Examination of Witnesses (Questions 1080
- 1099)
WEDNESDAY 21 JULY 2004
FIONA MACTAGGART
MP AND MR
RICHARD CORDEN
Q1080 Ms Keeble: It is a serious
point.
Fiona Mactaggart: It is.
Q1081 Ms Keeble: What you cannot
do is just get the Charity Commissioners to temporarily agree
and then get the powers and go off and exercise them. You would
then have to have a regulator that is set up, fit for purpose
to carry out this legislation in a proper way, not one that will
give us a form of words now to say "Yes, we will do it the
way you want" because once they have got the power then,
frankly, it is just too late.
Fiona Mactaggart: No, I am not
looking for any short term fix. I am trying to have legislation
which will last, which will protect the charity brand, which will
build on public confidence. That is one of the reasons why I think
there is a real disadvantage in listing public benefit in 2004-05
and the precise criteria that people should apply.
Q1082 Ms Keeble: I take that point.
Fiona Mactaggart: However, I agree
that if you do not have a regulator who is confident that the
law can be applied to the ambition which the draft Bill—
Ms Keeble: We do have to have confidence
in the regulator. You drew the example of the FSA. The FSA was
a specially structured fit for purpose regulator set up to do
a very clear specific job in a new regime in a new era of food
regulation.
Q1083 Lord Phillips of Sudbury: I
think, if I may say so, I may not be the best charity lawyer in
the world but I have been 30 years doused in this subject and
I beg to suggest, Minister, with real respect, that your notion
of banging heads together, Home Office and the Charity Commission,
and coming up with a definition that will convert the Charity
Commission into—I think you call it—a confident regulator,
to be honest that is simply not available to non participants.
I will just suggest why. The law in this regard is, as you rightly
say, made up of cases, most of which pre-date everybody around
this table.
Fiona Mactaggart: Exactly.
Q1084 Lord Phillips of Sudbury: They
deal in the most general principles against circumstances no longer
prevailing. There are very few of those cases and nonetheless
we are going to be relying on a common law definition for the
future. Your point being that gives flexibility and organic evolutionary
capacity. Now, we know that no cases get before the high court
because it is too expensive and we know as well that there will
be no cases getting before the tribunal because exactly the same
problem will remain. I think what you have to contemplate is a
circumstance the day after this becomes law which is as confused
and complicated as it is sitting around this table. If I may just
add this. You made a comment earlier on Re Resch, which
is indeed the authority on public benefit and health, hospitals,
again, with great respect, I have to say whoever is advising you
on that in my view has advised you wrongly. I come back just with
one single instance of how I think it would be utterly irresponsible
for Parliament to leave this mess in existence. Perhaps I will
not bring in the Nuffield hospital case but what I will ask you
is this: what is wrong with having one or two ways forward, not
an exhaustive definition, and I would go to the stake against
it, but to have non-exclusive criteria which can be rather similar
to the criteria which the Charity Commission publish in their
guidance currently on public benefit and/or guidance issued by
the Home Secretary after consultation with the Charity Commission
and anybody else he or she thinks appropriate, non binding statutory
guidance. Just one last encouragement on that prospect, we have
in clause 5 as it stands of your Bill that one of the objectives
of the Commission is the social and economic impact objective—I
go on—to enable and encourage charities to maximise their
social and economic impact.
Fiona Mactaggart: Yes.
Q1085 Lord Phillips of Sudbury: Now
why should there not be some broad but clear guidance like that
vis-a"-vis public benefit and the public benefit clause
which might, for example, talk about maximising social and economic
impact and maximising reduction of disadvantage or something because
a huge number of people, including me—and I am not anti
the independent school and I am not anti charitable hospitals—just
feel that the present circumstances are not as helpful and consonant
with public perception of charity as they might be. We have this
chance it will not reoccur and we need to do better than we are
on the Bill currently.
Fiona Mactaggart: I share your
view, as I have made very clear, that we should not put the criteria
on the face of the Bill. I think even having non exclusive criteria
on the Bill has some substantial risks in it. I think the idea
of non statutory guidance agreed between the Home Office and the
Charity Commission might be one of the kinds of ways forward to
get beyond the points that people have raised here because we
are not trying to increase confusion. It is clear that there is
some confusion, we do not want that, we do want charities to be
able to do good for the public, to be able to benefit the public
and to advance their charitable purposes. If a mechanism which
provides more clear understanding of how that can work through
the form of something like non-statutory guidance might be a sensible
way forward I think that would be helpful.
Q1086 Lord Campbell-Savours: Can
I just make it clear, Minister, I am absolutely in favour of special
tax statutes for independent schools, however I cannot see how
independent schools can be charities. I want to ask you a question:
do you believe that you are protecting the charity brand by leaving
independent schools in the way that they are at the moment, protecting
the charity brand in the eyes of the general public and what they
perceive to be a charity?
Fiona Mactaggart: I will explain
how I think that we probably are which is by removing the presumption
of public benefit, we are not saying that every school automatically
is a charity merely because its purpose is charitable. We are
then saying that together with the charitable purpose it has to
demonstrate public benefit. I think that has helped to encourage
some of these schools to do more, to use their resources to benefit
the public.
Q1087 Lord Campbell-Savours: Do you
accept that we could do that outside of charity law by simply
giving them special tax status with exactly the same savings?
Fiona Mactaggart: It would be
one way of doing it but if you could do it within the framework
of charity law I think it would be a good thing. I think we are
doing it. I believe that some of the initiatives that we have
seen recently from these kinds of schools, for example Dulwich
getting involved in the City Academy and so on, it is partly because
of—not wholly because of this—this legislation. They
see that the demand for demonstrating public benefit, being something
of importance to the public, of expectation through legislation
and they are responding to that. I think that is meaning that
the very substantial resources which some of these institutions
have are being more generously—I think generosity is a very
important concept to keep in our minds about charities. It is
the thing which connects the philanthropic charities and the social
action charities in schools. It puts the duty on them to be generous
with their experience, expertise and so on in order to participate
in the charity brand. If they fail and, therefore, fail to demonstrate
public benefit, they do not have an automatic presumption that
they will be charities and I think that is the right way to approach
it.
Q1088 Lord Campbell-Savours: Is not
the definition of public benefit almost being geared to encompass
public schools and thereby distorting the definition? I say that
having talked to a number of people in the charities, as we all
have, and by watching the faces of the witnesses who come before
our Committee. There is an embarrassment; people just think there
is something wrong. It is as if certain groups do not want to
talk about it but when you ask them privately they say it would
be better if they were excluded and then they could get on with
the business.
Fiona Mactaggart: I will tell
you why that happens. I think that why that happens is because
that has been perceived as the controversial item in this Bill.
Maybe it is a good thing that most of the Bill is not controversial,
actually, maybe that is a good thing. The idea of charity is one
in which we all have some commonality, a common stake, that
is uncontroversial. It is one of the reasons why the brand is
such a powerful one, that overwhelmingly it is uncontroversial.
The thing about the media and public discourse is that we talk
about controversy rather than about where we agree because it
is more interesting, the controversy, and I think that has been
part of the reason why it has been like that.
Q1089 Chairman: I think, with respect,
that is an unconvincing answer. It is not just the media, we all
love to blame the media and why not, I am not a friend of the
media, we might as well give them a kicking whilst we have the
opportunity. But, come on, with respect, you know as well as I
do that every survey that has been undertaken anywhere not of
the media but of the public, people are amazed, in some cases
aghast, in some cases appalled, I am not saying I share these
views but that is what people say about the fact that independent
schools and independent hospitals enjoy the tax perks of the charitable
status. Let us not pretend this is somehow an invented media issue,
it is not, it is a real issue of substance that has to be dealt
with, does it not?
Fiona Mactaggart: People's surprise
about what is a charity is not restricted to public schools, for
example. People are very surprised that the British Museum is
a charity.
Q1090 Chairman: Your purpose is to
clarify all that. Your purpose is to instil confidence.
Fiona Mactaggart: Absolutely.
Q1091 Chairman: How does it do that?
Fiona Mactaggart: By saying that
charity is a very broad concept and that where you are advancing
the public good without profit in a way which benefits the public
for the kind of purposes—we have been clearer about the
purposes which are charitable—that is an all encompassing
thing. It is part of the normal way that we do business, there
is a good in our society. I think that focusing on what we might
cut out is the wrong way to approach this thing. What we need
to do is to include in people because that way we will be able
to benefit from talent, from expertise, in advancing education
in a way which makes sure that it delivers a wider public benefit.
Q1092 Mr Campbell: On that point,
this is not a controversial issue because it has been raised in
the evidence sessions here or in the context of the Bill, this
is a controversial issue, one which at the very beginning of our
deliberations we said we would be remiss in not raising it and
discussing it. One of my fears is that the real controversy will
come if the Bill is seen as ducking the issue. Going back to what
Lord Campbell-Savours said, this is not just an issue for the
public, these concerns were raised by the charity community themselves.
It was not just a nod and a wink embarrassment, the independent
schools, particularly the most elitist ones, were seen as an embarrassing
relative which had outlived their time within the charity community
and they should go and live somewhere else. It is not just an
issue of public thinking, it is an issue from within the charity
community themselves. Have you not picked that up in your discussions?
Fiona Mactaggart: The charity
community itself is on the whole very enthusiastic about the Bill.
They believe, as I do, that the removal of the presumption of
public benefit from particular classes of charity, including education,
promotion of religion and so on, that will mean that every charity
needs to show that it benefits the public, that it meets the kind
of criteria where guidance about public benefit and fee charging
charities, for example, is met and they are enthusiastic about
that being the case which is a change from the present situation.
I think that will encourage a tradition which has started fee
paying schools putting more emphasis on their contribution to
wider society rather than traditionally they have done and this
will accelerate that process. If it does that it is a good thing.
Mr Mitchell: Chairman, can I just say
I broadly agree with what the Minister has said on this subject.
Mr Foulkes: That should worry her.
Q1093 Mr Mitchell: It may well worry
her. I would not want her to go away with the impression that
the views expressed by, for example, Lord Campbell-Savours and
by Mr Campbell are the views of all of us on this Committee, indeed
I know that they are not. I just want to make the point that if
this issue of private education, upon which there is quite a division
in the Committee, were to dominate our report I believe that we
would have failed in scrutinising the Bill. Also, I want to dissent
from what the Chairman has said about the very wide concerns on
this and draw your attention to the evidence that was given by
the headmaster of one of the Manchester schools which personally
I thought was some of the best evidence we had and really demonstrated
how these private schools provide enormous charitable good. I
just wanted to make that point to balance up some of the comments
which you have heard, Minister.
Fiona Mactaggart: You are absolutely
right that some do—
Chairman: It was a comment, you do not
need to respond. He was submitting evidence. It is very interesting.
Baroness McIntosh might have a question.
Q1094 Baroness McIntosh of Hudnall: I
might, Chairman. I really would like you, Minister, to focus on
what comes out of this discussion. I do not disagree with you
as it happens in relation to the question of whether the independent
schools and hospitals should or should not be included within
the Charity Commission. I think there are many disadvantages—and
Lord Campbell-Savours knows that, I think—to separating
them out. However, if they are to be left in and if the public
benefit test is the mechanism whereby the applicability of proper
criteria to their operations is to be brought about then there
has to be a Charity Commission both able and willing to apply
the public benefit test in an efficient and effective way to all
of those schools and to run the risk in so doing that some of
them may fail to meet the criteria. That seems to me to be where
the heart of this discussion has been, the ability of the regulator
properly to fulfil its remit which were it to do would deal with
many of the issues which people who take a very hard line view
on the question of public schools and hospitals feels needs to
be dealt with.
Fiona Mactaggart: I think you
are right.
Q1095 Chairman: Okay. We have an
assurance from you, Minister, notwithstanding the current state
of the future, that in a matter of a few short weeks the confusion
will be resolved, the independent regulator will be brought into
line and we will have clarity when it comes to how the public
benefit test that you have introduced in this Bill yourself will
be operated?
Fiona Mactaggart: Let me assure
you, Chairman, that I am not planning to bully anyone.
Q1096 Chairman: Good.
Fiona Mactaggart: Which is what
that might have sounded like, I am not.
Q1097 Chairman: We are going to see
a merging of currently very disparate views by a process of osmosis,
transcendental meditation and eventually consensus and agreement.
Fiona Mactaggart: I think that
the question which Baroness McIntosh suggested at the end is the
key one and I hope that before the Committee has to draft its
report they will be able to be confident that is the case.
Q1098 Lord Phillips of Sudbury: Dare
I say that the good Chairman is pushing you into a sort of unreal
cul de sac. There is no way that whatever you do or we do you
will get lawyers around the charity sector agreeing on what the
public interest is now.
Fiona Mactaggart: That is lawyers.
Chairman: Can we move to other areas.
Trading.
Q1099 Mr Foulkes: The Number 10 Strategy
Unit, after very careful consideration, suggested that charities
should be allowed to carry out training in their own name without
setting up subsidiaries. Why did you reject that recommendation?
Fiona Mactaggart: Because the
recommendation was to allow charities to not just trade to their
charitable purpose but to create a completely different kind of
trading. I envisage the risk that you could have within a charity
someone who created some way of fundraising for the charity, the
small bar in the village hall, who then started running a chain
of pubs, and that would be quite possible, and that could raise
money which went to charities. They could benefit from tax relief
in terms of non domestic rates, they could benefit from all the
other tax reliefs and it seems to me right that if you are to
have something which is not for the purpose of the charity, while
we have de minimis arrangements, up to £50,000 or
a quarter of the charity's income which can be very substantial
in some cases if you think of £70 million for the cancer
research charities, we do not think that you could be able to
form an enormous company with all the tax benefits that would
have which could compete in the high street, which had charitable
character. If you want your profits to give to charity you could
covenant them to charity and get the tax breaks in that way and
that would be the right way to do it.
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