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Lord Hodgson of Astley Abbotts: I have tabled two amendments in this group, Amendments Nos. 69 and 75, which echo the amendment of the noble Lord, Lord Phillips, but approach the matter in a slightly different way. I have sought to add a further duty to the general duties of the commission; that is, in the wording of Amendment No. 69,
"To have regard to the principle that a burden of restriction . . . should be proportionate to the benefits",
Amendment No. 75 relates to proposed new section 1E, "The Commission's incidental powers", and covers a similar point. It seeks to ensure that the commission can give directions under proposed new sections 19A and 19B to charities,
At Second Reading and at various points in Grand Committee I have stressed the need for the commission to avoid enforcing a one-size-fits-all approach on charity regulation. The amendment would give higher priority to this concern as it would make it a general duty of the commission to consider the question of proportionality before committing to a decision.
If the provision was included in the Bill it would allay the many fears in the sector concerning the commission's new powers and whether they will be used "proportionately", a word that is so far conspicuously absent from the Bill. As the noble Lord, Lord Phillips, said, the degree to which proportionality is or is not taken into account by the commission is one of the central concerns to emerge during the hearings of the Joint Scrutiny Committee.
Looking at the potential effect of the new approach on a specific part of the sector, the grant-making charities, is perhaps the best way to show the importance of proportionality. The Association of Charitable Foundations, among other organisations, has expressed grave concerns over the matter of proportionality and the role of the commission. The association believes that it is vital that the commission should act in a way which takes due account of the diversity of the charitable sector, in particular the special position of grant-makers and small charities.
There is concern about the possible danger of inappropriate over-regulation of grant-making charities. These charities have the capacity and the will to address issues and situations that are largely untouched by other funders. They are able to be creative, flexible and sometimes unorthodox in the use of their funds to take risks that other funders are constrained from doing, including the funding of unfashionable projects. The benefits of this may emerge only over the long-term and may be difficult to quantify, although some flourishing projects owe their original existence to start-up funding from a grant-making charity.
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ACF's concern remains that elements of the Bill could have a negative effect on the grant-making sector and deter potential philanthropists from setting-up grant-making charities. My noble friend Lord Sainsbury made a powerful speech at Second Reading—it has already been quoted and I shall not quote it again—about the way in which the balance of regulation has moved against people wishing to set up grant-making charities. Noble Lords who wish to read what my noble friend said, as a very experienced head of a grant-making charity, in the Second Reading debate can find his remarks in full at col. 904 of the Official Report for 20 January.
If such grant-making charities were subject to precisely the same regulation as the larger charities, many of which are predominantly fundraising, the sector would lose the balance that has ensured the continuation of its flair and flexibility. Moreover, it would have done so for the sake of rigid and stifling regulatory parity.
There is a parallel objective. Amendment No. 69 is designed to force the Charity Commission to consider what benefits will flow to the public, to society or to the sector from imposing a new regulation, measured against the cost or burden imposed on those who are regulated.
We all want to maintain public confidence in the charitable sector and to avoid failure or malfeasance in that sector. However—and with respect to the noble Lord, Lord Borrie—risk is part of our existence. There is a danger that the commission, in its efforts to be seen as a good regulator, will overburden the sector. In my Second Reading speech I accepted that an ounce of prevention was worth a pound of cure, but I want to ensure that we shall not get a pound of prevention when an ounce of cure would suffice. Amendment No. 69 seeks to achieve that.
I am not suggesting that the wording of Amendment No. 69 meets the case. I admit that it has been lifted wholesale from the Financial Services and Markets Act, but it gives the Minister the chance to explain the Government's views. Amendment No. 75 applies a similar test to the powers given to the commission in Clause 19(a) and (b).
Lord Swinfen: Perhaps it would be for the convenience of the Committee if I were to speak now to my Amendment No. 72. It should have been included with this group of amendments as it covers the same subject.
I agree with everything that has been said by the noble Lord, Lord Phillips of Sudbury. I agree that the Bill should be amended to state that the Charity Commission must use its powers proportionately, fairly and reasonably. That must also cover accountability to donors, beneficiaries and the general public. Amendment No. 72 addresses two problems. The first is that the Charities Act 1993 is founded on the protection of charity property, with no regard for the human resources and liabilities, which has resulted in some destructive behaviour by the commission on some past occasions.
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The second problem is that, while it may be that general administrative law requires all public bodies to act in a proportionate, fair and reasonable manner, the fact is that the Charity Commission has not always done so and certainly has occasionally not been perceived to do so. To have such words on the face of the Bill would be a useful reminder, not only to the Charity Commission but to those who work in charities generally.
Lord Borrie: The noble Lord, Lord Phillips, has made a strong case and has been followed and largely supported by those who have spoken. There are tremendous advantages in having something on the face of the Bill—provided that it is not too lengthy, and here quite a small number of words are being suggested—if that makes a matter clearer to those who are involved in administering the Act and those who are subject to it, which will entail a huge variety of bodies, people and organisations, rather than simply having the requirements as part of the general law, which you would know about only if you knew or were advised about the general law. The arguments put forward by the noble Lord, Lord Phillips, and others are strong. It is best to have those requirements on the face of the Bill.
I cannot anticipate what the Government reply will be, but it is likely they will say that if you have that on the face of this Bill but not on the face of other Bills where public bodies are subject to the same general laws, then that will perhaps call into question whether those rules apply in the other cases. It might be suggested that one could have had such matters on the face of the Bill but that Parliament deliberately did not do so. That may be a government response. But I question whether the noble Lord, Lord Phillips, took his argument a bit too far in raising that spectre, which is encouraging to everyone who is not a lawyer, that he could somehow avoid legal advice and the need for legal expense.
It seems to me that if you have on the face of the Bill or in the general law a requirement that the public body shall act in a manner which is fair, reasonable and proportionate, as soon any problem with the conduct of the Charity Commission arises, someone will ask, "Is this fair, reasonable and proportionate?". There will be different views and you will need legal advice to resolve the matter. So the argument that the noble Lord, Lord Phillips, was relying on, that it is better to have it on the face of the Bill so that we can avoid the need for legal advice, is going too far.
Lord Phillips of Sudbury: That was not my argument actually; at least, it was only part of my argument. The greater importance of the measure is that it will set clear landmarks for the great wide charity world. Charities will know that it is there. When they think they are being unfairly, unreasonably or disproportionately dealt with, they will therefore be able to say to the Charity Commission, "Look, you are not acting in accordance with the Bill". I am not suggesting that they will then rush off to see their lawyers; I believe that the measure of itself
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will provide an effective discipline that will work on the ground in every day circumstances. I was not assuming that many legal cases would arise; I refer to the usefulness of the measure in that respect.
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