do it all the time. When such companies are appointed to run small charities—or indeed large ones—they inevitably rack up huge bills.

Sadly, the freedom of information search found only about seven or eight examples in which the commission retained sufficient information to tell the researcher how much it had spent on the 51 receivers and managers. In one case the figure was £129,000 for six months, in another £87,000 for nine months, in another £393,000 for four months’ work—these are KPMG rates—and in a further case the figure was £72,000 for five months’ work. All those sums were paid for by the charity.

I accept that we cannot measure the work of a big company such as KPMG solely by the time that elapses between its appointment and its discharge. I am sure that in many cases such companies do not do much for part of the time and that they do not charge for those periods. However, those are huge sums to charge small charities. I am concerned to read that in at least one case—the Little Gidding Trust case—the commission refused to appoint a receiver and manager whenthe trustees requested that it do so, because the commission believed that the charity did not have liquid funds with which to pay the receiver and manager. That is not the Charity Commission working in the best interests of the charity. I propose therefore in new clause 4—this is fundamental—that the commission and not the charity should meet the regulatory cost.

New clause 5 emphasises that. I cannot see a single person in the list of 51 who is a volunteer. I shall let other Committee members into a secret, Mr. Gale, of which you might be aware: for many years, whenever there was a row in a Conservative association, the professional staff in the Conservative central office had to spend hours trying to sort it out. [Interruption.] Of course there were lots of rows, as I am sure there are in other parties as well. Recently, that has been changed. Professional staff in central office now spend their time campaigning or assisting people in campaigning—in some cases, not as effectively as we might like, but never mind; that also is true for all parties—while the senior volunteers spend their time trying to sort out the rows. I see no reason why the commission should be wedded to appointing hugely expensive international firms of consultants, for that is what they are.

Helen Goodman (Bishop Auckland) (Lab) indicated assent.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

The hon. Lady nods. I hope that she will not mind my drawing attention to it. Such consultants are hired to sort out problems that could well be solved using the common sense of an experienced volunteer.

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

On a point of order, Mr. Gale. I was advised earlier that we could speak more than once during debate on a clause.

Photo of Roger Gale Roger Gale Conservative, North Thanet

Order. The hon. Gentleman is absolutely right. It is customary, after the two Opposition Front-Bench spokesmen have spoken to their amendments, to hear from the Minister. If the hon. Gentleman wishes to contribute further before the Minister responds, he may do so.

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

I am extremely grateful for your indulgence, Mr. Gale. I apologise that I neglected to address new clause 9, which stands in my name and has been grouped with amendment No. 104.

New clause 9 is relevant to the remarks made by the hon. Member for Isle of Wight on new clause 4, because the two offer alternative approaches to the possibility that the cost of receivers and managers, interim managers, trustees or whatever they will end up being called will run out of control. I have a lot of sympathy with new clause 4, and the sums that the hon. Gentleman recited sound extremely high, but it is unreasonable simply to say that the Charity Commission should always bear the cost of sorting out the problems of a charity that has, legitimately or not, been put into such a situation.

The most alarming thing about the Association for Charities report, although I cannot find the page that gives chapter and verse, is that in some cases the original estimated cost of the receiver and manager, and therefore the basis on which the contract was awarded, was exceeded by a huge proportion—six or seven times, if I am right. In such circumstances, there is a legitimate reason for the commission to bear at least the cost of any surplus over what was originally intended.

New clause 9 would address the problem by saying that a proper public tender exercise must be conducted in line with best practice from the Office of Government Commerce, which I am sure is very good indeed. If a cost has been estimated to the receiver and manager, there would therefore be some onus on them to limit costs and a direct interest for the commission in restricting excessive costs among the receivers and managers that it appoints, because it will run the risk of bearing the costs if they are excessive.

Regrettably, I cannot support new clause 4, but I invite the hon. Member for Isle of Wight to support new clause 9. If the opportunity arises, I shall press it to a Division.

Photo of Roger Gale Roger Gale Conservative, North Thanet

The hon. Gentleman has indicated that he would like to force a Division on new clause 9 when the appropriate moment arrives, and the hon. Member for Isle of Wight indicated that he wished to press one of his amendments. If he does, he had better tell me now, or it will not be moved.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

That was merely a way of finishing a speech, Mr. Gale. I apologise for misleading you.

Photo of Ed Miliband Ed Miliband Parliamentary Secretary (Cabinet Office) 2:00, 13 July 2006

The amendments are important, but I disagree with them. None the less, I hope to offer some words of reassurance.

Amendment Nos. 104 and 106 to 111 are all about the name “interim manager”. It is precisely because of the debate in another place that we have changed the name from “receiver and manager” to “interim manager”, because it was considered in that the name “receiver” would conjure up inappropriate images. Interim managers are appointed only after an inquiry has found misconduct or has found that property is at risk—appointment is not a trivial matter. Last year, there were only two cases of appointment of an interim  manager among all the charities in Britain. Appointment of an interim manager is both a serious and an unusual occurrence.

I do not think that the name “interim trustee” would be appropriate. It is true that interim managers sometimes assume the whole of the trustee’s responsibilities, but on occasion they assume only part of those responsibilities. It would be incredibly confusing for there to be both an interim trustee—whom we propose to call the interim manager—and a group of trustees who would continue to fulfil some of their charitable functions. An interim manager might, for example, assume responsibility for the charity property, with operations remaining in the jurisdiction of the trustees. The solution proposed by the amendment was potentially ingenious, but it would lead to confusion.

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

I understand the point that my hon. Friend makes, and it is a powerful one. The point of the amendment would be to clarify the function being undertaken. However, although it cannot be dealt with now, is there a case for a title such as “interim trustee” to be used when all the trustees’ functions are being taken over, rather than only part? That should not be decided on the hoof, but will my hon. Friend reflect on it?

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

I shall, but my first impression is that my right hon. Friend’s suggestion might lead to even further confusion. An interim trustee would be appointed if he were going to run the whole charity, whereas an interim manager would be appointed if only part of the charity were going to be run under his jurisdiction. I am not sure that that would convey the message that we want to convey, though I appreciate that the suggestion is an ingenious one.

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

Would the Minister be moved in his position by the opinion of counsel that was obtained by the Association for Charities? That concluded:

“For practical purposes, therefore, an R and M has the same powers as the trustees whom he displaces, whether the displacement is in whole or in part, albeit that he exercises them under the Commission’s supervision.”

Does the Minister therefore accept that the confusion already exists, or at least that legal differences of opinion already exist? The suggestion made by the right hon. Member for Cardiff, South and Penarth (Alun Michael) has a lot to recommend it.

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

I do not agree. The legal opinion might be right, but that does not detract from the fact that trustees continue to fulfil part of the functions in the case of at least some interim manager appointments. To give the interim manager the name “interim trustee” would suggest that the trustees no longer had any powers over the organisation.

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

The evidence obtained by the Association for Charities under the freedom of information legislation suggests that that is exactly what is happening in the majority of cases—the existing trustees are excluded.

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

The question is not about the majority of cases—we are trying to deal with all cases. The question is whether the term “interim trustee” would be appropriate in all cases, and the problem is that it would not be appropriate. Where would that leave the original trustees who are continuing to carry out functions? It is all very well the hon. Gentleman saying that my right hon. Friend’s suggestion is correct—it is ingenuous—but I am not sure what it would achieve.

In the most serious cases, we would have an interim trustee appointed where all the powers were being taken over. In the cases seen as less serious, we would have an interim manager appointed with trustees continuing to exercise some functions. If the hon. Gentleman’s concern is that the notion of “interim manager” is an unfortunate term—because it suggests a gravity that he thinks is inappropriate—it does not meet his purpose to apply it to what might be seen as the less serious cases.

Several Hon. Membersrose—

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

I have a wealth of options before me, but let me carry on with the hon. Gentleman.

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

The suggestion of the right hon. Member for Cardiff, South and Penarth is more ingenuous than he realises. In the less grave situations, charity trustees would still be in position. Therefore, the damaging impression would not necessarily be there. It is only in the case in which the charities are completely excluded that the greatest risk to public reputation is present.

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

I am not sure that I follow that point but let me give way to the hon. Member for Isle of Wight.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I think that the Minister is construing this amendment slightly too sharply because it actually refers to

“’(who will otherwise be known as an interim trustee as appropriate)’.”

In other words, if someone has responsibilities of trusteeship, he is known as an interim trustee. If he does not, he is not known as that. That was the intention of amendments Nos. 106 to 111.

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

I fear that we are beginning to dance on the head of a pin. I understand the point being made. My point is that that is an unusual case; it happened twice last year. Let us have one name covering the appointment of those individuals. To have different names for the same individual, albeit exercising powers that are slightly different in whole or in part, will add to the confusion that hon. Gentlemen say that they want to clear up.

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

My hon. Friend is engaging precisely with the matters before us. I understand his wish not to make a change that might end up being more, and not less, confusing. He is right to attempt to achieve that. However, if there is a lack of clarity about what the  responsibilities are in all cases and if there are two functions, one taking over the full trusteeship—[Interruption.]

Photo of Roger Gale Roger Gale Conservative, North Thanet

Order. If hon. Members wish to discuss matters with staff, they must do outside the Committee room.

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

If an individual comes in under those powers and takes over all the responsibilities of trustees, that ought to be clear in common-sense language to people outside. If that individual is taking over only a specific area, such as protection of property, that also ought to be clear because the trustees are still in place. I suggest to my hon. Friend the Parliamentary Secretary that he may be right—that defending what is in the Bill is the right course to take. However, it would be sensible to reflect on the available options and try to achieve terminology that is clear to the general public.

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

One thing that will add to the confusion is that the trustees always remain in office even if their functions are given to the interim manager. However, I will reflect on what my right hon. Friend says.

I do not think that there is an issue that needs to be cleared up because the substantive issues about interim managers are not really about the name, but about the costs, as raised by the hon. Member for Isle of Wight. They are about the ability to review both their appointment and continuing appointment, as raised earlier—very passionately—by the hon. Member for Cheltenham. I want to deal with that briefly, and I hope that that will provide some reassurance.

Earlier in our deliberations, the hon. Member for Cheltenham engaged in a protracted discussion with me about the extent to which the appointment of the interim manager and that person’s continuing presence in office was reviewable. I undertook to come back to him with the Charity Commission’s guidelines on how often it reviews the continued appointment of the interim manager and how often that decision can be reviewed. I can tell the hon. Gentleman that new, internal guidelines are being prepared and they will be implemented by the commission in the coming months. That will ensure that there is a gap of not more than two months in the process of reviewing the appointment of interim managers and, on each occasion, those decisions will be appealable to the charity tribunal. I know that he was worried about ensuring that there was proper scrutiny of the continuing presence in office of an interim manager and I hope that he will be reassured by what I have said.

I hope that I have answered the point about new clause 3 in my intervention on the hon. Member for Isle of Wight. Indeed, he concluded that the sun was shining as a result of it. New clause 4 is about who pays for the interim manager. I am sympathetic to the hon. Gentleman’s argument about the costs and nature of interim managers, and the impact that that could have. I reiterate that it is an unusual occurrence, but that is not to say that the costs that he described are large. Big sums are often at risk and liabilities are potentially  incurred by an individual, as part of a corporate body, going in to sort out an organisation. Such people would need proper insurance to cover them, which partly explains why large, professional bodies tend to be involved.

Photo of Rob Flello Rob Flello Labour, Stoke-on-Trent South

Will my hon. Friend note the wider issue in respect of receiver’s fees? They have been extremely high in simple cases that are not associated with charities.

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

That is an important point that should be noted by the Committee.

In partial reassurance to the hon. Member for Isle of Wight, the hon. Member for Cheltenham explained why it is right in most cases for the charity concerned to bear the cost of the appointment of an interim manager. The commission can, however, in exceptional cases—it has done so recently—agree to pay the costs itself. As for new clause 5, it is already the case that receivers and managers may work for nothing. It is just that none of them chooses to do so. I hope that I have reassured the hon. Gentleman about that.

There are two aspects to new clause 9 tabled by the hon. Member for Cheltenham, the first of which is a sum being agreed in advance and who should meet the additional costs. There is a real danger in a public tender exercise. At present, the commission appoints from a panel, but a widely publicised public tender exercise would do more reputational damage to a charity than the current system of appointing from a panel.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I am sure that the Parliamentary Secretary is aware that the panel is sometimes appointed by public tender. That does not involve naming each individual charity that it might be called on to serve in the future. Is that the practice?

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

That may be right. I will happily look at the matter but I am not convinced that there is not a perfectly good system in place at the moment. I undertake to talk to the commission about how it chooses its panel and whether, tying together the comments of the two hon. Gentlemen, there is a sufficiently wide range of candidates that can come forward.

On the second part of the amendment, for the same reasons that the hon. Member for Cheltenham answered the hon. Member for the Isle of Wight about the costs being borne by the charity concerned, it would be difficult to say in advance before one has gone into the organisation to work out the full extent of its problems and difficulties that a certain sum must be the limit of how much the interim manager is paid. I take the points about cost control that have been made across all sides, and I will go back to the commission from the debate and I am sure that it will be listening and reading the transcript of our proceedings and hearing the Committee’s concern, but it is not practical to decide in advance how much those costs would be  and essentially make the commission bear any additional cost. With that explanation I hope that I have satisfied the Committee.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs) 2:15, 13 July 2006

I am reassured by some of the Minister’s statements and certainly by his intention to go back and talk to the commission. He mentioned both the role of receivers and managers and possibly considering the suggestion by the right hon. Member for Cardiff, South and Penarth; to look at the excessive costs being run up on occasion by people in the position of receiver and manager and in future of interim manager or trustee, as we decide.

I think that he is being slightly optimistic, however. First, he said that this happens only once or twice a year. If that is true in the past 12 months, that is atypical, because as I mentioned earlier, the Association for Charities obtained the total list of appointments between 1993 and 2004 and in some years five or six such appointments were made. It is sometimes much more common than he suggests in his remarks.

It is a matter of legitimate concern among charities, particularly among smaller charities that are growing and developing and are possibly subject to scrutiny because some of the practices that they may have indulged in may not conform always to best practice. It might be a legitimate concern for the Charity Commission that in practice the appointment of the receiver and manager can end up doing more harm than good, and on occasion lead to the closing down of the independent charity.

While I take the Minister at his word on his good intentions to talk to the commission, I am still minded to press new clause 9 in particular to a vote to ensure that there is a clear incentive for both the appointed receivers and managers and for the commission to minimise those excessive costs.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

I think that the hon. Gentleman has picked the right new clause to press if he is going to press one, but we all recognise that the Charity Commission is not part of the debate while it might agree with one or two of the things that the association has said; for example, in one case the receiver manager found poor financial controls and record keeping, inability of trustees to work together, inadequate charitable activity, the absence of a definitive membership list, which had apparently been remedied, and the unconstitutionality of some trustee appointments. I think that people who were complaining about the Charity Commission accept the criticism that the charities were broadly just. He has picked the right new clause.

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

I am grateful for that generous intervention by the hon. Member for Worthing, West. He makes a legitimate point that we are not here to challenge the concept of appointing something equivalent to a receiver and manager or an interim manager in principle. Obviously in many cases that will be necessary and as I said in many of the cases presented by the Association for Charities the case is certainly arguable and I can see the argument on both sides.

However, as he suggested I am going to press new clause 9 to a vote. I beg to ask leave to withdraw amendment No. 104.

Amendment, by leave, withdrawn.

Amendment made: No. 61, in schedule 8, page 149, line 16, at end insert—

‘(za) for “they have” substitute “it has”,’.—[Edward Miliband.]

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I beg to move amendment No. 51, in schedule 8, page 155, line 6, after ‘charity’, insert

‘but so that the requirements of such regulations shall be the minimum commensurate with the need to ensure that the statement of accounts provides a true and fair view of the charity’s financial position’.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss the following amendments: No. 52, in schedule 8, page 155, line 7, after ‘made,’, insert ‘or—

(c) for more than one type of statement to be prepared to reflect the differing natures and sizes of different charities,’.

Government amendment No. 62

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

These are simple amendments. Amendment No. 52 would require that those setting regulations for charities’ accounts be able to prescribe more than one statement

“to reflect the differing natures and sizes of different charities.”

Amendment No. 51 would provide that

“the requirements...be the minimum commensurate with the need to ensure that the statement of accounts provides a true and fair view of the charity’s financial position”.

Again, that is designed to put SORP into context, which at present it appears not to be, and to reflect more clearly the capacity of different charities to do things differently.

Some charities—I wish this were in the UK—of the character of the Bill Gates Foundation, but not of its size, need do no fundraising at all. All they do is disburse moneys. There is no need for them therefore to have the same accounting requirements as, say, a large charity that depends a great deal on fundraising.

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

I am grateful for the hon. Gentleman’s comments on the matter, but I am slightly confused. It seems to me that the advantage of SORP is its universality. Even if the declared fundraising costs are nil, there is a huge virtue in everyone following the same standard. However, in the interests of work-life balance and the time of day, I shall restrict my comments to that.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West

A friend of mine essentially leads the trusteeship of a significant charity, and was amazed when approached by someone from the Charity Commission and asked, “Why aren’t you trying to raise more money?” She replied with the point that my hon. Friend made, “Actually, the job of our trusteeship is to spend the money that it has got, and is perfectly adequate for the purposes for which it was established. We do not want to be told to raise money, if we decide that we do not need to”. A degree of sensitivity would be worthwhile. I am sure that the Charity Commission  is capable of distinguishing between charities that raise money and those that do not. It should not be telling people which of the two they should be doing.

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

First, let me deal with my amendment in this group. Essentially, it is a minor amendment consequent on the conversion from “Commissioners” to “Commission”.

I am afraid that the hon. Member for Isle ofWight gets no stars for his two amendments, uncharacteristically. Amendment No. 52 is unnecessary because section 86 of the 1993 Act, which applies to all regulation under this Bill, allows already for the Secretary of State to make provision for different cases. Indeed, current regulations do exactly that.

I understand the hon. Gentleman’s intention behind amendment No. 51, but I do not think that it is fit for purpose—to use the current parlance—because it would be placed in a paragraph dealing specifically with requirements on settlor trusts. I am sure that it is not his intention, but the amendment would essentially introduce a new “true and fair” yardstick for settlor trusts and their statements of accounts. That would introduce SORP into a part of the law applicable only to settlor trusts, and a whole new raft of accounting standards for settlor trusts, which I am sure is not the deregulatory intent for which he wishes to be famous.

The other thing about it is that paradoxically, it would introduce new requirements relating to settler trusts but would also, by using the phrase “minimum commensurate”, relax the obligations. It would not require settler trusts to comply with more general regulations relevant to all charities—for example, by disclosing the salaries of a charity’s highest paid employees.

I am afraid that this is comprehensively a no-stars amendment. I hope that the hon. Gentleman will withdraw it.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

That is the sort of mark that I would have given it as well. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 62, in schedule 8, page 156, leave out lines 39 and 40 and insert—

‘(c) for “the Commissioners so request, be transmitted to them” substitute “the Commission so requests, be transmitted to it”, and’.

No. 63, in schedule 8, page 158, line 9, at end insert ‘, and

(c) for “they may” substitute “it may”.’.

No. 64, in schedule 8, page 164, line 41, at end insert—

‘(2A) Omit—

(a) in the definition of “exempt charity” in subsection (1), the words “(subject to section 24(8) above)”, and

(b) subsection (4).’.

No. 184, in schedule 8, page 165, line 7, at end insert—

‘(ba) in the definition of “institution”, after ““institution” insert “means an institution whether incorporated or not, and”.’.

No. 196, in schedule 8, page 165, line 15, at end insert—

‘169A In section 100(3) (extent) for “Section 10” substitute “Sections 10 to 10C”.’.

No. 185, in schedule 8, page 169, line 32, at end insert—

‘Constitutional Reform Act 2005 (c. 4)

In Part 3 of Schedule 14 to the Constitutional Reform Act 2005 (the Judicial Appointments Commission: relevant offices etc.) after the entries relating to section 6(5) of the Tribunals and Inquiries Act 1992 insert—

“President of the Charity Tribunal

Paragraph 1(2) of Schedule 1B to the Charities Act 1993 (c. 10)”.’.

Legal member of the Charity Tribunal

Ordinary member of the Charity Tribunal

No. 186, in schedule 8, page 169, line 32, at end insert—

‘Charities and Trustee Investment (Scotland) Act 2005 (asp 10)

The Charities and Trustee Investment (Scotland) Act 2005 has effect subject to the following amendments.

In section 36(1) (powers of OSCR in relation to English and Welsh charities)—

(a) for “Charity Commissioners for England and Wales inform” substitute “Charity Commission for England and Wales informs”,

(b) for “under section 3” substitute “in accordance with section 3A”, and

(c) for “section 3(5) of that Act,” substitute “subsection (2) of that section,”.

In section 69(2)(d)(i) (persons disqualified from being charity trustees)—

(a) at the beginning insert “by the Charity Commission for England and Wales under section 18(2)(i) of the Charities Act 1993 or”, and

(b) for “under section 18(2)(i) of the Charities Act 1993 (c. 10),” substitute “, whether under section 18(2)(i) of that Act or under”.’.

No. 187, in schedule 8, page 169, line 32, at end insert—

‘Equality Act 2006 (c. 3)

(1) The Equality Act 2006 has effect subject to the following amendments.

(2) In section 58(2) (charities relating to religion or belief)—

(a) for “Charity Commissioners for England and Wales” substitute “Charity Commission”, and

(b) for “the Commissioners” substitute “the Commission”.

(3) In section 79(1)(a) (interpretation) after “given by” insert “section 1(1) of”.’.—[Edward Miliband.]

Schedule 8, as amended, agreed to.