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Charities Bill [HL]

My Lords, this Bill improves the efficiency of the charity sector by implementing the majority of the recommendations from the Law Commission’s Technical Issues in Charity Law report. The Bill simplifies a number of processes, promotes consistency and reduces overcomplicated regulation. Rather than be burdened by overly bureaucratic processes, charities will be able to focus their resources on the public good. The Law Commission and the Charity Commission are in full support of the Bill and it has been welcomed by the sector.

During the pandemic, the charity sector has received several billion pounds of support from the Government, including a £750 million package of support for charities, social enterprises and the voluntary sector, as well as benefiting from the cross-economy measures that the Government have introduced. We are deeply grateful to the thousands of charities and social enterprises, large and small, that have provided practical and emotional support to people in every corner of this country. It is now time for us to address regulatory change that will continue to make a difference to charities in the longer term.

In 2017, the Law Commission published its Technical Issues in Charity Law report, taking inspiration from the review of the Charities Act in 2012 produced by

my noble friend Lord Hodgson of Astley Abbotts, and after extensive consultation with the charity sector and charity law stakeholders. The Law Commission gained valuable insights from an array of consultation events and meetings involving representatives from across the sector. This close engagement has led to various iterations of the proposals, and the Bill reflects this extensive input and scrutiny.

This is a highly technical Bill. However, the changes that it brings will, together, give charities more flexibility, time and resources to fulfil their charitable purposes. While we must ensure that the appropriate safeguards are in place to protect the public’s trust in the sector, we also have a duty to shape legislation to work for those delivering such vital services, helping those in need and working to improve lives. I believe that the Bill strikes a sensible balance between protecting charities’ assets and avoiding unnecessary expense and bureaucracy. The Bill makes a number of amendments to the Charities Act 2011. I will now explain the changes that the Bill will bring, grouping the clauses into themes for clarity.

Clauses 1 to 5 of the Bill will simplify current processes for amending governing documents and provide greater flexibility. The Bill will align these amendment mechanisms as much as possible across the different legal forms that charities can take.

Clauses 6 and 7 make it easier to use funds from a failed fundraising appeal for other similar purposes, alleviating the need for charities to expend time and resources to search for donors of small donations.

Clauses 9 to 14 concern the use of permanent endowment. The Bill will open up more opportunities for trustees to exercise flexibility in making decisions that are in the best interests of their charity, allowing them to utilise their permanent endowment better and make social investments, while protecting the enduring nature of such funds. The Bill creates a clearer definition of permanent endowment and a new power for trustees to borrow from their permanent endowment, and it streamlines the existing power available to trustees to release those funds.

Clauses 15 and 16 concern ex gratia payments, which are payments that trustees want to make morally but cannot make legally. The Bill allows charities to make relatively small payments without seeking Charity Commission authorisation. It also reframes the test so that trustees, if they want to, can delegate the decision to make these payments to the charity’s staff.

Concerning land transactions, Clauses 17 to 24 will remove ineffective and disproportionate statutory requirements around disposals of land by charities, create a simple process for ensuring compliance with statutory requirements and pave the way for secondary legislation to broaden the pool of advisers at trustees’ disposal.

Regarding inappropriate charity names, Clauses 25 to 28 expand the Charity Commission’s powers in respect of misleading, offensive or very similar charity names to remove anomalies and prevent an inappropriate name appearing on the register of charities.

Charities could not function without the vital role of trustees. In Clauses 29 to 31, the Bill allows charities to source goods from trustees, subject to safeguards, removing a gap in the current law. It also enables the

Charity Commission, in limited circumstances, to authorise trustees to be paid for specific work that they have carried out for the benefit of the charity.

In relation to incorporations and mergers, Clauses 32 to 35 save administrative costs by ensuring that legacies in wills can be transferred to a merged charity and by automatically giving trust corporation status to corporate charities in their capacity as trustees of charitable trusts.

On charity tribunal costs, Clause 36 provides protection for trustees to avoid charities being discouraged from pursuing litigation because of the risk of having to pay the costs of proceedings personally.

The Bill contains further provisions to modernise language and to rationalise the Charities Act 2011.

All benefits I have described have been carefully balanced against the need for proportionate regulatory safeguards. We have worked closely with the Charity Commission, which will benefit from the removal and reform of unnecessarily lengthy or complex processes.

Although not a provision in the Bill, the Law Commission’s 2017 report recommended that the Government periodically review all financial thresholds in the Charities Act 2011 with a view to increasing them, by secondary legislation, in line with inflation. The Government have accepted this recommendation and agree that such a review should take place at least every 10 years and, subject to resources, we will aim to undertake a review of the financial thresholds in 2022. I can confirm that thresholds in relation to permanent endowment and failed fundraising appeals will be included in the review.

The Bill will have a positive impact on all charities, large and small, with the greatest benefits felt by small charities, for which administrative burdens and legal and professional costs are likely to be most prohibitive and disproportionate. Other than financial savings, clarity in the law will help trustees to act with confidence in their charity’s interests. Removing unnecessary layers of regulation and administrative burdens enables charities to function more effectively. In turn, we anticipate public trust to flow from charities working unhindered and able to focus fully on their charitable mission.

In closing, the Bill plays a key role in our efforts to support the charity sector. Through the valuable work of the Law Commission, those who work in charity law every day have shone a spotlight on the particular processes that drain their resources away and distract from their charitable purposes. In providing clarity and consistency in the legal framework, charities can be confident that we are here to make their paths clearer and simpler. We continue to be immensely grateful for all their work.

I hope that the Bill receives strong support from your Lordships, and I look forward to your contributions in this debate. I beg to move.

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