Charities Bill [HL]

My Lords, I am grateful to the noble Lord, Lord Hodgson of Astley Abbotts, for his explanation of the amendment, and the noble Lord, Lord Phillips of Sudbury, for raising his questions. They reflect some of the concerns that we have had in looking at the proposed changes to the clause. As we have noted, the effect of the amendment to be inserted after Clause 42 is to create a presumption against permanent endowment. I hope that the House will indulge me while I spend a minute or two explaining what happens at the moment. It is worth noting that the Charity Commission does not operate a presumption that property is held as permanent endowment. It makes the best assessment of what restrictions apply to the property by looking at the trusts on which the property is held and, if those are not conclusive, at other available evidence. If that evidence indicates that particular functional land and buildings which the charity trustees want to sell is permanent endowment, then there are two different regimes, depending on the circumstances. The commission may or may not require recoupment. ““Recoupment”” is the replacement, out of income, of the capital sum that has been spent. The first regime is this: if the proceeds of sale of land and buildings are to be applied in the purchase of other land and buildings to be used for the purposes of the charity, the commission does not require recoupment of the proceeds of sale. If, however, the proceeds of sale are to be applied wholly or partly in the provision, improvement or development of buildings, the commission would normally require recoupment. In this case, land is effectively being exchanged for buildings. The basis for the distinction between the two regimes is that land has perpetual existence and buildings do not. I know that it is sometimes difficult for some charities, such as schools, to determine the trusts on which different parts of their land is held, because the school premises may have been put together over many years—in some cases over many centuries—and acquired in several different ways at different times. However, we do not think that the ordinary law of evidence should be interfered with in this way. The nature of the trusts attaching to particular property should continue to be determined in accordance with established legal principles. Amendment No. 84 would apply to existing charities. The original founders and donors to existing charities would therefore find, if the amendment were passed, that the goal posts had been changed in that the commission would have to start presuming that all property was not permanent endowment. Even if there were some evidence, falling short of a ““clear and express intention”” by the donor—that it was intended to be permanent endowment, the commission would have to presume that it was not. We argue that this cannot be right, not least because there has never been a requirement on a donor to state a ““clear and express intention”” in order to establish the donated property as permanent endowment. Once the restriction on permanent endowment is removed, it cannot be put back. In addition, the amendment does not contain any safeguards, unlike Clause 42, which gives a limited power to spend capital. Amendment No. 83 would include land held on trusts which stipulate that it is to be used for the purposes, or any particular purpose, of the charity in the new power for unincorporated charities to spend capital in certain circumstances. As the noble Lord ably explained, this is directly related to the first amendment because it lifts the restriction on permanently endowed land to allow it to be sold and the capital proceeds of sale expended without any recoupment. Where the trusts on which land is held specifically stipulate that that land is to be used for the purposes of the charity, we do not think it right to override that stipulation and allow the capital sum the land represents to be expended. My earlier comments explaining that the commission does not presume land is permanently endowed, but that it looks at individual circumstances on a case-by-case basis, are relevant here, too. While I know that for some landowning charities determining which parts of their property are permanently endowed and which parts are not can be difficult, it is not impossible and the commission aims to take a constructive approach in helping, where appropriate. The current system, whereby the commission, together with the charity, looks on a case-by-case basis at different pieces of property and makes informed judgments according to the available evidence, seems to be the best and most practical approach in the tricky kind of circumstances in which some landowning charities can find themselves. The disadvantages I have highlighted which the noble Lord’s amendment would introduce are not insignificant and I am therefore not able to accept the amendment.