Examination of Witnesses (Questions 160
- 179)
WEDNESDAY 16 JUNE 2004
MR CHRISTOPHER
SPENCE, MR
DAVID EMERSON
AND MS
RHONA HOWARTH
Q160 Mr Foulkes: Before we leave
the definition, each of you is going to send us a note dealing
with the point that Lord Campbell-Savours raised about the test
for public benefit. Could you also include whether you think there
should be criteria defined as part of that test.
Mr Spence: Lord Phillips' point.
Mr Foulkes: Could we then move on to
the role of the Charity Commission. Lord Best will lead off.
Q161 Lord Best: The Bill gives the
Charity Commission quite a lot of power, not least to police the
public benefit issue that we were talking about before but to
register new charities and so on. You have expressed some concern,
perhaps particularly Governance Works has, about the lack of any
safeguards. There is the Charity Appeal Tribunal, but that is
there to deal with points of law. You were saying that there should
be safeguards, but what form of safeguards might we suggest should
be incorporated in the Bill? What would satisfy you?
Ms Howarth: I feel that, whilst
the Charity Commission clearly would be a regulatory body, there
are some differences between the Charity Commission and other
types of regulatory bodies such as the Financial Services Authority
or even Companies' House. I think there is a much closer relationship
between the Charity Commission and the charitable sector. There
is a lot more dialogue. There is a culture of talking to each
other about knowing who everyone is. There are previous examples
of working with the sector to develop guidance and listening to
the sector. So, in a sense, it is not simply a policing body;
it is much closer than that. Because the Bill does give the Charity
Commission very wide-ranging powers—and I do not have a
problem with that, but it does have wide-ranging powers—it
does feel as if the sector should have an opportunity at some
point to comment on the extent to which the Commission has met
its obligations as a regulatory body and has fulfilled its function
as a regulatory body. It may be that the Charity Commission board
would take that into account rather than be part of the Act.
Q162 Lord Best: Are you thinking
there should be representation on that board from the sector?
How are you creating this greater accountability from the actions
of the Charity Commission?
Ms Howarth: That would be one
route for it, but it may be that it did not necessarily go that
far. I had assumed that people who were appointed to that board
would have some charitable background and, in that sense, would
be representing the sector or would have some contacts with the
sector. It may be more to do with the Charity Commission being
obliged to consult on some sort of regulatory basis with the sector
on their own performance and effectiveness.
Q163 Lord Best: "Obliged to
consult." I do not know whether the others would agree.
Mr Spence: I would absolutely
agree. I am not sure exactly of the mechanisms, but I think to
try to build in the notion of both consultation with the sector
and accountability to the sector would be a very good move.
Q164 Lord Best: No independence from
it.
Mr Spence: Yes.
Q165 Lord Best: Absolutely critical.
Mr Emerson: Could I suggest four
points that we think would help. To begin with, the Charity Commission
is being asked to do more and we believe it is crucial that the
Charity Commission has the resources to employ the staff to undertake
this work which is additional. I think it might be helpful if
the appeal was allowed to be an appeal on any action of the Charity
Commission, not just the restriction in the Bill. In last week's
session, Mr Foulkes, it was emphasised that the Charity Commission
should be asked to make clear the distinction of when it is giving
advice from when it is giving direction, and some of my members
have suggested that it would be helpful to make clear that their
accountability relates to administration not in the exercise of
trustees' discretion.
Q166 Lord Best: You mentioned appeal.
In our last session, it was suggested that, rather than the system
defined in the Bill, some kind of ombudsman might be a simpler
and a better way of dealing with it. What do you think of that?
Mr Emerson: We have a general
welcome from our members for the appeal in principle, so I think
I would have to endorse that, but that it should cover the whole
of the Commission and an ombudsman I will happily think about.
My first reaction is the response I was asked to give—
Q167 Mr Foulkes: You are quite happy.
Mr Emerson: Providing it covers
the whole Commission's works.
Q168 Lord Best: Would you also feel
that obliging the Charity Commission to consult the sector should
be a statutory requirement?
Mr Emerson: Yes.
Q169 Mr Foulkes: Do either of the
other witnesses want to add anything on that?
Mr Spence: The one point I would
add is that I think there is a considerable tension currently
between the regulatory function of the Charity Commission and
the kind of guidance and good practice support function. I would
support the idea that its main and primary function is regulatory
and that the good practice and the guidance and support be provided
by the voluntary and community sector infrastructure which already
exists. So some kind of separation of those functions.
Mr Emerson: I would partly endorse
that, but I think my members feel that the Commission has been
very good—some of the advice it gives is valued and appreciated
and we do need advice—but it does need to be made clear
when the Commission is giving advice, because with a body like
the Commission giving advice to a small charity, it would be very
easy for it to be perceived as direction. Our concern is that
the separation between direction and advice is made very clear.
Q170 Lord Sainsbury of Preston Candover:
Following up on that point, would you have any idea how that
distinction should be made? We have heard from others of this
problem, that advice being considered by the smaller charity is
likely to be taken as instruction or requirement. Would you have
any ideas as to how that distinction could be better made in the
future?
Mr Emerson: Candidly, off the
top of my head, no. My first reaction is that the Commission could
make that clear literally when they are responding, whether it
was mandatory or whether it was advice. But I am more than happy
to come up with some further thoughts of clarification.
Q171 Lord Sainsbury of Preston Candover:
You do not think it should be done by a distinctly different
body or a different part of the Charity Commission, so that there
is no doubt at all of the distinction between regulation and advice.
Mr Emerson: I was wary of coming
to this Committee and suggesting divisions in the Charity Commission,
sections for this and sections for that. But if that was felt
by the Committee to be a route, certainly I think that could be
done.
Ms Howarth: By simply having the
Charity Commission's name on the document, the confusion is there
in that sense. Already this happens and I am not sure that really
we will ever be able to stop it happening because there will be
some organisations that perceive guidance as being regulation.
I think that is part of it. I think it is important for the Charity
Commission in some way to endeavour to ensure that the wider sector
has a very clear understanding of the Charity Commission's role
and its responsibility and its powers. In some way, when the Bill
becomes law, it would be essential for the Charity Commission
to get out there and talk to the sector, to make sure that that
understanding is clear.
Q172 Baroness McIntosh of Hudnall: This
issue came up in our discussion with the NCVO last week and their
colleagues. Specifically in relation to the Bill and the way the
Bill is drafted, do you have views about how this issue can or
should be reflected on the face of the Bill? When we were in this
discussion last week—and again now—we were not talking
about the Bill but about the way the Charity Commission conducts
its affairs. Although these two things are closely linked, they
are not the same. I would like to hear from you what you think
the Bill should say about this issue of regulation and guidance
being separable that it does not currently say. Or, if you believe
it does say all it needs to say, do tell us that.
Ms Howarth: I would not be in
favour of tying the Bill down to a role that is advice and guidance
purely around regulation. Just to make it so narrow, I would not
be in favour of. It may be that in future or on another occasion
the Charity Commission needs to be able to conduct its business
in a broader manner, and I would hesitate to restrict it that
tightly. We are quite comfortable with the Bill as it stands.
It is about practice; it is about relationships in future, with
the Charity Commission as the challenge, the sector as the challenge.
Q173 Baroness McIntosh of Hudnall: The
extent to which the Bill lays down the way in which the Charity
Commission will conduct itself in the future seems to you to be
sufficient to meet your concerns.
Ms Howarth: Yes.
Q174 Baroness McIntosh of Hudnall: Would
that be true of the other two?
Mr Emerson: Yes.
Mr Spence: Yes.
Mr Foulkes: We need to move on. The next
topic is the different levels of accountability for grant-making
charities.
Q175 Ms Keeble: One of the issues
that has come up repeatedly has been the huge diversity of the
charitable sector. We are talking about different scales of organisations,
some really big international ones, some very small local ones
and also some doing dramatic functions, providing services or
grant making. The problem with legislation is that it has to deal
with all of them. We are not even very clear at the moment about
the definition. Do you think that range of organisations should
be subject to the same types of levels of accountability. Just
to break that down a little bit, so that we are clear what we
are talking about, do you think there should be differences for
the grant-giving as opposed to the fund-raising or service delivery
charities?
Mr Emerson: Yes. To an extent,
I believe it would be beneficial to have a distinction. In short,
there is a completely different role between those who raise money
from the public and for which there should be accountability.
It needs a different form of regulation, perhaps a lighter touch,
for trusts and grant-making charities which have a secure source
of income.
Q176 Ms Keeble: What do you think
there should be? What would it look like in the legislation?
Mr Emerson: In the legislation
there would be enough to recognise this type of charity and to
permit the Charity Commission to be able to regulate differently.
We are wary of saying that the full definition of what should
happen should be in the Bill. It would be managed by the Charity
Commission. The Charity Commission, we have concern about their
resources, but if the Bill does not say something about the distinction
of grant-making charities we believe there might be the risk that
the Charity Commission would not follow that up appropriately
afterwards.
Q177 Ms Keeble: I see the point about
not wanting to restrict innovation, philanthropy and such like,
but how about the problem of grant-giving charities being used
as sort of fronts to provide grants to things which are not genuinely
recognised as being a particularly clever idea.
Mr Emerson: I think there are
two things. There is a range of grant-giving charities. We are
concerned about those that have—Lord Phillips' point—in
loose terms "endowment" but have secure funding. I am
talking about those grant-making, grant-giving charities. Your
second point is concerned about . . .?
Q178 Ms Keeble: If you are going
to have lighter-touch regulation for these—which I think
is what you are proposing—how do you still make sure that
there is proper scrutiny and thought given to the fact that if
they are giving grants they have to give grants for recognisable
purposes?
Mr Emerson: That is the current
situation, that they would have to declare the 50 largest grants
they make, and I think that is appropriate. I think that is covered
at present.
Q179 Ms Keeble: You still propose
to have the same kind of arrangements, in fact. You are saying
that there should be different forms of regulation and you are
saying that that should be recognised in the Bill. There should
be lighter-touch regulation for grant-giving, so how do you frame
the regulation to make sure there is still some control or some
scrutiny about where the money goes?
Mr Emerson: I should say this
is a difficult one for me. You were talking about where the grant
is going out.
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