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Charities Bill [HL]

moved Amendment No. 14:"Page 45, leave out lines 17 to 19." The noble Lord said: My Lords, I have to detain the House for a moment or two on this amendment. It deals with an issue I raised at Report stage but, having heard the arguments then put forward by both the Minister and the noble Lord, Lord Phillips—the noble Lord has an amendment in this group, which aims down the same alleyway as mine—I have returned to it on a narrowed basis. The amendment is concerned with Clause 43 and the power to spend capital. Clause 43 is the replacement for Section 75 of the Charities Act 1993. Perhaps I may briefly summarise the background again. I remain concerned by the unsatisfactory and unclear position of what is known as ““permanent endowment””. Permanent endowment is defined in Section 96(3) of the Charities Act 1993 as follows:"““A charity shall be deemed for the purposes of this Act to have a permanent endowment unless all property held for the purposes of the charity may be expended for those purposes without distinction between capital and income, and in this Act, ‘permanent endowment’ means, in relation to any charity, property held subject to a restriction on its being expended for the purposes of the charity””." The result of this definition is that unless a donor specified that a gift was not to be regarded as permanently endowed, it would be so regarded. Gifts that may have been made centuries ago are therefore trussed up in a way that is probably quite at odds with the wishes of the now long dead original donor. My amendment on Report sought to reverse this position by taking into permanent endowment only those gifts so specifically designated by the donor. The present position is that charities can be inhibited in maintaining their assets in their most effective form; for example, selling a small piece of land with planning permission and using the proceeds to enhance and improve the charity’s other buildings will require the Charity Commission’s consent. This may be given only the basis of a scheme of ““recoupment””, which requires the replacing of the fixed asset over a period of years. To my commercial, but non-legal, eye—I am aware that the noble Lord, Lord Phillips, dislikes fudges—recoupment seems to be a classic fudge. Recoupment is normally carried out on a straight, pound for pound basis. This means that neither interest nor inflation is taken into account. So if recoupment is really meant to protect the alleged wishes of the original donor, it fails to do so. So why should we not be open and clear about it? Let us accept that proving a negative is extremely difficult and allow that, unless the donor expressly wished it, permanent endowment will not apply. On Report, I tabled two amendments, the second of which was a redefinition of Clause 96(3) of the 1993 Act. On reflection, having re-read the debate of 18 October, I think that I was being overambitious. Amendment No. 14 is therefore a narrower amendment which would permit ““land”” to be included in ““available endowment fund””. That would be achieved by leaving out lines 17 to 19 of page 45 of the Bill. I have heard it suggested that this amendment is unnecessary because when the land is sold it becomes cash and so no longer falls within the prohibition, but instead qualifies as ““available endowment fund”” under Clause 43(7)(a) and (b). If this is indeed the case, the whole clause must be without purpose. It must indeed be a farce. In our earlier debate, the noble Lord, Lord Phillips, asked me three questions to which I owe him a formal reply. First, do I seek to apply this principle to charity law generally? Yes, I do. Secondly, he asked me to define and explain the issue of ““intention””. This is no longer relevant because I am not seeking to redefine ““permanent endowment”” any longer. Thirdly, he asked about the application of the new approach. Again, some of its force has been reduced by the narrower objective of the amendment, but I of course seek to reach back to solve the problem of donations made many years ago where no specific wish was expressed by the donor. Indeed, the noble Lord, Lord Phillips, and his colleagues in charity law are now well aware of this problem and so always ensure that present donors’ views are made clear when the gift is made. I conclude. It is generally accepted that the definition of ““permanent endowment”” in the 1993 Act is unduly restrictive, clumsy and unhelpful to charities. My amendment seeks to achieve clarity and to free charities from dependence on the inevitably capricious judgments that are made from time to time by the Charity Commission. I do not wish to divide the House on my amendment unless I have to. I hope that the Minister will be able to reassure me by making a commitment to look further at this issue during the passage of the Bill in another place. At the very least, the Minister needs to put on record his expectation that the Charity Commission will act expeditiously and flexibly in this important area. I beg to move.