Select Committee on Welsh Affairs Fourth Report

#####centon#####FOURTH REPORT#####centoff#####

The Welsh Affairs Committee has agreed to the following Report:



  1. The Welsh Affairs Committee published its First Report of Session 2001-02, The Children's Society in Wales (HC 525), on 15 February 2002. We received the Government's response on 19 April 2002; it is published as Appendix 1 to this Report. A separate response to the Report was received from the Charity Commission on 26 June 2002, and is published as Appendix 2 to this Report.
  2. We recognise that the Charity Commission has taken time and trouble in order to produce a full response to the points we raised in our February Report. We also welcome the Commission's acceptance that the trustees' performance was far from perfect:

  • it describes the process by which the trustees took steps to inform themselves as having had "shortcomings"[1]

  • it characterises the widespread criticism of trustees' handling of consultation as "understandable" and notes that "the possibility cannot be excluded that consultation of statutory funders might have generated "rescue" funding opportunities"[2]

  • the Society "cannot be said to have managed its financial circumstances as successfully in some respects as could, and arguably should, have been the case".[3]

The Commission has concluded that "the Society's handling of the issues fell short of good practice and has advised the Society accordingly".[4] It has decided not to open a formal inquiry "as the enquiries that it has pursued in connection with the Committee's report have already been of comparable depth and thoroughness", but it will "continue to monitor the Society's financial management and planning, and maintain contact with it as necessary on the other lessons of the case".[5]

  1. We are dissatisfied with the Charity Commission's response. We well appreciate that as the statutory regulator the Commission does not have the discretion to comment on or overrule decisions validly taken by trustees; and that the response deals primarily with an assessment as to how the courts would regard the decision taken to close the Society's work in Wales, were it to be subject to legal challenge. The explicit criticisms made by the Charity Commission are in our view unduly lenient. The inquiry the Commission carried out—and their response confirms that it was an inquiry in all but name—confirms the principal criticisms we made in our February Report. The Church of England Children's Society has now been found by the Charity Commission to have performed badly, and the criticisms we made in our February 2002 Report have been fully substantiated.


  3. We remain particularly concerned over one issue: the extent to which the trustees were justified at taking into account the costs of the Welsh Language Programme in reaching their decision. The Charity Commission's covering letter states—
  4. "Given the financial situation and the options being considered (a partial or a total reduction of services/presence in Wales as part of a wider programme of cuts), it is unlikely that the courts would have found it unreasonable in legal terms for the charity to take into account the costs of the Welsh Language Programme, and of fundraising in relation to fundraising returns in Wales."[6]

    The fuller legal opinion annexed to the Commission's response adds the rider "provided that they were not treated disproportionately to the other factors in its overall financial position".[7] The courts would consider whether it was perverse or irrational of the trustees to have taken Welsh Language Programme costs into account: not whether it was inappropriate to have done so. There would of course also be detrimental effects in Wales and elsewhere were it to be accepted as appropriate for trustees to take into account the costs of fundraising in particular areas in relation to returns when deciding on future levels of service provision in that area.

  5. We have no reason to quarrel with the Charity Commission's assessment of the likely view a court would take: but we do take strong exception to the state of the law thus revealed. Any company or body is thus free to discriminate against the provision of services in Wales, pleading the allegedly burdensome costs of Welsh language requirements. It is hard to imagine a court accepting a similar plea in relation to the costs of complying with health and safety or non-discrimination legislation. There is in our view a strong case for legislation to provide that those charged with management of charities (or any other comparable bodies) should be explicitly prohibited in coming to decisions from taking into account the costs arising from compliance with statutory obligations, such as those arising under the Welsh Language Act.


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