Charities Bill [HL]

My Lords, first, I should declare an interest as the settlor and a current trustee of a grant-making trust, namely, the Linbury Trust. I am also a trustee, known as a visitor, of the Ashmolean Museum, Oxford, a trustee of the Rambert School of Ballet and Contemporary Dance, the Sainsbury Archives and the Said Business School Foundation and, I am pleased to say, an honorary fellow of Worcester College. In general, I continue to support the Bill with some enthusiasm and believe that it is a better Bill than when it was last before your Lordships’ House in a number of small, but important, ways. In particular, I welcome the Minister’s acceptance of the compromise that I suggested in Committee that makes it permissible for grants to be anonymous during the lifetime of the settlor—and his spouse—of a grant-making trust. Although paragraph 127 of Schedule 7 does not revert to the pre-1995 reporting requirement for grant-making trusts, it does so for the lifetime of the settlors of such charities. That is a welcome improvement on the current situation. Of course, the desire for anonymity is not the only deterrent for potential settlors of charitable trusts. Another reason has been what is perceived as the regulatory bureaucracy of the Charity Commission. I was pleased to note that in new Section 1D(2)2 under Clause 6, the Charity Commission must act in a way that is,"““compatible with the encouragement of . . .  all forms of charitable giving””." That is a useful requirement. With that in mind, I would be interested to know whether the Minister would regard it as ““compatible”” to face charities with accounting regulations in the present SORP consisting of no less than 439 paragraphs. In 1995, it was half that figure—and that was bad enough. That is a formidable discouragement to those who are considering establishing a grant-making trust. It is far in excess of what is necessary for reasonable disclosures for any charity, particularly small charities and, in a different way, for grant-making charities. I fear that it is part of the Charity Commission’s predilection for the one-size-fits-all attitutude. The same accounting regulations cannot be equally appropriate to all charities, and, if the Charity Commission is to act in ways compatible with the encouragement of all forms of charity, it should have a different SORP for grant-making charities, for small charities and for others. An example of how inappropriate and, indeed, seriously misleading the SORP is for grant-making trusts can be seen in the required method of accounting for grant liabilities, which can have the effect of significantly understating the financial strength of the charity through the under-reporting of its true reserves. This is just one accounting detail of many, but I would not wish to take up your Lordships’ time by giving all the many examples of the blunderbuss of regulation that the SORP represents. It is enough to put off any benefactor who has the misfortune to try to read those paragraphs. It is, of course, manna from heaven for the accounting profession, whose fees, no doubt, respond to the length of the regulations that they are required to follow. This is a direct drain on charitable funds, which is a serious matter for small charities. Perhaps I may give one further example of how the regulations are incompatible with the encouragement of charitable giving. It concerns the requirement under SORP 2005 to spell out the methods of selecting and training trustees. I recognise that that might be a sensible requirement for large national service-providing charities, but is it really compatible with encouraging new grant-making charities? A wealthy potential benefactor who is considering what has to be a major step in committing a significant part of his wealth to charity for all time is most likely to wish to have trustees—in addition to, perhaps, being one himself—whom he knows and trusts and who have similar priorities to himself about which charities to support. I suggest that it is not an easy matter for a new grant-making trust settlor. It is not encouraging for him to have to disclose such a personal issue. I suggest that the Minister considers that that requirement could and should be treated in the same way as paragraph 127—in other words, removing it from being a requirement during the lifetime of the settlor. In a similar way, there is the Charity Commission’s attitude to the holding by grant-making trusts of a substantial proportion of their capital in a single stock. In most cases, that is sensible, but that is exactly what some major benefactors would wish to do in a new grant-making trust. Why not, if it encourages them to make over part of their wealth irreversibly to charity? The Charity Commission should be required to accept such an ““all eggs in one basket”” situation during the settlor’s lifetime. I had the privilege of serving on the Joint Committee that scrutinised last Session’s Charities Bill. One of the most important of our unanimous recommendations concerned the independence of the Charity Commission and the idea that it should not exercise its powers on behalf of the Crown. So, I was pleased to read new Section 1A, under Clause 6, which gave effect to the Government’s desire for independence from ministerial direction. However, as I pointed out at Second Reading of last Session’s Bill, that would not be the same as making the commission truly independent. As long as   the commission is a non-ministerial government department, it cannot be responsible for the number of its staff or their pay and conditions. If the Government really wish that the commission should be fully independent of ministerial direction and control, why not make it a non-departmental public body, reporting to Parliament? In a sense, the status of the Charity Commission implies that the Government cannot bring themselves to trust the chairman and members of the commission to carry out their tasks in the best interests of the charity sector and in the public interest. Why cannot the model be followed of the National Audit Office which must,"““have regard to the desirability of keeping the remuneration and other terms and conditions of employment of the staff broadly in line with those employed in the civil service””?" That would allow the necessary flexibility that the Charity Commission could use, if necessary. The important point is, surely, that the Government have the ultimate control, with the right to appoint or dismiss the chairman and commissioners, if they do not perform as the Government believe that they should. I cannot see why the Government are so fearful of giving the commission full independence to get on with the job completely free of government, knowing nevertheless that if they do not serve the nation well, they will not remain in post. I support all that my noble friend Lord Hodgson said on the importance of ““one last heave”” to make the Charity Commission truly independent. Finally, I refer to the efficiency of the Charity Commission. The Joint Committee heard evidence that suggested that the commission, while always meaning well, was, at times, excessively bureaucratic and inefficient. As I said at Second Reading in the previous Session, part of the problem of bureaucracy and inefficiency is probably the fact that the commission is seriously under-resourced and is unable to attract sufficient qualified staff, particularly on the legal side. The commission needs not more staff but more capable and qualified staff. It is understandable that able and ambitious civil servants cannot be attracted to the world of charity in a non-ministerial department, as opposed to a main government department where the variety of career opportunities is bound to be greater. We must bear it in mind that the Bill significantly increases the work and the responsibilities of the commission. The success of the Bill and the development of charity law in the decades ahead depends greatly on how well the Charity Commission carries out its tasks. We said in the Joint Committee that the evidence that we had heard had given us reason to question whether the Charity Commission was indeed properly organised with the proper resources effective for its new tasks. We went on to say:"““We recommend that professional advice be sought to review the ability of the Charity Commission to meet its new responsibilities under the draft Bill and in particular the quality of its processes, methods and organisation; the calibre of its staff; its resources””." I know that the commission now has a new and highly regarded chairman and chief executive, but I still believe that the proposed internal inquiry into the efficient working of the commission is insufficient. In view of the Charity Commission’s past weakness and the significant increase of its responsibilities under the Bill, I suggest that, in addition to the planned inquiry of the Better Regulation Task Force, the Charity Commission would benefit from and should have an outside, independent, expert business management review to equip it properly for the future.