Charities Act 2006 (Charitable Companies Audit and Group Accounts Provisions) Order 2008

I thank the Minister for explaining the order. I echo his gratitude for the very thorough work done by my noble friend Lord Hodgson on the legislation when it passed through the House. I think that the noble Lord, Lord Davies of Oldham, was down to speak on this order today. We all know how busy he has been and I am grateful to the Minister for taking this on. Can the Minister kindly confirm in simple terms that the order’s effect is, first, that charities that are companies will in future be treated the same as charities that are not so incorporated, and, secondly, that charity companies that own subsidiary companies will be required to prepare consolidated accounts? Assuming that that is correct, and while I am aware that the sector has broadly welcomed the provisions—and I agree that those who donate to charities deserve, of course, to know that their donations are properly dealt with—my prime concern is that of cost, particularly at the smaller end. Charities that are companies with turnovers of as little as £10,001 are now to be subject to audit. As a matter of detail—and the Minister may have referred to this—that is a more stringent procedure than that being applied to charities that are not companies. Somewhere in the documentation, I see that the Government think that the average cost per charity will be the princely sum of £213. I practised once as an accountant and declare an interest as a member of the Institute of Chartered Accountants in England and Wales. I have to say that even I have never met an accountant who has charged as little as £213 for anything. Yet, having made this rather odd assumption, the Government go on in their analysis to say that they discount 85 per cent of the total cost to charities across the country on the grounds that many charities already have an audit. It is unclear what their justification for 85 per cent is. It may be that some percentage can fairly be applied, but I am worried about those conclusions in respect of smaller charities, which are surely less likely to have had an audit up to now. Perhaps the Minister can convince me. Is the preparation of consolidated accounts strictly necessary, again at the very low end? Accounting practice means that the balance sheets of companies that own other companies already include them in their accounts, but as a single line item rather than with each line item being consolidated, and then with notes expanding on the detail. Consolidation is a procedure that adds complication, time and therefore money. Can the Minister convince me that it is absolutely necessary, especially at the smaller end? The big cost arises from the work in the first year to set up the consolidation. If some charities then, as I will mention in a moment, fall out of the requirement as a result of the threshold being raised, it really will have been a huge waste of their time and money. Therefore, I ask the Minister whether the Government are not being a little hasty in implementing this order when the lower threshold stands a good chance of being raised as a result of the joint consultation on thresholds between the Office of the Third Sector and the Charity Commission. I think I am right in saying that this is likely to result in some charities becoming subject to the new, stricter rules in one year and then not so subject in the subsequent year. Is that not a complete nonsense? Perhaps the Minister can explain why this cannot be dovetailed properly? Is not the Office of the Third Sector charged with making things easier? The Charities Act 2006 introduced the requirement for the preparation of group accounts by parent charities. It was to achieve that by inserting Schedule 5A into the 1993 Act. Can the Minister explain, therefore, why neither Part 6 nor Schedule 5A applied to charitable companies? Lastly, respondents to the consultation on the draft order commented on the complexity of the legislation surrounding this whole area. I am aware that the Office of the Third Sector has stated its intention to prepare a consolidated version of Part 6 of the Charities Act 1993 prior to commencement, but does the Minister understand the importance of the vast majority of donations to charities, many of them small, going directly to the good causes they support rather than into advice from expensive lawyers—in addition to accountants, as we earlier discussed—on how to comply with complicated rules, and that hasty legislation followed by correction does nothing to help them? The Army has a phrase, ““Order, counter order, disorder””, which I suggest rather aptly summarises the Government’s actions.