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Part 2 of the Bill is divided into 11 chapters, each of which deals with some aspect of the regulation of charities. Chapter 1 of part 2 converts the Charity Commission into a corporate body. Currently, its functions are discharged by the five charity commissions. The chapter also contains reforms to the commission, modernising its constitution, governance and powers to build on its current effectiveness. We are giving the commission five new statutory objectives and are requiring it to report annually to Parliament on the extent to which it has met its objectives. I hope that
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that reassures the hon. Member for South Staffordshire (Sir Patrick Cormack) and others about the commission’s relationship to Parliament.

We are also putting the commission under a duty to have regard to the principles of best regulatory practice, including the principle of proportionality under which a regulator’s action must be proportionate to the risk posed by the problem with which it deals. We included that Joint Committee recommendation after listening carefully to the debate in the other place. In fact, the commission already operates in accordance with that principle, and recent surveys have recorded the high levels of satisfaction among charities that have dealt with it.

The commission is and will remain a non-ministerial department. We believe that its independence from Ministers is of paramount importance for the proper regulation of charities and for public confidence in the regulatory system. The Bill expressly prevents any Minister from controlling or directing the commission in its regulatory work. Those changes are to ensure that we have a Charity Commission that is independent and emboldened but accountable, regulated and effective.

Chapter 2 of part 2 creates a new charity tribunal. At the moment, anyone wanting to challenge a regulatory decision or order made by the commission must take it to the High Court, which is daunting and prohibitively expensive for the vast majority of charities. The new tribunal will provide a simpler, quicker and cheaper route through which to challenge the commission and improve its accountability.

Chapter 3 of part 2 deals with the registration of charities. There are three main changes. First, the Bill raises from £1,000 to £5,000 the income threshold above which a charity must register with the Charity Commission. The Joint Committee on the draft Bill found that there was a consensus for a registration threshold of £5,000. Charities whose income falls below the threshold will be able to register with the commission if they so wish, which will give more freedom to smaller, local charities.

Secondly, the Bill brings the arrangements for excepted charities into line with those for other charities. Excepted charities are those which fall within the regulatory powers of the commission but which are not currently required to register with it. They include some charities within the Church of England and other Christian Churches, and some charities within the armed forces. Requiring such charities to register will not significantly increase the regulatory burden on them but will rightly increase the transparency and accountability of those charities, which have exactly the same entitlement to tax relief as registered charities. To ease the transition from excepted to registered status, we are starting by requiring only those with an income of more than £100,000—the top 10 per cent. or so—to register. As we have said, we expect gradually to bring more of those charities into registration in future.

Thirdly, the Bill introduces new arrangements for the so-called exempt charities, which will include the universities, other places of further and higher education, some registered social landlords and some museums and galleries. Exempt charities are those that are currently outside the Charity Commission’s supervisory and monitoring powers. They enjoy the status and fiscal benefits that other charities have, but
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there is currently no mechanism for monitoring their compliance with charity law. The Bill changes that.

When a regulator is already in place—for example in the case of registered social landlords who are regulated by the Housing Corporation—that regulator will take on responsibility for monitoring compliance with charity law. When no suitable regulator is already in place, the Charity Commission will take on that responsibility. The proposed new regulators have been identified following extensive discussion with the relevant regulators and charities, and will be prescribed by regulation. The purpose of the changes is to ensure that modern and effective regulation extends right across the charity sector, not just to some parts of it.

Chapter 5 modernises the Charity Commission’s regulatory powers. It includes new powers for the commission to suspend or remove trustees and employees from membership of their charities. Chapters 6 and 7 raise the income threshold above which charities must have their accounts professionally audited, releasing about 3,000 charities from that obligation.

A development that we believe will be particularly useful in the longer term is the creation by chapter 8 of part 2 of a new legal form called the charitable incorporated organisation, or CIO. That could bring significant deregulatory benefits by allowing charities to take an incorporated form without having to submit to regulation under company law as well as charity law. A charity in CIO form will be treated and regulated as a charity, but not as a company. Existing charities will be able to take on CIO form, and new charities will be able to start up in CIO form.

Perhaps three quarters of a million people in England and Wales are trustees of charities, giving their time, commitment and expertise, unpaid, to the service of others. Trusteeship is a demanding yet personally rewarding endeavour. We want to encourage more and a greater diversity of people to be trustees of charities.

James Duddridge (Rochford and Southend, East) (Con): Would the Minister react warmly to the tabling of amendments that would allow people with learning disabilities to be trustees in organisations where there are learning-disability issues?

Hilary Armstrong: I never like to make commitments on amendments, but I should be very surprised if that were not already possible. I am fairly sure that it is, because I am fairly sure that I know someone with learning difficulties who is involved. I shall examine the position.

Chapter 9 of part 2 contains three provisions that will be helpful to trustees in their stewardship of charities. The first will allow a charity to pay a trustee who is willing and able to provide his or her charity with a professional or trade service that it needs. I emphasise that the Bill will not allow payment of a trustee for carrying out the ordinary duties of trusteeship, nor will it allow charities’ paid employees to be trustees at the same time. It preserves the voluntary principle of trusteeship which is part of the ethos of charity. The second provision will allow trustees to apply to the Charity Commission for relief
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from personal liability for breach of trust when they have acted honestly and reasonably, but their action has nevertheless caused some loss to their charity. The third will allow trustees to pay for trustee indemnity insurance using their charity’s money.

Those measures are intended to encourage more people to become or continue as trustees by giving them confidence that they will not be personally penalised for an honest mistake. The fear of having to pay out of one’s own pocket to make good an honest mistake can be a real deterrent both to the taking on of a trusteeship and to innovation in the running of a charity.

Chapters 10 and 11 of part 2 will allow smaller charities to alter their own constitutions without needing the Charity Commission’s permission. The rules restricting charities’ abilities to spend their capital endowments will also be relaxed, though the concurrence of the commission will be required before they may override the wishes of a donor who has given a large sum as an endowment on condition that only the income from it can be spent. Some legal and technical obstacles to mergers between charities will also be removed. Decisions whether or not to merge will of course remain for charities themselves: it is not the Government’s role to procure mergers between charities or to put pressure on charities to merge. However, it should be easier for them to merge, if that is their wish.

An important part of the Bill, part 3, is the reforms to the regulation of public charitable collections. The present arrangements do not work as well as they could, because different types of collection are subject to different sets of licensing rules, and because the rules are applied differently from one local authority to another. Through the Charities Act 1992 it was intended to introduce a new scheme for the regulation of fundraising, but the relevant part of the 1992 Act was never introduced because the proposed scheme was thought to be unworkable in practice.

We propose in part 3 of the Bill a new, unified licensing scheme to iron out the inconsistencies. We responded to a recommendation made by the Joint Committee on the draft Bill by giving the Charity Commission the role of determining the eligibility of organisations to carry out public collections. Charities and other bodies wanting to carry out public collections will be able to apply to the Charity Commission for a public collections certificate lasting for up to five years. Public collections in the street will continue to require, as well as that certificate, a permit from the local authority to authorise the time and place of the collection. For public collections from house to house, which includes from pub to pub, a public collections certificate will be needed and the collection must be notified to the local authority. The Bill brings face-to-face fundraising, sometimes called “chugging”, within the statutory licensing scheme.

Elsewhere in part 3 there is a reserve power for the Government to introduce a statutory scheme for the regulation of charity fundraising generally. We have said that that power will be exercised only if self-regulation fails. I am glad to say that self-regulation, led by the recently established Fundraising Standards Board, is getting off the ground very well. The Government hope and expect that self-regulation
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will be effective in the longer term, although the power in the Bill will be available should self-regulation fail.

Tom Levitt: My right hon. Friend describes some welcome changes in regulation that involve some significant new powers and responsibilities for the Charity Commission. Can she assure the House that the commission will have the capacity and the funding to deliver on those powers?

Hilary Armstrong: My hon. Friend raises an important point. We are working with the Charity Commission so that we have a better estimate of what the reforms will cost. We will have to consider the situation once the figures are clearer than they are at present.

Other provisions of part 3 include provisions to put beyond doubt the Government’s power to fund charities and other voluntary organisations. That responds to the concern of the Home Affairs Committee about the lack of a proper statutory power for the Home Secretary’s funding of voluntary organisations. The Bill gives the National Assembly for Wales the same funding power as it gives to the UK Government.

Mr. David Drew (Stroud) (Lab/Co-op): I am surprised that the fiscal regime for charities is not addressed in the Bill and I hope that we will be able to take account of that in consideration of the Bill. In particular, the question whether VAT can be recovered is crucial in determining whether charities in the social and health care area are effective in spending their money. Is that an issue that the redefinition of charities will help to address? Discussions with the Treasury just seem to lead to even greater opacity.

Hilary Armstrong: I hear my hon. Friend, but the problem is that his “opaque area” carries a bill of about £500 million. In any financial matter, the Government must take an overall view about their priorities. It is always for the Treasury to take that view first, through the Budget and its proposals in the Finance Bill, rather than it being done in a Bill such as the one before us. Matters will move and change over the years, and the Government take the overall management of the economy very seriously. We have done very well at it, and I do not want to be the Minister who undermines it through something in this Bill, given that the economy is a matter for my right hon. Friend the Chancellor of the Exchequer.

Daniel Kawczynski (Shrewsbury and Atcham) (Con): The hon. Member for Stroud (Mr. Drew) raised a very important question. In Shrewsbury, the League of Friends of the Royal Shrewsbury hospital raises hundreds of thousands of pounds every year to buy vital hospital equipment, which the Government do not therefore need to purchase. It is important that the Minister takes on board its view that it would benefit greatly from not having to pay VAT on that vital equipment.

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Hilary Armstrong: That is a fair point, and many such points can be made. However, our investment in the health service means that that league and others can continue to purchase equipment and services that are often not central to the national health service. The leagues do a very good job, but we have put additional money into the health service—considerably more than £500 million. Priorities must be set and judgments made. I could make a comment, but I am not going to do so. [Interruption.] I am sure that the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) knows that it might be about the investment in the health service, and who supported it and who did not.

Daniel Kawczynski: The hon. Lady is being charitable.

Hilary Armstrong: I am.

Part 4 contains the final provisions, including one that will require the Government to commission a general review of the operation of the Act within five years of Royal Assent and to report it to Parliament. That is an important provision. We will then be able to consider some questions about which hon. Members, for perfectly sound reasons, have concerns. The Government are introducing the Bill, but the regulator will be at arm’s length—at least—from the Government. Parliament will want to review how measures such as the public benefit test are interpreted. We will have the opportunity to do so, because the Bill provides for a review within five years. The Bill will allow us to judge the legislation’s effect on various matters, including public benefit, as I said, and public confidence in charities.

Another provision in part 4 will pave the way for the consolidation of charities’ statute law to make it easier for charities and their advisers to read and understand the law. I am sure that many of us welcome that.

The Bill will support the work of thousands of people and organisations, working throughout the country to make a real impact on their communities, by improving the ways in which charities are run and regulated. The Bill’s overall effect will be deregulatory. It will liberate charities and enable them to provide an even better service, while ensuring that they are fairly and rigorously accountable to the public.

The Bill enjoys high support from people in the voluntary and community sector, many of whom have been involved in drafting it. It gives me great pleasure to present it, and I commend it to the House.

4.19 pm

Mr. Andrew Turner (Isle of Wight) (Con): I welcome the Chancellor of the Duchy of Lancaster and her Parliamentary Secretary to their new responsibilities. It must be a great relief to the right hon. Lady to be relieved from the vow of silence that binds the Government Chief Whip, and I am sure that it will do us all good to benefit from the additional intellectual weight that the hon. Member for Doncaster, North (Mr. Miliband) brings to the new office of the third sector.

Last week, I talked briefly to some youngsters in my constituency about the Bill. One aspect of it interested them. It was not the public benefit test or the
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establishment of the charity tribunal. It was not even the transformation, after 400 years, of the charity commissioners into a body corporate. The thing that interested them was the section on fundraising and whether we will retain the ban—as they see it—on volunteers shaking their tins during street collections. Those youngsters, like youngsters nationally, are the best—they keep up a tradition of fundraising for charity at the numerous carnivals in my constituency, which date back to the first documented carnival in Britain that took place in Ryde in 1888. However, as collectors compete with the amplified music on many carnival floats and with bands such as the Medina marching band, the Wight Diamonds or the Vectis corps of drums, and 40,000 excited spectators, it is difficult for them to draw attention to themselves if they are banned from even rattling their collecting tins. If local councils have the power to impose such a ban—many people think they do—they should use it sparingly, if at all.

I would not be forgiven if I did not pursue that point in Committee because little things, as well as strategic issues, matter in legislation. If we get the little things wrong, as the Licensing Act 2003 is demonstrating, we disrupt people’s lives and destroy the local voluntary effort that is at the heart of much charity work, whether it is fundraising for large charities such as the National Society for the Prevention of Cruelty to Children, with a national turnover of nearly £90 million a year, or for small charities such as the Isle of Wight Historic Lifeboat Trust, with an annual turnover of between £5,000 and £10,000.

Meg Hillier (Hackney, South and Shoreditch) (Lab/Co-op): As the hon. Gentleman canters through his proposals and comments on the Bill, will he tell me whether he agrees with the right hon. Member for Witney (Mr. Cameron), who wants to set the voluntary sector free, or with the 19th-century philanthropic view of the voluntary sector espoused by the chief executive of the Association of Chief Executives of Voluntary Organisations, or with the view expressed by the right hon. Member for Chingford and Woodford Green (Mr. Duncan Smith)?

Mr. Turner: I shall return to the issue of the 19th-century philanthropic view of charities, but of course I agree with my right hon. Friend the Leader of the Opposition.

Although it is important that charities are effectively regulated to protect the charity brand and to ensure that donations are properly used in pursuance of a charity’s objectives, we should not, by over-regulation, drive out individuals who have an appetite to help their fellow man but do not desire to become bogged down in bureaucracy.

David Taylor: The hon. Gentleman unsurprisingly pledges loyalty to the views of his party leader. He referred to the NSPCC in warm terms. Does he accept and endorse the views of a previous Conservative leader, the right hon. Member for Chingford and Woodford Green (Mr. Duncan Smith), who urged the NSPCC to stop shouting and start working? Is that the hon. Gentleman’s view of the NSPCC?

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Mr. Turner: I congratulate the hon. Gentleman on getting to point 2 on the parliamentary Labour party sheet. My belief is that we should assist charities to do their jobs better. Many of them—in fact, virtually all of them—want to do that.

At a time when all political parties are enthusing about the role of the third sector in the supply of public services, it is as well to remember that charities and voluntary organisations were the first providers of public services. That is because they were set up by a diverse, and sometimes eccentric, range of individuals and groups to do the good that those individuals and groups wanted to do. Some of that will fit into a national or local strategy, but much of it will not. Those benevolent institutions have continued to serve their public right into the 21st century, while the state has learned from them and taken on some of their responsibilities. Some of that state involvement was to ensure equity of access to essential services; some was rooted in the belief, sadly reflected in the words of a Government Back Bencher, that

and that

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