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Bob Russell (Colchester) (LD): As much as that?
Mr. Milburn: For the hon. Gentleman’s benefit, political parties have a rating of 1 per cent. I am not sure whether the Liberal Democrats score. The Joint Committee was especially keen to ensure that smaller charities did not find that their volunteers and necessarily limited resources were swamped by paperwork, more red tape or over-regulation. We took evidence from organisations that represent small charities and heard their concerns about that. We made a series of suggested changes to the draft Bill as a result. I am personally pleased that many of our recommendations have been taken on board in the Bill.
John Bercow: I am listening with great interest to the right hon. Gentleman’s comments. There are great dangers in over-prescriptive regulation and we often complain about that, but I hope that he accepts that the flipside of the coin can be unduly ambiguous legislation and that the Government would want to avoid that, too. Earlier, the hon. Member for High Peak (Tom Levitt) spoke powerfully about independent schools sharing facilities, to the public benefit, and how that might be viewed as a criterion for retaining charitable status. I do not object to that—it is perfectly sensible. Does the right hon. Gentleman agree that another way forward might be to say that, if those independent schools can prove that they provide permanent access to people from low socio-economic groups, it might also be proof of their public benefit?
Mr. Milburn: The hon. Gentleman makes an interesting and telling point. I received an interesting letter from the Independent Schools Council, which, as many hon. Members know, represents the vast majority of private schools and charitable private schools.
Helen Goodman (Bishop Auckland) (Lab): Public schools.
Mr. Milburn: Yes. It is confusing—the schools are public but they are private. When I say private, I mean public. I hope that that has clarified the point.
Jonathan Shepherd of the Independent Schools Council gave evidence before the Joint Committee and he made an interesting point in a letter to me dated 22 June. He referred to the presumption that the hon. Member for Isle of Wight defended: because an organisation is educational, it is automatically charitable. The letter stated:
“The presumption has sheltered lazy charities because they did not have to demonstrate public benefit... The new Charity Commission checks will not allow charities to get away with being lazy or disengaged from society.”
The hon. Member for Buckingham (John Bercow) therefore makes a good point. Perhaps he could make it privately—or publicly—to the hon. Member for Isle of Wight.
On regulation or deregulation, the charitable incorporated organisation, which is the new legal form for charities, to which my right hon. Friend the Minister referred, is genuinely deregulatory. It avoids the need for dual registration that most charities
currently experience. Similarly, the advent of a legal appeals mechanism through the charity tribunal is an important antidote to the additional powers that the Bill gives the Charity Commission. I welcome the fact that the Government have agreed with the Committee’s call for a review of the burden of regulation on charities. I believe that that review is now under way.
It is slightly less welcome that the Joint Committee’s recommendation that the Charity Commission should be required to use its powers proportionately, fairly and reasonably has been only partially incorporated in the Bill. As my right hon. Friend suggested, the word “proportionate” appears in the measure. However, “fairly” and “reasonably” do not. One out of three is not too bad but given the genuine concerns that were expressed in another place and the continuing need to reassure especially the smaller charities that they will not face some sort of Big Brother Charity Commission with extensive new powers at its disposal, I hope that my right hon. and hon. Friends might be able to go a little further.
If the balance can be got right, regulation as proposed in the Bill can be a protection, not a distraction for charities. Part of the purpose of the Bill, the Committee was told by the Government, was to protect the charity brand. We heard evidence from elsewhere in the world—I remember in particular the evidence that we received from the United States of America—about how organisational and regulatory failure had combined in a succession of scandals affecting individual charities, such that the charity brand was contaminated and public confidence in charities severely dented. In that sense, charities face an especially tough accountability test. They rely ultimately on public giving, so they must be confident of public support. As we know, however, there is much public confusion about the most basic of facts: what qualifies to be a charity and what does not. There is a perception gap between what people think is, or at least should be, charitable and what is charitable according to the law. We know, for example, that 97 per cent. of people surveyed think that Oxfam is and deserves to be a charity. Only 15 per cent. of people think that Tate Modern—not too far from this place—is a charity. Fewer still think that Eton is a charity. Closing that perception gap is clearly important if charities are to enjoy continued public confidence.
Bob Russell: I apologise for my late arrival at the debate—I had other parliamentary commitments this afternoon. The right hon. Gentleman will recall that I served on the Committee under his chairmanship. I shall put the point to him now that I put in the Committee. Does he agree that were Eton to have a flag day, people might accept that it is a charity?
Mr. Milburn: The hon. Gentleman might want to put that point to the provost of Eton rather than to me.
The Bill’s answer is to introduce a public benefit test, which all charities will have to pass in order to gain charitable status. Unlike the Conservative Front-Bench spokesman, I very much welcome the introduction of that test. We must concede, however, that it is by far the most controversial aspect of the Bill, particularly when it applies to private hospitals and private schools. It was certainly the issue that took up most time on the
Joint Committee, with many different points of view represented, and it sparked sometimes fierce debates in the other place. The Committee concluded:
“Since the purpose of the Bill, according to the Minister, is to protect the charity brand, it is important that any new law on charity must properly deal with the issue of public benefit.”
For some, this is deeply ideological terrain. There is antipathy in some quarters— even, I guess, among those on these Labour Benches—towards private education per se. That is not my starting point. For me, politics is not about taking things away from people, or levelling down, but about giving things to people—levelling up. That is why I support the proposition that we should have more choice, not less. It is also why I am a long-term advocate of partnerships between the public and private sectors. The widespread recognition nowadays that the old divide does nobody any good is welcome. In the national health service, for example, partnerships between public and private sectors are now commonplace and, for most patients, welcome.
As the briefing that all Members received recently from the Independent Schools Council demonstrated, many enlightened private schools have made a great effort to open their doors to the wider community. Partnerships with state schools to teach minority subjects, to develop distance learning materials, to undertake summer schools and even to prepare pupils for university have been fostered. Therefore, we know that partnership can deliver the goods. The creation of both city academies and trust schools provides further opportunities to make partnerships between private and state schools even more meaningful and to help to bring an end to the educational apartheid that has in the view of many been so damaging to schooling in our country.
Where private schools engage in such partnerships, they make a good case for providing genuine and direct benefit to the wider public. The argument that we heard on the Joint Committee that private schools deserve charitable status because they save the taxpayer money by educating children who would otherwise have to go to the local state school, however, is not helpful to their case. That is both a fallacious and deeply complacent argument. On the same basis, private gyms, I presume, might become charities, as it could be argued that they dampen demand for local authority facilities and so reduce the cost to the public purse.
Charitable status should not be a given; it should have to be proven. While many private schools make their facilities available to state schools, the latest report by the Independent Schools Council—“Good Neighbours”, published in 2003, which is about relationships between state and private schools—says that the majority do not, and that
“absence of charitable status makes little difference to... a school’s willingness to make its facilities available.”
When, according to the Independent Schools Council’s own report, 48 per cent. of private schools that are charitable never make any of their facilities available to state schools, people are bound to ask what the public get back for the £100 million of public expenditure that such schools enjoy in tax benefit earned as a direct consequence of their charitable status. At present, only some can answer that question. In future, all will have to be able to answer it, because
the Bill removes the automatic presumption that every educational venture is, by dint of being educational, also charitable. Instead, it introduces the much-decried public benefit test.
Public expenditure is not, and cannot be, a free good. It rightly comes with strings attached: it must be a something-for-something deal—in this case, tax advantage in exchange for public benefit. I have no objection to that principle. Indeed, I think it is a principle that we should enshrine far more fairly than we do at present, and that applies as much to private charitable hospitals as to private schools.
Mr. Andrew Turner: Would the right hon. Gentleman apply that to any form of tax relief?
Mr. Milburn: We are not discussing any form of tax relief, but leaving that aside, I think it no bad thing to ask what we are receiving in return for public expenditure. The hon. Gentleman may not think that it is public expenditure, but it could at least be described as public expenditure forgone. As he would be the first to say, it is not our money; it is the taxpayer’s money. It just so happens that when we are in government, we are responsible for applying different purposes for the taxpayer’s money. It seems to me a good principle that when people work hard to earn money and pay it into the Exchequer, we, as custodians of the public purse, should say “Here: this is what you get back.” If the hon. Gentleman is inclined to say that that applies to some areas of public expenditure but not others, I think people are entitled to ask him why he thinks that a level playing field should not apply to all areas of public expenditure.
Mr. Andrew Mitchell: The right hon. Gentleman knows that that was the key point raised in the scrutiny Committee, and the point of greatest contention. Surely what we should be pointing out today is that after a great deal of discussion, some of it very heated, the entire Committee was able to camp on the position set out in our report, which the Government have endorsed. Will the right hon. Gentleman urge his right hon. and hon. Friends not to try to unpick a deal with which everyone can live?
Mr. Milburn: I think that I have done quite a bit of urging already in my speech, but the hon. Gentleman is right: we had heated discussions, but we reached a consensus. I shall say more about that shortly.
David Taylor: In the “costs” column of the cost-benefit analysis applying to private schools, my right hon. Friend lists only the estimated cost of various tax reliefs. Should he not also have included an estimate of the cost of the damaging impact on local state schools of academically selective, socially divisive schools in the community that tend to cream off the most motivated and academic young people?
Mr. Milburn:
We addressed that point in questioning the various representatives of the private school sector who appeared before the Committee. I am not here to
defend private schools or otherwise; what interests me is whether the public receive benefit in exchange for the expenditure that we make on their behalf. That is my fundamental concern.
If properly applied, the public benefit test could drive forward partnerships between the private and the public sectors and, in particular, between private and state schools. I was very taken with the evidence to the Committee of one private school head teacher when he argued that the new public benefit test will accelerate the trend for the rest to follow the lead of the best. Indeed, the Independent Schools Council has welcomed the Bill and its general secretary, Mr. Jonathan Shephard, told the Joint Committee that he agreed with the proposition that the new test should be used as a lever to get more schools to provide more public benefit.
And here we need to be certain that the Bill will do what it purports to do. On that count—notwithstanding strong differences of opinion on the question of the charitable status of individual schools and hospitals—the Joint Committee had grave concerns. Those concerns were accentuated by evidence from the Charity Commission that the public benefit test as defined in the draft Bill would have no impact on the charitable status of private schools or hospitals. That led us to conclude that
“while a detailed statutory definition of public benefit would be too inflexible, nonetheless there is a need for a more explicit definition of public benefit in connection with the Bill.”
We went on to recommend that a set of principles should be included in the Bill or in Government guidance. New clause 4 requires the Charity Commission to issue such guidance which it has already helpfully drawn up in draft form.
The challenge now for Ministers is to assure themselves and the House that the clause and the draft guidance are clear enough in setting the framework for the Charity Commission to guarantee public benefit; otherwise there is not much point in introducing a new test. In evidence to the Joint Committee, the Government told us that the public benefit test was intended to have teeth. Providing it bites, that test can guarantee that all charities—including private schools and private hospitals—do what only some currently do: provide public benefit that is direct not indirect, high not low, and meaningful rather than tokenistic. That after all is the direction of travel shared in common by all political parties, the Government, the opposition on the Joint Committee, charities, organisations representing charities, individual schools and the Independent Schools Council.
Getting the public benefit test right is central to guaranteeing public confidence in what charities do. Charities do good. Few if any Members of Parliament or the public would disagree with that proposition. But in a world where accountability is tougher, scrutiny is greater, and the role that charities play is potentially wider, the assumption of good is simply not good enough. It has to be proved. I welcome the Bill because it provides a golden opportunity for charities to do just that. It will make a huge difference to the work of charities and the wider charitable and voluntary sector, and to each and every one of the communities that we represent.
5.33 pm
Martin Horwood (Cheltenham) (LD): I must declare some non-pecuniary interests, as a member of the Institute of Fundraising, a patron or friend of various local charities in Gloucestershire, and a trustee of the UK’s leading blindness research charity, Fight for Sight. That is not the first plug we have had for a very worthwhile charity in this debate and I am sure that it will not be the last.
I also welcome the new ministerial team and congratulate them on bringing this Bill before us after so long a wait. Credit is also due to the right hon. Member for Darlington (Mr. Milburn), my hon. Friend the Member for Colchester (Bob Russell) and the hon. Member for Sutton Coldfield (Mr. Mitchell), who contributed to the long periods of effective scrutiny and the welcome degree of consensus that has been achieved—at least, until today—although I cannot go along with the rather extreme penalties, such as beheading, that the right hon. Member appeared to recommend for some of the dissenters. In any event, I pay tribute to the Joint Committee’s work.
This Bill has been so long in preparation that I remember briefing voluntary sector colleagues on the new Charities Bill that I thought was to become law imminently long before I was even a candidate for Parliament, let alone an MP. Now that we are finally debating it in the Commons, I hope that with the help of a sufficiently brisk and efficient Committee stage, we might just see it complete its passage before the summer recess. There will certainly be groans of disappointment from my former colleagues if we allow it to be delayed by another three months. However, all credit to the ministerial team for having rescued it from the long grass at all.
To extend the horticultural analogy, Ministers have entered an area of public policy that is like a huge garden, worth billions of pounds in income, as the Minister said, and which employs 600,000 people, according to the National Council for Voluntary Organisations. It is a garden in which Ministers are just visiting gardeners, and they would do well to tread carefully. The garden has diverse species of many colours and sizes. It has plants as different in size, function and characteristics as daisies and oak trees: from Cancer Research UK, with its £240 million income and huge marketing budget, to wonderful but hard-pressed charities in my constituency, such as Cheltenham Open Door and Cheltenham Community Projects; from democratic membership organisations with large volunteer bases to highly specialist trusts; and from charities that only sell Christmas cards to important service providers whose fees pay for the education, care and support of large numbers of the most vulnerable in our society. This Bill must look after the interests of them all.
If left unattended, the garden will not wither—probably quite the reverse—but weeds will creep in, often looking pretty at first, but threatening the future reputation of the whole. However, if the garden is cultivated and nurtured, it will flourish, grow and produce enormous benefits for us all.
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