Select Committee on Welsh Affairs First Report


1. On 19 October 2001, the Board of Trustees of the Children's Society[1] decided to close all the Society's operations in Wales. The decision was announced on 6 November, when the Chief Executive, Mr Ian Sparks, issued a press notice in which he said:

"It is with great sadness and regret that we are forced to close our work in Wales. We have worked in Wales for 113 years and in that time we have been supported generously and unstintingly by the people of Wales and, in particular, the Church in Wales.

"The Children's Society, along with all other charities, is facing an uphill struggle to raise funds in the current climate. Amongst the hardest hit charities are medium­sized charities, church charities and children's charities. The Children's Society falls into all three categories.

"We have taken this decision because it was the only option available to us. This year we anticipate finishing the financial year with a £4 million deficit, following deficits over the last 4 years of £24million in total. As a result we currently have £13 million remaining in general reserves, only enough to cover three and a half months' operating costs. In total we need to make savings of £6.4 million. Unless we take action now to address the deficit, we will not remain solvent as an organisation".[2]

This decision, of which no prior warning had been given, was met with widespread concern in Wales, particularly among Welsh Members of Parliament and Members of the National Assembly.

2. We wrote to the Society on 20 November seeking a memorandum of evidence on the reasons for the decision, the causes of the Society's financial difficulties, the alternative options which were considered and the way in which the decision was taken. We received their response on 13 December,[3] and on 18 December we took evidence from representatives of the Society: Lady Toulson, who is the Chair of the Board of Trustees but who only joined the Board after the decision to close the operations in Wales had been taken; the Revd John Glover, the Church in Wales's nominee on the Board; Mr Ian Sparks, the Chief Executive and Mr Charles Nall, the Director of Finance and Administration.

3. The root cause of the decision to close operations in Wales was the Children's Society's lack of funds. In the four years prior to the year in which the decision was taken, the Society had deficits of £24 million in total. It estimated a further £4 million deficit in 2001-02. All those connected with the Society assert that cuts were needed in order for it to remain viable. This assertion seems relatively uncontroversial, although it seems from the Society's spending decisions in recent years (see paragraph 4, below) that the current shortage of funds was not anticipated or planned for. We have not attempted to make a detailed examination of the Society's account of its financial position, nor of the reasons why it found itself in a situation where such significant cuts were necessary; our main concerns in this Report are the way in which the cuts are to be made, the way in which the decision to cut all the Society's operations in Wales was taken and the future of the projects which are currently run by the Children's Society in Wales.

Background to the decision

4. In March 1998 the Children's Society had liquid reserves of £35.8 million, compared with annual expenditure of £29.6 million. This had been the result of the outstanding performance of the equities held by the Society over previous years. In its Annual Report for that year the Society announced that it would be using £12 million of its reserves to fund new work with children and young people and that it had developed a new fundraising strategy which it hoped would lead to a significant increase in voluntary income.[4] The strategy, which involved both developing new sources of income and reducing costs, led to an increase of 7.5 per cent in net fundraising income. This was below the target set by the Trustees, which was to raise the Society's income growth rate above the 10.5 per cent which had been the average of the previous 15 years.[5]

5. The Society's Chief Executive and Director of Finance and Administration told us that the reason for this failure was the fact that the investment in fundraising necessary to meet the target had originally been under-estimated. When it became apparent that more resources were required, additional investment—some of it in new forms of fundraising such as door­to­door and face­to­face appeals—was made available.[6] With hindsight, the Chief Executive told us, the approach to fundraising at the time "proves to have been mistaken," although he said that the Board's view at the time was that the strategy had been formulated "reasonably and carefully".[7]

6. It became clear in September 2000, based on preliminary figures for the first half of that year, that the Society was unlikely to meet its long-term ambitions for growth in voluntary income. The Trustees approved savings of £2 million, only £50,000 of which related to Wales. Since then, there have been fluctuations in fundraising income and it has now reached its long-term target level. The Society nevertheless considers that it remains necessary to make further cuts in order to make up for previous years of slow growth. Since the package of savings agreed in September 2000, additional savings have been made without any further closures, but these have been almost entirely absorbed by inflation. The Society's pay scales are linked to those of local authorities and therefore to inflation-based pay awards. Since staff pay is its single largest cost, it is particularly vulnerable to inflationary cost increases.[8] By July 2001, "it was recognised that substantial further cuts could not be delayed any longer".[9]

The decision and the reasons for it

7. At its meeting on 19 October 2001, the Board of Trustees was invited to consider how to respond to the charity's financial situation. The Chair of the Board, who retired at the Annual General Meeting the following day, was the Rt Revd J L Thompson, Bishop of Bath and Wells. Lady Toulson attended as a co-opted member—her first meeting of the Board—although she did not take part in the discussions because she did not feel that she had the background knowledge to contribute to an informed debate.[10]

8. The Trustees were invited to consider three main options:

    (a)  making all the necessary savings in England;

    (b)  reducing the Society's work in Wales by half; or

    (c)  closing all of the Society's work in Wales.[11]

The Board decided to close all of the Society's operations in Wales.

9. Finding all the necessary savings in England was not considered to be a viable option. The Society had already made £1.45 million of cuts to its work in England in its programme of closures in October 2000 and the Chief Executive's view was that total savings of £3.85 million over two years were the most that could be made in England without significantly harming the Society's "position as a national charity within England with a capacity to influence Parliament and Government Departments".[12] By the same token—that the maximum viable level of savings in England had already been reached—spreading the savings between England and Wales was also ruled out. The Chief Executive was later to describe the decision made as "the only option available".[13]

10. We asked our witnesses to explain why it was not possible to make further cuts in England, in addition to those that were carried out in October 2000 and those which are planned as part of the current round of cuts. The root of the decision seems to be the view, expressed by the Director of Finance and Administration, that if the Society is to remain effective not only as a provider of children's services but as a lobbying organisation influencing Government policy, it must retain sufficient practice to "draw worthwhile conclusions about the state of childhood in Wales".[14] It is the Society's role as a service provider which gives it its locus standi in the discussion of policy at the national level.

11. The Revd John Glover interpreted the reasons for the decision rather differently: "Seemingly, the Children's Society is realigning itself in the voluntary sector to become a social justice organisation. The advocacy in Wales did not seem to fit into that kind of pattern and I suppose is not seen as being politically glamourous enough because the idea is that the Society is able to influence government by the work it does".[15] The Chief Executive rejected this suggestion, arguing that it was a common view within the world of children's charities that project work and lobbying had to go hand-in-hand if they were both to be effective.[16] This view was reflected by the Parliamentary Under-Secretary of State for Health, Hazel Blears, who said in the course of a debate on the Children's Society that the most effective lobbyists of Government are those organisations which are involved in running projects and the best and strongest cases are made from the evidence that people find from their work on the ground.[17]

12. Another argument in favour of withdrawing from Wales was that "to continue in Wales would have made operations in both countries unstable".[18] Lady Toulson told us that "it has been made clear to [Trustees] by management that were we to ... keep Wales open for business the Society would implode".[19] We were disappointed that witnesses were not able to offer any further explanation of this view or evidence in support of it. The Chief Executive told us that "it was the judgement of the Director for Children and Young People which we discussed with her in some detail. It has to be a judgement. It is not a financial, mathematical calculation. It is a judgement of a manager about the impact of making further closures in England".[20]

13. A third reason offered for the decision was the cost of operating in Wales. The Director of Finance and Administration pointed out that operating in two countries required two influencing functions.[21] There were cost savings to be made from withdrawing from Wales, in addition to those provided by the closure of individual projects, such as the closure of regional offices. He also suggested that the Society's work in Wales was more expensive, per child, than that in England.[22]

14. It is reasonable and desirable for a charitable organisation which is required to make expenditure cuts to do so in such a way as to maximise the benefit derived from its remaining expenditure. However, it seems that in this case the problem is not that the cost of serving a child in Wales is greater than the cost of serving a child in England but that, according to Mr Nall, "the area of [the Society's] work which is the most expensive to run in terms of the voluntary income received and the contribution which has to be made from the central funds is Wales".[23] Mr Nall acknowledged that Wales's comparative poverty—Wales is ranked 11th out of the 12 UK regions in GDP per capita[24]—might be one reason for this. The Society views this situation as "subsidising its work in Wales from donations made in England".[25] Others might describe the use of money raised voluntarily in richer areas to fund the provision of services in poorer areas as one of the defining functions of a Christian charity.

15. Finally, it was suggested that the cost of Welsh language provision made the cost of providing a service in Wales more expensive in absolute terms than the cost of providing a similar service in England.[26] The Revd Mr Glover indicated that he had told the Trustees at their meeting in October that it was unacceptable to use the cost of Welsh language provision as a reason for pulling out of Wales.[27] The Chief Executive of the Welsh Language Board, Mr John Walter Jones, wrote to us on the day after the meeting in response to this suggestion.[28] He pointed out that the Welsh Language Act does not place any requirement on charities to fulfill their work through the medium of Welsh, but that the Children's Society, in common with over 50 other charities, had agreed a voluntary Welsh Language Scheme with the Board.[29] The Scheme includes a statement that:

"The Children's Society's Welsh Language Scheme needs to reflect the core value of the Society in a way which recognises the value of language and culture in Wales. Such a commitment carries a cost which is the cost of the agency and not the cost of the region alone".[30]

The Society has clearly now retreated from this view; witnesses saw the cost of Welsh language provision as a cost which attached exclusively to its work in Wales, and a cost which could be saved by withdrawing from Wales entirely.[31]

16. The Society's reasons for deciding to withdraw from Wales are unpersuasive in the extreme. The principal argument, that the decision was taken in order for the Society to retain its status as a body which is able to influence government policy, is scarcely credible in the context of the outrage with which the decision has been greeted in Parliament, in the National Assembly for Wales and within the Church in Wales. The second argument, that the Society's operations would "implode" if it tried to continue its work in Wales, is also highly dubious. Lady Toulson suggested that this argument was put to the Trustees by the Society's management and that the Trustees relied heavily on it when making their decision. However, not one of our witnesses was able to elaborate on it or to offer any evidence in support of it. The best the Chief Executive could manage was that it was "the judgement of the Director for Children and Young People". The Society's arguments about the cost of providing services in Wales might well have a grounding in fact. Wales is, in the words of the Most Revd Dr Rowan Williams, the Archbishop of Wales, "a variously and seriously disadvantaged country",[32] but that is all the more reason for the Society to continue its work there. Witnesses told us that the Society does not expect each region of England to break even in terms of voluntary income and expenditure,[33] yet the Society talks of Wales being "subsidised" by England.[34] Finally, it is unacceptable for the Society to use the cost of Welsh language provision as an excuse for pulling out of Wales and this was brought to the Trustees' attention at the meeting on 19 October 2001. It is inconsistent with the Society's own statement in its Welsh Language Scheme, that the cost of Welsh language provision is a cost for the Society as a whole rather than a cost for Wales alone. It also has worrying implications for the Society's work with other children whose first language is not English.


17. There was no consultation on the three options before the Trustees took their decision. The Society's argument is that, because the proposal involved a large number of redundancies (both in England and Wales), it could not consult external bodies before the staff and trades unions were made aware of the proposal.[35] But the Society did not even consult their own staff in Wales, not even their Welsh management teams, before taking the decision. No appeal was made to the National Assembly for assistance,[36] nor to the UK Government, nor to the Church in Wales nor, as might have been expected if the cost of Welsh language provision were a major concern, to the Welsh Language Board.[37] The Chief Executive told us that this was because the Director of Children and Young People, who is based in London, was "able to take a view about what the impact and effect [of the proposal] would be. ... That is her responsibility".[38]

18. One person who was consulted, after a fashion, was the Archbishop of Wales. The Revd John Glover, the Church in Wales's nominee on the Board of Trustees, told us that, when he was notified of the proposal two weeks before the October 2001 Board meeting, he sought permission to notify the Archbishop and other Bishops in Wales.[39] The matter was discussed at one of Archbishop's regular meetings with Bishops in Wales and he made written representations to the Society before the meeting.[40] In his letter to the Chief Executive, the Archbishop explained the ill-feeling that a decision to pull out of Wales would generate and reminded him of the faithful support that the Church in Wales had given the Society. He also reminded him that Wales is a nation, and the Church in Wales an independent church, and suggested that the proposal failed to recognise either of these facts.[41]

19. However, it is clear that the Archbishop himself does not consider this to constitute proper consultation. The Revd Robert Paterson, Principal Officer of the Church in Wales's Council for Mission and Ministry, made a submission to us in on behalf of the Archbishop in which he argued that the Archbishop, as a President of the Society, "should have been consulted ... prior to the decision of the Trustees of the Society to withdraw from work in Wales".[42] The decision has clearly generated a great deal of ill-feeling in the Church in Wales and possibly in the wider Anglican Church. As the Revd Mr Glover told us, "I think that the Anglican Communion will feel that this is a Society that may not be able to be trusted".[43]

20. It seems that there may have been material inaccuracies in the case which was put to the Trustees by management, which might have been avoided had they consulted with their colleagues in Wales. For example, the Trustees were told that the advocacy projects in Wales were due to end in March 2002 whereas at least three of the projects are in fact due to run until 2003.[44] Even at the time of our meeting, two months after the decision was taken, the Chief Executive was unable to say with confidence exactly when all the projects were due to end.[45] The Society's management also appear to have believed incorrectly that staff in Wales were on six month contracts,[46] and that advocacy services are now a statutory requirement in Wales.[47] The Chief Executive told us that these considerations did not play a significant part in the Trustees's decision.[48] The Revd John Glover, on the other hand, thought that the suggestion that all the projects were due to come to an end in March 2002 was "an important factor" in the decision because it would have meant (had it been true) that the Society would not have had to break any contracts.[49]

21. The Assembly's Minister for Health and Social Services, Jane Hutt AM, told us that the Assembly's Children and Youth Partnership grant scheme, which provided funding for a number of the Society's advocacy projects in Wales, was initially a three-year scheme due to end in 2002. However, the Assembly made clear in 2001 that the Scheme would continue to 2003 and in August 2001 bids were invited to for the 2002-03 financial year. At that time, consultation had already taken place for a successor scheme, the Unified Children and Young People's Support Fund, to run from 2003-04 onwards. Representatives of the Children's Society in Wales were invited to consultation conferences on these proposals.[50] The Minster described the Society's failure to consult its own staff in Wales, its funding partners and the National Assembly as "inconceivable and regrettable", showing "utter disregard" for all parties in Wales.[51]

22. It is regrettable that the Society did not consult with, or seek assistance from, the National Assembly (or, for that matter, any other body which might have been able to offer assistance) before making its decision to withdraw entirely from Wales. It is particularly disappointing that the Society's managers in London should have recommended to the Trustees that the Society withdraw from Wales without once consulting their own Welsh managers. This is especially significant in view of the management's apparent ignorance of the funding arrangements for their operations in Wales with which Welsh staff had been closely involved.

23. It is difficult to understand the Chief Executive's position in relation to the inaccurate information that was presented to the Trustees. It is not at all clear why information about the length of contracts and the duration of funding arrangements should be regarded by the Trustees as being of little significance in considering their decision. The Chief Executive's assertion that this was the case is at odds with that of the Revd Mr Glover, one of the Trustees. Whatever the impact of mistakes in the management's presentation of the case on the Trustees' decision, we are concerned that the Charity's management were unable to present the Board with accurate, relevant and complete information and that the Trustees have been inadvertently misled on matters of fact with which the Charity's managers might have been expected to be more familiar. We believe there is a strong case for the Society to review its systems for making information available to Trustees in order to ensure that in future major decisions are taken on the basis of accurate information.

Timing of the decision

24. It does not seem that the option of withdrawing from Wales had been under consideration within the Society for very long. In May 2000, the Society established a Working Group on the effects of devolution. Their Report, published in February 2001, recommended a number of possible responses to devolution: the establishment of an Advisory Committee on Wales as "the least that the Society should consider in the short term",[52] the establishment of a devolved management structure and, in the longer-term, the possibility of a federation of two semi-independent Societies in England and Wales.[53] At the end of July 2001 the Society implemented the first of these recommendations with the establishment of a Welsh Advisory Committee, of which the Revd John Glover was appointed Chair.[54] The Society spent nine months reviewing its future in Wales post-devolution, and as recently as July 2001, it was implementing the recommendations of that review. Yet three months later, the decision to withdraw from Wales entirely had been taken, after the Trustees had been given only two weeks' notice of the proposal.

25. The Assembly's Minister for Health and Social Services, Jane Hutt AM, pointed out to us that the Society's Report and Financial Statements for 2000-01 hints at a possible downsizing of their operations. It refers to "a review of our direct work with children and young people focusing on the size and scope of the Society's work ... [which] is intended to ensure that the Society's work is focused on those areas where it can have the greatest impact".[55] It also suggests that "some painful decisions" may be necessary in order to achieve a surplus before gains and losses on investments and other assets in 2002-03.[56] The Minister suggests that this indicates that the thinking which led to the closure in Wales was already underway in July 2001, the very time that the Welsh Advisory Committee was established. It seems that there were two separate and mutually exclusive sets of plans being made by the Society in July 2001: a plan to continue and strengthen its Welsh operation, through the Welsh Advisory Committee, and a plan to close it down entirely. An alternative explanation is that the decision to close the operations in Wales was taken rather hastily, in the three-month period between the Advisory Committee being established and the Trustees' meeting on 19 October. Neither possibility inspires a great deal of confidence that the decision was carefully considered by the Society's officials before it was presented to the Trustees for approval. It is regrettable, as the Minister pointed out,[57] that the newly-established Welsh Advisory Committee was excluded from such a grave decision being taken with respect to the Charity's operations in Wales.

Responsibility for the decision

26. There appears to be a degree of uncertainty within the Society over who is responsible for the decision. The current Chair of the Board of Trustees sees her role as implementing the decision taken by the Board under her predecessor. She would not comment on whether or not the decision was the right one, nor on whether it was properly considered, on the ground that she had not been a Trustee prior to the meeting on 19 October (though she had been Chair of the Board of Trustees when it reviewed the decision and decided to uphold it on 14 December 2001).[58] She said that she had no awareness of the problems which the Society was facing when she agreed to take over as Chair.[59] She suggested that the Society's management had made clear to the Trustees that the closure of the operations in Wales was the only option.[60] This is consistent with statements which the Chief Executive has made elsewhere.[61]

27. The Chief Executive, on the other hand, said that the Trustees had been presented with a range of options and were invited to choose between them, albeit on the basis of a recommendation from management. One of the reasons he gave for not consulting the Society's workforce on the proposal was that nobody knew whether the Trustees would accept it or not.[62] He repeatedly expressed the view that the responsibility for the decision rested firmly with the Trustees.[63] The Director of Finance and Administration explained that any risk associated with the decision to spend £12 million of the Society's reserves was taken on by the Trustees,[64] and the Chief Executive said that it was the Trustees who were "mistaken" in reaching the judgement that the fundraising targets could be met.[65] The confusion over the responsibility for the decision is compounded by the fact several of the Trustees, including the Chair, resigned at the AGM on the day following the Board's decision. This is in line with the Society's normal practice, where several Trustees are replaced at each year's AGM on a rolling basis, but nonetheless it represents unfortunate timing.

28. It is proper for the Trustees, rather than the Society's professional management, to take major policy and strategic decisions such as the one in question. It is right that in doing so they should take account of advice from management. That does not mean that the management bear no responsibility at all for the decisions, especially in a case where, according to the two Trustees who gave evidence to us, they have given the Board a strong steer towards a particular course of action. We are concerned that a situation has arisen in which, for various reasons, neither the Chair of the Board of Trustees nor the Chief Executive of the Society feels able to acknowledge responsibility for, or mount a robust defence of, such a controversial decision.

29. It is important that the Charity's Trustees are able to fulfil their duties fully from the outset, carefully scrutinising proposals which emanate from the Society's management and making informed decisions about the Society's future. To this end, we believe that the Society should consider providing a comprehensive programme of training and induction for new Trustees.

Consequences of the decision

30. The most obvious and immediate consequence of the decision is that the future of the Children's Society's 13 projects in Wales, and of the children which they serve, has become highly uncertain. On 8 November 2001 the Assembly's Minister for Health and Social Services met the Chief Executive, the Society's Director for Wales and representatives of the Society's staff in Wales. Following this meeting, she asked Children in Wales, the umbrella body representing statutory and voluntary children's services, to convene a Task Force to find arrangements for securing the future of the services which the Society currently provides in Wales retaining, if possible, the skills of the staff who are currently employed in those services.[66] At the same time, a group was formed by the Society's staff in Wales, which sought to found a new body to continue the Society's work. The Archbishop of Wales has established a new fund, the Archbishop of Wales's Fund for Children, to act as a holding fund for funds raised for children by the Church in Wales while the future of the Society's Welsh projects is worked out.[67] (One further unfortunate aspect of the decision is that it was taken just before Christmas, the period in which Christingle services which aim to raise money for the Society's work are held.)

31. Some progress now appears to have been made towards securing the future of the Society's services in Wales. The Society's Director of Finance and Administration told us at the meeting on 18 December that the Society had £1 million in endowments, which it would like to see released to a successor charity. He also indicated that the cost of closing the programmes in Wales would be £600,000 which, if alternative arrangements were made quickly enough, could be released to a successor body in order to keep the programmes going.[68] The Society has since offered up to £755,000 towards the continuation of its work in Wales,[69] a sum of money which the Task Force describes as "significant", but there is still a shortfall of about £250,000. The Task Force is optimistic that this will be met from individual and corporate donations and grants.[70]

32. The Children in Wales Task Force met on 20 December 2001 and 22 January 2002.[71] It has now agreed an interim business plan, under which an interim organisation would operate until March 2003, giving time for a new charity or other service provider to secure the long-term future of the services currently provided by the Children's Society.[72] We commend the Assembly for its swift response to the situation and we are pleased that negotiations over the future of the Children's Society's services in Wales are making progress. We call on the Government to monitor further developments closely with a view to offering any assistance which it might reasonably give.

A code of practice for voluntary organisations

33. It is important that charities and other organisations providing services in partnership with government at all levels understand the new political geography of the UK, post-devolution. We are concerned by the possibility that other organisations which faced financial or administrative difficulty might see withdrawing from Wales as an simple solution to their problems. This concern is shared by the Assembly's Voluntary Sector Partnership Council, which consists of representatives of the Voluntary Sector in Wales and Members of the National Assembly. The Council recently considered steps which might be taken to enable UK organisations to reassure their funders and stakeholders of their continuing commitment to Wales. The Council proposes to write to the relevant UK voluntary organisations to invite them to provide assurances about their future plans for Wales and to hold a joint seminar with the Wales Council for Voluntary Action (WCVA) to discuss their decision making processes in the light of devolution. The intention is that, following the seminar, the NAW and the WCVA will draw up a voluntary code of principles which organisations will be invited to adopt. The principles would include a commitment to early consultation with funders, stakeholders and service users in Wales in advance of any decision to withdraw from, or significantly alter services for people in, Wales.[73] It is possible that the National Assembly for Wales will amend its Code of Practice on the Funding of the Voluntary Sector to include a requirement that organisations adopt the proposed new code of practice as a condition of receiving Assembly funding.[74]

34. Following the Children's Society's decision, we believe that a code of practice which voluntary bodies operating in more than one country of the UK could choose to adopt would be a welcome development. A public commitment from voluntary bodies to consult properly before withdrawing from, or significantly reducing services in, Wales (or any other constituent part of the UK) would help to remove some of the uncertainty surrounding the work of the voluntary sector in Wales which has arisen in the aftermath of the Children's Society's decision. We urge the Government to support such a code of practice and to consider whether its adoption should be a condition of bodies receiving funding from the UK Government.

The Children's Society's subsequent advertising

35. Nearly seven weeks after the decision was taken to withdraw from Wales, recruitment advertisements appeared in the Welsh press for fundraisers for the Children's Society.[75] The Chief Executive explained that the advertisement had been placed in a Liverpool paper by the Personal Fundraising Partnership (PFP), an independent fundraising agency, and had been "lifted" by the newspaper's sister publication in North Wales.[76] This had been done without the knowledge or consent of PFP or the Society. We were assured that the Society had stopped recruiting in Wales except, as the Director of Finance and Administration explained, where it was necessary to fill a vacancy in order to secure safe practice.[77]

36. On 14 January 2002 an advertisement appeared in The Guardian for several marketing communications, media and fundraising posts with the Society. The main body of the advertisement began with the words "Each year, over 10,000 young people are locked up in England and Wales. Around 1 in 10 inflict injuries on themselves while in custody. Most disturbingly, from 1996 to 1999, 24 of them killed themselves. Here at The Children's Society, it's our goal to develop the long-term solutions that eradicate statistics like these ... before we can help vulnerable kids like these up and down the country, their stories need to be heard".[78] We do not believe that there was any intention to mislead by the wording of the advertisement, but it clearly gives the impression that the Society works in both England and Wales. Despite the publicity which has surrounded the decision to withdraw from Wales, it is reasonable to assume that many people will continue to believe that the Society, which has worked in Wales for 113 years, will continue to be active in that country. People in Wales who wish to support a children's charity must not be given the false impression that, by donating to the Children's Society, they will be supporting continuing work with children locally in Wales. The Children's Society must therefore take pains to ensure that neither the content nor the placement of any of its advertising, or of any other publicity or public statements issued by or on behalf of the Society, gives the false impression that it will continue to work in Wales.

The role of the Charity Commission

37. Under section 8(1) of the Charities Act 1993 ("the 1993 Act"), the Charity Commissioners "may from time to time institute inquiries with regard to charities or a particular charity or class of charities, either generally or for a particular purpose".[79] The Charity Commission has an evaluation procedure whereby it will consider each application for an investigation on its merits. Section 18 of the 1993 Act goes on to provide the measures that the Commission can take where the Commissioners are satisfied that:

    (a)  there is or has been any misconduct or mismanagement in the administration of the charity; or

    (b)  that it is necessary or desirable to act for the purpose of protecting the property of the charity or securing a proper application for the purposes of the charity or of property coming to the charity.

Generally it allows for the replacement of a trustee, officer, agent or employee of the charity and also the transfer of property to an official custodian. The Commission can not reverse a decision taken by the trustees of the charity.[80]

38. There are a number of aspects of this case which we believe might merit an investigation by the Charity Commission:

    (a)  at the very least, it seems that the Society's financial forecasting in the years prior to the decision was seriously flawed; at worst, the fundraising operation was hopelessly mismanaged—the resulting programme of expenditure, based on over-optimistic forecasts of growth in voluntary income, played a large part in the Society's current financial difficulties;

    (b)  the decision itself is so self-evidently perverse and the Society is unable to offer any justification for it beyond vague and insubstantial suggestions that it is "the only option" and that the Society's operations would become unstable if operations in Wales were kept open;

    (c)  although the decision does not appear to be outwith the purposes of the Charity set out in its governing document,[81] it is clearly contrary to other, established policies of the Society such as the Welsh Language Scheme, as well as more recent policies such as the establishment of the Welsh Advisory Committee;

    (d)  there was no consultation of any kind either within or outside the Society prior to the decision being taken;

    (e)  Trustees were invited to take the decision on the basis of inaccurate and incomplete information;

    (f)  there is still a question mark over the amount of the Society's reserves which will be made available to a successor body or bodies—it is vital that a fair settlement is reached in this matter and that money which was raised in Wales, or which has hitherto been allocated for use in Wales, is passed on to a successor body in Wales.

We will send a copy of this Report to the Charity Commission so that they may consider what action, if any, it would be appropriate for them to take in view of our findings.

1   The Church of England Children's Society, Registered Charity No. 221124. Back

2   Children's Society to Close Work in Wales, Children's Society Press Notice dated 6 November 2001. Back

3   It is printed in this Volume with the Minutes of Evidence at pp. 1-5. Back

4   Ev 1. Back

5   Q 16. Back

6   QQ 17-21. Back

7   Q 22. Back

8   Ev 1. Back

9   IbidBack

10   QQ 38-42. Back

11   Ev 2. Back

12   Ev 2. Back

13   Children's Society to Close Work in Wales, Children's Society Press Notice dated 6 November 2001. See also Q 82. Back

14   Q 83. Back

15   Q 73. Back

16   Q 85. Back

17   Official Report, 12 December 2001, col. 308WH. Back

18   This quote is taken from an e-mail briefing circulated to Welsh MPs by the Children's Society shortly before the Committee's meeting (not printed). Back

19   Q 88. Back

20   Q 89. Back

21   Q 92. Back

22   Q 232. Back

23   Q 233. Back

24   See Pathway to Prosperity: A New Economic Agenda for Wales, National Assembly for Wales, 1999, paragraph 3.2. Wales's GDP per capita in 1996 was £8,899: 82 per cent of the UK average. Northern Ireland is ranked 12th with a GDP per capita of £8,700. Back

25   Ev 2. Back

26   QQ 92 & 231. Back

27   Q 236. Back

28   Ev 34 (Appendix 2). Back

29   Cynllun Yr Iath Gymraeg/Welsh Language Scheme, The Children's Society, 29 July 1999. See Ev. pp. 35-7 Back

30   Ibid, section 1.3 (Ev 36). Back

31   See, for example, Q 231. Back

32   Letter from the Most Revd Dr Rowan Williams to Ian Sparks, dated 12 October 2001 (not printed). See paragraph 18, below. Back

33   Q 146. Back

34   Ev 2. Back

35   IbidBack

36   Official Report, 12 December 2001, col. 303WH. Back

37   Ev 34 (Appendix 2). Back

38   QQ 54-60. Back

39   Q 71. Back

40   Ev 2. Back

41   Letter from the Most Revd Dr Rowan Williams to Ian Sparks, dated 12 October 2001 (not printed). Back

42   Ev 34 (Appendix 1). See also QQ 96-98. Back

43   Q 103. Back

44   QQ 61-63. Back

45   Q 62. Back

46   Q 66. Back

47   Ian Sparks, Viewpoint: Passing the Baton, not Jumping Ship, Community Care, 6-12 December 2001, p. 21. Back

48   QQ 62-69. Back

49   Q 73. Back

50   Ev 38. Back

51   IbidBack

52   TCS Presence in Wales: A Report on SMT & Council on the implications for the Society of the impact of the National Assembly for Wales, February 2001, paragraph 7.5. Back

53   Ibid, paras. 7.12-7.17. Back

54   QQ 71-73. Back

55   The Children's Society Report & Financial Statement 00:01, July 2001, p. 6. See also Ev 37. Back

56   Ibid, p. 10. Back

57   Ev 38. Back

58   QQ 37, 42, 73, 104, 105 & 136-139. Back

59   Q 82. Back

60   Q 88. Back

61   For example, in the Press Notice announcing the decision (see paragraph 1). Back

62   Q 75. Back

63   Q 54, 73, 172 & 193. Back

64   QQ 10 & 11. Back

65   Q 22. Back

66   National Assembly for Wales Cabinet Statement by Jane Hutt, Minister for Health & Social Services, 15 November 2001. Back

67   Church in Wales expresses strong commitment to ensuring work of The Children's Society continues, despite pull­out from Wales, Church in Wales Press Notice dated 19 November 2001. Back

68   QQ 177-182. Back

69   Letter from Mr Bob Reitemeier, Chief Executive Designate of the Children's Society, to members of the Committee dated 8 February 2002 (not printed). Back

70   Children in Wales Press Release dated 22 January 2002. Back

71   National Assembly for Wales Cabinet Statement by Jane Hutt, Minister for Health & Social Services, 8 January 2002. Back

72   Children in Wales Press Release dated 22 January 2002. Back

73   Letter from Jane Hutt AM, Assembly Minister for Health & Social Services to Angela Eagle MP, Parliamentary Under-Secretary of State, Home Office, dated 25 January 2002. Back

74   Ibid. This Code of Practice was published in October 2001 in response to the Assembly's Voluntary Sector Scheme (September 2000). Back

75   The advertisement was placed by the Personal Fundraising Partnership and included the logos of the Children's Society, the Cancer Research Campaign and the Wildlife Trusts. It appeared in the Daily Post on 6 December 2001. Back

76   Q 226. Back

77   Q 228. Back

78   The Guardian Marketing & PR Section, 14 January 2002, p. 34. Back

79   The section also provides that "no such inquiry shall extend to any exempt charity", but the Children's Society is not one of the exempt charities listed in Schedule 2 to the Act. Back

80   Charities Act 1993, s. 1(4). Back

81   The Memorandum of Association and Articles of Association of the Church of England Children's Society, a company limited by guarantee and not having share capital. Back

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