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Lord Phillips of Sudbury: My Lords, I am sympathetic to what I take to be the intent of the noble Baroness, Lady Turner, but I am afraid I have to express my objection to the amendment because I think it would have consequences which she does not intend.

At present, the crucial distinction in terms of political campaigning is between charities whose purposes, objects and aims in their constitution state that they are for a change in the law, here or elsewhere, which is impermissible and, by contrast, political campaigning as a means of achieving non-political objects or aims. I fear—perhaps the noble Baroness intends this—that the amendment would be construed as allowing as charitable objects, purposes or aims which explicitly charge the organisation with a change in the law, whether here or elsewhere.

I believe—I have had many causes and cases to consider this very carefully—that one of the fundamental and virtuous bases of our whole charity structure is that charities should not be in existence to change the law. The traditional judicial argument against that is: "How are we the judges able to judge between one proposed change in the law and another, or between the status quo and a proposed change in the law?". It would make their role impossible, because by what yardsticks would they be able to double-guess Parliament or public opinion more widely? Therefore, since I believe that public support for the notion of charity is essentially bound up with the non-party-political nature of charity, this amendment would, inadvertently, I know, be an Exocet under the waterline of the charity sector as a whole. I put it as strongly as that.

The only point that I would add which should be of solace to the noble Baroness—and I think she knows it—is that the guidelines for campaigning by charities are now extremely wide and generous. For example, if a piece of legislation comes up, a charity can campaign strongly in respect of that legislation and claim that an aspect of it would be inimical to its charitable purposes. For example, Shelter has in times past gone
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very public and very political—non-party political—in resisting or supporting change in housing law. That is permissible so long as it fulfils very sensible guidelines.

The scope for charities to engage in strong political action is already with us. For the reasons I have attempted briefly to explain, the amendment would inadvertently create evils that would be really serious.

Lord Bassam of Brighton: My Lords, under the existing legal framework charities may engage in campaigning so long as it is in furtherance of their charitable purposes. Of course, organisations that exist solely to pursue political purposes cannot be given charitable status. We think that that is right; the words uttered by the noble Lord, Lord Phillips, coincide with our views.

The extent of charities' freedom to campaign has been strongly supported by government. In 2002 the Strategy Unit published its report, Private Action, Public Benefit, which recommended that the Charity Commission's guidance on the subject be updated and revised in order to place greater emphasis on the campaigning and political activities that charities can engage in. When the commission subsequently published revised guidance in 2004 it was widely promoted and welcomed extensively across the charitable sector. Its enabling approach highlighted the freedoms of the existing legal framework.

On the issue of charities campaigning specifically for a change in the law, they are already free to support or oppose the passage of parliamentary Bills if such support or opposition is in furtherance of their charitable purpose. Daily we receive missives from charitably funded organisations doing exactly that. Charities working internationally may seek to promote a change in legislation or public policy on the same principle: that the change is in furtherance of their charitable purposes.

As I said, the commission's guidance, which set out the current legal position on campaigning and political activities by charities, was welcomed and the commission is not aware of any strength of feeling from the charitable sector on any need to alter or change it at this stage. For those reasons, although I am sure that the amendment was moved with good spirit, and attractive as it is, we cannot give any support to it.

Lord Wedderburn of Charlton: My Lords, my noble friend has clearly and explicitly explained the Government's position. I am sure that he will tell me if I am wrong, but as I understood him, if one has objects that fall within Clause 2 in the necessary list and can therefore advance to the public benefit test, the fact that one is campaigning on issues that relate to that object does not prevent one from being a charity. If that is so, why does he not accept the amendment? It says that a purpose in subsection (2), which is what first has to be met,

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I thought that that was more or less what I had said in the first proposition. The noble Lord, Lord Phillips, raised political campaigning: as soon as we put that in there are problems. If a charity is founded for the object of whatever the noble Lord means by political campaigning, it will not meet—

Lord Evans of Temple Guiting: My Lords, I must remind my noble friend that we are on Report, and once the Minister has sat down there is no more discussion.

Lord Wedderburn of Charlton: My Lords, I commend my noble friend's assiduous looking at the rules, but this is an important point. There are dozens of charities that campaign and they want to know the answer. I want to know why I have misunderstood the Government's position when they are rejecting what they appear to approve of.

Baroness Turner of Camden: My Lords, I thank the Minister for his response and also the noble Lord, Lord Phillips of Sudbury, for his helpful intervention. He said that he sympathised with the objectives and I am sure that most people do. I gave an instance of one case with which I had personally been involved, where I had spoken on a brief for a charity that was anxious to change the law in an area where it obviously had an interest: Save the Children was interested in the Education Bill and the Government were prepared to accept what I had to say as a result of its campaigning.

I was simply seeking to ensure that that kind of lobbying and campaigning was clearly something that a charity could do because it was in line with its objectives. As my noble friend Lord Wedderburn said, I sought to encompass that by referring to,

which would bring it within the public benefit test. If a charity passes the public benefit test, it should be granted in law—in the Bill, which will eventually become an Act—the status to campaign for changes in the law within its own remit. That is all that we sought to do—to ensure that a charity that had a particular area of activity was able to campaign for changes in the law within its own remit. That is all we were after. I am sorry that it has not been possible for the amendment to be accepted. I shall perhaps think of a different wording with which I can return before the Bill finally leaves this House. However, in the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 5 not moved.]

Lord MacGregor of Pulham Market moved Amendment No. 6:

After Clause 3, insert the following new clause—

(1) This section applies to a body or trust charitable under existing law which ceases to be treated as charitable owing to the practical difficulties of complying with section 3.
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(2) A body or trust referred to in subsection (1) shall be called a "former charity".
(3) The Commission shall ensure that all the assets and liabilities of a former charity shall be vested in a community interest company as defined in the Companies (Audit, Investigations and Community Enterprise) Act 2004 (c. 27)."

The noble Lord said: In moving Amendment No. 6, I declare an interest as the deputy chairman of the Association of Governing Bodies of Independent Schools. I do so because the point that I am about to raise concerns independent schools—normally it applies only to a very small number; in fact, it applies only to a few—but it could apply also to other charitable trusts, institutions or charitable companies.

I say straight away to the Minister that no doubt he will find defects in the drafting. There could well be wider repercussions from the proposed new clause. Therefore, I do not intend to press it. However, it is a convenient way of raising an issue that arose in our Committee debates during the previous Parliament. On that occasion, the Minister, although sympathetic to the point, was unable to give a firm response. Today, I seek a fuller and, I hope, more reassuring response or a promise of a better answer to the problem than my proposed new clause contains, either on Report or when the Bill goes to the other place.

I shall explain the point and give the independent school situation as an example of the problem. In Committee both before and after the election, we had considerable discussion on independent schools, and I do not intend to go over that ground today. Suffice it to say that there is full acceptance among independent schools of the public benefit test, and it has been met on an increasing scale in many ways over the past 10 years—for example, through the provision of bursaries to help pupils from lower income families attend independent schools. About 30 per cent of all places now have a bursary of one sort or another. There is also the sharing of facilities in the wider community; a considerable amount of that is taking place. There is movement between the maintained and independent sectors as regards teachers, employment and recruitment and in many other ways. The Government are encouraging private/public partnerships between the two. So there has been full acceptance of the public benefit test, but some schools—as I say, it will probably be very few—will have overwhelming difficulty in meeting the test. I think in particular of small schools in isolated rural areas with fairly slender financial resources that can neither share their facilities because there is no one to share them with or have real difficulty in providing bursaries on any scale.

If schools in that situation lose their charitable status because they cannot satisfy the public benefit test, they lose the tax benefits that go with charitable status. That is fully accepted. However, it seems extremely unfortunate that if the assets cannot be used for a similar charitable purpose, the school or hospital will have to close down. It is unlikely that another charitable trust or company would be willing or able to take it over as a school because it, too, would have difficulty meeting the public benefit test for the same reasons.
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Before the election, the noble Lord, Lord Goodhart, tabled an amendment in Grand Committee on 3 February 2005—the reference is col. GC7 of Hansard—to deal with the point. In so doing, he referred to his experience as a lawyer in advising schools on the problems that arise when an organisation ceases to be a charity. Similar concerns arising from this Bill have been expressed to me.

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The Charity Commission's document on public benefit contains this passage:

I have already referred to their being extreme, but there will be some—

precisely the situation that I am describing—

That sounds sympathetic and is obviously intended to be helpful, without entirely meeting the point.

There are three ways in which the point can be met. The first is by use of the cy-près doctrine, which I presume is what that passage in the Charity Commission document really refers to. I am no lawyer, but the problem with it is in not properly dealing with this issue: what are the "charitable purposes close to"? If they are educational, and they have to provide those wider public benefits to meet the test, they will probably be providing educational services of a different sort, but not as a school. Therein lies the problem that is not actually dealt with; that of closing the school as such.

Secondly, my new clause would be a way of dealing with it. It would mean that the school would continue to pursue its original charitable purpose and would become essentially a not-for-profit company. There is a connection, because, under the Companies (Audit, Investigations and Community Enterprise) Act 2004, in Clause 26(3),

That is clearly a reference to the point that they may have been charitable but have become a community interest company. It would mean not having the tax benefits, but they would be able to continue.

Thirdly, could the Charity Commission give a commitment—the Minister could confirm this—that the use of the phrase "treating proportionately", which is now added to the Bill, would mean that different considerations would apply to a school—for example, one in a remote rural area—unable either to provide bursaries or make facilities available to the wider
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community because, by definition, there is no demand? Such schools would be treated differently from a Winchester or the many schools that can make their facilities widely available to other organisations and provide a lot of bursaries. That would enable the former schools to satisfy the test and continue in existence.

A school of that sort would obviously have to provide sufficient proof that it had used every endeavour to meet the public benefit test. That is the point of the new clause. I hope that the Minister will make some sort of constructive response to reassure schools that might find themselves in that situation. I beg to move.

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