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Lord MacGregor of Pulham Market: My Lords, like all others who have spoken before me, I warmly welcome this Bill. I have to declare an interest as a patron, office-holder or other involvement in charitable organisations, not least in fundraising. I do not need to repeat all the arguments in favour of voluntary activity, because they were well rehearsed by my noble friends Lord Hodgson of Astley Abbots and Lady Howe of Idlicote, and by the noble Lord, Lord Phillips of Sudbury, among others. I agree with everything that they said.

As a Member of Parliament and a citizen in a rural area for over 30 years, I am extremely well aware what an important—indeed, vital—contribution the voluntary and charitable sector gives to the health and vitality of our rural communities. I had well over 100 towns and villages in my constituency, many of which depended on voluntary activity for that health and vitality. I am equally aware, however, how much bureaucracy can stifle enthusiasm. I was struck by what the noble Baroness, Lady Howe, said about the innovations that grow from very small voluntary seeds. Her reference to the National Association of Governors and Managers and pre-school playgroups struck a vivid chord with me because my own wife was deeply involved with the noble Baroness in those very early stages, and has since devoted her life to voluntary and charitable activity.

It is not only their time that people give to voluntary activity, there is a financial cost freely given by many because of the worthwhile and fulfilling nature of the work. There is no financial reward, very often the reverse. Bearing that in mind, too much bureaucracy can be a major disincentive. I echo all those who have already spoken in saying that the Government and the new Charities Commission must do everything to avoid it.

At this stage I want to make only four comments on the Bill. The first is about process and timing. I congratulate the Government on the exemplary way they have prepared this Bill. The Minister described all the various stages, so I do not need to repeat them. It does mean, however, that all the issues have had a lot of consideration, and most of them have already been ironed out. I cannot find a better model for approaching a Bill of this nature than the one the Government have pursued.
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I wish I could say the same about the timing, however. To have the Second Reading after Christmas, bearing in mind—as everyone seems to be commenting—that we may well have an election this spring, gives us very little time indeed. I was heavily involved in the run-ups to the 1987 and 1992 elections, as a Cabinet Minister dealing with the legislative programme. I am therefore well aware of the tight constraints. Of course, we have to give the Bill proper scrutiny in this House, and various aspects have already been drawn to our attention. I very much agree with the noble Lord, Lord Shutt of Greetland, however, that we need to get on with it. This is the kind of Bill that, in the first Session of a new Parliament, finds itself crowded out because of the new governmment's need to get on with all sorts of important political Bills. For that reason, I want to see this Bill go through in this Session, if at all possible. I know from experience that it can be done, but it means that we must all have a clear idea of where we are going on the timetable. I hope that the Government can give us some indication of that.

The second point is about independent schools, to which the Minister and others have referred. I declare an interest as the deputy chairman of AGBIS, the Association of Governing Bodies of Independent Schools. I want to say a brief word—it can only be brief today—about the public benefit that the independent sector provides. There is first, of course, the educational benefit. This Government, building on various initiatives that the previous Conservative government took in relation to grant maintained schools, city colleges, technology colleges and so on, have tried to develop variety and choice in both the maintained and independent sector—particularly, of course, in the maintained sector. I wholly support all of that. The roles that the independent sector can play, however, help to enhance that variety and choice. Many of the educational innovations which have been taken up in general come from the independent sector. We are increasingly seeing partnerships between the independent and maintained sectors, which this Government are keen to pursue, as were we. There have been many developments, and the previous Secretary of State, Charles Clarke, who is himself a distinguished pupil of a distinguished independent school—Highgate School, of which my wife was a governor—has done much to promote that. This is encouraging from the educational point of view.

Then there is the wider participation. Today, nearly a third of all pupils at independent schools receive some financial assistance towards their fees. Forty per cent of all parents of pupils at independent schools did not go to independent schools themselves.

Finally, because I am being brief, there is the financial issue. We know now that about a third of all income to the charitable sector comes from government subsidies. In the independent sector, however, it is the other way round. The independent sector gains approximately £100 million from charitable status, through business rates and the tax relief associated with it. It gives over £300 million in
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bursaries, scholarships, grants and prizes—the vast proportion in help with fees to those who may not otherwise be able to afford it—widening participation in the sector. That is already a 3:1 benefit to the public sector. If you add to that the £2 billion in savings from the children in the independent sector not having to go to maintained schools, and the £200 million lost in irrecoverable VAT, there is something like a 25:1 benefit to the public sector from the work of the independent sector. So charitable status does not confer much financial benefit, but it is the recognition of public good, the difficult-to-define ethos and spirit, that matters.

My third point is the public benefit issue. I support the government position on that and the arguments have already been well rehearsed. It is clear that most charities, especially the NCVO, agree with the Government's position. I agree with the Minister that it is not practicable to try to obtain a clear definition on the face of the Bill that will last for all time. I have talked to charity lawyers and I know that there are differences of view, but some are experts who have spent much time trying to define something on the face of the Bill that would cover all the issues. They have found that impossible.

I agree with the Government's comments in their response to the Joint Committee about the social and economic changes that are taking place in society, to which my noble friend Lord Hodgson also referred, and the need for flexibility. That cannot be achieved by putting it on the face of the Bill. There will be many developments in the years ahead, not just for some of the sectors to which I have referred, but the whole of the charitable sector. Building on the present case law and leaving the matter to the guidance of the Charity Commission is the right approach, because, above all, if we insert something in haste towards the end of proceedings on the Bill, which, in a couple of years or so, we feel needs to be changed, it will be difficult to obtain the legislative slot for a short Bill to carry that through. There are always dozens of offers from each department in any legislative Session and a small change such as that might not be easy to achieve. So I agree with the Government's position.

My final point is in relation to the tribunal. I am a member of the House's Constitution Committee which recently published a report on the regulatory state, which was debated in this House just before Christmas. One of our major recommendations was an independent right of appeal in all regulation matters. The Higher Education Bill, passed in the previous Session, did not originally have that independent right of appeal against the decisions of OFFA—the Office for Fair Access. As a result of pressure in this House, the Government agreed to insert that in that Bill. I warmly welcome that—it is an important principle for all regulators and I am glad to see that it is in this Bill. But the advantages are obtained only if the process is speedy and cost-effective, which is, after all, the criticism of the present arrangements for going to the High Court. I hope that that will be very much borne in mind.
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I shall end where I began. This Bill has all-party support, has already had substantial scrutiny and is not only welcomed but ardently and urgently wanted by those affected. I hope that we will take this opportunity to put it through now and not see it having to take its chances in later parliamentary Sessions.

Lord Dahrendorf: My Lords, I begin by strongly supporting the points made by the noble Lord, Lord MacGregor, about the Bill being welcome and about the need, above all, to ensure that it will be enacted before this Parliament ends. It is also welcome that, after extensive scrutiny in a Joint Committee of both Houses, it should be introduced in your Lordships' House. Most Members of this House have an interest in charities. Many are trustees and quite a few chair trusts and boards or serve as patrons. Indeed, were the House to be abolished, or even turned into an elected Chamber, a great reservoir of responsibility for the voluntary and charitable sector would be lost.

My interest stems from the chairmanship of the Council for Charitable Support. It is an informal gathering of leading representatives of charities and voluntary organisations set up by CAF, the Charities Aid Foundation. Its first chairman was the late Lord Goodman. He was succeeded by the late Lord Whitelaw. I shall soon hand over to another Member of your Lordships' House.

In the years of my chairmanship of that council, I have been able to follow important developments, notably in the relationship between the charity sector and government. This relationship has grown ever closer in recent years. It was, therefore, no surprise when, in introducing the Bill, the Home Office press release stated:

All that is welcome, and yet it leads me to question whether it has, perhaps, become a little too much of a good thing. Does the embrace by government squeeze out some of the air of freedom which charities need to breathe? Is there even a sneaking doubt over whether the public benefit test in Clause 3 is either undesirably vague or equally undesirably exclusive?

I come to the subject from another angle than most. For me, a thriving civil society is the basis of a liberal order and a thriving civil society consists of a creative chaos of voluntary and essentially private activities by individuals and their associations. This is what some of us encouraged when we went to the post-communist countries after 1989 and set up foundations, publishing ventures, private colleges and much else. This is what many all over Europe and the wider world have always admired as they looked at the United States of America and also at this country.

In recent years, however, we have watched what I would call a growing functionalisation of civil society. When one hears that the health service is crucially dependent on large numbers of volunteers, or that the delivery of care services would be impossible without
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charities, and then considers a document like the compact to regulate relations between state and civil society, one begins to wonder. Is this still what we had in mind when we praised Britain's civil society? Or has the third sector become a semi-governmental sector of public life? I quote again the Home Office press release on the Bill. There are, it states,

For a long time, I was inclined to resist such a trend. But I am not Don Quixote. The windmills will grind on regardless. My more considered conclusion was, therefore, that we are in fact witnessing a split in the charity and voluntary sector, which sometimes runs right through the same organisations. On the one hand, there is a para-governmental third sector, which is independent in status, but part of the public sphere, notably when it comes to public services. On the other hand, there is still a truly non-governmental third sector. There are associations which make no contribution to government-led public policy. They are useless in the narrow terms of public benefit and yet they are the lifeblood of a free society. They range from brass, or even rock, bands to bridge clubs, from esoteric study groups to foundations with highly idiosyncratic and politically incorrect purposes. I remember the newly created MacArthur Foundation in the United States setting up a scheme of "genius fellowships", which provided large sums for the most gifted who were in no sense disadvantaged. Is that public benefit? Some such associations are just fun; others may even be a nuisance to some—they fit into no ready schema and neither want nor need a compact. Yet they deserve the same advantages that more functional charities enjoy. They certainly do not deserve to be disadvantaged in any way.

My friends in the third sector have tried to persuade me that whatever an association does, one can always construct a case for their "public benefit". Maybe so, but then the test begins to lose its meaning. Fortunately, the criteria of charitable purposes leave little doors open for associations which do not figure as internationally recognised NGOs. Above all, the Charity Commission continues to have a degree of discretion in what one might call the practical definition of charities.

Nevertheless I want to register a plea for charities, foundations and voluntary associations which neither endeavour to serve government-defined public purposes nor can be construed to do so. This country has managed to avoid becoming a state-dominated society. This distinguishes it from many of its European neighbours. A loose and generous regime for charities is part of the secret of Britain's civil society. The Bill will, I hope, leave enough space for keeping this great tradition alive.

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