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With this Bill, the Government show every sign of not charging in with a mechanical digger, as they have in a few other areas of legislation and policy. The
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careful and consultative approach has brought them the overwhelming support of the voluntary sector, and I am pleased to say that the Bill continues to enjoy the full support of the Liberal Democrats, too.

There are many benefits of a new Charities Bill. I highlighted them to my colleagues all those years ago, and I still commend them to the House today. They include many of the practical steps that the Minister outlined, which will make easier the roles of trustees, finance directors, company secretaries, and treasurers in particular. I am sure that those measures will be much appreciated.

We all have delicate balances to strike between the voluntary foundation of the best charities and the professionalism demanded of them in today’s risk-averse world, and between the need to regulate and avoid the misuse of publicly donated funds and the risk of over-burdensome red tape. Public opinion will punish us either way if we get those balances wrong.

Public opinion is also a strong factor in the Bill’s fundraising provisions, which we might have expected to be more contentious. However, I am pleased that the Institute of Fundraising fully supports them as proportionate and equitable. As a paid-up member still, I shall follow my institute’s lead in the hope that the provisions do not impact unduly on the income of national charities or increase too much the bureaucracy with which they have to deal.

I was a little upset by the Minister’s reference to chugging. I do not know whether she knows this, but it is short for charity mugging. It is an insulting reference to hard-working paid and unpaid charity fundraisers, and I hope that she will avoid it in future.

From fundraising to campaigning, the new heads of charity recognise among other things the importance of what might be called campaigning functions, such as the prevention as well as the relief of poverty, the advancement of human rights and the promotion of religious or racial harmony, equality and diversity. That is in line with previous Cabinet Office policy advice that charities should not keep the experience of their front-line work to themselves, but should be encouraged to share it with legislators and decision makers such as ourselves, and, where appropriate, campaign for change. It is right that we no longer ask charities to witness poverty, injustice, ill health or cruelty, but not to speak out about the fundamental causes of those ills.

To put my point into new Labour-speak, the direction of travel is broadly good. However, I agree with the hon. Member for Stroud (Mr. Drew), who is no longer in the Chamber, that the Bill, perhaps out of necessity because it is not a Finance Bill, leaves out a big issue—VAT. The Minister was worried that including such a provision would mean a bill for half a billion pounds, but that is exactly the bill faced by charities at present because VAT is not recoverable. We cannot address that question in this debate but we might find a way of doing so in Committee, perhaps through the reporting measures proposed in part 4—no spending commitment implied.

The new heads of charity will provide a level playing field as between the educational, religious and poverty charities, mentioned by the hon. Member for Isle of Wight (Mr. Turner), which did not previously have to
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pass a public benefit test under various Charities Acts, and the vast number of organisations that had to pass such a test. They range from St. John Ambulance, which saves lives in local communities, to Survival International, which works for the rights of tribal peoples around the world. It is right, as Lord Hodgson of Astley Abbotts said, that

The question whether we should add clarification and guidance to the Bill’s provisions on public benefit is already generating a lot of hot air outside this place. On the one hand, the Independent Schools Council is lobbying hard against any strengthening of the public benefit test, and schools such as Fettes college in Scotland are talking about the “politics of envy”. On the other, a former aide to Cherie Booth, writing in The Guardian this weekend, predicted “class war” headlines. So far, so unhelpful.

Today, we witnessed the astonishing spectacle of the official Conservative spokesman setting out in the House of Commons an even more reactionary position than the one advocated by his noble Friends in another place. In effect, he argued for the insertion of a special status that would require a public benefit test of St. John Ambulance but not of Eton college. That is an astonishing position. I do not know whether the Leader of the Opposition is aware of what his hon. Friend is proposing, but it does not sound like the new model Conservative party to me.

The Minister gave reassuring responses to various interventions about the bodies and organisations that would not be affected by the Bill’s public benefit test, but as the right hon. Member for Darlington said, it would seem desirable that such brave new legislation should make some kind of difference to somebody in terms of the public benefit test. I shall, therefore, clarify the Liberal Democrat position, which has been consistent throughout the Bill’s long history. Along with the NCVO and the Charity Commission in some of its guidance, we believe that the current public benefit test leaves the law in a muddle and that the Bill needs to be strengthened in that respect. I draw the attention of Members to the comments signed by Stuart Etherington of the NCVO, David Harker of Citizens Advice, Michael Lake of Help the Aged and John Low of the Royal National Institute for Deaf People. They say:

The Bill does not yet do that.

An interesting new law has been passed in Scotland. Adopting its terminology, which was supported by Labour and Liberal Democrat Ministers north of the border, would seem to have much to commend it, not least the obvious advantage of consistency. That is not compulsory, but it is clearly desirable for charities that operate both north and south of the border.

The ISC is simultaneously lobbying against such clarification and advising its members on how to
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respond to the tightening of the law on public benefit. Its 2005 briefing on the subject stated:

I could not put it better myself—exactly the outcome that Liberal Democrats seek.

Today, I consulted Tim Hastie-Smith, the headmaster of Dean Close school, an independent school in my constituency, who told me that

Before the Minister nods too much, I should tell her that Mr. Hastie-Smith told me that he supported strengthening the public benefit test and thought that Dean Close school had nothing to fear from it. I suspect that the hon. Member for Buckingham (John Bercow), who is also no longer in his place, might even support that, judging by the sentiment of his intervention.

Having enjoyed Dean Close’s excellent theatre facilities—not because I pay fees, but as the parent of a local four-year-old in a wonderful community-based dance production—I fully understand Mr. Hastie-Smith’s confidence. He also cited the example of Christ’s Hospital, which has the kind of endowment fund that the Charity Commission might rightly look twice at in any charity, but which has such a good record of charitable activity that it too would be at no risk from a reasonable public benefit test of the kind that we would support.

Hilary Armstrong: I support the way in which the people to whom the hon. Gentleman has been talking are speaking about public benefit. The issue is the means of getting there. There is much argument among lawyers about whether anything new would bring clarity to the whole sector or whether including something else in the Bill would bring further uncertainty, given that we are talking about something that, up until now, has largely been delivered by case law. That case law would have to be undone and we would have to start again. I wanted to assure him that we all will the ends; the question is, what are the right means to achieve those ends?

Martin Horwood: I am grateful to the Minister for that intervention. It bodes well for Committee, where we may be able to find constructive ways through the issue. Having said that, I am still puzzled by her comments. She says that she is going to use the precedent of existing law, which relies on case law, but the Charity Commission, in its current guidance, says that the law is confused and it has not been able to provide suitable clarity through regulations and guidance to satisfy organisations such as the National Council for Voluntary Organisations, the Royal National Institute for Deaf People and Help the Aged. I stick to my initial assumption that we need to follow that advice and provide more guidance in the Bill. I do not see why guidance in the Bill is so much more threatening than guidance provided elsewhere.

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Hilary Armstrong: The Charity Commission goes on to say that it would have to be absolutely clear that any further—I cannot remember the exact words—deliberation did not bring with it unintended consequences. That is precisely what I am referring to. Clarity in one aspect may bring a lack of clarity in other aspects in terms of how the public benefit test was to apply to other charities.

Martin Horwood: Again, I am grateful to the Minister. I suspect that we may be citing different parts of what the Charity Commission has said. I was not citing guidance relating to the effects of the Bill; I was referring to guidance advising charities on whether there is clarity in the current situation, which there is not. I still support taking the opportunity to add clarity.

In case there is any doubt about the effect that our amendments would have, or in case any party is thinking of caricaturing them as intending some kind of bonfire of charitable status, I should say that we will aim to table amendments in Committee that will make it absolutely clear that, just as fee-charging special schools or carers support charities should not be caught by a stiffer test, nor should independent educational establishments that follow the ISC’s guidance on imaginatively seeking ways to increase their public benefit. As the first ever friend of the country’s leading independent specialist college for disabled young people, the National Star college, based in and next to my constituency, I would be in trouble if I suggested any measure that threatened its charitable status.

The last areas that I will touch on are the role and powers of the new improved Charity Commission established by the Bill and of its new overseer, the charity tribunal. I use this opportunity to restore a measure of consensus on this side of the House by supporting the comments of the hon. Member for Isle of Wight when he suggested the establishment of a suitors’ fund to reduce the risk to charitable funds in approaching the charity tribunal. There is much to recommend that and I support it. Hon. Members should pay tribute to the outstanding individuals, such as Geraldine Peacock, who have led or served as charity commissioners, but we must also acknowledge the dissatisfaction with the practical results of the Charity Commission’s action—and occasionally inaction—which has occasionally run high. I am afraid that I have my own examples of that from personal experience.

While I was the director of fundraising of the Alzheimer’s Society, a new charity called the Alzheimer’s Foundation was set up. It was registered by the Charity Commission, but it had no background in Alzheimer’s research, no volunteer or supporter base and no donor base. However, it suddenly started running an extremely large and—to us—threatening fundraising campaign through which it sought large amounts of public funds. It turned out that the charity had a close association with an American direct marketing agency. We believed that that agency loaned the trustees of the charity the money to establish the fundraising campaign, and that the donations that resulted from it were used to pay back the American agency. That was obviously good business for the
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American agency, but extremely poor value for the donors whose money had overwhelmingly been used to pay a business, rather than for Alzheimer’s research, as they believed.

At the time, we approached the Advertising Standards Authority, the Charity Commission and, on the side, the Daily Mirror. The most useful of the three was the ASA, which came down on the organisation like a ton of bricks and stopped the misleading claims that it was making in the public arena. The Daily Mirror was pretty useful, too, but I am afraid that the Charity Commission considered the matter for a long time before deciding that there was no problem. It was only when we approached the then Minister, the hon. Member for Slough (Fiona Mactaggart), and she took up the matter—I am grateful to her—that we miraculously got a result from the Charity Commission. There are thus weaknesses in the regulatory regime.

While there is such disquiet about the role of the charity commissioners at present, the Government want to extend the number of charities to be registered, add a new status of charitable incorporated organisations, which will be regulated by the Charity Commission, rather than by Companies House, and add new powers and responsibilities to advise and guide charities. A Government who want to do that without suggesting how the organisation will cope with its expanded responsibilities are pretty brave. Each of those measures is welcome in itself, but nothing will damage faster the critically important public confidence and trust to which the Minister rightly referred than the creation of a regulatory regime that—however accidentally—turns out to be less effective than the one we have at present. We will have to pay careful attention to that matter in Committee, but it should not disturb the healthy cross-party consensus in support of such a worthwhile and long-overdue Bill.

5.52 pm

Alun Michael (Cardiff, South and Penarth) (Lab/Co-op): I welcome my right hon. Friend the Minister for the Cabinet Office to her new role. I also congratulate the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Doncaster, North (Edward Miliband), on becoming the first Minister with responsibility right across the third sector. I warn him that that is not only a big opportunity, but a big challenge. It is a pleasure to speak after my right hon. Friend the Member for Darlington (Mr. Milburn). I congratulate him on his contribution to both the scrutiny of the Bill and the general election campaign.

I want to develop three points. First, we should celebrate the arrival of the Bill and engage keenly with the outstanding issues of detail, such as the meaning of “public benefit”. Secondly, we should see the Bill in the context of the wider third sector of value-driven organisations. Thirdly, we should accept that there is no quick fix. The Bill should be seen as being about not the Government or Parliament laying down the law, but relationships in the sector, among sectors and between the Government and the third sector. Like all relationships, they will need hard work and a lot of give and take if they are to be successful, as has been illustrated during the debate.

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We should celebrate the Bill as a staging post in the Government’s support for charities and the wider voluntary and community sector. It is worth recording, with some pride, that the Labour party has taken the sector seriously as a partner in a way in which no previous Government have done. The Prime Minister’s interest goes back to his time as shadow Home Secretary, when he launched what became the leader’s review of the relationship between Government and the voluntary sector. That culminated in “Building the Future Together”, which was published in 1997, and the introduction of the compact arrangements. Those arrangements were themselves only the start of a journey that was stimulated by both the review, which I led, and the sector’s own work, which was led by Professor Nicholas Deakin. Indeed, I welcome the development of compact plus as the next stage of the process.

The Chancellor has always emphasised the importance of values. He introduced many improvements on the treatment and encouragement of charities. I am especially excited by the way in which he has built work on the role of the third sector in preparation for the forthcoming comprehensive spending review by both engaging the sectors in that work and creating connections across Whitehall. It is in that context that the long-awaited Bill, as several hon. Members have described it, is important.

The lack of modern legislation on charities partly reflects a reasonable fear of getting things wrong. It also reflects the sensible judgment that the matter is not just for the Government and that a top-down approach will not work. However, a lot has happened in 404 years. The existing law is old and case law is too rare to cover all contemporary issues. There are thus matters that must be grasped by the Government and Parliament, and the need to modernise charity law is inescapable. However, that is a difficult matter with which to deal, as our debate has demonstrated, so introducing even such a carefully crafted Bill, which has emerged from long consultation, deliberation and scrutiny, must be seen as an act of courage by Ministers. The way in which my right hon. Friend the Minister for the Cabinet Office made her speech showed that she knows how courageous she is being.

Although removing the presumption of charitable status in favour of the concept of public benefit is clearly greatly welcome and a sensible minimum step towards modernising the law, it is courageous. It is naive to think in the modern world that all education bodies, or bodies formed with religious aims or the aim of alleviating poverty, are automatically charitable and working in the public interest. However, we need to be clear about what we mean by the public interest test, which is a job for Parliament and, especially, the Committee to which I hope that the Bill will be committed. The last thing that we want is a tightly-worded definition that becomes a straitjacket, so the idea that the Charity Commission should work on the concept and consult widely is probably sensible, as long as we are clear about the general terms of reference for that work and the commission listens to parliamentarians, too.

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