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Lord Phillips of Sudbury: In the Joint Scrutiny Committee, one recurring theme was the need to allow the Charity Commission to have more latitude in the appointment of staff and particularly in the remuneration of the staff so appointed, in order to enable
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the commission to have at its command that quality of personnel without which, the Joint Scrutiny Committee felt, no Bill could achieve its optimum outcome. On that broad basis, I lend my support to Amendment No. 13 moved by the noble Lord, Lord Hodgson. I await with interest to hear what the Minister says about the constitutional proprieties of the amendment. I hope that, although the Treasury is now the responsible department of state for the commission, this is within the conventional arrangements—in that it will allow the commission the freedom, within their allocated budget, in terms of numbers and levels or remuneration.

Lord Bassam of Brighton: We return to the issue of independence. I thought we had already got ourselves to a good position during the debates on the Bill prior to the election, but I am not surprised that the noble Lord, Lord Hodgson has come back to this in another form, and I congratulate him on his wit in so doing.

The Charity Commission already has significant flexibility in the appointment of its staff, under its existing delegated authority. Except for senior civil servants, of whom there are currently only six at the Charity Commission—that excludes the commissioners, who will cease to be civil servants under the Bill—there are no restrictions as such on how the commission determines pay and grade structures. Instead, it is required to work within its overall pay remit to employ the right mix of staff to deliver its objectives.

Senior Civil Service pay and grade structures are determined by the Cabinet Office, but departments including the Charity Commission have flexibility to make their own arrangements for determining individuals' pay by reference to performance. Therefore, except for a small number of its most senior staff, the Charity Commission already effectively has control over the terms and conditions of service of staff within it.

The current regime for pay and grading of staff is set out in paragraph 2 of Schedule 1 to the Charities Act 1993. That refers to the Treasury because, at that time, there were standard national grade and pay structures for all civil servants across government. Subsequently, the Treasury made all departments responsible for deciding their own pay arrangements within overall Treasury limits.

The commission has discretion in how its total pay budget is divided up. It also agrees its arrangements annually with the Treasury to ensure that they are broadly in line with other departments. Paragraph 5(2) and (3) of Schedule 1 does not mean that the Minister for the Civil Service or officials at the Cabinet Office acting on his behalf have to approve the detailed terms and conditions of service of either the chief executive or Charity Commission staff in general. In practice, for the Charity Commission as for other departments, they approve only the broad framework within which detailed decisions on terms and conditions are taken by departments themselves.

The commission has recently made several successful appointments, not least that of Andrew Hind, appointed last year as chief executive following open competition. That competition attracted a good field of
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high-quality candidates, which does not suggest that the Civil Service framework in which the commission currently operates prevents it recruiting staff with the skills and experience that it needs. The commission reviewed its recruitment procedures as recently as 2003 to ensure that it was able to recruit and retain high-quality staff. In addition to its performance-related pay system, the commission makes good use of starting-pay flexibility, recruitment and retention allowances and non-pay rewards to both attract and retain high-calibre people.

The commission has developed a workforce strategy that sets out a comprehensive approach for achieving the changes needed to meet financial, structural and cultural challenge, and the challenge of future delivery needs. Key priorities identified include further modernisation of its pay and reward structures to support a high-performing, highly skilled and flexible workforce, and effective investment in the training and development of its staff to maximise retention.

The amendment would affect the commission's status as a non-ministerial department. We thought long and hard about the commission's status, and decided that the most appropriate status for it remained that of a non-ministerial department—not least because no suitable alternative had been identified and described to us. The commission fully supports the continuation of that status.

However, we listened to the points made by noble Lords on the matter in the previous Session, so have made provision in Clause 70 for the commission's status to be considered as part of the review of the impact of this legislation. A person must be appointed to carry out the review within five years of the Bill receiving Royal Assent, and a copy of the report produced as a result of the review must be laid before Parliament. As a result of that review, some alternative status and perhaps an alternative strategy for the Charity Commission may well be identified outside the Civil Service. For as long as it remains a non-ministerial department staffed by civil servants, it is in our view essential that government should retain some control of staff terms and conditions. For that reason, the Government cannot accept the amendment, and I invite the noble Lord to withdraw it.

Lord Hodgson of Astley Abbotts: I am grateful to the Minister for a very worthy reply and for his encouraging words about the future remuneration policy of the Charity Commission. As he will know from our earlier debates, an issue that came up from representations made to us was the inadequacy of experienced staff and the fact that staff had changed a lot, which undoubtedly was linked to how they were paid and remunerated. It is therefore good to know that that point has been taken on board.

I appreciate also the change to Clause 70, which enables the situation to be reviewed in future. I note all the points, but will have one further thought about the issue, consult externally, and see whether I wish to have a final throw of the dice and persuade the Minister that he should take the last step. In the mean time, I beg leave to withdraw the amendment.
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Amendment, by leave, withdrawn.

Schedule 1 agreed to.

Schedule 2 agreed to.

6.15 pm

Clause 7 [The Commission's objectives, general functions and duties]:

Baroness Pitkeathley moved Amendment No. 14:

The noble Baroness said: I begin with an apology because the amendment is worded rather awkwardly. What was intended by it was that the charitable resources objective should be to promote the effective use of charitable resources, and to increase them—to increase the amount of resources, as well as their effective use. With the leave of the Committee, I hope that I may be permitted to speak to the spirit of the amendment rather than the actual wording.

This is a short but potentially significant amendment that I tabled because of the response that I received when I said, at Second Reading, that the Bill had not taken sufficient opportunity to encourage giving—to promote philanthropy. As I pointed out, in this country we have a long way to go in philanthropy compared with, for example, the United States. The Minister was kind enough to say in his response that my comments were helpful, and I have since received further encouragement from the noble Lords who have added their names to the amendment; I am grateful to them. The amendment would commit the Charity Commission not only to promoting the effective use of charitable resources, but to taking opportunities to increase them.

As Members of the Committee will know, the voluntary sector gets approximately 30 per cent of its income from individuals and grant-making charities. Increasing charitable resources in the form of philanthropy and income from individuals would, in turn, increase the capacity of the sector. What is important about that form of income is not only that it gives the voluntary sector greater capacity overall, but that it may come with fewer strings attached. It so enables charities to address issues and situations that may not be possible with other forms of income, such as those that they get from government sources or business.

Philanthropic income gives the potential for charities to be creative, flexible, and sometimes unorthodox or risky in the use of their funds. It allows them to innovate, often with benefits that may emerge only over the long term and are difficult to quantify or may be unfashionable. All those are important elements in a healthy and mature society. There is value in encouraging the supply of such income and, notably, in providing a supportive environment for individuals who wish to give substantially or to create grant-making trusts.

At present, that is not necessarily the situation. That is because all charities broadly have the same regulation, whether they raise money in the street and
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provide services, have an endowment or a single sum donated by a philanthropist, or provide grants for other people or institutions. The purpose of the regulation of charities is primarily to safeguard the interests of those who entrust resources to charities, or the interests of recipients of services. In the case of grant makers, however, there is rarely any solicitation of funding from either the public or the Government. Nor are services directly provided to the public. Leaving grant makers to fulfil regulations and reporting criteria that are focused on operating charities and do not fit them well is a burden and a disincentive for individuals to give further.

The research study by the Association of Charitable Foundations among people of substantial means found that,

General regulation may have adverse effects on the charitable sector as a whole. The report by the joint scrutiny committee on the original draft Charities Bill recognised the vital role of grant makers to the sector, and saw appropriate regulation as imperative to ensure that,

While I am certain that the present leadership of the Charity Commission is aware of this, it would still be helpful to give the commission a specific direction to be conscious of developing philanthropy. Therefore, I am proposing this strengthened objective to increase charitable resources. This would be an incentive for the commission to be more supportive of regulation that would encourage philanthropy and facilitate the work of grant-making trusts. That would in turn increase the funds coming into the charitable sector and enable more good work to be achieved by the sector as a whole. I beg to move.

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