Charities (Regulation and Administration) (Scotland) Bill: Stage 3

– in the Scottish Parliament on 28 June 2023.

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Photo of Liam McArthur Liam McArthur Liberal Democrat

The next item of business is stage 3 proceedings on the Charities (Regulation and Administration) (Scotland) Bill. In dealing with the amendments, members should have the bill as amended at stage 2—that is, SP bill 20A—the marshalled list and the groupings of amendments. The division bell will sound and proceedings will be suspended for around five minutes for the first division of stage 3. The period of voting for the first division will be 45 seconds. Thereafter, I will allow a voting period of one minute for the first division after a debate.

Members who wish to speak in the debate on any group of amendments should press their request-to-speak buttons, or enter RTS in the chat function if they are joining us online, as soon as possible after I call the group.

Members should now refer to the marshalled list of amendments.

The Deputy Presiding Officer:

We start with group 1, which includes minor and technical amendments. Amendment 4, in the name of the Cabinet Secretary for Social Justice, is grouped with amendments 5 and 9.

Photo of Shirley-Anne Somerville Shirley-Anne Somerville Scottish National Party

These are very minor amendments. Amendments 4 and 5 are self-explanatory and simply correct the language that is used in two places in the bill. Amendment 9 addresses a consequential amendment following on from stage 2. At stage 2, acting on a suggestion from the Law Society of Scotland, we removed the requirement for charities to give 42 days’ notice of certain proposed changes.

All that will be required now is for charities to obtain consent before going ahead with those changes. As a result, we no longer need to make provision in paragraph 4 of the bill’s schedule about how the 42-day period is to be calculated in a case in which the charity ends up agreeing a different name with the Office of the Scottish Charity Regulator from the name that it originally sought to consent to.

I move amendment 4.

Photo of Jeremy Balfour Jeremy Balfour Conservative

Those of us on this side of the chamber welcome all of the amendments in the name of the cabinet secretary, and we will support all of them as we go on this afternoon. We will not speak to them.

Amendment 4 agreed to.

Amendment 5 moved—[Shirley-Anne Somerville]—and agreed to.

The Deputy Presiding Officer:

Group 2 is on the register of persons holding a controlled interest in land. Amendment 3, in the name of Jeremy Balfour, is the only amendment in the group.

Photo of Jeremy Balfour Jeremy Balfour Conservative

I suspect that this is the only slightly controversial point of this afternoon’s debate, but I think that this is an important issue, and I hope that the chamber will take seriously the concerns raised by churches and faith groups across Scotland.

We are seeking to exempt Christian charities, churches and religious bodies from previous legislation passed by the Parliament. Of course, there is already precedent for that in that Scottish charitable incorporated organisations were excluded from that legislation. We seek to do this not because the churches and religious bodies do not want to be transparent, but because it comes down to whether it is reasonable and appropriate for them to be included in this.

Perhaps I can best illustrate the issue using a submission that was made by the Scottish Episcopal Church at stage 2 of the bill, which we had in committee. It used an example of a diocese in Scotland in which there are 50 congregations and five diocesan trustees, comprising 50 church buildings, 40 rectories and 25 church halls, which equals 115 properties in total. With each congregation having a minimum of three associates, the number of registrations required would be 5 times 115 times 3, which—I am sure the Deputy Presiding Officer will know—equals 1,725. If that is multiplied across the seven dioceses in Scotland, we are looking at a large number of transactions that have to take place.

That would have to happen every time someone stepped down and another person was reappointed in their place. A lawyer would have to be instructed to do the transaction, which would cost money. We were told during the stage 1 debate that it would cost the Church of Scotland more than £100,000 per year—money that could be used to fund social work, good causes and other activities of that denomination and of churches. Every trustee that will be part of this is already on a register under OSCR, so their name will be there for people to see and to know, and nothing is being hidden.

I am deeply concerned that already limited resources will be taken away from those organisations and that it will not be used for what they are set up to do but will simply pay lawyers to do more legal work. I am also concerned that there is a liability issue, because, if they do not follow that process or if there is an oversight and somebody does not do it, the organisations will be open to legal action against them.

I think that I speak on behalf of all parties when I say that part of what we want to see from the bill is more people coming forward to take up these positions. So, I believe that it will be a major step forward if this amendment is passed by the chamber this afternoon, and I ask all members to consider it seriously.

I move amendment 3.

Photo of Paul O'Kane Paul O'Kane Labour

I wish to make a brief contribution on amendment 3. I am sure that that will not come as a surprise to the Government, given my interest in the bill at stages 1 and 2.

Indeed, my colleague Rhoda Grant raised issues around controlled interests of land in relation to religious organisations and churches during scrutiny of amending regulations earlier this year. I will refer to some of the points that she raised then, which the Government has not fully addressed.

Transparency, proportionality and accuracy are fundamental. We all want a register of charity trustees, which the bill is seeking to put in place, and a register of persons holding a controlled interest in land, both being transparent and accurate. As I have said, the bill firms up the register of trustees with OSCR, thereby making clear who is in control of the charity and who is responsible for it, which is, of course, very welcome. However, there is an opportunity to deal with the concerns that many churches and religious bodies have raised in relation to the register of persons holding a controlled interest in land.

I do not view amendment 3 as one that would make organisations exempt from the register of persons holding that controlled interest; instead, it seeks to record their interest more accurately, reducing the burden to individual office bearers. The Government has, of course, exempted Scottish charitable incorporated organisations, charitable incorporated organisations that are based in England, and charitable companies limited by guarantee, arguing that they are covered by alternative transparency regimes within OSCR. Why, then, would religious charities not be covered by the new transparency regime that will list the trustees’ individual charities, which we are considering in the bill? Those are the trustees whom we know will collectively make decisions on the assets of the charities, in line with the democratic structures of their organisations.

At a cursory glance, prior to coming to the chamber, I was able to access the financial income and expenditure of the churches in the community where I live and some 37 pages of entries from across the whole country just from the Church of Scotland. To further that example, the Church of Scotland contends that the regulations as they currently stand do not achieve the aim of transparency around who has a controlled interest in respect of the land that they own. Indeed, it argues that the opposite is the case.

As members will know, the Church of Scotland will have to record individuals who hold congregational offices—the minister, the session clerk and the treasurer—who are deemed by the regulations to be the people who exercise control or have significant influence over the land although, actually, the governance of the Church of Scotland is designed to preclude individual control. I am sure that we remember from our history lessons that that was the whole point of the reformation. No single individual, including those named office bearers, has control over decision making in relation to land. The register would therefore be inaccurate and, we could argue, would not be wholly transparent or create the level of transparency that we all intended when the 2005 legislation was passed—although I was not a member of Parliament at the time.

Would it not make far more sense for the organisation to be registered as holding the controlled interest, in order to better reflect the accuracy of decision-making processes and the decisions that will be taken on the land in the organisation, given that the details of those organisations are publicly available and that trustees will, by virtue of the bill, be on the charity register?

I will finish where I started, with my colleague Rhoda Grant, who said during the scrutiny of an SSI that the

“legislation ... was designed to close tax loopholes and to create transparency about who the beneficial owners of land are—especially when that land is held in companies that are registered in tax havens”.

It should not, however,

“put an unacceptable burden on Scottish churches.”—[

Official Report

, 16 March 2023; c 114.]

We must be able to find a solution that has balance, transparency, proportionality and accuracy.

Photo of Murdo Fraser Murdo Fraser Conservative

I wish to contribute briefly to the debate on amendment 3, which is in the name of Jeremy Balfour. I refer members to my entry in the register of interests as a member of the Church of Scotland.

I echo what Mr Balfour and Paul O’Kane have said in relation to the importance of amendment 3. The Land Reform (Scotland) Act 2016 provides that there should be transparency in respect of persons having a controlled interest in property in Scotland. That is a perfectly legitimate and credible policy outcome that Parliament sought at the time. The problem is that that legislation has had unintended consequences. I do not think that, when the legislation was introduced, it was ever intended that churches and religious charitable organisations would be caught in the way that they have been caught, as a result of it. We have all been approached by church groups that have raised their concerns about the issue.

The Church of Scotland has a presbyterian structure. Essentially, that means that decision making is devolved to the local level to local parishes and local kirk sessions, which are elected by the members of the individual churches. Therefore, the titles to the properties that are held at local level are in the names of individual kirk session members. The kirk sessions change regularly—sometimes as often as annually. There will be continual churn and cycle of the names of the people who are involved. As has already been pointed out, an enormous administrative burden will be put on local churches because they will have to comply with the regulations in relation to persons who hold a controlled interest in land.

The Church of Scotland says that it currently holds title for 5,000 properties across Scotland. They include church buildings, church halls, manses and other properties that local churches might own. Each of those 5,000 properties will require to be registered in the name of three office bearers every time, which is a huge burden to start with. Every time there is a change of office bearers, which might happen annually, the properties will need to be reregistered. Again, that will put a huge burden on the Church of Scotland and, indeed, other churches across the country.

As members will be aware, the Church of Scotland is currently going through a reorganisation and is amalgamating presbyteries and a number of parishes, and is reducing the number of places of worship because of the decline in the number of worshippers and ministers. It is already facing quite significant financial challenges. To put the additional financial burden to which Jeremy Balfour has referred on the Church of Scotland at this time seems to be entirely inappropriate.

I cannot see that there is any public policy interest in pursuing the requirement that churches and other religious charities comply with the regulations. It seems simply to be bureaucracy for bureaucracy’s sake.

I support Jeremy Balfour’s amendment 3 and say to the Government that if it is not minded to support the amendment, it needs to tell us what mitigations it might put in place to address the issues that have been identified. I know that it has been suggested that there might be a delay in the regulations being introduced, but that would merely postpone the inevitable. The additional burdens would still come in and will last for time immemorial, with an annual cost to churches and local kirk sessions. If the Government will not support amendment 3—I hope that it will—will it tell us, please, what else it will do to solve the problem?

Photo of Willie Rennie Willie Rennie Liberal Democrat

I will make an appeal to the cabinet secretary. The arguments that have been set out in the debate are eminently sensible. We have heard that the Church of Scotland is designed to preclude individual control. However, the Government is going to require such organisations to state who has individual control when that does not exist. I do not understand why the Government is pursuing the matter when there is a perfectly practical solution, which is to avoid double registration and double reporting, reduce the burden, reduce cost and make sure that we do not discourage volunteers from coming forward to operate within such organisations.

Murdo Fraser’s last point was incredibly sensible. I understand that the Government is probably going to push ahead with its proposals. Therefore, it has an obligation to make sure that that does not cause undue burden for organisations and that there are proper and meaningful mitigations in place. We cannot deal with the consequences when organisations are already going through significant turbulence. I hope that the minister will have a last-minute change of heart. If not, it will be necessary to put mitigations in place.

Photo of Miles Briggs Miles Briggs Conservative

From the outset, the bill has not all been controversial; however, section 2 certainly has been. The churches and faith groups that have great concerns about it have been quite clear. The Church of Scotland’s briefing indicates that it has sought countless times to explain the points to the Scottish Government, and to offer constructive solutions. However, it asserts, quite clearly, that it has been disappointed that the Scottish Government has not recognised the church’s willingness to work with it, and that the Government has been unable to appreciate the church’s situation. As has been stated in the debate, it is clear that there will be unintended consequences. I think that ministers accept that, because they have already said that a year’s extension will be granted for churches and faith groups.

As has been stated by others, it is important that mitigations be put in place, whether or not the cabinet secretary will consider reviewing the provisions before they come into effect. I do not know where the Green and Scottish National Party whips are today, but I wonder whether amendment 3 could be supported.

It is not controversial to exclude from the bill, at this stage, the provisions that we have discussed. We have made arguments on the point throughout stages 1 and 2 on a cross-party basis, as have church and faith groups.

This is an important point. As Fergus Ewing stated at the stage 1 debate, it is clear that the measures will have financial impacts. None of us wants more money to be used by our charities for legal costs; rather, we want it to go towards their purposes and to churches doing good in our society. I hope that the cabinet secretary will take on board the cross-party concern on the matter, and that mitigation and review can be brought in early—especially given the one-year extension that I hope the cabinet secretary will be telling Parliament about soon.

Photo of Shirley-Anne Somerville Shirley-Anne Somerville Scottish National Party

I am afraid that I cannot support amendment 3, which is in the name of Jeremy Balfour, for the same reasons why I could not support the equivalent amendment at stage 2. Charity regulation is, fundamentally, in place to ensure and maintain public trust in the operation of charities. The register of persons holding a controlled interest in land, known as the RCI, was an essential part of the Land Reform (Scotland) Act that was unanimously passed in 2016. The purpose of the RCI is to improve transparency in relation to land and property assets, irrespective of what type of legal entity owns them, and to ensure that there is a direct link between the property and whoever exercises a controlled interest in that property.

The bill seeks to increase transparency in relation to charities and is not about the RCI. All parties supported the introduction of the RCI, which is a key part of our land reform strategy. Much progress has been made by Parliament on delivering greater transparency in relation to individuals who have control over decision making in relation to land. The RCI regulations are complex legislation, and amendment 3 risks unintended consequences.

Photo of Rhoda Grant Rhoda Grant Labour

I am sure that the cabinet secretary agrees that the provisions were put in place in order to find out who the beneficial owners are who offshore their companies, hide behind legislation and do not pay their taxes. At no point did anyone think that churches would be caught by the legislation. I appeal to the cabinet secretary to consider the matter again. The delay in acting on that part of the bill means that the people who seek to hide their companies offshore and who avoid scrutiny in Scotland are let off the hook, while people who volunteer for churches are being held to account in a way that was never intended.

Photo of Shirley-Anne Somerville Shirley-Anne Somerville Scottish National Party

I appreciate the concern that has been shared by members today, but I still believe that it would be a backward step for land reform if members were to support amendment 3, which would reduce transparency of ownership and control for some of the largest organisations that come within the scope of the RCI because of the number of property titles that they hold.

Just last week Parliament debated the need for further changes to address the concentration and transparency of land ownership and to support more communities into land ownership. Amendment 3 would cut across the need for that transparency. The information that will be available on the Scottish charity register under section 2 of the bill is charity trustee names. The RCI relates to transparency in ownership and control of property and, as such, requires additional information, rather than simply being a list of names. The two registers require different information—they are not the same, and the people who own or tenant the land might not be the people who are the charity trustees. It is therefore not correct to say that the two registers will contain duplicate information, nor is it required that there will be a financial cost of submitting names to the register. That is one of the areas on which the Government and others are working carefully and closely with the churches, to see what more can be done to simplify the process and ensure that concerns about the need for legal representation are allayed.

To return to some of the points that Murdo Fraser raised, I note that addressing concerns is very important and I take it very seriously. That is why there is continuing engagement to ensure that we find an appropriate way to support stakeholders and to deal with the issues that members have raised today—but that will not be through a carve-out, as is being suggested in amendment 3.

The Scottish Government has already extended the transitional period for compliance by 12 months, to 1 April 2024, thereby providing more time to those who need to register with the RCI. That is a move that gained unanimous support in Parliament.

Although I appreciate that religious organisations have raised concerns about the RCI, this bill—on charity regulation—is not the place to change the obligations of the RCI, so I urge members not to support amendment 3.

Photo of Jeremy Balfour Jeremy Balfour Conservative

I thank all members for their contributions. I declare that I, too, am a member of the Church of Scotland.

I will respond to a few points that the cabinet secretary made. The issue that the Scottish Government is perhaps missing is with regard to who controls property. For example, when I, in a previous life, was a Baptist minister, the title deeds of the church and manse were always held in the name of the minister, the church secretary and the treasurer: they were the people who would sign the documentation. However, control over whether a church or manse could be sold was down to the church meeting and the local congregation. The trustees, or the people who sign their names, do not have the power to take such decisions, which are made by the church. When we are talking about who owns the land, it is not the three individuals whose names are on the title deed, it is a local congregation or denomination. It is really important to make that point.

The cost issue is big. Again, in its submission to the committee at stage 2, the Scottish Episcopal Church made it clear that its view is that the work will have to be done by lawyers. I welcome what the cabinet secretary has said today, but further progress must be made in this regard, or we will simply be lining the pockets of lawyers.

I understand that the transitional period has been extended by one year. If amendment 3 falls this afternoon, I hope that the Government will do more than just engage in conversation. Engagement in conversation is important, but unless it brings about change to what is happening on the ground, it is simply talking for talking’s sake and does not get us anywhere. Although we have that 12-month period, I hope that there can be significant movement by the Scottish Government on the matter to ensure not only that there is transparency and openness, but that churches and religious organisations from all faiths can get on and do what they are about, which is helping people in their local communities.

I will press amendment 3.

The Deputy Presiding Officer:

The question is, that amendment 3 be agreed to. Are we agreed?

Members:

No.

There will be a division.

As this is the first division at stage 3, I suspend Parliament for about five minutes to allow members to access the digital voting system.

16:08 Meeting suspended.

16:12 On resuming—

We proceed to the division on amendment 3. Members should cast their votes now.

The vote is closed.

Division number 1 Charities (Regulation and Administration) (Scotland) Bill: Stage 3

Aye: 42 MSPs

No: 63 MSPs

Aye: A-Z by last name

No: A-Z by last name

The Deputy Presiding Officer:

The result of the division is: For 42, Against 63, Abstentions 0.

Amendment 3 disagreed to.

Group 3 is on reorganisations etc. Amendment 6, in the name of the cabinet secretary, is grouped with amendments 7, 8 and 12.

Photo of Shirley-Anne Somerville Shirley-Anne Somerville Scottish National Party

At stage 2, I highlighted that this area of the law is not a straightforward one and that there may be a need for some further technical refinement of section 12A at stage 3, once detailed feedback from charities, legal professionals and OSCR had been received. The amendments were lodged following those discussions, and they primarily refine and clarify the provisions added to the bill on the reorganisation of endowments at stage 2.

T hey do so in two specific ways. First, amendment 6 will remove charities that are established by royal charter or royal warrant from the scope of what will be new section 42(6)(b) of the Charities and Trustee Investment (Scotland) Act 2005. That will mean that those charities can reorganise their endowments but not the entire charity. That is being done to target the provisions more accurately at the charities that are most likely to hold only endowment property. No royal charter or royal warrant charity has ever tried to seek a reorganisation scheme, so this is most likely a theoretical change only, but we think that it is appropriate that the provisions do not go wider than is necessary or appropriate.

Secondly, amendments 7 and 8 will ensure that the income that is derived from an endowment is treated as part of the capital sum and may be included in a reorganisation scheme that is proposed by a charity under the new provisions. Without those changes, charities might have to apply for a second reorganisation scheme to reorganise the restricted funds that comprise the income or they might have to spend the income prematurely to dispose of it. Those are not consequences that we would want.

Finally, amendment 12 seeks to clarify that, where a charity of any type has varied its constitution—by way of reorganisation or other means—references in the 2005 act to the charity’s constitution mean the constitution as varied. That reflects what we understand already happens in practice and what we believe was intended through the 2005 act, and simply ensures that there is no room for ambiguity.

I move amendment 6.

Amendment 6 agreed to.

Amendments 7 and 8 moved—[Shirley-Anne Somerville]—and agreed to.

The Deputy Presiding Officer:

Group 4 is on OSCR’s communication with charities. Amendment 1, in the name of Jeremy Balfour, is the only amendment in the group.

Photo of Jeremy Balfour Jeremy Balfour Conservative

I lodged an amendment at stage 2 on this issue, and I am grateful to the cabinet secretary for helping me to lodge an amendment at stage 3 that is perhaps better and which I hope will get the support of the whole chamber.

The amendment will enhance OSCR’s existing reporting duty. It will add a new requirement that the annual report must contain information about what action it has taken to raise awareness and understanding in charities about the steps that they need to take to comply with charity law.

During stage 1, we took quite a lot of evidence that many charities, irrespective of whether they are large or small, often just do not know what is being asked of them. A duty should be placed on OSCR to provide more information.

The amendment will require OSCR to produce a general annual report, which would be laid before Parliament. It will add to the existing duty, and allow for on-going scrutiny by Parliament of OSCR’s communication with charities. That will allow committees and others to be involved in that.

The report will cover communications with charities about all the relevant legislation, not just the changes made by the bill. That should help to address the concerns that we heard during stage 1 about the lack of awareness in the sector about existing requirements and about the new requirements that will be introduced through the bill.

OSCR will be able to incorporate that communications reporting into its existing annual report process, which will ensure efficient use of its resources. That will give more clarity to the third sector. I hope that members will support the amendment.

I move amendment 1.

Photo of Paul O'Kane Paul O'Kane Labour

Forgive me, Deputy Presiding Officer—in my previous contribution, I should have declared an interest as the chair of trustees of the Neilston War Memorial Association.

I rise to speak briefly in support of the amendment. As Jeremy Balfour has outlined, communication and understanding the obligations that are placed on charities were a key part of the evidence that was heard in committee. It is often the case that charity trustees feel anxiety, as they do not know whether they are being fully compliant with what is expected of them.

It is important that OSCR outlines clearly how it intends to do that and to review its communication strategies to ensure that no charity is left in the dark when we reflect on the changes that will come about thanks to the bill. Labour members will certainly support the amendment, and we encourage colleagues to do likewise.

Photo of Shirley-Anne Somerville Shirley-Anne Somerville Scottish National Party

I am grateful to Jeremy Balfour for raising this issue at stage 2. We have worked with him on amendment 1, which enhances OSCR’s existing reporting duties.

Adding a new requirement that the annual report must contain information about what actions OSCR has taken to raise awareness and increase the understanding of charities about the steps that they need to take to comply with the 2005 act will enable the Parliament and the public to scrutinise OSCR’s communications with charities.

The report will cover communications with charities about the 2005 act as a whole, as well as the changes made by the bill. That will address the concerns about a lack of awareness within the sector with regard to some existing requirements, as well as concerns about the new requirements that are introduced by the bill. OSCR will be able to incorporate that communications reporting into its existing annual reporting processes, and ensure an efficient use of its resources. I therefore encourage members to support Jeremy Balfour’s amendment.

The Deputy Presiding Officer:

I call Jeremy Balfour to wind up and to press or withdraw amendment 1.

Photo of Jeremy Balfour Jeremy Balfour Conservative

I press amendment 1.

Amendment 1 agreed to.

Amendment 9 moved—[Shirley-Anne Somerville]—and agreed to.

The Deputy Presiding Officer:

Group 5 is on data protection. Amendment 10, in the name of the cabinet secretary, is grouped with amendment 11.

Photo of Shirley-Anne Somerville Shirley-Anne Somerville Scottish National Party

T he 2005 act already makes provision for information sharing between OSCR and others, and a slight expansion to that existing provision was made by amendment at stage 2.

The changes that were made at stage 2 tie into existing language in the 2005 act, which refers to being able to share information despite any restriction on disclosure. The type of restriction meant by that is, for example, the rule in section 29(4) of the 2005 act that restricts how OSCR can use information that is provided to it for the purpose of an inquiry.

Amendments 10 and 11 make it clear, for the avoidance of doubt, that the provision in section 25(1) of the 2005 act, as amended at stage 2, relating to information sharing is not intended to override data protection legislation.

Although amendment 10 does not make a change of substance, we consider it appropriate and helpful for the avoidance of doubt in the case of this specific reference. The amendment aims to ensure clarity, and draws on the approach that has been taken in some other UK statutes.

I move amendment 10.

Amendment 10 agreed to.

Amendments 11 and 12 moved—[Shirley-Anne Somerville]—and agreed to.

The Deputy Presiding Officer:

That ends the consideration of amendments. There will be a brief pause before we move to the next item of business.