Examination of Witnesses (Questions 180
- 199)
WEDNESDAY 16 JUNE 2004
MR CHRISTOPHER
SPENCE, MR
DAVID EMERSON
AND MS
RHONA HOWARTH
Q180 Ms Keeble: Yes, that is right.
Mr Emerson: Within the trust deed
of the organisation it clarifies what their charitable aims are,
where they are giving. That is already clarified, so, for us,
it is the issue of the regulation of the finances. If I may come
at it from a slightly different direction: We know—we get
calls—that there are young, wealthy people who are interested
in setting up foundations. When they look into it a bit more,
they think that at present the regulation is a disincentive and
they could quite easily do Gift Aid to their favourite charity.
We believe it is important for the sector that issues like poverty
and racial harmony, issues that are really crucial but not necessarily
of high public concern, continue to be funded by grant-making
charities, and that there continue to be people keen and anxious
to give their money in the establishment of foundations. That
is the principle. We want to make sure that people still want
to set up foundations and do not feel they are having to follow
a reporting mechanism which is entirely appropriate for a fund-raising
charity.
Q181 Ms Keeble: I understand the
principle of what you are saying. If you have young, wealthy people
who want to spend money particularly on the priorities you have
talked about, which might not be achieved by giving money to a
traditional charity, conventional charity, they want to be able
to have the flexibility and we need to have the space for them
to be able to do that because they can fund a wide range of activities.
However, how do you then make sure you have the regulation that
draws the line somewhere so that you do not give charitable status
to an organisation which ends up funding something which the general
public would generally not perceive as being a very good idea?
Mr Emerson: I would want to be
careful about it. The public might not think necessarily that
funding or funding of poverty or necessarily all criminal justice
issues would be a good idea, but we would recognise that those
are important issues.
Q182 Ms Keeble: Absolutely. It is
not those, but I am sure you would understand that you could get
to the point where somebody says, "Why on earth are you giving
charitable permission for them to fund . . ." and they might
name an activity which generally would be perceived to be totally
unacceptable.
Mr Emerson: I had come beforehand
and done some research with possible small amendments. I would
like the permission of the Committee to follow that up. We think
there is some wording in clause 5 that would clarify that.
Q183 Mr Foulkes: You will come back
to us on that.
Mr Emerson: Yes, may I get back
to you on that.
Q184 Ms Keeble: The other matter
I wanted to ask about is whether the regulation should be the
same for large and small charities, which is something we have
asked some previous witnesses. Ms Howarth, you have worked with
a wide range of charities, and you have been involved in some
small ones, so you can see it from both sides of the equation.
Could you say how you think the draft Bill deals properly with
small as well as large charities? Do you think we should be looking
at anything else?
Ms Howarth: I am sorry, I really
do not feel I could answer that at the moment. Again, I would
like to come back and have another look at the drafting in relation
to that very specific question. Is that possible?
Ms Keeble: Could Ms Howarth come back,
because she is in a very different position from a lot of our
other witnesses, having seen both sides.
Q185 Mr Foulkes: It would be helpful
because this is the nature of what has been put to us. There is
a wide spectrum of different kinds of charities: large, small,
grant-giving as well as grant-receiving, and I think it is very
important to understand the different requirements.
Ms Howarth: I will come back.
Q186 Lord Sainsbury of Preston Candover:
You referred to the fact that there has been discouragement
from people to create new foundations because of their concern
at the amount of regulation. I think it would be very important
for us to have specific examples of this, if you would submit
that to us in writing, because we are all concerned with the importance
of encouraging giving. We do not want the fact of regulations
that are very rightly needed for other sorts of charities to inhibit
the foundations. But we cannot talk in generalities; we have to
be specific. I think it is important that you do. There is an
example that comes up of a charity being obliged to declare its
objectives and to report actually on whether they are achieving
those objectives. That sort of report would presumably be felt
to be inhibiting to someone who was starting a foundation for
charity without a necessarily clear idea of which charity he wishes
to support through it. Is that true or not?
Mr Emerson: I think that is true.
I think this echoes what was in last week's discussion about the
aim of the social and economic objectives—which is one we
are uneasy about. I am not sure that that is appropriate, that
the Charity Commission would be in a position to be able to judge
those appropriately. We all may know, Lord Sainsbury, that we
have had a project for three years called Finance UK, looking
at the motivations of givers, and we are about to publish a report
and that report has a number of quoted examples of potential philanthropists
looking at how they might give money, looking at the risks to
them, what they saw were the disincentives and why they decided
not to go that way. You are quite right, there needs to be hard
evidence, and we can submit that.
Q187 Lord Sainsbury of Preston Candover:
Does your report have statistical evidence as to the number
of foundations that have been established in the part and any
slow up in the creation of new ones at present?
Mr Emerson: That report has not
because it is about dealing with 100 individual rich people and
their motivations, but we could certainly provide that evidence.
Lord Sainsbury of Preston: I think that
would be helpful to put it in proportion.
Q188 Baroness McIntosh of Hudnall: Would
it be possible for us to have evidence in support of the material
that Lord Sainsbury is after that points to other models of philanthropic
giving that it might be useful for us to know about in thinking
about how distinctions should be made within the Bill between
grant giving and other sorts of charity?
Mr Emerson: Yes.
Q189 Lord Campbell-Savours: David,
you have been arguing for a difference in treatment. Can I refer
you to page two, paragraph seven, of your evidence where it says
that grant-making charities should not be held accountable to
donors, beneficiaries or potential beneficiaries in the same way
as fundraising charities should be. What are you really getting
at there?
Mr Emerson: The grant making charity
will not be delivering the service itself, it will be giving the
funds to another service charity to deliver. The delivery of the
task to which they are funding is done by a separate body.
Q190 Lord Campbell-Savours: You are
not saying that the grant giving charity itself should not be
held accountable, you are saying it should not be held accountable
for the end product?
Mr Emerson: The wording is the
same, not that they should not be accountable, that is why I italicised
the words "in the same way".
Q191 Lord Campbell-Savours: But then
it is an organisation, by definition, that has substantial tax
advantages, is it not? You argue in paragraph 4 that without tax
advantages these organisations would not exist.
Mr Emerson: Before the last meeting
of the Committee it became very clear that you understood those
issues already and so I would not want to press those points.
The grant making trusts should be open and accountable, there
is no question of that, we would not suggest anything different,
they are one step removed from those people who are receiving
the benefits of their funds, that is why I emphasised the words
"in the same way".
Q192 Lord Campbell-Savours: So you
do not feel they have any responsibility for the end product?
Mr Emerson: Of course they do,
and that is why most grant making bodies will undertake monitoring
and checking and liaison with those charities which they fund
and they will ensure those funds are used appropriately. The other
emphasis is about risk. One of the great things which I suspect
you all understand about grant making trusts is that they are
the one independent body who can take a risk. We need to make
sure that trusts can follow up the idea that no-one else will
follow up because it is politically marginal or unpopular, because
that is where we get the greater ideas and the benefits to society
as a whole. It is just ensuring that the framework is not risk
averse.
Q193 Lord Campbell-Savours: What
practical difficulties do you think would be encountered if different
levels of regulation were applied to different charities across
the sector?
Mr Emerson: I would like to put
it the other way round and suggest there would be less difficulties
if there were different types of Regulation.
Mr Foulkes: I think we should move on
to another aspect of regulatory balance, particularly audit thresholds
and Andrew Mitchell is going to lead on this.
Q194 Mr Mitchell: My question touches
particularly on what Christopher said in his written evidence
in welcoming proposed changes to the annual audit under Clause
22. Clearly right at the heart of what we are trying to get at
on this Committee is to ensure that the Bill strikes the right
balance between flexibility and accountability. I wanted to ask
all of you your view on whether the Bill does achieve that balance
or how you think it can be improved to make either side of the
equation better without hindering the charities in the execution
of their aims and aspirations. Shall we start with Rhona?
Ms Howarth: I am not an expert
in this field. However, I did feel that it did strike the right
balance. It felt to me that it was allowing organisations some
flexibility without tying them down too strictly, that it provided
for the accountability that would be required within the sector
and mechanisms for that financial accountability. So we were very
comfortable with what is proposed in the Bill.
Mr Spence: We are too with one
caveat, which is the requirement for reporting an audit on very
small volunteering organisations which are in receipt of statutory
funding.
Q195 Mr Mitchell: This is Clause
22?
Mr Spence: Yes. We distribute
opportunities for volunteering grants on behalf of the Department
of Health at a level of around £30,000 to very, very small
organisations. The reporting requirements are, frankly, ludicrous.
They are required to report far too often and in far too much
detail at considerable expense to themselves. I think that is
out of proportion.
Q196 Mr Mitchell: Can you give us
some specific examples which can help us to understand the way
it impacts as you have described?
Mr Spence: I would love to submit
in writing some small case studies, yes.
Q197 Mr Mitchell: I think that would
be very helpful.
Mr Emerson: I agree with what
Rhona has said.
Q198 Mr Mitchell: So you are all
happy about what you perceive to be the balance between flexibility
and accountability?
Mr Spence: Yes, broadly.
Q199 Baroness McIntosh of Hudnall: I
would like to probe this a little further with Christopher Spence.
What I understood you to be saying in your evidence was that although
the current regulatory framework does not require charities to
report to the Charity Commission in a particularly onerous way,
they are required by other bodies, ie for instance local authorities
providing fund—
Mr Spence:—or government
departments.
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