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The noble Lord said: My Lords, we now come to the subject of charities, linked with the word “clarity”. Before I move on to the substance of the amendments tabled in my name, I express my gratitude to the Minister for her exemplary dealings with Members of the House, not only in the written word but in meetings. Since we last discussed this Bill, I have received 29 pages from the Minister and we have had a couple of meetings. That is a good way of doing business. I hope to return here tomorrow to talk about the Dormant Bank and Building Society Accounts Bill, which has been dormant now for 10 months. I have not had as much as a picture postcard from Her Majesty’s Treasury, but that is another matter.

In moving Amendment No. 16, I shall speak to Amendments Nos. 18, 20 and 24. There are three deletions and one addition. I bear in mind what the noble Lord, Lord Dixon-Smith, said earlier about this being Third Reading, so I will not go into great detail about the splendour of the charitable sector, save to say this. Unlike the state or local government, the charitable sector seems able to get round it. The charitable sector has supporters’ clubs of serious magnitude in the people who are prepared to back it. Not only that, but the charitable sector finds itself, from time to time, the repository for gifts, whether of shares, cash or, indeed, land. Therefore, it is a sector in which people have great confidence.

Amendment No. 16 would move towards greater clarity. The deletions would leave us with regulations that provide for exemptions from CIL, for persons who would otherwise be liable, where the development is a relevant charity. If one deleted the items that, in my view, should come out, CIL would not apply when the charity wanted to develop for its own purposes or if it wanted to develop and recycle the proceeds for its own charitable purposes. Amendment No. 24 would give that opportunity to areas that may not yet be seen as charitable or be classed as charities under the Charities Act, such as community enterprises or community sports clubs. With these changes, it would be clear that charities were exempt and that there were opportunities for work that is seen by many members of the public as similar to charitable work to be exempt or, in certain circumstances and depending on the regulations, to have some degree of reduction.



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I do not want to be bobbing up and down, so I shall speak also to the other amendments in this group. The effect of the amendments tabled by the noble Lords, Lord Cameron and Lord Hodgson, and the right reverend Prelate the Bishop of Southwell and Nottingham is similar to that of my amendments. Deleting “may” and inserting “must” and changing subsection (3) would be very helpful. If it comes to the point, I will be happy to support them.

Amendments Nos. 22 and 23, tabled by the Minister, change subsection (3). The language is strange, but I believe that it is meant to clarify. Regardless of what happens to my amendments and those tabled by the noble Lord, Lord Cameron, it will be important for the Minister to talk about clarity. I know that she will want to speak about the improper use of a charity. I do not believe that any noble Lord would want to see charities used in an improper way. Any regulations will need to take care of anybody who is up to no good and is trying to use a charity in an improper way. The Minister will also want to speak about state aid, although I am far from clear whether that is real or imagined.

If today two charities are each given £10 million, the first in stocks and shares and the second in land, and in five years’ time they sell, for the first there will be no capital gains tax and for the second, with today’s law, there will be no CIL. Yet there is the prospect of CIL. It is important to be clear about where we are on that. It is particularly important that the Minister sets out how she sees the position on investment property and whether CIL applies. It will be helpful to hear what the Minister has to say. I beg to move.

The Chairman of Committees (Lord Brabazon of Tara): My Lords, I should point out that if this amendment is agreed to, I shall not be able to call Amendment No. 17.

Lord Cameron of Dillington: My Lords, I shall speak to my three amendments in this group. I have no wish to repeat the arguments that I set out in previous stages of the Bill. It has been proven again and again that charities deliver public benefit, including benefit that comes within the definition of community infrastructure, at far better value than any public administration can, usually because of the voluntary input of labour and the localised nature of many charities. The idea of raising money in any form from charities to be spent by the public sector is a negative benefit for society. For the Treasury to be shy about giving a total exemption for charities is short-sighted.

My second general point is that the charitable sector is already very heavily regulated, with no room for manoeuvre for charities outside their charitable purposes and with every aspect of their business having to be explained to and audited by the Charity Commission. I cannot believe that there is any room for underhand dealings—certainly nothing that any extra regulation or control can do to make a ha’p’orth of difference in this field, apart from causing all charities, especially the very small ones, unnecessary extra costs in the form of lawyers and accountants to comply with an extra layer of unnecessary regulation.



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5 pm

Lastly, before turning to our amendments, as we have progressed through the Bill’s stages and watched the Government's prevarication on the simple question of a clear—I mean clear—exemption for charities in the Bill, I have become more certain that under no circumstances should we leave anything to chance in the form of secondary regulations in which, subject to Amendment No. 27, this House will play no part.

I do not say that in any way as an attack on the noble Baroness, because I know that she has been working very hard on our behalf with the powers that be. I add my praise to her to that which has already come from other Members of the House for her general ability throughout the Bill to listen to what the House has had to say, to amend and to reach an accommodation with the views expressed from all quarters of this House. As has already been said, she deserves her place in history. That does not undermine my point about the general government prevarication in getting exemption for charities into the Bill.

On Amendment No. 19, in conversation with the Bill team, I discussed the restrictive nature of subsection (1)(b), referred to by the noble Lord, Lord Shutt: the difference between charities that may own investments as opposed to property. When I explained my dismay at the change of tack that seemed to be taking place compared to other tax exemptions and the disadvantage that charities that owned property would have in this case, I was told that my concerns could be catered for under subsection (2)(a). I immediately jumped on the word “could” because, at the moment, that is all that subsection (2)(a) promises. Actually, it promises endless hours of expensive individual negotiations—hence the rationale behind Amendment No. 19. I add in passing that even with the amendments tabled to subsection (3), the regulators are still left with a huge degree of flexibility regarding subsection (2) charities, even if “may” is turned to “must” with reference to subsection (2).

On Amendment No. 21, at Report, we were pushing for a total withdrawal of subsection (3), because as it stands it undermines the certainty that we sought in both subsection (1) and subsection (2). However, following the response of the noble Baroness on Wednesday and her subsequent letters, we are prepared to agree a compromise and to allow subsection (3) to refer to subsection (2) only, but not subsection (1) charities, as defined in subsection (4). That is our bottom line. It is a good compromise between our position and the Government's position. Even with the new government amendment, subsection (3) as proposed seems for the first time to bring conditionality into charity legislation. As I said, we can understand why DCLG wants to impose conditions on institutions to be exempted under subsection (2), especially Scots, Northern Irish and EU charities, because their charity law is different from that of England and Wales, but under statute and common law in England, a charity is a charity is a charity.

We certainly do not want any additional test of public good or public benefit beyond that already set out in the Charities Act 2006, especially if that test is being set by people who are either from central

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government, in the form of the regulators, or from local government, in the form of local authorities—people who are without experience in the sector. I believe that would be totally invidious. Charities in England are already regulated by charity law, company law, Her Majesty’s Revenue and Customs in respect of tax, and the common law of trust. Subsection (3) appears to impose another layer of regulation on a sector that is already incredibly heavily regulated. I am sure there are ways of cheating the system but they are frankly fairly unlikely. I do not believe another set of rules is going to change that. If a subsection (1) charity develops property, it is impossible to extract any profit from that charity as all dispositions of land, where there is a change of purpose for that land, have to go to the Charity Commission for clearance. The Charity Commission audits the transaction and follows the money.

The Minister has said she is worried that any concession in this area might engage the EU state aid rules. She has argued that subsection (3) is there not just as an anti-avoidance provision but because of state aids. We can see why that might be needed for subsection (2) but not for subsection (1). Charities cannot normally trade except where it is primary purpose trading so the state aid rules are much less likely to be applicable because there is unlikely to be any cross-border distortion of competition between suppliers of a service which is undertaken as a primary purpose of a charity. As I have said many times before, and we have consulted various top lawyers on this, we regard this state-aid distraction as little more than UK gold-plating.

Amendment No. 25 follows on logically from Amendment No. 21 and the acceptance of one, with or without a vote, implies acceptance of the other. Amendment No. 25 is really only a clarifying drafting point. The department admits that subsection (5) is only intended to apply to institutions exempted under subsection (2). Some lawyers have claimed that the semi-colon in the middle could be interpreted as indicating that the second half refers to both subsections (1) and (2). Our amendment merely removes all element of doubt. It is clarifying and it succeeds or fails along with Amendment No. 21.

Finally, I repeat that the acceptance of our Amendment No. 21 is the bottom line for the charity sector. There is enormous support, inside and outside both ends of the Palace of Westminster, for unequivocal exemption for registered charities. The longer certain parts of the Government have prevaricated on this Bill, the more convinced I have become that we need our Amendment No. 21.

Lord Hodgson of Astley Abbotts: My Lords, I add my thanks to the Minister for the trouble she has taken, the letters she has written and the way she has tried to reach a solution on this rather tricky issue. In her letter she refers to the question of “purpose” or “purposes” which we discussed last time. She wrote to us to explain that “purpose” or “purposes” in her letter was the same under the Interpretation Act. It might be helpful if she could say that on the Floor of the House this evening. While many people will undoubtedly read her letter, more people will read the proceedings of this House in Hansard, so if she could say it again, that would be extraordinarily helpful.



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I have a great deal of sympathy with Amendment No. 16 tabled by the noble Lord, Lord Shutt. As he graphically pointed out, it is discriminatory against charities which happen to have ended up with their assets in land as opposed to in investments on the stock market. The Government have concerns about a windfall from development. It seems strange that you could get a windfall from a takeover on the stock market and be liable to no tax but on the other hand, as the noble Lord, Lord Shutt, pointed out, you could be CIL-able in terms of a land holding. Charities tend to be quite rich in land because schools and care homes will have land. Therefore, there will tend to be discrimination against them and against people who seek to leave property to charity in the future.

I take slight issue with the Minister’s officials about one aspect of the letter. In our previous debate, I referred to the fact that Section 36 of the Charities Act 1993 contained an anti-avoidance provision. I felt that it underlined the reasons why Amendment No. 16, in the name of the noble Lord, Lord Shutt, was worth pursuing. Her officials describe this as a reasonably undemanding requirement on the charity and what it can do. It is worth pointing out that the Act requires that, if there is a connected party, the disposition must go to the Charity Commission, whatever happens. In any case, the trustees have to,

and—

Having considered the surveyor’s report, they must consider,

There follows a definition of who the qualified surveyor must be.

It is not fair for the Minister and her officials to say that these are reasonably undemanding requirements, as they force the charity to consider very carefully what it is doing and to take appropriate advice. If the charity fails to do that, the charitable resources requirement requires the Charity Commission to ensure that charitable resources are being used properly. One therefore wonders whether the Government have the appropriate confidence in the Charity Commission to carry out this task. I understand why they wish to leave this to the regulations. Indeed, the Minister says that draft regulations will be published in the spring and that they will listen carefully to the views of the sector, but this is the heart of the difficulty; we will have passed the Bill before the regulations come out. Moreover, the regulations are not amendable and will not come to this House, so it really is good night from us tonight on the detail of this part of the Bill.

The issue of changing “may” to “must” has been detailed by the noble Lord, Lord Cameron. It simply does not make sense for officials to write letters saying that this would be otiose and would lead to unworkable results, with duties that were impossible to fulfil. It

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would be helpful when the Minister winds up if she could give us some real-life examples of why this would be so.

On our Amendment No. 21, the noble Lord, Lord Shutt, has a rather more draconian, scorched earth approach in that he wants to blast the whole thing out of the way, but I think that we need to make the change that the noble Lord, Lord Cameron, has outlined: no ifs, no buts, no maybes. There are very clear controls on the way in which the clause will operate: you have to be a relevant charity, so there is no question of you being able to sneak into this; and, unless the Minister accepts Amendment No. 16, in the name of the noble Lord, Lord Shutt, there will be regulations, which can be drawn up in such a way that they are anti-avoidance measures. We therefore do not need to think of a further, final failsafe in an anti-avoidance provision. I very much hope that the Minister will see that Amendment No. 21—and Amendment No. 25, which would ensure that the clause applies only to subsection (2)—is absolutely critical to maintain the confidence that the charitable sector should have in the way in which the Government propose to apply CIL to charities.

The Lord Bishop of Southwell and Nottingham: My Lords, I, like other noble Lords, am most grateful to the Minister for the enormous energy that she has put into striving for the best possible legislation; she is probably conscious that she is nearing sainthood in this House. My name is attached to Amendments Nos. 19, 21 and 25, and I support what the noble Lords, Lord Shutt, Lord Cameron and Lord Hodgson, have said. I do not want to detain the House by repeating arguments or by trying to embellish them in any way. I simply appeal to the Minister and the House to strive to produce crisp, clear-cut and unambiguous legislation, which is unencumbered with unnecessary compliance or regulatory complexity, so that the whole of the charitable sector can get on with its valuable work for the public good and for the public benefit, and so that scarce resources do not have to be diverted into overcoming a plethora of new, complex hurdles. Like other noble Lords, I, too, wait expectantly for the Minister’s reply.

5.15 pm

Lord Best: My Lords, I have two short speeches to make in quick succession on these amendments. The charities most affected by the possibility of paying the community infrastructure levy are the housing associations, which are building tens of thousands of homes on which this new levy would be charged over and over again. We have reached a point where it is clear that those housing associations that are charities will be excluded and will not have to pay CIL. In all normal circumstances, Clause 209 will cut them out, which is extremely good news and very positive.

The housing associations divide between the 70 per cent that are charities and the remainder that are not charities because, usually for slightly obscure historical reasons, they decided not to register as charities. I had responsibility for helping such organisations to register between 1968 and 1988, which gave me 20 years of looking at the constitutions of those different

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organisations. About 30 per cent of them are housing co-operatives or organisations that are industrial and provident societies without charitable status. Even though they make up only 30 per cent of housing associations, they make up about 50 per cent of the total housing association output. If they are not also excluded we will run into all kinds of anomalies. When one looks at the two types of organisation side by side, it is hard to be sure which is and which is not a charity.

I hope that the Minister will place on record some of the very helpful comments that she made to us in a letter. She expressed the view that she hopes it will be possible, after consultation with the National Housing Federation and others, to find the regulations to ensure that those organisations that do not happen to be charities but are also providing this much needed affordable housing are included in the same exemption from CIL.

I am hoping to hear—again, it is a matter of saying this on the Floor of the House, which is important to those in the world outside—that it is the Government’s intention that all housing associations that are making the same provision of social housing for the same kind of people will be placed in the same position for CIL, which I hope is a fairly straightforward statement. Otherwise, we will have half the production line of affordable housing by these organisations disadvantaged and confused. All kinds of anomalies will creep in as to which kind of organisation a builder or a local authority wants to work with. It would be immensely helpful if we could have clarity regarding the Government’s intention to place all housing associations on the same footing if they are doing exactly the same job with the same subsidies and the same governmental support.

My second speech relates to the amendment specifically about charities. I have followed the ebb and flow of this debate very closely and with a good deal of interest. Obviously, we must recognise that the Minister has already—perhaps she has not been given a sainthood for this part of the Bill—moved a long way towards putting in the Bill the fact that there will be a 100 per cent non-negotiable exemption for charities in all normal circumstances. That is the effect of the way in which the Bill is phrased. However, she has reserved unto government the fact that in regulations there will be the opportunity in exceptional circumstances to say no to that overarching 100 per cent general exemption. It would not be like rate relief which, for example, is 80 per cent relief or VAT which is 0 per cent relief. As someone who runs charities, I know that we have to pay some taxes, such as VAT.

I turn to those that have invested in land. I ran the Joseph Rowntree Housing Trust for many years and we had a portfolio that included land that will go for future development. Indeed, the trust still owns such land. I was musing on the point that an investment by charities in land should be treated in the same way as an investment in stocks and shares; that is, if they are sold, no capital gains tax is payable. But if land is held for investment, when it is sold, the charity would not pay CIL at that point; it would be payable further down the line by the housebuilder who purchases the land. However, it would not be payable if the purchaser was a charitable housing association. Therefore, this

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would affect only indirectly the investment of the Rowntree foundation and others holding land for investment purposes. I absolutely take the point.

The question for us, having put into the Bill a 100 per cent exemption in normal circumstances, is whether we can be given sufficient reassurance about the exceptions to those normal circumstances in which the Government reserve the right to say no. I chair the Giving Forum which looks at ways in which giving and donations can be increased. We are promoting, for example, the idea of lifetime legacies, ways of giving during someone’s lifetime but still getting some benefit. I have come up against the staunch resistance of the Treasury to measures that might be abused by clever lawyers using obscure charity law to benefit individuals or companies. Tedious as it is, I have come to recognise that it is possible for avoidance measures to creep in to such schemes.

On state aid and the European dimension, I am afraid that I have no understanding of why that is an inhibition at all, but I appreciate that the Treasury has its own lawyers who will put up a very hard fight to ensure that there is in regulations a safety net for the Government that provides that although in normal circumstances there will be a 100 per cent exemption, the Government can reserve the right in some perhaps obscure situations nevertheless to call in the CIL exemption. We are not going to get past that because the government lawyers are going to be fairly adamant. That seems to be a pretty solid brick wall. We can take a rush at it, although possibly the rush would go a bit too far with the amendments tabled by the noble Lord, Lord Shutt. However, those tabled by my noble friend Lord Cameron of Dillington, the noble Lord, Lord Hodgson of Astley Abbotts, and the right reverend Prelate the Bishop of Southwell and Nottingham, do not. I hope that we can be given sufficient reassurance not to have to push this too hard. I have a great deal more sympathy with those amendments rather than seeking to go at this head on. I hope, too, that the Minister can give us a few more words of comfort before we take the next steps on this.

Baroness Ford: My Lords, I want to intervene to say a few words about the state aid legislation. I have enjoyed our thoughtful debates on this at each stage of the Bill and I pay tribute to my friend for the journey she has made and the willingness she has shown in trying to encompass all the genuine points made on the charities aspect.


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