Reserve powers to control fund-raising

Charities (Protection and Social Investment) Bill [Lords] – in a Public Bill Committee at 12:00 am on 7 January 2016.

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‘(1) The Charities Act 1992 is amended as follows.

(2) In Part 2, after section 64A (reserve power to control fund-raising by charitable institutions) insert—

“64B Reserve power in relation to fund-raising regulators

(1) Regulations under section 64A may, in particular, impose on charitable institutions requirements to do any of the following—

(a) to comply with requirements imposed by a regulator;

(b) to have regard to guidance issued by a regulator;

(c) to be registered with a regulator for the purpose of its regulation of charity fund-raising.

(2) “Regulator” means a body specified in the regulations as a regulator for the purposes of this section.

(3) A body may be specified as a regulator for the purposes of this section only if the regulation of charity fund-raising appears to the Minister to be a principal function of the body.

(4) A body maintained out of money provided by Parliament may not be specified as a regulator (and this section does not confer power by regulations to establish a body to act as regulator).”

(3) In Part 2, after section 64B insert—

“64C Reserve power to confer additional powers on Charity Commission

(1) In the case of charity fund-raising which—

(a) is carried on by a charity, a person managing a charity or a person or company connected with a charity, or

(b) involves soliciting or otherwise procuring funds for the benefit of a charity or a company connected with a charity, or for charitable purposes,

regulations under section 64A may, in particular, make provision conferring functions on the Charity Commission, including provision applying or reproducing, with or without modification, any provision of the Charities Act 2011.

(2) The regulations may provide for a power that is exercisable by the Commission by virtue of the regulations to be exercisable by a person appointed by the Commission for the purpose.”

(4) In section 64A(2) after “this section” insert “and sections 64B and 64C”.

(5) In section 77(4) (regulations and orders) at the end insert “and, in the case of regulations made by virtue of section 64B or 64C, shall in particular consult the Charity Commission.””.’—

This is a new clause to extend the existing reserve power to regulate charity fund-raising (in s.64A of the Charities Act 1992). If exercised, the power could require mandatory registration and compliance with a specified fund-raising regulator or for fund-raising regulation to be carried out by the Charity Commission.

Brought up, and read the First time.

Photo of Rob Wilson Rob Wilson The Parliamentary Secretary, Cabinet Office 11:30, 7 January 2016

I beg to move, That the clause be read a Second time.

May I begin by congratulating you, Mr Hamilton, on your promotion to a shadow foreign affairs post? I know that you will put your enormous experience to good use on behalf of your party.

Most people will be familiar with the issues surrounding charitable fundraising by large charities that surfaced last summer, and which I referred to in some detail in relation to clause 14. As I said, I accepted Sir Stuart Etherington’s recommendation to give charities a final chance to make the self-regulation of fundraising work. The new system has my complete support, and the public are eager to see improved fundraising and signs that charities are listening to and acting on their concerns. It is now up to the sector to make the improved system of self-regulation work in a timely and effective manner, and I will keep a close eye on the progress being made.

Charities rely on the generous charitable giving and voluntary work of the British public and so need to deliver on the public’s expectations; otherwise, we must be prepared to step in and act. I do not want to have to do that, but I want to be prepared in case it becomes necessary. Public trust and confidence in charities has already been rocked because of the poor practice uncovered last summer. In a survey last year, only 48% of people—less than half—said that they trusted charities. A more recent survey found that 76% of the public wanted tougher regulation of charity fundraising. We cannot allow further damage to public trust, which is why it is imperative that we have the right tools to act if it becomes clear that the new system is not sufficiently supported by charities. For that reason, I propose an amendment, through new clause 7, to the existing reserve powers in the Charities Act 1992. This will act as a safeguard should self-regulation fail.

Proposed new section 64B of the 1992 Act will extend existing powers in relation to fundraising regulation to compel charities to comply with the requirements and guidance imposed by the fundraising regulator. It will also allow the Government to require charities to be registered with a body for the purpose of regulating charitable fundraising. Under this provision, Ministers will have the discretion to mandate with the regulation of charity fundraising any body whose principal function appears to be in line with that purpose. The provision makes it clear that that may not be a body maintained out of money provided by Parliament. That will be the case with the new fundraising regulator currently being established by Lord Grade of Yarmouth, the interim chair, and Stephen Dunmore, the interim chief executive, which will be funded by the sector itself.

Most of the largest charities have already committed to registering with the new body once it is established, and I am sure that any charity showing initiative and commitment in that way will be a welcome sign to both the public and Parliament. However, should any charities be found to be dragging their heels, this power could be used to compel them to register with the fundraising regulator. It could be used as a first statutory step should charities prove insufficiently proactive in their support of the new self-regulatory system.

Self-regulation will not work if charities decide to wait and see what the finished system looks like before pledging their support. It would be starved of both the necessary mandate and the financial resources even to begin its work. This power will therefore be a vital safeguard to ensure that self-regulation is given a proper chance to succeed. If needed, the power would further act as an early warning sign to charities, flagging it up to them that they are falling behind the expectations that the public, Parliament and the Government have of what is necessary to make self-regulation work. I would challenge any fundraising charities and, in particular, large, sector-leading charities that did not sign up to the new self-regulator to consider their obligation to safeguard the public and their trust in charities more generally. It would certainly be a poor reflection on what is largely a dedicated, compassionate and well-run sector if the Government were forced to invoke this power. However, I will not hesitate to do so if that becomes necessary.

The new clause also introduces proposed new section 64C into the 1992 Act. The new section extends the existing reserve power to regulate fundraising, to enable the Government to confer the function of regulating charitable fundraising on the Charity Commission. That is a significant power, which would change fundraising regulation completely.

Photo of Thomas Tugendhat Thomas Tugendhat Conservative, Tonbridge and Malling

For clarity, may I ask a brief question on the Minister’s slightly earlier point, which he has just moved on from? Is it only charities that will have to opt in, or will other organisations have to?

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

I thank my hon. Friend for raising that really important question. Charities—particularly education charities—rely on the special relationship they have with their membership. The data protection legislation that has just been passed in Europe means that all sectors will need to move to an opt-in system in the next 18 to 24 months. That means that any organisation will require unambiguous and affirmative consent before being able to process any individual’s data. Workarounds such as assumed consent or pre-ticked boxes will simply no longer be good enough. A change is therefore coming, and it will affect all sectors, not simply the one we are discussing.

Photo of Peter Kyle Peter Kyle Labour, Hove

The Minister has repeatedly asserted in his opening speech that charities need to heal the wounds resulting from the challenges they faced last year and from the public dismay that greeted some of what happened. However, would it not be more honest to acknowledge that the Government also played a role in undermining public confidence in charities last year? Will he take this opportunity to reaffirm that the Cabinet Office will no longer put millions of pounds in funds into charities that are trading insolvently—something that greatly undermined public confidence in not only one charity, but the Government themselves?

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

That really is a very strange point to make. What we saw over last summer was a number of large charities clearly targeting vulnerable and elderly people in the most immoral way and on a scale we had not seen before. The Government had no role in making that happen or even allowing it to happen. Since we discovered the scale of what was going on, we have acted extraordinarily swiftly. We have set up a new single regulatory body in a very short time, given it the powers to be successful and made sure it is funded sufficiently. We have got the sector’s backing, and a whole series of other things are now happening to make sure that that body is up and working so that the sector does not make the terrible mistakes it has made in the past.

It is also important to recognise that it is a small number of large charities that have let the whole sector down and that, by and large, small charities have had nothing to do with this. We are therefore having to focus on a fairly narrow section of the sector, but that work is important, because we have seen the figures for those who trust charities go down to below half the population—it was previously much higher—and that has had an impact on how people feel about donating to charities. A lot of the work that the Government have done over the past five or six years has been about building the idea that people should give of their time and money to volunteering and charities, and that has been a big success for the Government.

Photo of Peter Kyle Peter Kyle Labour, Hove

I am grateful to the Minister for giving way again. He spoke with great passion about solving the problems that a small number of charities faced, and indeed created, with some of their fundraising practices last year. However, he also quoted figures for the damage done to the voluntary sector’s reputation, and I invited him to face up to the fact that the Government also played a role in damaging the sector’s reputation last year by overriding officials’ recommendations not to put more money into Kids Company. In doing so, the Government put millions of pounds into a charity that was trading insolvently, creating a national scandal that was reported throughout the media, which damaged the sector itself. Yes, the voluntary sector needs to own up to its challenges, but will the Government take a lead? Will the Minister say that the Government will no longer fund charities that are trading insolvently?

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

Look, there are at least three separate investigations into what happened at Kids Company, two of which are due to report by the end of this month, I think. It is important that we all wait to see what those reports say. If lessons can be learned, the Government will certainly learn them and do what we can to ensure that such things do not happen again, but to pre-empt that in this Committee would be wrong.

I was talking about the change in the nature of fundraising regulation if we had to invoke this power. It would no longer be governed by a self-regulatory system; instead, the Government would be able to invoke statutory regulation by mandating the Charity Commission with that task. Were that function to be passed to the commission, clearly it would require additional funding or would charge fees under section 19 of the Charities Act 2011.

I hope that I will never feel compelled to use this power, as it would mean that the self-regulatory system had failed. More importantly, it would mean that large charities had failed to put their house in order. However, the seriousness of the abuse in the past year or so and the impact it has had on public trust in charities has made it clear that a robust backstop is needed to ensure that the public feel that they can give with confidence and to prevent the same sorts of scandals from being repeated.

Photo of Alan Mak Alan Mak Conservative, Havant

One area of charitable practice that helped to undermine confidence in the sector is the behaviour of so-called chuggers—charity collectors who collect direct debits on behalf of charities. Can the Minister assure the Committee that the new regulatory system will clamp down on such bad practices and increase confidence in the sector by way of regulation?

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

I thank my hon. Friend for raising an issue of great public interest. Many people have raised such concerns in recent years. Personally, I am not convinced that that method of fundraising is beneficial to the sector’s reputation. Many people dislike being approached in the street or on their doorstep. On the other hand, I appreciate that it represents an important source of income for the sector, and it would be churlish not to acknowledge that there have been some improvement in the regulation of face-to-face fundraising—it is known as that, rather than chugging—in recent years. It was highlighted as a problem as far back as 2012 by Lord Hodgson’s report. However, I expect that the new fundraising regulator will pay very close attention to chugging. Charities and the new regulator need to ensure that it is done respectfully and responsibly, and that the methods used to solicit donations are not the next big scandal waiting to happen.

Let me return to section 64C, if that is not too geeky for the Committee, which sends a clear signal about the Government’s intention for better regulation of fundraising in the future in one way or another. The charity sector feels compelled to ensure that that is achieved through the Etherington system, rather than statutory regulation. I think that everybody here wants fundraising to be better regulated in future to ensure that it protects the vulnerable, is not governed by vested interests and does not allow free riders to abuse the system. The new clause provides a robust back-up to the system of self-regulation currently being implemented. It will also act as a deterrent to those who are still in denial about the seriousness of the issues that the sector faces.

In some ways, it is odd that I hope that I and my successors will never have to invoke the reserve powers to regulate fundraising. Ultimately, whether or not that happens is in the hands of the charities themselves, which need to ensure that the self-regulation of fundraising works in the public interest. I hope hon. Members will agree with me and back this important new clause, which will help safeguard the future of fundraising and the reputation of charities in the long term.

Photo of Anna Turley Anna Turley Shadow Minister (Cabinet Office) 11:45, 7 January 2016

May I second the Minister’s comments and congratulate you, Mr Hamilton? Yours is an extremely well deserved appointment and we look forward to seeing the wealth of experience you bring to the role. It is not before time, so many congratulations. I would also like to congratulate my hon. Friend the Member for Cardiff Central, who is not with us but also received an appointment today. There have been some very good moves all round.

We support the Government’s new clause, which seeks to reserve powers to control charity fundraising. It could require mandatory registration in compliance with a specified fundraising regulator, or for fundraising regulation to be carried out by the Charity Commission.

Before going into more detail on why we support the new clause, I want to refer to the important point made by my hon. Friend the Member for Hove. The strength of the Bill, and one of the main reasons for our support, is that it is important for charities to have the support, the regulatory framework and everything they need to ensure they are abiding by the highest standards.

We also think that there are many lessons to be learned from the sorry Kids Company saga. I was pleased to hear the Minister commit to conveying strongly the message from the investigations underway. We look forward to seeing the outcome of those investigations and to working with the Government to ensure that those standards are upheld within Government as much as within the sector.

Returning to the new clause, the Institute of Fundraising, the professional membership body for UK fundraising, and the Public Fundraising Association, the membership body for charities and agencies that carry out face-to-face direct debit fundraising, are in the process of merging to form a single professional body across the sector in the light of the Etherington review. Both say that they understand the reasons for amending the Bill to introduce these reserve powers and do not object in principle to their introduction. They hope, as do we, that ultimately the reserve powers will not be needed, and that the new self-regulatory structures will be effective. They commit to working to support the new system of stronger self-regulation to help ensure its success without the need for the reserve powers to be used. I welcome their positive commitment to that.

As we said in the previous sitting, we believe that the sector takes its responsibility in this field very seriously and will strive to reach the high standards set out in the Etherington review, which we welcomed. Standards have fallen short with some recent fundraising practices. I agree with the Minister that those practices were restricted to a small minority but had a substantial and disproportionate effect on public perception of the sector. When that does happen, it is important to ensure that charities and the bodies charged with regulation can act swiftly and effectively to restore public trust.

We believe that state regulation should be a last resort when self-regulation has failed, but these powers give self-regulation the opportunity to succeed, while ensuring that there is proper back-up should the new arrangements fail to deliver satisfactorily. We look forward to working with the Government on reviewing the steps that the sector takes to fulfil these commitments. Like the Government, we hope that the powers will not need to be invoked, but it is important, when tackling these issues, that we have backbone and teeth with such powers.

If the Minister had not indicated on Second Reading that he was going to amend the Bill in this way, we would certainly have put down an amendment, because we support the need for these measures. We welcome them, support them and look forward to working with the Minister to protect the integrity of charity fundraising.

Question put and agreed to.

New clause 7 accordingly read a Second time, and added to the Bill.

New Clause 2