My hon. Friend makes an extremely important point. It is clear that when the Charity Commission works in terms of its role of supporting, encouraging and giving guidance to charities, it is extremely effective. Particularly given the pressures on its finances, expecting it to undertake a wide range of enforcement in this manner is potentially quite costly.
Alternatively, amendment 10 would allow the commission to make details of the warning public without referencing the charity, or a charity trustee, by name. This would allow the commission to publish a warning anonymously if it felt that it held important lessons for the wider charitable sector, but without the consequent impact on the charity.
Secondly, under amendment 11 the commission would be obliged to give the charity adequate notice of its intention to issue a warning. The Bill states that
“the Commission must give notice”,
but there is no specified notice period. That means that there is nothing to stop the commission giving less than 24 hours’ notice of its intention to issue a warning, which would give the trustees, who are very often hard-pressed volunteers, and any charity staff almost no time to respond. This is a serious risk. In the High Court judgment that I mentioned, it is understood that charity trustees were given less than 24 hours to respond to the commission, prompting the Lord Chief Justice, as I said, to describe the time limits as “ludicrous”.
This concern has already been raised by the Joint Committee that reviewed an earlier draft of the Bill. It recommended that a reasonable minimum notice period to make representations on a draft warning should be made clear in the Bill. The Government’s response to the Joint Committee’s report accepted that a recipient should have the opportunity to make representations on the warning for the commission to consider before it is published. In our view, this requires the inclusion of a minimum notice period in the Bill, and that is what our amendment seeks to achieve. The Government may argue that there could be circumstances where the commission has such serious concerns that it must act swiftly and without notice. In such cases, the commission should exercise some of its other regulatory powers designed for more serious concerns, some of which may be used without advance notice. We have been told that the warning power is not intended for such serious cases.
We also propose a small amendment, amendment (a), to Government amendment 2 on the proposed power to withdraw or vary a warning. Our amendment is designed to help reduce any reputational damage to a charity that might result from the inappropriate issuing of a warning. It is absolutely right and fair that if the warning was subsequently found to have been incorrectly given, then it should be publicly revoked and any damage sought to be undone.
Thirdly, amendment 12 seeks to ensure that it is absolutely clear in the Bill that the commission will not be able to use its warning power to direct charities. It is not appropriate for the commission to be able to direct charity trustees on how to act. It is very clear from the Charities Act 2011 that the commission is not able to act as a charity trustee except for very limited exceptions. In a small range of circumstances, the commission can issue statutory directions to charities, but these are
rightly subject to very strict safeguards. It seems that the Government agree with this principle. In responding to the consultation on the extension of the Charity Commission’s power that was a precursor to the Bill, the Government specifically decided not to extend the commission’s powers to make directions outside a formal statutory inquiry. If the commission could use the warning power as a way to direct charities, it would be able to give directions via the back door. This is a fundamental shift in the delicate balance of the relationship between the commission and charities, and it should not be allowed.
We would welcome some clarification from the Minister on this point, as there seems to be confusion in the sector about it. We understand that the commission does not regard the warning power as giving it the power to direct charities, yet the explanatory notes to the Bill imply the opposite, stating:
“Where the Commission considers it disproportionate and unnecessary to open an inquiry purely for the purpose of making a direction, issuing an official warning could be an alternative way of making it clear to a charity that they should take action.”
Confusion over a similar issue gave rise to the High Court case that I mentioned, prompting the Lord Chief Justice’s comments about the commission’s actions. Our amendment makes it clear that while a warning can be used to give advice or guidance to a charity—which can often be very positive, as my hon. Friend the Member for Hove (Peter Kyle) said—in order to remedy the conduct that gave rise to it, it absolutely cannot be used to direct the trustees to take action.
New clause 1 would allow for the issuing of a warning to be appealed to the Charity Tribunal. I have already explained the potentially significant consequences that the issuing of a warning has for a charity. The Charity Tribunal is a low-cost forum that was established in the Charities Act 2006 especially for charities wishing to challenge the commission. In the absence of an express right of appeal, charities affected by a warning are able to challenge it only via judicial review. Judicial review is expensive, complicated, and time-consuming. It is a completely inappropriate option for a mechanism that is intended to address low-level non-compliance. The Charity Tribunal was introduced precisely so that charities would not have to rely on costly judicial review proceedings to challenge the commission’s decision making. There is no good reason, and I am afraid none was forthcoming in Committee, as to why it should not be possible to appeal an official warning to the Charity Tribunal. It is illogical that the exercise of the warning power should be more difficult to challenge than the exercise of the commission’s more extensive regulatory powers, which can be appealed to the Charity Tribunal.
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It is worth my highlighting again, first, that a warning can be issued if the commission considers that there has been a breach of duty—something that may well be disputed by the charity—and, secondly, that failure to comply with a warning can of itself allow the commission to take more significant regulatory action. These two factors make it even more important for a charity to have an accessible, realistic way of challenging a warning.
Amendments 13, 14 and 15 refer to clause 10 on the power to disqualify. The Bill will give the Charity Commission a completely new power to disqualify someone
from being a charity trustee. Again, we have significant concerns about the scope of this power, and again, we are not alone. The Joint Committee expressed concerns about the safeguards that accompany this power. The Charity Law Association has said that although the test for disqualification
“appears superficially to be robust, it is in fact insufficiently defined and lacks clarity and adequate safeguards.”
While the commission is naturally concerned to protect charities from unscrupulous trustees, and we support that aim, it is important to recognise the adverse impact that disqualification might have on an individual.
Our amendment would improve the power in three ways. One of the preconditions of the exercise of the power is that the commission should be satisfied that the person concerned is unfit to be a charity trustee. The Bill includes no guidance at all as to the meaning of “unfit”, which leaves a considerable degree of discretion in the hands of the commission and no benchmark against which unfitness can be judged. Amendment 14 would oblige the commission to publish a definition of “unfit”, after public consultation. This would go some way towards introducing objective criteria by which to assess unfitness. Where the commission disqualifies a person on the basis of past conduct that it considers is likely to be damaging to public trust and confidence in charities, our amendment 15 would make it clear that the conduct must be both relevant and serious.
Amendment 13 seeks to ensure that in situations where there has been a collective failure by more than one individual trustee, more than one person can be disqualified. This could be necessary in situations where more than one member of a board has been complicit and the board has collectively turned a blind eye to an abuse or misdemeanour within a charity. In some of the sexual abuse cases that have come to light recently, there has been what can only be described as a conspiracy of silence. This amendment seeks to challenge that.
These amendments and new clause 1 are intended to provide safeguards on the new powers of the Charity Commission. We believe that they will serve to strengthen the original clauses, not weaken them. Powers that place too much decision-making responsibility in the hands of the commission in making finely balanced judgments and executing actions with significant consequences could lead to confusion, error, suspicion and mistrust between the sector and its regulator. Greater clarity, a more balanced approach, and a strengthening of the boundaries of the relationship will give greater confidence to both sides on how to proceed in using the Bill’s new powers.