Charities Bill [HL]

My Lords, I must also declare an interest in the Bill, as I am a patron of a number of charities. I have also founded and run a charity that provides, by means of telemedicine, medical consultant advice to hard-pressed doctors in the developing world and in post-conflict situations. I congratulate the Government, in drafting this Bill, on taking on board some of the criticisms of the earlier Bill. In particular, I refer to the new imposition on the Charity Commission that its regulation should be,"““proportionate, accountable, consistent, transparent and targeted only at cases in which action is needed””." I also refer to the requirement on the Secretary of State to appoint a person to review the working of the Act within five years of its passage into law. That is all very sensible. However, I am not very happy with the Government in their failure so far to take on board some matters that I consider to be of even more importance. First, there is a significant gap of principle in the regulation of charities, which has historically been concerned only with the material assets of a charity and ignored the charity’s people, whether they are assets, such as volunteers and donors, or liabilities in the form of beneficiaries. As charities exist for their beneficiaries, it is odd that charity law allows the regulators to ignore their interests. The Charity Commission has sometimes acted in a rather cavalier fashion towards a charity’s people, and that should stop. Cases include Iran Aid, where the commission abandoned to starvation and death some 13,500 children in Iraq; the Hedley Roberts Trust, where the commission abandoned to blindness Indian children who worked on the salt pans by cutting off the supply of sunglasses; and the Protection of Animal Life Society, where the commission shut out the volunteers who were the lifeblood of that charity. I urge the Minister to reconsider that omission and table the Government’s own amendment to require the Charity Commission to take proper account of a charity’s people. Secondly, in Grand Committee in the previous Parliament, the Minister repeatedly told us that all public bodies such as the Charity Commission are required by law to act fairly, reasonably and proportionately and that therefore there is no need to include those words in the Bill. This new Bill introduces the requirement to act proportionately, but it does not include the requirement to act fairly or reasonably. In the Little Gidding Trust   case, which I mentioned in Committee in the previous Parliament, the High Court, supported by the Court of Appeal, refused to consider the fairness or reasonableness of the Charity Commission’s behaviour, even after the court had recognised that that was at the heart of the case. Thus the Minister’s argument that ““fair and reasonable”” are already part of the law does not, as far as charities are concerned, hold water. The sums of money that can be lost to charities, trustees and their beneficiaries by unfair, unreasonable or disproportionate behaviour of the Charity Commission can be very substantial indeed. The Minister has given us ““proportionate”” in the new Bill. Will she please concede ““fair and reasonable””? Unlike commerce, charities are founded on principles of moral behaviour. Charities and their trustees quite rightly expect nothing less than fairness and reasonableness from their regulator. I now turn to the lack of an effective appeal mechanism against the commission’s decisions. At present, there are four appeal mechanisms available to charities and trustees who are dissatisfied with the decision of the commission. They are a Charity Commission internal review, the independent charity reviewer, the High Court and the Parliamentary Ombudsman. These are all so ineffective that the Cabinet Office report, Private Action, Public Benefit, described the Charity Commission as virtually unchallengeable in practice. The Government have accepted that criticism and the Bill, like its predecessor, proposes a charity appeals tribunal. So far, so good. But the charity appeal tribunal is to be permitted to consider only the legal decisions of the Charity Commission, not its administrative decisions. Thus a new charity that is pushing at the boundaries of what is charitable in law and falls foul of the commission when attempting to register, may use the tribunal to challenge the commission’s decision. But an existing charity that has been the subject of a commission inquiry, and perhaps has a receiver and manager at a cost to the charity of hundreds of thousands of pounds, is to have no recourse to the tribunal if it feels that it has been treated unfairly, unreasonably or disproportionately. The Government have accepted that the present mechanisms do not work. The abuses of charities by the Charity Commission have been well documented in the Association for Charities’ report, Power without Accountability. There can be no excuse for the Minister holding back on this issue. I believe that the Government have been sent a copy of the report. They have had plenty of time to read it, because it was sent to them before the Second Reading of the Bill in the previous Parliament. In Committee, the noble Lord, Lord Phillips of Sudbury, described this problem as,"““an evil that needs addressing””." He went on to say that the Charity Commission holds the view that,"““the role of the independent complaints reviewer should be amended  . . . given more teeth and more powers to award compensation””.—[Official Report, 14/3/05; cols. GC 449–50.]" I do not consider it likely that the commission will be   allowed by the Treasury voluntarily to give the independent complaints reviewer the power to award substantial compensation for financial loss caused by the commission’s occasional misbehaviour. It therefore follows that there must be a mechanism in this Bill if it is to deal with this evil. The Government may oppose such a clause because it has cost implications for the public purse. If any private citizen improperly harms another financially, he can expect to pay. There is no reason why the Government’s regulator should, in practice, be above the law. In reality, I think that a practical mechanism of redress for abuse will assist the new management at the commission to change the culture there, and we shall see very few claims as a result. Our House is in the business of developing law that conforms to commonly held concepts of justice, knowing that otherwise it will rightly be despised by those whose actions the law is intended to confine. The courts and the Government support alternative dispute resolution procedures as a means of levelling the playing field between the citizen and the state. Without such a mechanism, this Bill may go on to deliver law, but it will fail to deliver justice. I now turn briefly to the suitor’s fund, which was mentioned and supported by the noble Lord, Lord   Phillips of Sudbury, and the noble Baroness, Lady Pitkeathley. Last year, the Charity Commission took it upon itself to reverse its traditional interpretation of charity law in the cases of Trafford Community Leisure Trust and Wigan Leisure and Culture Trust by allowing the registration of two charities to deliver local authority services. The fact that the commission can so casually change charity law so profoundly is causing considerable concern among charity lawyers. It is also causing considerable concern in the charity sector, which can see that it would be all too easy for most governmental services to be hived off into charities, thereby fundamentally changing and undermining the integrity of the concept of charities as independent bodies. The suitor’s fund could be used to allow the courts to look at this. I now turn to the commission’s statutory inquiries. They are an essential tool in the armoury of regulation but the commission has not always used them in accordance with the principles of good regulation. Too often, the commission inquiry reports have been one-sided affairs, sometimes presenting a picture that was literally unrecognisable by the subjects of the reports, and which entirely failed to recognise the real cost of the inquiry to the charity, trustees and others. Too often, inquiries have appeared to be self-justifying fishing expeditions, hoping to find some minor wrongdoing to justify the sometimes spurious claim that the charity’s assets are under threat. My first suggestion to the Minister is that when the commission publishes an inquiry report it shall invite the charity, its trustees and all other affected parties to submit for publication with the report an appendix containing those parties’ estimates of the costs of the inquiry to them, including the cost of consultants, lost time, lost assets, lost income and any other relevant costs. My second suggestion is that charities and other parties mentioned in inquiry reports should have the opportunity to respond to those reports in an appendix to be published with the commission’s report. The commission’s reputation for balanced reporting is seriously tarnished. This proposal will go some way towards assisting it to improve its reputation. My third suggestion on this subject concerns the draft reports produced by the independent complaints reviewer on complaints received about the Charity Commission’s behaviour. Such draft reports are sent to the Charity Commission for comment, but are not sent to the complainant to whom they are shown only after incorporating the commission’s amendments. This is not justice being seen to be done. It smacks of backroom deals and undermines confidence in the integrity of the independent complaints reviewer. Of course, the independent complaints reviewer is anything but independent. She is appointed and paid by the commission, which writes her remit. I urge her and the commission to amend her procedures and I urge the Minister to amend them for her, should the Government accept my proposal to put her role onto a statutory footing. I look forward to seeing a government amendment in Committee. I am delighted that the Government are going to change the name of the ““receiver and manager”” to ““interim manager””, but what about ““interim trustee”” when the managers are, in fact, acting as trustees where the trustees have been removed, and are not just managing the trust? I also suggest that the Charity Commission should in all cases pay the fees and expenses of any interim manager and any consultants appointed to assist him. This amendment runs counter to the arrangements for commercial companies, but the situation in charities is very different. The commission has shown itself to be careless with charity funds when appointing receivers and managers. This could make it think very seriously about whether to appoint an interim manager. For example, in the Voice of Methodism case it took more than six years to get rid of the receiver and manager who did relatively little in that time except collect his fees, which I am told were £100,000. In the current Cancer Care Foundation case the receiver and manager has already run up costs in excess of £600,000. I am told that they are likely to increase to more than £1 million. In that case, more than a year’s work has not produced any evidence of significant wrongdoing in the charity, but the charity is facing a colossal bill caused by the commission’s ineptitude. The commission’s only legal authority for appointing a receiver and manager is to ““protect charity assets””. In this case, it has done the opposite: it appears to be wasting them. Before the election, the Minister said that,"““the appointment of a receiver and manager generally happens when trustees are no longer in control of a charity””.—[Official Report, 14/3/05; col. GC 445.]" If that were always the case, the Minister’s stance would be firmer. But in the Cancer Care Foundation case and the recently settled Kingsway International Christian Centre case the trustees were entirely in control of their charities and running them very well when the commission took them over at exorbitant cost to the charities. Finally—noble Lords will be glad that I am coming to an end—I return to the topic raised by other speakers. I refer to the statutory status of the Charity Commission. Many of your Lordships have expressed the view that the Charity Commission should be sufficiently independent of the Government that it cannot interfere with the matter of regulating individual charities. It is only a few years since we all saw the disgraceful spectacle of a Minister of the Crown publicly denouncing Iran Aid, a charity of the highest integrity, as merely a front for funding terrorism. Perhaps it was only coincidence that that was when the Iranian Government were demanding that this charity be closed because it organised aid for the orphans of political dissidents in Iran; perhaps it was only coincidence that the Government at that time was seeking closer relations with the Iranian Government because of the prospect of oil contracts; and perhaps it was only coincidence that the Charity Commission obediently opened an inquiry which found no evidence of support for terrorism, but which effectively destroyed the charity, to the delight of the Iranian Government. The existing non-ministerial basis of the commission leaves it vulnerable to back-door interference while making its actions unquestionable in Parliament. Only by putting the Charity Commission on a truly independent basis, free of the government of the day, will the reputation of charities, the Charity Commission and the Government be protected. I urge the Government to think again on this matter.