Charities Bill [HL]

moved Amendment No. 83:"Page 42, leave out lines 38 to 40." The noble Lord said: My Lords, I rise to move Amendment No. 83 and to speak to Amendment No. 84, which address Clause 42. The purpose of these two amendments is to end the confusion which currently exists about what is or is not permanent endowment. The guts of what we are seeking to achieve are in the second of these, Amendment No. 84, the amendment which leads the group and is an introductory necessity. This ordering caused some confusion among the Minister’s officials but I hope that I shall now be able to clarify the intention. In short, we seek to insert a new clause into the Bill that will provide a clear and unambiguous definition of what constitutes permanent endowment. Difficulties with the present position have been brought to our attention by several law firms expert in charity law. Section 96(3) of the Charities Act 1993 contains a definition of permanent endowment that is widely interpreted as meaning that property is permanent endowment unless, at the time of the gift of it, it is expressly stated by the donor that both the capital and the income of the donated property can be spent on the charity’s purposes. Given that it would never occur to most lay people that there was a need to state that—they would assume that it would be the effect—much more charity property is held as permanent endowment than was ever intended by the original donors. The purpose of the amendment is to turn the definition around so that, in future, property will be deemed to be permanent endowment only if, at the time of the gift, there was an express stipulation that only the income from the capital could be spent on the purposes of the charity. If that definition is adopted, it will be only where donors have deliberately intended that their gift should form permanent endowment that those restrictions will apply. It is extremely unsatisfactory for service-providing charities, often schools, to find that they cannot sell a piece of land with valuable planning permission to enable them to construct new buildings on land already owned by them because of that definition. In consequence, the Charity Commission requires some system of recoupment of the money spent on the basis that the buildings to be erected are ““wasting assets””. I fear that too often the Charity Commission has, without having taken professional advice from chartered surveyors, come to the conclusion that because many of the buildings are being constructed with a view to having a lifespan of a century or more—in any event, that their existence enhances the value of the land on which they have been built—its requirement to recoup money spent is unnecessary. I am told that Clause 42 will not necessarily help the situation. That is because the trustee’s right of freedom to deal with permanent endowment will not apply to,"““land held on trusts which stipulate that it is to be used for the purposes, or any particular purposes, of the charity””." Those are the words that Amendment No. 83 seeks to leave out. The proposed clause would have a number of considerable advantages. First, it would create a positive definition of permanent endowment instead of the present rather vague and odd definition. Secondly, it would clearly exclude from permanent endowment all those user-type trusts and ancient deeds in which no intention was expressed, probably because the donors and other parties had no such intentions. Thirdly, it would catch those trusts specifically set up with the intention of creating a permanent endowment in the sense that only the income can be spent on the purposes of the charity. The Government may be concerned that, if the wishes of donors can be overridden by Parliament, that will put off future donors. That is no doubt a very good argument in respect of more modern charities or those charities where a clearer intention is expressed, but it is not satisfactory where charities have their assets brought in as permanent endowment primarily by an implication drawn by the Charity Commission over the years and now reflected in the 1993 Act. A letter that I received from Mr Michael King of Stone King, a well known firm of solicitors specialising in charity law, states:"““I think it is perfectly understandable that the law should seek to give effect to the wishes of past donors to charity, but why should it be assumed that such donors wanted the money or property they gave to be restricted for income (or occupation) for the rest of time?""““What are now Clauses 39-42 of the current Bill already provide for the spending of capital in limited circumstances, extending the 1993 Act, so Parliament is prepared in principle to ignore the express wishes of donors. What I cannot understand is why Parliament should wish to continue to imply permanent endowment where there is no such express wish. As we suggested in our submission to the Scrutiny Committee, this rule comes from another age when accountability by charities was policed in a less sophisticated way.""““However, many such charities do have some land which they hold on special trusts and even more so this applies to schools and care homes. Clients are infuriated to find that selling off a small piece of land or redundant building for development in order to pay for a much-needed new facility on their campus is not possible without Charity Commission consent, which often requires a recoupment arrangement to be worked out with the commission””." The Minister should be aware that I have received similar representations from Lee Bolton & Lee as well as the Charity Law Association. The House will have strong feelings about this issue, and I hope the Government will be able to give a sympathetic response. I beg to move.