Mr.
Turner: I am not sure whether the hon. Gentleman is
talking about facilitating or promoting mergers. His most recent
remarks suggest that the process is difficult, whereas his earlier
remarks implied some mild
encouragement.
Martin
Horwood: Although my amendment does not relate to
mergers—we seem to have strayed into that subject—my
point is that the merger process is difficult at the moment. The Bill
will make it easier and is therefore a good thing. I agree with the
hon. Member for Worthing, West that, generally, where mergers are
appropriate it would not be unreasonable for the Charity Commission to
encourage them as a way of reducing overall administrative costs and
burdens. I should like
to move to amendment No. 75, which is a probing amendment that would
add to the first general function a systematic review of the public
benefit test for existing charities. If the Government’s
arguments on Tuesday are to be believed, the new legislation will make
a difference, even in its unamended form. The application of the public
benefit test to charities that were not previously required to pass it
will potentially change their charitable
status. The Office of
the Scottish Charity Regulator is embarking on a process of systematic
review. I should be interested to know whether the Parliamentary
Secretary envisages that process happening in England and Wales once
the Bill has been passed or whether, when that has occurred and the
lawyers conclude that not much has changed, and existing charities are
assumed, until challenged, to have charitable status, that process will
ever be reviewed systematically by the Charity Commission. That touches
on the problem underlying many aspects of the Bill, which is that the
Charity Commission is being given quite significantly expanded
responsibilities—not greater powers—and there are more
charities to regulate, more functions to carry out and more advice to
be given. However, there is no expectation that the commission is to be
given extra resources to carry out its wider responsibilities. As many
hon. Members have already mentioned, there is some doubt about how
effectively the Charity Commissioners carry out some of their
existing
functions, let alone their future functions. That is still an underlying
worry, which I should like the Parliamentary Secretary to deal
with. Edward
Miliband: Thank you, Mrs. Humble. It is nice to see you
back in the Chair this
morning. We have had a
useful and interesting debate. Let me start by dealing with amendment
No. 8, tabled by the hon. Member for Isle of Wight. The debate has
reflected the need for balance to ensure compliance, as my hon. Friend
the Member for South Derbyshire said, and to do so in a way that is not
heavy-handed, onerous and does not stifle charities’ initiative.
The task is to strike the right balance, and the Bill does
that. Let
me explain the effects of the BillĀ in the context of the
underlying situation. It will improve the regulatory situation in
respect of how the commission works. I refer the Committee in
particular to the fourth duty listed in proposed new subsection 1D(2),
which alludes to the better regulation principles enshrined in the
Hampton report. Those are now in the Bill following debate in another
place, precisely to ensure that regulatory practice and activity should
be proportionate, accountable, consistent, transparent and targeted
only at cases where action is needed. That is one aspect of what is
happening.
9.45
am A second point
is that the Legislative and Regulatory Reform Bill, which is currently
being considered in another place, introduces the concept of properly
targeted risk-based regulation. Under part 2 of the Bill a new code of
practice will be triggered for organisations that were considered by
Hampton. The Charity Commission, as hon. Members may know, was one of
the bodies that was considered in the report. The Government intend
that the Charity Commission should be one of the bodies subject to the
new code of
practice. The new code
of practice comes from Philip Hampton’s report of March 2005.
The principles of inspection and enforcement that he set out will form
the basis of the new code of practice, which, I believe, is either
being drafted or has already been drafted in illustrative form. I shall
pick out for the Committee a few of the principles that Philip Hampton
wants enshrined in the code of practice; regulators and the regulatory
system as a whole should use comprehensive risk assessment to
concentrate resources on the areas that need them most; all regulations
should be written to be easily understood, implemented and enforced,
and all interested parties should be consulted at the drafting stage;
regulators should provide authoritative, accessible advice easily and
cheaply.
Mr.
Todd: The Minister is making an extremely powerful point.
What tools of risk assessment does he think the Charity Commission
might use? That is one of the critical areas; we all talk about risk
assessment—or perhaps we do not talk about it enough, although
it is increasingly common for the Government to do so—but
noticeably little thought is given to exactly how to do
it.
Edward
Miliband: My hon. Friend asks a pertinent question. In a
sense the decision is for the commission,
and the hon. Member for Cheltenham (Martin Horwood) made the point that
one cannot simply make a distinction between small and large charities
in relation to where risk lies. However, I suspect, although I do not
want to speak for the regulator, that very large charities are at
greater risk than smaller ones because of the sums of money that they
deal with. The fourth
principle set down by Philip Hampton that I want to highlight is that
when new policies are being developed explicit consideration should be
given to how they can be enforced using existing systems and data, to
minimise the administrative burden. A lot is being done to achieve what
the hon. Member for Isle of Wight intends by his amendment, which is
something with which the Committee clearly has some
sympathy. As to the
issue of trustees, there is, later in the Bill, much that is relevant
to the amendment, which trustees will welcome. One such matter is the
ability to use the charity’s funds to take out indemnity
insurance if necessary, which the Committee will consider. Another is
the Charity Commission’s ability to relieve trustees who have
acted honestly and reasonably of personal liabilities if something has
gone wrong. That will assist
trustees. I am
sympathetic to the intention behind the amendment, but I do not think
that it will achieve all that much. What is happening elsewhere is
important. Having said all that about the need for risk-based,
proportionate, well targeted regulation, I think that it is also right
that the compliance objective is taken seriously, as hon. Members have
highlighted. It should not somehow be diluted. We are talking about two
separate stories; we need a compliance objective that is rigorous and
properly upheld and, at the same time, across all of the
commission’s activities, we need a regulatory system that does
not impose unfair and excessively burdensome requirements.
Let me deal with the
SORP. Mr.
Peter Bone (Wellingborough) (Con): Does the Minister agree
that it would be much better to have this measure in the Bill than to
rely on legislation that is in another Bill? If we want to highlight an
issue, it should be in the Bill that we are dealing
with.
Edward
Miliband: I am very sympathetic to the intentions behind
the amendment, and I do not want to suggest otherwise. What troubles me
slightly about it is that we need to deal with compliance in a place
that is separate from the overall approach of the Charity Commission to
regulation. Nothing that this Committee does on this Bill must be seen
to undermine the need for proper compliance. At the same time, it is
right that we need to ensure that we send a message that the regulatory
system should not impose burdensome regulation. On that basis, I am
afraid that I am not inclined to accept the amendment.
Let me deal with the SORP. I
confess that the knowledge shared by the hon. Member for Isle of Wight
about the number of pages in the SORP is something of which I was not
aware. That is why the Committee helps to enlighten us all. A SORP is a
statement of recommended accounting practice; it is
not part of the law, although parts of it are in law. It is important to
say that only parts of the SORP are in law. The SORP is intended to be
helpful; it is, after all, a statement of recommended
practice. Mr.
Turner: If we are not careful, this may take us on to
future amendments. As I quoted, the SORP actually says of
itself: “compliance with
which is considered necessary, in all save exceptional circumstances,
to meet the legal
requirement”. If one puts
that information in front of trustees, they do not feel that they have
much scope for doing something differently. I understand what guidance
means, as I am sure the Minister and other hon. Members do, but I do
not think that trustees who are presented with that phrase would feel
that they had much scope to something a better
way.
Edward
Miliband: The hon. Gentleman makes an important
point. I was about to
say that, as with everything that the hon. Member for Worthing, West
has said so far in this Committee, I have sympathy for what he said. I
think that I will accept his challenge to sit down, at least, with the
commission and talk to them about the SORP and about whether there is a
way in which it can be produced in a more comprehensible and shorter
form. I suspect that that has probably occurred to the commission
before, but I think it is a fair and important challenge. When I do so,
I shall also take into account the comment made by the hon. Member for
Isle of Wight in a recent intervention that the actual phrasing of the
SORP is important. I understand that if the charity’s turnover
is less than £100,000, the SORP does not produce significant
requirements, even in law. However, I shall take up these
issues. In a sense, we
are talking about the administrative practice of the commission. I
think that the commission will have heard this debate and I hope that
it will take account of it. My hopes that it will take account of it
are buttressed by both the legislation that we have before us and what
the Legislative and Regulatory Reform Bill will do. That will have an
important effect.
Peter
Bottomley: I thank the Minister for his kind words. I
should have said earlier that, in my dealings with the Charity
Commission over the past 30 years or so, I have found it to be almost
invariably sympathetic and helpful, even though it clearly has problems
with resources and with addressing all those who are responsible for
charities. I should also say a word in favour of the SORP in general
and I have one illustrative example. As a trustee, I was told,
“If you make an unconditional commitment for future years,
you’ve got to account for it.” I originally thought that
that was a burden, but I now think that it is better to tell potential
recipients of grants, “This is subject to us having the money
and you continuing to perform.” The SORP has got us to change
our practice, and one should not suggest that what it is trying to
achieve is wrong, because it is normally trying to achieve something
that is right and worth while.
Edward
Miliband: Again, the hon. Gentleman speaks wise words, and
I shall take them, and his earlier words, into account in my
discussions with the commission.
Time is marching on, so let me
move on to amendment No. 66, which stands in the name of the hon.
Member for Cheltenham. The amendment concerns the commission’s
advice on registering or not registering a charity, and the most
interesting exchange was that between the hon. Members for Worthing,
West and for Cheltenham about mergers, in which my hon. Friend the
Member for High Peak also intervened.
We need to be careful that we
understand the regulator’s role, which is to uphold the system
of charity law, to ensure public confidence in it and to give advice on
establishing or not establishing charities. We must be careful,
however, that we do not place the commission in the position of
persuader in respect of mergers or the setting up or not setting up of
charities, because that is not really its job. The commission’s
job is to respond to the population’s wishes and demands in
respect of establishing charities and to give information and guidance,
not to put itself in the position of persuader or demander. I fear,
however, that the amendment tabled by the hon. Member for Cheltenham
goes slightly in that
direction. Having said
that, I do have a piece of good news for the Committee and, I hope, for
the hon. Gentleman. The Charity Commission is about to publish a
document called “Registering as a Charity”, which is
designed to explain precisely what is and is not a charitable activity;
which activities people think are charitable, but are not; why the
promoter of a charity should consider working with an existing charity,
rather than simply setting up a new one; what qualities trustees should
have; and the principles that should guide them in taking on their role
as a charity. Therefore, the commission will issue guidance and advice
on charity law and on setting up
charities. However, we
must tread carefully and ensure that we do not move to a situation in
which the commission somehow feels able to tell someone who has gone
through the process of establishing a charity and who has gone to the
commission to register it, “Actually, our advice is that you
should not have set up a charity.” By that point, the charity
will already have been established, and the person will be moving to
registration. I fear that the hon. Gentleman’s amendment moves
us too far in that direction.
I am very sympathetic to the
hon. Gentleman’s overall intentions, and the commission needs to
be able to give people clear advice about the options open to them.
However, it should do that in the role of neutral broker, not
persuader, and I fear that the amendment takes us into the real of
persuasion. I therefore hope that the hon. Gentleman will not press
it. As for amendment
No. 75 on public benefit, it is pretty clear from clauses 3 and 4 both
that a public benefit test will be applied to all charities—we
had great fun discussing that on Tuesday—and that the Charity
Commission will issue overall guidance on public benefit. As hon.
Members know, illustrative guidance is already available. As I said in
Committee on Tuesday, we will later consider different classes of
organisation and the relationship to public benefit and the
requirements.
10
am On the
phrase “a systematic
review of the public benefit”,
I am not sure that it is for us to tell
the Charity Commission the nature of a review of public benefit. It is
pretty clear what it will do: it will issue guidance and consider
different classes of organisation, as well as whether and how they meet
the public benefit requirements. I am cautious about appearing to give
instruction to the regulator. The public benefit test is established
and will, for the first time, apply to all organisations. There will be
overall guidance and separate classes will be considered. From
briefings that the Charity Commission has given Members and from what
it has said in public, it is clear that it will take those
responsibilities seriously. We do not necessarily need to move beyond
that.
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