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Mr. Milburn: I understand and respect the right hon. Gentleman’s point of view on the issue. As I shall say in a moment, however, it is a complex question in the areas that were previously exempted, and that are about to be unexempted if the Bill is passed, most notably in the case of education.
If we can properly apply the public benefit test, it can help to assure the public that any organisation acquiring charitable status and, therefore, significant financial resources, is providing some identifiable, and preferably quantifiable, benefit, notwithstanding the difficulties in doing that.
Mr. Gerald Howarth: I freely confess that I have not had the opportunity of studying the Bill to the extent that I would have wished or should have done. Clearly the right hon. Gentleman is knowledgeable about it, so may I ask him one question? Today, I happen to be wearing the tie of the Army Benevolent Fund, and I note that one of the charitable purposes, under paragraph (l), is
“the promotion of the efficiency of the armed forces of the Crown”.
I think that the test that he has applied of what the public would regard as worthwhile would include the Army Benevolent Fund, but I am not sure whether it is connected with the efficiency of the armed forces. Given that he was in such an influential position to scrutinise the Bill, can he reassure me about that?
Mr. Milburn: I am not sure that it is my job any more to reassure anyone. That is my hon. Friend the Minister’s job, and it is a question for him. I do not know whether he feels reassured by my contribution. In passing, I remember—I do not know whether this reassures the hon. Gentleman—that the Joint Committee took evidence from a variety of Army-related and military-related charities, and we tried to address some of the concerns that they expressed in our recommendations to Government. Incidentally, the Government addressed many of our recommendations in the Bill.
Although much of the debate has centred on the issue of religion, I think that the trickiest issue, certainly politically, has been that of charitable private schools and hospitals, which sit in the middle of a pretty uncomfortable triangle. On one side, they are bound by their obligations as charities, because they have charitable status. On another side, obviously, they owe obligations to the fee-paying parents and patients who provide the overwhelming bulk of their income. On the third side, they have wider obligations to taxpayers, who fund the estimated £100 million-worth, I think, of tax relief that they enjoy as a consequence of their charitable status. Some may have seen the Bill as an opportunity to resolve those tensions by exacting some sort of ideological revenge on such private schools and hospitals by stripping them of both their financial benefits and their charitable status. I do not think that that is the intention of my hon. Friend the Member for Selby, and it certainly is not mine. I am a long-term advocate of partnerships between the public and private sectors.
It is true, however, that charities that charge fees for their services have a special obligation to prove that they can none the less provide a wider public benefit. I, for one, very much welcome the initiatives that many private schools, for example, have taken in recent years to develop meaningful partnerships with state schools. The problem is that while some have an exemplary record, others, sadly, do not. Under the current law, however, all benefit equally from charitable status. That, as Mr. Jonathan Shepherd of the Independent Schools Council—which represents more than 1,000 private schools in this country—wrote in a letter to me dated 22 June,
“has sheltered lazy charities because they did not have to demonstrate public benefit.”
If we get the new public benefit test right, rather than using it to drive a wedge between public and state schools, I believe that it could help drive them still closer together. The worry that some have, including my hon. Friend the Member for Selby and those who have put their names to his amendment—to some extent I share it—is that without a clear definition, public benefit could end up being interpreted as requiring nothing more from private schools or hospitals than the offer of some form of indirect or tokenistic public benefit. For example, they could argue that they save the taxpayer money by educating children or treating patients who would otherwise be taught in state schools or treated in NHS hospitals.
Surely meaningful public benefit must be more than that—and I would argue that it must also be more than the odd sharing of a classroom here or a playing field there. Ideally, it should be a lasting partnership that enables many more state school pupils, regardless of background, aptitude or ability, to benefit from the expertise and resources that private schools often, although not always, have at their disposal. That, after all, is the declared purpose of both Government policy and private schools, as represented by the Independent Schools Council.
Mr. Andrew Turner: The right hon. Gentleman seems to be saying—and I agree with him—that some independent schools do not offer very much. Frankly, a rowing trench near Slough is not contributing greatly to public education. But it seems to be Ministers’ position that the public benefit test is not changed by the Bill, and that that what is being established is existing case law. Is that the right hon. Gentleman’s understanding?
Mr. Milburn: I shall come to that, and I have a point or two to put to my hon. Friend the Minister about it. First, however, let me quote another part of Mr. Jonathan Shepherd’s letter. He wrote
“indirect public benefit is not enough on its own: there must be direct benefit to the public or to a significant section of it.”
So we are all agreed. The Government agree; I think that now, under its new leadership, the Charity Commission agrees; and the Independent Schools Council agrees. The problem is that persuading the sort of recalcitrant school that the hon. Gentleman has identified, or for that matter a recalcitrant private sector hospital—I have to say that there are more than a handful of them if the evidence given to the joint Committee is anything to go by—persuading, that is,
the recalcitrant few rather than the noble many, to demonstrate direct and public benefit in exchange for the advantages that they gain from charitable status, requires any test to be clear and understandable to all concerned. At present I am not convinced that the test is clear and understandable, and I am sure that that is what led my hon. Friend the Member for Selby to table his amendment.
The problem with the amendment is that in seeking to introduce clarification, it risks causing more confusion. Although my hon. Friend cited parallel Scottish law, the wording of his amendment is subtly but significantly different from the form of words used in Scotland. The new charity law there refers to the need to ensure that charities are not “unduly restrictive” in the way in which they guarantee public benefit, so allowing a balanced consideration of benefits against disbenefits. The amendment, however, refers to “any undue restriction”, which I think would make such a balanced judgment more difficult to achieve. Indeed, I should be surprised if that wording did not cause a learning disability charity that none the less charged for its services to find itself failing the public benefit test, thereby risking the loss of its charitable status. I am sure that my hon. Friend would not want ambiguous wording to produce such a result.
I do not believe that my hon. Friend’s amendment does the trick. My hon. Friend the Minister has moved the Bill forward substantially, but although the proposal to review the operation of the law after three years rather than five is welcome, I do not think that it does the trick either. To me it seems rather like closing the stable door after the horse has bolted.
The Bill gives us an opportunity to deal with charity law. My hon. Friend is right: it is a once-in-a-generation opportunity. It is a rare event for charity law to be changed by Parliament—I believe that the last occasion was 15 years ago, and the penultimate occasion was probably 20 years before that—and unless my hon. Friend knows something that I do not know about proposals for legislative changes in the future, I should be surprised if we are given another crack of the whip in the imminent future. So we need to get the public benefit provision right now.
That is what led the Joint Committee 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”.
And of course clause 4 requires the Charity Commission to issue guidance for that purpose. The problem is that we do not have the guidance before us today, so it is difficult for the House to know exactly what it is being asked to support.
Indeed, I was struck by an article by Dame Suzi Leather, the new chair of the Charity Commission, in The Guardian last week in which she argued that the public benefit test was a “slippery concept”. That is not to say that, having spoken to Dame Suzi, I am in any doubt about her determination to see the public benefit test applied vigorously—a view that the National Council for Voluntary Organisations interestingly now
shares, as my hon. Friend the Minister knows. Indeed she says in her article that fee-charging charities could be expected
“to assess and report the value of the tangible benefits they bring as well as the value of their tax breaks.”
I welcome that. It is a significant step towards clarity in how the public benefit test will be applied, but there is many a slip twixt cup and lip, as the House knows. That is why I hope that my hon. Friend the Minister, in replying to the debate, can give a very clear indication as to whether he agrees with Dame Suzi’s proposal and how, more generally, he expects public benefit to operate in practice.
Short of a Government amendment, which we do not have, it is important for the Minister to put the Government’s intention on the record, not least so that the Charity Commission and the courts are left in no doubt that public benefit is intended to be direct and meaningful. If he can do that, he can kill several birds with one stone. First, he will bring clarity and certainty—important for the whole sector, which we want to grow—to a vital modernisation of charity law. Secondly, that could help to foster more real partnerships between the public and the private sector in health and education, for the benefit of both patients and pupils. Thirdly, he will be able to offer many of us the assurances that we need to give our wholehearted support to this part of the Bill, just as we already do to the rest of it.
This is a good Bill, which is long overdue. The introduction of a public benefit test is a very good thing, which will make a profound difference to the operation of the charitable sector. I welcome what the Minister and my right hon. Friend the Chancellor of the Duchy of Lancaster have done thus far; I just ask them to go that one little bit further.
Martin Horwood: As the right hon. Member for Darlington (Mr. Milburn) has just said, this is a very good Bill and the concept of public benefit is central to it. Rather than citing older Charity Commission reports, it is more useful to consider the commission’s current guidance on how it plans to implement the Bill in future. The commission’s website, which is a fertile source of material for this debate, contains a briefing, issued this month, on the approach to public benefit and how it will be treated. The commission promises to apply the public benefit test robustly, and that is welcome. Perhaps I detect the hand of the Minister in that form of words, which is welcome.
The guidance also contains some slightly more alarming words, which underline the fact that the issue is a moveable feast—a slippery concept, as the right hon. Gentleman put it. For example, the briefing contains what appears to be an entirely new concept of the need for continuing improvement. It states:
“Our aim will be to ensure both that charities demonstrate public benefit in what they do and, beyond that, continue to increase the value they bring to the communities they serve.”
That seems to go beyond the Bill and add a dangerous new dimension, because it puts an obligation on any charity to prove that it has satisfied the public benefit test and later to prove that it has increased the public benefit. That is perhaps a similar example to the one cited by the right hon. Member for Maidstone and The Weald (Miss Widdecombe) on
modern laws, with the Charity Commission going a little further than the Bill, and also perhaps failing to issue the best possible guidance. The Minister with responsibility for the third sector will have to be on his mettle in managing the implementation of the public benefit test.
The concept is slippery. As the right hon. Member for Darlington also noted, there are areas of spectacular confusion, not least in respect of whether the Bill changes the law on public benefit at all. Many people—including Liberal Democrats in this House and the other place—argue that it does, but my noble Friend Lord Phillips said, in a letter today to The Guardian:
“Many leading charity lawyers beg to differ. Without some leverage in the bill, the judges are not free to innovate, especially as the leading case law endorses the status quo, where the school or hospital can claim charitable status if it saves the taxpayer money or provides extra facilities unavailable in the state sector.”
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I confess that I am not a lawyer. Although my interpretation does not entirely match his, my noble Friend is an extremely eminent charity lawyer and the fact that he thinks that that is an arguable case shows that the Bill in its current state leaves matters very unclear. The hon. Member for Selby (Mr. Grogan) said that the NCVO and the Charity Commission appear to be shifting their ground slightly about whether further clarification is needed. Earlier this year, the NCVO issued a briefing that stated:
“According to Guidance published by the Charity Commission, charities that charge high fees for their services merely have to show that ‘the less well-off are not wholly excluded from any possible benefits, direct or indirect’.
NCVO does not believe this goes far enough ... However, the Charity Commission itself has said that this is a complex area of the law and it would like further clarification from Government on this issue and particularly in relation to fee-paying charities.”
Mr. Turner: Does not the hon. Gentleman think it odd that the Charity Commission should seek clarification from the Government rather than from this House?
Martin Horwood: I am not sure that I follow what the hon. Gentleman means. It is reasonable for the commission to want to know the Government’s intentions in respect of forthcoming legislation, and that is what we are trying to establish in this debate.
The current Charity Commission briefing states:
“We need to articulate and explain the concept of public benefit in a way which is consistent with the law and clear to the public.”
The fact that the briefing itself does not do that shows that matters as they stand are not entirely clear.
Mr. Beith: My hon. Friend is demonstrating his usual skill, but some of us find the Bill very unclear. The House is delegating the most fundamental concepts to the charity commissioners. That leaves dissatisfied those of us who believe that we need a more robust approach to public benefit in respect of schools and hospitals, while those who worry that the longstanding acceptance of religious charities is threatened remain concerned because the concept behind the proposals is as vague as he has set out.
Martin Horwood: As ever, my right hon. Friend makes a good point, and he may have some sympathy for the much more detailed amendment that I tabled in Committee. It was based on the established Scottish law, which offers a much clearer way forward, but it was not accepted and we are now debating the more modest proposal introduced by the hon. Member for Selby. However, amendment No. 1 at least contains the useful phrase “undue restriction”, which makes it clear beyond doubt that the bar is being raised somewhat and that all charities would have to earn their charitable status. The amendment would require the word “charity” to be unequivocal, and that no charity could take advantage of a status quo that allows all sorts of bodies to retain their charitable status without having to change in response to the Bill.
Mr. Bone: I am not sure whether the hon. Gentleman supports amendment No. 126. If the bar is being raised for charities that want the advancement of religion, would it not be a good idea for him to support the amendment, so that religion does not have to pass that test?
Martin Horwood: I thank the hon. Gentleman for that question, and I shall come to amendment No. 126 in due course.
I was about to say that I have consulted some of the outstanding private educational establishments in my constituency, such as Cheltenham Ladies college, the National Star College for Disabled Youth, Cheltenham college and Dean Close school. I tested out the amendment to see whether those institutions felt that it represented some great threat to their charitable status, and they all thought that raising the bar was a good idea. Given their excellent public service record of sharing facilities with the wider community, they did not believe that it would damage them, and they also believed it would helpfully raise the bar for smaller, perhaps less reputable, organisations that were more or less indistinguishable from businesses in their approach. I am not saying that there is a large number of them, but raising the bar on public benefit would help to clarify that such organisations need to act charitably in order to earn the considerable benefits of charitable status.
There is a good example in my constituency of a small private nursery and pre-preparatory school that underwent some anxiety about whether it would pass a stricter public benefit test. It wondered whether it would be able to share any facilities with the wider community. It was a problem, as it did not offer scholarships in the requisite age range, so it had to think hard about the threat of a stricter public benefit test. In the event, it decided to share music teaching with neighbouring state schools. That seems an excellent result and it happened on account of the threat of a test stricter than the status quo.
The question remains whether the Bill in its present form contains such a test. I do not believe that it does, but I would be interested to hear the Minister’s comments. I wonder whether he will say that there are sufficient incentives, either in law or from the commission, to encourage organisations and institutions such as that school to improve the quality of their public service.
On amendment No. 126, I listened carefully, as ever, to the right hon. Member for Maidstone and The Weald. One of the Bill’s central principles is that it removes the current archaic definitions of charitable purpose, which date back to the mediaeval era and are simply no longer fit for purpose—though I hesitate to use that rather new Labour phrase. The right hon. Lady said, “If it ain’t broke, don’t fix it,” but the overwhelming consensus in the charity sector is that current charity law is broke, at least to the extent that the Bill deals with many areas of charity law and is designed to reform and improve them. That is precisely why it has had such widespread support— [Interruption.] The hon. Member for Castle Point (Bob Spink) shouts out “Not religion” from a sedentary position, but I refer him to his colleague in the other place, Lord Hodgson of Astley Abbotts, who said in support of a level playing field for all charities:
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