Charities (Protection and Social Investment) Bill [Lords] – in a Public Bill Committee at 7:00 pm on 5 January 2016.

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Question proposed, That the clause stand part of the Bill.

Photo of Rob Wilson Rob Wilson The Parliamentary Secretary, Cabinet Office

You have me working hard this evening, Mr Hamilton.

The clause introduces important new requirements that will greatly increase transparency in relation to a charity’s approach to fundraising. These provisions were added to the Bill in the other place following a series of media exposés of poor fundraising practices in which elderly and vulnerable people were targeted by charities or subjected to undue pressure to donate. Many of those poor practices are completely and utterly unacceptable. It is important to remember that although bad practice has been uncovered, most charities fundraise well. They need to be able to ask people to donate to raise funds, and we should not forget that many do so responsibly and in line with best practice.

The sorts of poor practices that we have seen in the media recently are mainly in the areas of mass marketing fundraising, such as direct mail or telephone fundraising. In these high volume data-driven areas, some charities have been treating donors as a means to an end, rather than focusing on the charity’s relationship with the donor as an individual. The first new requirement under subsections (7) and (8) will ensure that charities put in place explicit safeguards for potential donors when they wish to fundraise through third party contractors.

The provision prohibits a contractor from fundraising for a charity unless the written agreement between the fundraiser and the charity includes standards such as how it will protect vulnerable people from undue pressure and how the charity will monitor the contractor’s compliance. It has become clear that much of the poor practice we have seen over the past year or so occurs when there is a lack of accountability over how charity fundraising is conducted. The new requirement aims to make it absolutely clear that charities are responsible for ensuring that third parties who are paid to fundraise on the charity’s behalf act in a moral, respectful and responsible manner when asking the public for money.

The second requirement under new section 162A will introduce much greater transparency in relation to a charity’s track record in fundraising. It will require charities to publicly disclose information on how they conduct fundraising, whether they subscribe to appropriate self-regulation, and whether any good practice requirements have been breached. They will also need to publicise more details on the number of complaints that they have received, as well as what principles they follow in order to protect vulnerable donors and the wider public from poor practice. That will ensure that high-quality fundraising becomes a board-level issue and returns to the heart of a charity’s operations where it belongs. In that respect, I also warmly welcome the Charity Commission’s new guidance for trustees on their responsibilities to do with fundraising. The new guidance, which is being consulted on, should be a must-read for all trustees of charities that fundraise from the public.

To update the Committee on our progress in strengthening the self-regulation of fundraising, which sits alongside the provisions in the Bill and is arguably more important, not only did we amend the Bill in the other place, but I asked Sir Stuart Etherington to undertake a review of fundraising self-regulation over the summer. He was supported by a cross-party panel of peers. His report, published in September, recommended the establishment of a new, tougher, single self-regulator to oversee charity fundraising with universal coverage, high standards of best practice, stronger sanctions and close links to existing statutory regulators.

The review also recommended the setting up of a fundraising preference service so that people who felt inundated with charity fundraising requests would be able to reset their consent to be contacted. That has proved a popular concept with the public. Taken together, the proposals will provide a strong and comprehensive framework for the self-regulation of fundraising.

We are making good progress on implementation. I appointed Michael Grade, Lord Grade of Yarmouth, to be the interim chair of the new fundraising self-regulator. In December he appointed his interim chief executive, Stephen Dunmore. He also appointed a working party to develop plans to implement the fundraising preference service, led by George Kidd, who has vast experience in direct marketing regulation. In December the largest fundraising charities were invited to a summit, which was streamed live and at which Lord Grade set out his vision for the new self-regulator. The meeting was a success and I left with the impression that the largest charities accepted that things needed to change and were willing to throw their weight behind the new regulator.

Over the next few months Lord Grade’s vision will be turned into reality and we expect to see the new regulator up and running from spring 2016, with the fundraising preference service following shortly afterwards. Most of the largest charities have committed to fund the new self-regulator’s set-up costs and I am sure that the others will soon follow. This is an opportunity for the charity sector to demonstrate its leadership and maturity and to show that it can put its own house in order.

I have every confidence that, with charity support, the new self-regulatory system will succeed and, most importantly, consign poor fundraising practices to history. If the new self-regulatory system were to fail, however, we need a back-up plan, which is where new clause 7 on the Government’s reserve powers to regulate fundraising through statute comes in. I will explain those powers to the Committee in more detail at our next sitting.

Photo of Anna Turley Anna Turley Shadow Minister (Cabinet Office)

The Opposition welcome clause 14 and have tabled no amendments to it. However, it is important and deserves discussion, so I will take some time, with the leave of the Chair, to make a few points.

Due to the clause’s importance and, in particular, because of some of the public exposure that led to it, it is essential to explore some of the issues behind it. It amends section 59 of the Charities Act 1992 and prohibits commercial fundraisers from raising funds for a charitable institution unless the fundraising agreement between the commercial fundraiser and the charitable institution includes certain terms on fundraising standards that the commercial fundraiser undertakes to follow. That is extremely important, because many within and outside the sector have felt that what could be described as the outsourcing of a charity’s fundraising function can perhaps play a part in distancing that process from the charity’s original aims and objectives. People have also felt that the accountability of a charity itself could be somewhat loosened by the outsourcing of fundraising provisions. We therefore think the clause is an important amendment to ensure that a proper agreement is in place setting out a certain number of standards that must be followed.

Clause 14 also amends the Charities Act 2011 by inserting new section 162A, which requires charities whose accounts have to be audited in accordance with section 144(2) of the Act—currently, those with a gross annual income of more than £1 million, or those with a gross annual income of more than £250,000 and assets with an aggregate value exceeding £3.26 million—to set out in annual reports their approach to fundraising, including in particular whether they use commercial fundraisers and how they protect vulnerable people from undue pressure in their fundraising.

It is particularly right that vulnerable people and other members of the public are protected from behaviour that is, in the words of the Bill, an

“unreasonable intrusion on a person’s privacy”,

that consists of

“unreasonably persistent approaches for the purpose of soliciting or otherwise procuring money or other property” and that places

“undue pressure on a person to give money or other property.”

We welcome the transparency and accountability that will come from the inclusion in the annual statement of a charity’s approach to fundraising, whether that activity was outsourced, any failures to comply or any monitoring activity, the number of complaints received and what steps the charity has undertaken to protect people from the behaviours I have set out. Those are important steps to improve transparency and accountability, and it is right that they are part of the Bill.

There is no doubt that 2015 was a seismic year for the charitable sector in terms of fundraising. A raft of difficult headlines and media stories threw into relief the unpleasant practices of a very small minority of charities, but had a hugely and disproportionately damaging effect on the thousands of hard-working, diligent, sensible and cautious fundraising professionals and volunteers in the charitable sector who raise money from people who donate generously to causes that are dear to their hearts. That was a real shame.

It is important to ensure that no one falls below the standards expected of the sector, in order to protect not only citizens—particularly the most vulnerable—but fundraising, which is a vital lifeline for charities, particularly in today’s difficult and austere climate. As Sir Stuart Etherington said in his review:

“Britain is a generous society with a strong tradition of philanthropic action. In turn, there is tremendous, though not inexhaustible, public goodwill towards Britain’s charities. As such, they have a privileged status in society. With this comes a responsibility to live up to the very highest standards. Most charities are conscious of this and strive to work to high standards in everything that they do.”

We support that view and believe that the clause works hard to ensure the sector takes responsibility and strives to reach the high standards set out in the review. Where standards fall short, as has recently happened in the case of some fundraising practices, it is important to ensure that charities and the bodies charged with regulation act swiftly and effectively to restore public trust. As such, we welcome Sir Stuart Etherington’s review and its recommendations.

It is clear that the current arrangements for self-regulation are not working and are complex and badly resourced. We believe the sector will respond accordingly, and I am reassured by the Minister’s update about the positive response from the sector. We also believe that state regulation should be a last resort, where self-regulation has failed. While I welcome the Minister’s update on self-regulation, we look forward to hearing the detail of new clause 7, which sets out a fall-back scenario, should self-regulation fail and we need to take further steps. We believe the clause remains an important part of the Bill and of the broader suite of reforms being undertaken to protect the integrity of charity fundraising.

Photo of Rob Wilson Rob Wilson The Parliamentary Secretary, Cabinet Office 7:15, 5 January 2016

I did not note many questions in the hon. Lady’s speech, but I am grateful for her strong support for the clause. There have been some worries in the sector about the financial burden on charities as a result of the clause. Overall, we estimate the cost to the charity sector to be about £1 million over 10 years, which is marginal compared with the benefits of greater transparency about how charities will safeguard the public from poor practices. That is a very positive investment.

Photo of Thomas Tugendhat Thomas Tugendhat Conservative, Tonbridge and Malling

Having sat through sittings of the Select Committee on Public Administration and Constitutional Affairs and listened to stories of misery from various people, and seen the rapid reaction of the Government on this issue, I would like to pay a little credit to both the Government and the Opposition. They have worked closely together to produce what is a very effective response to the malpractice of various of our charities and what, I hope, will go far in securing the greater confidence that the public have the right to have in our charitable sector.

Photo of Rob Wilson Rob Wilson The Parliamentary Secretary, Cabinet Office

It is very kind of my hon. Friend to make those comments. It is true that the Opposition have worked effectively in the other place and, indeed, in this place. I deliberately set up the Etherington review as an all-party review because I wanted every party to be involved and to have a stake in ensuring we get this right. By and large, the Etherington review, all of whose terms I have accepted, has proved to have produced a very effective report, and we need to get on with implementing all parts of it.

Photo of Robert Jenrick Robert Jenrick Conservative, Newark

I strongly support the changes in the Bill, but I want to press the Minister on the annual statement that the larger charities will have to make about how they conduct their fundraising. One question that it does not seem to ask is what percentage of the public money that is given to charities is spent on funding commercial fundraising operations. I have written to a number of charities on behalf of my constituents to ask that question, and on every occasion they have replied by saying that they cannot provide that information because it is commercially sensitive. The public want that information. They want to know how much of their money is spent on funding commercial fundraising operations, rather than on the charities. I would like that to be either in the Bill or the Charity Commission’s guidelines.

Photo of Rob Wilson Rob Wilson The Parliamentary Secretary, Cabinet Office

I understand what my hon. Friend says, and I believe there would be a level of support among the public for that. There certainly are commercial confidentiality considerations, in the same way as there are for Government contracts, but I will look seriously at what he said and come back to him.

To take that point a little further, there are questions about how extensive the problem of poor fundraising is for charities. The hon. Member for Redcar said that it is a small problem that affects a small number of charities. By and large that is true, but the Fundraising Standards Board received 52,000 complaints in one year, so the activity is deep-rooted. That is why it is important that we introduce these measures and try to do something about it. I believe that these two measures, coupled with the others, will help to stop some of the poor practices. They will ensure that there is oversight and accountability among the trustees and that fundraising is overseen directly.

Photo of Peter Kyle Peter Kyle Labour, Hove

It would be nice if the Minister said how many of the 52,000 complaints that he has mentioned were upheld. For context, we should bear in mind that the charitable sector, despite the very focused challenges in recent months, is still the most trusted sector in society.

Photo of Rob Wilson Rob Wilson The Parliamentary Secretary, Cabinet Office

The hon. Gentleman will have seen in the recent reports that trust has gone down to 2008 levels as a result of some of the stories that have been heavily profiled in the media. The issue is not whether 52,000 complaints were upheld; it is that 52,000 people felt that they had to complain about being inundated with telephone calls or direct mail containing information that, in many cases, they obviously did not want to receive. Clearly, the public are seriously concerned about the targeting of elderly and vulnerable people in particular. I believe we are doing the right thing in introducing these measures and changing the law to ensure that charities are directly accountable for the fundraisers that act on their behalf. They must ensure that those fundraisers act in a proportionate and moral way that reflects the best practices of the charity itself.

Photo of Peter Kyle Peter Kyle Labour, Hove

Does the Minister agree that the trustees of a charity are ultimately responsible for safeguarding the way that money is spent and for upholding the moral activity of the charity?

Photo of Rob Wilson Rob Wilson The Parliamentary Secretary, Cabinet Office

That is exactly what these measures are for. They will ensure that trustees look at the things they should be looking at: how their fundraising is conducted and how it interfaces with the public. The two measures will ensure they do that through the annual report and the contracts that they sign with third parties. It is for exactly those reasons that we are making these changes.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15