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Lord Phillips of Sudbury: I am most grateful to the noble Lord for giving way. I regret not supporting at least part of his amendment. He and the Charity Law Association are correct that the level of reporting of decisions has declined. It is an important issue.
Lord Hodgson of Astley Abbotts: I am grateful to the noble Lord. His comments—from an expert of 20 years' standing—underline my own as a mere Johnny-come-lately to charity law. Perhaps the Minister will have a further response.
Lord Phillips of Sudbury: It is 40 years.
Lord Hodgson of Astley Abbotts: I apologise.
Lord Bassam of Brighton: I am not sure that I agree with the comments of the noble Lord, Lord Phillips, on a reduction in the publication of the outcome of cases. I should like to see a quantification of that before I accept it. I think that he would accept that point.
The noble Lord, Lord Hodgson, said that it was policy to report. What I said was that the commission also has a policy to report the outcome of every formal inquiry by publishing a statement of the results on its website. I hope that that clarifies what I said. I think that it should. I would be very puzzled if it did not.
Lord Hodgson of Astley Abbotts: We have had a good canter round that track. I will read what the Minister said and talk to the Charity Law Association. I shall also no doubt get further advice from the noble Lord, Lord Phillips, with his 40 years of experience; I apologise to him for undercooking it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hodgson of Astley Abbotts moved Amendment No. 71:
"In managing its affairs, the Commission must differentiate clearly its regulatory from its advisory functions."
The noble Lord said: We come now to a matter which the noble Lord, Lord Best, and other noble Lords have already mentioned: the further general duty of the commission to differentiate clearly its regulatory from advisory functions. As we heard, the topic of the Charity Commission's advisory and regulatory functions was subject to rigorous investigation and discussion during and after the Joint Committee's hearing of evidence on the draft Bill. The need for that separation was the subject of recommendation 20 of the Joint Scrutiny Committee.
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The concern—and I am again partly repeating what has already been said this afternoon—is that the Charity Commission will be in a position where it can enforce regulations upon a given charity as well as advise that same charity. If it is not made abundantly clear to the charity whether it is advice or regulation being given, the charity will either risk the repercussions of ignoring regulations or risk carrying out regulations which were intended only as advice.
There was a clear wish from a large number of interest groups to amend the Bill to avoid that confusion. The Association of Charitable Foundations, the Charity Law Association, the National Council for Voluntary Organisations and the Association of Chief Executives of Voluntary Organisations all highlighted the need for the commission to distinguish its regulatory from its advisory functions. If such a distinction is not made, the likely effect will be that advice given by a regulator becomes de facto regulation, as my noble friend Lord Caithness said earlier, thereby gradually extending the regulation of charities.
Of the 190,000 regulated charities, 95 per cent do not employ staff. The commission clearly needs to have a strategic advisory as well as a regulatory role, but these smaller charities are particularly dependent upon the advice of the commission. But we do not want these smaller charities to interpret advice by the commission as a "must do". It is, therefore, particularly important to make the distinction between advice and regulation, as it will be far from favourable if the smaller charities were to suffer from regulatory creep. In practice, such a distinction should not be difficult to make. Indeed, noble Lords have already referred to some of the mechanisms this afternoon—different coloured paper, different sections of the commission, and so on.
The Bill is intended to encourage charitable endeavour and encourage citizenship engagement in the charitable sector. We do not wish to see a regulatory regime which prevents this happening. The point was concisely explained by Mr Stuart Etherington, the chief executive of NCVO, while giving evidence to the Joint Committee on 9 June. He said:
"The slight anxiety is this: that voluntary organisations and charitable organisations are part of the civil society and their sophistication with which they engage with the State apparatus is quite a complex one, and we would not want to see spontaneous, citizen-led activity stifled by a regulatory regime which actually, when it gave advice, implied that you could or could not do certain things which had the force of statute when it did not . . . Of course one wants to see a good and robust regulatory regime and of course that regime will give advice when it has the competency to give it and should make it clear that it is giving advice, but our anxiety comes from, if you like, the smaller end, the fact that we want to encourage more charitable activity and we want to encourage more citizen engagement through this type of activity and we do not want a regulatory regime which prohibits that from happening".
Advice being interpreted as regulation could well stifle citizen engagement, particularly considering the impact it will have upon the smaller charities. Amendment No. 71 would make it a general duty of
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the commission to ensure that it manages its affairs so that confusion between advice and regulation would not occur. I beg to move.
Lord Phillips of Sudbury: I certainly support the noble Lord, Lord Hodgson of Astley Abbotts, in his opening remarks that there is, quite often, in practice, a confusion between the advisory and the regulatory functions. I speak as a great supporter of the separate tasks of policing and the charity friend. I have had cases in which a client charity has been the object of a formal statutory inquiry and has not known for weeks, sometimes months, that the inquiry has started. The commission has engaged in correspondence without telling the charity that the statutory inquiry has commenced and the charity has therefore conducted its correspondence in a less guarded way than might otherwise have been the case.
I am sure I speak for charity lawyers generally in saying that some of the inexperienced case officers who deal with correspondence do not know at what point they are stating matters which have no statutory or other common law backing but are merely advisory, and when they are on firm legal ground.
So there is certainly a problem. I know that the commission has endeavoured to get to grips with it—there is no question about that—and I am not damning the commission. I am saying that there is a problem which, given the special and unusual duplicity of roles, could recur. Something needs to be done, as the cliché has it.
The Earl of Caithness: I support my noble friend's amendment. This point was raised in the Joint Committee and in their reply the Government said that they endorsed our recommendation in paragraph 207. Later it was stated that the commission accepts the recommendation.
Given everything that the Minister has said in his previous arguments, particularly on Amendment No. 68, about how the Charity Commission behaves, what it is supposed to do and how it sets out its business, why has not this already been done? The amendment should be otiose. If the Charity Commission was doing what the Minister said it should be doing, the amendment would be totally unnecessary.
Lord Bassam of Brighton: The noble Earl asks a very reasonable and fair question and I shall come to it.
Let me remind the Grand Committee where we are. It is certainly right that the Joint Committee recommended that the commission should,
"take steps to differentiate between its advisory and regulatory functions and make clear in all its communications the distinction between advice and instructions".
As the noble Earl said and the noble Lord, Lord Phillips, made plain, that recommendation is broadly accepted. It is a recommendation, of course, which the Charity Commission should take forward.
In fairness, the commission has already in part adopted that approach. For example, in the beginning of its publications it states that the words "recommend
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or advise" are used where the commission is suggesting to trustees actions which we consider to be good practice but which do not represent a legal requirement; and the word "must" is used to refer to actions that trustees, or their agents or employees, are obliged to take by law.
However, this approach is not formally incorporated into all the commission's other communications and the commission accepts the Joint Committee's recommendation. Indeed, the commission has stated:
"The Commission will take [the recommendation] forward by reviewing its structure and communications to help trustees and their advisers recognise when the Commission's activities are directed specifically at informing charities about compliance with their legal obligations and when the activities are advisory".
I understand why noble Lords want to see this included on the face of the Bill. In seeking that objective, they wish to compel the commission to take forward the recommendation. But both the commission and the Government have accepted the recommendation and, in the sense of changing practice—which is what this is all about—the noble Lord is pushing at an open door.
It is perhaps worth adding that the commission, in recognising that it needs to change, has now commissioned work to produce a new format for publications which will make a much clearer distinction between legal requirements and advice. The formats now being applied to all publications are being reviewed—reference has been made to such publications during our debates—and the first revised publication, as I understand it, is currently being tested with a consumer group prior to being issued. So some practice is being undertaken to see whether the new format works. I also understand that the commission has separately commissioned advice on the design and layout of its publications. From 1 April this year all new and revised publications will be in that new format. It is giving effect to the recommendation. Obliging it to be written into the legislation is probably unnecessary and perhaps overbearing in this regard. It would be ill advised to write it into the Bill as the noble Lord suggests.
The commission and the Government understand the importance of the recommendation; we want to see it carried through. From my understanding, it seems that the commission is taking practical steps to do that. The point is very well made and well understood.
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