Charities Bill [HL]

My Lords, I put my name to the amendment for three reasons. First, as my noble friend Lord Hodgson said, the accounting regulations encompassed by SORP have grown and grown. They have become a serious burden to charities, especially small charities. I suggest that the only gainers of that proliferation of regulation are the accountants. In the opinion of those in the charity sector whom I have consulted, the regulations have not resulted in clearer accounts than those that existed in charities five or more years ago. The amendment should be a real help to charities. Requiring minimum regulations commensurate with giving a true and fair view of the charity’s financial position should reduce significantly the number of paragraphs in the SORP. Ending the ““one size fits all”” regulations should result in appropriate regulations that take account of charities of different size and type, and thus, I suggest, provide a more meaningful account. My second reason for supporting the amendment is that the current regime of SORP is a serious disincentive to some potential large benefactors considering establishing a grant-making trust as an alternative to channelling their charity giving via gift aid, which they might do. It is obviously in the interests of the charity sector that grant-making trusts be established for the long-term benefit of charities rather than the valuable gift aid, which is the immediate way to help. The shorter, simpler and more appropriate the regulations the less likely that potential benefactors will be discouraged. My third reason for supporting the amendment is my belief that under the present regime the accounts of some charities are actually forced to be misleading. That is a serious allegation, and I feel that I must justify it by explaining exactly why it is the case. The existing regulations require charities to report expenditure made in one year and what is committed for the following year against the income that is received in the first year and reserves. That in itself is certainly entirely sensible. However, the definition of ““reserves”” specifically excludes capital of a grant-making charity. In the case of many endowed grant-making trusts, the charity’s governance document specifically makes endowment expendable if required for grant-making. In logic therefore, the so-called endowment is obviously part of the reserves. I know of cases where existing regulations, SORP 2005, require such trusts to post a deficit of several million pounds where in practice it has an endowment of several hundred million pounds on which it can draw to make its grants. If trustees comply with the current legally enforceable practice, they will not be providing a true and fair view of the charity’s financial position. A further example of the inappropriateness of the current SORP regime is the regulations concerning endowed trusts or foundations, which in many cases are set up solely to pursue what are defined as ““general charitable objects””. In practice, that means that they exist to give grants to other charities. In the latest accounting regulations applying to all UK charities, those charities are required to make a more detailed statement of their activities. However, grant-giving is specifically excluded from the definition of charities. Therefore, current regulations deny trusts in that position the scope to report simply and precisely what they exist to do. There are hundreds of charities in this country giving well over £2 billion together to charity every year. Surely that anomaly—that extraordinary situation—is in itself enough to justify the amendment, which will ensure that in future we are not limited to a single type of statement.