Charities Bill [HL]

My Lords, I beg to move that this Bill be now read a second time. The Government believe that a thriving charity sector is a cornerstone of a healthy society. Perhaps I may say just a word about someone else who thought that it was the cornerstone of society. That is our late and dear friend Lady Blatch. Your Lordships will know that she was a Minister of State in the Home Office and was responsible for Home Office policy in relation to charities during her ministry, which started in 1992. She worked tirelessly on this and other issues, and had a strong commitment to education. As noble Lords will also know, she was president of the National Benevolent Institute. I know that my noble friend Lady Ashton, who sits beside me on the Front Bench, joins with me in acknowledging the commitment that Lady Blatch made. We would like to say, if the House gives us leave, that we very much regret that she is not with us during the discussion of this Bill today. I know that she would wish it well. Through the Charities Bill, we aim to facilitate and promote the activities of the sector by creating a modern legislative framework for it. Many of us in this House enjoyed some 32 hours of discussion in Grand Committee on this Bill. We had the privilege of discussing the provisions on 3, 9, 10 and 23 February, and 8, 14, 16 and 21 March. In the Printed Paper Office there is a delightful compendium of all the discussions that we enjoyed during that period. I am confident that it will rest with each Member who participates in the debate on the new Bill—and I intend to rely on each and every word of what they said, by way of explanation, in the hope and aspiration that it will not have to be said again. The Government’s three aims for the Bill remain. The first is to provide a legal and regulatory environment that will enable all charities, however they work, to realise their potential as a force for good in society. Secondly, we   want to encourage a vibrant and diverse sector, independent of government. Thirdly, we want to sustain high levels of public confidence in charities through effective regulation. The story of this Bill is one of a thorough process and substantial consultation. I am very pleased that the Bill has attracted much support, not only in your Lordships’ House but, importantly, throughout the charitable sector itself. The Bill’s content is based on proposals by the Prime Minister’s strategy unit, published in late 2002. The draft Bill, published in May   last year, received pre-legislative scrutiny by a joint committee of your Lordships’ House and another place, and the Government accepted more than three quarters of the joint committee’s recommendations. Many of your Lordships will know that we then introduced the Bill to your Lordships’ House on 20 December last year. The Bill completed Grand Committee in March but fell when the general election was called. The Bill that we reintroduced on 18 May has had the benefit of more than 30 hours debate in Grand Committee. I am told that it had 31.2 hours, to be precise. The Bill as reintroduced incorporates the amendments made in Grand Committee together with the amendments tabled by the Government for Report and a very small number of minor drafting changes. In other respects it is the same Bill as before. The Bill has five principal themes. First, the definition of charity and the public benefit requirement; secondly, changes to the Charity Commission’s constitution and functions, and the creation of a new tribunal to hear appeals against commission decisions; thirdly, the creation of a new corporate legal form for charities, the charitable incorporated organisation; fourthly, changes to ensure that effective and proportionate regulation applies right across the sector, including those charities which have not in the past had to register with the Charity Commission; and, fifthly, the regulation of charitable collections. I shall cover those areas in a bit more detail later on. The Bill extends to England and Wales only. In both Scotland and Northern Ireland, subject to suspension of the Assembly there, charity law is a devolved matter. A charity law reform Bill is currently before the Scottish Parliament. Continuing co-operation between the Scottish Executive and the UK Government, and between the regulators in each territory, will ensure that the two Bills are compatible. I shall now describe the content of the Bill in more detail. Part 1 covers the meaning of ““charity”” and ““charitable purpose”” and applies a public benefit requirement which all organisations will have to satisfy to qualify as charities. The Bill removes the presumption of public benefit from those charitable purposes which currently have that presumption: the relief of poverty, the advancement of education and the advancement of religion. It also requires the Charity Commission to issue guidance on the public benefit requirement. The commission will carry out checks on charities, starting with charities that charge fees for their services, to ensure that those charities are meeting the public benefit requirement. Part 2 of the Bill covers the regulation of charities. It modernises the Charity Commission’s constitution, governance and powers, preserving the commission as an independent, non-ministerial department. Challenge to the commission’s legal decisions must currently be made in the High Court. The Bill’s creation of a new charity appeal tribunal will make it easier to challenge commission decisions. The compulsory threshold for registration is raised by the Bill from an annual income of £1,000 to £5,000. Charities whose income falls below the threshold will still be able to register voluntarily. There are changes to the regulation of excepted charities, such as Armed Forces and Church charities. Those charities do not currently have to register with the commission, and the Bill requires those with an annual income of more than £100,000 to register with the commission. Those charities are already within the commission’s regulatory jurisdiction, and the changes made by the Bill should not significantly increase the burden on those organisations. There are also changes to the regulation of exempt charities. That group includes the universities, other places of further and higher education, schools, museums and galleries. At the moment, they are excluded from the commission’s regulatory jurisdiction and they are not monitored for compliance with charity law. New ““principal regulators”” have been identified for various groups of charities, such as the Department for Culture, Media and Sport for some of the art galleries. When no principal regulator can be identified, the Charity Commission will regulate formerly exempt charities for charity law compliance. Part 2 also contains provisions modifying the cy-pres rule, to give the Charity Commission greater flexibility when changing a charity’s failed purposes into useful new purposes. Part 2 also contains provisions raising the threshold for professional audit of charity accounts and introducing new protection for auditors who whistleblow. The Bill creates a new corporate legal form for charities, the charitable incorporated organisation, or CIO. Unlike the most popular existing corporate form, the company limited by guarantee, the CIO will be regulated only under charity law and not under company law. That is a significant deregulatory measure. Part 2 also gives a power for trustees to be paid for some types of service provided to the charity, subject to safeguards and only when it is in the best interests of the charity. It also allows trustees to apply to the Charity Commission for relief from personal liability for breach of trust when they have acted honestly and reasonably. Other provisions of Part 2 will allow charities to spend small amounts of permanent endowment capital more easily than at present, and will facilitate mergers between charities. Part 3 of the Bill has been much welcomed. It reforms the regulation of public charitable collections by introducing a new, unified licensing scheme. The function of checking an organisation’s general eligibility to hold public collections will rest with the Charity Commission, while local authorities will continue to have the function of issuing permits to authorise the holding of a collection at a specified time and place. The scheme will cover face-to-face collections in the street for direct debits which are not properly regulated under the present law. Part 3 also gives the Home Secretary a power to regulate all forms of charity fundraising. He will not exercise this unless the self-regulation of fundraising fails. The Home Office is consulting on the criteria for assessing the success of self-regulation. There are also new powers for the Secretary of State and for the Welsh Assembly to fund voluntary organisations working in England and in Wales respectively. I said earlier that we have made some amendments to the Bill since it was last before your Lordships’ House. I mention the more significant of them now. I shall give the clause numbers so that those who wish to follow what I say using the Bill will be better able to do that. At Clause 37, the Bill now gives charity trustees a statutory power to purchase trustee indemnity insurance using their charity’s money. Another new provision, at Clause 70, will require the Home Secretary to appoint an independent person to review the operation of the Act within five years of Royal Assent. The review will, among other things, have to look at the effect of the Act on excepted charities, such as charitable funds within the Armed Forces. The Bill prohibits at Clause 9 any lowering of the registration threshold for excepted charities until the review has been reported to Parliament. On the Charity Commission, we have introduced a number of provisions responding to concerns raised by noble Lords in Grand Committee. At Clause 6, the Bill now guarantees the commission’s independence by specifying that it is not subject to the direction or control of any Minister or government department. At Clause 7, the Bill now also puts the commission under a duty to have regard to the principles of best regulatory practice, including the principle that regulatory actions should be proportionate. And at Schedule 1, it puts a three-year limit on the period for which members of the Charity Commission may be appointed, with a power to renew the appointment to a maximum of 10 years in all. The Charity Commission’s continuing status as a non-ministerial department will be addressed as part of the independent review that must take place within five years of Royal Assent. We have also included a provision, at paragraph 127 of Schedule 7, to ensure that the identities of recipients of grants given by a charitable trust need not be disclosed in the trust’s accounts during the lifetime of the settlor or his or her spouse or civil partner. On mergers, the Bill will now require, at Clause 42, that charities wishing to take advantage of the merger provisions in the Bill confirm to the Charity Commission, when they notify the commission of their merger, that they have made proper arrangements to discharge their liabilities. We have also added power at Clause 73 to make pre-consolidation amendments by order, as we agree with noble Lords that a consolidation of charity law would be desirable. The consolidation of statutes is principally a matter for the Law Commission, but we understand that the commission hopes to begin work on the consolidation soon after the Bill receives Royal Assent. The Government plan to table further amendments in Committee in response to concerns expressed in Grand Committee and I should like to outline them briefly. I hope that all of these amendments will give noble Lords a degree of pleasure and not irritation. Before the general election, my noble friend Lord   Dubs tabled amendments in Grand Committee to provide for groups of charities to prepare accounts for the whole group rather than just for the individual charities in the group. We agreed with the spirit of my noble friend’s amendments but time did not allow us to incorporate his proposals into the Bill. We now propose to do so. We also propose to change the name of the ““receiver and manager”” that the Charity Commission may appoint in certain circumstances to ““interim manager””. We are also looking at the possibility of including provisions giving the Attorney-General or the Charity Commission a power to refer a matter to the new Charity Appeal Tribunal for a decision in certain circumstances. Finally, although this is not expressly stated in the Bill, the Government propose to carry out a review of all the financial thresholds in the Bill one year after Royal Assent to see whether those thresholds are fixed at appropriate levels. The thresholds can be changed if necessary by subordinate legislation. I am very grateful to all noble Lords for their invaluable help so far in shaping the Bill. Perhaps I may particularly mention the noble Lord, Lord Hodgson, and my noble friend Lord Bassam, who shouldered an immense burden when this matter previously was going forward. I commend their industry and hard work. The Government have listened and, as I hope noble Lords will agree, responded positively to the consultative debates we have had. I do not for a moment exclude the noble Lord, Lord Phillips, who I think has been a redoubtable Grand Committee member and has made a real impact on this whole area of law. The charitable sector was disappointed, as were the Government, that the Bill did not receive Royal Assent before the general election. I know that the sector remains very keen to see the Bill enacted. I commend it without reservation to the House. Moved, That the Bill be now read a second time.—(Baroness Scotland of Asthal.)