---

Charities Bill

I am most grateful to be allowed to speak in this debate this afternoon, in view of Mr. Speaker’s ruling that members of the shadow Cabinet may not ““moonlight””, so to speak, on issues from the Back Benches. I should explain to the House that I sat on the Joint Committee of both Houses set up to scrutinise this Bill in draft, and it is on that basis that I have sought to catch your eye this afternoon, Mr. Deputy Speaker. Many Members in all parts of the House believe that the pre-legislative scrutiny process needs to be strengthened and used to a far greater extent, and the Joint Committee, which was chaired so ably by the right hon. Member for Darlington (Mr. Milburn), did a service to the House in terms of the quality of such scrutiny. I am, of course, referring—as he did—to the staff of the House who staffed that Committee and to the many experts who appeared before us, but also to the great expertise of the other place, which, in contributing to that Committee, underlined the advantage of the non-elected principle. I hope and believe that our Committee performed a very useful task, and some of that benefit is on display in today’s debate. As I said, the right hon. Member for Darlington did a really excellent job in chairing the Joint Committee. He tried to put some minor distance between himself and the conclusions reached, on the ground that he went off to another—rather less laudable—job, but he missed only one meeting and his spirit certainly brooded as we reached our conclusions. He kept us facing in the right direction, and it is perfectly clear that he is ideally suited to being the next deputy leader of the Labour party. He knows that I have some modest experience of leadership elections—on the losing side, admittedly—but if there is anything that the Opposition can do to help him, he has only to pick up the telephone. On the Government’s reaction to our Committee’s work, which is enshrined in the Bill, I congratulate them on accepting most of our recommendations. They deserve about seven and a half out of ten for their efforts today and I hope that, if they listen fair-mindedly to what has already been said in this debate and in another place, they will have done even better by the time that we reach Third Reading. Given that this entire process was set in motion by the Prime Minister’s own strategy unit and progressed through a Joint Committee of both Houses, I was surprised to learn that the Government seem to have ignored a number of that Committee’s recommendations, particularly bearing it in mind that it was chaired by the right hon. Member for Darlington—a senior and well-respected former Cabinet Minister, Blairite and close confidante of No. 10. Perhaps the Government need to hear again today some of the arguments that they appear to have rejected. The recommendations left out of the Bill that the Government have yet to see fit to include are relevant to both the charity sector and the British public, who are so generous with their support through donations not only of money, but of time and expertise. One of the most important points that our work on the Joint Committee reinforced was that Britain does have a charitable sector of which we should all be really proud. We have heard today from the Minister that there are more than 160,000 main charities on the Charity Commission’s register. That figure is growing by almost 2,000 a year, and that is not the only upward trend. Between 1998 and 2000, for example, employment in the charitable sector grew by almost 7 per cent., which is a faster rate than in both the public and private sectors. In 2005, the total annual income was almost £38 billion—equivalent to more than £600 for every man, woman and child in the UK. However, people in Britain are as generous with their time as they are with their hard-earned cash. Home Office figures show that in 2003, more than 20 million people were involved in some kind of volunteering in the community, half of whom were involved in formal volunteering more frequently than once a month. Some 3 million volunteers do work for one or more registered charities, and such work is equal to 1.5 million whole-time equivalent jobs. It was estimated in 2000 that the value of unpaid work to charities was more than £15 billion a year. Baroness Scotland has stated:"““The Government’s three aims for the Bill remain. The first is to provide a legal and regulatory environment that will enable all charities, however they work, to realise their potential as a force for good in society. Secondly, we want to encourage a vibrant and diverse sector, independent of government. Thirdly, we want to sustain high levels of public confidence in charities through effective regulation.””—[Official Report, House of Lords, 7 June 2005; Vol. 672, c. 783.]" Those aims have been affirmed by the Minister today. However, the Joint Committee had some serious concerns that have not been addressed. The first was that smaller charities should not be overburdened with regulation, but should be encouraged in a climate that promotes philanthropy. Secondly, the independence of the Charity Commission and the charities sector should not be compromised. Thirdly, the new definitions of charities and the removal of the presumption of public benefit should not hit private schools, hospitals and religious groups the hardest. Last, but certainly not least, the Committee was concerned about the ludicrous proposal that excepted charity status should be abolished for armed services mess and sports non-public funds—a proposal that should be removed in its entirety from the Bill. It is the rejection of certain of the Joint Committee’s key recommendations covering those points that could prevent the Government from achieving all their stated and laudable aims. I shall deal first with the independence of the charities sector generally. Among charities and the general public alike, there is growing disquiet that in Lord Dahrendorf’s words, the third sector has"““become a semi-government sector of public life””.—[Official Report, House of Lords, 20 January 2005; Vol. 668, c. 938.]" In his interesting speech, the right hon. Member for Darlington spoke of the importance of partnership between government and the charitable sector, and it is the importance of getting that balance right that I wish to flag up. There is a degree of ambivalence—on the one hand, the voluntary and charitable sector has an enviable record of providing outstanding care, but on the other, we are talking of a desire to see a thriving, independent charitable sector, which should not be dominated, fettered and generally taken over by the state. The Cabinet Office paper, ““Private Action, Public Benefit”” clearly defined the Government’s objective as one of ever closer union, aiming to"““enable the sector to become a more active partner with Government in shaping policy and delivery.””" That was the burden of the right hon. Gentleman’s comments. The Charity Commission, however, has made it quite clear that that approach is not a panacea. It warns:"““Increased co-operation increases charities’ reliance upon the State for funding and, in turn, creates a potential risk to charities’ independence.””" Such a loss of independence, the commission says, could lead to bodies being"““created with a stated purpose that is charitable, but with an unstated purpose that is concerned with giving effect to the wishes and policies of a governmental authority.””" The Charity Commission concludes:"““It would be difficult to avoid the conclusion that a body of that kind was not really a charity at all. Instead of being set up for the stated charitable purpose, it would exist in fact for the purpose of securing the benefits of charitable status while carrying out the wishes and policies of the governmental authority.””" In fact, there are already 731 charities that have a local authority as a trustee. More worrying is the fact that for 595 of them, the local authority is the sole trustee. In response to that, one of the most important of our unanimous recommendations was in relation to the independence of the Charity Commission and the provision that it should exercise its powers"““on behalf of the Crown””—" an arcane form of words that means that the Charity Commission would be closely bound in to the Government, ministerial diktat and departmental governance. In the light of the Government’s stated objective to encourage"““a vibrant and diverse sector, independent of government””—[Official Report, House of Lords, 7 June 2005; Vol. 672, c. 783.]—" it is incomprehensible that the Government have, as yet, failed to remove what was clause 4(1) of the draft Bill, which proposed that the Charity Commission would perform its functions"““on behalf of the Crown.””" With that clause in place, the commission will continue to be, in effect, a Government Department, albeit a non-ministerial one. That means that it cannot appear to be fully independent of government. Witnesses before the Joint Committee warned of the risk of greater political interference and of prejudice to the commission’s quasi-judicial functions—I draw the House’s attention to paragraph 177 of the report. The Government’s rejection of our recommendation does not adequately answer those concerns. As if to add insult to injury, the Government failed to adopt the Joint Committee’s recommendation that the Charity Commission be more accountable to Parliament and its Committees and declined to give statutory force to a requirement for the commission to report to either House. A number of witnesses from whom the Committee took evidence expressed grave misgivings about the effect of such a proposal on the credibility of the Charity Commission. For example, in its evidence to the Joint Committee on the draft Bill, the Charity Law Association stated that if the commission"““is a Government Department, then it is likely to lessen, rather than increase, public confidence in charities. It will be seen as susceptible to being used by the Government to further its own policies.””" It is important that the commission be accountable to Parliament rather than to the Crown. The National Council for Voluntary Organisations went even further, arguing that it was not enough for the Bill simply to stipulate that that the commission be answerable to Parliament, but that it must give at least some outline of how the mechanism of that accountability should operate in practice. Parliament would need to enforce regular and detailed monitoring of the finance well-being and the regulatory effectiveness of the Charity Commission. Speaking from my experience on the Joint Committee, I hope that the Home Affairs Committee will take up the recommendation that it hold an annual evidence session with the Charity Commission. I also hope that there can be a debate every year, in Government time, on the annual report of the Charity Commission in both Houses, as the Joint Committee suggested. My next point is on the introduction of a blanket public benefit test. At present, if an organisation’s purposes lie within the three named heads of charitable purpose—the relief of poverty, the advancement of religion and the advancement of education—it is presumed to be acting in the public benefit, unless a positive reason for doubt is presented. In the Bill, it is proposed to change that presumption, requiring all bodies to show that they are acting in the public benefit, as defined in law, before they are granted charitable status. The reversal of the presumption of public benefit will primarily impact on private schools and hospitals and religious groups, which previously came under the three headings of the preamble to the legislation about which the right hon. Member for Darlington spoke so eloquently, but which now, as the House knows, must prove a public benefit. Although the Bill does nothing to override existing case law, so it will not change the definition of public benefit itself—it is inevitable that the requirement to demonstrate public benefit will make it harder both to register as a charity and to remain as such. Moreover, the nature of the legislative requirements will mean that charities will be subjected to ongoing public benefit checks. Inevitably, it will be the smaller charities that will bear the brunt of the legislation, which are the least able to deal with that sort of regulation in terms of both manpower and expertise. Ultimately, everything will turn on how the Charity Commission operates the public benefit test. One of the most valuable contributions that the Joint Committee was able to make, and where it had a positive effect on clarifying the thinking within the Home Office and the Charity Commission, was in causing them to produce what I believe we called a concordat on how that part of the legislation will be operated. However, that is no guarantee that the change to the public benefit test will not produce uncertainty and turbulence to educational and medical bodies, whose activities have long been regarded as for the public benefit. None the less, I urge the Government to stick to what has been agreed and what is in the Bill and to ignore the old Labour class warriors chuntering on the Government Back Benches and revving up to amend the Bill in that respect. Let us hope that the new arrangement will work out as most of us believe it should. In that sentiment, I have no doubt that I have the full support of the right hon. Member for Darlington. Lastly, I wish to join Lord Craig of Radley in his outrage at the intention to abolish excepted charity status for armed services mess charities. An excepted charity, as authorised by a 1965 statutory instrument, has no obligation to register with the Charity Commission, although it must still meet the requirements of the Charities Act 1993. The real concern must be that, in due course, the threshold for registration will be reduced from a turnover of £100,000, and that more and more small armed forces charities will be required to register and to come under the closer regulation of the Charity Commission. Excepted charities that choose not to register with the commission do not have to submit accounts, prepare and transmit annual reports, or complete annual returns. The rationale behind this reduced regulation is that accepted charities, such as the armed services charities, are those that are under the control of another body acting in a regulatory capacity. There are about 15,000 armed services funds, which are charities. They are spread across the three armed forces. Their purposes range from officers and sergeants’ mess accounts to service, sporting and recreational activities. A defining characteristic of such funds is that they derive their income not from the public, but exclusively from military personnel. Ministers have assured the Grand Committee in the other place that those funds will not lose their charitable status. On Report, a Government amendment has included in the list of charitable purposes the promotion of efficiency in the armed forces of the Crown. However, that does not change the fact that an entirely superfluous bureaucratic burden will be added. It will be superfluous because the funds are more than adequately supervised by the Adjutant General. Far more so, I might add, than by the Charity Commission, which in the past has failed to satisfy the Public Accounts Committee and the National Audit Office. It caused the Joint Committee to express doubts as to its ability to meet the demands of the proposed wider remit. The commission has some way to go, and I sincerely hope that it will do so compellingly to demonstrate clearly, in today’s parlance, that it is fit for purpose. The points that I have raised are minor but extremely important. They could make the Bill even better if they were included in the measure. I hope that the Government will reconsider them in the terms in which I have put them, and consider seriously including them in the Bill in Committee or on Report. I end where the right hon. Member for Darlington, the Chairman of the Joint Committee, ended his speech, in saying that the Bill is long overdue. It will make a tremendous contribution to updating charity law. It will help to ensure that the brand is protected and enhanced. There are tremendous opportunities, working with the charitable sector, to advance the objectives that we all hold within society. I hope that the Government will consider what I have said on these minor points to see whether the Bill can be made yet better.