Charities Bill [HL]

My Lords, speaking for myself and, I hope without presumption, for others on these Benches, I associate myself with the moving tributes paid to Lady Blatch. She was a lovely lady and a formidable contributor to the work of this House and I, for one, will greatly miss her. My charitable interests are all listed in the Register of Members’ Interests. My concerns about this otherwise broadly satisfactory approach to charity law relate to the treatment of service non-public funds (SNPFs) which are charities. There are about 15,000 of them, spread across the three Armed Forces. They range widely in application and geography, covering a host of interests, from officers’ and sergeants’ mess accounts to service sporting and recreational activities. They can amount to as much as several million pounds, in the case of a service central fund, or to a few hundred pounds for some small activity. The origins of the SNPFs’ charitable category go back to the Statute of Charitable Uses 1601. SI 1056 of 1965 authorises their current excepted charitable status. SNPFs should not be confused or grouped with the many charities that in one way or another provide assistance and support for service and ex-service personnel and their families—for example, the Royal British Legion, SSAFA, Army and RAF Benevolent Funds and many others. SNPFs are quite separate. Most significantly, they do not fund-raise from the public. Their funds derive from the pockets of serving personnel. The Bill raises three concerns for me about the treatment of SNPFs: the public benefit test; registration and auditing costs; and devolved regime problems. My noble and gallant friend Lord Boyce, who cannot be here today, supports me wholeheartedly in my concerns. Ministers have assured us that SNPFs will continue to enjoy charitable status. The new Minister in charge, Paul Goggins, has written to us following a meeting that my noble and gallant friend and I held with Fiona Mactaggart, who had been dealing with this topic before the election. I thank him for writing. A very delayed return flight to the UK yesterday left me no time to respond properly before this debate. Some of his points have certainly been helpful, but I remain concerned whether the Bill as drafted gives SNPFs sufficient safeguard and reassurance for the future. For ““charitable purpose””, SNPFs must rely on the sweep-up of Clause 2(4), which indicates that any institution that is a charity under existing charity law continues to have a charitable purpose. Surprisingly, the Armed Forces are not mentioned in any of the descriptions of purpose in Clause 2(2), although military forces are deemed charitable in the 1601 Act. Indeed, none of the Clause 2 descriptions of purpose goes anywhere near embracing the ““efficiency of the armed forces””—the relevant words in SI 1056. Au contraire, purposes such as the advancement of conflict resolution and reconciliation or animal welfare are specified—the latter a modern day concept seen as worthy of mention while long-standing military welfare is not. What sort of message are the Government trying to send the Armed Forces? I am greatly disappointed and disheartened that the Government still choose not to reflect that ancient recognition of the charitable value attaching to the Armed Forces, whom today they so frequently praise and claim to do so much for the good of the country. Surely a mention in the Bill would not be amiss or cause widespread dismay. Turning to the ““public benefit”” test, the House should note that Clause 2(3) negates three presumptions in the 1601 Act of charitable benefit. Organisations for the relief of poverty, the advancement of education and of religion do not per se meet the public benefit criterion. This, the Explanatory Notes tell us, puts all charitable purposes on ““the same footing”” for the public benefit test. No mention is made of the Armed Forces, whose charitable status also springs from the 1601 Act. Does that mean that the military charitable purpose is to be treated as retaining a public benefit? Is that what is intended? Clause 4 requires the Charity Commission to issue guidance in pursuance of the public benefit requirement and to promote understanding and awareness of the operation of that benefit. So we need to be quite clear—and clearer than at present in the Bill—what is the public benefit of SNPFs. In the round—this is why I should like to see it especially covered in the Bill—advancement of the efficiency and welfare of the Armed Forces of the Crown should be seen not only as a charitable purpose but as a public benefit. It may not, however, be so clear to some in the commission and elsewhere why a particular SNPF devoted, for example, to sporting or recreational interests in one of the three services, should enjoy charitable status when other comparable activities in civil life may not. Indeed, without any specific reference to the Armed Forces, the commission may find that it is not easy to explain or distinguish public benefit in the case of a SNPF-supported activity, but not others. It would avoid later misunderstanding if there was greater clarity in the Bill about the existing and continuing charitable status of SNPFs. I should welcome Ministers’ views about that, and will be looking to some amendments in Committee and on Report to clarify the position for the Armed Forces and SNPFs. My second concern relates to the issue of registration and submission of trustee names, annual accounts and the other regulatory requirements. Of course, I am all for the proper scrutiny and administration of any public or non-public fund. That is greatly in the interests of both the members and the trustees themselves. I have had personal experience of SNPFs in my service career as mess secretary, president of the mess committee and at more senior levels of responsibility. There is already in place within the three services sound accounting and auditing facilities and procedures, which must examine and supervise SNPFs—not least because those private funds must be kept totally separate from public funds. These in-service procedures must perforce continue. Although I welcome, as far as it goes, the inclusion in this version of the Bill of Clause 70, which introduces the five-year review of the Bill’s operation when enacted, and of the provision inserted by Clause 9 to prevent the Home Secretary from changing the registration threshold for excepted charities before then, I have a related concern. The requirement in future for all excepted charities with annual gross incomes of more than £100,000—there are more than 2,000 of them—later reduced to cover lesser amounts, to duplicate the accounting and auditing already done within the services seems at odds with Clause 11(14). That clause provides a power for the Secretary of State to mitigate the risk of dual accounting regimes arising for charities that lose their exempt status and become subject to registration with, and regulation by, the Charity Commission. What will apply to formerly exempt charities should surely apply to SNPFs. Noble Lords will understand that many SNPF trustees are ex   officio appointments. Individual trustees will change frequently as postings and detachments are very much the norm in today’s expeditionary Armed Forces. Reporting trustee changes to the commission—the service authorities which instigate the moves will not need to be informed—could become quite burdensome for individuals who are under pressure to deploy at short notice and who may not have time for more than a cursory handover. On top of those bureaucratic complications, there will also be costs for the SNPFs which can be met only by the members and at the expense of their actual activities. I have heard that the initial registration and audit for RAF SNPFs with greater than an £100,000 annual gross income could be approaching £1 million. It would be considerably more for Army SNPFs which are generally the best endowed in the three services. These not inconsiderable sums were ignored in the regulatory impact assessment. I believe that the Government are wrong to claim that the Bill will not add a new and costly bureaucratic burden for the three services and, initially, over 2,000 of these SNPFs. This is a bad time to be adding burdens to the three services when they are so highly stretched on operational commitments world-wide and when their personnel strengths, and so the prime source of income for SNPFs, are being reduced. My third concern relates to the global spread of SNPFs. Not all of them could conceivably be considered to be domiciled in England or Wales. A ship may be home-ported in Scotland and a relevant SNPF could be subject to charity law there, but the ship’s company may never be in port there, and some of its SNPF activity support might come from English or Welsh-based funds. I am not sure how Ministers expect ships’ companies, or battalions and RAF squadrons on deployment overseas, to avoid confusion and to abide by the new registration and other procedures being thrust upon them by this Bill and similar, but not necessarily identical, legislation in Scotland and Northern Ireland and, one day, maybe even in Wales. Defence is rightly not a devolved issue, but to treat one important aspect of the efficiency and welfare of our Armed Forces as a devolved matter, when the rest is not, is a complication too far. New Clause 23 of the Bill helps, but the theory and attractions (such as they are) of pressing for a one-cap-fits-all approach is doing nothing to help our hard-pressed Armed Forces which are spread throughout the world. I urge Ministers not to be a slave to dogma. Instead they should be prepared, even anxious, to treat SNPFs as a special and unique case with further sensible adjustments to the Bill before us today. The Joint Committee singled out the large number of SNPFs as worthy of special consideration by the MoD and the Home Office. The Government response, saying that the Joint Committee’s view was based on a false premise, served only to side-step the real points of practical concern that the Joint Committee and I have been attempting to draw to Ministers’ attention. The issue is not about formal jurisdiction, but about inviting the Home Office and the MoD, in the words of the Joint Committee report, to,"““explore ways of ensuring that these funds remain properly accounted for without bringing such a large number of small Armed Forces accounts within the remit of the Charity Commission””—" accounts, not funds. I read that to mean remitting SNPF accounts which, thanks to SI 1056, are not remitted to Charity Commissioners today. In view of the likely Scottish legislation which will allow SNPFs in Scotland not to have to register, is it inconceivable that a similar approach should not be adopted for England and Wales, and if not, why not? That would resolve a glaring discrepancy in the legislation between the two administrations which is affecting the Armed Forces. Surely those who take an interest in the good work of charities and their proper governance would have no difficulty in accepting the special needs of SNPFs. Our Armed Forces deserve better consideration and treatment. In the words of the noble Lord, Lord Hodgson, ““one more heave”” may yet get fair treatment for the SNPFs.