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Lord Hodgson of Astley Abbotts: I urge the Government to listen carefully to what my noble friend Lord Glentoran said on this occasion. I promise the Minister I shall intervene rarely, if again, this afternoon. He has had to listen to me for three solid afternoons. I shall not go on for long.
The Securities and Investments Board, of which I was a member, was a product of the Financial Services Act, which took investment firms under the law for the first time. They were mostly small firms. Many had perfectly good intentions. They sought to do their best and to follow the law. Here, we are all M25-centric but many smaller firms operate well away from London and the sophistication of the metropolis. They would go and see their solicitor, who would say, "Well, it's a very new piece of law and it is not very clear what the position is. There are no precedents. Why don't you go and ask the Securities and Investments Board? They should tell you. They are administering the law". We were always told that we could not do that; that we were a regulator and that our powers did not include the ability to give advice. I am concerned that we shall have a similar situation here. We have a new legal framework and relatively unsophisticated quite small bodies, corporations and companies, operating well away from London. There will be no precedents. It will be difficult for them in the early days to see exactly how the floor will bed down and to get advice from provincial solicitors. If we are going to make this thing a success—and I assume that the Government do want to make it a success—some midwifery is needed.
The purpose behind the amendment is to provide a midwifery service. I am sure that over time the midwifery service will die away because there will be precedents; practice will become established; people will know where to go; and solicitors will become familiar with the legislation.
Therefore, I hope that the Government will consider my noble friend's amendment and, indeed, the additional amendment of the noble Lord, Lord Phillips. I hope that they will not fall back on subsection (5). As my noble friend has pointed out, "may" is permissive and if we want to be successful with this issue we need a bit of compulsion in the provision of the midwifery service.
Lord Evans of Temple Guiting: The noble Lord, Lord Hodgson, urges me to listen to his noble friend Lord Glentoran. I have listened with enormous interest to the noble Lord, Lord Hodgson, for three days—I mean that—and I shall continue to listen to his colleague.
We want to see high-quality guidance and help being made available to CICs and to those who wish to set up CICs. This will of course help to encourage take-up of this new kind of company, which is what the Government want, and will make it easier for people to comply with their legal obligations. Good information is obviously very important so that people set up a CIC only if that is the right solution for them because when they do so they will be putting a permanent lock on their assets and profits. The noble Lord, Lord Hodgson, made that point during the Second Reading debate.
There will be several sources of this advice. They range from the regulator himself, through other information sources supported by the Government, such as Business Link, to the various social enterprise groups and professional advisers who specialise in this field. The Government are also engaged in wider work
to improve access to good-quality advice and signposting towards specialist information providers for social enterprises generally, through the Business Link operator network, and of course CICs will benefit from this.On the first day of Grand Committee I made a point about non-executive directors. The noble Baroness, Lady Noakes, said I was completely out-of-date and that things had changed a great deal over the past few years. At this stage I should like to quote from an article in today's Daily Telegraph. The timing is perfect and I think it is reassuring. The headline is:
- "There's nothing woolly about a social conscience. A growing band of social entrepreneurs are lending business brains to social aims . . . Oxford's Said Business School is launching its Skoll Centre of Social Entrepreneurship with a grand-sounding world forum . . . Hyperbole, perhaps. But social entrepreuneurship is in danger of becoming business flavour of the month".
Lord Phillips of Sudbury: I am most grateful to the noble Lord. I am interested: does the noble Lord go to academics for advice? I go to them for all sorts of things, but not for advice on new pieces of legislation.
Lord Evans of Temple Guiting: I know a little about the Saud Business School. A great part of it is non-academic and is aimed very specifically at giving practical advice to people who wish to set up businesses, both businesses that make profits and those which do not, which is what we are talking about today.
Clause 24 specifically recognises the role that the regulator will play in providing guidance. It empowers him to provide such assistance—
Lord Glentoran: I want to correct something. The noble Lord said that we were talking about businesses that were not set up to make profits. As I understand it, CICs are set up to make profits but it is a question of how the profits are to be used.
Lord Evans of Temple Guiting: That is a perfectly fair correction. I am grateful to the noble Lord, Lord Glentoran, for making that clear.
As I said, Clause 24 specifically recognises the role that the regulator will play in providing guidance. It empowers him to provide such assistance and guidance about CICs as he wishes. It also gives the Secretary of State a power to require him to provide guidance about any matter relating to CICs that she might specify.
During the consultation last year, we proposed that the regulator should issue advice on a range of topics, including the legal requirements of CIC status, such as the registration and annual reporting processes, and on good practice in areas such as working with stakeholders. That remains the Government's intention. In particular, the power in Clause 24 to
require the regulator to provide guidance will be used, if necessary, to ensure that all the appropriate advice and guidance is produced.Except where he is directed to provide advice or assistance by the Secretary of State, we believe that the regulator should be able to exercise discretion over the assistance that he provides. Amendment No. 105 would make that impossible. A requirement to advise on the permissibility of any action would, in effect, require the regulator to provide free legal advice not only on the special requirements of CIC status but on all aspects of the law and the proposed action. It would be bound to generate large numbers of queries, including many that were merely speculative, irrelevant or simply over-cautious. In all probability the regulator would find it very difficult to respond to such queries without investigating the precise circumstances in detail. It is noteworthy that, for example, the Charity Commission retains a discretion as to whether or not it provides that kind of advice to charities.
Such a requirement would, of course, require a larger regulator's office with an increased staff and budget, perhaps particularly for lawyers. The scope for additional costs would increase hugely if the number of CICs increased substantially. A small but effective regulator is a key factor in keeping costs low for CIC registration initially and in the future.
Amendment No. 106 would aggravate those difficulties. The Government intend that, over time, the regulator should move towards covering its own costs from its fee income, although we fully appreciate that it will be some while before the take-up of the CIC form is high enough to make that possible. But, if this is ever to work, and if we want the regulator to be able to provide advice and related services to CICs, it will not be realistic to provide that he may never charge for doing so. It will be important that the core guidance is made freely available. That is the practice of many existing bodies. We expect the regulator to adopt the same approach. But why should we prevent the regulator from developing other services, and charging for them, if people would find them valuable and would be willing to pay for them?
The regulator will be given sufficient resources to carry out the various functions that we have set out in the Bill. As I said, we expect him to use those resources to provide appropriate and useful guidance to CICs and those dealing with them as an important part of those functions. The Bill provides for him to do that.
The point was made that, by not providing advice on the permissibility of actions, we may deter the formation of CICs. They will be very small entities and will need help from the regulator such as guidance in all kinds of forms. We fully intend that the regulator will give guidance on all the major issues and that will be a very important function. We do not see the need for a general obligation on the regulator to provide individual advice on the permissibility of specific actions. As I said, the Charity Commission does not
give advice on everything. It is highly selective and our consultation process did not suggest that the sector needs a regulator to provide advice at every level.5.15 p.m.
Lord Glentoran: I thank the Minster for that lengthy and detailed explanation. We will certainly wish to read carefully what he said in Hansard. One thing was omitted. I can see where the sort of advice for which I was looking, which is whether something is permissible or not, would be extremely helpful. I also support the points about midwifery made by my noble friend Lord Hodgson. It seems very selective and I would like to see something on the face of the Bill in relation to that selection.
[The Sitting was suspended for a Division in the House from 5.16 to 5.26 p.m.]
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