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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 660xii

HOUSE OF LORDS

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

JOINT COMMITTEE ON THE DRAFT CHARITIES BILL

 

 

DRAFT CHARITIES BILL

 

 

Wednesday 14 July 2004

MAJOR MICHAEL ADLER, MR DAOUD ROSSER-OWEN and MR ANDREW BRITTON

Evidence heard in Public Questions 891 - 965

 

 

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Oral Evidence

Taken before the Joint Committee on the Draft Charities Bill

on Wednesday 14 July 2004

Members present:

Mr Alan Milburn, in the Chair

 

Caithness, E.

Campbell-Savours, L.

McIntosh of Hudnall, B.

Sainsbury of Preston Candover, L.

 

 

Mr Alan Campbell

Ms Sally Keeble

Mr Andrew Mitchell

Bob Russell

________________

Memoranda submitted by the Churches Main Committee,

the Independent Services Agency Ltd and Religions Working Together

 

Examination of Witnesses

 

 

Witnesses: Major Michael Adler, Mr Daoud Rosser-Owen, Religions Working Together, and Mr Andrew Britton, Churches Main Committee, examined.

Q891 Chairman: Gentlemen, welcome. Would you mind introducing yourselves and saying which organisation you represent?

Mr Rosser-Owen: Good afternoon, ladies and gentlemen. My name is Daoud Rosser‑Owen. I am representing an organisation called Religions Working Together. We have sent you a submission. I am also president of the Association for British Muslims and an executive committee member of the Union of Muslim Organisations in the UK area.

Major Adler: Michael Adler. I am a trustee of about six military charities, and I have various offices as secretary or treasurer to about another 40.

Mr Britton: Andrew Britton. I am here on behalf of the Church of England. I am acting chairman of the local parochial church council and I am also the chairman of the Diocesan Board of Finance in Southwark.

Q892 Chairman: Welcome. I would like to clarify one thing. This afternoon we are dealing with this whole issue of excepted and exempt charities although there will be other issues that we want to deal with. Just for the avoidance of doubt, could you tell me whether you represent an excepted or exempt charity?

Mr Britton: The parochial church council is excepted and the Board of Finance is not.

Major Adler: Within the Armed Forces all our unit funds are excepted charities. We do not know the number, but it could be 15,000.

Mr Rosser-Owen: No, sir, we are neither excepted or exempt.

Q893 Chairman: Let me put a question to Michael and Andrew first of all. We have had various submissions to us in writing expressing concern about the clauses in this draft Bill. Incidentally, I should say that our purpose is not to defend the Bill, our purpose is to examine the Bill, so feel free to say what you mean. Could you give me a flavour as to whether you have concerns and, if so, what the concerns are?

Mr Britton: May I say on behalf of the parochial church councils, I think we regard the exception as being appropriate for the small ones and we are concerned that the process to equalise the income limits for excepted and not excepted should be quite protracted to give the small parishes time to get used to the idea as it were because it is a new role for them. As far as the ones who would come into effect immediately, the bigger parishes, whilst some of them might find it a little bit strange, they could probably learn to live with it. So we are not objecting in principle.

Q894 Chairman: So your view is that it is okay in principle but effectively you want a transition period that is sensible, is it not?

Mr Britton: We need a long transition period, yes.

Q895 Chairman: How long?

Mr Britton: I have seen a figure of 30 years suggested.

Q896 Mr Mitchell: Why?

Mr Britton: The people who run parochial church councils are not necessarily very sophisticated in terms of their financial and legal expertise and they may think that it is more difficult than in fact it is going to be. I guess the other consideration is that there is just so many of them and this is more an issue for the Charity Commission than it is for us, but we are talking about many thousands and for them all to come in immediately would present problems both at our end and at the other end.

Q897 Chairman: Michael?

Major Adler: On the excepted charity roles, our accounts are all the domestic accounts of units of the Armed Forces. There is absolutely no fundraising effort to bring money into these accounts. They are domestic accounts dealing with the president of the Regimental Institute, for example, which is the soldiers' club, the sporting activities fund or the sergeants' mess, which is sergeants contributing a bit extra to make their rations a bit more palatable. So within these accounts there is nothing that I can see that is of the remotest interest to the general public. In "Private Action, Public Benefit" it is mentioned several times that one of the aims of this exercise is to cut red tape, so I am mystified as to why we need potentially to register 15,000 funds, a lot of which have hefty turnovers. At Christmas time, when preparing for its ball, the sergeants' mess can have a very high turnover on its books and so many of these accounts may go over the threshold that you have set for what purpose? I am afraid the military section of the Charity Commission would have to increase in size by a factor of ten in order to deal with it.

Q898 Chairman: Basically, to put an unkind paraphrase to you, you want special treatment, do you not, both of you?

Major Adler: I would suggest that if the status I have stated is to go then they should be exempt. These funds are there to improve the morale of the Armed Forces and the primary duty of the national government is, to quote the Chancellor of the Exchequer on 12 July, "the defence and protection of all citizens". A certain amount of public money is devoted for that, but that covers anything that is really for the comfort of the troops and that is found from within the Armed Forces. In the Army many officers contribute two days' pay to their regimental fund. What we are talking about is something to make life better for people to win wars, which is the ultimate extent of politics. If we go back to 1601, that has always been a charitable purpose. The defence of the Realm and the efficiency of the Armed Forces of the Crown are a good charitable purpose, although they are not named in the present draft legislation, that is perhaps an omission. So there are two main tenets to our argument. Firstly, the defence of the Realm and the efficiency of the Armed Forces of the Crown should be declared as good charitable purposes. Secondly, all the funds within the fighting units of the Armed Forces should be excepted or exempt.

Q899 Chairman: Why? All of us would have extremely high regard for the work that your organisations do. Why should you be treated differently from any other organisation?

Major Adler: Because essentially we are topping up an inadequacy of public funds.

Q900 Chairman: We have heard that argument, with respect, from many other charitable heads. We heard that argument - although you are not in the same category - from both the independent schools and the independent hospitals sector. Why should different rules apply to you from them?

Major Adler: Because we are the only group of people who have to go onto a battle field and risk our lives. We are different in many respects. The building of morale of the Armed Forces is almost certainly the major war winning factor. In the Principles of War, of which there are about ten, morale is considered to be the most important. I would venture to suggest that within other charitable groups we do not have that sort of requirement.

Q901 Chairman: Mr Britton, what is your response?

Mr Britton: Our case has not been that it is wrong for the local parishes to be separate charities but just that it is unnecessary. As I have said before, we are not objecting to the larger ones coming in, as is proposed in this Bill. It has been argued in the past and it might well still be in relation to smaller churches that the supervision that is provided through the diocese and bishops and the diocese and officials actually has proved adequate for the purposes of the Charity Commission. So it is not that we say it is inappropriate, we just have argued in the past that it was unnecessary.

Q902 Chairman: What is your big fear if you lose excepted status?

Major Adler: Increased unitary work going on to people who are already heavily taxed. It is a very small number of people within a unit involved in financial management and this is adding yet another task when they should be more concerned with pay and allowances. If I may say so, sir, the internal systems of audit and accountancy within the Armed Forces are actually tighter than they would be if we were forced to go outside and use external audit. A military audit board will sit for so long as it is required. I have been on some which have been run for three days because of the sheer size of the funds. The Adjutant General is tasked through the Adjutant General's court with making sure that these funds are run according to extremely strict regulations and I would argue that internal regulation is stricter than would apply outside and cheaper. We did an exercise in the Portsmouth area for the Royal Navy a short time ago and we looked at some of their large Service Non‑Public Funds there, and if they have to go outside for audit there will be an extra cost of at least £110,000 a year just for that one area. Those accounts are at present internally inspected by the Royal Navy. I look at them from time to time. I know that they are being properly accounted for.

Q903 Chairman: That is fine. I am not saying this is my view, but one could argue that it is not an unreasonable proposition to suggest, since as a charity you enjoy certain financial advantages which accrue from all of us as taxpayers, there should be some form of accountability for how taxpayers' money is spent. Is that an unreasonable proposition?

Major Adler: We have lost it on our investment income. I would be hard pressed to think of any tax reliefs that are actually being claimed within a Service Non‑Public Fund. Deposit interest is paid gross, but that is about it.

Baroness McIntosh of Hudnall: This is exactly what I was hoping we might discover. There are a range of potential benefits that accrue to an established charity, not all of which all charities take up. Major Adler, what are the benefits to your organisations of being charities at all? Certainly, on the face of it, given the objectives that your organisations have and the way in which the duties and objectives are followed through and so narrowly drawn and precisely targeted, you are saying that you do not accrue any particular tax advantage. This leads one to ask why are you a charity, why do you have charitable status?

Q904 Lord Campbell-Savours: When a sergeant gives two days' pay to the mess, is that tax relief as a charitable contribution?

Major Adler: Yes, sir, that would be gift aided. In one of my earlier papers - and I think I have submitted three - I did make the point that one did not have to be registered with the Charity Commission in order to accrue the tax advantages which apply. Therefore I think there is an argument for the Service Non‑Public Funds to be withdrawn altogether from this arena and Services to have an arrangement with the Inland Revenue whereby that deposit interest is paid gross and they qualify for gift aid on a day's pay scheme. I think it is just going to clog the whole system up if we put all these Service unit funds into an already overloaded public audit area.

Q905 Lord Sainsbury of Preston Candover: I was wanting to distinguish how much real benefit small units are getting? It is the same question as has already been asked. I can see there is a small amount of benefit from gift aid. Do you have any way of measuring how important the gift aid income is to the charities you are talking of?

Major Adler: The gift aid would only apply within the officers' and sergeants' messes. Some officers' messes are giving two days' pay to the unit funds each year under gift aid. Within The Royal Logistic Corps our sergeants' mess is only giving half a day's pay. The maximum that one can actually compel an officer to give ‑ you cannot compel him but you can put internal pressure on ‑ is to apply one day's pay under the gift aid scheme. We are not talking about the corporals' mess giving large amounts, we are talking about very limited funds mainly from the officers' mess and the sergeants' mess which are gift aided. Within the First Battalion loan sheets we aggregate the Service funds into a thing called the "Central bank". Within the loan sheets there may be about 40 or 50 sub-funds from the band fund and the jazz club and the wives' club upwards. If we cheated we could go below the figure and we could desegregate all our blanket funds and make them all tiny, but that goes against the whole spirit of trying to run things administratively efficiently and in large groups. So we are earning deposit interest on a large bulk of funds because we bulk up the unit funds and then break that down into sub‑funds.

Q906 Chairman: How much does the "Central bank" have at any one point?

Major Adler: It depends on the type of unit, but I would say that an average balance on the "Central bank" is in the order of £100,000 cash. There may be a considerable volume of investments as well. When you get above the unit level then you get into regimental funds and by and large those are registered charities. The Royal Logistic Corps Regimental Association Trust, of which I am a trustee, is a registered charity. I am not really concerned about those.

Q907 Mr Mitchell: We are talking about the funds you have been talking about so far, not further up the line?

Major Adler: Absolutely. We are talking about the funds of fighting parts of the Armed Forces.

Q908 Mr Mitchell: You have answered most of the questions that I came armed to ask partly because, of course, you have produced this really excellent paper which I found extremely helpful. I have really only two things to ask you, one of which is only a matter of detail. It might perhaps be helpful to others on the Committee if you said a little bit more about what these unit funds are used for. Are we talking about KitKats on top of compo rations, as they used to be called in my day in the Army, or are we talking about helping out the widow of a former distinguished member of a unit? Can you tell us a little bit more about how these funds are dispersed?

Major Adler: Within the officers' mess and the sergeants' mess a certain amount of money is taken from the mess members for extra 'messing' and that is exceptional. Within all the accounts the main activity would be subsidy of sporting activity so that the private soldier has to pay as little as possible. Sport in the Armed Forces is an extremely good way of team building, keeping people fit and keeping people out of trouble. Then we take that one step further.

Q909 Chairman: Maybe we should try that here!

Major Adler: I cannot speak, sir. I only deal with the military.

Q910 Chairman: Maybe we will get you on secondment.

Major Adler: We go one step further than sport and into adventure training, which is the envy of certainly the American Army. A very large amount of the money that we take is applied to sending people all over the world in very small groups, usually a young officer masterminded by a much more experienced sergeant, with ten or 15 soldiers and they will go and climb the Himalayas, dive or sail. Right now we have got about 68 positions in the field and they do a lot of good work for the nation as a whole.

Q911 Mr Mitchell: That adds some more detail to what these funds do. If we accept the logic of your case, can I take it that the Adjutant General's supervision of these funds would be absolutely sufficient in your view to meet the criteria which for other non‑military charities will be met by the provisions of this new Bill?

Major Adler: The Adjutant General's audit procedures and accounting practices are extremely effective and efficient. I have done the Service funds accountancy course myself and various other accounting courses and as a civilian I have often applied much of what I learned there to civilian accounting practice as it is better in many respects. I have no doubt that the present system is more searching and more efficient than it would be if privatised.

Mr Mitchell: Thank you very much.

Q912 Earl of Caithness: All your funds that you are managing are for serving officers, are they not?

Major Adler: Within the Service Non‑Public Fund area, the excepted charity area, they are all for serving members of the Armed Forces. We are not talking about any benevolent activity at all, that is a separate activity. We are talking about in-Service welfare funds covered by a Statutory Instrument, which I have with me if you would like a copy, and that expressly excludes any ex‑Service benevolence. We are talking about funds for the efficiency of serving members of the Armed Forces.

Q913 Earl of Caithness: Are there any charitable activities for non‑serving members of the Armed Forces who are much more involved which would be affected by this legislation?

Major Adler: Regimental and above that level of benevolent fund at present abide and, I would imagine, will always continue to abide by existing charitable procedures. We have no worries about such funds and the new law.

Q914 Chairman: Do you think they are currently non‑excepted, those ones that you have just described?

Major Adler: All the charities for which I am a trustee, things like the Royal Regiment Wales Common Investment Fund, are all registered charities and will continue to be so. We probably have 5,000 for the Army, 1,500 registered charities for the Navy and 700 for the Royal Air Force. The Royal Air Force tends to be more compact because it has not got the regimental history.

Q915 Mr Campbell: If the financial benefits are relatively small then why bother at all to seek charitable status?

Major Adler: I agree, sir. I would like to see us really outwith that system and simply registered with the Inland Revenue.

Q916 Mr Campbell: The very admirable things that you have said about sport and team building and everything else would seem to me to be really more to do with the core activities of the Armed Forces rather than something which should be left to charity. The route that you have inherited, is it not actually in some regards self‑defeating, in other words it holds you back from making the case to the MoD for the funding of what I would regard as pretty essential activities?

Major Adler: I have difficulty with proposed legislation in that it ignores a thing called the public utility aspect of charity and it is much more concerned with the social level of charity. If you go back to the 1601 Act, things like the making of roads, protection against highwaymen and the setting out of soldiers are all charitable purposes. Most of those things have evaporated except for the setting out of soldiers in defence of the Realm. All charity law since then is in the social area. I would agree with you, sir, I think we have got to get back to the original Act and say this military activity has been called charitable but it is not in the current Oxford dictionary sense a charitable activity, so let us get it out of the legislation.

Q917 Chairman: So your bid in a sense, if I can again try to paraphrase, is that in an ideal world you would have nothing to do with this vexed complex issue of charitable law, you would quite like the Treasury to be supportive. That is your bid. Alternatively, you would like excepted status to be maintained, and your third fall‑back position is that if you cannot be excepted you want to be exempt. Is that correct?

Major Adler: Thank you, sir, absolutely.

Chairman: That is quite a bid. Good for you for trying it!

Mr Mitchell: Under the Adjutant General.

Chairman: Yes, presumably.

Q918 Lord Campbell-Savours: Michael, do you think you would pass the new public benefit test?

Major Adler: Sir, without Armed Forces there could potentially be anarchy.

Q919 Lord Campbell-Savours: That is not what I asked. It is a very, very interesting answer. The answer basically is yes or no.

Major Adler: Yes.

Q920 Chairman: I think we have dealt with Michael's concerns reasonably well. I would like to deal with the other issue in relation to the churches and indeed to religion. There is at least one submission that has put to us the whole question of belief and whether or not the current charitable head or the proposed charitable heads are really right or up‑to‑date. Do you have a general view on that to begin with?

Mr Rosser-Owen: Yes. I may have misled you when I said we are neither excepted nor exempt. As a body we are neither excepted nor exempt, but we do have within us people who are excepted in the sense that we have members of the Church of England and so on, so we do have a concern here. One of our concerns is that under the proposed legislation excepted and exempt charities will have to register. This means that under the exempted charities at the moment you will find the Society of Friends, Christian Scientists and so on. When they come to register, if the commissioners apply their published definition in the CC21 document for registering a charity, the Quakers and the Christian Scientists and others like Jians and Bhuddists and so on will not meet the criteria of being a religion. We are not opposed to the idea of having to explain that you do a public benefit provided there are some guidelines in the Act to tell the commissioners how a public benefit is to be interpreted, that it is sufficiently general and in effect the presumption of public benefit that exists at the moment is maintained. If a religious charity is able to certify that its members are good people and that by going out in the community at large they are actually doing good things and, therefore, the public benefits from having good people out there then that should be sufficient. We are slightly worried about the published definition that the Commission have stated in CC21. This strikes us as being somewhat archaic in that it does not take into account the ideas, attitudes and beliefs of many of the other religions at present in England and Wales and we would like to see a definition of religion to help the commissioners on their way which would be inclusive rather than, as it stands at the moment, exclusive. We believe, certainly our members with whom we have discussed the matter, that this particular definition may be fine for the three Abrahamic faiths and Hinduism, but would exclude Jainism, Buddhism and so on, although I notice that Mr Dibble, in his submission, stated that they would treat Jainism as a religion, which seems to imply that some other criteria are at work here other than the published ones, so we are somewhat concerned that the commissioners appear to be making it up as they go along.

Q921 Ms Keeble: I want to ask three points, one being on the definition there because when the Charity Commission came here, they were very clear that they were going to be quite inclusive in their interpretation, including, for example, Humanism as well. Would you accept their intentions there or are you saying that you want it actually in writing, so to speak?

Mr Rosser-Owen: I would like to see it in writing. I do not believe that many people have terribly good experiences of dealing with the Charity Commission necessarily and to leave it up to them I think is far too arbitrary.

Q922 Ms Keeble: But religions have not had to deal with the Charity Commission thus far, have you, because you are excepted?

Mr Rosser-Owen: Some are, but Muslims by and large are not and we have to register our charities. Most of the Muslim charities in fact do qualify under one heading or another, but then we do actually meet the definition which they have published in CC21.

Q923 Ms Keeble: That goes to an extent to charitable purposes where the definition comes in, but with the public benefit test, could you be a bit more specific about what you would want to see in the public benefit test which would enable religious charities to satisfy that?

Mr Rosser-Owen: I think that, as far as public benefit is concerned, it has always up to now been assumed that because it produces better people, therefore, the public benefit is from having better people.

Q924 Ms Keeble: You are excepted, are you not?

Mr Rosser-Owen: Some are. The Quakers and so on are excepted charities, not all, but even in general terms, even, as the Commission said, in one or two cases Humanists to the extent that Humanists follow what is basically a derived ethical code from the Judaeo-Christian heritage, they are in fact benefiting the public by being better people.

Q925 Ms Keeble: But are you saying that the Anglicans might have something to say here as well? Are you saying that you should continue to be exempt from a public benefit test? That is, religious organisations, churches rather than, say, church schools, which I think are a whole different ballgame, but are you saying that you should continue to be exempt from the public benefit test or are you saying that there is a different test or that the test could be couched in a different way so that you could more clearly satisfy it and to take uncertainty away?

Mr Rosser-Owen: I think your third point, that the test is not necessary for exceptions or exemptions, but that the test should be drawn up in such a way that religions could qualify without having to demonstrate that they are somehow producing a public benefit. For example, what is the public benefit of a church service?

Q926 Ms Keeble: Yes. Well, I put the question back to you which is if you are not asking to be excepted and you are saying that the test should be drawn up in such a way that churches can easily satisfy it, or religious organisations and charities can easily satisfy it, can you suggest a form of words or can you suggest some points? My question would be to you and also to the Anglicans.

Mr Rosser-Owen: We did actually in our submission ----

Chairman: Yes, you did suggest a form of words.

Q927 Ms Keeble: I thought it was a definition of religion rather than public benefit.

Mr Rosser-Owen: At the end we did suggest or we stated that we felt that it would be unhelpful if the Bill prescribed an exhaustive test of public benefit. We would like to consider the inclusion of a clause which set out the sorts of consideration which the Charity Commission might look at when applying this test, in a sense reducing it down, rather than listing caselaw, to general headings.

Q928 Chairman: There are two separate strands of argument, are there not? The first strand of argument is about the definition of religion. That is the first strand of argument and that is quite an important strand of argument bearing in mind your evidence to us and your submission to us both in writing and verbally that it is important that that definition is as inclusive as possible and as up to date as possible, so that is the first point. The second point is that the definition of public benefit applies, as you would like to see it, to a broad range of belief systems across the board. Yes? There are two separate arguments.

Mr Rosser-Owen: Yes.

Ms Keeble: Yes, that is right, and what is the test. The point is, is there a test?

Q929 Chairman: Well, can I just explore the first of those with Mr Britton. To what extent do you feel comfortable with the Religions Working Together arguments that the current definition is inadequate?

Mr Britton: Well, I think, as far as the Church of England is concerned, we have no problems with the current definition, but if it is the wish of Parliament to broaden it, I do not think we would want to stand against that.

Q930 Chairman: Would you support it, which is a different proposition?

Mr Britton: I think I need notice of that question, to be honest!

Q931 Chairman: That is the problem with coming here, I am afraid!

Mr Britton: Obviously everyone would agree that there is a limit to how broad religions could be cast, with part-time political parties being religious bodies!

Q932 Chairman: Sometimes it feels like that! The Humanists argue to us that actually there is an argument to suggest that the word "religion" should disappear and the word "belief" should be instated instead.

Mr Britton: Well, I think you might well run into philosophical difficulties with that word, but I do not feel that there is a Church view on that issue. What I did want to say apropos of the purposes of a charity is that I hope it will be possible for the thousands of local parish churches to agree one form of words and you do not have to get each church justifying itself as a religious organisation separately. I think that is quite an important point.

Q933 Chairman: It is very important.

Mr Britton: Could I make a point about public benefit.

Q934 Chairman: Just before you do, and I know that you did not have advance notice and that may not be the Church's considered view, but I would like an answer to my question about how far you would feel comfortable in going towards the position we have heard from Religions Working Together which, as I understand it, is that you would like to see a very broad definition indeed, one which is inclusive enough to include many religions and indeed belief systems.

Mr Rosser-Owen: Yes, basically the definition adopted by Australia and New Zealand.

Q935 Bob Russell: Would that include Druids and pagans?

Mr Rosser-Owen: If they conformed to the definition, yes, why not.

Q936 Chairman: So maybe you could put in a note to us following the Committee, if that is possible, Andrew, as that would be very helpful.

Mr Britton: I was just going to say something about the question of what constitutes public benefit. I think that if it is left to the Commission or the courts to decide that issue, it may prove contentious, and there is, I think, some advantage, if possible, for the Bill actually to attempt to define what constitutes public benefit in a religious context. At the moment it is, I think, clearly intended to include worship, the organisation of services which are open to the general public, and that is fine, but of course there are religious charities, not necessarily local churches, but religious charities whose work, whilst it is within the framework of religion, is not actually organising services, so it is not only who they are, but precisely what they can do, such things as pastoral work, evangelism, interface dialogue, what-have-you, and all of these things are done by religious charities under the heading of the "furtherance of religion". If public benefit has to be defined, I think it would be helpful if the Bill were more explicit as to what they thought that was and we would like to see a broad definition, not something which suggested that only worship is a religious purpose.

Q937 Chairman: Well, again I would suggest to you that it would be very helpful to the Committee if you could have a go at that. Since you have made your pitch, maybe we can pitch back to you and suggest that this is something which you could look it. Just bear in mind when you do that, if you are able to, that it would be important in providing any definition of public benefit that it does not have adverse consequences for other heads of charity. It may be perfectly possible to get a workable definition for religions or belief systems, but that might not work quite as well for military organisations or schools or hospitals or animal welfare or all the other heads.

Mr Britton: I was certainly envisaging that this would be linked to the religious objective.

Q938 Chairman: If it is possible and you would like to, we would very much like to see your view on that.

Mr Britton: We will try.

Q939 Ms Keeble: You did mention that some of the Muslim charities were actually registered. Is that the mosques or is it the other activities which are attached to mosques?

Mr Rosser-Owen: I think probably in terms of the other activities, it is a bit difficult to separate them out. Generally speaking, they tend to register a list of all they have done so far and they tend to look at the four definitions, so we have that, we do that, and they write them into the objectives in order to include as many of those as possible. They would usually come under something like "educational practices" or as part of the advancement of religion.

Ms Keeble: We do not have any idea about the scale of what is involved here and we did ask the Charity Commission about it, so would it be possible for some of the witnesses to provide us with a note as to where you think the difficulties might be because it might be that there are particular religions which fall foul of this when that might be avoided by careful wording, or it might be like some of these religious communities which would suddenly get caught under it because it is a group of people living in a house and they would suddenly be required to register and they did not fit easily into any categories. Without knowing the scale of the organisations, it is very hard to see where some of the difficulties might be.

Q940 Chairman: If you felt able to do that, that would be helpful.

Mr Rosser-Owen: Well, we did submit to the Committee a paper on how different religious charities advanced religions.

Q941 Ms Keeble: Yes, I saw that, but it would give us some idea about whether there are a lot of religious communities living in the community, as it were. They would probably be more Catholic actually than either of the two religions here. It might tell us whether there is a particular form of religion which might find itself routinely caught by having real difficulty in registering.

Mr Britton: I do not think a closed community would be a charity because if we talk about a closed community, that would not necessarily be a charity at all.

Q942 Chairman: Because it would not fulfil the public benefit purposes?

Mr Britton: Yes.

Q943 Ms Keeble: What do they do now?

Mr Britton: I think that there are religious communities which do not have charitable status and have not sought it.

Chairman: It is quite a tricky area, but your views would be helpful to the Committee. Now, having dealt with the high issues, the philosophical issues, as Andrew put it, we would now like to deal with some nitty-gritty issues in regard to the workings of the Bill or the potential workings of the Bill, and first of all audit.

Q944 Earl of Caithness: There is nothing much more mundane than regular annual audits. We have been told that the proposed system of registration having different levels for different types of charities is illogical and confusing. What are your views?

Mr Britton: I think you have to look at it from the point of view of what a charity is like in terms of its internal organisation and the sophistication of the people involved in bookkeeping. I think that the arrangement where a small parish church can run its affairs on a receipts-and-payments basis is perfectly acceptable to the people involved, it saves a great deal of time and does not lead to any serious problems of accountability. On the other hand, when you are talking about a church or another charity dealing in hundreds of thousands of pounds, there is every reason why they should be audited as thoroughly as a company would be. The question is where you draw the line and any line which you draw is going to seem somewhat arbitrary, but I do not have any difficulty with the concept that the big ones should be treated more thoroughly than the small ones.

Q945 Earl of Caithness: Do you think that the lines proposed in the Bill are right or would you like to see them changed, from the Church's point of view?

Mr Britton: The line which is drawn for auditing is not at issue, as I understand it. We have been talking about registration, which is something different, but we have no problem with the auditing proposals as they are now.

Q946 Earl of Caithness: Daoud, do you have any problems?

Mr Rosser-Owen: No. It seems that more or less what has been said by the Church of England, we would agree with, that there does not seem to be any particular reason why large charities should not be investigated more than smaller ones and indeed jumping through rather more onerous hoops.

Major Adler: The excepted charity area of the Armed Forces, as I have said, I think should be done under the existing internal audit system. For the Regimental Benevolent Fund, the Army Benevolent Fund, the Army Central Fund, big charities like that, no difficulty at all.

Q947 Lord Sainsbury of Preston Candover: We are anxious that the small charities, quite apart from the auditing, are not overburdened by regulation, particularly regulation which includes a lot of paperwork. I wonder if you would like to comment on the burden of paperwork at the moment and how it will be affected by the new Bill.

Mr Britton: I think that people are often intimidated by the burden of paperwork which they think will be involved and that is a serious issue which in terms of getting people to volunteer for positions like treasurer of the PCC, or separately for that matter, they need reassurance that the burdens will not be unreasonable. Having looked at the actual difference between being exempted and not being exempted in terms of paperwork, I do not think there is a vast difference and, therefore, that is really why I have reacted to this in the way I have. There is, however, a serious problem of conveying that information to the people who actually do the work and I think that a certain amount of publicity will need to accompany any change so that people actually operating small charities know what they are, and what they are not, expected to do.

Major Adler: For the larger charities we deal with an office of the Charity Commission located at Tangier in Taunton and it is a very small office. Most of the staff with whom we have traditionally dealt have now been posted away and we are faced by people who find difficulty in understanding the language of the Armed Forces, which is often acronyms and abbreviations and there are peculiar practices within the Armed Forces which the Armed Forces understand, so when we sit through a Charity Commission interrogation, and sometimes they have a roving audit team, we do have difficulties in explaining to them what we are about. The most recent argument has been over whether in the Charity Commission's schemes we should be talking about the wellbeing of soldiers or the welfare or soldiers, and they would not accept what the Army view is now for the term "wellbeing" because they say that is not a charitable purpose and we have to talk about welfare. Now, militarily we do not like "welfare" because it smells of Mrs Smith is in trouble, wife of Sergeant Smith, and it has become a welfare case, so we have that sort of difficulty with the Charity Commission and the more we expand our dealings with them and the more under pressure it becomes, perhaps the more difficult it shall get. I am sorry for a rambling answer.

Mr Rosser-Owen: I think that, generally speaking, we would go along with whatever is proposed in the Bill, but we would like to see two things which are specifically clarity, because sometimes the words are impenetrable, and certainty. I think people certainly in religious communities will probably be able to accommodate whatever is proposed as long as we understand what they are. I have read through the submissions given by the Charity Commissioners to the Committee and I must say I could not understand half of it, it did not seem to be in English, and this has been the common experience of dealing with them face to face as well.

Baroness McIntosh of Hudnall: Can I just pick up on that point, if I may. You all in various ways seem to have had at least some dealings with the Charity Commission in some capacity. What I am hearing is something we have heard a lot from other witnesses which is some anxiety about the distinction in dealings with the Charity Commission between their role as an advice-giver and their role as a regulator and I think, Mr Rosser-Owen, you were in a way implying that when you talked about the need for clarity and certainty, clarity of language and so forth. Could you each give the Committee an impression of how the Charity Commission operate as far as you have experienced it in each of those roles, as an advice-giver and as a regulator, and is it clear when they are doing what?

Q948 Chairman: And would you like to see it separate, advice from regulation?

Mr Rosser-Owen: Well, I do not mind whether it is done by the Charity Commission, but I would like to see two separate departments clearly marked as a department which gives advice and a department which regulates, so you know exactly who you are dealing with. As to examples of wording, as I mentioned, in the CC21 definition of validity and examples of definitions of religion in CC21, it is not clear whether this is advisory or directive because it says that to qualify as a religion, the religion has to do one thing and then the next one, so anybody picking up the document and reading it may think, "Well, I am a Jain, so I do not qualify for this, so why bother", whereas if it is simply advisory, it ought to be phrased slightly differently, so the choice of phrase in this case needs to be modified if it is simply advisory, but if it is a directive, then of course fine, so many people will fall foul of it.

Major Adler: It used to be a very good advice-giver and they were a very effective regulator. I would say that now the advice-giving side is of a lower quality, it is more time-consuming to obtain and often you get an answer which is not that which you wanted.

Q949 Chairman: We know the problem!

Major Adler: So we would tend, using our own legal resources, to take our external advice and the advice of trustees with that and only very rarely are we, and we have got two cases at present where we are, in discussion with the Charity Commission. One of those relates to the passage of regimental chattels from a former Gurkha regiment to the Royal Gurkha Rifles. One Gurkha regiment has been allowed to do it and one has not and we cannot understand why, so on the advice-giving side I have strong reservations about the present ability of the Commission, but on the regulatory side I think they are perfectly adequate.

Q950 Chairman: And we have had various representations put to us and one representation has been that advice should be stripped away from regulation, externally as distinct from Daoud's point about internally, and that there should be a separate organisation or organisations responsible for advice to the sector. Your view?

Major Adler: I think a separate organisation for advice is advisable.

Mr Britton: Yes, I agree with that. It seems to me that the two functions are clearly different and I can think of a case where in a conversation on the telephone it was not absolutely clear whether we were being advised or regulated and I think we need to know.

Q951 Chairman: Somebody put to us this morning, not in jest because Lord Campbell-Savours checked it and I am not saying that this is possible over the telephone, but somebody suggested to us this morning, reasonably wisely in my view, that it might be possible, for example, in terms of the correspondence you receive from the Commission that it could be colour-coded in the way that Ofsted colour-codes advice going to school governors, making it clearer what is advisory and what is "must do".

Mr Britton: But of course if they are the same body, it will always be the case that if you have taken the advice of the advisory part, you are more likely to get a sympathetic answer, so to what extent you should make them at arm's length is obviously a nice point, but I am not sure that colour-coding is enough, is the point I am making.

Q952 Chairman: Just bear in mind that one of the pleas that we have heard, and indeed we have heard it this afternoon from you, is that you would rather like to have less regulation than more and the more organisations you put on a playing field, the more the confusion, in my experience.

Mr Britton: I think it is partly that we do a lot of regulation already ourselves, you know, the diocese regulates the parish churches in that sense and checking through that the accounting is done properly and, therefore, we do not relish a great deal of duplication of our own functions.

Q953 Ms Keeble: Major Adler, you said that presently the advice of the Charity Commission has got worse or presently it is not so good. When did the decline start? Was it linked to any specific event or is it just a general observation of general deterioration?

Major Adler: It was the passing of an extremely experienced Assistant Commissioner who did a lot of internal training.

Q954 Ms Keeble: Which was when?

Major Adler: He retired over ten years ago, but he trained two people superbly to take over from him, both of whom have received internal promotion, so the people with whom we deal on the military side at present are new to the area and still training.

Ms Keeble: So there is a training issue.

Q955 Mr Campbell: I think this is a fundamental point actually which arose in this morning's session too. Are we talking about a problem with the Charity Commission which is to do with performance or is it a problem to do with the role of the Commission because what we found this morning was that nine out of ten smaller charities valued the advisory role of the Charity Commission, but only two out of three actually valued the advice that they got or they did not regard it as high enough, so is it a question of the Bill potentially changing the role of the Charity Commission, particularly if they are going to get new responsibilities, or is it a case of them doing a better job?

Mr Rosser-Owen: They do quite a good job in the regulatory sphere at the moment. It is on the advice that they tend to fall down because of this fogginess about people not knowing whether they are getting advice or directive. If that was distinct, whether in a separate body or a separate internal office, I think people would generally be happy with their performance, even if the role of the Commission is actually expanded to take on new responsibilities. I think in essence what I am saying is that clarity is what is required when dealing with the Charity Commission so that we know who we are dealing with and what actually their role is within the organisation. I would not, however, be happy if they were left to define the role themselves. If they are to get new responsibilities, I would like to see Parliament define what they are for them.

Q956 Mr Campbell: Would you agree with that?

Major Adler: Yes, I would, but we also in the Armed Forces have another layer of difficulty in that charity law, as talked about today, is that of England and Wales and we have to deal with the devolved Scottish and Northern Ireland offices. One of my capacities is that of Secretary to the Army Charities Advisory Committee, which is an Army company which runs combined investment schemes for military units. We launched this with the aim of trying to get as many military funds to invest in the same common investment fund to ease administration, so a unit is not tracking 70 dividends a year, but they are just getting more distributions from the common investment scheme. We promptly found that the Scotland and Northern Ireland parts of the Armed Forces could not partake. Now, we have had an assurance that this is being addressed, we do not know when, but we have been assured that it will be and in fact I see in the draft Bill that there is a paragraph on it, but for the time being that sort of activity gives us great difficulty. Originally I got on very, very well with the Charity Commission. I used to go down and visit them three or four times a year and we were on very consensual terms, but now I fear that that sort of relationship simply is not there because I do not, I am afraid, trust them to give the right advice. I trust them totally as a regulator, but I know more about the areas now than they do and I know what would have been said ten years ago, but it is not being said now and we are taking a lot of time and extra effort in having to employ our own legal sources in order to get the decisions we require.

Q957 Lord Sainsbury of Preston Candover: I want to go back for a moment, Michael, to your point about the very small units of charities which are doing good work in, as you described, team-building, sport activities and so on. I do not think that we understood, or at least I did not understand, the financial consequences if those ceased to be charities and were under the control of the Adjutant General and did not have the advantage of charitable status. How serious financially would that be to those activities?

Major Adler: There is one registered charity I can think of, the Berlin Infantry Brigade Memorial Trust Fund, which deals exclusively in sports and adventure training and a little bit in welfare. That has an income at present of about £150,000 a year and it cannot recover any tax any longer on its dividend income, so no effect in that area, and what we earn in deposit interest is a couple of thousand, so to make the thing a non-charity would have minimal financial effect.

Q958 Lord Sainsbury of Preston Candover: So there seems to be great attraction in doing it then.

Major Adler: There is an attraction for getting outside of this area of regulation. Somebody will regulate us somewhere.

Chairman: Thank you. Are there any other points from any member of the Committee?

Q959 Earl of Caithness: I would like to come back to Andrew when we were talking at the beginning about the excepted charities. How many Church charities will move from being excepted to being registered once we have passed that £100,000 limit?

Mr Britton: I have got some figures here. As far as the Church of England is concerned, the number required to register at the £100,000 threshold is estimated at 1,800 to 2,000. If the threshold was lowered, of course it would progressively be more and more. As far as other churches are concerned, there are figures available, but they are still not complete. I think we, or you, I should say, are still waiting for figures on the Roman Catholics and the United Reform Church.

Q960 Chairman: So that is purely for the Church of England?

Mr Britton: The figures which I have given you of 1,800 to 2,000 are for the Church of England.

Q961 Chairman: We have a figure in total from the Home Office of 5,000. It sounds like one or other might not be right, that either yours is not right or unbelievably the Home Office might not be right.

Mr Britton: Are you saying that the Home Office ones look high relative to ours?

Q962 Chairman: I am saying that if the Anglican Church is 1,800, it makes up well over a third of the Home Office's grand total, which may be right, I do not know, and I should have thought that the Home Office would be higher, but I assume you are right and they are wrong.

Mr Britton: All I would say is that we may have more complete information than they do.

Chairman: That is a very nice way of putting it!

Q963 Earl of Caithness: The other thing is that when you were speaking, you asked for a 30-year transition. In your submission to us, you asked for a 20-year transition. Why has it gone up?

Mr Britton: No, I said that I had heard the figure of 30. I think all I would say is that something of that order would be needed not only from our point of view, but quite possibly also from the point of view of the process of registration. This is not something which could be done quickly.

Q964 Earl of Caithness: Is that a transition period for the 1,800 to 2,000 charities or if the level drops between ----

Mr Britton: That is if the level drops. I am not talking about transition for the 1,800/2,000 who are over £100,000. It is the ones which fall between wherever the lower exemption limit eventually ends up and the £100,000 which is where we start from. When we are talking about the ones with income over £100,000, they could reasonably be expected to fulfil the criterion of the extra work that is involved in being registered because they are very well run already, which is the point I would like to say.

Q965 Earl of Caithness: So are the ones below £100,000.

Mr Britton: Indeed, but they will find the extra work more difficult and, as I said in answer to another question, I think it is very important that it should be explained to the people who run these very small churches or charities that what is being asked of them is not unreasonable or unnecessarily burdensome because there will be objections and I think that there is a public relations job of explaining why it is necessary and not in fact all that difficult.

Mr Rosser-Owen: I do have some relevant figures actually on this from the Office of National Statistics as of 12 July, that the total number of registered places of worship, and this includes the ones under £100,000, as the £100,000 threshold test is to be progressively reduced, it gives us a ballpark of what is going on. The Church of England total, including Ministry of Defence Church of England buildings, is 16,350 of which, as Andrew says, some 2,000 or so are under the £100,000 threshold, and non-Conformists, including all other religions, plus MoD non-Conformists gives a total of 29,397, which gives a grand total of all these registered places of worship of 45,747, so basically we are talking about a ballpark of some 46,000 registered places of worship which, under the proposal, will potentially have to register and the Commission have stated that they have made no provision for this, nor have they made any provision to inform these people that they have to trudge along and register.

Chairman: Are there any other questions? No. Well, thank you, gentlemen. I think your evidence has been extremely helpful to us. If you could think about the issues which I raised with you and if you would like to make further submissions, we would very much look forward to hearing from you again. In the meantime, thank you very much for your time and effort.