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