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Lord Phillips of Sudbury: As a member of the Scrutiny Committee, which made the recommendation read out by the noble Lord, Lord Hodgson, I entirely support the amendment in the name of the noble and gallant Lord, Lord Craig of Radley, as comprehensively moved by the noble Lord, Lord Hodgson. This is a large and potentially ferocious sleeping dog which should be left to lie where it is for all the reasons put forward by the noble Lord, Lord Hodgson.
The noble and gallant Lord, Lord Craig of Radley, spoke with force when we considered Clause 2, the meaning of charitable purpose, and wanted a specific reference to Army charities such as these to be put into the list. It would be of considerable comfort to the Armed Forces charities concerned to have specific reference made to them, even if it is in Clause 11 rather than Clause 2. The case made is overwhelmingly clear in terms of common sense, administrative savings and a huge saving in potential costs.
Lord Swinfen: If this amendment is not agreed, what is the potential tie-up of service manpower? Could people who did not want the services to undertake a particular operation be so awkward in tying them up administratively on their charities that they could disrupt what the services were being asked by the Government to do?
Lord Borrie: I want to make a point arising out of what was said by the noble Lord, Lord Phillips of Sudbury. I am favourably disposed to what I have heard today, particularly the extensive speech of the noble Lord, Lord Hodgson. However, I am worried that if the amendment became part of Clause 11, but there is no amendment of the kind requested by the noble and gallant Lord to Clause 2, one has a great deal of detail while the basic question of the charities for a "charitable purpose" under Clause 2 is not answered.
Lord Bassam of Brighton: At the moment the charitable service non-public funds of the Armed Forces are excepted from the requirement to register with the Charity Commission, provided that those
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charities are mainly or wholly established to promote the efficiency of the Armed Forces. The purpose of these amendments would be to confer on those charities exempt charity status.
I shall put into my reply our thinking on the background to our position and to the excepted and exempt charity status. The Charities Act 1960 exempted certain charities from the Charity Commission's regulatory jurisdiction on the basis that they were adequately supervised by another regulator. Exempt status is very different from excepted status in that exempt charities are not able to register with the commission and are not subject to its supervisory powers. Excepted charities, while not required to register with the commission, can do so voluntarily and whether or not they are registered are fully subject to the commission's supervisory powers. As a general rule, charities are excepted from the requirement to register on the basis that they appear on some other list. Excepted charities are already subject to virtually all the accounting and regulatory requirements of charity law. Excepted status gives them exception from registration and little else.
One of the main aims of the Strategy Unit review was to bring forward proposals to enhance the accountability and transparency of the charitable and wider not-for-profit sector. One of the main means of achieving that is the changes to the exempt and excepted charities provided in the Bill.
6.45 p.m.
When considering the position of exempt charities, we have sought to ensure that where a principal regulator has been identified for an exempt charity, the monitoring regimes to which it is subject will be adapted to cover basic charity law requirements. For the larger exempt charities—those with incomes above £100,000 per annum—where no principal regulator has been identified, the charities would be required to register with the Charity Commission. For the smaller exempt charities—those with incomes below £100,000 per annum—for which no principal regulator has been identified, the charities would become excepted charities.
The Government do not intend to add any other charities to the list of exempt charities in line with our aim to increase the transparency and accountability of the sector as a whole, which we believe is vital to its success. In any event, as I have explained, exempt charities without a principal regulator are being required to register with the commission. There is no independent principal regulator for the Armed Forces charities.
It has been estimated that, at the £100,000 threshold, approximately 90 per cent of the Armed Forces charities will not be required to register with the commission. We are alive to the concerns of the Armed Forces. There have been discussions, which will no doubt continue. We will meet their representatives in order to discuss their concerns. Allowing for a long lead-in time for the implementation of the changes to the excepted charities will enable those charities above
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the registration threshold to prepare adequately for registration. As explained, we do not intend to introduce the changes to the excepted charities until October 2007.
It is sometimes argued that what the forces call service non-public funds do not warrant registration as charities because they do not appeal for money to the public and are administered wholly in the Armed Forces, so are of no legitimate public interest. We cannot agree. The funds have charitable status and benefit from the tax privileges that brings, including the ability of service personnel to give tax efficiently to them through Gift Aid. We believe that there is a legitimate public interest in any organisation benefiting from charitable status and tax privilege. That interest extends to knowing of the existence and purposes of the funds—and that is satisfied by requiring them to register as charities. We will introduce registration gradually to minimise disruption.
As a result of the changes provided for by the Bill, for the first time all charities will be monitored for their compliance with charity law. I hope that Members of the Committee will accept that adding to the list of exempt charities would have a negative impact on the transparency and accountability of the sector as a whole, so would not be desirable.
The noble Lord, Lord Hodgson, said that there could be another principal regulator for service funds. It would not be appropriate for the Armed Forces charities to be regulated by the service boards, because they are under the control of principal officers from the services, so are controlled by the beneficiaries of the charities concerned. Boards also have no expertise in dealing with matters of charity law. I think that it is the case that they would then have to acquire that expertise and that we would have to give them a statutory function to carry out the role that the noble Lord seeks to provide for them. There are some practical difficulties involved in the noble Lord's suggested strategy for that sector.
The expertise is already there within the Charity Commission. We have a gradualist approach in terms of implementation. Some 90 per cent of Armed Forces charities will not in the first instance be required to register with the commission.
Lord Hodgson of Astley Abbotts: While I am grateful to the Minister, because he obviously thought extensively about the points that were raised in the debate, I cannot say that I am anything other than disappointed by what he has said. We accept that excepted charities will disappear. I understand that and why it makes sense. But we are to preserve a number of exempt charities that are listed, which we will debate shortly. They can be removed from but not added to. It is not clear why we are preserving an exempt list that is stuck like a fly in ambergris, which cannot be changed at all.
It seems that the Government have got themselves very hung up on that important, significantly large but internal, set of service charities. There is no question
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about St Dunstans, the Royal British Legion or all of those, which come in. There are any number of levels at which the regulator could participate. As I say, they can go from the individual service chiefs up to the MoD, which, surely, is far enough away from the individual charities at unit level not to have conflicts of interest.
I take the Minister's point that there is an associated tax privilege. Clearly, there has been a tax break and Gift Aid can be used. There is, therefore, a point of public interest. But, at this level, are we really talking about bringing around 12,000 to 15,000 internal charities into the Charity Commission net on that slim and rather narrow point? The service non-public funds will be very disappointed with the Minister's reply. I hope that before Report he will have a chance to think carefully on whether he is not using a sledgehammer to crack a nut—or a sledgehammer to crack a nut that does not even exist. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hodgson of Astley Abbotts moved Amendment No. 111:
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