Charities Bill [HL]

My Lords, I have not previously troubled your Lordships’ House with my views on this subject. To do so at this late stage one must have a very good reason. I believe that I do in that I can speak on these matters from a perspective that has not been heard during all the previous debates, eminent and knowledgeable though they have undoubtedly been. I, too, join the noble Lord, Lord Hodgson of Astley Abbotts, in thanking the House authorities for producing the new bound volume of debates. It will be right up there on my bookshelf alongside my battered copy of the handbook to charitable status written by the then quite common A. Phillips Esq. I begin by declaring an interest and also making a confession. I have spent all my working life working for charities. More than that, my present role—which I have held for some years—with Age Concern is as an adviser to boards of trustees and managers on, among other things, charity law. Having said that, I have not spoken to my colleagues in Age Concern—I have not discussed the matter with them at all—and some of the matters to which I shall refer today are not based on my experiences with Age Concern but with other charities. I have spent a long time trying to help trustees wrestle with charity law. I was not able to take part in the previous discussions because I was engaged on other business in the House, but this time I have sat down and looked at the Bill with the eye of a practitioner and from the position of someone who will have the joy of explaining it to the trustees of small organisations and trying to help them to make it work. I welcome a great deal of what is in the Bill and the central thrust behind it, which is to modernise the structures for charities and to make them more workable. When I was considering the issue, an analogy with footwear came to mind. Up until now in the charity world we have had unincorporated associations, which are rather like battered old slippers; they are very comfortable but not quite what we want. We have had companies limited by guarantees, which are rather like clogs; they are very hard-working and durable but they do not fit exactly with what we need them to do. Now we have CIOs, which some of us are led to believe will be the high-performance, all-terrain shoe that we need in order to do our business. I believe that they will be of great benefit to many organisations but I have one or two questions about them. I agree very much with the statement made by my noble friend Lord Phillips about the Charity Commission on the previous Second Reading. He said that many of the failures of the Charity Commission were not because of the commission itself or its structure but because of deficiencies in staffing. That is true. I have worked with organisations which have had the deeply frustrating experience of asking exactly the same question of the commission and having completely contradictory answers coming back to them. I have also looked with great care at what is proposed by the Government for changes in the structure of the commission. I again agree with my noble friend Lord   Phillips that the test of the changes will be the extent to which the commission works for small charities. They are the people who need it most and who form the bulk of the sector. There is still something in what has been proposed which will slightly handicap the Charity Commission in what it is trying to do. It will still have an investigative—almost policing—type role within the sector. No matter how hard the Charity Commission tries—and it does try; as someone who spends many a happy hour looking at the investigations section of the Charity Commission’s website and other things I can say that its advice is extraordinary—still it is always seen as having this policing role. Smaller organisations which are in need of support but which desperately fear getting tangled up in major issues, will still find it quite hard to relate, perhaps informally, to the commission. I have looked through all that has been written and wonder whether there is not a case for establishing some kind of users’ panel or user involvement group to help with those small operations, consisting not of professionals in the charity world but of trustees and perhaps, as the noble Lord, Lord Swinfen, said, of members and users of charities. I agree with my noble friend Lord Phillips that the Charity Appeal Tribunal runs the risk of becoming like employment tribunals. They were initially meant to be extremely informal but it would now be highly unusual for anybody to appear in front of one without the aid of a solicitor, and I do not think that many small charities could do that. I listened very carefully to what the noble Baroness, Lady Scotland, said on trustee indemnity insurance. I am glad that the Government are looking at this; it is perhaps the number one issue raised by trustees of charities, particularly sizeable ones. I tend to belong to the sceptical school of thought when it comes to trustee indemnity insurance. A great many such policies are not worth the paper they are written on and do not cover people for very much at all. I am happy to see the proposals in the Bill as long as the clear message is sent to trustees that the best form of indemnity insurance is good practice, which will always outweigh any kind of insurance cover. I do not wish to enter into arguments on public interest, which have already been covered substantially. I simply say that when a resolution is found, as it will be by the end of these discussions, I hope that we do not lose sight of the fact that a great many small charities are founded to assist small defined groups of people and sometimes to enable them to participate in self-help activities. I hope that whatever the definition of public interest is, it will mean that such organisations do not have their very essence removed if they pursue their ends in a charitable fashion. I greatly welcome the changes to the cy-près schemes. However, in my experience, the biggest problems arise when buildings are involved and a local authority is somewhere in the background. Sometimes buildings are handed out and given to local authorities. I hope that when the new cy-près schemes come into play, local authorities in particular will be appraised of the new rules so that they can help charities work their way through them. The last time the Minister introduced the Bill, she said that the Government had decided not to deal with the issue of charities and trading. I agree with her. I agree that, for the reasons she gave, charities which pursue non-charitable trading should do so on the same basis as any commercial enterprise. However, I agree with the comments of my noble friend Lord Dholakia that to operate trading companies is an enormous and cumbersome business for charities. I agree with the noble Baroness that changes in this area are perhaps best done through changes to taxation law. However, I still think that for transparency and openness in accounting, there is still an issue that needs to be considered, particularly the operation of subsidiary trading companies. The noble Lord, Lord Hodgson of Astley Abbotts, reeled off the different levels at which one has to have different forms of accounts. I was once sad enough to analyse the accounts of about 200 charities of varying size, from tiny organisations through to ones with multi-million pound incomes. It was a fascinating experience. Overall, the standard of accounting was extremely good. The most fascinating thing was that the standard of the accounts bore no relation to the size of the organisation, with one exception. In the accounts of very tiny organisations, one could see exactly what was going on—where the money was coming from and where it was being spent. That applied to the larger organisations as well. But there was a band of organisations with incomes of about £200,000 to £250,000, which had clearly had an IFA rather than a full audit. They had gone to the only accountant practising in the small place they lived who clearly had   no idea about charity accounting. Some had profit and loss accounts rather than SORP accounts. Remarkably, one had a set of profit and loss accounts that did not add up. It became quite clear that the standard of charity accounting has to be taken into consideration when looking at where to set the levels. There are all sorts of ways in which you can define at what level the charity should be accountable—the level at which it begins to employ staff, for example. We could go round and round; perhaps the GuideStar programme will give us better information. The noble Baroness said that it was the Government’s intention to review those limits within a year. I suggest that that review would be best timed to coincide with the introduction of the new SORP. Most of the accounts under the new SORP will not arrive for some time after that. Perhaps it might be in the Government’s interests to get better information by delaying that ever so slightly. I recommend that access to charity accountants is also included in the analysis. Schedule 6, which sets out what has to be included in the constitution of a charitable incorporated organisation, does not say that a designated area of benefit has to be included. I know this is an anorak-y question, but could the Minister tell me whether that is because the words ““charitable purposes”” or the ““purposes of the charity”” are inclusive and therefore the area of benefit should be spelt out? That is a particularly important issue for those charities organised along federated lines. I know that some charities still have quill pens, but some have e-mail. Some of us are about to try governing documents where it is recognised that we work electronically. Would it be possible to reflect that in the regulations if not the legislation? For example, charities could have virtual meetings rather than always having to do things by post. It is a matter I am just about to bring before the commission on behalf of one of the organisations with which I work. Finally, as others have said, the Bill is very nearly there. It is an extremely good basis upon to which to work. Speaking as someone who will probably have to implement it over the next 20 years until we have the next lot of charity legislation, I hope that noble Lords will support it. Those of us who work in the charity sector do so because one can have the freedom to think, to be creative and to bring about real change for individuals, unencumbered by great structures. I hope that noble Lords will allow us to do that and to organise our business properly and professionally.