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Lord Borrie: I fully accept what has been said. I thought I indicated that I fully accepted the general advantages of having this kind of phrase on the face of the Bill. However, I wanted to sound a warning, as it were, to the Charity Commission—if it needs any such warning—and to any charity involved with the regulatory powers of the commission that such a measure would avoid the need for legal advice regarding what was fair, reasonable or proportionate in particular circumstances.
Lord Dahrendorf: Even accepting the warning of the noble Lord, Lord Borrie, I agree with him, and above all with the noble Lord, Lord Phillips, that there is a strong case for this amendment. I support all four amendments mentioned in this brief debate, but I believe that Amendment No. 68 is the most important.
As some Members of the Committee know, I am of the view that the world of charities should not constitute a highly efficiently organised sector. In many ways it constitutes a creative chaos, and should be so. At the margin there are small charities that are quite afraid of large bureaucracies and which therefore need the protection of those of us who believe that they have an important part to play in our civil societies. It seems to me that Amendment No. 68 in particular is certainly an instruction to the Charity Commission. However, it is also a weapon in the armoury of those who are affected by what happens. That is the important point regarding why I am in favour of it. If one is representing a small or unorthodox charity vis-à-vis the Charity Commission, one could refer to these seemingly weasel words, which in fact in this particular situation can be quite powerful, and notably to the word "proportionate". Therefore, I strongly support Amendment No. 68 and am happy to support also the others that were mentioned.
The Earl of Caithness: I am always interested to note how on one or two occasions opinions from those in every party seem to coalesce and an issue becomes very important. The position was no different in the Joint Committee in that the more we discussed the measure, the clearer it became that something needed to be on the face of the Bill regarding the accountability of the Charity Commission. It is a strong recommendation. As the noble Lord, Lord Phillips, said, it was probably one of the most important that we made. It is extremely disappointing that the Government are so negative about it at the moment. I hope that they will change their mind.
Paragraph 3 of new Section 1D(2) states:
"In performing its functions the Commission must have regard to the need to use its resources in the most efficient, effective and economic way".
If it does that, there is potential to do severe damage to smaller charities as it will be required by law to act in a certain way that does not take into account the needs of the smaller charities, which constitute the vast bulk
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of the charity sector. The commission will argue that if it is producing a new SORP, it will have to produce one that covers all charities as that is the most efficient, effective and economic way of producing a SORP.
My noble friend Lord Hodgson of Astley Abbotts referred to the grant-making charities. It was very clear to the Joint Committee that much of what the Charity Commission is now proposing will stop the creation of grant-making charities. That to my mind is unacceptable; it is a complete put-off. I strongly urge the Government to take the amendment away and consider the words "fair, reasonable and proportionate" to see whether they can come back with a measure—with their own wording, if necessary—as the current wording of paragraph 3 of new Section 1D(2) will make life much harder for many charities.
I hope that the Minister will not use the argument that has already been rejected by the Joint Committee. The Minister told us that the Government could not implement the relevant provision for charities as it might call into question other pieces of legislation. That is not an acceptable argument. The Minister will have to come up with something a great deal better than that.
Baroness Howe of Idlicote: My intervention is probably superfluous but I shall make it anyway. I am impressed by what I have heard so far from all noble Lords in support of this amendment. It is one of the most necessary of the amendments and it appeals to me for two reasons. One reason has already been mentioned; namely, that complaints have been made about the way in which the commission has previously dealt with charities. Complaints have been made about the unfeeling and sometimes incomprehensible way the commission has gone about its business. I know that everything is changing, but the impression remains.
The amendment of the noble Lord, Lord Swinfen, takes everyone's interests into account. I am not suggesting that it contains the appropriate wording, but we need a measure which permits sympathetic and understanding treatment with regard to the lack of professionalism of a particular charity, if you like. We also need a power to deal with the very professional charities that perhaps have not filled in all the forms they should have done over a number of years. Such cases have arisen. It would be enormously helpful to have such a measure on the face of the Bill. I say that as someone who has chaired a public body and has often said, "Let us see what is in the Bill". If the relevant measure is not in the Bill, albeit there is a general duty on all bodies of this kind to act in a way that is fair, reasonable and proportionate, it tends to get overlooked, if it is remembered at all. If ever there was a case for including such a measure in the Bill, this is it. I warmly support the relevant amendments and the intention behind them.
Lord Bassam of Brighton: I have listened with considerable interest to the debate on this group of amendments. I am grateful to the noble Lord, Lord Swinfen, for marrying his amendment with the others as it helps us to focus the debate.
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I hope that I can be helpful in part. However, I start with a negative sentence; that is, I do not think I can accept the amendment of the noble Lord, Lord Phillips of Sudbury. I shall not repeat the argument I used at Second Reading, although the noble Lord, Lord Swinfen, reminded us that there is a general principle of administrative law that in this sphere organisations must act in a way which is fair, reasonable and proportionate. That is a very important safeguard and it is quite proper that we should remind ourselves of it. Of course, the Charity Commission is obliged to act in that way.
I fully acknowledge that the Joint Committee made an important recommendation that the Bill should have a provision obliging the commission to use its powers proportionately, fairly and reasonably. As regards the Government's view on introducing a requirement for the commission to act in that way, we have already gone over that ground in our response to the Joint Committee's recommendations. We stated that we were in no doubt that the commission, like all other public bodies, already has a duty in administrative law to use its powers reasonably. We do not think that there is any need to include a statutory provision in the Bill to give the commission that duty. We think that if Parliament felt it necessary to give this duty to the commission through the Charities Bill, the implication would be—as I have said before—that Parliament did not see the commission as being under that duty at present.
Neither do we agree that the Bill should include a requirement for the commission to act proportionately. The Charity Commission already operates on the principle of proportionality. As a regulator, the commission operates with regard to the five principles of better regulation, which are that regulation should be proportionate, accountable, consistent, transparent and targeted.
It is worth reminding ourselves that in its publication, The Charity Commission and Regulation—to which I have drawn attention previously—the commission outlines the seven principles by which it tries to work. These are: accountability, independence, proportionality, fairness, consistency, diversity, equality and transparency. The commission makes clear in the publication what it means by that. I wish to quote from the document as it expresses very reasonably the way in which the commission operates:
"We focus our priorities and resources where we believe our intervention as regulator can make most difference to charities and the people who benefit from them. We aim to ensure that the actions we take: are proportionate to the issue and to the risk of harm involved; and take account of the capacity of organisations to comply with requirements for change".
That picks up the point made by the noble Earl, Lord Caithness. The document continues:
"We think of harm as: detrimental effects on the people or causes the charity serves; loss or misuse of significant assets or resources; damage to the public reputation of a charity or charities generally; and damage to public confidence in charity regulation.
"Where, in our view, none of these harm factors is present, we are likely to conclude that we can use Commission resources elsewhere to greater effect in the public interest, and that we should not take regulatory action.
"This approach means that we are usually less likely to take up issues in relation to very small charities than to larger ones. All charities, whatever their size, have access to our Contact Centre and publications, which are almost all free of charge".
There is evidence that the way the commission operates demonstrates a proportionate response. The point made about the size of the relevant charity emphasised that. The commission's guidance to its own caseworkers—much of which is published on its website—frequently covers issues of proportionality in relation to the exercise of specific powers. For example, in the guidance to caseworkers on "payment of trustees" the commission makes clear:
"Where, for example, the cost of making an Order (to authorise a payment already made to a trustee without previous authority) is disproportionate to the value of the transaction or activity being authorised, we are entitled to regard the matter as insignificant in terms of regulatory impact and potential risk to charitable funds".
The question is not whether the commission should have regard to issues of proportionality, but how it exercises its judgment when deliberating issues of proportionality. Those who believe that the commission has exercised its judgment incorrectly in a particular case and thus has acted disproportionately will have recourse to the commission's internal complaints and decision review procedures, to the independent complaints examiner, to the parliamentary ombudsman and the new Charity Appeal Tribunal.
If noble Lords have some specific ideas about how the commission might act differently in certain general circumstances, that might be something we could discuss further. However, I am not sure that the amendment we are discussing helps us in the way the noble Lord claims as the matter is already covered with regard to the way in which the commission operates.
I turn to Amendment No. 69. The noble Lord, Lord Hodgson of Astley Abbotts, made a very useful contribution that helps us in relation to the amendment spoken to by the noble Lord, Lord Phillips. I was attracted to the wording of the amendment of the noble Lord, Lord Hodgson. I am extremely grateful to him for drawing attention, by way of analogy, to the Financial Services and Markets Act. I am not sure that the wording would work completely in the context of charity law, but I am happy to consider the possibility of alternative wording and, if the noble Lord is satisfied with that, to come back with an amendment at a later stage. Having invited further thought from the noble Lord, Lord Phillips, on some of the issues he has raised with his short form of words, I hope that noble Lords will find my response useful.
The amendment of the noble Lord, Lord Swinfen, brings us back to the issue raised by the noble Lord, Lord Phillips, in his amendment. I believe that I have covered the important points with regard to that amendment. I understand where the noble Lord is coming from, but what he seeks is already implicit in the way the Charity Commission works. The commission certainly regards it as implicit. It is an important general principle and one to which we expect the commission to adhere.
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I recognise the value and the importance of this debate because we want the Charity Commission to behave in the way suggested by the noble Lord. However, I am not sure that is best achieved through his proposed route.
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