Charities Bill [HL]

My Lords, we have spent a long time discussing the appointment of interim managers during the passage of the Bill. It has been time usefully spent. In practice, of course, the appointment of an interim manager is usually a last resort, when it is essential temporarily to secure the assets of a charity where there has been serious maladministration, misconduct or—perhaps worse—where the assets are clearly at risk. That is not a desirable position. An interim manager can be appointed by the commission only after the opening of a formal enquiry and after evidence of misconduct or mismanagement in the administration of the charity is obtained or in the event that it is necessary or desirable to protect the charity’s property. The Government continue to believe that, in most circumstances, it is appropriate for interim managers to be remunerated from the income of the charities concerned. Such appointments are made only after careful consideration of all other possible options and generally after a tender exercise to ensure both value for money and that the right appointment is made to deal with the circumstances that have arisen. Unfortunately, the need for appointments arises in circumstances where the problems are often complex and the trustees are either unwilling or unable to put the matters right themselves. Charities run their own affairs and, we would all agree, must be responsible for the consequences of their decisions and actions, including the consequences of mismanagement. We believe that in most cases it should not fall to public funds to pay the costs of an interim manager appointed to a charity as a result of the decisions and actions of the trustees of that charity. I invite noble Lords to agree with that basic principle. Interim manager appointments are rare: only two were appointed in 2004–05. We accept that the costs associated with the appointment can be high, but they must be considered alongside the value of the charity assets that are secured—almost £20 million for the seven cases that concluded in 2004–05. The commission has a statutory responsibility to supervise all receiver and manager appointments, which it discharges in all cases. The new powers to give directions to be conferred on the commission under Clauses 20 and 21 of the Bill may lead to a reduction in such appointments, as they will provide an alternative and simpler route to dealing with some of the concerns that give rise to appointments now. One of the points that has been made is about the high cost of disbursements and other professional fees incurred by interim managers. There is an argument that such professional advice would be necessary for the charity to restore itself to a sound financial footing in any event, regardless of whether it was being administered by the original trustees or by an interim manager appointed to it. The commission in supervising the appointment will clearly wish to keep those costs, as it does other matters, under careful review. We also agree that there may be some circumstances where it would be more appropriate for the interim manager to be remunerated out of public funds. An example might be where serious issues have arisen in the administration of the charity but the charity concerned is small and would not have the resources to pay the costs of an interim manager. It is perhaps with those circumstances that the noble Lord, Lord Swinfen, is most concerned. Nevertheless, if the commission decides that it is in the public interest and the best interests of the charity to appoint an interim manager, it may appoint one at public expense. It is only right that there is a clear understanding that nothing in the existing legislation would preclude the use of public resources to pay the costs of an interim manager where appropriate. However, our view remains that those should be exceptional cases and that the norm would be for interim managers to be paid out of the charity’s resources under the supervision of the commission. There is no reason why public resources cannot be used to pay for interim managers where it is right for them to do so. We understand entirely the point about the size and capacity of charities to fund the costs and expenses of the interim manager and any disbursements that they may have to make. Given the flexibility that is already in the law, I suggest to the noble Lord, Lord Swinfen, that it might be more appropriate to withdraw his amendment.