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The most important thing is that they deliver benefits to society at a far better rate and at far better value than government possibly can. As the noble Lord, Lord Dixon-Smith, said, it cannot be stressed enough that they are very heavily regulated by the Charity Commission or the Office of the Scottish Charity Regulator in Scotland. Regulation that is good enough for Her Majesty’s Revenue and Customs vis-Ã -vis income tax and capital gains tax must be good enough for CIL. As the noble Lord, Lord Shutt, said in Committee, what we need is certainty, and that we do not have in the Government’s amendment as currently drafted. I still have the feeling that the only people who are going to benefit from it are lawyers and accountants.

I shall run through our amendments to government Amendment No. 136AA, bearing in mind that we want clarity and certainty. I recognise that there is a difference between charities governed by subsection (1) of the new clause, as defined by subsection (4), and other bodies with a charitable purpose as defined in subsection (2). Dealing first with subsection (1), as I understand it, it provides a compulsory exemption from CIL for all charities as defined in subsection (4), but it seems that both subsection (1)(a) and subsection (1)(b) have to be fulfilled before that exemption is a certainty. Subsection (1)(b) restricts the exemption to buildings that are used “wholly or mainly”, as in the amendment tabled by the noble Lord, Lord Dixon-Smith, for charitable purposes. I have no doubt that the Minister will clarify that in her response.

On the question of charitable purposes, the Bill refers to “a charitable purpose”, so I would be grateful if the Minister could confirm that for “purpose” we can also read “purposes” so that three of our amendments are taken care of.

I have the same concerns as the noble Lord, Lord Dixon-Smith, about which buildings are exempt, or

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even things that are not buildings. Being a rural person, I immediately think of a dilapidated village hall being sold for development to a developer in order to build another village hall. The hall that is being sold is not going to have a charitable purpose any more, or it could be the car park of the village hall that is being sold by the village hall trust, which would most likely be a registered charity, to reinvest in the village hall. In both cases, if CIL were payable, the developer would almost certainly charge the charity for CIL in its price, and it would thus be the equivalent of the charity paying CIL in the first place. I cannot believe that that is the Government’s purpose in the amendment.

11.15 pm

In my conversations with the noble Baroness and her team, it was suggested that some of my concerns about the limits of subsection (1) could be covered under subsection (2)(a). If that is the case, that adds weight to the need for our Amendments Nos. 136AD and 136AE, because it is vital that we have the certainty of “must” rather than “may” governing subsection (2). It is also important that subsection (2)(a) stands by itself, making the word “or” in Amendment No. 136AE crucial. The word “or” is needed for another reason. The present draft is entirely unclear as to whether it is the Government who are to make the exemption, the individual charging authority, or both. Those three possibilities are a recipe for utter confusion. I hope that, following our conversations, the Government will agree to both those amendments.

Amendment No. 136AF is again an attempt to achieve clarity and certainty. The noble Baroness mentioned the words “or reduction in”. I see her point of view, but I find them undermining and unhelpful. Giving a charity a 1 per cent reduction in CIL would satisfy the terms of subsection (2)(b), but would be of no use to the charity. We need clarification of what the Government mean by a reduction—or, preferably, an alteration in the subsection.

We come to subsection (3) of the government amendment and our Amendment No. 136AF. Everyone to whom I have spoken in the charitable sector agrees that that subsection undoes all the certainty towards which we are working in the first two subsections. The words “may provide” and,

“only if specified conditions are satisfied”,

need no further comment. Frankly, they undermine the whole government amendment and render it useless. The clause has to go; that is our bottom line.

Our final amendment in the group is as much for clarification purposes as anything else. Why do we need the words “or not to be” in subsection (5)? It might give the persons drawing up the regulation or even the local planning authorities entirely the wrong idea. We would therefore prefer that phrase to be removed.

I will not delay the House much longer, because it is very late, but, as I said at the outset, the principle behind our amendments is that no public benefit is to be gained by taking money from charities and giving it to government agencies. Charities are rigorously scrutinised for public benefit by the Charities Commission and provide benefits for society at far better value than

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CIL or any of its charging authorities ever could. In my view, the government amendment needs to be totally reworded to give greater certainty and clarity to cater for the grave and sensible concerns of the third sector, as I have set them out. At the very least, we need the undermining subsection, subsection (3), removed from the clause.

Lord Howarth of Newport: My Lords, what would be the application of the new clause in Amendment No. 136AA to cathedrals, such as Winchester Cathedral, where I spent a rather large part of my childhood as I was educated at the cathedral choir school, and Norwich Cathedral, in the city where I now live? I raise that question not out of idle personal curiosity but because I have been made aware that there is uncertainty in the Church of England, and therefore some concern among custodians of cathedrals, as to the meaning of the legislation for cathedrals.

Not having a close knowledge of this field, I none the less have the impression that the application of charity law to cathedrals is somewhat special. That may be because many cathedrals and their educational foundations and other associated charitable undertakings were in existence some hundreds of years before the 1601 Statute of Uses, which is the fountainhead of much subsequent charity law. Be that as it may, it would be very helpful if the Minister could clarify whether and how her new clause applies to cathedrals, and in particular whether they would be exempt from the liability to pay CIL, as the new clause provides. If she cannot give me a definitive answer this evening, perhaps she will write to us in good time before Third Reading.

Lord Hodgson of Astley Abbotts: My Lords, my name is on some of the amendments in the group, and I too thank the Minister for the work that she has undertaken to move towards the position that we so earnestly desired in Committee. I have listened carefully to her explanations, which were quite complex. I was reminded of Sherlock Holmes’s remark in a complicated case: “These are deep waters here, Watson, deep waters indeed”. We are in slightly deep waters with some of the points that she was making, and they repay careful study.

I emphasise one or two points that arise from the amendments that we have tabled. The first is the question of “or purposes”, as opposed to a single purpose in the Minister’s amendment. Section 2(2) of the Charities Act lists very clearly 13 different types of charitable purpose. Some of them overlap very closely. For example, paragraph (a) is,

“the prevention or relief of poverty”,

and paragraph (j) is,

“the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage”.

There will be charities that have more than one, perfectly legitimate, charitable purpose. Indeed, a charity that starts out with a single charitable purpose may have to widen that purpose, as year succeeds to year, because of the changing nature of our society and because the needs that it must reflect are slightly altered.

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I reassure the Minister that, under the amendment, all cases would have to meet the charitable purposes test and the public benefit test. The Charity Commission would look at all of it, so there would be no question of people being able to slip through the net. I hope that she will be able to address that in due course.

I have a word or two to say about proposed subsection (1)(b) in Amendment No. 136AA and its implications for charities. My point amplifies the point that my noble friend Lord Dixon-Smith has already made, and relates to how we will get to “wholly or mainly” and the way in which charitable assets are used. I shall give a short example to illuminate what I am trying to get at. Let us assume that we have a successful charitable care home, which is regulated and appropriately looked after. It seeks to extend its operations, which is something profoundly to be sought. It decides that it will fund these additional rooms and facilities by a public appeal. It has that appeal and applies for planning permission. Buildings are constructed and no CIL is payable. However, let us suppose that exactly the same charity, in these difficult economic times, decides that it cannot successfully appeal but has a corner of its land that it could sell, with planning permission, for commercial development. The proceeds will be used in exactly the same way—to build more rooms in the care home. In other words, they will be used for charitable purposes. Clearly the additional rooms are charitable, but the development is commercial. It is unreasonable, unhelpful and disadvantageous to charities that are rich in land assets that they cannot build in this way without having to suffer a commercial disadvantage.

I may have misunderstood the nature of the Government’s amendment and the noble Baroness may be able to reassure me. But at the moment we seem to have a distortion arising out of the choice that the charity makes of the way in which it funds its expansion. If it realises a land asset to build a building which is charitable, from the way I read this, CIL will be payable, but if it did it by public appeal, no CIL would be payable.

On the words “may” and “must”, the hour is late and the noble Lord, Lord Cameron, smote this ball to the boundary very successfully. Clearly, “may” is a weasel word which makes a matter optional. It may mean something or it may mean nothing. As the noble Lord, Lord Shutt, says, we need clarity on this.

On a slightly wider point, I am not quite clear yet as to why charitable purposes, as opposed to a relevant charity, have to be dealt with separately. As the noble Baroness made clear, proposed new subsection (5) defines the purposes of proposed new subsection (2), which refer back to the definitions in the Charities Act 2006, to which I have already referred. Therefore, it seems strange that we need to deal with this in a different way. The words,

“to be, or not to be, treated”,

in proposed new subsection (5) mean that the Government would start to come into conflict with what the Charity Commission is treating as a charitable purpose.

When we considered the then Charities Bill, the noble Lord, Lord Bassam of Brighton, who is not here, and all parts of the House were keen that it

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should remain independent of all political parties. Therefore, we now appear to be getting to a position where the Government are starting to conflict with the powers of the Charity Commission to decide how and what purposes are charitable. The Charity Commission has powers in its objectives that would enable it to close the loopholes. Like the noble Lord, Lord Cameron, my concerns are further underlined by the words “or reduction in”, which we seek to remove under our Amendment No. 136AF. Again, there is no certainty.

Finally, Amendment No. 136AH would remove proposed new subsection (3). As the noble Lord, Lord Cameron, has said, this appears to drive a coach and horses through everything we have been discussing. Proposed new subsection (3) refers to,

“exception or reduction ... specified conditions are satisfied”.

I understand that the Minister, no doubt driven by her colleagues at the Treasury, is concerned about the way in which this could be used to evade fiscal and taxation responsibility. I ask her to ask her officials to look at the Charities Act 1993, which provides for a catch-all clause to prevent the sort of evasion that I think she is concerned about. Section 36 in Part V, “Charity Land”, states:

“Subject to the following provisions of this section and section 40 below, no land held by or in trust for a charity shall be sold, leased or otherwise disposed of without an order of the court or of the Commissioners”,

which, in this case, is the commission.

The section goes on to lay out what has to be done and states that we have to use appropriately qualified valuers. Where connected parties are concerned, the Act lays down that the commission has to be involved. We could reassure the Minister about the dangers of proposed new subsection (3). The Government have powers, within the Charities Act 1993, to block off that loophole and the Minister could reassure her colleagues in the Treasury that there is no loophole, and that the powers and the blocking powers already exist. I hope that in this way we shall be able to make the further step forward that we all earnestly desire.

11.30 pm

Lord Shutt of Greetland: My Lords, my name is attached to Amendments Nos. 136AC to 136AJ. The best way to tackle this is to try and grasp what Amendment No. 136AA says. Proposed new subsection (1)(a) talks about a relevant charity. This is then defined in proposed new subsection (4). I do not understand “relevant”. Can the noble Baroness define an irrelevant charity? If there is an irrelevant charity, I would like to know what it is. A charity is a charity, so why “relevant”? I am concerned as to whether anything has slipped out because of “relevant” being placed there. Proposed new subsection (1)(b) is about charitable purpose. That is clearly about those who have not taken the trouble or felt the need to register as a charity, but it covers what they wish to do.

Proposed new subsection (2) is where the important concerns of the noble Lord, Lord Dixon-Smith, come in as to the position with what we might describe as investment property or investment land. Is proposed new subsection (2) saying that if it is a case of investment property or land, there is the opportunity for a reduction but not a requirement? Is that what that is about?

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Finally, because it is late, I turn to proposed new subsection (3). It has to go. This really is a case of two steps forward and three back. Proposed new subsection (1) says:

“CIL regulations must provide for an exemption”.

That is a very positive thing to say to the charities. Then proposed new subsection (3) says,

“that an exemption or reduction applies only if specified conditions are satisfied”.

That is a very negative thing for charities. Where is the clarity in this? Either charities are not going to be paying CIL or they are. “Must provide an exemption” ought to be as clear as clear can be. Then lo and behold, somebody slips in proposed new subsection (3) and takes that clarity away again. That wants to be crossed out—got rid of.

Lord Boyce: My Lords, I declare an interest as the chairman of the Royal National Lifeboat Institution and I hold similar positions in a number of other charities. I welcome the distance gone by the Minister in introducing Amendment No. 136AA. However, I will be left with a number of uncertainties in running my various organisations if that amendment goes forward as it stands. I will not test your Lordships’ patience by trying to do better than noble Lords who have gone before me and articulated so well what those uncertainties are, particularly the noble Lords, Lord Dixon-Smith, Lord Cameron, and Lord Hodgson. Suffice to say, I support Amendments Nos. 136AB to 136AJ.

Baroness Andrews: My Lords, I detect some welcome for our amendment but noble Lords have displayed in their extensive forensic examination just why charity law and this clause are so complex. If noble Lords will forgive me, given the hour and the questions which have been raised which are both technical and definitional and explore the relationships between these subsections, I will write a comprehensive letter and pick up everything that noble Lords have said as soon as possible.

I hoped I had reassured the noble Lord, Lord Shutt, when I began this debate some time ago. The question of cathedrals was to be raised by the right reverend Prelate the Bishop of Southwell and Nottingham. I can reassure my noble friend that we intend to ensure that the development by the Church of England of its cathedrals will be 100 per cent exempt from CIL. We need to investigate further how that will be achieved. Our current view is that an exemption could be provided for by using the powers in subsection (2). If that is wrong, other powers to make exemptions exist to allow us to do this, for example in Clause 214(1)(c). I hope that at least gives some clarity.

Many important points have been raised and I appreciate the feeling of the House. I am grateful to noble Lords who understand that we have wrestled with trying to put something in the Bill which actually meets the concerns that have been raised. I can see that noble Lords remain concerned that the amendment I have brought forward may not offer the degree of clarity they seek. With that in mind I will reflect on the issues and see whether I can propose further changes that might reassure the House. In the mean time, I

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shall write to noble Lords on the specific points of detail. Indeed, I am grateful to all noble Lords who have tried to help us resolve these real difficulties.

Lord Low of Dalston: My Lords, I welcome the Minister’s offer to pick up on all these points and write comprehensively to noble Lords. I wish to add one more issue that has not been raised; I would be grateful to the Minister if she would take it on board. In raising it I declare an interest as chairman of the Royal National Institute of Blind People. I want to probe further the notion of “charitable purpose” that appears in government Amendment No. 136AA. It is perfectly clear that the charity would be relieved from CIL if it was undertaking a development in pursuit of its core business, such as building a school. But what if it were undertaking a development that was not so clearly an example of provision for a beneficiary group, such as refurbishing its headquarters? Obviously that would be crucial to the maintenance of the charity, but not an activity directly designed to meet the needs of beneficiaries. Would that also be exempt? I would be grateful if the Minister could include this point in her response.

Baroness Andrews: My Lords, I would be happy to do that.

The Earl of Caithness: My Lords, I understand the Minister’s concern to write to us, but we are in the privileged position of being able to receive a letter from her. So many people outside, particularly in the charity world, read the Official Report. How does she plan to get the answers that so many people outside want to read into the Official Report?

Baroness Andrews: My Lords, obviously I intend to put a copy of the letter in the Library and I am happy for what I write to be used by Members of the House to inform any person outside whom they feel have a concern. As far as is practicable, I shall circulate the letter if the noble Earl would like me to do that. However, we should bear in mind that there are something like 600,000 charities in this country.

Lord Dixon-Smith: My Lords, I understand that it is my amendment that is under discussion rather than the amendment tabled by the noble Baroness. I am grateful for her offer to try to take the matter forward through correspondence. With that, I beg leave to withdraw the amendment.

Amendment No. 136AB, as an amendment to Amendment No. 136AA, by leave, withdrawn.

[Amendments Nos. 136AC to 136AJ, as amendments to Amendment No. 136AA, not moved.]

On Question, Amendment No. 136AA agreed to.

Lord Cameron of Dillington: My Lords, I am sorry to interrupt the proceedings, but I had the impression that the noble Baroness said that she would not pursue her amendment because she was going to clarify the points raised and make amendments to it for Third Reading. I am sorry if I have got it wrong, but that is why I did not consider moving my amendment. Perhaps she could clarify the position.

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Baroness Andrews: My Lords, I still have to move my amendment. I shall think further about how I can help noble Lords in respect of my amendment before Third Reading.

Clause 203 [Amount]:

Baroness Andrews moved Amendment No. 136B:

136B: Clause 203, page 117, line 5, leave out paragraph (b) and insert—

“(b) matters specified by CIL regulations relating to the economic viability of development (which may include, in particular, actual or potential economic effects of planning permission or of the imposition of CIL);”

On Question, amendment agreed to.

Baroness Andrews moved Amendment No. 136C:

136C: Clause 203, page 117, line 40, at end insert—

“(6A) A charging authority may consult, or take other steps, in connection with the preparation of a charging schedule (subject to CIL regulations).”

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 136D:

136D: Clause 203, page 117, line 40, at end insert—

“( ) For the purposes of subsection (6)(f) the regulations may provide, or permit or require provision for differential rates in respect of developments which renew or replace existing buildings, and which do not incur any significant costs to provide infrastructure to support the development.”

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