House of Commons Hansard Debates for 16 Oct 1990

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(8) No liability (other than liability for a criminal offence) shall attach to the nominee in consequence of any act or omission of his in the performance of his functions under this section. (9) The power of the nominee to effect transactions in relation to the accounts of a body shall cease to haveeffect--

(a) when the Lord Advocate notifies him of his intention to proceed under subsection (6) above ;

(b) if the relevant institution by which the accounts are held notifies the nominee that the accounts held by or on behalf of the body are no longer dormant ; or

(c) where the nominee becomes aware of the identity of a person concerned in the management or control of the body, when he informs the institution of that fact,

and in any case to which paragraph (c) above applies, the nominee shall also inform the Lord Advocate of that fact.

(10) The Secretary of State may, by regulations made under this section--

(a) make provision as to the procedure to be followed by the nominee in exercising his powers under this section ;

(b) require the nominee to make to the Secretary of State an annual report as regards the exercise of his functions and such regulations may specify the form and content of such report ; and the Secretary of State shall lay a copy of such report before each House of Parliament ;

(c) prescribe the circumstances in which and the extent to which the nominee may apply any interest accruing to any account as regards which subsection (3) above applies during any period for which he is entitled to effect transactions in respect of the account for the purpose of defraying his expenses in connection with the exercise of his functions under this section ;

(d) require the nominee to keep accounts as regards his outlays and expenses in connection with the exercise of his functions under this section ; and

(e) amend subsections (3) and (5) above by substituting a different figure for the figure for the time being mentioned in those subsections.

(11) Where every account held by or on behalf of a body which appears to a relevant institution to be a recognised body is a dormant account, no obligation of confidentiality or requirement of secrecy (whether imposed by any enactment or rule of law or otherwise) shall prevent the institution from supplying to the nominee information such as is mentioned in subsection (12) below. (12) Information referred to in subsection (11) above is information relating to any account such as is mentioned in that subsection above which consists of any of the following :-- (a) the amount of the balance of the account as at the date the information is supplied ;

(b) the last date on which a transaction (other than a transaction consisting only of the accrual of interest to the account) was effected in relation to the account ;

(c) so far as is known to the institution, the terms of the trust deed or other document constituting the body or any information as to the nature of the purposes of the body.

(13) For the purpose of this section--

(a) a "relevant institution" is--

(i) an institution which is authorised by the Bank of England to operate a deposit-taking business under Part I of the Banking Act 1987 ;

(ii) a building society which is authorised by the Building Societies Commission under section 9 of the Building Societies Act 1986 to raise money from its members ;

(iii) such other institution mentioned in Schedule 2 to the Banking Act 1987 as the Secretary of State may, by regulations made under this section, prescribe ;

(b) an account is dormant if--

(i) in the period of ten years preceding the date on which the institution reviews the account, no

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transaction (other than a transaction consisting only of the accrual of interest to the account) has taken place in respect of the account ; and

(ii) the institution has no knowledge of the identity of any person concerned in the management or control of the body in whose name or on whose behalf the account is held.'.-- Lord James Douglas-Hamilton.]

Brought up, and read the First time.

Madam Deputy Speaker (Miss Betty Boothroyd) : With this it will be convenient to debate Government amendments Nos. 90 and 91.

Lord James Douglas-Hamilton : In Committee, the hon. Member for Cunninghame, North (Mr. Wilson) tabled an amendment which would have required banks to identify accounts of recognised bodies which had lain unused and to require the Inland Revenue to list such bodies. The object of the hon. Member's clause was for moribund charitable funds to be brought back into use. That principle was warmly supported by Committee members, and I gave the hon. Member an assurance that I would explore with the banks how such moneys might be brought back into charitable use.

The Committee of Scottish Clearing Bankers and the Building Societies Association have been co-operative in exploring how moribund charitable funds might be brought into use. We propose to remove any duty of confidentiality from the relevant institution in respect of dormant accounts and to enable them to inform an authorised person--the Scottish charities nominee--of such accounts. They will pass to the nominee details of the account holders' funds, and information as to the founding document. The nominee is to be satisfied that the account holders are recognised bodies. He will be concerned only with those which are recognised bodies. The nominee will have a right to effect transactions in respect of accounts. The nominee will take different actions according to whether the aggregate amount in the account is £5,000 or less, or more than £5, 000. Where the amount is £5,000 or less, subsection (3) procedures provide that the nominee may transfer the balance to such other recognised body as he may determine, having regard to the purposes both of the moribund body and of the body to which he transfers the funds. In many instances, the amounts will be small, and it will not be economically viable to appoint new trustees. Frequently, trust deeds will not be located and therefore there will be no means of appointing trustees. The important consideration is that the money is made available for charitable use, so he is empowered under subsection (4) to transfer funds to such other recognised body as appears to him expedient.

Subsection (5) relates to accounts with funds amounting to more than £5,000 and to cases under subsection (3)(a) and (b). Under that subsection, the nominee is to advise the Lord Advocate of the information received from the relevant institution about the body together with any other relevant matter. Under the powers of clause 11(2) and clause 6(4), the Lord Advocate is able to appoint trustees or to apply for the appointment of an interim judicial factor. Where the Lord Advocate does not so act, the nominee shall dispense the funds in the same way as those under £5,000.

Subsection (10) empowers the Secretary of State to make certain provisions by regulations. They include the procedures to be followed by the nominee in exercising his

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powers, in reporting annually to the Secretary of State. They also require him to keep accounts under subsection (10), and the Secretary of State is to lay a copy of the report before each House of Parliament.

The functions of the nominee must be paid for. Subsection (10)(c) enables my right hon. and learned Friend to prescribe the circumstances in which, and the extent to which, the nominee may apply any interest accruing during the period when he may effect transactions. Such interest would be used for defraying the nominee's expenses. There will therefore be no public expenditure implications.

Power for the relevant institutions to report to the nominee are included in subsections (11) and (12). Clause 11 removes any duty of confidentiality while subsection (12) sets out the information to be provided to the nominee. I have received an assurance from the banks that their branches will undertake routine periodical trawls of dormant accounts to identify any that they believe fall within the definition of "recognised body". The institutions have assured me that they will make every effort to identify moribund charitable accounts and will make particular efforts to identify accounts with balances in excess of £50. Below that figure, the cost of the efforts involved in addressing the matters becomes a balancing factor, but they have undertaken to use their best endeavours.

Given the assurances and co-operation of the relevant institutions, I am confident that this new provision will prove a very worthwhile innovation in ensuring that good use is made of charitable funds.

Sir Nicholas Fairbairn : The criteria in subsection (13)(b) are very rigid, referring to

"the period of ten years preceding the date on which the institution reviews the account"

and to the institution having

"no knowledge of the identity of any person concerned in the management or control of the body".

Ten years seems to me to be an arbitrary period. Surely it should be that if the institution has lost contact with any person concerned with the body's management, the funds will be considered dormant in those circumstances.

Lord James Douglas-Hamilton : I sympathise with the point that my hon. and learned Friend makes. We entered into detailed negotiations with the banks, and new clause 23 is drafted in such a way as to ensure that it can be effectively implemented. The spirit of the amendment proposed by the hon. Member for Cunninghame, North has been honoured ; although a slightly different approach has been taken, nevertheless substantially the same objective is achieved in bringing funds into use. I am grateful to the hon. Member for Cunninghame, North for raising the matter and I hope that the House will support the clause.

Mr. Wilson : This is probably the first evidence I have seen since entering the House of a good idea--if I can claim that for it--being translated into legislation. I am grateful to the Minister and to his civil servants for the work that has gone into producing what I hope is a useful reform, and one that was not conceived of at any stage of the Bill.

Scotland will be taking the lead with this interesting innovation, and if it proves half as relevant as was suggested in Committee, it may be viewed with envy by other parts of the United Kingdom. In Committee, I

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qualified the value of my proposal but said that it could be useful in some cases--but as other members contributed their anecdotes, the suspicion grew that perhaps we were on to something much bigger than I had realised at the outset. It remains to be seen just how substantial that innovation will be.

The basic point, which I shall reiterate for hon. Members who were not on the Committee, is that in my experience and in random contacts and researches in every rural and urban community in Scotland, there are funds which were raised for some specific purpose and which, for all sorts of historical reasons, have fallen into dereliction. In some cases, those funds have lain in banks for many years and no one knows that they are there : their purpose and the people who administered them have become lost in the mists of time.

I shall follow this matter with considerable interest to see if we shall uncover something big or whether the funds are more modest. 5 pm

Sir Nicholas Fairbairn : I congratulate the hon. Gentleman on achieving the amendment. Many private accounts which were set up by or for people who are now dead, must be sitting in the coffers of banks. Perhaps he would like to table another amendment to the next law reform Bill to deal with those.

Mr. Wilson : I should be so lucky. However that is a good point, and the hon. and learned Gentleman may recall that one of his English colleagues said in Committee that a Select Committee had discovered that literally tens of millions of pounds were being held in accounts on behalf of people who had gone into mental institutions or similar places. Money in bank accounts which to all intents and purposes have become defunct could amount to a great deal. We are taking the first step in Scotland, and I warmly welcome it.

For my own clarification, as I am sure the Minister has attempted to meet the spirit of the original amendment, I shall ask him two questions--the first about the term "recognised bodies". As more than a few months have intervened, I have perhaps become hazy about all the debates that we had about recognised bodies, but in practical terms, are we talking about the type of organisation established perhaps 100, 50 or 30 years ago--in most cases pre-war--when the definitions of a recognised or non-recognised body were not current, as they have only recently become?

Within the terms of the clause, will the phrase "recognised bodies" give the nominee access to the type of accounts which I have described? That question is purely for information, as the answer obviously could transform the situation, and I might have to withdraw everything good I said if that is not the case.

Lord James Douglas-Hamilton : The answer is yes.

Mr. Wilson : That is excellent ; I shall withdraw nothing. Secondly, I should like clarification about the public availability of information given to the nominees. I should have thought that to some extent the activities of the nominee should be demand-led. If a village hall is to be built, and folk can check up and find that there is a 50-year-old village hall fund which no-one knew anything

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about, then that is clearly better than having to wait for the nominee to tell them at some random time that such a fund exists. Will there be public access to the information that the nominee obtains?

Lord James Douglas-Hamilton : Is the hon. Gentleman aware that the nominee will have to publish an annual report and from time to time may have to advertise information depending upon the situation, and that that matter is currently being looked into?

Mr. Wilson : I know about the annual report and I welcome it, but it will deal with what has been done in the past year, rather than list funds and give an idea of what the nominee may do. However, I am happy to leave the matter there. Clearly, once a register of such funds is established, there should be public access to it. I do not want to delay the House, and I am delighted with what the Minister has done. I am perfectly happy with the mechanisms drawn up to bring this into effect. We shall know within a year or two whether the measure will be substantial. The important thing is the certainty that, in some communities in Scotland, money which would not previously have been available for useful purposes, which was given for useful purposes, will be unlocked because of the new clause. In that spirit, I thank the Minister for his efforts.

Madam Deputy Speaker : Does the Minister wish to respond before I put the Question? He does not have to, as there seems to be a degree of agreement.

Lord James Douglas-Hamilton : No.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 7

Duties of Commissioners of Inland Revenue

If any person requests from the Commissioners the name of any recognised body or other information relating to that body set out in section 1(1)(b) of this Act it shall be the duty of the Commissioners to supply that information in so far as it is in their possession.'-- [Mr. Dewar.]

Brought up, and read the First time.

Mr. Dewar : I beg to move, That the clause be read a Second time. A minute ago, Madam Deputy Speaker, you referred to a degree of agreement. I guess that that will not exist with this new clause. I fear that the gap between myself and the Minister over this clause is unbridgeable.

I regard this clause as a matter of some importance, because I hate to think how many hours we spend discussing the first 13 clauses of the Bill in Committee. As every hon. Member who has taken even a passing interest in the Bill will know, in those 13 clauses we have erected an extraordinarily complex machinery of control and scrutiny.

We considered rules for accountants and auditors, and the powers of investigation of the Lord Advocate and the Court of Session, and we immersed ourselves in the world of recognised bodies, non-recognised bodies, registered charities and non-registered charities operating in Scotland, and in the problem of what constituted a Scottish charity, which greatly interested us. Many of those bodies had inescapable duties laid upon them, carrying the full force of the law. All that hung on the peg

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of a new definition of charity, and a new availability of information about charities existing in Scotland which was to come from the Commissioners of Inland Revenue.

What astonished me, and no doubt other hon. Members, in Committee was that, although we were laying down duties for members of charitable organisations, we were laying no duty upon the Commissioners of Inland Revenue to make the basic information available about whether a charity was recognised for tax purposes. That was a key matter, because the writ of the Charity Commissioners does not run in England. There is no register of charities which one can consult at present. We were going to put that right by giving people the opportunity to obtain information about who or what is registered for tax purposes as a charity by applying for it to the Commissioner of the Inland Revenue.

I was amazed to discover, in part I, clause 1(i) of the Bill that there is

"No obligation as to secrecy or other restriction upon the disclosure of information imposed by statute or otherwise shall prevent the Commissioners of Inland Revenue (in this section referred to as "the Commissioners") from disclosing to any person who requests it, the name of any recognised body and the address last used by the Commissioners for any communication with the body and the year when such communication occurred."

The Minister explained that he did not wish to make it a duty to give us such information. After all, the Inland Revenue might be in difficulties-- presumably it might be in the middle of some cost-cutting exercise or have a difficulty over staff. In theory, because there is no duty to provide information in the Bill, one is merely removing an inhibition that might prevent it from giving such information.

If I turned up and said that I wanted to find out about body X, and whether it is recognised as such, as defined in part I of the Law Reform (Miscellaneous Provisions) (Scotland) Bill, the Commissioners of Inland Revenue might say that, for various reasons, they had fallen behind with their work in compiling the records, they are hard pressed and, in one way or another, it is not very convenient ; and they could ask me to go away and come back at some future date. Legally, there will be no reason why they should not do that. The Minister will no doubt say, "It won't be like that ; the CIR will carry out their part of the bargain." But there is no legal imperative that they should do so. That is an unsatisfactory state of affairs, which new clause 7 seeks to put right.

We are erecting a complicated system around the duty to disclose which, it turns out, does not apply to the CIR. For example, let us consider the duty of a recognised body to make available on request to any member of the public an explanatory document setting out its aims and objectives. If it delays for more than one month in doing so, a complaint can be lodged with the Lord Advocate. If such complaint is lodged with him, then it may be noted for the purposes of clause 1(2). That is all posited on the assumption that there will be disclosure by the CIR.

I take the simple view that it would make this whole construction a good deal more logical and understandable to everyone concerned if we imposed upon the CIR the duty of disclosure, as explained and described in clause 1. I hope, therefore, that the Minister will accept new clause 7. It is simple and straightforward and seems to me to provide justice to both parties to the bargain.

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Mr. Menzies Campbell : I support, as I did in Committee, the observations of the hon. Member for Glasgow, Garscadden (Mr. Dewar). When we create a sophisticated and, in some respects, an extremely onerous system for the regulation of charities in Scotland, a system which contains a number of explicit responsibilities and duties which we have not shrunk from spelling out in substantial--some would say overly substantial-- detail, it is ludicrous to send this part of the Bill on its way if it does not contain an express duty to permit disclosure of the information that clause 1 is designed to elicit. As has been forcefully pointed out, if there is no duty, then, for any reason which may appear to be appropriate to the Commissioners of Inland Revenue, they may decline to make available the information that this part of the Bill is designed to give public currency. The Minister endeavoured in Committee--in my judgment, hardly successfully--to provide justification for the absence of that duty. He will remember that the way in which the relevant part of the Bill is framed creates a right for the CIR not be be bound by what is otherwise the universal rule of confidentiality. Even that came under scrutiny in Committee. The fundamental and central issue is whether the CIR are obliged to make information available. The absence of a duty of the kind that the new clause seeks to impose would make a substantial part of what this part of the Bill endeavours to bring about unattainable. I hope, therefore, that the Minister will be willing to accept the new clause or, if he is not prepared to do that, to give a better explanation for not doing so than he tendered in Committee.

Lord James Douglas-Hamilton : Clause 1 rightly overrides the Inland Revenue's confidentiality rules, and empowers the Inland Revenue to disclose to the public the names and addresses of Scottish bodies that it recognised as charities for tax purposes. The new clause tabled by the hon. Member for Glasgow, Garscadden (Mr. Dewar) would place a statutory duty on the Inland Revenue to disclose that information.

The new clause returns to a point that we discussed in Committee. I undertook then to consider what was practicable. I understand why the hon. Gentleman has raised the point, and I have considered it with great care. However, I am afraid that his new clause would lead to some practical problems. I think that the arrangements already provided for by clause 1 will work satisfactorily.

It may help hon. Members who were not on the Standing Committee if I explain how the arrangements for public information will work. Once clause 1 comes into operation, members of the public will be able to ask the Inland Revenue's claims branch in Edinburgh whether particular Scottish bodies have been recognised as charities for tax purposes. Inquiries can be made either in writing or by telephone. The public will also be able to go to the claims branch office at Trinity Park house in Edinburgh and inspect a list of Scottish bodies which have been recognised as charities and which have been in contact with the Inland Revenue within the last 20 years. The list is likely to include about 15,000 charities and will be updated regularly.

The Bill also gives the public the right to obtain further information about the charities direct from the charities themselves. Thus, members of the public will be able to have access to useful information which is not at present

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publicly available. Furthermore, if there is sufficient demand for the microfiche, it will be made available in other public places. 5.15 pm

We have to bear in mind the fact that the Inland Revenue's records of charities date back to the 19th century. They were designed to meet the needs of tax administration, rather than as a public index. There are many cases where a Scottish body asks the Inland Revenue whether it qualifies as a charity for tax purposes, but it seldom, if ever, makes an actual claim to tax exemption later, because it does not receive the particular types of income on which it would need to claim a tax repayment.

When a charity is wound up, it does not necessarily have to notify the Inland Revenue, so the Inland Revenue's index of charities will include many bodies which were recognised as charities many years ago but which no longer exist, or which have long since moved from their original address.

Some inquirers may ask the Revenue about only one or two charities, but others may ask about a substantial number, or inspect the whole list. In that case, the new clause would in effect place a duty on the Revenue to provide a list of all Scottish charities ever recognised, which would mean going back very many years.

Mr. Tam Dalyell (Linlithgow) : Is the Minister sure that he is right when he says that a charity does not have to inform the Inland Revenue if it is wound up? I recollect a Finance Bill--I cannot put a date on it because I sat on a number of Committees that considered Finance Bills--that discussed charity law in great detail. The Inland Revenue claimed that it found out the very moment when a charity ceased to operate. This is tied up tightly with charity law.

Lord James Douglas-Hamilton : If registered, that would certainly be the case. I have received briefing not only from Scottish Office officials but also from the Inland Revenue on this point. The point that I am making is that much of the information included in such a list would be out of date. That would be unhelpful, and indeed positively misleading, to the public. That is why we propose that the list available for inspection will include only bodies which have had contact with the Revenue within the last 20 years. If an inquiry is made about a particular named body, it will of course be possible for the Inland Revenue to check back to their earlier records ; and, of course, charities which are still active but have not been in touch with the Inland Revenue for more than 20 years can contact the Revenue again and ensure that they are included in the list.

It is also possible that some small local charities will not be recorded in the central list at the claims branch because, at some time in the past, they have been dealt with by a local tax office which has consulted the claims branch informally. If any such bodies come to light, they can of course be added to the claims branch list, but if the Inland Revenue was put under a statutory duty, as the new clause proposes, it would have to make a comprehensive search of all local office files before the system came into operation, in order to ensure that it could comply with the duty. That would involve disproportionate work and expense.

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For all these reasons, I think that the new clause would be undesirable and would lead to practical problems. I can assure the House that the Inland Revenue will provide the information which clause 1 empowers it to do in the way I have already explained. I therefore hope that the hon. Gentleman will not feel that it is necessary to press his new clause.

Mr. Dewar : I am sorry to disappoint the Minister, but I cannot say that my doubts have been swept away. He made the point that members of the public have a right, which cannot be defeated, to request information in the form of an explanatory document from a charity. It is odd, therefore, that members of the public should not have the right to request from the Commissioners of Inland Revenue essential information that would establish whether the body from which they might wish to require further information has charitable status. I was not impressed by the Minister's remarks. I am sure that the Commissioners of Inland Revenue will attempt to be helpful when they can, but I do not see why they alone should be left with a power of discretion that is not allowed to any of the other parties under part I of the Bill.

New clause 7 is not immodestly drawn ; it merely insists that there should be a duty on the commissioners to give

"the name of any recognised body or other information relating to that body set out in section 1(1)(b) of this Act."

We are suggesting not that they produce something that is not available to them on their records but merely that they ensure that the information on those records is available. If a local charity has never been recorded at central headquarters and has slipped through the net, its name cannot be produced. We are laying on them a duty to give information that is available and is on their records, to guard against the possibility that for some reason they will either allow the matter to slip, exercising their discretion, or will not make the information available.

I cannot say that the Minister has reassured me. I do not think that his objections to the new clause are substantial, and I intend to press it.

Lord James Douglas-Hamilton : I want to be clear that I did not mislead the hon. Member for Linlithgow (Mr. Dalyell). He asked whether charities have a need to inform the Revenue. The answer is that they do not need to do so for tax purposes, but they must give information on tax as required by the Revenue.

Question put, That the clause be read a Second time :

The House divided : Ayes 141, Noes 184.

Division No. 317] [5.21 pm

AYES

Abbott, Ms Diane

Allen, Graham

Archer, Rt Hon Peter

Ashdown, Rt Hon Paddy

Banks, Tony (Newham NW)

Barnes, Harry (Derbyshire NE)

Barnes, Mrs Rosie (Greenwich)

Barron, Kevin

Battle, John

Bell, Stuart

Bennett, A. F. (D'nt'n & R'dish)

Bidwell, Sydney

Blunkett, David

Bray, Dr Jeremy

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