Charities Act 2006 (Principal Regulators of Exempt Charities) Regulations 2011

My Lords, my noble friend Lord Phillips, from his lengthy experience in the charity field, has carried most of the points with him. I shall attempt to sweep up behind a little, if I may, and raise a couple of issues. Before doing so, I need to declare interests as president of the National Council for Voluntary Organisations and as chairman of the Armed Forces Charities Advisory Company. I wanted to speak on this issue because, first, the concept of exempt charities is complex and their structure and rationale is not immediately apparent. Secondly, these exempt charities are of course educational charities, and it is around education and health, but particularly education, that the whole issue of public benefit and charitable status revolves in the case of private schools. Therefore, it is important that we give these instruments a proper degree of scrutiny. One danger and one problem or issue that arose during the passage of the Academies Act was whether we had undermined the issue of presumption, because the Act merely stated that these institutions would be charitable, full stop. Having spent a great deal of time earlier removing presumption and making sure that all charities had to justify their public benefit status, it seemed strange and possibly dangerous that we would suddenly say that a group of charities—in this case, schools—was exempt. Therefore, the question of how they are going to be regulated and the nature of the regulator is important. As for when the regulator takes over from the Charity Commission, originally the 2006 draft Bill suggested that exempt charities could only disappear. Originally, the Bill as drafted allowed only for exempt charities to be removed; the original concept was that they would finally fade out. However, some of us, including my noble friend Lord Phillips and I, decided that it would be better to have a two-way valve, not a one-way valve. Indeed, it is the two-way valve that is being used to create a new category of exempt charities. When we examined some of the exempt charity regulators, there were some surprises, which have a read-across to this debate. The regulator for universities is the Higher Education Funding Council for England. It has always been surprising that that is the regulator because it has no charitable knowledge at all; it is merely a funding body. I shall come back to that again in connection with the proposals for the regulator and the Secretary of State in the current regulation. We have had some grave disappointments. Given that we were trying to create a proportionate regime, it was a shame that the MoD was not prepared to take on some of the requirements of the exempt regulation for Armed Forces charities, because there are many hundreds of them and they require a particular light touch. On the upside, you can have light-touch and proportionate regulation focused on a particular group of exempt charities, but there is a down side, which is regulatory arbitrage. You can find ways to fall between the cracks of the regulatory regime, which is something that we have to be very careful about. As I understand it, there will be two principal regulators. One of them is the Secretary of State for Education—that is very clear, although there are some down sides that my noble friend has just mentioned—but in the Welsh situation the regulator is a ““responsible person””, which is defined in Regulation 6(2). It means a person who, "““is or was … a Welsh Minister””," was, "““acting on behalf of the Welsh Ministers””," or was, "““a member of a committee established by the Welsh Ministers””." This is not an attack on the devolution process but it does mean that nobody is identified as the regulator for the Welsh educational institutions. I think that responsibility should lie with someone, or some defined body, and there is a danger here of having an amorphous and opaque nature of responsibility with regard to Welsh educational institutions. On the question of memoranda of understanding, through which we can avoid regulatory arbitrage, I assume that there will be two—one with the English regulator, the Secretary of State, and one with the Welsh person. It will be interesting to know from my noble friend who that person will be in the light of the rather opaque drafting of the regulation. This will be the first time that we have had two regulators—one for England and one for Wales. As I look through the other exempt regulators, I see that DCMS regulates museums and galleries for both England and Wales. We are now dividing them for the first time and creating an interesting precedent. I share the concerns that my noble friend Lord Phillips raised about role of the Secretary of State for Education in respect of England. This is a tiny part of his empire and can hardly have the attention that it might deserve. There is the issue of independence that my noble friend underlined, as well as the question of conflicts of interest that may arise in the future. I was quite attracted by the idea that the YPLA should be a regulator. If it is to be succeeded by the education funding agency, so be it. After all, if the Higher Education Funding Council is doing universities, why should the education funding agency not do this group of educational institutions? As the Explanatory Memorandum says: "““In practice, the YPLA (and its proposed successor the EFA) will carry out much of the necessary information gathering which would then be used to report to and advise the Secretary of State””?" Why not just have them carry out the role? It would be a good devolution of power. It would remove the role from the Secretary of State and avoid the conflicts of interest to which my noble friend referred. In conclusion, I understand that these are technical questions. I am sorry that my technical e-mailing skills are not sufficient to have been able to get them to my noble friend in advance of this afternoon’s debate, but I think that they are important. In these stringent, difficult and suspicious times, we need to maintain the culture of the charity brand, especially in the field of education. Some precedents are being set here and we need to be careful that we are not doing something that we will later regret. I think that, in line with the Government’s overall policy, devolving power for regulation to the lowest possible level is appropriate, and therefore I do not quite see why the Secretary of State has to have a continuing role here. That seems to be centralising rather than devolving.