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Lord Hodgson of Astley Abbotts: My Lords, when the Government come to look at the regulations, would they be prepared to give attention to the introduction of clawbacks of the future value? Too often, the regulations talk about what happens at the present moment, but, clearly, one can get value down the road. Therefore, some form of clawback would be helpful.
Lord Bassam of Brighton: My Lords, that might best be expedited through some reference to sell-on clauses and so forth. It is a sensible suggestion and no doubt those are the sorts of issues that the consultation will need to address. I am grateful to the noble Lord for that intervention.
I am grateful to the noble Lord, Lord Best, for raising this issue because I recognise its importance. Other noble Lords who contributed to this discussion also recognise that. We cannot agree with the noble Lord's solution—if solution indeed it be. However, perhaps by reviewing the regulations and taking on board a broader range of views on the way in which those regulations have operated in the past, we can find a way that deals with an important part of the issue identified by the noble Lord. I hope that the noble Lord will feel able to withdraw his amendment.
Lord Best: My Lords, I am very grateful to noble Lords for expressing their views on this matter and for all the good advice that has come from this exchange. I am sorry that the noble Lord, Lord Phillips, did not get the excellent briefing that I prepared for him. I recall that correspondence is not always opened in his office when it is expected to be opened, but when he comes to read it I know that he will find it entirely convincing.
It may well be that the problem that I identified is best handled by enhanced regulation through the Charity Commission, particularly covering the important point that the noble Lord, Lord Hodgson, seized on—that value can accrue later and not at the moment of sale. Development value comes after the acquisition of the school as a going concern when either part of that school or another school which, in the process of a number of acquisitions now becomes
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redundant, can be redeveloped. That is the point one needs to capture. If regulation through the Charity Commission can do that it would be more than helpful. Indeed, perhaps better advice, more advice and a helpline, as suggested by the noble Lord, Lord Hodgson, through the Independent Schools Council could heighten awareness of the issue and help people avoid the problem. Such measures would support the less astute trustees of charitable independent schools in the face of powerful pressures from purchasers who have very different motives from those of charities. I thank your Lordships. I also thank the noble Lord, Lord Bassam, for that positive, encouraging and helpful response. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Bassam of Brighton moved Amendment No. 65:
The noble Lord said: I rise to move Amendment No. 65 standing in the name of my noble friend Lady Scotland and to speak to Amendment No. 66 which is grouped with it.
Paragraph 1 of new Schedule 5A to the 1993 Act, as inserted by Schedule 6 to the Bill, supplies the meaning of a "subsidiary undertaking" for the purposes of the new group accounting provisions. If the requirement to prepare group accounts applies, a parent charity must prepare accounts covering itself and its subsidiaries as a group. The definition of a subsidiary undertaking is important because it determines, for each parent charity, which other entities must be accounted for in the group accounts.
Sub-paragraph (4) of paragraph 1 lists entities which are not to fall within the definition of a subsidiary undertaking. One such entity is any institution to which a direction under Section 96(5) of the 1993 Act applies for the purposes of the group accounting provisions. Section 96(5) allows the Charity Commission to determine that an institution established for any special purposes or in connection with a charity shall be treated as either forming part of that charity for accounting purposes or as forming a distinct charity. If the commission has already determined that a particular institution forms a distinct charity for accounting purposes, it does not make sense for the Bill to exclude that institution from the definition of subsidiary undertaking. However, at present the Bill does make such provision.
These amendments are designed to correct that, and I am greatly indebted to the Association of Charity Independent Examiners for bringing this matter to our attention and enabling us to make that correction.
On Question, amendment agreed to.
4.15 pm
Lord Bassam of Brighton moved Amendment No. 66:
On Question, amendment agreed to.
Lord Bassam of Brighton moved Amendment No. 67:
The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 75, 76, 77, 78, 79, 103, 108 and 111.
Clause 37 of the Bill gives the Charity Commission the power to relieve trustees, auditors and others from liability for breach of trust or duty where the relevant person has acted honestly and reasonably and should fairly be excused for the breach. These are minor, technical amendments to that provision and their purpose is twofold, as I shall now briefly explain.
First, we have discovered that the Bill as drafted does not cover all those who report on a charity's accounts. Logically, the commission's power should extend to all those who report on charities' accounts, including group accounts, and these amendments ensure that it does. Secondly, the amendments also extend the court's existing power to grant relief to an auditor or independent examiner of an unincorporated charity appointed under the current Section 43 of the Charities Act 1993. The amendments give the court the power to relieve from liability all those who report on the accounts of an unincorporated charity, including the group accounts of an unincorporated charity. I hope that noble Lords will agree that this is a sensible and logical group of amendments that tidy up the existing powers in the Bill.
On Question, amendment agreed to.
Schedule 7 [Charitable incorporated organisations]:
Lord Bassam of Brighton moved Amendment No. 68:
Page 105, line 25, leave out "the address of its principal office" and insert "whether its principal office is in England or in Wales"
The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 73 and 74.
I am grateful to the Hospital Broadcasting Association for bringing to our attention this and a number of other issues on which we have made amendments. One receives a lot of correspondence on these matters which is most helpful. It is important that the address of the principal office of a CIO is known to the public. Those who have dealings with any corporate body need to be assured that they will have no problems communicating with it. For that reason, the Bill as currently drafted would require the address of the principal office to appear on the face of the CIO's constitution. But the consequence of that is that any change to that address would need a constitutional amendment. The procedure for constitutional amendments, set out in paragraph 14 of new Schedule 5B, rightly contains a number of safeguards. However, representations have been made to the effect that those safeguards are unnecessary and that accordingly the amendment procedure is over-burdensome when a CIO is simply changing the address of its principal office. We agree that the
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procedure set out in paragraph 14 is burdensome for the process of simply changing the address of a principal office.
The effect of the amendments now tabled will be that the address of the principal office need not appear in a CIO's constitution. Therefore, a constitutional amendment will not be necessary to change the address. The need to publicise the address of the principal office can be achieved in other ways. It can appear in the Charity Commission's register entry for the CIO, any change being effected only when it has been notified to and recorded by the commission. It could be made a requirement that the address of the CIO's principal office should appear in its correspondence. These are matters to be considered when framing the regulations to be made under Schedule 7. However, since the application of some of the CIO provisions will depend on whether the principal office is located in England or in Wales, we think that the country of location should still appear on the face of the CIO's constitution. The national location of that office should be capable of change only by the normal constitutional amendment procedure.
The second part of these amendments has the effect that all changes to a CIO's constitution will take effect only on registration by the commission. I hope that the House will agree that this is a sensible set of amendments designed to reduce burdens on charities. I beg to move.
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