Committee (1st Day)
Relevant document: 1st Report from the Delegated Powers Committee
Clause 1: Official warnings by the Commission
1: Clause 1, page 2, line 6, leave out “how” and insert “when and where”
My Lords, good afternoon. I welcome the noble Lord, Lord Bridges, to his first Committee. No doubt he has been briefed extensively and told that these are occasions on which their Lordships are allowed to do absolutely anything they like. I think this is the point of maximum terror for the spokesperson, although I am sure we will treat him gently.
This might well seem the most pedantic amendment that noble Lords have ever seen but we are dealing with charity law, are we not? Let us start as we mean to go on. However, it is a rather important amendment. I want to start the Committee’s deliberations by trying to ensure that, throughout our proceedings, we do not stray into the realms of viewing this legislation simply in terms of the extent to which it adds to the arsenal of weapons at the disposal of the commission and without thinking of the impact that some of these measures can have on trustees.
When some of us undertook the work of the scrutiny committee, under the able chairmanship of the noble and learned Lord, Lord Hope of Craighead, we were presented with witnesses who were, by and large, people with professional interests from around the charity world. At times, we rather lost the sense that on the end of this legislation will be individual trustees, the majority of whom we know are perfectly decent and honest. Just a few are not.
On the committee, we considered at some length whether this power to issue a formal warning was really necessary. In the end, we were persuaded that on balance—it was on balance—perhaps the Charity Commission could make fair and good use of it to issue a warning rather than open a statutory inquiry and go through all that that entails. Simply having the power to issue a warning to trustees where it was considered that the actions in which they were engaged presented a fairly low-level risk to the charity or to charities in general is absolutely fine. I agree with that. However, it is still a public warning. It is still something likely to cast a shadow over, if not leave a stain on, a person’s reputation. The majority of trustees hold the commission in very high regard. They take very seriously the actions of the commission. For the majority of trustees the prospect of a public warning would actually be quite difficult for them personally if not professionally.
We deliberated long and hard, and were influenced a great deal by the wisdom of the noble Lord, Lord Hodgson. He argued that this was meant to be a proportionate response to very minor misdemeanours, albeit recurring ones, and because this is not meant to be a draconian power, we should not allow an appeal mechanism, making the process a bureaucratic nightmare. I agree, but that makes it all the more important that trustees are alerted in good time that they may be the recipients of a warning, giving them a chance to put right their failures. That is what this power is supposed to be about—the prevention of fairly minor misdemeanours.
For that reason, it is important to ensure that people know where and when the warning will be published. It is one thing for a notice to be published on a part of the Charity Commission’s website, where only those of us who are sufficiently intrepid or boring to make our way will find it. It is quite another for it to be published prominently somewhere in a local paper, for example—if local papers still exist—in an area in which the charity operates. That could have quite a profound and damaging effect on the charity’s reputation.
In putting this apparently small and fussy amendment before your Lordships, I am trying to echo the points made by the Charity Law Association which thinks that trustees ought to be given fair notice that they will be subject to this so that they can try to put matters right. If we do that, this power will serve to act in the preventive way that was envisaged rather than being a rather heavy-handed hammer to crack a nut. In that spirit, I beg to move.
My Lords, there is a great deal that the noble Baroness, Lady Barker, said with which I agree. Perhaps I can take this opportunity to pay my own tribute to the work that she, along with other Members of your Lordships’ House who are present, did on the committee. There is a great deal of force in her point about the importance of the notice that is being given to trustees as to what the Charity Commission wants to do with regard to publication. However, I have a concern about the removal of the word “how” and the substitution of the words “when and where” for this reason: when you think carefully about what the words really mean, the effect of the amendment is to narrow the amount of the information that is required by the provision. There are other things built into the word “how” which are not there—the manner in which this is to be done, and how often, are two examples. One point that the Charity Law Association raised with us and is in a memorandum it sent to us in connection with the Committee stage of the Bill is the element of publicity itself and whether anonymity is to be given to the trustees who are the subject of the publication. If one restricts the amount of information simply to “where” and “when”, it leaves out the possibility of further inquiry as to the precise way in which this is to be done.
I appreciate the word “how”. After all, a three letter word seems very weak but, if you think about it, it is actually quite a powerful word because it embraces so much within it. If you read that together with what is in subsection (6) which enables people to make representations as to “how”—I repeat the word “how”—the publication is to be done, one can see that it gives scope for a good deal more inquiry.
I have huge respect for the noble Baroness, Lady Barker—I am entirely in sympathy with what she is seeking to do—but I would respectfully suggest that “how” is probably the best word to use. If it is to be replaced by something else, then there would need to be more in it than simply “where” and “when”. I find that a little untidy, which is why I suggest that we leave the word “how” as it is.
My Lords, I have some sympathy with the noble Baroness’s amendment. I hoped that she would have inserted those words in addition to “how”, so that it would have been “how”, “when” and “where”.
Before I address the pros and cons, because this is the first time I am speaking in Committee, I want to take this opportunity to let noble Lords know of a potential, tangential interest that I may have in a matter which will come before them at a later stage. It concerns fundraising. The charities report that I produced, which was published in July 2012, has a whole chapter—Chapter 8—devoted to fundraising. It is 17 pages long and makes a number of recommendations, none of which I resile from. In fact, I think many are equally, if not more, appropriate today.
In my non-political life, as can be seen on the register of interests in your Lordships’ House, I am non-executive chairman of a company called Nova Capital Management. Nova is a specialist private equity firm which is focused on what are known as “secondary directs”. This means that Nova purchases groups of companies on behalf of groups of institutional investors—often an unloved and neglected division of a much larger company. Nova provides intensive support for management of the individual companies within the group with a view to achieving improved operating and financial performance which, in due course, is reflected in a superior sale price. I play no part in the day-to-day operation of Nova, let alone of any of the individual companies in the various portfolios.
In December 2011, Nova created a company called CNH Capital Partners to take over a public company called Parseq plc. It has three divisions—two need not concern us at all. The third, Parseq Services, has a series of subsidiaries which provide business processing outsourcing services to banks, local authorities and utility companies from locations stretching from Glasgow to Brighton. In February 2013, seven months after my review was completed, the board of Parseq decided to expand its operations by acquiring a company called Panther Group. This, in turn, has a number of subsidiaries. One of these, Pell & Bales, undertakes telephone fundraising for a number of leading charities, including Christian Aid, RNIB, Cancer Research UK, Barnardo’s, the National Trust and the Royal British Legion.
As a result of the death of Olive Cooke, Pell & Bales has been caught up in the storm over charity fundraising, in particular because an undercover journalist from the Sun was embedded in the business in order to investigate the sector. In its major article of Saturday 6 June, the Sun concluded:
“There is no suggestion Pell & Bales did anything illegal. Indeed, the company is scrupulous in instructing its employees to stick to acceptable practices”.
I understand that the management of Pell & Bales has since reported the Sun to IPSO as a result of what the company believes are breaches of the press guidelines.
As I have explained, my very tangential association with Pell & Bales began six months after I completed my review. There can be no suggestion that it was in any way influenced by that association. Some might argue that I have nothing to declare. I think it best if I explain this position on the first occasion I speak in Committee. This amendment is not about fundraising but I judge that the sooner I lay out the facts and explain my position, the better. In the highly charged atmosphere of cases such as the tragic death of Olive Cooke, truth and accuracy can be early casualties.
With that declaration, I turn to the amendment in the name of the noble Baroness, Lady Barker. As I explained, the ideal situation would be to have “when and where” added to “how”. An example is the impact not only on a trustee, but on a charity. The charity might have been given an official warning—or a warning of a warning under new Section 75A(3)—but perhaps I and my fellow trustees do not agree with the commission’s determination. We make representations, but the commission decides not to accept them. Our charity has a significant funder and I want to talk to him or her about this case and give the trustees a view of the issues. Such a conversation or discussion is made much clearer if I know when and where the news of the official warning is to be released—the date, time, methodology and so on. “How” could mean no more detail than by a press release on a date yet to be determined. That would be unfair to the charity, which may be contesting the view and wants to be able to talk to its funder to ensure that its side of the argument is heard, without which the case might go by default.
With respect to the noble and learned Lord, Lord Hope of Craighead, I do not entirely take his point because, for a charity trustee, some further clarity in the wording would be a good idea. Therefore, I look forward to hearing my noble friend’s response.
My Lords, I am very pleased to welcome the noble Lord, Lord Bridges, to his first Committee. I am sure that we will have some productive discussions over this and the other Committee sessions, and, indeed, beyond that.
When I looked at the amendment in the names of the noble Baroness, Lady Barker, and of the noble Lord, Lord Wallace of Saltaire, I thought that there is not really much to disagree with, but because they are Lib Dems I thought it was worth a go anyway. As it appeared, we on these Benches reached the conclusion that we could not really see anything untoward about it. But perhaps not unsurprisingly, given his legal brain, the noble and learned Lord, Lord Hope of Craighead, has raised an issue that certainly had not occurred to me.
With noble Lords’ indulgence, as a brief aside, the noble and learned Lord and I take our titles from the same county, Perth and Kinross. I am more towards the eastern end, on the outskirts of Dundee where I grew up. The noble and learned Lord mentioned the word “how” and how such a small word could, perhaps, have significant meaning. Let me just enlighten noble Lords that, in Dundee, “how” has a different meaning than is more normally associated with it. If you are at your desk at work in Dundee and you turn to your colleague and say, “It’s 15.47, I’m going home now”, he or she might say to you, “How?”. You might say, “By train or bus”, but the answer would be, “Because I’m not feeling very well”. “How” tends to mean “why” in Dundee. I use that as an illustration of the fact that the noble and learned Lord, Lord Hope, was indeed right in pointing out that that little three-letter word can contain a bit more than might at first be obvious.
More seriously, I take the noble and learned Lord’s point that it could be seen to be narrowing the wording in the Bill. It is certainly right that, wherever possible, individuals should not be identified unless the Charity Commission is very clear that that is the appropriate thing to do. If they are to be identified, they have to have as much notice as possible and an indication of the form in which the commission proposes to publish the warning. Whether that means them saying, “We will put it in these newspapers”, or whether they say just “in the media”, or “on such and such a date” I do not think is of huge concern. But I accept that the main thrust of this part of the legislation should be to ensure that the individual is given the protection that he or she deserves until such time as the commission reaches its conclusions.
Like other noble Lords, I was a member of the Joint Committee that looked at the draft Bill. In response to the Joint Committee’s report, the Government set out new criteria in Clause 1, which are very welcome. However, the remarks we have heard, particularly those from the noble and learned Lord, Lord Hope, mean that we should perhaps return to this issue on Report with a view to coming up with some wording that would be more appropriate. I am not going to suggest anything off the top of my head because I initially thought there was nothing to which you could object in this amendment. Given what we have heard, it may well be that further consideration is needed. It is important for the commission to have this power, but the individual has to be given some consideration. What happens to charities is important, and it is the Charity Commission we are talking about, but let us not forget that individuals as trustees do invaluable work for charities and we have to give them due consideration.
My Lords, noble Lords need to bear in mind that each of the three words “how”, “when” and “where” is a preposition, and each word has a slightly different meaning. Since the intention of this part of Clause 1 is plainly to give as wide a discretion to the commission as is practicable, I respectfully suggest that all three words should be included, each meaning something slightly different. If the words were “how, when and where”, all would be covered.
My Lords, before I address the amendment moved by the noble Baroness, I should repeat my declaration of interest as a trustee of the Foundation Years Trust.
The noble Baroness began by suggesting that she might be seen as pedantic, and I think the other word she used was “fussy”. I would not dream of accusing the noble Baroness of being either. Indeed, the whole purpose of this Committee is to kick the tyres of this policy and to do precisely what we are doing, which is to examine every word, even thin little words such as “how”.
The noble Baroness began by making an excellent overarching point which I endorse wholeheartedly. We need to ensure that this Bill and all the measures within it are balanced. We are mindful of proportionality. We must also ensure that proper safeguards govern the measures and all the new powers in the Bill. I very much welcome the debate that we are going to have. I would also like once again to put on record my thanks to all noble Lords who spent so much time in the pre-legislative scrutiny committee shaping the Bill before us today.
Taking a step back, the Charity Commission asked for these powers following criticism from the NAO and PAC about its regulatory approach. These powers were a specific recommendation of the NAO in its December 2013 report. Further calls for tougher powers for the commission came from the extremism task force in December 2013 and from the Home Affairs Select Committee.
We consider the Bill is a “must have” because it forms just one part of a multistrand approach to addressing criticisms of the Charity Commission by ensuring that it has the tools it needs to do the job that we and the public expect of it. One of these powers is the power to issue an official warning. As my honourable friend the Minister for Civil Society said to the Joint Committee in pre-legislative scrutiny, this is one of the most important new powers in the Bill. An official warning could be issued to a charity trustee or to the charity itself where the Charity Commission considers there has been a breach of trust or duty or other misconduct or mismanagement. The power would enable the Charity Commission to publish a warning, as we have been discussing. The Charity Commission has said that it would not publish all warnings, which is an important point to note. The decision to publish would be in line with its current policy on publishing the announcement of statutory inquiries, which are considered on a case-by-case basis. The Charity Commission would not publish an official warning if it considered that it would not be in the public interest to do so.
Let me give the Committee two brief examples of when the Charity Commission might consider issuing an official warning. Fist, a charity is consistently a little late in submitting its accounts. An official warning would remind the trustees of the seriousness of their non-compliance. Secondly, a charity makes unauthorised payments to a connected company or one that benefits a trustee. The size of the sums involved means that it would be disproportionate for the commission to take firmer action, but it could issue an official warning on future conduct.
As the Committee would expect, and as I mentioned, the power is accompanied by a number of safeguards; I know these were discussed in the committee, and others have been added since then. The first is as follows: the Charity Commission must give notice of its intention to issue a warning to the charity and its trustees. The notice must specify a number of matters, including the grounds for issuing the warning and any action that the commission considers should be taken by the charity to rectify the breach that has given rise to the warning. The notice must specify a period for representations to be made about the proposed warning, and the commission must take account of any representations before it issues any warning. An official warning could also highlight the likely consequences of any further non-compliance, which would be likely to require a more significant intervention by the regulator.
This is the one new regulatory power in the Bill that we and the Charity Commission expect may impact on more charities than the other proposed powers. Most of the powers in the Bill are targeted at serious, deliberate abuse of charity. The official warning power would be used more frequently by the commission as a more reasonable and proportionate way of dealing with breaches where the risks and impact on charitable assets and services are lower.
The Charity Commission’s current policy is to consider publishing reports of its non-inquiry work where, first, there is significant public interest in the issues involved and the outcome and, secondly, there are lessons that other charities can learn from them. The commission has explained its proposals for publishing official warnings in evidence to the Joint Committee on the draft protection of charities Bill. In its written evidence, it said:
“We do not intend to publish all warnings. Whether or not we do so will, in line with our current policy on publishing the announcement of statutory inquiries, depend on whether it is in the public interest. We would not publish an official warning if we consider that it would not be in the public interest to do so”.
It went on to say that it would follow its existing practice of inviting comments on factual inaccuracies, which it would take into account, and would publish guidance on the criteria that it would use in deciding whether or not to publish an official warning.
The requirement for certain information to be specified in the notice of an official warning was added in response, as I said, to a recommendation from the Joint Committee on the draft protection of charities Bill. In terms of where the official warning would be published, the Charity Commission already publishes around 25 non-inquiry regulatory case reports on its pages on www.gov.uk. Details can also be published alongside the charity’s register entry. It also summarises its regulatory casework and, in particular, identifies each year wider lessons that charities can draw from it in an annual report. To pick up the noble Baroness’s point about publication, only in certain cases might the commission consider issuing a press release, and this is always shown to the charity in advance. The commission will also share with the charities where it is to be published.
As to when the commission would publish the official warning, this would always be after the period of representations, and a period for the commission to consider any representations made by the charity. There may be some cases where the commission needs to have further engagement with the charity before it can publish an official warning, based on the representations that it receives from the charity. So it is not possible for the commission to specify exactly when it would publish an official warning at the point at which it issues a notice of intention. However, it would tell the charity before publication. If the charity needed to have such discussions and needed to have an extra time period, I am sure that the commission would listen carefully and respond accordingly. The commission already has in place a procedure and published policy that works which announces the opening of inquiries, and it has had no complaints from charities about the process. The commission would engage with the charity and would not publish without letting them know but, as I have said, it would not be possible to do this in the original notice of intention.
Any published details of warnings would have to be removed by the commission after a period of time. Its current practice in relation to inquiry and case reports is to archive them after a period of two years. The commission will set this out in its guidance on official warnings, which will be published before the power is commenced. As the noble and learned Lord, Lord Hope, suggests, the amendment might well narrow the requirement if it were brought into effect.
I am sympathetic to the intention behind, and I agree with the spirit of, the noble Baroness’s amendment to provide further clarity around the publication of an official warning. I think that we agree in principle and I hope that I have been able to offer some reassurances about the way that the process would work. As I have stated, the criteria would be published and the commission would engage with the charity throughout. However, logistics and the nature of the response from the charity to the notice would mean that it would not be able to say when it would be published at such an early stage. On that basis, I hope that the noble Baroness will be able to withdraw the amendment.
My Lords, I thank noble Lords for the range of contributions, which showed just how important a three-letter word can be. I say to the noble Lord, Lord Watson of Invergowrie, that I speak Scottish as well. It is a good job that the word “aye” is not written into legislation very often because it has a multitude of meanings.
I thank the Minister for his response. I proposed this amendment for two principal reasons. One was picked up by the noble Lord, Lord Hodgson of Astley Abbotts. When one works with charity trustees, as I have done a lot, it is not unusual for the administration and so on to take much, much longer than it would in, say, a commercial firm. Simply because people are volunteers, processes take time to complete. Whenever I drew up things such as grievance and disciplinary procedures, I used to look at people who had grievance procedures and had taken them either from a local authority or from a standard suggestion by lawyers. The timescales were longer because things just took longer to do. The noble Lord, Lord Hodgson, is right that it is necessary to have something that concentrates the minds of trustees. It is important that they say, “We have to sort this by this date or else this warning is going to be issued”.
There is a second reason why I thought it important to put the amendment forward. The Minister said that the Charity Commission would, after a period of time, remove notices and archive them. However, these days, given the development of the web, the issuing of a statement is irrevocable—it is there for ever. I therefore think that it behoves us all to be slightly more careful than we might otherwise have been in the days when things were issued solely on paper and could be torn up without anybody knowing. We need to be that bit more careful about the way in which we pursue these matters.
I bow to the assessment of the terminology given by the noble and learned Lord, Lord Hope of Craighead. I understand the inclusivity of words which lawyers love so well, but I rather favour the suggestion of the noble and learned Lord, Lord Scott, that we should perhaps think about putting all three of these words together. It seems that if the Charity Commission is to exercise this power, it needs to give the utmost consideration to how it communicates with trustees. The one thing that a charity and a charity trustee must value above all else is their reputation. That is the thing that is most vulnerable to attack.
I thank noble Lords for taking part in this debate, which I hope they think was useful, and for the moment I beg leave to withdraw the amendment.
Amendment 1 withdrawn.
2: Clause 1, page 2, line 15, at end insert—
“( ) The Charity Commission may call for and randomly or systematically check the Disclosure and Barring Service checks undertaken by charities on trustees.”
My Lords, I remind the Committee of my interests as a trustee of a number of quite small charities. In moving Amendment 2, I shall speak also to Amendment 7, both in the names of my noble friend Lord Watson and myself. As with the next group, these amendments are to improve the safeguarding of children and vulnerable adults, particularly in regard to sexual abuse.
Amendment 2 concerns the power for the Charity Commission to check on disclosure and barring service checks undertaken by charities. It follows concerns raised by Mandate Now, a pressure group supported by the Survivors Trust, which lobbies for mandatory reporting of abuse, and is led by adults who experienced child abuse in establishments that were also charities. Mandate Now told us of a charity providing education; in its inspection report, there were references to failure to return—that is, notifications—but the staff concerned went on to abuse elsewhere. They also told us about a charity providing education where the press reported that the head in that case had phoned a receiving establishment to warn it of an abuser who was applying to work there. However, no formal notifications were found that might have ensured the known abuser would not offend elsewhere, and—this is the important thing—the trustees do not appear to have challenged the head.
In 2010, an inspection report on another educational establishment registered with the Charity Commission said that there was no,
“established policy for reporting directly to ... the Independent Safeguarding Authority, responsible for such referrals … The advisability of making such referrals is now clearly understood even when there may not be a strict legal obligation to do so”.
Our concern is that it is advisable only—there is no compulsion. In the case that I have just mentioned, neither the management nor trustees made any referral to what is now the DBS, which meant that it did not lead to any action. No action was taken about those trustees for not making those reports.
I think we can all agree that notification should not be an optional extra. More than that, the Charity Commission should be able to check that the system is working as intended. Relying on trustees always to do the DBS checks obviously does not always work.
Another example occurred in an educational establishment which happened to be run by a religious order, where the head ignored the enhanced check, which showed a history of child abuse offences for the new chair. It appears to be rather discretionary as to whether trustees act on information provided by the DBS, when there are no independent checks by a third party that the correct procedure is happening. Amendment 2 gives a power—not a duty—to the Charity Commission to undertake such checks.
Amendment 7 covers perhaps the most glaring anomaly in the current law, which is that someone who has got into debt and is subject to an individual voluntary arrangement, or a person with financial misdemeanours behind them, is automatically excluded from being a trustee, but people on the sexual offenders register, who have surely done far worse than run up their credit card debt, can happily serve as a trustee. To date, the Government have said that when something comes to light, or in areas covered by the DBS, such people should be identified. That is not good enough. We do not want to wait until something has happened, or until other trustees get suspicious and then have to act, possibly against someone with whom they have been working closely on the trust. Nor is it sufficient to deal only with charities which obviously are in contact with children, and thus covered by DBS. There may be other examples, such as a church hall that gets used by guides, or for children’s parties. That would not have been covered.
An alcohol misuse charity could decide to run a special programme for the children of problem drinkers or, similarly, a cancer group could offer support to the children of cancer patients. They would not be covered by the current safeguarding regime. Who would think to check on the background of someone, particularly if they were offering to be the treasurer of such a charity? It is a thankless task, as I know. Trustees are all too willing to sign up a suitably qualified person without a thought for their wider background. Indeed, I have had dealings with an accountant who, unbeknown to the trustees using him, admittedly as an adviser rather than a trustee, had been convicted, although not imprisoned because he was having a kidney transplant, as he had been found with more than 1,000 images and videos of child sex abuse on his computer. None of the trustees knew about it.
I know that many trustees are very sympathetic to our proposal to add sexual offences to the criteria that trigger automatic disqualification from being a trustee. Of course we would want a waiver for charities working with ex-offenders which need that input to help them in their work. Those charities would know of the record and there would be no secret.
We also know that many smaller charities, particularly parish charities, depend on hard-pressed volunteers and already find the expanding vigour of the Charity Commission guidelines and reporting somewhat burdensome. Expecting those trustees to think and risk-assess before they approach a new trustee is quite a burden to put on them. Surely the onus should be on the person on the sex offenders register to know they should not, without a waiver, be a trustee. We should not to leave it to chance that someone else would spot it and consider whether it makes them a risk.
This is an opportune moment to add being on the sex offenders register as a category for automatic exclusion, subject to waiver, as this Bill adds terrorism, money-laundering and bribery to such automatic exclusions. I assume that the Government are as concerned about safeguarding children, women and other vulnerable people as they are about debtors and money-laundering. I am therefore very hopeful that this amendment can be accepted. I beg to move.
My Lords, the noble Baroness, Lady Barker, and the noble Lord, Lord Hodgson, talked about concentrating the mind of trustees. The main attribute of my noble friend’s amendment is to work further on that concentration of the mind. Contrary to the assumptions often made that charities regulated by the Charity Commission are the large household names which have skilled, informed trustees who are offered training and induction, most charities are not like that. They are small, with governance that can be a bit hit and miss for some of the reasons we have heard: the difficulty of getting volunteers and so on. I venture to suggest that the majority have no idea about the Charity Commission and its powers and have a very hazy concept of collective responsibility, which we will discuss in the next group of amendments. History shows us that we cannot take the protection of children too seriously. We must also be aware of the serial, repetitive nature of some sexual offences and of the great skill in deception that sexual offenders often have. I therefore very much support these amendments. However, I am wary of the need for balance, which the Minister reminded us about, so I am very pleased that the amendment acknowledges that some charities need positively to seek trustees with experience of, even convictions for, these offences so that they can be helped in their work of rehabilitating offenders.
My Lords, I would like to focus on Amendment 2. I do not doubt that it is an exceptionally well-meaning amendment. If that sounds patronising, I do not mean to be at all; I think that it is very well meaning. We have all been horrified by the Jimmy Savile cases and the other cases of that nature, and we all want to do everything we can to protect children. The easy option is to say, “Absolutely, we should agree to this”, and that would avoid the by-product that one might be accused of being careless about the safety of children.
However, this afternoon I shall resist that temptation and ask my noble friend to reject the amendment. I do so on three grounds: those of efficacy, proportionality and impact. I want to say a word about each of those in turn but, before doing so, I draw the Committee’s attention to the fact that, before doing the charities review, I produced another report for the Government on what stopped people volunteering—what stopped people giving money and their time. The report was called Unshackling Good Neighbours. I took a lot of evidence from people about this and I should like to refer to some of it.
First, on efficacy, there are not many good outcomes from the terrible saga of Jimmy Savile and other prominent people, but one is that now the doziest trustee of the sleepiest charity is aware of CRB vetting and barring, as well as the legislation and the importance of complying with it. That is for two reasons: first, the risk to trustees themselves if they fail to do so; and, secondly, the risk to the charity they represent. We were talking about fundraising. The rows that there have been over unauthorised fundraising will be as nothing compared with the damage to a charity’s reputation if it is shown to be light-handed over the need to check its volunteers as appropriate.
The evidence that I had when preparing the Unshackling Good Neighbours report was that screening to prevent undesirable individuals becoming involved with children or vulnerable adults is now pretty fine. Indeed, if I heard the noble Baroness aright, the example that she gave was from 2010, about five years ago. We learned that the dangers, such as they were, were not so much within the institutions, because these undesirable people go where the softer targets are. They know that they are going to be checked if they work in schools with vulnerable adults, so the dangers are outside the school gates and, above all, on the internet, and that is where society needs to apply the pressure to ensure that our children are safe. Therefore, at the moment I do not see why this amendment would add to the efficacy of the vetting and barring arrangements vis-à-vis charities.
Secondly, on proportionality, vetting and barring legislation has nothing to do with charity law. It is the statute on its own that needs to be enforced. Vetting and barring is to do with a well-run organisation, whether it is a charity or not, but it does not particularly apply to charities. I think that government departments and the police need to enforce their own legislation and not pass it around, trying to find somebody else to do the checking for them. I am always concerned that if more and more is passed to charity trustees, fewer and fewer people will wish to take on the risks and responsibilities of what appears to be becoming a very one-sided state of affairs. If, as I believe, the mesh on the screen is pretty fine, should we be imposing another specific role on the Charity Commission? It should do it anyway, and in any case it has the powers to ask for this. The commission is already stretched. Vetting and barring is a role that is not part of charity law and there is already an established enforcement procedure for it.
If we are concerned about the situation with charities, why are we concentrating just on vetting and barring? Why do we not include health and safety? That, too, is very risky for people. Without sounding too flippant about it, a school headmaster whom I talked to said, “Actually, if you want to safeguard children with a new level of screening, the best way is to make sure that everybody everywhere drives at below 30 miles an hour, because that is how most children are injured”. Therefore, I think that proportionality is the second important issue.
The third is the question of impact. Surely our shared objective must be to encourage as many of our fellow citizens as possible to become involved in our civil society and to volunteer. It may be strange to the Committee but many potential volunteers find vetting and barring legislation intrusive, especially in the way that it is implemented and shows a lack of personal trust. The law says—I think that the Minister will put me right if I have got this wrong—that it is a question of frequent and intensive contact. Nervous trustees interpret those words pretty widely, and amendments like this will increase that nervousness and increase the likelihood of wholesale vetting and barring checks even when they are not needed.
One of the examples that I received was from a retired doctor living in the north of England: she was 65 and wished to do some work reading to Alzheimer’s patients. She was required to carry out the CRB vetting and barring check. She said to me, “Look, I’ve been before the GMC now for 35 years and if you can’t trust me now, what else do you require from me? I’m not going to do it as a matter of principle”, and she did not. That seems to me to be a shame. It is important that we do not allow this to become out of all proportion.
I have a second example, from a lady who got involved in a Manchester drama group. She was required to be checked and was happy about that but, she says,
“having been approved, we were invited to a session with the local child protection officer. I came away from that meeting with a number of very serious questions as to whether I should get involved with this sort of group. The talk left me feeling I would potentially be placing myself in situations of real risk. The child protection officer focussed the session on ensuring no adult put themselves in a vulnerable position e.g. if a child requests to go to the toilet—in no circumstance should an adult accompany them. If a child (with particular reference to girls) falls and cuts her knee, whilst wearing tights—under no circumstances should any adults remove the girl’s tights and help stem the bleed. No adult, whatever sex, should ever be alone with either one or more children. Needless to say, I came away from the session questioning the sense in many of the messages conveyed. As a caring responsible adult … I did not feel at all comfortable with the prospect of not being able to help an injured child”.
In accepting the spirit of the noble Baroness’s amendment, we have to be prepared to step back from this issue and accept that there is another side, however difficult it is to interpret. Why does this matter so much to us? All of us, particularly as parents, are of course horrified by child abuse and wish to stamp it out. Less attractively, however, there is an industry out there that actually profits from CRB vetting and barring checks. If noble Lords receive the same emails that I do, they will have had one today from one of the agencies that provide vetting and barring checks saying, “If you get checks through us for the next month, we’ll put £1 of the check cost towards charity because our chief executive’s going to run a marathon”—a way of appearing user-friendly. That is fine, but they are not going to tell us that fewer checks are needed; they will tell us that we need more. Some of the big charities have vetting and barring sections, and they too—after all, it is their job—are going to say, “We need more checks and more emphasis on them; that is the right way forward”.
I am not so sure. I think that right now the mesh performs its task pretty well. Is it perfect? Of course not. Whatever the size of the mesh, though, there will be failures, and when they happen we shall be told by someone that if the mesh had been finer we would have caught the person in question, and that will be very hard to rebut. Still, we need to stand back now and not impose further responsibilities on the Charity Commission that, as a by-product, may reduce the willingness to volunteer.
My Lords, I wonder if I might ask the noble Baroness, Lady Hayter, a question about her Amendment 11, which, as she explained quite clearly, deals with children. A lot of my work with charities is about vulnerable adults. In fact, the noble Lord, Lord Hodgson of Astley Abbotts, is right: if there has been any silver lining to the horrors that have been unveiled over the last five years it is that there is now a much clearer focus on the need to protect children in all settings. That includes in charities.
The law governing abuse of vulnerable adults is much less robust. If one were to think about this in a strategic way, the increase in dementia that will happen over the next 10 to 20 years, barring the discovery of an effective medical treatment, means that scope for abuse of older people will be far greater than it is now. That is something to which good charities—there are many of them—are alive. They put in place robust procedures with their staff and their volunteers. I happen to think that it is no less serious than abuse of children. If I have an objection to that amendment it is that omission.
My Lords, I will say a word or two about Amendment 7, which seeks to add a new “case K”, where:
“P has been found guilty of a sexual offence or has been placed on the sex offenders register”.
I will sound a note of caution about this amendment, for a variety of reasons.
The previous cases listed, some of which are the subject of other amendments, deal with incidences of dishonesty, failure to observe court orders and things of that kind. They cast doubt on the probity of the individual managing trust funds and are reasons for thinking that there might be some mismanagement of the funds. Indeed, terrorism is added, for reasons that we all understand. What is being introduced here is something that is not generic to the others, although it deals with an undoubtedly very disturbing social problem, which is people who abuse children, although it is not confined to child abuse, which I will come back to in a moment. There is a question of whether it is right to bring other criminal offences into the automatic disqualification field. One can think of other cases—extreme violence, for example. Crimes of violence are not listed here. There may be other crimes of a kind that society would regard as repugnant, but they are not listed here either. I have some doubt as to whether it is right to put the sexual offences chapter into the automatic disqualification field.
There are other reasons for being concerned about the wording. There are two chapters here. First, there is being found guilty of “a sexual offence”. There is no qualification as to how serious that offence may be. Anything that falls within the broad chapter of sexual offences would be included here, some of which may not require or justify a sentence of imprisonment at all. Then there is “the sex offenders register”. The position is that a person is placed on the sex offendering register as a matter of law if a sentence of 30 months or more is passed. So far so good: you are dealing with the more serious categories to justify being put on that register, but the initial part—conviction for “a sexual offence”—does not include everything.
There is a feature of the register that has been cured by order, but which caused concern in a case on which I sat in the Supreme Court. An 11 year-old boy who had committed a sexual offence—a very serious one, because he was sentenced to more than 30 months’ imprisonment or detention—was placed on the register. As it stood at that time, in 2010, the presence of his name on the register was without limit of time. It is an indefinite feature.
Sitting suspended for a Division in the House.
My Lords, I will resume what I was attempting to say. Before we broke for the vote, I drew attention to the width of the expression “a sexual offence”, which is a cause of some concern. There are a number of points to be made as far as the sex offendering register is concerned. First, it applies to people who have been sentenced to 30 months or more of imprisonment or detention. Secondly, subject to an order that came into force in 2012 and gives a certain power to the chief officer of police, the entry on the register is indefinite, without limit of time.
The case that I was about to mention came before the Supreme Court in 2010 and led eventually to the making of the Sexual Offences Act 2003 (Remedial) Order 2012. It was a case where a child aged 11 was convicted of an offence. It caused real grounds for concern in that the crime he committed meant that he would have had a permanent position on the register. One has to wonder whether somebody who committed an offence of that kind when a teenager and who reached the age of 60, let us say, should really be subject to the automatic disqualification which would flow from this amendment if it were to stand as it is.
I appreciate that the chief officer of police has the power to remove people from the register but I do not know how often that power has actually been exercised. It may be that the Minister can find out from other sources as to the efficacy of the order, but it is a ground for concern that placing on the register has such a powerful effect on the individual. We heard evidence from a body called Unlock. It made the point that there are some people for whom rehabilitation is so important. Contributing to public life by participating in charities, years after an event which happened at a much earlier stage in their life, is something that they would greatly value. There are real grounds for concern about the width of the amendment and its suitability, and whether it really falls into the nature of offences that would justify automatic disqualification.
I raise these issues as a note of caution. I would not go to the point of voting against the amendment if it were pressed to a vote—which, of course, it cannot be in Grand Committee—but these points suggest that the question requires careful consideration before the noble Lord would accept the amendment.
My Lords, let me start by echoing what my noble friend Lord Hodgson of Astley Abbotts said. We all agree that we must do all we can to ensure that the vulnerable—be they young or old or, as the noble Baroness, Lady Barker, said, those with dementia—are protected within charities. The question we are grappling with is how best to do so.
The Charity Commission takes safeguarding issues very seriously. Its statement of regulatory approach makes it clear that the abuse of vulnerable beneficiaries is a matter to which the commission will pay particular attention, alongside terrorist abuse of charities and fraud. The Charity Commission’s director of investigations, monitoring and enforcement has said:
“The public relies on trustees to have robust procedures in place so that people working in a charity with access to beneficiaries are suitable to hold those roles”.
“ensure their charity has appropriate and robust policies and procedures in place to safeguard the charity’s beneficiaries, including a process for recording incidents, concerns and referrals”.
The Charity Commission publishes detailed guidance for charities on their safeguarding responsibilities. It explains the legal requirements for charities working with children and vulnerable groups and how they must safeguard them from harm. It covers what safeguarding involves, what child protection policies and processes should include, and explains the Charity Commission’s role in ensuring that charities follow the law.
The Protection of Freedoms Act 2012 established, as your Lordships know, the Disclosure and Barring Service or DBS, which processes criminal records checks and manages the lists of unsuitable people who should not work in regulated activities with children or adults. The DBS decides who is unsuitable to work or volunteer with vulnerable groups. There are two points to stress: it is an offence first, for a barred person to apply for such work, paid or voluntary; and secondly, it is an offence for a charity to employ a barred person in such work. Furthermore, Sections 35 and 36 of the Safeguarding Vulnerable Groups Act 2006 imposed a duty on regulated activity providers and personnel suppliers to provide the DPS with information where there is a risk of harm to a child or vulnerable adult. There is an established policy of reporting abuse directly to the DBS.
Turning to charities, when appointing new trustees or recruiting employees who will engage in regulated activities with children or vulnerable adults, charities should ensure that appropriate checks are undertaken. As I said, it is an offence for a person to permit a barred individual to engage in a regulated activity if he knows or has reason to believe they are barred. The Protection of Freedoms Act 2012 includes a duty on regulated providers to check whether a person is barred but this is not yet commenced.
The Charity Commission requires charities working with children or vulnerable adults to have in place policies and processes for safeguarding them. Where concerns are raised with the commission about safeguarding issues in a charity, the commission may request information from the charity about its safeguarding policy and evidence to demonstrate that that has been properly implemented. This could include requesting details of DBS checks that have been carried out on trustees, staff and volunteers. Where DBS checks have not been carried out and should have been, the charity may have committed an offence if it permitted a barred person to engage in regulated activity, knowing or with the reasonable belief that the person is barred from that activity.
That is the background. Turning to the noble Baroness’s first amendment, the Charity Commission does not need a specific power to enable it to call for or either randomly or systematically check that charities have undertaken proper DBS checks on trustees—or for that matter staff or volunteers. It can do so under its existing powers. Of course, there is a policy question of whether the commission should undertake random checks of charities’ procedures in relation to DBS checks rather than wait for concerns to be raised with it, and whether that would be an effective use of the commission’s limited resources.
Here I point to the report of my noble friend Lord Hodgson, which he mentioned, Unshackling Good Neighbours. In that, my noble friend questioned regulatory duplication. The task force report said:
“A second aspect of this red tape ‘band-wagon’ is the tendency for regulators to, as it was put to us, ‘take in each other’s washing’ (i.e. to ask questions about regulations which are not directly their concern). For example, appropriate CRB checks are a legal requirement. Should the Charity Commission (responsible for enforcing Charity Law) be asking about CRB checks or OFSTED (responsible for educational standards) be asking questions about PAT checks? Should the responsibility not lie with the organisations to decide what is required to comply with the law? The present situation, in which small”,
civil society organisations,
“are asked over and over about regulatory compliance, tends to undermine their confidence in their own judgment and to feel that ‘they must do something’”.
We need to bear in mind that almost all trustees are volunteers, as my noble friend Lord Hodgson pointed out. We do not want to impose onerous or duplicative requirements that could have—to coin a phrase—a chilling effect on the willingness of people to step up to serve as trustees. This is an important element of the proportionality argument that I made at the start. It is important that charities, like private and public sector employers, have in place the proper safeguarding policies and processes and, where required by law, obtain the necessary DBS checks.
I have some sympathy with the noble Baroness’s second amendment in this group. Like all noble Lords involved in the debate, I want to ensure that unsuitable individuals are not able to serve in positions of responsibility where they could present a risk to children or vulnerable adults. However, to add to what the noble and learned Lord, Lord Hope, said, I would like noble Lords to consider a number of potential issues of concern were we to consider such an amendment. The first is the question of proportionality. As the noble and learned Lord said, the sex offender register is very wide-ranging, and more than 43,000 people are on it. Any sexual offence with a sentence of more than 30 months results in an indefinite notification requirement to be on the sex offender register. As the noble and learned Lord pointed out, there is an issue about the efficacy of the order, and I will look into that point. There is also a question about relevance. Should a person on the sex offender register be banned from being a trustee of a charity that has nothing to do with children or vulnerable adults—for example, a historic building preservation trust?
In framing the criminal offences that give rise to automatic disqualification from charity trusteeship, we have been careful to consider offences that are relevant to the role of a charity trustee: those involving deception or dishonesty, support for terrorism or money laundering, for example. In these cases, an unspent conviction, with the proviso of a waiver to aid rehabilitation, is relevant to the role of a charity trustee. It is not so clear that sex offences would always be relevant to a person’s ability to serve as a charity trustee. Where it is, there is already a system in place to protect children and vulnerable adults from the risk presented by unsuitable people. There is the mechanism of the DBS, which decides who is unsuitable to work or volunteer in regulated activity with vulnerable groups, and it is illegal for a barred person to apply for such work or for a charity to employ such a person. This system is in place not just for charities but for other social enterprises.
There is another important failsafe to think about. It is the disqualification power in Clause 10. The Charity Commission has said that it would consider using this power where someone is serving as a charity trustee who is clearly unsuitable, given former convictions for sex offences, but who is not barred from serving as a charity trustee because the role involves no regulated activity. The Clause 10 disqualification power would give protection in such circumstances, enabling the Charity Commission to disqualify a person who is unfit from serving as a charity trustee and senior manager. A disqualification order could be limited to a particular class of charity, in this case those working with children or vulnerable adults.
I hope that the noble Baroness will recognise that a specific power to request from charities details of their DBS checks is not necessary and that she is reassured that the Charity Commission takes these matters very seriously and will consider how it can secure greater assurance that charities that require them obtain the proper DBS checks. In relation to extending automatic disqualification to individuals on the sex offender register or who are guilty of a sexual offence, I hope the noble Baroness will accept my explanation that the DBS system is the right system to protect children and vulnerable adults from unsuitable individuals regardless of whether the organisation is in the public, private or third sector.
While I am very sympathetic to the aims of the noble Baroness to further protect children and vulnerable adults, I hope she will understand that I am not able to accept her amendments today. I will, however, commit to considering and discussing with the Charity Commission whether there is more that can be done in this area, and I am happy to meet the noble Baroness before Report to feed back on those discussions.
I will certainly take up that offer. I want to make only a couple of comments. I thank noble Lords who participated in this debate. My noble friend Lady Pitkeathley quite rightly said that this is about concentrating the mind. If we do not get this movement, I hope nobody reading this in a few years’ time says that the Minister was being very complacent. I do not think anyone who spoke was complacent, but the feeling coming across is that everything is fine as it is, and I am not sure that that is correct. It is quite right that the case was five years ago but the charities that have dealt with abused children have been with us this week and last. They retain those concerns and will not be reassured by some of the things that they have heard along the lines of, “Don’t worry, it’s all there”.
I was not suggesting that the Charity Commission had to check that charities were doing their job with DBS; I was suggesting that it has the power to do so. I want to read Hansard very carefully about whether it has that power or not. At one point the Minister was saying that there was a power for the regulators that had not yet been implemented, but at another point he seemed to be saying that the commission could do this. Whether it could, short of an inquiry, I am not certain. Perhaps that is something we could clarify. I think that I read out some of the stuff that was said. The charities concerned have been told that these spot checks, if you like, could not be done.
There is also something beyond the charity itself. We have seen the damage that was done both to the NHS and to the BBC by their complete failure over Jimmy Savile. I would hate to find that a charity where this sort of thing happened then damaged the whole of the charitable sector. That risk remains.
I thank the noble and learned Lord, Lord Hope, for his comments. I certainly think that the wording of this could be greatly improved. It would be about serious sexual offenders. I think that some of the comments about being on the register for life probably affect other things even more than this particular one, and that is more a question about the register itself. I think that I emphasised the word “waiver” a few times, not only for ex-offenders in general but for here. A waiver to get someone back into charitable work or into civil society is great. As people know, I was and still am very involved in alcohol misuse. If we did not have ex-offenders working for us, we would be rather short of hands to do it, so the waiver is very important.
My concern remains that we are more concerned about money than about people. We are adding money-launderers to the people who will be barred and we are very worried about people’s ability to look after funds, but beneficiaries are probably rather more important.
The issue remains that we do not know which charities these people could be involved in—even, I have to say, a charity working to restore historical buildings and churches. If a woman gets raped in one of those buildings, I would not want to be the Minister who said, “Oh well, that’s a safe charity because it doesn’t see children”. Those are empty properties late at night. As a woman I would be very worried if someone who could have been on the sex register, not for a child but for a serious sexual offence, looked terribly respectable in preserving an old building, and I was the one there late at night. Having said that, though, I welcome the offer from the Minister to discuss this further, particularly Amendment 7, because, as I say, I am very worried that debtors, money-launderers and terrorists, or the people who help to fund terrorism, should be excluded but people with perhaps quite serious findings, not just about children but about women, would be able to be a charitable trustee unknown to all of us. I look forward to discussing that further, but for the moment I beg leave to withdraw the amendment.
Amendment 2 withdrawn.
Clause 1 agreed.
Clause 2 agreed.
3: After Clause 2, insert the following new Clause—
A trustee must report to the Charity Commission any serious incident that results in, or risks causing, significant harm to their charity’s work, beneficiaries or reputation.”
My Lords, this is in a way part of the same issue—it is about where we put responsibility. In moving Amendment 3, which relates to reporting misdemeanours, I shall speak also to Amendment 11, which concerns the power to disqualify all trustees where there has been a collective failure to protect children or, indeed, vulnerable adults, as the amendment should have said. They are not mentioned in the current wording, but I will come on to that.
The Charity Commission’s guidelines on reporting serious incidents list—I shall keep to the order used—significant items to report. They include loss of money, damage to property and, only thirdly, harm to beneficiaries. The examples given have the same order of priority. They start with fraud and theft, go on to a large donation from an unverified source linked to terrorism, a disqualified person acting as a trustee, then not having a policy to safeguard your charity’s vulnerable beneficiaries, not having vetting procedures to check prospective trustees, and, only lastly, suspicions, allegations or, indeed, incidents of abuse of vulnerable beneficiaries. That order does not seem to give great confidence that beneficiaries rank very highly.
In the same guidance, the commission warns that if trustees fail to report a serious incident, the commission “may”, not “must”, consider this mismanagement and take regulatory action. Therefore, it is possible that trustees could have failed to record an incident of abuse of a vulnerable beneficiary and still no regulatory action would be taken. So not only does abuse of vulnerable beneficiaries rank below big donations or theft but failure to report is only possible evidence of mismanagement.
We should compare that with the duty on auditors, which, again, relates to money rather than to beneficiaries. The Charities Act 2011 places a duty on auditors to report matters of material significance to the Charity Commission, so there is a higher requirement on auditors for anything relating to money than there is on trustees for abuse of beneficiaries.
For that reason, amendments are needed both to make reporting mandatory and also, where there has been a collective failure of a board to identify, report or deal with serious allegations or incidents, to enable—not force—the Charity Commission to replace the whole group. At present, the Charity Commission would have to seek to disqualify each trustee one by one, probably showing evidence of individual responsibility, whereas if on the watch of a whole group of trustees things were seriously amiss and there had been a collective failure, the amendments would enable them to be removed as a collective so that the charity could move forward in the interests of its beneficiaries.
Although, as has already been pointed out by the noble Baroness, Lady Barker, Amendment 11 deals with a failure of trustees to protect children, we also have in mind other vulnerable beneficiaries, including older people who may be at risk of elder abuse. Perhaps I may cite some examples of why we think that these two amendments are necessary and important. We know of cases in more than one charity where incidents of abuse of children were not reported as serious incidents by trustees. That shows that the general duty is not strong enough and not sufficient. We also know that trustees who may not be expert in child abuse and safeguarding work very much at the behest of the staff, who may have little more than cursory training in safeguarding.
This is particularly the case in trusts which do not concentrate on children. The Charity Commission may be notified by relatives of children that major incidents are not being taken seriously by the charity and the trustees. However, in one such case the families were advised by a government department that the Charity Commission was the only party able to address the failings of trustees to protect children. In that case the Charity Commission disagreed, feeling that it did not have the powers to intervene. It could only trigger the beginning of an inquiry. It appears that it lacks the power either to remove the trustee board as a whole, because it can do it only one by one, or indeed to appoint a new trustee with relevant experience to assist the board with the complex area of child protection.
This need for a power to remove all trustees also arises from the case of an institution where there were several instances of child-to-child abuse. An investigation by families and their lawyers showed that the staff had failed to appreciate the cumulative danger facing children, and they therefore failed to report. The fact of repeated sexual injuries involving different children over time should have led the trustees to ask some very challenging questions of the child protection officer there, as well as of the management, but they failed to do so. In that case the charity finally had to close. However, had the Charity Commission had the power to act in the way that we are proposing and been able to remove several trustees simultaneously, the closure might not have been necessary. Without the scope for agile action, matters can drag on, further damaging not only the children concerned but the charity’s reputation and, ultimately, its future. I beg to move.
My Lords, I was slightly surprised to see that the noble and learned Lord, Lord Hope of Craighead, was not going to rise to his feet to take us through the significant words “any serious incident”, as serious incidents obviously can be in the eye of the beholder, the second point,
“results in, or risks causing”,
which requires one to take a view of the future, which is also quite demanding, and the definition applied to “significant harm”. I wonder about the wording of this amendment, which I think would have a pretty chilling effect on trustees and might well lead to them ringing the Charity Commission with inquiries about the nature of particular incidents and whether they qualified under this quite broadly drawn clause, or indeed might lead to a rash of reports to the Charity Commission, which may or may not be a good use of the commission’s time and energy to follow up.
For my part, I go back to my wish to expect trustees to behave responsibly and for the Charity Commission to check them, but not to impose other and further duties. I drew a different conclusion from the noble Baroness about the Charity Commission’s guidance on its website, which seems to be a much better way of dealing with this than putting it into statute. The charity’s trustees would have to be aware of that guidance and follow it. I think that the noble Baroness was slightly unfair to the commission about the order in which it has rated the different offences. Just because child abuse comes a bit further down the list does not mean that it is considered less important; I do not think that is a fair conclusion to draw. It is more important that we should have flexible guidance and that the Charity Commission empower trustees. We should not impose in statute quite wide-ranging and imprecise duties that will be a further reason why people do not want to act as a trustee.
My Lords, I say to the noble Baroness, Lady Hayter, that I do not think anyone in this House feels that the whole matter of child abuse has been done and that there are no more protections to be had. There is a question about the extent to which we need to change the law as opposed to the extent to which we need to give advice and change practice within organisations. I rather think that large organisations, such as the BBC, and indeed small organisations, are very far from having fully worked out their response to the revelations that have come out over the past couple of years.
I, too, take the point made by the noble Lord, Lord Hodgson: I think that the order in which things appear on the Charity Commission website, to be fair to the commission—and we are not always very fair to it—is as much to do with history as with anything else. In the time of Anthony Trollope, financial misdemeanours were at the forefront of the commission’s mind, not child abuse. I really think that the climate has changed. I shall not repeat the arguments that I made about older people under the previous group, because I misread the groupings, but I take the point about the protection of vulnerable adults.
I wanted to ask the noble Baroness about her Amendment 11—and perhaps the Minister might help with the answer to this—and the power to disqualify all trustees of a charity. My understanding is that it is a basic tenet of charity law that trustees are jointly and severally liable for decisions that are made or for failures within the charity. So I am surprised to learn that trustees can be removed only as individuals. I should have thought that their joint and several liability would mean that, if something as bad as the examples given by the noble Baroness were to happen, the whole board of a trust would be equally affected by it and would therefore they would all be removed. But maybe my understanding is slightly out of date.
I have a point to make on the wording of the amendment, although it is not quite the same as the noble Lord, Lord Hodgson of Astley Abbotts, thought it might be. It is about Amendment 11, and it is a rather technical point. I am aware that the noble and learned Lord, Lord Scott of Foscote, who knows much more about drafting trust documents of this kind than I do, may have a different view. The point that troubles me is the phrase,
“who are direct beneficiaries of the charity”.
As I understand it, to qualify as a charity, individuals as such are not direct beneficiaries. That is the creature of a private trust, where a trust is framed to confer a defined benefit on a particular individual. It would meet the noble Baroness’s point if the rather less attractive phrase,
“who are within the objects of the charity”,
was substituted. That would then bring in the point that she is considering people on whom the trustees would focus as possible recipients of benefit. That would be the kind of phrase that I would use myself, but I am conscious that the noble and learned Lord may know more on this than I do, although he is shaking his head. It is a point on wording, which would arise if the Minister was attracted by the amendment.
I shall add a thought. I think that we are talking about charities that are deliberately set up to benefit children and added-in vulnerable people, but may I move to museums for a minute? I refer to a registered museum that allows children under 16 to enter free, for example. Let us say that somebody gets into a fracas, one child hits another and somebody else enters in. Widening the responsibilities of the Charity Commission and the trustees of that museum as the amendments propose is completely unrealistic. If there are remedies to be sought, they should be sought under another piece of legislation and not under charity law. We have already had reference to the chilling effect on people volunteering to be trustees if they see that the responsibilities are made so wide and so difficult to adhere to. We really have to be careful. The Minister referred to the limited resources of the Charity Commission. Under existing circumstances, it is not likely that those resources will be added to, to any great degree, at least for a while. We need to be very careful about what responsibilities we place on the Charity Commission and trustees under this proposed legislation.
My Lords, I think I had an invitation to speak on this from my noble and learned friend Lord Hope. I have puzzled a little bit over the object of Amendment 11. There is a reference in it to where there is,
“sufficient reason to believe there is a collective failure of all trustees to ensure the safety and protection of children who are direct beneficiaries of the charity”.
The children may be the objects of the charity in the sense that the charitable money is meant to go to them. However, if all that is intended in the charitable trust in question is that charitable money be applied for the benefit of the children, it is a little difficult to see how the safety and protection of the children comes into it. Any misuse of the funds of the charity would be a breach of trust. You do not need a provision in the Act to say so. That could be remedied at any time by any of the trustees.
I find it difficult to quite understand what is meant by a,
“failure of all trustees to ensure the safety and protection of children”.
If the children are the objects of the charity in the sense that the funds must be used for their benefit, it is not the duty of the trustees to ensure their safety and protection. Their safety and protection may be put at risk by any number of different means that have nothing whatever to do with the objects of the charity. I am little puzzled by the intention behind that as it stands.
My Lords, following what the noble Baroness, Lady Hayter, said in response to the last amendment, I will just put on record that I would certainly not wish to give the impression that I am complacent about these issues. I completely understand that we need to debate and discuss them. As I said right at the start, we need to kick the tyres here. I just wanted to make that perfectly clear.
Let me start by dealing, first, with the proposed new clause on serious incident reporting. It might help if I explain briefly the position as it currently stands. The Charity Commission already requires serious incident reporting from charities with an income of over £25,000 as part of annual return requirements and encourages all charities to report serious incidents immediately as a matter of good practice. The Charity Commission’s annual return regulations require charity trustees to sign a declaration each year that there have been no serious incidents in the charity in the year or to give reference to any serious incident reports already made to the regulator and also report serious incidents that have not previously been reported.
On the lists that have been referred to in the debate, I do not think that the order of the listing suggests how serious the Charity Commission thinks those issues are. However, I can tell the noble Baroness, Lady Hayter, that the Charity Commission will look again at the issues it defines as serious.
There are various other legal requirements on charity trustees to report certain matters immediately. For example, there is a duty under terrorism legislation to disclose information about certain possible terrorist financing based offences to the police. Specifically on safeguarding, the Safeguarding Vulnerable Groups Act 2006 places a requirement or legal duty on employers and volunteer managers of people working with children or vulnerable adults to make a referral to the DBS in certain circumstances where a person has been dismissed or removed from working with children or vulnerable adults. That is in addition to any referral to a body such as a local authority safeguarding team.
As regards charities themselves, charity trustees are ultimately responsible for safeguarding within their charity. The Charity Commission’s role in safeguarding is to ensure that charity trustees take steps to protect and safeguard their beneficiaries. This means that charities working with vulnerable beneficiaries must have in place appropriate safeguarding policies and procedures, and must monitor them on an ongoing basis to ensure they are effectively implemented. The Charity Commission can and does take action against charities and trustees where they fail to do so but it is not the role of the Charity Commission to investigate suspected abuse. If there are allegations of abuse of vulnerable beneficiaries, the Charity Commission expects trustees to handle them properly and, where appropriate, report allegations to the police, social services or other agencies. Where the commission itself has serious concerns, it can and does refer them to the police or other agencies.
As I said at Second Reading, the Bill is about striking the right balance. While on the face of it there are many attractions to imposing a new serious incident reporting duty on charities, we have to acknowledge that it would be a new reporting requirement that would affect tens of thousands of small charities. Furthermore, and this is an important point, there is also the concern that the charities that would meet their obligations under a duty to immediately report serious incidents are those charities that would do so as a matter of good practice, and have already taken appropriate action to address the issue. Charities bent on abusing their position of trust would be unlikely to report the matter to their regulator. The danger would be that we would simply create a lot of red tape for the vast majority of honest charities, while those poorly managed or involved in abuse would ignore the requirement.
Under the amendment, diligent trustees might consider it necessary to report to the Charity Commission every time there was a risk to beneficiaries or the charity’s reputation. It is not hard to see how the commission could be inundated with queries and unnecessary reports. There is also the question about whether the commission would be able to cope, and what it would do with such a volume of reports.
The Government are committed to minimising regulatory burdens for charities, particularly small charities. We do not want to impose new burdens, particularly when the implications for the commission and the impact on charities have not been fully considered.
I do not want to appear overly negative towards this amendment as I believe there is much to be said for it, but I hope that the noble Baroness will also accept that there are downsides and that we do not want to tie up small charities with red tape. I hope that on that basis she will feel able to withdraw her amendment.
I have a question, which does not have to be answered today. The Minister refers to the fact that the Charity Commission generally refers matters to the police. Are we satisfied that police forces around the country always refer matters to the commission? I wonder sometimes if the commission is not up here while the police forces down there are looking into things. Is the information flow sufficiently strong? I am not asking for a response today; this is something that we can pick up later. However, it is an issue that has come up from time to time in the discussions that we have been having.
My noble friend makes a very good point about the information exchange between agencies across government, and I am more than happy to pick that up with him in writing or at a later stage.
I turn to the noble Baroness’s Amendment 11. This amendment seeks to empower the Charity Commission to disqualify an entire trustee board where it collectively fails to ensure adequate protections for children who are the charity’s beneficiaries. Later on we will come to debate Clause 10, which will confer the power for the commission to disqualify on a case-by-case basis; suffice it to say that it is one of the most important powers in the Bill. That clause is relevant to this amendment so it may help the Committee if I give a short overview of it now before going on to consider the noble Baroness’s amendment.
Most unfit individuals will be caught by the existing—and, under the Bill, extended—automatic disqualification criteria, but the Charity Commission needs a power to act in cases where individuals are not excluded by automatic disqualification. The whole point of this power is to give the commission the ability to disqualify an individual whose conduct clearly makes them unfit to be a charity trustee, where, if the commission were not to act, there would be a real risk, or at least a reputational risk, to charities.
We carefully considered the report of the Joint Committee on the draft protection of charities Bill, and made improvements to this provision as a result. More detail about the operation of the provision has been included in the Bill, and it is now a three-limbed test: first, one of the conditions A to F must be satisfied; secondly, the commission must consider that the person’s conduct makes them unfit to be a charity trustee, and draft guidance has been published on that; and, thirdly, the commission must consider that exercising the power is in the public interest, to protect public trust and confidence in charities. While the power may be relatively broad, its use would be targeted. The commission has said that it expects to use this power on a relatively low number of occasions each year.
The commission already has the power to act, and has done so, in cases where there has been a collective failure of trustees in relation to systemic governance issues. The powers to remove trustees in Sections 79 and 80 of the Charities Act 2011 do not explicitly or implicitly contain any restriction on removing trustees where that leaves one or none in place. Neither does the proposed disqualification power in Clause 10. There is, therefore, no reason why the commission would not remove all trustees on the ground of ensuring the safety and protection of children, where this was appropriate, proportionate and in accordance with best regulatory principles.
In circumstances where there is an impact on the beneficiaries of the charity, the commission has tended to appoint an interim manager, under Section 76 of the Charities Act 2011, to ensure the continued operation of the charity and to get it back on track before new trustees can be appointed and take over. However, there has been a case—and I will not name the particular charity concerned—where the commission has removed all 10 trustees on the board for collective governance failings.
The noble Baroness, Lady Barker, made a point about trustees having joint liability. The Charity Commission is required to act proportionately and so, in most cases, would target regulatory action on those most culpable or responsible for misconduct or mismanagement.
The noble Baroness’s amendment deals specifically with collective trustee failure relating to safeguarding. We would not want to cast any doubt on the commission’s existing liability to take action relating to collective trustee failures, or limit that by making specific provision. On the basis that the commission can, and does, already act to address collective trustee failures where it is proportionate to do so, I hope the noble Baroness will feel able to withdraw her amendment.
I thank the Minister, particularly on that second point. The reassurance that action for collective failure can be taken answers the point we were seeking to make.
On reporting, I have greater concerns. In answer to the noble and learned Lord, Lord Scott, we know of schools where abuse that was taking place was not being reported. Clearly, the recommendations and guidelines for reporting are not being followed. This is the problem. You have an educational establishment where abuse is going on and it is not being reported. It is that failure to report which gives rise to concern.
The noble Lord, Lord Hodgson said that we expect trustees to behave responsibly. Of course—but this issue is where they do not. I have now heard the phrase “red tape” used twice and I jib slightly every time I hear “red tape bandwagon”. It is not red tape. We are talking about protecting vulnerable people.
The noble Baroness has used the word “complacent”. She has used the phrase “red tape”. Nobody is in any way complacent about the importance of protecting children. The question is how do we do it effectively and are we getting the right answers to make it happen, or is it coming at a cost that is out of all proportion? One can argue that there is no cost too high, but the reality is that we have to have a system that ensures we get the proportionate, right result. Is this system going to be perfect? I have never said that it would be, but we need not be complacent about it. What we are trying to do is to give trustees the confidence to decide what is best for their charity, rather than saying, “Here is all this wraparound that you have to look at”, which terrifies them and means that people do not become trustees at all.
The noble Lord is absolutely right. Are we doing it properly? Representatives of abused people are coming to me, saying, “No, it is not working right”. That is the difference between us. We are hearing that there is a failure at present. There has to be a balance. The noble Lord is saying, “No, we have it about right”. The people representing the families of abused children where something did not happen are saying, “No, it is not right”. This is a charity Bill. If they are correct that it is not working properly, this is our opportunity to make it better. This is what we are seeking to do.
The order of the guidelines may be historical, but the issue is that, sadly, we know far more about sex abuse than we used to. It is probably already going on. It happened to my aunt when she was a child—she would be 109 if she was alive. This is not new, but we know more about it. Sadly, we know that it is far more common than we think. We are trying to do something to make reporting and awareness of it better. The only difference between us is that we are hearing from the charities concerned that the policies and the reporting requirements do not seem to be working. We are trying to get it right.
I, of course, defer to the noble and learned Lord, Lord Hope, about whether the phrasing should be “direct beneficiaries” or,
“who are within the objects of the charity”.
We were trying to say,
“those people for whom they provide a service”.
I am not going to try to draft, but we are talking about establishments that provide a service for a group of people where there is some sort of abuse going on and they fail to notice it. It is well hidden; people do not come along in dirty macs to abuse children. Either trustees really do not know because they do not have the qualifications, or they are not dealing with it properly and are not reporting it. We are trying to lift the bar.
I want to make this one point to the noble Baroness. I asked the commission what its communication to the sector would be when the relevant changes on automatic disqualification come in. I completely agree that we need to ensure that not only are these new measures properly communicated, but we take the opportunity to remind all charities of their existing responsibilities, not just on this, but on other issues, although I would suggest especially on this. I will not bore the Committee with the six bullet points that I have been given about e-newsletters, press releases et cetera, but I can assure the noble Baroness that I have asked the Charity Commission to do this. It has given me its assurances, which I am happy to pass on.
I wonder if the noble Baroness could help me with one point. If a scholarship is set up for a particular school, the money is charitable money and is used to provide scholarships for people who perhaps otherwise would not be able to go to the school. I find it extraordinary to suppose that the trustees of the charity must examine what is going on in the school to see that there are no misdemeanours among the staff towards the boys or things like that. If that is the intention of the proposed new clause, it seems to me that it is full of difficulties. If that is not the intention then the wording is not quite right.
The wording may not be right, but we are talking about where, basically, they are running an establishment, such as a music school. They are the trustee running the school; they therefore have these responsibilities. They cannot say, “I am a trustee, it is not my responsibility”. They have the responsibility to ensure that they have the right management and that they are trained correctly. It is some time since I have done that, but they have to have those policies in place. This group of people, who are running an organisation either for children or for vulnerable people, has that responsibility.
The bit that we are trying to add is where it has come to their notice—or they have not asked the question right—that abuse is going on in those areas where they have responsibility. We want it to be a duty on them, not just in guidelines, that they should report that abuse. I am not a draftsperson, but what we are driving at is probably clear. It is raising the bar of when they need to report. The guidelines are already there, the duties are on them, and what we are hearing is that sadly some trustees fail to report what they should. For the moment, I beg leave to withdraw the amendment.
Amendment 3 withdrawn.
Clause 3: Range of conduct to be considered when exercising powers
4: Clause 3, page 2, line 39, leave out “privy to” and insert “participated in”
I shall speak also to Amendment 9 which is in my name and is grouped with Amendment 4. The amendment takes out the words “privy to” in the two places to which these amendments refer and inserts the words “participated in”. This is really a discussion about the use of language. The background can be narrated by referring to paragraph 122 of the committee’s report, in which we mentioned that a number of witnesses expressed concerns about the wording of this clause. Among the phrases referred to are “privy to the misconduct or management” and “facilitated it”, which we decided did not require further comment.
However, we picked up “privy”, which had been drawn to our attention by, as footnote 157 states, four charities: Bond, Joseph Rowntree Charitable Trust, Muslim Charities Forum and NCVO, which all expressed concern about the wording. “Privy” is a curious word and really rather antique. In the Shorter Oxford English Dictionary one of the definitions is,
“sharing in the secret of a person’s plans”.
I am not quite sure what that means in this context. The other possible meaning is,
“a person having a part or an interest in an action, matter or thing”,
which perhaps comes closer to what the draftsman has in mind.
When we were trying to find an equivalent formula, we suggested, in paragraph 125 of our report, “aware of”, but there may be more in it than that. There may be something more active than simply knowledge, which is why I am now suggesting “participated”, which is actually doing something to assist the act of misconduct or whatever it is. Either way, I suggest that “privy” already looks antique, and if this Bill is going to survive for a number of years, it will become increasingly so. It may be in the spirit of the present Government, as expressed by Mr Gove yesterday, to try to modernise and clarify language, and here is an opportunity to try to do the same thing. I offer the words “participated in” as an alternative to what we put into the report, but the basic suggestion is that something should be done to clarify what “privy” means.
This is an important clause because it deals with a situation where these very important powers may be exercised. Not only does the Charity Commission need to know what it should be driving at but the people against whom the powers are being exercised are entitled to know as well. I beg to move.
I entirely support the amendments proposed by my noble and learned friend Lord Hope for the reasons he has given. As he said, in the Oxford dictionary there are two alternative definitions of the expression “privy to” and neither would be appropriate in this part of the Bill. On,
“sharing in the secret of a person’s plans”,
I suppose that spouses share in the secrets of the plans of their partners, but that does not make them people who ought to be subject to the provisions of this Bill. The other meaning is,
“a person having a part or an interest in an action, matter or thing”.
“Interest” is not appropriate. The substituted words suggested by my noble and learned friend—“participated in”—seem much better and should be accepted.
My Lords, as a member of the committee, I want to support the noble and learned Lord, Lord Hope. I love going to Hampton Court. When you go there, particularly if you are a kid, you get to understand how this term came to be. We are not in Tudor times but it is a very important matter. A number of the charities we talked to in the course of our discussions work internationally. They work in very difficult situations, such as in war situations around the world, and at times it can be quite difficult to ascertain the extent to which the trustees know what is happening in their charities.
On the last set of amendments, the noble Baroness, Lady Hayter, tried to take us to a place where we could understand the difference between management and governance. We are talking very much about governance here, not about the people who run or manage charities and are therefore close to the day-to-day activities of those charities. If the question is about the extent to which trustees in a position of governance need to know what is being done by their charities or can inadvertently be assumed to have known that something adverse happened, then that is absolutely wrong.
I am always interested in things that clarify governance for trustees. Governance is very difficult to pin down. This change of language is an attempt to help the trustees of today understand that distinction between governance and management, and that is laudable.
My Lords, I start by saying that the Opposition support these amendments as well. One of the issues arising among a number of organisations in response to the Bill is that it lacks clarity in various ways. If one of the more straightforward means of overcoming some of that lack of clarity is changing the wording as suggested here, then we should all welcome that.
The noble and learned Lord, Lord Hope, mentioned the recommendation of the Joint Committee and that the wording “aware of” was suggested. In response to the committee’s recommendations, the Government stated in their report of March this year:
“The Government will explore implementing the Committee’s recommendation to replace ‘privy to’ with ‘aware of’ with Parliamentary Counsel. The term ‘privy to’ is already widely used in the existing legislation and we want to carefully consider the implications of any change before committing to a change of wording”.
Following that consideration, the Bill was not changed and, of course, “privy to” remains in it.
The noble and learned Lord, Lord Hope, told us why he came back with amended wording. My only thought on the matter is that a former Law Lord’s understanding of the law would be something to which I would give weighty consideration—to put it mildly. Can the Minister say why, and indeed whether, Parliamentary Counsel continues to believe that that wording is right? This is a fairly straightforward change that should be made to the Bill.
My Lords, I stand with some trepidation to debate with the noble and learned Lord, Lord Hope, on this matter. Mention has been made of my right honourable friend the Justice Secretary and his remarks yesterday. I have been very careful in this debate not to use “impact” as a verb. I am also very intrigued by this area. This debate over the word “privy” makes me wonder whether it needs to be modernised in terms of the Privy Council, but I do not want to get into that right now.
It strikes me that what we are debating is what the layman understands versus what is legally accurate and watertight. The Joint Committee that considered the draft Bill, chaired by the noble and learned Lord, recommended, as the noble and learned Lord just said, that the term “privy to” be removed and replaced with “aware of”, so that the Bill referred to a person who was aware of an action that constituted misconduct.
As has been said, there were real concerns about the lack of clarity. There has been careful consideration, and it was decided to retain the current reference to “privy to”. I shall explain why. Our research suggested that “privy to” and “aware of” may not amount to the same thing. “Privy to” can comprise more than mere knowledge and include an element of knowing concurrence or agreement as well, as the noble and learned Lord referred to. We did not think it appropriate to amend the Bill in a way that might impose a lower threshold for intervention by the Charity Commission.
The amendment tabled by the noble and learned Lord proposes to replace “privy to” with “participated in”. On the face of it, this looks as though it might be a higher threshold for intervention, because clearly “participated in” would appear to require some sort of positive action beyond agreement or knowing concurrence. We would be reluctant to raise the threshold in the light of that. I recognise the need for clear language in legislation that leaves no doubt as to its effects, so I would be happy to give some further consideration to whether there is an alternative formulation to “privy to” that maintains the threshold for intervention at the same level.
As I have said, we would need to have particular regard to how an alternative formulation would work with the rest of clause, which currently refers to conduct that,
“contributed to or facilitated the misconduct or mismanagement”.
Furthermore, the term “privy to”, as I am sure the Committee knows, is already used in Section 79 of the 2011 Act in relation to trustee removal and Section 178 of that Act in relation to trustee disqualification. Any alternative formulation would need to work in the context of those provisions as well. On that basis, I invite the noble and learned Lord to withdraw his amendment.
My Lords, I am very grateful to the Minister for his very helpful reply. I take the point that we are talking about thresholds. The problem is that the word “privy” could be read as meaning “aware”, which is a low threshold. It could be read differently to mean “participating”, I suggest, which is a somewhat higher threshold, although perhaps not the highest conceivable one. I understand the Minister to be saying that he will look again at this with a view to seeing whether it could be more clearly expressed to avoid doubt.
Of course I understand the point that within the 2011 Act the word “privy” appears, which I suppose might mean that I should have asked for more amendments to be put in at each point where the phrase occurs and I had not done my homework sufficiently to find them all. That would be a rather laborious exercise. However, there is an opportunity here to try to remove the doubt as to where exactly the threshold should be placed but, on the basis of what I understand the Minister to say, I am happy to beg leave to withdraw the amendment.
Amendment 4 withdrawn.
5: Clause 3, page 3, leave out lines 3 to 6
My Lords, I shall speak also to Amendment 10. I hesitate to suggest this, but these are perhaps two of the most substantive amendments before us today. During the work of the pre-legislative scrutiny committee, it became clear that there was broad agreement that the commission should have the power to disqualify some people from being trustees. Furthermore, there was agreement that there should be an automatic power to disqualify some people from being trustees. We listened to various people from all around the sector, who agreed on many of the measures in this Bill that we might not debate in great detail, such as the power to disqualify someone who might well have evaded disqualification because they had already resigned. There was a general consensus that the commission needed more powers to disqualify unsuitable people to ensure that the reputation of individual charities, and charities as a whole, was upheld. However, we also heard that by and large trustees are overwhelmingly, for the most part, honest people who very occasionally, in rare circumstances, make mistakes, and in even rarer circumstances commit criminal acts. It was against that background that we deliberated the powers in the draft Bill.
The two elements of the draft Bill that received the widest criticism of all were the conditions under which these powers would be exercised, which are the subject of these two amendments. In Clause 3, the range of conduct to be considered by the commission when exercising its powers to disqualify includes many with which we would have no quarrel whatever, where people have been found guilty of misconduct and mismanagement. The point on which there was the most discussion and disagreement among the witnesses who came before us was Clause 9(3)(b)—that the commission could take into account not just a person’s conduct in relation to the charity of which they had already been deemed guilty of mismanagement and misconduct such that an inquiry had been opened but,
“any other conduct of that person that appears to the Commission to be damaging or likely to be damaging to public trust and confidence in charities generally or particular charities or classes of charity”.
So, any other conduct at any time or in any other circumstances. That is a very wide power, and it is one that has drawn criticism not just from bodies that exist to champion charities, such as ACEVO, but, most significantly, from the Charity Law Association working party, the body of charity lawyers who have spent a considerable amount of time working on this. The association agrees that the commission should have this power but, if it is going to have it, there needs to be clarity and transparency about how it would be exercised. Any trustee who found themselves subject to the power would then clearly understand the evidence that was being used to come to a judgment about them.
The government response to the draft report noted that the commission was already required to produce a statement of reasons under Section 86 of the Charities Act 2011, when it exercises its compliance powers, but noted that it would explore whether an amendment to the Bill was needed to make this clear. There has not been any such amendment. So in introducing this probing amendment, I wish to discuss and get on the record some of the criteria that would be used.
As the Minister said in the debate on the previous group of amendments, the Charity Commission has produced a draft policy paper on how it might use this proposed power to disqualify people. Eventually perhaps the commission could get round to sending it to those of us who were members of the Select Committee and who are discussing the Bill. It is a guidance paper that is comforting in that it makes a series of heartening statements, particularly in relation to Clause 10, but it raises a number of problems too. As the Minister said, the power to disqualify in the new sections introduced by Clause 10 comes in three parts: somebody has to have been guilty of one of the conditions labelled A to F as set out in new Section 181A(7); the person is unfit to be a trustee; and the order to disqualify somebody is desirable in the public interest in order to protect public confidence.
I cannot take exception to conditions A, C, D and E. Condition A states that,
“the person has been cautioned for a … offence against a charity or”,
in the administration of a charity, for which the conviction would be automatic disqualification. Condition C is that,
“the person has been found by Her Majesty’s Revenue and Customs not to be a fit and proper person to be a manager of a body or trust”.
Condition D states that the person was,
“a trustee … officer, agent or employee of a charity at a time when there was misconduct or mismanagement”,
and the person was responsible for, contributed to or facilitated the misconduct or mismanagement. Condition E is that an officer, employee or corporate trustee was responsible for, contributed to or facilitated misconduct or mismanagement of a charity. I do not think anyone would think that any of those would be a reason not to disbar.
The problems lie in conditions B and F. Condition B has already been the focus of some discussion and will be so again. Under that condition, which is in two parts, where a person has been convicted of an offence in another country that is against, or involves the administration of, a charity or a similar body, the person would face automatic disqualification from acting as a trustee if—this comes in the second part—the offence would have constituted a disqualifying offence if committed here. In the Charity Commission’s policy paper there is no “and” or “or”. There is no interrelationship between those two parts; they are just stated as bullet points.
I have a question for the Minister. If someone who is active in parts of the world where gay people are persecuted is found guilty in a court of law of breaking the law of that country and then comes to Britain, would they be barred from being a trustee of a charity? After all, they broke the law in their own country. If someone was found guilty in Russia of breaking the law under that country’s increasingly draconian laws against NGOs and charities, would they then be regarded in this country as ineligible to be a trustee of a charity under this provision?
By far the biggest problem with this clause is condition F, which we are seeking to delete. It states,
“that any other past or continuing conduct by the person, whether or not in relation to a charity, is damaging or likely to be damaging to public trust and confidence in charities generally or in the charities or classes of charity specified or described in the order”—
in the view of the Charity Commission. That, I rather think, drives a coach and horses through all the other conditions, because if I could not debar someone under any of the other conditions I am sure that I would go to that one.
The second test to be applied is someone’s fitness to be a trustee. Again, fitness to be a trustee is not defined in the legislation; that is left to the judgment of the commission. In a paper, the commission said that it would look at three broad categories under which it would debar people: honesty and integrity; competence; and credibility. It has set out in some detail how it would stop the sorts of things that it would begin to look at. I have no problem with the examples that it has given as failures of honesty and integrity: that is, things like exploiting a position of trust for personal gain, dishonesty, deception or cheating. I do not have a problem with competence either, because the commission says that it would take the competences of trustees that we all know and love as CC3, the longstanding guidance by the Charity Commission about trusteeship, and if someone was to fail on them, I would understand that.
The problem is credibility, under which a person’s conduct can damage their personal credibility and reputation. Again, the commission has come up with a number of behaviours that I suppose would be acceptable as a reason to disqualify people: being negligent, repeated failure to comply with requirements on tax matters or having been penalised by HMRC. Fine; I agree with that. However,
“conduct which shows a material risk of harm to the work of charities in general”,
is very wide.
The third test is whether or not there has been a failure to act in the public interest to protect trust and confidence in charities. I think that what has happened, particularly by the inclusion of condition F, is that we have given the Charity Commission a power and then we have given it a whole series of escape routes, or wriggle room, by which it can exercise its judgment in a subjective way. My particular objection to condition F is where it gives the commission the power to retrospectively judge the past conduct of an individual. The noble and learned Lord, Lord Hope of Craighead, spoke before about the fact that people may do things as young people. Under the power of this clause as it stands, that can come back to haunt them and be taken into account by the Charity Commission. I have no doubt that the commission would argue that it would take past conduct into account only if it felt that it would damage trust and confidence in charities, but that is not as objective and straightforward a test as one might think.
All told, these two provisions together, Clause 3 and Clause 10, bring to what should be an objective test something that is far too wide and unclear for trustees to have confidence, first, that they themselves will know that they are likely to be deemed unfit to be a trustee or not to be disqualified, and, secondly, that they will know on what grounds the Charity Commission might disqualify them. Let us not forget that to be disqualified as a trustee has a profound affect on a person’s life. It really affects their reputation, not just their standing within their community but their professional reputation too. This is not a power that we should give the commission without very serious consideration. I beg to move.
My Lords, I was sorry not to be able to take part in the Second Reading debate on the Bill, particularly as I was fortunate enough to serve under the excellent chairmanship of the noble and learned Lord, Lord Hope of Craighead, on the pre-legislative scrutiny committee. I declare my interests as chair of a charity, International Students House, as a member of the councils of two universities—UCL and Nottingham Trent—and as a member of the advisory council of NCVO.
As a member of the committee, I want to comment briefly on this amendment. I certainly do not want to repeat the points made by the noble Baroness. However, it was quite clear that we felt that, in the course of a statutory inquiry, the commission should not be limited to evidence of misconduct and/or mismanagement in the administration of the specific charity subject to such an inquiry. One discussion we had was around the Cup Trust, where the promoters of the scheme had a history of using charities in tax schemes.
However, we felt that the provisions of this part of the Bill were very broadly drawn since what is damaging to public trust and confidence in charities is obviously an open and potentially very subjective test. We shared the concerns of the Joint Committee on Human Rights, which expressed its anxiety about the breadth of this provision. We also shared the concerns of NCVO and several other witnesses—as the noble Baroness said—about the risks associated with this power and its lack of clarity. In particular, I know that NCVO was concerned that, in the absence of guidance, trustees and charities will be uncertain about the possible consequences of their conduct in relation to matters that will probably not have anything to do with the management or administration of the charity. I am very conscious of the points made by so many noble Lords about the reaction of trustees to the chilling effect of some of the commission’s powers. We are very unclear about the impact those powers will have.
As I said, I want to speak on this only briefly. I do not wish to exclude the reference to conduct not associated with charitable activities because that is very important. I hope the Government will look again at this. They said they would. They have not included any reference to this in the Bill, so I hope they will look again and be more explicit about the constraints on this apparently unlimited power.
My Lords, I just add a word to what the noble Baroness, Lady Warwick of Undercliffe, said by drawing attention to two paragraphs in our report—paragraphs 120 and 121. In paragraph 120, we refer to evidence from the Charity Law Association. It told us that, in its view,
“the wording of this power was ‘very wide’ and that it had concerns about how conduct would be deemed relevant for consideration by the Commission”,
if it was given that very wide power. In paragraph 121, we referred to the Muslim Charities Forum—this is on page 41 of the report—which expressed a concern that,
“the provision would allow the Commission to pass judgment on the political views of charity trustees, potentially infringing upon freedom of association and expression”.
A particular concern—and we quote from its evidence—was that trustees might, in a personal capacity,
“express support for Palestinian Statehood, speak out against the crack-down on Freedom of Association in the aftermath of the Arab Spring, or merely voice their anger at aspects of Western foreign policy”.
That could all,
“potentially fall under the net of supporting terrorism and/or extremism”.
It would then fall within the very broad description which is given in the two paragraphs to which these amendments refer.
I have to confess that we did not make any specific recommendation in our report. However, in paragraph 124, we state:
“we share the concerns of the JCHR and other witnesses about the risks associated with the power and its lack of clarity”.
I wanted to make these points to emphasise that there was a strong evidential basis for the concerns that the noble Baroness, Lady Barker, has expressed. These two references are in addition to those that the noble Baroness, Lady Warwick, mentioned in her short speech.
My Lords, having served on the pre-legislative scrutiny committee, I understand the concerns about the width of this clause, but if we were to accept this amendment, we would go from a very broad power to a very narrow one. As I read it, we have to take into account, first, the effect of a person’s behaviour within the charity about to be inquired into and secondly, the conduct of that person in any other charity. That does not seem satisfactory because there are clearly issues that range more widely. The behaviour of a trustee in general life is an indication of their seriousness. For example, the existence of county court judgments would indicate that their personal financial behaviour may be a bit erratic. It may be that they had been a director of a commercial company which had gone bankrupt and which had been unfavourably commented upon by the companies’ inspectorate. It might even have resulted in them being banned as a company director for a time. These are all issues which the Charity Commission might reasonably take into account when considering a particular situation, if what can be seen as a proven rotten apple is likely to result in damage to the position, reputation, trust and confidence in the charitable sector generally.
While I have some sympathy with the concerns of the noble Baroness, I do not think striking out subsection (3)(b) of new Section 76A is the right answer. It would be too narrow a prism and the Charity Commission would have its hands unduly tied. We must find some better way to sort it out.
My Lords, we think this clause in its generality provides an important addition to the powers of the commission. It is appropriate that a person’s activity outwith their work with or for a charity should be taken into consideration. That is not to say that we are uncritical of the wording of the two paragraphs referred to in these amendments in the name of the noble Baroness, Lady Barker.
One reason it is a useful addition is that it would only apply after a statutory inquiry had begun. That would be a sign that the Charity Commission already believed that there was evidence of misconduct or mismanagement. That is clear from the last two lines of page 2 of the Bill. Of course, there are concerns—some of which noble Lords have referred to in the Joint Committee’s report. It is again a question of provisions being drawn too widely and lacking clarity.
The Government’s response to the Joint Committee’s report stated that they would,
“look to revise the draft Bill to make this clearer”.
Unfortunately that has not been done. I invite the Minister to say why the Government eventually proved unable or unwilling to do so. It is regrettable, although I do not think it constitutes a reason to remove the wording completely from the Bill. I do not think that is appropriate. We agree with comments that have been made about the need to refine the wording, and perhaps some attention might be given to the report published yesterday by your Lordships’ Select Committee on the Constitution on this and two other Bills. Paragraph 41 of the Select Committee’s report was critical of new Section 76A to be inserted by the Bill. I am sure the Minister has already read that report and taken it on board. It is important that that should be considered further before Report.
The final paragraph of that report states:
“The concerns identified by the JCHR from a human-rights perspective are mirrored by corresponding constitutional concerns on the grounds of legal certainty. We draw these concerns to the attention of the House”.
That simply adds to the arguments we have already heard in relation to these amendments.
An important suggestion of the Select Committee’s report is that conduct should be qualified in terms of its seriousness. It must be recalled that this activity does not need to lead to a charge or a conviction. On these amendments, and I think in a previous amendment, the noble Baroness, Lady Barker, mentioned that things that you do at one stage in your life these days follow you around through social media. It is very possible that a person a lot younger than me and a lot more able on social media might well do something that seems relatively trivial but that could come back to haunt them in later years. That has to be borne in mind.
The noble and learned Lord, Lord Hope, referred to evidence that the Joint Committee received about political causes. That is a concern. It could be that somebody who was publicly critical of government policy or of the Charity Commission might find that coming back to them. I do not mean that as a trivial point. The point is that we do not know what would be regarded as something that could effectively add to charges already assembled by the Charity Commission in targeting an individual. It is a question of uncertainty. We have heard this point several times this afternoon. In light of what the Minister has heard, I hope he will reconsider this matter, possibly with a view even to bringing forward a government amendment on Report. Given those remarks and the report of the Select Committee on the Constitution, I hope we may be able to look forward to that when we consider this matter again.
My Lords, this has been a very stimulating debate and I pay tribute to the noble Baroness, Lady Barker, for provoking it. I shall first address Amendment 5 about the proposed powers of the commission to take into consideration the conduct of a person outside a charity. I recognise that these are broad powers in that they allow the commission to take into account any outside conduct. However, these powers are necessary to enable the commission to address conduct which could seriously damage public trust and confidence in charities and need to be viewed in the context of the other criteria that apply to their use, along with the various safeguards in place.
Just as we have to place a large degree of trust in charity trustees to exercise their discretion properly in running their charities, we need to trust the Charity Commission to regulate independently and in the public interest. Of course, there is a range of safeguards, not least the independent judicial oversight provided by the Charity Tribunal, which has shown since it started work in 2008 that it is not afraid to criticise the Charity Commission in the few cases where it considers that the commission has overstepped the mark and acted disproportionately.
As I and others said on Second Reading, the Bill seeks to achieve a balance. The powers that it would confer on the Charity Commission need to be broad enough to make them useful. If they are too narrow they would be impractical and go unused—a point that my noble friend Lord Hodgson made. But charities need to know the circumstances when the powers may be used and I believe that the Bill achieves that balance.
The purpose of the noble Baroness’s first amendment would be, as we have discussed, to limit the other conduct that the Charity Commission could take into account when considering the exercise of its compliance powers. It is important that we retain this part of the clause as it prevents the undermining of public trust and confidence in charities, as all relevant—I stress “relevant”—conduct ought to be taken into consideration before the commission determines how to act accordingly. The commission could not take account of any irrelevant conduct. Indeed, I argue that the commission could be criticised for failing to act, or for taking only weak regulatory action, if it were unable to take into account relevant evidence of misconduct of an individual outside of a charity.
I shall illustrate this with an example. The Charity Commission opens an inquiry into charity A regarding concerns of financial mismanagement. It establishes misconduct and mismanagement against trustee X, an accountant, as large payments have been taken out and not accounted for. Blank cheques have also been signed by trustee X. The commission then approaches other relevant regulators which provide them with information that trustee X has had two cases of professional misconduct for accountancy irregularities in previous employment. Under Clause 3 as proposed, the commission would be able to take this other evidence into account before deciding what action it would be proportionate to take in the circumstances. If the amendment were to be accepted, the commission would be able to give no weight to this other, potentially compelling, evidence.
I emphasise that safeguards would be in place to ensure that any conduct outside of a charity would be only that which was relevant to the decision being considered by the commission. I shall illustrate those safeguards. First, there must be a statutory inquiry open and the Charity Commission must be satisfied that there is misconduct or mismanagement linked to the individual in the charity under inquiry before it can rely on any conduct from outside the charity as a makeweight in its decision-making.
Secondly, the commission, when exercising its powers, must provide a statement of reasons under Section 86 of the Charities Act 2011, which would set out the evidence it relied on in making the decision. This would include any evidence it relied on from outside the charity. No amendment to the Bill is needed to ensure that that is the case; we can amend the Explanatory Notes to make that clear.
Thirdly, as with all the Charity Commission’s compliance powers, the commission would have to be satisfied that the exercise of the power would be in line with the principles of best regulatory practice, including that it is proportionate, accountable, consistent, transparent and targeted only at cases where action is needed, as set out in Section 16 of the Charities Act 2011.
Finally, there is, of course, a right of appeal to the Charity Tribunal in relation to the exercise of the commission’s compliance and remedial powers, ensuring judicial oversight of the exercise of the relevant power.
The noble Baroness’s second amendment would remove the condition that enables the Charity Commission to consider disqualification on the basis of conduct likely to damage public trust and confidence in charities. The power to disqualify from charity trusteeship and senior management positions is indeed a significant power. As such it is important that the process is rigorous but fair, and, once again, balanced.
I shall explain what that will mean in practice. First, the individual must have met tougher new criteria to become a trustee and not be automatically disqualified in the first place. Secondly, before the commission can decide to disqualify an individual, three new conditions need to be met, as set out in the guidance issued by the Charity Commission. First, one of criteria A to F is met; secondly, the individual is considered to be unfit to be a charity trustee, defined by that guidance; and, thirdly, the commission considers it,
“desirable in the public interest in order to protect public trust and confidence”,
The commission then has to give notice of its intention to disqualify and give a period for representations to be made before any decision is made. If a decision is made to disqualify, the disqualification could take effect only after a period of time has elapsed in which the individual can lodge an appeal with the tribunal—that is, 42 days. If the decision is appealed to the tribunal, obviously the tribunal would be able to confirm or overturn the disqualification. In making a decision, the tribunal would consider the case entirely afresh on the basis of all the evidence before it; it would not simply review the Charity Commission’s original decision. Lastly, all the commission’s actions in this process would have to abide by Section 16 of the Charities Act 2011.
As was said just a moment ago, the Joint Committee that undertook pre-legislative scrutiny agreed that there was a,
“need for a broad power to disqualify an individual in certain instances, not all of which can be specifically identified and encapsulated in legislation”.
The noble Baroness, Lady Barker, referred to one scenario and asked whether a person could be disqualified on the basis of an overseas conviction in a country where homosexuality is illegal. An overseas conviction is not enough on its own. As I have said, the commission must also be satisfied that a person is unfit to be a charity trustee and that disqualification is in the public interest to protect public trust and confidence in charity. Furthermore, the conviction must concern a charity; on its own, it would not trigger disqualification. I draw the noble Baroness’s attention to that point in the little box on page 3 of the guidance, where it talks about a,
“conviction abroad for bribery or terrorist financing in connection with a charity or similar body”,
and says that such a conviction,
“would take account of any concerns raised about any court or other legal processes, their compliance with right to a fair trial … and whether the standards of evidence and justice would not be accepted in a UK or European court”.
I think that that is all pretty relevant with regard to her scenario.
Before the Minister moves on, the point that I made about Russia is that it is entirely possible that someone could be prosecuted there under its new, draconian laws about NGOs. That is not far-fetched; it could well arise that someone comes to this country from Russia having been found guilty of an offence under those laws against a charity, and that person then wants to serve as a trustee of a British charity. Believe me, organisations such as Stonewall are regularly subject to challenge as to whether their activities comply with all sorts of things, which they do. So it is not a far-fetched scenario.
I thank the noble Baroness for that point. The power would be discretionary and on a case-by-case basis. I refer her to test 3, which says that a,
“disqualification must be desirable in the public interest in order to protect public trust and confidence”.
It goes on to say that that the,
“test will, for example, allow the commission the flexibility to take account of circumstances in which the risk of (further) damage to charity is minimal and it would not be in the public interest to act against the individual”.
I am happy to write to the noble Baroness and illustrate this issue further, as she makes a good point.
As I was saying, condition F is a comparatively broad criterion, but we consider it necessary to enable the Charity Commission to address conduct that could seriously damage public trust and confidence in charities but which would not be caught by one of the other criteria. The condition needs to be considered in context of the other limbs of the exercise of the disqualification power—those that I have just described: fitness, and that disqualification is desirable in the public interest to protect public trust and confidence in charities—and the safeguards relating to the operation of the power, including the right of appeal to the Charity Tribunal.
The Charity Commission’s draft guidance on how it would exercise the power should provide reassurance that it will use the power only when there is a clear case for doing so, that the commission would clearly explain what it would take into account before using the power, and that in exercising the power the commission would provide an explanation identifying the conduct in question and why it thought the conduct met condition F. Crucially, the commission has committed to consulting widely before it finalises its guidance on the use of this power and will do so before the commencement of the relevant provisions.
I shall also address the point made by the noble and learned Lord, Lord Hope, about the political views of charitable trustees and whether the clause might potentially infringe upon freedom of association and expression. Charity trustees are entitled to their own political views in private. However, they must never use a charity as a vehicle to promote any party political views. That is not permitted under charity law. In relation to extremist views, all charities obviously must comply with UK law and so must not promote or support terrorism or extremism or other illegal conduct such as racial or religious hatred. Nor can a charity’s name, premises or money be used to promote extremist and other activities that are inappropriate under charity law. Furthermore, the Charity Commission has published detailed guidance on charities and extremism to raise awareness among trustees of the legal requirements placed on them in relation to both criminal law and charity law so that they can properly discharge their duties in the interests of their charity.
The disqualification power may appear to be broad, but is not so when considered in the context of the other requirements of the disqualification provision, and the commission has been clear that it will be narrow in its application. I repeat the point I made earlier about the need for powers in the Bill to be usable by the Charity Commission: if we attempt to so narrowly draw criteria for the regulator’s intervention, we will end up with powers that would go unused and abuse that would go unaddressed, and we may find ourselves back in a few years’ time having this debate all over again. We have to trust in the regulator to use these powers proportionately and in a targeted way. On that basis, I hope that the noble Baroness will be persuaded to withdraw the amendment.
My Lords, I thank the Minister for his comprehensive and considered response. I say to other noble Lords that this is Committee and these were probing amendments. Although I am rather glad that we have had this discussion, I am not sure that we have satisfactorily answered the point.
I say to the Minister that I understand why lawyers, particularly charity lawyers, wish to have powers that are broad and can be used in a number of different circumstances. However, when those powers are as broad as they are in the Bill, they do not help individuals to understand their fitness to serve as a trustee. Part of the law must be about enabling those who use it to know what it means. It would have been possible, had the Government been so minded, to have addressed this problem in a different way, particularly on the matter of fitness or unfitness. They could have heeded the advice given to us by the Charity Law Association about the list of matters and criteria that could be taken into account, such as the Company Directors Disqualification Act, which has a long list of factors, which would enable somebody to know the criteria that would be used to determine whether they are fit.
On the reliance on the tribunal, in the Joint Committee debates there was a level of agreement that the tribunal works perhaps far better than anticipated by those who took part in the painful process of debating the legislation that set it up. However, I say to the Minister that, as it stands at the moment, it is only when there has been an order to disqualify and that matter has come before the tribunal that anybody will be in a position to make an independent assessment of whether the commission is acting correctly and proportionately. By that time, a person will find themselves on the end of a potential disqualification which could have a profound impact on not just their involvement as a trustee but their professional life, too.
These provisions are way too wide. They do not serve the purpose of explaining matters to people who may wish to put themselves forward as trustees but who would be so unsuitable that they would be disqualified. It does not help charities to have this lack of clarity about who they should or should not have on their trustee boards. This is a matter to which I think we may return at a later stage but for the moment I thank noble Lords for their contributions and beg leave to withdraw the amendment.
Amendment 5 withdrawn.
Clause 3 agreed.
Clauses 4 and 5 agreed.
Committee adjourned at 6.37 pm.