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Lord Phillips of Sudbury: My Lords, a week is a long time in politics.
Lord Bassam of Brighton: My Lords, I am tempted to make a cheap comment about the length of the period that it takes to choose a Conservative Party leader, but that is unfair. I withdraw that.
I think that the answer to the question is that, as I explained, it can be extended for a period of up to six months, but it has to be a period of no longer than 12 months in total.
On Question, amendment agreed to.
18 Oct 2005 : Column 703
Lord Bassam of Brighton moved Amendments Nos. 71 to 74:
Page 114, leave out line 11 and insert "If the resolution is confirmed (or treated as confirmed) by the Commission—"
On Question, amendments agreed to.
Clause 37 [Power of Commission to relieve trustees, auditors etc. from liability for breach of trust or duty]:
Lord Bassam of Brighton moved Amendments Nos. 75 to 78:
"(b) a person appointed to audit a charity's accounts (whether appointed under an enactment or otherwise), or
(c) an independent examiner, reporting accountant or other person appointed to examine or report on a charity's accounts (whether appointed under an enactment or otherwise)."
Page 35, line 38, at end insert—
"( ) For the purposes of this section and section 73DA below—
(a) subsection (1)(b) above is to be read as including a reference to the Auditor General for Wales acting as auditor under section 43B above, and
(b) subsection (1)(c) above is to be read as including a reference to the Auditor General for Wales acting as examiner under that section;
and in subsection (1)(b) and (c) any reference to a charity's accounts is to be read as including any group accounts prepared by the charity trustees or directors of a charity."
Page 35, leave out lines 44 and 45 and insert—
"(c) section 73DA(2) below (which extends section 727 to auditors etc. of charities which are not companies)."
Page 35, line 45, at end insert—
"73DA COURT'S POWER TO GRANT RELIEF TO APPLY TO AUDITORS ETC. OF CHARITIES WHICH ARE NOT COMPANIES
(1) This section applies to a person acting in a capacity within section 73D(1)(b) or (c) above in relation to—
(a) the accounts of a charity which is not a company, or
(b) any group accounts prepared by the charity trustees of such a charity.
(2) Section 727 of the Companies Act 1985 (power of court to grant relief to officers or auditors of companies) shall have effect in relation to a person to whom this section applies as it has effect in relation to a person employed as auditor by a company.""
On Question, amendments agreed to.
Clause 38 [Trustees' indemnity insurance]:
Lord Bassam of Brighton moved Amendment No. 79:
On Question, amendment agreed to.
Clause 39 [Power to transfer all property]:
Lord Hodgson of Astley Abbotts moved Amendment No. 80:
The noble Lord said: My Lords, I shall speak extraordinarily briefly to Amendments Nos. 80 and 81, which are concerned with Clause 39 on the power
18 Oct 2005 : Column 704
to transfer all property. We have discussed on several occasions, most recently in Committee on 12 July, the problem of a small charity wishing to wind itself up having to find a single charity with precisely matching charitable objectives to merge with. The Minister gave an encouraging reply then, as a result of which I withdrew my amendment. I understand that the tectonic plates are about to shift but have not yet done so. Perhaps the Minister could update us. I beg to move.
Lord Bassam of Brighton: My Lords, I shall try to deal with this tectonic fare as rapidly as I can. The noble Lord is right: I did say in Committee that we saw a lot of sense in the amendment and we would go away and think about it, and we did. I am sorry that we have not been able to table an amendment for today, but we have every intention of tabling what I am sure the noble Lord will agree will be a suitable amendment at Third Reading.
We have identified a problem with the amendment as it is drafted, for reasons I will explain. Let us imagine that there is a charity with purposes A and B, whose trustees want to use the power in the Bill to transfer all of its property. As drafted, the amendment that the noble Lord, Lord Hodgson, has tabled would allow the charity to divide its property between a charity with purpose C and a charity whose purposes encompass both purposes A and B. This comes about because the transferees together can be said to have purposes wide enough to encompass the purposes of the transferor. But it would not be right to allow a charity which had only objects A and B to transfer property to a charity with a purpose outside the transferor's own trusts—in this example, purpose C.
We are having to juggle and conjure here and we are working on the exact scope of our amendments, which we intend will satisfy the noble Lord's concerns, and we are seeking to iron out the problem that I have just identified. I am sure that the noble Lord will withdraw his amendment and I look forward to moving our amendment to address his points at Third Reading.
Lord Hodgson of Astley Abbotts: My Lords, I am grateful to the Minister and I understand the issue of charities A, B and C. I hope that the Government will come forward with an amendment which has a reasonably commercial and practical application, otherwise we will find ourselves so constrained in what can and cannot be done as to make the whole idea of smaller charities being able to wind up to merge with other charities stillborn. The purpose behind these amendments is to improve efficiency and effectiveness in the charitable sector. I look forward to seeing an amendment, but in the mean time I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Bassam of Brighton moved Amendment No. 82:
The noble Lord said: My Lords, I rise to move Amendment No. 82 tabled in the name of my noble friend Lady Scotland. Clause 39 inserts a new Section 74 into the 1993 Act. In doing so it makes provision for a small unincorporated charity to transfer all of its property to one or more other charities, subject to certain requirements—including the passing of a resolution. A copy of the resolution must be sent to the Charity Commission, and, subject to Section 74A, it would take effect 60 days after it was sent to the commission.
It has been pointed out to us that it could be difficult for the commission to establish the date on which the resolution was sent. This amendment would remove such potential uncertainty by amending new Section 74(9) so that the 60 day period begins on the date the commission receives the resolution. It also has the advantage of making this section consistent with new Sections 74B(9) and 75A(10) which similarly provide for time periods to commence on the date of receipt of a resolution by the commission. I hope that simple explanation suffices and I beg to move.
On Question, amendment agreed to.
Clause 42 [Power to spend capital]:
Lord Hodgson of Astley Abbotts moved Amendment No. 83:
The noble Lord said: My Lords, I rise to move Amendment No. 83 and to speak to Amendment No. 84, which address Clause 42. The purpose of these two amendments is to end the confusion which currently exists about what is or is not permanent endowment. The guts of what we are seeking to achieve are in the second of these, Amendment No. 84, the amendment which leads the group and is an introductory necessity. This ordering caused some confusion among the Minister's officials but I hope that I shall now be able to clarify the intention. In short, we seek to insert a new clause into the Bill that will provide a clear and unambiguous definition of what constitutes permanent endowment. Difficulties with the present position have been brought to our attention by several law firms expert in charity law.
Section 96(3) of the Charities Act 1993 contains a definition of permanent endowment that is widely interpreted as meaning that property is permanent endowment unless, at the time of the gift of it, it is expressly stated by the donor that both the capital and the income of the donated property can be spent on the charity's purposes. Given that it would never occur to most lay people that there was a need to state that—they would assume that it would be the effect—much more charity property is held as permanent endowment than was ever intended by the original donors.
The purpose of the amendment is to turn the definition around so that, in future, property will be deemed to be permanent endowment only if, at the time of the gift, there was an express stipulation that only the income from the capital could be spent on the purposes of the charity. If that definition is adopted, it will be only where donors have deliberately intended
18 Oct 2005 : Column 706
that their gift should form permanent endowment that those restrictions will apply. It is extremely unsatisfactory for service-providing charities, often schools, to find that they cannot sell a piece of land with valuable planning permission to enable them to construct new buildings on land already owned by them because of that definition. In consequence, the Charity Commission requires some system of recoupment of the money spent on the basis that the buildings to be erected are "wasting assets". I fear that too often the Charity Commission has, without having taken professional advice from chartered surveyors, come to the conclusion that because many of the buildings are being constructed with a view to having a lifespan of a century or more—in any event, that their existence enhances the value of the land on which they have been built—its requirement to recoup money spent is unnecessary.
I am told that Clause 42 will not necessarily help the situation. That is because the trustee's right of freedom to deal with permanent endowment will not apply to,
"land held on trusts which stipulate that it is to be used for the purposes, or any particular purposes, of the charity".
Those are the words that Amendment No. 83 seeks to leave out. The proposed clause would have a number of considerable advantages. First, it would create a positive definition of permanent endowment instead of the present rather vague and odd definition. Secondly, it would clearly exclude from permanent endowment all those user-type trusts and ancient deeds in which no intention was expressed, probably because the donors and other parties had no such intentions. Thirdly, it would catch those trusts specifically set up with the intention of creating a permanent endowment in the sense that only the income can be spent on the purposes of the charity.
The Government may be concerned that, if the wishes of donors can be overridden by Parliament, that will put off future donors. That is no doubt a very good argument in respect of more modern charities or those charities where a clearer intention is expressed, but it is not satisfactory where charities have their assets brought in as permanent endowment primarily by an implication drawn by the Charity Commission over the years and now reflected in the 1993 Act. A letter that I received from Mr Michael King of Stone King, a well known firm of solicitors specialising in charity law, states:
"I think it is perfectly understandable that the law should seek to give effect to the wishes of past donors to charity, but why should it be assumed that such donors wanted the money or property they gave to be restricted for income (or occupation) for the rest of time?
"What are now Clauses 39-42 of the current Bill already provide for the spending of capital in limited circumstances, extending the 1993 Act, so Parliament is prepared in principle to ignore the express wishes of donors. What I cannot understand is why Parliament should wish to continue to imply permanent endowment where there is no such express wish. As we suggested in our submission to the Scrutiny Committee, this rule comes from another age when accountability by charities was policed in a less sophisticated way.
"However, many such charities do have some land which they hold on special trusts and even more so this applies to schools and care homes. Clients are infuriated to find that selling off a small
- piece of land or redundant building for development in order to pay for a much-needed new facility on their campus is not possible without Charity Commission consent, which often requires a recoupment arrangement to be worked out with the commission".
The Minister should be aware that I have received similar representations from Lee Bolton & Lee as well as the Charity Law Association.
The House will have strong feelings about this issue, and I hope the Government will be able to give a sympathetic response. I beg to move.
4.45 pm
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