Clauses 1 and 2 agreed. Clause 3: Powers of unincorporated
charities Amendment 1 Moved by 1: Clause 3, page 3, line 9, at end
insert— “(2A) For the purposes of this section “amendment” includes
the entire replacement of the trusts of the charity.”Member’s
explanatory statement This amendment provides that the power of
amendment in proposed section 280A can be used to replace the
entire governing document of an unincorporated charity with a
new...Request free trial
Clauses 1 and 2 agreed.
Clause 3: Powers of unincorporated charities
Amendment 1
Moved by
1: Clause 3, page 3, line 9, at end insert—
“(2A) For the purposes of this section “amendment” includes the
entire replacement of the trusts of the charity.”Member’s
explanatory statement
This amendment provides that the power of amendment in proposed
section 280A can be used to replace the entire governing document
of an unincorporated charity with a new governing document.
(Con)
My Lords, since I am not a Member of the Committee, I hope noble
Lords will forgive me if I say a few words about why I have taken
a particular interest in this sector and this piece of
legislation. This comes about because, as long ago as 2005, I was
the Conservative Party’s Front-Bench spokesman on what became the
Charities Act 2006, which is now the Charities Act 2011. My party
was then in opposition, so I was the shadow spokesman and the
government Minister on the Bill was the noble Lord, , well known to all
of us and a familiar Member of this House.
The 2006 Act represented the biggest shake-up of charity law
since 1601. It was a very substantial change and, while it was
generally agreed across the House that the sector needed a
shake-up, there was a concern about the unintended consequences
that might flow from such a big change. We therefore wrote into
the Bill, again by consent and with the agreement of the then
Labour Government, the need for a five-year review, which I was
asked to undertake in 2011. That is really the basis of my
interest. This Bill in large measure flows from the work that was
done in 2011, which was reported on, looked at and then enhanced
and improved by the Law Commission and forms the basis of what we
are discussing and approving today.
I want to place on record my thanks for the help I received from
what was then the team in the Cabinet Office, now DCMS, led by
Ben Harrison who is here today. It was a terrific effort and they
were exceptionally helpful. I want to make that very clear.
It is a humbling experience to spend a year looking at the
charity sector, because you see what relatively small groups of
men and women, with relatively few assets—money, plant, equipment
or buildings—do at the local level to improve their communities
and make the lives of their fellow citizens better. I therefore
felt that there were three things we ought to try to achieve.
First, we wanted to have lines of authority and responsibility
that were as clear as possible, from the commission and within
the 170,000 registered charities. Secondly, because many of those
charities are pretty small, we wanted to be deregulatory, as far
as possible. It was important, in my view, that people should
spend their time on public benefit and not on filling in forms.
That is the origin of the phrase that I have heard being used in
evidence sessions in Committee of “getting the barnacles off the
boat”. Thirdly, overarching this was the need to maintain public
trust and confidence in the sector, without which all is
lost.
I am sorry for taking a minute or two. I do not want the
Committee to think that I am whingeing about the Bill. It is an
excellent Bill and I support it very thoroughly. I have a certain
avuncular interest in its success, but there are some
improvements that we could make and to these I now turn.
When you are known to have undertaken a review of a sector like
the charity sector and a piece of charity legislation comes
along, you are fair game for a bit of lobbying. Everyone tips up
and says, “Have you thought about this? Have you thought about
that?” I suppose between 15 and 20 groups came to me about
various points in the run-up to Second Reading. I said to them,
“That’s absolutely fine, but I’m carrying a spear at the back of
the stage on this now. I no longer have any influence on this at
all. I’m just a normal Back-Bencher. You need to talk to the Bill
team.” My noble friend Lord Parkinson’s predecessor, my noble
friend Lady Barran, very kindly arranged for us to meet the Bill
team, talk about it and give their details, so I said to each of
the people who approached me, “Go to the Bill team and, if you
don’t have any satisfaction, then of course come back to me. I’ll
be pleased to try to see whether we can get clarity and/or
satisfaction.”
Of the bodies that came to approach me only one came back, and
this is the subject of these amendments. It was brought to my
attention by solicitors acting for the Spilsby Grammar School
Foundation, which is a registered charity but an unincorporated
association—quite a rare form, but nevertheless one that does
still exist. The foundation was created in 1994 to administer the
property and funds connected with King Edward VI Grammar School
in Spilsby in Lincolnshire. It is a grant-making charity and is
not connected with its successor school, the King Edward VI
Academy.
The charity is governed by a scheme put in place when it was set
up in 1994, and its provisions are now very out of date.
Individuals named are no longer alive. Property specifically
referred to in it is constitution is no longer owned.
Organisations have changed their names and the charity wishes to
update its constitution. The trustees were very surprised when,
earlier this year, the Charity Commission stated that it was not
possible for a charity governed by a scheme—that is to say an
unincorporated association—to replace that scheme by a
constitution. The Charity Commission said, “A scheme is a
narrative of the charity at the moment in time when it was made.”
It further said that a schedule detailing the property, all of
which was sold prior to 2009, does not require removal from the
governing documents. This does not seem a very sensible way of
proceeding. The solicitors to the trust said that they were aware
of a handful of other foundations in a similar position.
To make it clear, nobody, certainly not I, is suggesting that the
trustees of the Spilsby foundation should be free to make
whatever changes they feel necessary without the appropriate
permission from the Charity Commission. What do I mean by
“appropriate”? It depends on precisely the level of importance of
the changes you are making, in particular when they are to what
are called protected clauses, which are the essence of the
rationale and purpose of the individual charity. Clearly, where
you are going to change major items of the constitution affecting
its purpose, then you will need a higher level of permission.
Amendment 2 deals with a situation where you are dealing with
issues that are merely changes of wording: they make no change to
the underlying purpose of the charity but just change the
wording. What might I mean by this? For example, a lot of
charities have words such as “servicemen” in them. We do not have
just servicemen anymore; we now have service men and women, so we
need to change that to “service personnel”. In many charities,
for example, what we would now describe as being disabled is
described as “invalid”, which as a term has become slightly
pejorative. So you are making changes to bring the document up to
date with modern parlance. That is Amendment 2.
But Amendment 1 is where we deal with the wholesale replacement,
which, according to the commission’s email on 21 January, is not
currently permissible. This is to keep the protected clauses up
to date and, obviously, can be done only with the full consent of
the Charity Commission.
So when my noble friend the Minister comes to reply, there are
three things I think he might say. One is that the Charity
Commission was wrong in its interpretation, when it wrecks the
Spilsby Grammar School Foundation, and there are ways in which it
can update its constitution. The second is that the Government
recognise that there is a problem and will take it on board and
bring forward some suggested amendments at the next stage of the
Bill’s proceedings. I hope that he will say one of those two
things. The third thing he might say is that this is all too
difficult and the boat has sailed so we must wait until it comes
along next time and, in the meantime, Spilsby will have to work
with the presently rather unsatisfactory situation. I hope that
he will not say that but, with that, I beg to move.
(LD)
My Lords, it has been a real privilege to be part of the
Committee for this Bill and, in particular, to have been part of
the special evidence sessions that we had, because this is a Law
Commission Bill. As the noble Lord, Lord Hodgson, has just
demonstrated, this is fiercely technical, arcane law governing
very rare situations.
In the original proposals that were put forward, the Law
Commission explained that in its recommendations it was trying to
take several hundred years of charities’ existence in different
forms and formats and try to bring some of the law that applies
to charities of different formats—particularly unincorporated
charities, as differentiated from incorporated charities;
charities can be incorporated in a number of different forms—to
try to bring the process of amending governing documents much
more into line, so that a trustee in any charity would have a
clearer idea of how they could go about amending their charity’s
governing document. The Law Commission had to go back through all
sorts of different statutes that have led us to the point where
we are now in charity law. It readily admitted that, if you were
going to invent a way of doing this in future, you would not
start from where it had to start.
The Law Commission put in place what it saw as a new way of
enabling charities to amend their governing documents. Part of
our job today is to try to explain that to people who are not
steeped in all the detail of it. What we are talking about, by
and large, is charities not changing the purpose for which they
exist but changing the ways in which they achieve that purpose.
In the case that the noble Lord, Lord Hodgson, set out, he is
right that, when a major change concerns the disposal of
property, that is a very significant change. Our evidence from
the Law Commission said that there is a particular problem in
cases such as the one cited by the noble Lord where there may not
be a dissolution clause in a very old constitution. Therefore, in
order to achieve some kind of disposal of property, it is not
possible for the charity simply to dispose of that property and
merge with another charity. However, the Law Commission says that
it is, and that what it has come up with is a simplified way of
doing this. Some charity lawyers disagree with the way in which
the Charity Commission has gone about seeking to do that; this is
the issue that the noble Lord, Lord Hodgson, has alighted
upon.
10:15:00
As Members of the Committee, I have to say that we talked to
lawyers—charity law experts—who take a very different view from
the Law Commission. Members of the Committee came down on either
side. This appears to be about whether, if a charity does not
have a clause in its constitution that allows it to dissolve, it
then has to go through a process of setting up another charity in
which it vests property—a costly process that takes a lengthy
period with the commission.
I think the noble Lord, Lord Hodgson, has hit on an issue that we
should discuss further in the Committee. At the moment, I think
the Law Commission, perhaps on balance, has it right, but the
problem that the noble Lord has highlighted is a very real issue
for a very few organisations.
(Lab)
My Lords, I shall talk very briefly to this amendment. I agree
with the noble Baroness, Lady Barker, that it is a privilege to
be part of this technical Bill. It is one where I suspect that I,
among other lay Members of this Committee, have learned a lot. I
also thank the noble Lord, , for
introducing this amendment. He has explained a particular problem
that is a big problem for a small number of charities. I
understood that to be the problem that he outlined. The potential
solution is not agreed between the Law Commission and certain
specialist lawyers. Whether there is a way out of the problem
through either dissolution or merger of the charity is something
on which there is no overwhelming consensus.
I do not know what plans the noble Lord, Lord Hodgson, has for
his amendment at either this or later stages of the Bill. I shall
listen to the Minister’s response to the issues raised by the
noble Lord and then take a view, depending on what he does at a
later stage.
The Parliamentary Under-Secretary of State, Department for
Digital, Culture, Media and Sport ( of Whitley Bay) (Con)
My Lords, before responding to this group of amendments, I first
extend my best wishes to the noble and learned Lord, , who has so ably chaired
this Special Public Bill Committee so far. I hope he gets well
soon and is back with us swiftly.
I thank my noble friend for tabling
Amendments 1 and 2 to Clause 3 and for the way he set out not
just the amendments but, helpfully, the background to the Bill’s
importance to charities and the people it will affect. Of course,
he has long-standing interest and experience in this important
area.
On my noble friend’s Amendment 1, which would insert a new
subsection (2A) at line 9 on page 3 of the Bill, we consider that
new Section 280A can be used to replace all the stated governing
document in its entirety, with Charity Commission consent in
respect of the particular provisions that fall within Section
280A(8). We do not think that a legislative solution is necessary
and, as has been noted, this view is supported by the Law
Commission and the Charity Commission—we have discussed the issue
with both of them. I am grateful to my noble friend for raising
this point, as it has prompted us to consider ways in which we
can make the position clearer, but I hope that, on that basis, he
will feel able to withdraw his Amendment 1.
On Amendment 2, which would insert subsection (9A) at line 14 on
page 4 of the Bill, although my noble friend again makes an
important point, we can in fact already achieve what the
amendment sets out to do under the clause as it stands. Under the
Bill, the Charity Commission’s consent is required for an
amendment that would alter any unincorporated charity’s purposes.
That is equivalent to one category of regulated alterations for
charitable incorporated organisations, which requires the consent
of the Charity Commission. By way of comparison, the Charity
Commission currently treats amendments to the purposes of
charitable incorporated organisations of the same type referred
to in the amendment as not being a regulated alteration and
therefore not requiring Charity Commission consent. Given the
similarity between the statutory provision concerning charitable
incorporated organisations and the new Section 280A(8)(a), the
same approach would be taken in relation to changes to
unincorporated charities’ purposes. Therefore, Section 280A(8) as
it stands already looks at substance over form, and an amendment
to a governing document would require Charity Commission consent
only if it makes a substantive change, not if it is a pure
drafting change. I hope that provides reassurance to noble Lords.
As with the previous amendment, this is a view supported by the
Charity Commission and the Law Commission.
However, I thank my noble friend for keeping us on our toes and
for rightly probing this issue. Of course we want the situation
to be clear to everybody who will be affected by the new law, so
we will consider whether the Explanatory Notes could be expanded
on this point to make that clearer. I hope that, on the basis of
that reassurance—not the third of the options that my noble
friend outlined in his opening speech but looking again at the
Explanatory Notes to make this clear to all concerned—he will
feel able not to press his Amendment 2.
(Con)
I am grateful to the noble Baroness, Lady Barker, and the noble
Lord, Lord Ponsonby, for their contributions. My noble friend the
Minister has, of course, elegantly found a third way: it was not
that the Charity Commission was wrong; it was not that we need to
produce some new change to the Bill; there are powers within the
Bill as it stands to find a way around the problem through
Section 280A and ancillary provisions. I talked about getting
barnacles off the boat, and this was certainly a barnacle. I will
reflect on this, talk to the people from Spilsby, who are
obviously at the front line of this to see if they have any
comments. In the meantime, I beg to withdraw the amendment.
Amendment 1 withdrawn.
Amendment 2 not moved.
Clause 3 agreed.
Clauses 4 to 11 agreed.
Clause 12: Power to borrow from permanent endowment
Amendment 3
Moved by
3: Clause 12, page 13, line 37, at end insert—
“(4) No regulations under subsection (3) may be made unless a
draft of the regulations has been laid before and approved by a
resolution of each House of Parliament.”Member’s explanatory
statement
This amendment, recommended by the Delegated Powers and
Regulatory Reform Committee, would require the regulations under
subsection (3) of section 285 of the Charities Act 2011 (inserted
by Clause 12 (amount permitted to be borrowed from permanent
endowment and time limit for re-payment)) to be made pursuant to
the affirmative resolution procedure.
(Lab)
My Lords, the noble and learned Lord, , has asked me to move his
Amendment 3 and has provided me with speaking notes, which I will
read out. I would like to send my best wishes to the noble and
learned Lord and hope that he comes back to our proceedings as
soon as possible.
Amendment 3, as set out in the brief explanatory note included in
the Marshalled List, is in accordance with the recommendation of
the Delegated Powers and Regulatory Reform Committee’s fifth
report of Session 2021-22. Clause 12, which introduces new
Sections 284A, 284B, 284C and 284D to the Charities Act 2011,
creates a new statutory power for a charity to borrow a limited
amount from the permanent endowment subject to repayment.
Borrowing is limited to the permitted amount, as defined in
Section 284B by reference to a formula in new Section 284B(1),
and must be repaid within 20 years, as required under new Section
284A(2)(b), under the current provision in Clause 12(3) of the
Bill.
Those two matters can be amended by regulations made pursuant to
the negative resolution procedure. Clause 12(3) is one of five
provisions in the Bill providing for regulations to be made by
negative resolution where the appropriateness of the negative
procedure has been questioned by the DPRRC. The DCMS response was
that the powers are narrow in scope and use of the negative
procedure merely follows the practice in the 2011 Act. There are
three answers to that response. First, the fact that the negative
resolution procedure is mostly used in the 2011 Act does not
warrant the negative resolution in every case in the Bill.
Secondly, there are provisions in the 2011 Act that stipulate the
affirmative resolution procedure—see Sections 348 and 349.
Thirdly, the regulations in Clause 12(3) are to be contrasted
with regulations that are directed merely to changes in the value
of money over time. As to that, the 20-year repayment stipulation
is not a financial or threshold amount. No doubt it is for that
reason that in his oral evidence Professor Hopkins of the Law
Commission accepted that Clause 12 was not like other provisions
in the Bill which provide for financial limits to be altered by
regulation.
As to the calculation of the permitted amount, it is to be noted
that the DPRRC said that greater weight should be given to the
exceptional case of Henry VIII powers subject to the negative
resolution procedure than to consistency with the existing
approach in the 2011 Act; that in such cases provision for the
negative resolution procedure to apply is to be treated as
exceptional and requires a full justification to be given; and
that, critically, unlike a power to amend the financial limit or
threshold limit to uprating for inflation, the power in the Bill
to amend the permitted amount that can be borrowed from the
permanent endowment is not limited in any way and, in particular,
is not limited to making changes to reflect changes in the value
of money. I beg to move.
(Con)
My Lords, I urge the Government and/or the Committee to accept
this amendment and in doing so I, too, send my best wishes to the
noble and learned Lord, , for a speedy recovery. I am
sorry he is not here to speak to his amendment.
The issue of permanent endowment is critical. It sounds highly
technical, but it is critical because if you give a sum of money
for the future, you may not wish your successors after you have
died to spend it all. You may wish to have a permanent lump of
money that will go on creating, looking after and fulfilling the
public benefit you had in mind when you gave your funds in the
first place. It is a key issue of a donor’s wishes as expressed
in the way that the charity is set up. That is one problem.
The other half of the problem is that times change. The numbers
get quite small because of inflation and the nature of the
purposes to which you wish to put your money become outdated. We
therefore need to find a way to balance this, but it is important
because a person’s wishes as expressed in their will are a
critical part of our society, so issues such as this require the
affirmative resolution. Of course, we need to be able to change
things to reflect inflation and so on, but it needs as high a
level of scrutiny—of regulation—as we can offer. There are
arguments about whether any level of secondary legislation
scrutiny is good enough, but that is for another day. What is
important is that we should have the highest possible level of
scrutiny for this type of change that is available in the present
regulatory structure.
10:30:00
of Whitley Bay (Con)
My Lords, I am grateful to the noble and learned Lord, , for tabling this amendment
and to the noble Lord, , for moving it
in his absence. I had a very helpful conversation with the noble
and learned Lord, , yesterday and am grateful
to him for his time.
By way of background, there are six financial thresholds in the
Bill, which directly or indirectly ensure proper regulatory
oversight of charities by the Charity Commission. These
thresholds can be amended by secondary legislation to ensure that
they remain at an appropriate level, based on how they are
working in practice and on changes in inflation. The Delegated
Powers and Regulatory Reform Committee of your Lordships’ House
recommended that any future amendment of these thresholds should
be subject to the affirmative, rather than the negative,
parliamentary procedure. This means that there would need to be a
parliamentary debate any time the Government sought to amend
these thresholds.
The department rejected the committee’s recommendations because
the powers are narrow in scope and the negative procedure would
be consistent with similar amendment powers that already exist in
the Charities Act 2011. However, we recognise the difference
between the delegated powers in Clause 12 and the delegated
powers in the other five clauses that were discussed in the
report. The powers in Clause 12 vary the proportion of permanent
endowment that may be borrowed and the period over which such
borrowing must be repaid; the other delegated powers are
concerned with amending monetary sums.
I can see how this amendment to change the parliamentary
procedure from the negative to the affirmative for the thresholds
in Clause 12 would work in principle, and I am grateful to the
noble and learned Lord and the Committee as a whole for putting
this suggestion forward. I thank noble Lords who have made the
case for it again today and acknowledge the points they have
made. I will take them away and consider them carefully, and I
expect to return to this issue on Report but, for now, I invite
the noble Lord, Lord Ponsonby, on behalf of the noble and learned
Lord, , to withdraw his
amendment.
Amendment 3 withdrawn.
Clause 12 agreed.
Clauses 13 to 35 agreed.
Amendment 4
Moved by
4: Before Clause 36, insert the following new Clause—
“Consent for the taking of charity proceedings
In section 115 of the Charities Act 2011, after subsection (4)(b)
insert —“, or(c) if, within 60 days of the receipt by the
Commission of a request for consent, the Commission has neither
granted nor refused consent, in which case consent will be deemed
to have been given.””Member’s explanatory statement
This amendment specifies an exception to the prohibition in
section 115 of the 2011 Act on taking charity proceedings without
authorisation by the Charity Commission. The exception is where
the Commission has failed to respond within 60 days to a request
for consent, in which case consent will be deemed to have been
given.
(Lab)
My Lords, similarly, I will be reading out the comments that the
noble and learned Lord, , has supplied me with on
Amendment 4.
Section 115(5) of the 2011 Act provides that, if authorisation of
the Charity Commission is required to take charity proceedings
and it is refused, leave to take proceedings may be obtained from
a judge of the Chancery Division of the High Court. There is a
problem, however, with obtaining a timely decision of the Charity
Commission one way or the other, as no application may be made to
the Chancery Division for leave until the Charity Commission has
made a decision to refuse authorisation. The result of delay by
the Charity Commission in making a decision is that there may be
a lengthy period of uncertainty and enforced inactivity.
This amendment addresses that problem by imposing on the Charity
Commission a time limit of 60 days for refusal of authorisation.
This is a typical time limit under the provisions of the 2011
Act, such as Sections 270 and 271 on a resolution to transfer all
the property of a charity to take effect at the end of the period
of 60 days, unless the Charity Commission notifies the charity
before the expiry of the 60 days that it objects to the
resolution, and Sections 277 and 278 on a resolution to modify
the purposes of the charity to take effect at the end of the
period of 60 days, unless the Charity Commission notifies the
charity before the expiry of the 60 days that it objects to the
resolution. Under Clause 11(3) of the Bill, where there is a
resolution to spend the endowment fund of a charity under Section
282 of the 2011 Act, the commission is to state within 60 days
whether it concurs with the resolution or not. If it fails to do
so, the fund or relevant portion of it can be expended free of
the restrictions that would otherwise apply. I beg to move.
of Whitley Bay (Con)
I am grateful to the noble and learned Lord, , for his proposed amendment
and again to the noble Lord, Lord Ponsonby, for speaking to it.
It is important that we consider both the concern that the
amendment seeks to address and the practicalities of implementing
such a suggestion.
We are not currently aware of any particular issue with the
amount of time taken by the Charity Commission to respond to
applications to pursue charity proceedings. There was mention
during the evidence sessions which the committee has heard of
some perceived delays at the Charity Commission, but I do not
think they were in relation to decisions under Section 115. If an
issue were raised in relation to the time taken by the Charity
Commission for these considerations, that could be looked at
without the need for legislation, for example by looking at
internal processes.
By way of background, requests for Section 115 charity
proceedings are rare. The Charity Commission’s consideration of
such requests is often complex, being different from that of
other requests of the Charity Commission, which tend to be more
transactional in nature. Charity proceedings relate to the
internal or domestic affairs of a charity. There are a number of
considerations in relation to such requests that the Charity
Commission must resolve, as set out in its guidance. The Charity
Commission has therefore raised concerns about the
appropriateness of a statutory timescale.
To illustrate one such complexity, these applications do not
always result in either a grant or refusal of consent. In order
to protect charitable funds, the Charity Commission tries to see
whether there are routes the charity can take to avoid going to
court. This has previously led to the charity resolving the issue
itself, or the Charity Commission using its powers, such as by
making an order or providing an action plan to resolve the
issue.
The need for Charity Commission permission is intended to protect
charitable funds and the courts from claims that have no
reasonable prospects of success or which could be addressed more
appropriately in other ways. It is also important for the Charity
Commission to be satisfied that it is in the best interests of
the charity that the matter be adjudicated on by the court. For
the most part, these cases relate to internal disputes. While
these issues can be complex and involve a lot of information,
they also typically relate to one charity and therefore have a
low impact on the sector as a whole.
The issue with having a timescale imposed on the Charity
Commission for a decision of this nature, when no equivalent
timescales are imposed for other Charity Commission decisions,
also means that resolving these requests may become a higher
priority for the commission than other higher-risk or
higher-impact work. This would not be conducive to the Charity
Commission’s role as a regulator of the sector when taken in the
round.
If after a certain time cases were automatically to proceed to
court without the consent of the Charity Commission, we would be
concerned about the potential for court time and costs being
spent on unnecessary or meritless claims. There is also the issue
of cases where the Charity Commission has not received enough
information to make a decision, which often happens with such
requests, and further information or advice may also be sought by
the commission following legal referrals. We are therefore
apprehensive about the implementation of the 60-day time limit
proposed and would invite the noble Lord to withdraw this
amendment too, but we have heard the points of concern which have
been raised and will of course reflect further on them.
(Lab)
I thank the Minister for responding to the points that I read out
on behalf of the noble and learned Lord. The gist of his
response, as far as I understood it, was that he was not aware of
any particular issues, and internal processes could be adapted to
meet this problem. I too have spoken to the noble and learned
Lord, , in the past couple of days.
He said to me that he thought it was self-evident that there was
a problem. He will no doubt read the Minister’s response with
interest and the various reasons for which the Charity Commission
is resisting this amendment. If more evidence is readily
available, I am sure he will bring it to the Minister’s
attention. In the meantime, I beg leave to withdraw the
amendment.
Amendment 4 withdrawn.
Clause 36 agreed.
Amendment 5
Moved by
5: After Clause 36, insert the following new Clause—
“References to the Tribunal
(1) In section 325 of the Charities Act 2011, in subsection (2),
for “with the consent of the Attorney General” substitute “where
the Commission has given the Attorney General 28 days’ notice of
its intention to make such a reference”.(2) In section 326 of the
Charities Act 2011, in subsection (1), at the end insert
“provided the Attorney General has given the Commission 28 days’
notice of his or her intention to make such a
reference”.”Member’s explanatory statement
This amendment implements the Law Commission's recommendations
that the Charity Commission should not be required to obtain the
consent of the Attorney General before making a reference to the
Tribunal and vice versa.
(Con)
My Lords, I come to my second set of amendments. This is not a
barnacle; it is an issue of principle. What a panoply of talented
people have been good enough to put their names to the amendment:
a past Front-Bench spokesman from the Labour Party; the current
Front-Bench spokesperson for the Liberal Democrats; and, on my
right, last but not least, my noble friend the immediate past
chairman of the Charity Commission.
The amendment concerns an issue on which the Committee took a lot
of evidence, which I sat in on and listened to with interest. I
do not want to repeat all that, except to say the following: the
man in the street would undoubtedly think, in so far as he
thought about it at all, that the Charity Commission was an
independent, stand-alone regulator responsible entirely for the
proper behaviour of the 170,000 or so charities whose activities
reach into every corner of our national life. Why do people think
this? In part, it is because of the way in which the media report
on the commission: investigating, adjudicating and disciplining
the sector for which it is responsible. There is no suggestion of
any second-guessing in that.
If you were to probe further, that idea would be reinforced.
Section 13(4) of the Charities Act 2011 reads:
“In the exercise of its functions the Commission is not subject
to the direction or control of any Minister of the Crown or of
another government department.”
That is pretty clear, but, of course, subsection (5) has some
weasel words:
“But subsection (4) does not affect … any provision made by or
under any enactment”
or
“any administrative controls exercised over the Commission’s
expenditure by the Treasury.”
You get the impression that this is about money, so you can
understand why the Treasury does not want the commission to be
able to run away with the cheque book.
The implications of this were discussed in our proceedings on the
Bill. There were no clear conclusions, except that it was a knot
that would need untying at some point. As I undertook my review,
the complexities and problems of the knot became more apparent
because, as we know, Section 325 of the 2011 Act requires any
attempt by the commission to seek clarity on a point to law to do
so only through the Attorney-General. This means that there is a
second-guess of the Charity Commission. The commission will seek
interpretation of these important points only rarely; in my view,
this decision and the continuing position of the Attorney-General
have led to a number of important consequences.
First, it means that there is no longer a clear chain of
responsibility and command—one thing that I think is important in
the sector. Indeed, the noble and learned Lord, , put his finger on that
point in the evidence session with the Minister, the noble
Baroness, Lady Barran, when he said straight up that this means
that there are two regulators. He was completely right. Secondly,
this undermines the commission’s authority and can prevent it
obtaining clarity in the operation of charity law. Thirdly, and
most unattractively, it can serve to encourage individual
charities to take on the commission. We shall come to an example
of that in a minute.
These points were made to me and to the team when the review was
being compiled. There was plenty of evidence for them. However,
there was a contrary point of view that there could be a risk
that the Charity Commission would be rushing off to the tribunal
too often. One has to recognise the force of this point.
10:45:00
I recommended that the Attorney-General’s permission was not
needed as a last resort but that the Charity Commission had to
notify the Attorney-General and he would be party to the
proceedings. Obviously, if he is notified, he has a chance to
discuss it and suggest it should not go ahead. Indeed, it is true
that the proposal the commission had to go for a reference about
religion and the nature of religion was withdrawn after
discussions with the Attorney-General, who suggested it was not a
good idea to proceed.
My recommendation was rejected by the Government and rejected
again by the Law Commission in its recommendation 43, which was
discussed extensively in the evidence sessions. The Law
Commission points out that 17 out of 23 respondents to its
inquiry, some 75%, recommended removing the Attorney-General’s
veto power but not his right to be involved and informed about
what was going on.
The Government’s arguments against this are that, usually, the
Attorney-General’s consent is
“an important element in the system”,
but they do not quite say how. The second argument is that the
Attorney-General’s consent assists him in fulfilling his duty to
“protect charitable interests”. The Attorney-General has a role
to protect law, not specifically charity law, and therefore, if
he interferes in the way charity law operates, he is in fact in
danger of undermining rather than clarifying and protecting
it.
There is then the other idea that only three proposed references
have gone to the tribunal, so the need for change is not really
important. This goes back to the point I raised at the beginning
that the commission will wish to go to the tribunal for reference
only rarely and will do so on the most important issues. That is
why there have been only three instances.
I think there is an in-principle objection to the
Attorney-General having a veto and the consequences of a divided
command are less than attractive. If we park that objection for
the moment, I will turn to look briefly at the way the
Attorney-General has executed his duties under Section 325. One
of the references that went forward was about public benefit as
applied to fee-paying public schools. It will be no surprise to
anybody on the Committee that this is an extraordinarily
sensitive issue, liable to explode at any moment in all sorts of
directions and with very strong opinions on both sides of the
argument.
It was always rumoured that, in proceeding with the case, the
Attorney-General asked the Charity Commission whether there were
any questions or points of law it would like included when he
came to present the case. It was also rumoured that the
commission did put forward a series of questions, but they were
not all asked. I think Dr Mary Synge’s evidence when she appeared
before the Committee a couple of weeks ago confirmed that. Am I
alone in thinking that it is an extraordinary state of affairs
that, faced with such an extremely sensitive and delicate issue,
the Attorney-General did not even ensure that all the questions
that the sector regulator had put were tested before the
tribunal? I think that is wrong.
The second case is of course that of the Royal Albert Hall. This
is a much worse case. The Royal Albert Hall is a charity, built
by public subscription in the Victorian era. It is one of
London’s great cultural venues, home to the Proms, Last Night of
the Proms and many other important events in our national life.
It is a charity, built by public subscription; the subscribers
were offered seats in perpetuity as part of the reward for
putting up the money. Since not every subscriber would want to
take up their seat every night, resale opportunities were offered
through the Royal Albert Hall box office and the seat-holder got
the face value less a 10% handling charge.
A few years ago, seat-holders decided that there was a more
profitable way of doing this and that they could sell their seat
not through the Royal Albert Hall box office but through
third-party websites. So, if you wish to attend Eric Clapton’s
concert in May 2022, you will have to pay £1,185 for a seat with
a face value of £175. That is a profit of £1,100. As a result,
these seats become exceptionally profitable. It is alleged that,
pre-pandemic—I will come back to the pandemic in a minute—seats
were earning between £10,000 and £20,000 a year and changing
hands for £150,000 each.
I have absolutely no objection to seat-holders who have bought
the seats making a profit from them. The right to enjoy your
private property is enshrined in all sorts of law, such as the
European Convention on Human Rights. Indeed, the rule of law and
the right to enjoy private property are the cornerstones of our
civil society. Indeed, seat-holders are taking a risk because
during the pandemic a seat would not have been a very profitable
thing to hold. Therefore, if they take the lumps they can take
the bumps.
I have not mentioned that the hall received a £20 million loan
from the Culture Recovery Board. I heard that that was going to
happen, so I wrote to the Secretary of State for DCMS, , to say, “Are you aware that
there is a question about the governance of this place? In these
circumstances, is it right for the taxpayer to make a loan?” He
wrote back saying that it was nothing to do with him, that it was
entirely for the Culture Recovery Board and that £20 million had
been loaned to the hall. So the seat-holders are taking a risk,
but the risk has perhaps been ameliorated, perhaps, by the fact
that the CRB has given £20 million.
However, as I just said, the Royal Albert Hall is a charity and
as such is governed by a board of trustees. There are 25 of them,
and 19 are elected by the seat-holders. So 75% of the governing
body are seat-holders, and it is the governing body that
ultimately decides which events should be reserved to the
seat-holders. There must be a concern that the more profitable
events will be reserved to the seat-holders and the less
attractive ones will be let go.
It was on this very narrow point—that being a seat-holder and a
trustee was different from being a seat-holder, and that there
was a conflict of interest—that the Charity Commission sought a
legal ruling, for which, under the present law, it had to obtain
the Attorney-General’s permission. In August 2017, the
application was made. At varying points during the subsequent
years, I tabled Questions asking when a decision could be
expected. You can track it through Hansard. Every six to eight
months, I thought, “I’ll have another go and see what happens.”
Invariably, the Answer was the same: the Attorney-General is
having to think a lot about it; he is consulting, thinking,
talking, but he has not been able to make up his mind yet. That
situation prevailed until, following the Second Reading of the
Bill on 7 July, I tabled this amendment. Then, surprise,
surprise, out of the blue the Attorney-General suddenly decided
that he could make his mind up, and his decision was to refuse
the Charity Commission permission to take the case to the
tribunal on the grounds that it would not be in the public
interest. Effectively, after three years and 11 months, the
Attorney-General kicked the legs from under the Charity
Commission without giving a single reason comprehensible to
anyone in the sector.
A Royal Albert Hall seat-holders association has been
established. It writes about the Charity Commission in pretty
pejorative terms a lot of the time, as though it is the enemy. It
wrote at length, in pretty triumphant terms in September of this
year, about the relief that the hall feels at the decision taken
by the Attorney-General. It goes on to say, about how the
seat-holders have supported the hall, “This was recently
demonstrated tangibly by your”—the seat-holders’—“financial
support for the hall during Covid-19, when the hall had to close.
At a time when you were unable to enjoy your seats or receive any
income for them, you committed to pay not only the usual annual
seat rate but also an extra sum for that year and the next three
years.” There is no mention at all there of £20 million from the
taxpayer. The association lives in a parallel world—not a bad
world but a parallel world—where it sees no conflict in being a
seat-holder and a trustee and profiting from it.
Why should my tabling this amendment have led to the walls of
Jericho suddenly falling after three years and 11 months? The
Minister, ably briefed, has a smooth and polished performance
about why this amendment should be rejected but he would have
been in an impossible position if the Attorney-General had still
not made up his mind. We have reached a very strange position,
where the sector regulator is getting clarity only because a
Back-Bench Member of the House of Lords goes on and on and
finally forces the Attorney-General to make his mind up.
Now, I have said enough about both the principle and the
practical results of this position, and I think the present
situation is indefensible. I absolutely accept that the
Attorney-General should not be blindsided by the Charity
Commission, so while the Charity Commission has the ultimate
responsibility and power, it has to give the Attorney-General 28
days’ notice of intention to refer a case to the tribunal. During
that time, the Attorney-General will be able to argue, no doubt
forcefully, if he or she believes that different opinions should
prevail.
The wording I have used is that put forward by the Law Commission
after extensive research and not my original recommendation in my
review. This is a Law Commission Bill that we are discussing
today and this is a Law Commission amendment, made by it after
extensive legal, academic and sectoral consultation. I beg to
move and, in doing so, I reserve my right to test the opinion of
the Committee at the end, depending on what the Minister has to
say.
(Lab)
My Lords, I shall speak to Amendment 6 in this group. Again, I
shall read out the comments given to me by the noble and learned
Lord, . I may speak again at the
end of the group, once I have heard the responses from other
noble Lords in the Committee.
Amendment 6 is in consequence of the Government’s rejection of
the Law Commission’s recommendation that the Charity Commission
should not be required to obtain the Attorney-General’s consent
before making a reference to the charity tribunal, as currently
required by Section 325(2) of the 2011 Act. The Charity
Commission and the Attorney-General should be required to give
the other four weeks’ advance notice of any intended
reference.
11:00:00
The reason given by the Government was that the Attorney-General
has a duty, on behalf of the Crown, to protect charitable
interests in England and Wales. The mechanism for the prior
consent of the Attorney-General assists the Attorney-General to
fulfil that duty. In her written evidence to the Committee, the
Attorney-General explained that she is
“simultaneously the chief legal adviser to the Government and am
charged with upholding the rule of law.”
As a “key component” of that, the Attorney-General is
“the constitutional guardian of the public interest.”
The Attorney-General’s public interest portfolio spans a number
of different areas of law. She said in her evidence, in relation
to charities, that:
“The Attorney General acts as parens patriae on behalf of the
Crown.”
As such, she has a
“constitutional role as defender of charity and charitable
interests.”
She said that a reference to the charity tribunal, under Section
325 of the 2011 Act,
“is an unusual declaratory jurisdiction”
and it
“draws heavily on the public purse, both directly from the
Attorney General’s Office and indirectly through the Charity
Commission.”
She emphasised the different but complementary roles of the
Charity Commission and the Attorney-General in relation to
charities. The Attorney-General has
“an overview of public interest factors within the charity sector
and in wider society.”
She referred to a recent Supreme Court description of the
Attorney-General’s role of parens patriae as
“‘an important and very long-established role’.”
She pointed out that Parliament has consistently decided, for
example when the 2006 and 2011 Charities Acts were passed,
that
“matters of the public interest should continue to rest with the
Attorney General”
notwithstanding the existence of the Charity Commission as the
regulator of the charities sector.
The written and oral evidence of the witnesses before the Special
Public Bill Committee was divided on the appropriateness of
continuing the requirement under Section 325 of the 2011 Act that
the Charity Commission may only make a reference to the tribunal
with the prior consent of the Attorney-General. My view is that
the Attorney-General, and similar written evidence from the DCMS,
have made out a good case for maintaining the present
requirement. It is clear, however, particularly in relation to
the Albert Hall case, that there is a considerable problem of
delay by the Attorney-General in responding to a request for
consent and a lack of transparency about the reasons for refusal.
It was a number of years before the Attorney-General refused
consent in the Albert Hall case in August 2021 and, as far as the
witnesses before the Committee were aware, there has never been
an explanation for the refusal to consent.
As the Attorney-General’s decision of whether to give consent is
non-political, as she was at pains to emphasise for all her
functions relating to charities, there can be no good reason for
not publishing the reasons for refusing consent. This amendment
is intended to address both the delay in the Attorney-General
making a decision and transparency in the reasons for any refusal
of consent by, first, requiring any refusal of consent to be
given within 60 days and, secondly, requiring the publication of
reasons for refusal of consent.
(LD)
My Lords, in the course of deliberations on the Bill, we have
focused, rather predictably, on the Law Commission
recommendations rejected by the Government. This is the most
important of those. We spent a great deal of time on this in the
Committee listening to the Minister and the Attorney-General,
talking to the Law Commission in great detail about why it came
to the conclusions and put forward the proposals that it did and
talking to the witnesses.
A compelling witness was Dr Mary Synge, a specialist academic
researcher in charity law. She put forward to us the argument
that the reasons for keeping the Attorney-General’s veto on the
Charity Commission making a reference to the tribunal were quite
weak. The noble Lord, Lord Hodgson, referred to some of them, but
one that was particularly weak was that the Attorney-General is
part of the legal system; that does not seem a good enough reason
to indicate how they add to regulation by the Charity
Commission.
The Government’s second reason was the need for consistency in
the Attorney-General fulfilling her duty to protect charitable
interests. Back in 2006, a case was made during the passage of
that Charities Bill that we must at all costs avoid duplication
by the Attorney-General and the Charity Commission. The
amendments put forward today deal quite effectively with that.
There are strong reasons to do that. There are strong reasons to
allow the Charity Commission not to have to go through the
Attorney-General. The Charity Commission is the effective
regulator of charities. It has to be clear on the nature of the
charity law that it is to apply. If, as in the cases outlined,
the effect of the Attorney-General’s refusal is that the Charity
Commission is left in doubt about what charity law is, that
cannot be right.
Given that the Charity Commission has the overall duty to make
sure that the administration of charities is effective and legal,
we should not put this block in its way. It is important that we
make sure that the Charity Commission has permission to make a
reference without reference to government—therefore, completely
away from political interference of any kind. These amendments
avoid duplication. They do not prevent the Attorney-General
fulfilling her duty in any way. They simply allow the Charity
Commission to get on with part of its job, which is to clarify
charity law in a timely and effective way. I see no reason to
object to either of these amendments which seek to do that.
(Con)
This is the first time I have spoken on the Charities Bill since
it was first introduced to your Lordships’ House. I must declare
a recent, albeit ceased, interest, to which my noble friend Lord
Hodgson has already referred: I was chair of the Charity
Commission until the end of February this year. I became chair of
the Charity Commission at the end of February 2018. One of the
first things I did—it was certainly the first letter I wrote—was
write to the then Civil Society Minister asking the Government to
adopt the Law Commission’s recommendations and to bring forward a
Bill. The fact that the Government decided to bring it forward a
few weeks after I had left perhaps illustrates just how
influential I was when I was chair of the Charity Commission—I
hope not, anyway.
I am very pleased to add my name to the amendment that my noble
friend Lord Hodgson has tabled. I want to add some comments to
those he has made. After I had written the then Civil Society
Minister about the importance of the Law Commission’s
recommendations, I regularly raised the matter with DCMS. During
2020, I lobbied DCMS Ministers particularly on the merits of the
Bill because of its modest deregulatory measures.
The pressures that charities were under last year, and many are
still under a lot of pressures now, made the reason to bring this
Bill forward even more compelling. Like my noble friend Lord
Hodgson, I want to make it clear that I am delighted that the
Government have done so, and they have my wholehearted support
for the Bill.
However, I do not understand why, in a Bill that is about
deregulation and removing unnecessary burdens on charities, the
Government have not adopted the Law Commission’s recommendation
to relieve an unnecessary bureaucratic burden on the Charity
Commission itself. We have heard this morning that the Members of
this Special Public Bill Committee have received evidence from a
lot of witnesses over the past few months, but none the less I
still feel it necessary to say that I sometimes think that, in
general, people see the commission as almost a charity itself,
run by well-meaning volunteers. The Charity Commission is the
regulator of a sector with an annual turnover of £84 billion. The
combined property, assets and investments that it regulates add
up £250 billion.
To put that turnover in context, it is five times the size of the
UK’s television revenues, which are regulated by Ofcom. I know
that Ofcom regulates far more than just television, but even if
we look at the banking industry, regulated by the FCA, we see
that £84 billion of turnover does not pale into insignificance,
because the annual income of the UK banking industry is £124
billion, or so it was a couple of years ago. So the charity
sector is not a minnow. Whereas the FCA regulates 50,000
financial entities, which are varied, the Charity Commission
regulates 170,000 charities—that is only those that are on the
register; tens of thousands more are exempt—and they range from,
as we have heard, cultural institutions, university colleges,
professional bodies and public schools through to small local
community groups.
The commission is run and staffed by professionals who understand
charity law and ensure that it is applied, but they do more than
that. They represent the interests of the public to charities,
and not the interest of charities to the public. I am proud to
say that the Charity Commission is probably the least
technocratic public body that exists. It does not regulate for
the sake of it; it is motivated only by ensuring that charity can
maximise its benefit to society. That means that it also has to
ensure that people can be confident and have trust in charities
to operate in the way they say they do.
The Charity Commission’s most recent annual report shows its
success in the courts when anyone has sought to appeal against
its findings. Operationally, the Charity Commission has been
transformed in the past few years. Clearly, it is still on a
programme of improvement which will never stop; it is an
organisation that is continually seeking to improve. However, if
it is to meet public expectations—and people have a right to have
expectations of a regulator which exists to represent their
interests—many of the improvements that still need to be made
rely on it having more powers to take action against wrongdoing
more swiftly and in a way that leads to less bureaucracy.
That the Government consider it necessary to retain the
arrangement whereby the commission needs the permission of a
Minister, albeit the Attorney-General, to refer a matter to the
tribunal to get clarity on a point of law beggars belief. I
really hope that the Committee will support the amendment that I
have put my name to.
I note that the noble and learned Lord, , has tabled an alternative
amendment. When the noble Lord, Lord Ponsonby, comes to respond,
can he advise what protection there would be in the approach
suggested by the noble and learned Lord—that is, in the 60-day
period that is suggested—to avoid a situation where the
Attorney-General might say, “You need to think about it a bit
more”? Basically, would the clock keep getting reset? As noble
Lords have already heard from the noble Lord, Lord Hodgson, in
the context of the Royal Albert Hall, the Charity Commission has
experienced, certainly for the past few years, a never-ending
prevarication in terms of any decision being made by the
Attorney-General.
11:15:00
I will talk briefly about the Royal Albert Hall, as the noble
Lord, Lord Hodgson, went over it in great detail. Clearly, having
left the Charity Commission in February, I am not up to date on
the current situation with that case. I am aware that the
Attorney-General has made her decision on the reference to the
tribunal—which, I should add, was made before I arrived at the
commission. The first application to the Attorney-General
predated me, so it is worth bearing in mind that I was not the
chair of the Charity Commission who initiated this. We went
through a whole term of a chair before a decision was made.
I will echo a couple of points that have been made. Whatever
procedure is followed to achieve some resolution in the case of
the Royal Albert Hall, it is a much-loved and important cultural
institution. Everyone wants it to thrive and prosper. Like many
of our important institutions that have been around for a long
time, whether they are a charity or not, it is incumbent on the
people responsible for them to recognise when it is necessary to
modernise to meet modern public expectations about the way those
institutions operate. However, the Royal Albert Hall is a
charity. As the noble Lord, Lord Hodgson, explained, the key
issue that needs to be addressed concerns situations where people
are private property owners in their own right but, none the
less, the board of the charity is controlled by people who have a
private interest in it and are profiting at the same time. That
is exceptional in the context of a charity.
(Lab)
My Lords, I will respond to the question asked of me by the noble
Baroness, Lady Stowell. From reading the Member’s explanatory
statement, it seems that the objective of the amendment in the
name of the noble and learned Lord, , is to avoid the clock being
reset every 60 days. Nevertheless, I will draw the noble
Baroness’s question to the noble and learned Lord’s attention so
that he can respond to her.
(Con)
I am grateful to the noble Lord. Sorry, my point was this: what
would happen if the Attorney-General responded during the 60-day
period with an acknowledgement that the clock would not start
again at that point? This is not about getting to the end of the
60 days but about continuing to restart the clock during those 60
days.
(Lab)
I thank the noble Baroness for that clarification. I understand
her point: she does not want a “never-ending prevarication”, to
use her words. I will draw her question to the attention of the
noble and learned Lord, , so that he can respond to
her.
of Whitley Bay (Con)
My Lords, I thank my noble friend for tabling
this amendment and the other noble Lords who put their names to
it. As the Committee knows, when we responded to the Law
Commission’s report in March the Government rejected the
recommendation that the Charity Commission should be able to make
a reference to the charity tribunal without first having to get
consent from the Attorney-General.
Having noted the oral and written evidence taken by the
Committee, we remain of the view that the Attorney-General’s
consent function represents an important check in the system. As
the noble Lord, Lord Ponsonby, noted, the evidence received by
the Committee underlines the difference of opinion that exists
among experts with regard to the Attorney-General’s consent
requirement for references to the tribunal. This difference
strengthened our conviction that the role of the Attorney-General
as the constitutional protector of charities is important, and
that this is a different role from the regulatory function of the
Charity Commission. It is a mechanism that we feel must be
protected.
I am grateful to my noble friend Lady Stowell of Beeston for her
support for the Bill. Indeed, this is a Bill that she advocated
during her time as chair of the Charity Commission. She is right
to point to the excellent work it does in this important sector,
but we see this mechanism as not an obstacle for the Charity
Commission but rather a safeguard for it. The mechanism is
already narrowly drawn, and a second opinion prior to the
tribunal can help filter out claims that are not in the public
interest before they burden the tribunal and, potentially, the
charity in question if applicable to that case.
The Charity Commission may refer to the tribunal questions that
have arisen in connection with the exercise of its functions
which involve the operation of charity law or its application to
a particular state of affairs. The requirement for the
Attorney-General’s consent reinforces this approach.
The Charity Commission has an array of statutory functions, the
vast majority of which it performs without the involvement of the
Attorney-General. The two referrals that have been made to the
tribunal followed close discussions between the Charity
Commission and the Attorney-General, where both agreed that it
was in the public interest to proceed. The Attorney-General’s
consent function does not undermine the regulator’s role; rather,
it supports and complements it by ensuring that referrals are
made to the tribunal only where there is a clear public interest
in doing so. That is why the Government cannot support the
amendment and why I hope my noble friend will withdraw it.
I thank the noble and learned Lord, , for his Amendment 6, which
proposes a time limit of 60 days for the Attorney-General to make
a decision on applications for references to the tribunal.
Imposing a 60-day time limit on that decision to give or withhold
consent is a suggestion that requires due consideration.
The perceived delay in the most recent case, on the Royal Albert
Hall, was due to the particularly complex nature of that case,
which can often be the nature of such references. The Royal
Albert Hall case was a matter for the Charity Commission and the
Attorney-General. The Government support the role of the
Attorney-General in making references, given that the
Attorney-General values the importance of charity and her role as
protector of charities. I recognise the amount of time taken to
reach a decision in that case, but it was a very complex issue,
illustrated perhaps by the length at which my noble friend set it
out. I am glad that the case has now been concluded, and the
Attorney-General continues to be grateful for the excellent work
the Charity Commission does in regulating charities in England
and Wales.
(LD)
I am sorry, but this is getting a bit Jarndyce v Jarndyce. That
case has not been concluded. There has been no clarification on
that point of charity law. That is the problem.
of Whitley Bay (Con)
I am sorry, I should have said that I am glad that the long saga
to which my noble friend referred has come to an end, but these
are complex issues. We do not think we should give too much
prominence to one case, long and complex though it may be. We do
not think we should look to legislate to remove what is an
important check and balance in the system on the basis of the
evidence from that unique case, but I have heard the points of
concern raised by noble Lords not just today but throughout our
consideration of this Bill. We will certainly take away Amendment
6 from the noble and learned Lord, , to consider it further
ahead of Report, but I repeat that I hope my noble friend Lord
Hodgson will withdraw Amendment 5.
(Con)
My Lords, I thank the noble Baronesses, Lady Stowell and Lady
Barker, for supporting my amendment and for their powerful
interventions. I also thank the noble Lord, Lord Ponsonby. He
spoke on behalf of the noble and learned Lord, , who was kind enough to
speak to me over the weekend about his proposal.
Somebody said that the art of the diplomat is to create ladders
down which people can climb. With respect to the noble and
learned Lord, it seems to me that the law’s gain has been
diplomacy’s loss, because a very elegant ladder has been
presented to us here. The Attorney-General preserves his power
but he accepts restrictions to it of the sort described by the
noble Lord, Lord Ponsonby; namely, the 60-day limit—we will
possibly need some clarification on that along the lines of what
my noble friend Lady Stowell referred to—and on the comprehensive
statement referred to in the second part of Amendment 6. When the
noble and learned Lord, , and I discussed this, we
noted that it was very important that “not in the public
interest” could not be an explanation, because that took us back
to where we are now. If the Minister accepts this, we will
certainly want to explore with him exactly what a comprehensive
statement would mean and how it would work.
I understand and think this is a very elegant mid-way, but it is
half a loaf and not full-fat milk, if I may change the analogy.
It does not address the central problem of a divided command and
the fact that the Charity Commission is beholden to the
Attorney-General. The Minister slightly reminds me of one of
those subalterns on the Western Front in the First World War. He
is in a very desperate position and has sent a message back to
the chateau behind the lines saying, “It is pretty tricky out
here.” They say, “No, no. You stay there and hold the position to
the last man.”
I will pick up just a couple of the things the Minister said, but
I will not detain the Committee long. He said that the issue of
the Attorney-General did not really affect many of the
commission’s objectives. That is not true. The commission’s
objectives concern: first, public confidence, which is affected
here; secondly, public benefit, which relates to the public
schools case; thirdly, compliance, which relates to the Royal
Albert Hall case; and, fourthly and fifthly, charitable
authorities and accountability. I would argue that in at least
three—possibly three and a half—of those, the Attorney-General
would take an active interest in points referred to as a
result.
I understand the second point about the Royal Albert Hall case
being particularly complex, but every one of these cases will be
complex. Cases on public schools, religion and poverty will be
extremely complex and complicated. None of the things that will
rise to the top in respect of the Charity Commission’s position
will be easy, because they are difficult moral questions
affecting all sorts of views about public values and the way our
society operates. I therefore do not accept that the Royal Albert
Hall case was particularly complex.
As the noble Baroness, Lady Barker, said, four and a half years
in, we do not have a decision. Is it a conflict to profit from
the management of an organisation of which you are a trustee and
so profit from the decisions you make? Should that be allowed?
Since April 2017, the Charity Commission has been waiting to
resolve that and the Royal Albert Hall is sailing on unaffected.
Maybe that is right and reflects what the tribunal would find,
but surely we need to get this resolved, in fairness to the
Charity Commission and the sector.
I have gone on long enough today. This is an issue which remains
thoroughly unsatisfactory in every way. We are a small group here
today and I am not a member of the committee. I will withdraw the
amendment, but I serve notice to the Minister that I reserve the
right to bring it back when we come to the next stage of the
Bill. I also look forward to hearing further about what the
Government propose to do in response to the amendment from the
noble and learned Lord, . I beg leave to withdraw the
amendment.
Amendment 5 withdrawn.
11:30:00
Amendment 6
Tabled by
6: After Clause 36, insert the following new Clause—
“References to Tribunal by the Commission
In section 325 of the Charities Act 2011, after subsection (2)
insert—“(2A) If, within 60 days of receipt by the Attorney
General of a request to consent to make such a reference, the
Attorney General has neither given nor refused consent,
authorisation will be deemed to have been given.(2B) If the
Attorney General refuses consent within such period of 60 days,
the Attorney General must publish a comprehensive statement of
the Attorney General’s analysis and of the reasons for the
refusal.””Member’s explanatory statement
The proposed new subsection 325(2A) of the 2011 Act provides an
exception to the prohibition on the Charity Commission making a
reference to the Tribunal without the consent of the Attorney
General. It provides that where the Attorney General has neither
refused nor granted consent within 60 days consent will be deemed
to have been given. The proposed new subsection 325(2B)
stipulates that the reasons for any refusal of consent must be
published.
(Lab)
My Lords, briefly, I was grateful to the noble Lord, , for saying that he would
consider Amendment 6. It is put forward as an alternative to
Amendment 5. In the memorable words of the noble Lord, Lord
Hodgson, it creates an elegant ladder down which the Government
can climb. It is not a full-fat but a semi-skimmed ladder, if I
can put it like that. I look forward to the results of the
Minister’s consideration of the amendment, which I will not
move.
Amendment 6 not moved.
Amendment 7
Moved by
7: After Clause 36, insert the following new Clause— “Right
of appealIn Schedule 6 to the Charities Act 2011 (appeals and
applications to Tribunal), insert in the table the following new
entries—------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|“Decision by the Commission under section 67A(4)(b) not to grant
written consent. |The persons are-(a) the
charity trustees;(b) any other person who is or may be affected
by the decision. |Power to quash the decision and (if
appropriate) remit the matter to the Commission. |
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Decision by the Commission under section 280A(7)(a) to give or
refuse written consent. |The persons are-(a) the charity
trustees;(b) any other person who is or may be affected by the
decision. |Power to quash the decision and (if appropriate) remit
the matter to the Commission.””|
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Member’s explanatory statementThese amendments are consequential
on (1) Clause 7 of the Bill (cy-près application of proceeds of
fund-raising), which requires under the new section 67A(4)(b) the
Commission’s written consent if the money or property exceeds
£1,000, and (2) Clause 3 of the Bill (amendment of trusts of an
unincorporated charity) which requires under the new section
280A(7)(a) the written consent of the Commission to amendments to
which section 280A(8) applies.
(Lab)
My Lords, in supplemental written evidence, Professor Nicholas
Hopkins, the lead Law Commissioner on the Law Commission’s
project on technical issues in charity law, pointed to the list
of regulated alterations for unincorporated charities under the
proposed new Section 280A(7) to the Charities Act 2011, which
adds to the list of regulated alterations for companies in
Section 198(2) and for CIOs in Section 226(2). CIOs are
charitable incorporated organisations. The commission’s decisions
under Sections 198 and 226 to give or withhold consent are
appealable. The provision of a right of appeal, in respect of the
giving or refusal of consent to a decision under new Section
280A(7), would therefore be entirely consistent with the policy
of treating unincorporated charities in the same way as companies
and charitable incorporated organisations.
Professor Hopkins went on to say, regarding new Section 67A, that
a decision of the Charity Commission under the provision is
essentially a specific type of new Section 280A resolution.
Therefore, if there is provision for an appeal under new Section
280A, it would also be logical to provide an appeal to a decision
under new Section 67A. I beg to move.
(Con)
My Lords, I will speak briefly on this amendment. I am assuming I
have understood it correctly—do not look at me like that, Lord
Ponsonby! If I have, the amendment seeks to introduce a right of
appeal to trustees, after they have arrived at a resolution on a
decision. Under the proposals from the Law Commission, it
requires that they go to the Charity Commission for formal
approval or refusal. If I understand it, this amendment
perpetuates the appeals process. That is in contrast to the Law
Commission’s proposal, which is that, at the point that the
approval is sought from the Charity Commission on a decision
reached by the trustees, it is final. This introduces an extra
level of appeal.
I offer a few thoughts on this because, quite often with smaller
charities—we are talking about small amounts of money here—the
underlying problem is a dispute between trustees. A lot of the
commission’s time can be eaten up by disputes between trustees
over quite small matters. The Law Commission was trying to remove
that or force trustees, on these modest matters, to arrive at a
decision on their own and take responsibility in the way they are
required to and not, therefore, to allow an ongoing battle.
My fear is that if this appeal process is brought in, it would
lend itself to those trustees who will never ever give up. That
is why I caution against the amendment. I understand the
intention behind it and it is of course well-intentioned, but it
brings with it a burden that it might not have meant to. I
counsel against it.
of Whitley Bay (Con)
I thank the noble and learned Lord, , for tabling Amendment 7,
the noble Lord, Lord Ponsonby, for moving it, and those who
raised this issue in the written and oral evidence that the
Committee heard. By way of background, new Section 280A will
create a new power for unincorporated charities to amend any
provision in their governing documents. This brings the amendment
powers available for unincorporated charities more in line with
those for incorporated charities, supporting the Bill’s policy to
create greater consistency for different legal forms of
charities. In a similar vein, charitable incorporated
organisations and charitable companies both have the right to
appeal a decision by the Charity Commission to give or withhold
consent to a request to make a regulated alteration to their
governing documents.
(Con)
The Minister talked about appeal to the Charity Commission. One
of the matters the Committee looked at in some detail was the
time it took for those appeals to get processed and transacted.
He said that he would look at that matter and at some stage
report back to the Committee on how he feels we could improve the
whole process and speed it up.
of Whitley Bay (Con)
I will come to that point.
In addition, new Section 280A repeals and replaces some sections
that already carry a right of appeal in respect of Charity
Commission decisions, namely Sections 268 and 265. It is
therefore clear why the suggestion to give a similar appeal right
to unincorporated charities has been put forward in respect of
new Section 280A. However, making provision for a right of appeal
for Charity Commission decisions under new Section 280A would,
first, give unincorporated charities greater appeal rights than
companies and charitable incorporated organisations as there are
more types of regulated amendment and, secondly, expand
unincorporated charities’ existing appeal rights under Schedule
6. Therefore, this is not a simple amendment to agree to and
requires further consideration.
A different policy consideration is required for new Section 67A,
inserted by Clause 7. Under new Section 67A, trustees will now be
able to apply funds from a failed or surplus fundraising appeal
for new purposes without Charity Commission consent unless the
funds exceed £1,000. This modernises the regime and changes the
nature of the Charity Commission’s jurisdiction in failed or
surplus fundraising appeal cases.
In cases where Charity Commission consent is required, under this
amendment an appeal to the tribunal would be possible if the
commission refuses consent. Under the current framework, the
commission may be asked to make a scheme to apply fundraising
money for similar purposes. A decision not to make a scheme is
not currently appealable to the tribunal.
Although it is appropriate for the commission to have a level of
regulatory oversight for failed or surplus fundraising appeals
being spent on different purposes, the context is different
compared with the changing of a charity’s purposes. The general
regulatory experience of the Charity Commission demonstrates that
fundraising appeal cases are often contentious areas but lower
risk in relation to the issues seen in the sector.
Internal charity disputes might occur where there is a
disagreement over how money from a failed or surplus fundraising
appeal should be used. As is often the case with disagreements,
any result decided by the Charity Commission on how those funds
should be used might result in one disgruntled party. Making a
decision of the commission in relation to a trustees’ resolution
under new Section 67A appealable to the tribunal might therefore
open the commission up to challenge, time and cost in a way not
commensurate to the benefit or risks. The most appropriate avenue
of challenge in respect of these Charity Commission decisions
might therefore be judicial review, which would be the default
position if no new appeal right was listed in Schedule 6.
I would therefore like to take Amendment 7, in relation to the
expansion of Schedule 6 appeal rights to cover new Sections 67A
and 280A, away to give some more thought to the policy behind
these proposed changes and their potential implications. I hope
that, while we do, the noble Lord, Lord Ponsonby, will be willing
to withdraw the amendment he moved on behalf of the noble and
learned Lord, .
(Lab)
My Lords, I recognise the concerns raised by the noble Baroness,
Lady Stowell. In other parts of my life, I have seen the
expensive problem of perpetual litigants for relatively small
amounts of money and issues—I do not want to say “petty” issues,
because they are not petty for the people concerned—that can go
on for ever. Nevertheless, I am grateful to the Minister for
agreeing to take this matter away. The noble Lord, , mentioned the length of
time for appeals. The Minister has said that he will think about
this some more, so I beg leave to withdraw the amendment.
Amendment 7 withdrawn.
Clause 37: Public notice of Commission consent
Amendment 8
Moved by
8: Clause 37, page 28, line 23, leave out subsection (1) and
insert—
“(1) The Charities Act 2011 is amended as follows.(1A) In section
337 (other provisions as to orders of Commission)—”Member’s
explanatory statement
This amendment is consequential upon the amendment at page 28,
line 31.
of Whitley Bay (Con)
My Lords, I will speak to Amendments 8 to 12 in my name. I
informed the Committee of these amendments at a private meeting
on 20 October and wrote to the Committee following that meeting
on 8 November. I will place a copy of that letter in the Library
so that noble Lords who are not members of the Committee can see
it.
I will speak first to Amendments 8 to 11, all of which are
related. They make minor and technical changes to Sections 337
and 338 of the Charities Act 2011 to ensure that the policy
intention of the Bill is achieved and that there is no
misinterpretation of the law. Before this Committee started
gathering evidence, the noble and learned Lord, , met the Law Commission to
discuss the Bill. During that meeting, he raised the issue that
Amendments 8 to 11 address. We are grateful that he did so as it
has enabled us to work with the Law Commission and the Charity
Commission to bring forward these amendments to clarify the
position.
Section 337 of the Charities Act 2011 currently gives the Charity
Commission a discretionary power to give public notice or require
public notice to be given when it makes an order under the Act.
The Bill expands that discretionary power so that the Charity
Commission can give public notice or require public notice to be
given when it provides written consent under certain provisions
of the Act. For example, where the Charity Commission is required
to consent to the amendment of a charity’s purposes under new
Section 280A, the Charity Commission could require the charity to
give notice of its proposed change and invite comments from the
public. The policy intention is that this public notice
requirement may occur before the Charity Commission gives its
consent so that it can consider any comments from the public when
making its decision.
In its current form, the Bill does not make this as clear as it
could be. Amendments 8 to 11 would make sure that this is
expressed as clearly as possible. It is important to note that
these amendments do not represent any change in the policy of the
Bill or the Charities Act 2011; they are simply minor and
technical clarifications to remove any chance of
misinterpretation in these provisions. Once again, I am grateful
to the noble and learned Lord, , and the Committee for
bringing this to our attention.
Amendment 12 would insert a new provision in Schedule 2 to the
Bill, making a consequential amendment to the Cathedrals Measure
2021. That consequential amendment is considered appropriate as a
result of the provisions in Clauses 10 and 12. Clause 10 makes
changes to Section 282 of the Charities Act 2011, which allows
charities to release permanent endowment, while Clause 12 creates
a new power at Section 284A of that Act to allow charities to
borrow from their permanent endowment, with thresholds set on the
amount that can borrowed and the timeframe for paying those funds
back.
We have been made aware that these provisions may circumvent the
intentions of the Cathedrals Measure 2021, which was passed in
April this year. That measure provides financial controls in
relation to Church of England cathedrals and the funds held by
such organisations. It also provides for cathedrals to be jointly
regulated by the Church Commissioners and the Charity Commission.
After seeing the provisions in the Charities Bill allowing
charities to use their permanent endowment more flexibly, the
Church Commissioners approached the Government and asked to make
an amendment to place an additional safeguard in these two
clauses on the use of these powers by Church of England
cathedrals to resolve the potential inconsistency that would
otherwise arise between the frameworks established in the two
pieces of legislation.
Amendment 12 therefore provides that Church of England cathedrals
must also seek the consent of the Church Commissioners when
seeking to use the powers in relation to Clauses 10 and 12 to
make use of their permanent endowment. As such, this amendment is
in line with the wider arrangements already in place for the
regulation of Church of England cathedrals’ funds, which includes
the oversight of both the Charity Commission and the Church
Commissioners. The Church of England has made it clear that it
considers there to be advantages in maintaining the financial
safeguards that were put in place by the Cathedrals Measure 2021,
which sets out a regulatory framework that protects the valuable
assets of Church of England cathedrals. We do not wish for the
Charities Bill to undermine those safeguards.
I hope noble Lords will agree that Amendment 12 is appropriate to
ensure consistency between the framework established by the
Cathedrals Measure and that of wider charity law, and to ensure
appropriate continued oversight in the regulation of Church of
England cathedrals. I beg to move.
Amendment 8 agreed.
Amendments 9 to 11
Moved by
9: Clause 37, page 28, line 24, at end insert—
“(a) after subsection (2) insert—“(2A) Where an application is
made for an order under this Act or the Commission proposes to
make such an order, the Commission—(a) may itself give such
public notice as it thinks fit of the contents of the order
applied for or proposed to be made, or(b) may require it to be
given by—(i) any person making an application for the order,
or(ii) any charity that would be affected by the
order.”;”Member’s explanatory statement
This amendment makes provision for public notice of the contents
of an order applied for or as proposed to be made, including
provision enabling the Charity Commission to require another to
give public notice.
10: Clause 37, page 28, line 25, at end insert—
““(3ZA) Where the Commission’s written consent is sought under
section 67A, 198, 226 or 280A in relation to a charity, the
Commission—(a) may itself give such public notice as it thinks
fit of the contents of the consent sought, or(b) may require it
to be given by the charity.”Member’s explanatory statement
This amendment makes provision for public notice where the
Charity Commission’s written consent is sought, including
provision enabling the Charity Commission to require another to
give public notice.
11: Clause 37, page 28, line 31, at end insert—
“(4) In section 338 (directions of the Commission or person
conducting inquiry), in subsection (2), for “any such directions”
substitute “a direction of the Commission under any provision of
this Act”.”Member’s explanatory statement
This amendment alters section 338(2) of the Charities Act 2011,
which applies provision in section 337(1) to (3) about orders
made by the Charity Commission to directions given by the
Commission, in consequence of the amendment at page 28, line 24,
which inserts section 337(2A).
Amendments 9 to 11 agreed.
Clause 37, as amended, agreed.
Clauses 38 to 41 agreed.
Schedule 1 agreed.
Schedule 2: Minor and consequential amendments
Amendment 12
Moved by
12: Schedule 2, page 36, line 18, at end insert—
“19A_ In section 24 of the Cathedrals Measure 2021 (No. 2)
(investment powers, etc), after subsection (7) insert—“(7A) The
members of the Chapter of a cathedral may not pass a resolution
under—(a) section 282 of the Charities Act 2011 (resolution to
spend larger fund), or(b) section 284A of that Act (power to
borrow from permanent endowment),unless the Chapter has obtained
the consent of the Church Commissioners.””Member’s explanatory
statement
This amendment of the Cathedrals Measure 2021 relates to clauses
10 and 12 and requires a cathedral chapter to secure the consent
of the Church Commissioners before resolving under section 282 to
spend part of a larger endowment fund or under section 284A to
borrow from permanent endowment, as a chapter must for similar
matters under that Measure.
Amendment 12 agreed.
Schedule 2, as amended, agreed.
The Senior Deputy Speaker ()
My Lords, that concludes the Committee’s proceedings on the
Bill.
Committee adjourned at 11.48 am.
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