Charities Bill [HL]

My Lords, I declare my interests as the chief executive of a major charity, the Joseph Rowntree Foundation, and a charitable housing association, the Joseph Rowntree Housing trust. I am also a member of the Advisory Council of the National Council for Voluntary Organisations—which has done so much to   take forward the debate on public benefit—and chairman of the Giving Forum, set up by the Charities Aid Foundation to boost philanthropy, corporate and individual giving of money and time. I was on the Joint Committee that considered the original Bill, and have regarded it as a privilege to participate in the process of this legislation throughout its course to date. Clearly, it reaches its second Second Reading in very good shape, with only a handful of outstanding points to resolve. The whole process has been a model of co-operation and consensus, and it seems certain that the resulting Charities Act will be extremely valuable. In much of the discussion on the Bill to date, one can detect an inevitable tension between independence and regulation, between freedom for charities to do their own thing and to have control over their affairs to prevent abuses or loss of reputation. In particular, charities that accept the bulk of their funding from statutory sources always face the danger of a culture of contracts and compliance, undermining the value of a truly independent input to solving social problems. Achieving the balance to maximise the gains from a sector that is outside the profit-motivated private sector and outside the necessarily constrained public sector will require vigilance and even the occasional campaign from those of us who have spent their lives in the charity-voluntary-community third sector. Perhaps I may take a few moments to explain my support for the Bill’s provisions on ““public benefit””, but also my support for the earlier amendments relating to this issue of the noble Lord, Lord Phillips of Sudbury. The best illustration of the public benefit debate, and the most controversial ingredient in the Bill, relates to the treatment of independent schools that charge high fees, but are registered as charities. I start with a point of principle. It follows from a commitment to the not-for-profit sector that I support the concept of provision of education that is independent both of the state and the profit-making private sector. Linked to this concept of a third way of doing things, I would suggest that this might be the moment to drop the term ““public school””, which so inaccurately describes these bodies. All independent schools are clearly distinct from the public sector in their governance and funding. There are schools in the   private sector that exist to make a profit for shareholders, and their numbers are growing. But there are also the independent schools that are charities, with a status that lies between the private and public sectors in that middle ground of the third sector, where pursuit of social objectives is a key component. Charitable status means an obligation to reach out to the community outside the school gates, offering bursaries to pupils from less affluent families and joining in partnerships with local education authorities. Increasingly, it seems that the key distinction in the provision of education outside the public maintained sector will be between the voluntary, charitable bodies and the commercial providers of education, such as the large Cognita company that has been established by the former Chief Inspector of Schools, Chris Woodhead, which are not charities and do not accept the constraints that charitable status brings. These private sector agencies must place the maximising of rewards for shareholders as their key objective. The two largest of these companies have recently raised several hundred million pounds to invest in what they see as a lucrative market. They can turn their backs on the ideas of bursaries for pupils from low-income households or of making available their facilities for children from other schools or of working in partnerships with the maintained sector. Indeed, I gather that Mr Woodhead is on record as saying that these bodies should not co-operate with the maintained sector. This breed of profit-making schools runs the danger of reinforcing a divisive segregation of education between richer and poorer, private and public, with a philosophy that ““never the twain shall meet””. They highlight the advantages of a third sector that embraces the obligations of charitable status. Jonathan Shephard of the Independent Schools Council has said:"““There is the very serious point that charitable status underpins the social purpose of our schools and integrates them into society. There is a real risk that purely commercial schools will concentrate on fee-paying parents and ignore the local community””." Noble Lords should remember that all the capital assets, future capital gains and any surpluses achieved by charities are locked into charitable purposes in perpetuity. This is in stark contrast to the profit-making sector. Even opponents of independent schools would, I feel sure, prefer schools to be run by registered, regulated charities than by profit-making companies. Clearly, in return for the concessions and status that independent schools obtain as charities, they must accept their wider social purposes. This is where the Charities Bill, and the Charity Commission, come in. Surveys indicate that the general public find it hard to understand why organisations that charge high fees for entry should obtain the benefits of a charity. The answer in the Bill is that the commission will make sure   that these schools will indeed be providing public   benefit, marking them out as different from commercial providers. This can no longer be a matter of reliance on past case law that deemed education in itself to be a charitable activity. That was spelt out in the concordat of understanding between the Home Office and the Charity Commission, reached as a result of the discussions in the Joint Committee. It stated:"““An organisation which wholly excluded poor people from any benefits, direct or indirect, would not be established nor operate for the public benefit and therefore would not be a charity””." Some of the schools in the independent sector might feel discomfort in satisfying the public benefit requirements, but—and not least—if popular perceptions are to be respected and, to quote the relevant Minister in the other place, public confidence in the ““charity brand”” is to be maintained, the Charity Commission must ensure that, true its historic and traditional role, those schools accept the wider responsibilities that fully justify their relief from rates and taxes. Universities have been required to take access more seriously and to ensure that the obstacles facing those from families on lower incomes do not prevent them benefiting from higher education. If all the charitable independent schools follow the examples of the better schools in widening access and playing their part on the local education scene, their privileges as charities should be assured. I conclude. This is excellent legislation which has already received a huge amount of detailed scrutiny. The potentially contentious subject of bodies with charitable status charging high fees, particularly schools, should not slow progress. Perhaps with a little tweak from the noble Lord, Lord Phillips of Sudbury, this ingredient in the Bill should be seen as important and helpful. In return for their privileges as a charity, these not-public, not-commercial schools will be held to account for their important responsibilities to wider society, thereby enhancing the reputation and the underlying value of charitable enterprise. I look forward to the safe and speedy passage of this important Bill through all its next stages.