James
Duddridge: Specifically with the “Users on
Board” document, will the Parliamentary Secretary consider the
duties of existing trustees when appointing other trustees? At present,
it says that it is unfair to impose on someone a range of duties that a
person cannot properly understand or does not want to carry out. That
general guidance to existing trustees caused some confusion,
too.
Edward
Miliband: I shall definitely look into
that. Tom
Levitt (High Peak) (Lab): With all due respect to the hon.
Member for Rochford and Southend, East, who is doing the Committee a
service by raising the matter, he has confused learning disability with
the incapacity to make decisions on one’s own rights. There is a
huge difference in those two definitions. While there may be a grey
area in between them, we must not assume that those with learning
difficulties are not capable of making decisions in their own right.
Will my hon. Friend the Parliamentary Secretary comment on a situation
in which an existing trustee had a stroke and a power of attorney is
appointed? Would the person who acts as power of attorney be able to
act for the trustee under such
circumstances?
Edward
Miliband: As I understand it, that person would be able to
do
that.
James
Duddridge: Perhaps the Parliamentary Secretary will agree
that I was reflecting on the confusion in the documentation between
someone with a learning disability and not being able to make a
decision. I was not suggesting anything
untoward.
Edward
Miliband: I agree with the hon. Gentleman. The sins are
mainly those of omission in the Charity Commission’s documents
rather than it saying the wrong thing. The omission has obviously
caused confusion even to some commission staff, but action will be
taken to ensure that the document is corrected. We should all be
grateful to him for raising such an important
issue.
James
Duddridge: I beg to ask leave to withdraw the
motion. Motion and
clause, by leave, withdrawn.
New Clause
7Loss
of charitable status ‘Where
charitable status is withdrawn from any organisation or institution the
assets of that charity must be deployed or protected for the charitable
purpose for which they were originally constituted with regard
to— (a) the continuity
of that purpose; (b) the need
to maintain public confidence in that purpose;
and (c) the interests of
beneficiaries.’.—[Martin
Horwood.] Brought
up, and read the First
time.
Martin
Horwood: I beg to move, That the clause be read a Second
time. The purpose
behind the new clause is to deal with what might be a slight gap in
charity law—[Interruption.] The Minister is already
nodding his head vigorously. Sorry, I meant that he is shaking his head
vigorously. The new clause was the result of discussions with a learned
and noble Friend who had debated the Charity Bill at length in another
place. When discussing the public benefit test, he had realised the
possible implications of the loss of charitable status. The assumption
of many people would be that an institution that lost its charitable
status for whatever reason would simply carry on in a non-charitable
form. However, that would not be the case because the assets that it
had employed as a charity were given for a charitable purpose and must
in law be applied to a charitable purpose. They would not be available
to the non-charitable institution. In the case of fixed assets, such as
a significant building, that would be a major issue.
The purpose behind the amendment
is to clarify what is already the intent—and is certainly the
commission’s intent—to avoid the loss of charitable
status, that continuity and the interests of the beneficiary were ideal
and that every step should be taken to avoid this happening.
In the event of loss of
charitable status happening, the clause makes clear that the desirable
outcome is not the collapse of the institution and the redeployment of
its assets to another charitable purpose, whether cy-prĂ(c)s or
not, but the continuity of the institution—its name, public
reputation and the interests of its beneficiaries.
Those responsible for the
charitable assets would have a duty to try and recreate the charity
within the terms of charity law and passing whatever public benefit
test or whatever other reason it was that they had failed in their
charitable status in the first place. My noble and learned Friend was
convinced that this is a gap in charity law. However, if the Minister
can reassure me, I would happily withdraw the new
clause.
Peter
Bottomley: If I understand the new clause and the
explanation that the hon. Gentleman has given—he has made a fair
speech—I do not agree with his intent. If an organisation has
been a charity and has been held to have a charitable purpose, because
of this change of law—which frankly, I do not think is
necessary; I prefer to assume that both education and religion are
charitable, but that is not the situation that we are in—it is
perfectly possible that an organisation that has
operated as a charity with excepted charitable purposes for decades or
even hundreds of years may find itself ruled not to be
charitable. One
circumstance, which the new clause is aimed at, is for the trustees to
accept it as a modern charity. The alternative is to say that is not
why we exist, we want to go on doing what we have been doing for
decades or centuries, even though we are now to be modernised and told
we are not a charity. In those circumstances, it is not right that all
their assets—their name, property and endowments—should
be taken from them and given to something that is still excepted as a
charity.
Martin
Horwood: I hesitate to intervene on the hon. Gentleman and
ask him about something about which he may be wrong. Once the assets
have been given for a charitable purpose, they must be applied to that
charitable purpose. If that institution ceases to be charitable, it
cannot use them under any
circumstances.
Peter
Bottomley: That is one of the reasons whyI might
do a disservice; I know that I have a communication problem. I need to
go on and attempt to perfect what I am trying to say.
Let us suppose that donor
Bottomley in the 1660s had said, “I want my money to establish
an institution for purposes that are acceptably charitable in the 17th,
18th, 19th and 20th centuries.” There is a tradition of what the
purpose is and it is accepted. Yet because of this change of
law—we are changing the law and potentially redrawing the
boundaries of what is charitable—Bottomley’s donation
should be allowed to continue for the purpose for which it is given.
The fact that it is charitable is a secondary factor. I argue that, in
those circumstances, it should be allowed for the present trustees to
meet the purpose for which the trust was established. That is the
problem. I contend that it contradicts what the hon. Member has put
forward in his new clause. At some stage it would be useful to hear
other people’s views on
that. If I can make my
point more clearly, I do not want to get involved in the independent
school issue. I do not want to try to imagine the circumstances in
which the Chancellor might so take against an Oxford college, which is
going to have some kind of regulation or is part of the exemption that
we have dealt with already—so I should not go into that too
far—that he wants to say, “I am going to try to get the
Charity Commission to say that the charitable purpose is not
sufficient”. If there were then a review, and it decided that
the public benefit was not great enough, and so the college’s
charitable status was lost, what would happen to
it?
2.45
pm Would the
college be told that all the fellows who are the society, who are the
trustees, are going to be displaced and the Chancellor’s friends
from some other university are going to be brought in? Or would there
be an advertisement and a public appointments commission, with
head-hunters being brought in, to decide, once a society had been
created, who should be the research fellows and what tenure each of
them should have—all because the charitable purpose has been
redefined? It strikes me that the hon. Gentleman needs a bit of help on
this.
Martin
Horwood: I am grateful to the hon. Gentleman. I may have
underestimated the power and intellect behind his argument, because he
is right. The weakness in my new clause is that it says that where
charitable status is withdrawn from any organisation or
institution “assets...must
be deployed or protected for the charitable
purpose”, but it does not
specify whether those assets are charitable under the new law. If they
are considered to be charitable—if they were given for an
obviously beneficial, philanthropic purpose that qualifies as
charitable even under the new public benefit test—what I was
saying does apply and those assets would have to be deployed for a
charitable purpose and could not be carried forward to the new, now
non-charitable organisation. However, if those assets had been
charitable, but are not now charitable because, as the hon. Gentleman
said, they were given for a purpose that was deemed to be charitable in
the 17th century but is not deemed to be so under the new 21st century
law, there is a problem, which he has correctly identified, and I share
his
sentiment.
Peter
Bottomley: Perhaps there is a better way of putting it.
Will the Minister reflect in the next few months on whether, in the
rare circumstances in which a charity cannot maintain its charitable
status, which will not be common unless a coach and horses is driven
through independent education, and when it is clear what the
donor—the person who settled the trust—intended and there
is a conflict between that intention and the new circumstances that
have come about because of this legislation, there can be some way of
settling whether the purposes must be changed to remain charitable, or
whether the purposes can be maintained and the assets used? If the
Minister is adamant, Report is going to be rather more interesting than
it would otherwise be. What I am really trying to say is that I do not
support the hon. Gentleman’s new clause, assuming that I have
properly understood
it.
Edward
Miliband: I thank the whole Committee for this interesting
debate. Let me start with the legal base, which is really the subject
of the amendment, although it clearly goes much wider than that. I can
provide the whole Committee with an explanation by quoting from the
little-known Charity Commission document, “Maintenance of an
Accurate Register of Charities”. At paragraph 31, it
says: “In law,
assets held on a charitable trust are irrevocably dedicated to
charitable purposes. So, if trustees are unable or unwilling themselves
to arrange for changes to their charity’s objects so that these
are exclusively charitable, then they must apply to us to make a
cy-près scheme directing that the assets held on trust are used
for other charitable purposes as near as possible to the original
purposes of the institution. We can help trustees in making such an
application.” The basis
for that is in common
law. It is worth
pointing out that it is wrong to say that charitable status is
“withdrawn” from an organisation. That is the word that
the hon. Gentleman uses in his amendment. It is a bit of a
logic-chopping point, but charitable status is not like a licence that
can be granted and withdrawn. An organisation is either inherently a
charity or not, depending on whether the purposes for
which it exists are charitable and whether it is for the public benefit.
In registering a charity, the commission is not granting charitable
status to an organisation, but recognising that it is inherently
charitable, having legally assessed its purposes and the public
benefit. Martin
Horwood: I am grateful to the Minister. I agree with his
interpretation; perhaps the use of the word “withdrawn”
was unwise drafting. Nevertheless, as the hon. Member for Worthing,
West has observed, we are in the process of changing the law, and it is
possible that an institution that was charitable may no longer be so.
It might be that charitable status is lost, rather than withdrawn. None
the less, charitable status could be held to have been lost—the
change is possible.
Edward
Miliband: It is difficult to understand, but loss of
charitable status is already possible—the public benefit test
exists now. That takes me on to something that I was going to say about
what happens when an organisation is deemed not to be compliant with
the charitable purpose and public benefit requirements, which addresses
the point made by the hon. Member for Worthing, West. In that case,
action must be taken to get the institution back into charitable
status, and that is possible in most cases. It is not usually
inherently impossible for the institution to move back into charitable
status. In the few cases in which that cannot be done, the assets must
be dealt with by some form of cy-près variation of the
charitable purposes, but that is the already the situation
now. The hon. Gentleman
asked was why it is not possible for the institution simply to carry
on, not as a charity, but essentially pursuing the same purposes. There
are two problems with that. First, it is not fair to the people who
gave money, property or whatever to the charity in the first place, who
did it on the basis that the institution was a charity that met
charitable purposes and provided public benefit. Secondly, loss of
charitable status removes not only some tax privileges, but a degree of
regulation so that the assets of the charity could then quite easily be
disbursed for private profit, because charity law would no longer apply
and there would be no regulator for the institution. The wording of the
new clause proposed by the hon. Member for Cheltenham is admirable, as
are the underlying sentiments, but no organisation would exist to
regulate the institution, because the institution would no longer be
covered by charity law.
I agree with the hon. Member for
Worthing, West that the issue is tricky. The reassurance that I offer
to him is that the Charity Commission will in all circumstances
endeavour to enable institutions to move back to charitable status if
public benefit is no longer met. That must be the Charity
Commission’s priority. Only in the most extreme cases in which,
dare I say, there is stubbornness or refusal to co-operate would other,
more drastic measures be
considered.
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