Further memorandum from Wales Council
for Voluntary Action (DCH 245)
1. Wales Council for Voluntary Action (WCVA)
wishes to thank the Joint Committee for agreeing to consider additional
submissions on a point we believe to be of national significance
for the charity and voluntary sector in Wales. Provisional submissions
about Clause 44 (Cl.44) were presented in paragraph 3.38 of WCVA's
original response to the Joint Committee, dated 21 June 2004.
Pursuant to further research, and informal consultation with the
National Assembly, we now wish to develop these submissions.
Cl.44 of the Charities Bill (the Bill) makes
provision of the Secretary of State to give financial assistance
to charitable, benevolent and philanthropic institutions in England
only:
"(1) The Secretary of State may give financial
assistance by way of grants or loans to any charitable, benevolent
and philanthropic institution whose operations are carried on
wholly or mainly in England."
2. WCVA understands this statutory power
was introduced to overcome the limitations of the annual Appropriation
Act presently relied upon by the Home Office to draw funds for
its financial support of the voluntary sector. Unfortunately,
when drafting the Bill, it appears that an incorrect interpretation
was made about the corresponding powers held by the National Assembly
for Wales (Assembly)—namely the adequacy of S.85 of the
Government of Wales Act 1998 (GWA 98). The Explanatory Note to
Cl.44 states:
"This power extends only to such organisations
which operate wholly or mainly in England. Government funding
of similar organisations operating in Wales is devolved to the
National Assembly for Wales."
3. The Home Office has confirmed that it
had S.85 in mind in this respect. The expenditure powers in S.85
comprise:
"85.—(1) No expenditure shall be
incurred by the Assembly except—
(a) in, or in connection with, the exercise
of any of the functions of the Assembly, or
(b) for a purpose for which expenditure is
authorised or required to be incurred by the Assembly by any enactment.
(2) The ways in which the Assembly may incur
expenditure include, in particular, giving financial assistance
(whether by way of grant, loan or guarantee) to any person engaged
in any activity which the Assembly considers will secure, or help
to secure, the attainment of any objective which the Assembly
aims to attain in the exercise of any of its functions."
4. It was not unreasonable for the Home
Office to have made the objective assumption that S.85 afforded
a similar funding power to that created by Cl.44 but, in practice,
this is not the case. Unfortunately, we understand that internal
Assembly legal advice has precluded the use of this section in
a manner similar to that now intended by Cl.44. It is unclear
whether S.40 of GWA 98 was also in the Home Office's contemplation,
but this general enabling power is sometimes used in conjunction
with S.85 (as shall be seen below):
"40. The Assembly may do anything (including
the acquisition or disposal of any property or rights) which is
calculated to facilitate, or is conducive or incidental to, the
exercise of any of its functions."
5. Central to the administration and funding
of the voluntary and charity sector in Wales are the unique statutory
obligations set out in S.114, GWA 1998:
"114.—(1) The Assembly shall make
a scheme setting out how it proposes, in the exercise of its functions,
to promote the interests of relevant voluntary organisations."
And S.114(4)(a) states:
"(4) The scheme shall specify—
(a) how the Assembly proposes to provide
assistance to relevant voluntary organisations (whether by grants,
loans, guarantees or any other means),"
6. The Home Office has expressed, in conversation,
the view that as matter of general principle a statutory obligation
such as that in S.114 would not be created without a corresponding
power—the Assembly also took this view prior to the receipt
of its own legal advice. The logic by which the Assembly's legal
conclusion has been reached is complex but in essence may be summarised
as follows:
6.1 S. 26 of the Development of Rural Wales
Act 1976 was typically used as the general funding power to assist
all activities which contributed to the social development of
Wales, prior to implementation of the GWA 98. However, subsequent
to amendments made by the GWA 98 (Sch. 14, para. 15), the extant
legal advice is that S.26 is no longer available for such purposes.
As an aside, it is our feeling that the practical results of this
amendment may have been unintentional.
6.2 Post GWA 98, sections 40 and 85 were
considered to be the prevailing authority to fund activities within
the Welsh charity and voluntary sector, not least those obligations
that appeared to emanate from S114. However, around October 2002
internal Assembly legal advice took a contrary view.
6.3 The basic logic of the advice (in so
far as it has been conveyed to WCVA), would appear to be sound.
Central to sections 40 and 85 is the exercise of a "function",
and thus it follows that such function has to be clearly identifiable.
The function within S114 is to make a Scheme which, in itself,
sets out how the Assembly ". . . proposes, in the exercise
of its functions, to promote the interests of relevant voluntary
organisations." At best therefore, sections 40 and 85 can
only provide funding to the extent that it facilitates the creation
and maintenance of the Scheme, but not any additional functions
that fall to be considered by the Scheme itself.
6.4 These sections, in themselves, cannot
be construed or used as stand alone general funding/grant powers—they
have to attach to and facilitate an existing function. There is
no doubt that where clear functions are imposed elsewhere in the
GWA 98 or other legislation, these sections will be available
in the event such function is not otherwise inherently imbued
with their own funding powers—however, this does not assist
in the context of S114 and the wider voluntary sector objectives
of the Assembly.
6.5 In view of this legal advice, the Voluntary
Sector Unit of the Assembly now finds it necessary to target existing
powers within disparate legislation to facilitate the delivery
of its various objectives. Commonly used powers include: S64 of
the Health Service and Public Health Act 1968; S.28B of the National
Health Service Act 1977, and S126 of the Housing Grants, Construction
and Regeneration Act 1996. This is a best a compromise, as the
Assembly is clearly working within artificial constraints which
are not conducive to a coherent strategy for funding the charity
and voluntary sector, and certainly inappropriate in the modern
context within which it operates.
7. WCVA invites the Joint Committee to address
this important issue in one of two ways:
7.1 Where it is of the opinion that S85
(and possibly S40) is effective in similar manner to Cl44, take
steps to so confirm this by whatever legal means are most effective
(short of an amendment to the GWA 98), or
7.2 Amend Cl44 to create a corresponding
power for the National Assembly for Wales. The Joint Committee
may consider it appropriate to consult with the Assembly to establish
the most appropriate form of wording, but in the interim we have
amended the Cl44 as follows:
44. Power of Secretary of State and National
Assembly for Wales to give financial assistance to charitable,
benevolent or philanthropic institutions in England and Wales
(1) The Secretary of State may give financial
assistance by way of grants or loans to any charitable, benevolent
or philanthropic institution whose operations are carried on wholly
or mainly in England, and the National Assembly for Wales has
a corresponding power for charitable, benevolent or philanthropic
institution whose operations are carried on wholly or mainly in
Wales.
(2) Financial assistance under subsection
(1) may be given on such terms and conditions as the Secretary
of State and National Assembly for Wales consider appropriate.
(3) Those terms and conditions may, in particular,
include provision as to:
(a) the purposes for which the assistance
may be used;
(b) circumstances in which the assistance
is to be repaid, or otherwise made good, to the Secretary of State
and National Assembly for Wales, and the manner in which that
is to be done;
(c) the making of reports to the Secretary
of State and National Assembly for Wales regarding the uses to
which the assistance has been put;
(d) the keeping, and making available for
inspection, of accounts and other records;
(e) the carrying out of examinations by the
Comptroller and Auditor General in England, and Auditor General
for Wales in Wales, into the economy, efficiency and effectiveness
with which the assistance has been used;
(f) the giving by the institution of financial
assistance by way of grants or loans to other persons on such
terms and conditions as the institution or the Secretary of State
and National Assembly for Wales considers appropriate.
(4) A person receiving assistance under
this section must comply with the terms and conditions on which
it is given, and compliance may be enforced by the Secretary of
State and National Assembly for Wales.
(5) The Secretary of State and National
Assembly for Wales may make arrangements for:
(a) assistance under subsection (1) to be
given, or
(b) any other functions of his under this
section to be exercised, by some other person.
(6) Arrangements under subsection (5) may
make provision for the functions concerned to be so exercised:
(a) either wholly or to such extent as may
be specified in the arrangements, and
(b) either generally or in such cases or
circumstances as may be so specified, but do not prevent the functions
concerned from being exercised by the Secretary of State and National
Assembly for Wales.
(7) As soon as possible after 31 March in
each year, the Secretary of State must make a report on the exercise
of powers under this section during the period of 12 months ending
on that day and a corresponding obligation applies to any Ministers
to whom responsibility has been delegated by the National Assembly
for Wales.
(8) The Secretary of State must lay a copy
of the report before each House of Parliament and the relevant
Minister or Ministers must lay a copy of the report before the
National Assembly for Wales.
(9) In this section "charitable, benevolent
or philanthropic institution" means:
(b) a body or trust (other than a charity)
which is established for charitable, benevolent or philanthropic
purposes.
and "charity" and "charitable
purposes" have the meaning given by sections 1 and 2.
8. In conclusion, it would appear that the
problem Cl.44 was designed to remedy in England is directly analogous
to the situation in Wales—namely the creation of a direct
and appropriate statutory power to fund the charity and wider
voluntary sector. It is both sensible and desirable to make similar
provision for Wales and WCVA strongly urges the Joint Committee
to carry forward appropriate revisions to the Bill in consultation
with the Assembly. As evidenced by the intention behind Cl.44,
the Charities Act 2005 is a wholly appropriate vehicle to achieve
this critical reform for Wales.
July 2004
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