Charities Bill [HL]

My Lords, I am grateful to the noble Lord, Lord Hodgson, for moving the amendment and to other noble Lords—in particular the noble Lord, Lord Sainsbury—for their involvement in the debate. The noble Lords speak with great experience, and few, I would wager, have the great experience that the noble Lord, Lord Sainsbury, has in charity matters. That said, we take a different view. Although I understand the mischief that has been traced down here, we cannot agree with the analysis that is offered, in particular with regard to the way in which the current law operates. There are two elements to the amendment tabled by the noble Lord, Lord Hodgson. One is his new paragraph (c) of subsection (2), which would allow the Home Secretary’s regulations on the form and content of accounts to prescribe different forms of accounts for different sizes and types of charity. I deal with that matter quickly by saying that it is not necessary. Section 86 of the Charities Act 1993, which applies to all regulations made under the Act, already allows the Home Secretary to make different provision for different cases. Indeed, the current regulations do exactly that, by making different provision for common investment fund charities and for some housing and some educational charities. That element of the noble Lord’s amendment adds nothing to what is already possible in legislation that was enacted by his party’s government back in 1993, when they had the foresight to put in that flexibility. The other element of the amendment would, in summary, require the regulations to make only the minimum prescription needed to ensure that the accounts gave ““a true and fair view”” of the charity’s financial position. That is misconceived. The amendment proposes that the Charities Act 1993 generally requires charities’ accounts to give a true and fair view, an expression well known and understood by those in the accountancy trade. However, the Act—I am looking at the noble Baroness, Lady Noakes, on the Benches opposite—does not in fact do so. The concept of a true and fair view has no statutory definition. The amendment would, in the absence of a statutory yardstick for what is a true and fair view, create an unworkable system.  Currently, the Charity Commission and charities and their auditors rely on the methods and principles set out in the statement of recommended practice on charity accounting to provide the interpretation of what true and fair means in the context of charities.  That statement is not part of the law, except to the extent that regulations under the 1993 Act import some specific provisions of it into the law. The amendment could force regulations directly to import a whole raft of further accounting standards into law, which would create problems of interpretation that SORP was designed to solve. Furthermore, the amendment would prevent the regulations requiring disclosures that were relevant to stakeholders or the public interest but were possibly not relevant to the criterion of true and fair. An example might be the disclosure of salaries of a charity’s highest paid employees, in which there was a justified public interest. In summary, the amendment would have the opposite of the effect that the noble Lord intends. It seeks to import into the legislation the notion of true and fair in a way that could complicate matters and make the application of SORP more involved. It also seeks to import something into the legislation that is already there, which is the flexibility that the Home Secretary has to vary the form and content of the accounting rules and regulations so far as they apply to different sizes and shapes of charities. For those reasons, I continue to resist the amendment.