Joint Committee on the Draft Charities Bill Written Evidence


DCH 295 National Housing Federation

DRAFT CHARITIES BILL PUBLISHED MAY 2004

SUBMISSION BY THE NATIONAL HOUSING FEDERATION TO THE JOINT PARLIAMENTARY COMMITTEE

Executive Summary

The National Housing Federation welcomes the draft Charities Bill as a significant advance in charity law. The key points in this submission are:

  • The charitable objects described in the draft Bill should be interpreted as widely as possible to permit a broad range of activities to promote social improvement and sustainable neighbourhoods;
  • We should like CIOs be able to convert to, or merge with, charities that are formed as companies limited by guarantee or Industrial and Provident Societies; and
  • Exempt charities should be able to be listed on the Charity Commission's register of charities, while being regulated by their relevant lead regulator.


Introduction

1.  The National Housing Federation welcomes the opportunity to comment on the draft Bill. The Federation represents some 1,400 not-for-profit housing associations, which between them own or manage around
2 million homes in England. They play an important role, not just in housing, but also in regeneration and the creation of mixed communities and sustainable neighbourhoods. Most of our members are charities, with over 700 charitable Industrial and Provident societies and 200 charitable companies and trusts. The majority of our members are also registered with the Housing Corporation, a government body that funds and regulates them.

2.  The Federation broadly welcomes the draft Bill, and in particular the explicit inclusion within the definition of charitable purposes of rural and urban regeneration, the advancement of citizenship or community development, and the provision of accommodation to those in need.

3.  We have restricted our comments to those areas of the draft Bill that will have the greatest impact on our members. In particular, our response focuses on the potential impact on our members that are constituted as Industrial and Provident Societies and the role of the Housing Corporation as a "principal regulator".



General

4.  While we welcome the draft Bill, we should like to see charity legislation consolidated into one Act, to make it easier for charity trustees and others to understand the law.

Charitable Purposes

5.  Although the categorisation of charitable purposes does not appear significantly to change the range of purposes that are to be considered charitable, we think it is helpful to raise the public profile of charities by highlighting the main groupings.

6.  We should wish to see the Charity Commission give guidance that interprets these headings as broadly as possible. In particular, "the advancement of citizenship or community development" should be explicitly defined in such as way as to encompass not just physical but also social improvement to aid the creation of sustainable neighbourhoods.

7.  The draft Charities Bill and any subsequent proposals should be tested to ensure that they are sufficiently broadly drawn to encompass a wide spectrum of housing association activities as charitable purposes. In doing so, recognition should be given that associations in general provide housing, care and neighbourhood services to a wide range of people, and also that specialist services are targeted at particular groups.

The test should cover the work housing associations do to:

  • provide affordable rented, intermediate renting and low cost home ownership housing to a wide range of income groups and communities;
  • provide key worker housing targeted at particular groups;
  • manage housing, open spaces and local facilities, including on behalf of other bodies;
  • assemble land for redevelopment, build new homes and refurbish properties;
  • demolish homes as part of housing market renewal and lead neighbourhood renewal projects;
  • provide care and support services to a wide range of income groups and targeted in some schemes at particular groups;
  • provide student housing;
  • support community and social enterprises;
  • deliver, manage and support a range of neighbourhood services to a wide range of groups (and targeted in some schemes at particular groups) including training and employment schemes, community facilities, childcare, after school clubs, youth projects, sports activities, affordable credit, healthy living projects, etc; and
  • deliver and manage shops and other local facilities such as health centres.

8.  We believe that the draft Bill will make charitable status more attractive for associations. However, there may be a significant minority of associations that will wish to remain non-charitable while operating within the range of objects permitted for registered social landlords under the Housing Act 1996. It is important that the Housing Corporation should be ready to support an association in changing its rules, if necessary, in order for it to remain non-charitable, should the association have a good case for doing so.

Public Benefit Test

9.  We agree that public benefit should be one of the essential requirements of charitable status and believe that it is helpful to leave the definition of "public benefit" open in the Bill so that it can adapt over time as public opinon develops. However, it would be useful for the Charity Commission to issue updates from time to time, to clarify the position.

Charitable trading

10.  We strongly support the recommendation in the Strategy Unit's consultation paper, Private Action, Public Benefit, that charities should be allowed to undertake appropriate trading within the charity without the need for a trading company. For charitable housing associations, the establishment of trading subsidiaries adds substantially to their legal and administrative costs and can add greatly to the complexity of the development of mixed communities, where some people own their own properties and some rent.

Charitable Incorporated Organisations

11.  We welcome the introduction of the CIO, which will allow charitable housing associations to be incorporated without registering with Companies House. However, we believe that it is important that the framework for CIOs ties in to the legislative framework for companies. For example, it appears that under the proposed legislation, a CIO could have the same name as a company registered at Companies House with the consequent potential for public confusion. Also, it appears that CIOs may be constituted with unlimited liability. It is important for those who deal with such bodies, to know whether or not they have limited liability, and this should be disclosed on letterheadings etc.

12.  Although there is provision in the Bill for charitable companies and charitable Industrial and Provident (I&P) Societies to convert to CIOs, there appears to be no provision for a CIO to convert to a charitable company limited by guarantee or I&P Society. Many housing associations now operate within group structures, and it would be beneficial if CIOs could convert to the same legal structure as other members in the group. Provision should also be made for CIOs to be able to amalgamate with, or transfer undertakings to, other charitable companies and I&P Societies.

Charity Appeal Tribunal

13.  We welcome in general the introduction of a Charity Appeal Tribunal. As far as exempt charities are concerned, it seems that if a Charity Commission inquiry is initiated at the request of a principal regulator, such as the Housing Corporation, then an appeal may be made to the Charity Appeal Tribunal. However, if a decision is made by the principal regulator itself in respect of its duties to an exempt charity, then the route of appeal is unclear. We propose that exempt charities should be able to refer decisions based on a principal regulator's interpretation of charity law to the Charity Appeal Tribunal.

Exempt Charities

14.  We should like clarification on whether exempt charities may be registered with the Charity Commission (7 3A) and, if so, whether this is at the discretion of the Charity Commission. Current practice by the Charity Commission is that exempt charities are not allowed to be entered on the register of charities. This causes problems for many exempt charities in demonstrating that they are in fact charitable. It would therefore aid exempt charities to be able to be listed on the register, while being regulated by their principal regulator. In a similar manner, Industrial & Provident Societies are listed at Companies House, but are registered and make annual returns to the Financial Services Authority.

15.  We note that associations that are currently exempt charities but not registered social landlords (RSLs) will have to register with the Charity Commission. This will affect just over 200 of our members - most of them small associations with fewer than 500 properties. We agree with this proposal for stand-alone associations. However, where there is a group structure with a parent association that is an exempt charity regulated by the Housing Corporation, it may be more appropriate for the charity to have the Housing Corporation as principal regulator in respect of its charitable nature rather than the Charity Commission.

Role of the Housing Corporation

16.  As the regulator of registered social landlords (RSLs) the Housing Corporation plays an important role in the way that housing associations are run. In order to avoid duplication of regulation, we should wish to see all charitable registered social landlords, whether formally exempt charities or registered charities, have the Housing Corporation as their principal regulator for charity law.

17.  Although we agree with the principle that exempt charities should comply with charity law to the same extent as registered charities, we are very concerned that there should be no increased administrative burden on exempt charities. For example, we should want to be assured that exempt charities would not have to produce two versions of financial information - one to satisfy the Housing Corporation's own regulatory requirements, and one to satisfy the Housing Corporation as a principal charity regulator.

18.  Relevant stakeholders should therefore be involved at an early stage in discussions with their principal regulator as to how the compliance objective may be achieved without over-burdensome regulation.

Remuneration of Trustees

19.   We note the proposal that trustees of a charity should not be able to be paid for their services as trustees and that paid trustees should be in a minority. The Housing Corporation now allows for the remuneration of housing association board members where there is a compelling business case for its being in the best interests of the association. We believe that this principle should apply to all charities and that large, complex charities such as housing associations should, where there is a business case, have the choice of paying for the time of board members.

Conclusion

20.  While the National Housing Federation overall supports the draft Bill, we believe that there should be greater clarity concerning the role of principal regulators and greater flexibility for CIOs to fit in to group structures and merge with other charities.

Contact details:

Richard Reger

Head of Governance

National Housing Federation

Lion Court

25 Procter Street

London WC1V 6NY

Tel 020 7067 1010

Email: richardr@housing.org.uk


 
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