Charities Bill [HL]

moved Amendment No. 6: After Clause 3, insert the following new clause—    ““ORGANISATIONS CHARITABLE UNDER EXISTING LAW WHICH CEASE TO BE CHARITABLE (1)   This section applies to a body or trust charitable under existing law which ceases to be treated as charitable owing to the practical difficulties of complying with section 3. (2)   A body or trust referred to in subsection (1) shall be called a ““former charity””. (3)   The Commission shall ensure that all the assets and liabilities of a former charity shall be vested in a community interest company as defined in the Companies (Audit, Investigations and Community Enterprise) Act 2004 (c. 27).”” The noble Lord said: In moving Amendment No. 6, I declare an interest as the deputy chairman of the Association of Governing Bodies of Independent Schools. I do so because the point that I am about to raise concerns independent schools—normally it applies only to a very small number; in fact, it applies only to a few—but it could apply also to other charitable trusts, institutions or charitable companies. I say straight away to the Minister that no doubt he will find defects in the drafting. There could well be wider repercussions from the proposed new clause. Therefore, I do not intend to press it. However, it is a convenient way of raising an issue that arose in our Committee debates during the previous Parliament. On that occasion, the Minister, although sympathetic to the point, was unable to give a firm response. Today, I seek a fuller and, I hope, more reassuring response or a promise of a better answer to the problem than my proposed new clause contains, either on Report or when the Bill goes to the other place. I shall explain the point and give the independent school situation as an example of the problem. In Committee both before and after the election, we had considerable discussion on independent schools, and I do not intend to go over that ground today. Suffice it to say that there is full acceptance among independent schools of the public benefit test, and it has been met on an increasing scale in many ways over the past 10 years—for example, through the provision of bursaries to help pupils from lower income families attend independent schools. About 30 per cent of all places now have a bursary of one sort or another. There is also the sharing of facilities in the wider community; a considerable amount of that is taking place. There is movement between the maintained and independent sectors as regards teachers, employment and recruitment and in many other ways. The Government are encouraging private/public partnerships between the two. So there has been full acceptance of the public benefit test, but some schools—as I say, it will probably be very few—will have overwhelming difficulty in meeting the test. I think in particular of small schools in isolated rural areas with fairly slender financial resources that can neither share their facilities because there is no one to share them with or have real difficulty in providing bursaries on any scale. If schools in that situation lose their charitable status because they cannot satisfy the public benefit test, they lose the tax benefits that go with charitable status. That is fully accepted. However, it seems extremely unfortunate that if the assets cannot be used for a similar charitable purpose, the school or hospital will have to close down. It is unlikely that another charitable trust or company would be willing or able to take it over as a school because it, too, would have difficulty meeting the public benefit test for the same reasons. Before the election, the noble Lord, Lord Goodhart, tabled an amendment in Grand Committee on 3 February 2005—the reference is col. GC7 of Hansard—to deal with the point. In so doing, he referred to his experience as a lawyer in advising schools on the problems that arise when an organisation ceases to be a charity. Similar concerns arising from this Bill have been expressed to me. The Charity Commission’s document on public benefit contains this passage:"““However, in extreme cases,””—" I have already referred to their being extreme, but there will be some—"““where the trustees are co-operating with us but the organisation simply cannot in all the circumstances provide public benefit””—" precisely the situation that I am describing—"““our action might include removing the charity from the register and making a legal scheme where necessary to ensure that any charitable assets of the organisation will in the future be applied for other charitable purposes close to any purposes that have ceased to be charitable. This would only happen where it was not possible for an organisation to meet the public benefit requirement””." That sounds sympathetic and is obviously intended to be helpful, without entirely meeting the point. There are three ways in which the point can be met. The first is by use of the cy-près doctrine, which I presume is what that passage in the Charity Commission document really refers to. I am no lawyer, but the problem with it is in not properly dealing with this issue: what are the ““charitable purposes close to””? If they are educational, and they have to provide those wider public benefits to meet the test, they will probably be providing educational services of a different sort, but not as a school. Therein lies the problem that is not actually dealt with; that of closing the school as such. Secondly, my new clause would be a way of dealing with it. It would mean that the school would continue to pursue its original charitable purpose and would become essentially a not-for-profit company. There is a connection, because, under the Companies (Audit, Investigations and Community Enterprise) Act 2004, in Clause 26(3),"““A community interest company established for charitable purposes is to be treated as not being so established and accordingly—""(a) is not a charity””." That is clearly a reference to the point that they may have been charitable but have become a community interest company. It would mean not having the tax benefits, but they would be able to continue. Thirdly, could the Charity Commission give a commitment—the Minister could confirm this—that the use of the phrase ““treating proportionately””, which is now added to the Bill, would mean that different considerations would apply to a school—for example, one in a remote rural area—unable either to provide bursaries or make facilities available to the wider community because, by definition, there is no demand? Such schools would be treated differently from a Winchester or the many schools that can make their facilities widely available to other organisations and provide a lot of bursaries. That would enable the former schools to satisfy the test and continue in existence. A school of that sort would obviously have to provide sufficient proof that it had used every endeavour to meet the public benefit test. That is the point of the new clause. I hope that the Minister will make some sort of constructive response to reassure schools that might find themselves in that situation. I beg to move.