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I want to say in particular to the noble Lord, Lord Cameron, that I do not think that we can simply disregard state aid. I do not accept that what the Government are trying to do here is somehow to gold plateI believe that was the expression he usedthis part of the regulations. Over 25 years, I have found that the most vexatious and time-consuming work is creating structures for real estate and for regeneration which avoid charitable and non-profit-making organisations falling into the trap of state aid. I have to say to the House that of all the areas I have been involved in, this is one in which the European Union has tremendous expertise and incredibly long tentacles in its reach into such projects. The Union is very
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Lord Geddes: My Lords, I apologise to the House for intervening on this important Bill only at this late stage of Third Reading, but I have continued reservations on this charitable question. I strongly support Amendments Nos. 19, 21 and 25.
I shall speak briefly on those in a moment, but I have a problem with government Amendment No. 22. I much prefer Amendment No. 20 in the name of the noble Lord, Lord Shutt. If Amendment No. 22 is carried, I do not, in my ignorance, see how it makes sense. Unless I have completely misinterpreted it, Clause 209(3) would then read:
That appears to be a contradiction in terms, although I may be quite wrong on this. I do not like the clause, but it would make more sense if it read, reduction does not apply unless specified, and so on. Perhaps the officials could scribble a memo or two to the Minister to clarify that.
I return to the other amendments. In Amendment No. 19the must/may argumentI found it incongruous that subsection (1) has must while subsection (2) has only may. On Amendment No. 21 I can do no better than support what my noble friend Lord Hodgson has said, while Amendment No. 25 is to an extent consequential on Amendment No. 21. I urge the Minister to look again at the whole question of charitable status, particularly for those who are building and renovating buildings that are themselves in the charitable sector.
Lord Livsey of Talgarth: My Lords, I shall comment on Amendment No.16 and others tabled by my noble friend Lord Shutt. I am involved in 15 charities and voluntary bodies, which are declared in the Register of Lords Interests. There is no question that the ability of these charities to survive is very tenuous in some cases, while others are doing exceptionally well. The ones I am associated with that I have great concerns about are environmental charities, which often own property and land and which provide a superb service, not only for country dwellers but also for those in metropolitan areas. They would be captured in the net as the Bill is currently phrased. The amendments would provide a lifeline to many charities by ensuring that they were not unfairly penalised.
Baroness Whitaker: My Lords, I was puzzled by many of these amendments. I am involved in a number of charities, as is evident from the Register of Lords Interests. The noble Lords amendment to Clause 209 does not seem reasonable. It would be unreasonable to fetter the Executive as tightly as some of these
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I was much persuaded by the remarks of the noble Lord, Lord Best. He was talking, of course, about exemptions for charities. Speaking generally, the term charity covers a wide range of undertakings, and the activities of charitable institutions are also very variedthe charity owned by Northern Rock had some curious aspects.
Some charitable trusts put up buildings that have significant infrastructure implications; for example, a big art gallery in a city centre. Such trusts are economic undertakings when they charge to make a return on investments and to create additional funds. We are party to treaty obligations not to create unfair competition through state aid, with penalties, including for the charities, if we do. I live not far from the piers of the south-east coast, which could be a case in point. There is a real difference between what non-government Members may suggest and what Governments can actually do. I hope we do not accept constraints that would be quite unsuitable.
Baroness Andrews: My Lords, I have had the hand of history as well as comparisons to a vision of sainthood offered to me this afternoon. I am extremely grateful for all the kind things that have been said across the House. I pay tribute to my officials for an extraordinary job of work. The issues raised by the amendment have taxed us all.
On the other hand, of course, I have been accused of prevarication and obscuration. I wish that I had gone through the Charities Act 2006 with noble Lords. I suspect that, having been here for the passage of that Act, which was pretty heavy going, I would have understood many things that I have had to learn quickly in the past few days. I understand why the noble Lord, Lord Shutt, and the right reverend Prelate call for clarity. We are trying to make things as unambiguous as possible in legislation, so that we can have certainty about outcome and impact. That is absolutely the right thing to do.
Sometimes, however, clarity comes at the expense of risk. Things are complex. The problem with the third sector, as the noble Baroness, Lady Whitaker, pointed out, is that it is hugely diverse and complex in terms of what it does, charities objectives, how they work, their relationships, their economic arrangements with trading funds and so on. We are incredibly privileged to have this sector, but it is by no means simple. In all my dealings with noble Lords over the past few weeks, discussing these amendments with the Charity Tax Group, listening to debates and so on, I am reminded time and again how complex these areas are and how vital it is to be careful about what we are doing. Underlying everything I say this evening is a deep desire to do what is right and safe for the third sector, and to make absolutely sure that what we have will be as fully protective and enabling as possible.
I know that noble Lords originally had a number of concerns about Clause 209 and how we will use the powers it gives us to help charities in the important
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and the development is to be used wholly or mainly for its charitable purposes. The noble Lord, Lord Best, spelt that out in his contribution. A relevant charity in this context is defined in subsection (4) as any charity registered with the Charity Commission or which is excepted or exempt from the duty to register with the Charity Commission. It is not just about registered charities. The subsection covers many scenarios: a lifeboat station developed for use by the RNLI, for example, or a hostel which would be used by a homelessness charity. It would also apply to a building only to be used as a head office for a charity.
The noble Lord, Lord Shutt, was talking about land on this point. However, CIL becomes liable only if there is development on it. It is extremely important to recognise that when charities buy and sell land alone, CIL is not directly engaged. Charities are in fact asked for Section 106 contributions, reflecting that their developments have impacts. We are looking at whether Section 106 could be scaled back so that charities might benefit from that. That is the reality.
I shall plough on. Not all types of charitable body will fall within the scope of subsection (1) and, in addition, some charities and charitable bodies may perform development, perhaps for investment purposes, which may not constitute using a building for charitable purposes, to which the 100 per cent exemption in subsection (1) is tied. We certainly want to explore providing as wide a range of relief as is legally and practically possible in regulations.
One noble LordI am sorry that I do not know whotalked about regulations by chance. There will be nothing chancy about these regulations. The Charity Tax Group is committed to working with us assiduously on this, as it has done so far. I have no doubt that it will be as tough and comprehensive as it needs to be.
Because we want as wide a range of relief as is legally and practically possible, subsection (2) provides a power for regulations to go further than the duty imposed in subsection (1). It does this in two ways. First, subsection (2)(a) provides a power in CIL regulations to provide an exemption to institutions established for charitable purposes which fall outside the coverage of subsection (1). We have expanded the scope of the clause precisely to enable us to help more charities. For example, this would allow us to cover those in Scotland and Northern Ireland, and, if appropriate, other EU charities where they wished to develop in England and Wales.
Secondly, subsection (2)(b) empowers CIL regulations to require charging authorities to make arrangements for an exemption or reduction to CIL to institutions
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I reassure noble Lords who are concerned that subsection (5) may be used to cut back the range of charities that may enjoy the 100 per cent exemption in subsection (1) that this is not legally possible. We cannot do that. This subsection applies only to the powers in subsection (2) and cannot be applied to the duty in subsection (1).
That caused noble Lords concern, which I understand. I gave assurances on Report that we could not lawfully use the powers to render the duty in subsection (1) meaningless or hollow. There was a feeling, which I regret, that somehow that qualification would render subsection (1) null and void. It does not, and would not have. I therefore undertook to take away the amendment tabled by the noble Lord, Lord Cameron, seeking to delete the subsection.
It has been put to us that this subsection does not provide sufficient comfort to the charities that regulations implementing this subsection will reflect our broad policy aims. It seems to presume non-exemption with unspecified conditions. That was the problem with the original drafting. We came back with Amendment No. 22, which amends subsection (3) so that regulations can provide that an exemption does not apply if certain conditions are satisfied.
I understand that this is not elegant, but we have had to be deliberate in our drafting. As we have amended this clause, it will convey the message to charities that being exempt where a development is used for the charitable purposes of the charity will be the usual situation, as the noble Lord, Lord Best, said. Where very specific conditions are satisfied, however, an exemption may not apply. I shall come to those conditions in a moment.
It is symbolic that we are approaching the giving of exemptions to charities as being our presumption. There is now a presumption as regards exemptions. I should also make it plain that we are not intending to use this power to find some general way outI should feel deeply insulted if anyone thought that we wereof providing an exemption of the sort required under subsection (1). It is for exceptional circumstances. Far from intending to be harmful, subsection (3) is intended to help because it will allow us to work with the sector to decide what sort of conditions should feature in regulations. I have spoken to many of your Lordships over the past few weeks and they will know that the
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As regards the anti-avoidance measure, it is important that regulations have powers to outline anti-avoidance measures. It is not without parallel. For example, Schedule 8 to the Finance Act 2003 stipulates the condition to the relief for charities from stamp duty land tax. It states that,
I am aware of the argument about bureaucracy and imposing another layer of regulation. I know that noble Lords are unwilling to countenance what they see as further regulation in a heavily regulated sector, but the charitable sector is heavily regulated because there is a lot of public interest and public money at stake. Private money is also involved. It is a hugely complicated financial sector which has to be regulated in the way that it is. However, subsection (3) does not automatically impose further regulation. It is a starting point for discussions with the sector and other stakeholders on what conditions relating to anti-avoidance might look like. I assure noble Lords, not least with the Better Regulation Task Force in mind, that avoiding unnecessary duplication of existing regulation will be uppermost in our minds during this process.
As regards Europe, I was very grateful for the contribution of the noble Baroness, Lady Ford, because few people know about what she referred to as the long tentacles of Europe, and the sharp eyes. I believe that we are absolutely right not to take any risks, however remote people feel they may be. It is vital that regulations can protect the charity sector from a breach of state aid rules, the penalties for which are serious and could involve charities having to repay relief, with interest. I understand that some noble Lords are sceptical about this issue but we cannot afford to ignore the risk of this happening. Again, this is an issue which has been brought up in other regimes giving charitable exemptions. For business rates, the guidance on rate reliefs for charities and other non-profit making organisations published by a former incarnation of my department in 2002 brings this issue to the attention of local authorities and sets out how they should respond where a state aid is given under this regime. This is not a distraction, as a noble Lord said. The European Commission rules on state aid state:
Aid must have a potential effect on competition and trade between Member States. It is sufficient if it can be shown that the beneficiary is involved in an economic activity and that he operates in a market in which there is trade between Member States. The nature of the beneficiary is not relevant in this context (even a non-profit organisation can engage in economic activities).
The European Commission takes a very wide, purposive approach to EU law in practice. Therefore, we are trying to be careful, to anticipate, to use foresight and to use evidence as the basis of our judgment.
Our view is that state aid law can be engaged even where a development is to be used for a charitable purpose since charities can be engaged in an economic activity, be in competition with other undertakings and are engaged in an activity where there is trade
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Government Amendment No. 23 is a purely technical change. Currently, Clause 209(4)(b) applies only to institutions registered in the register of charities kept by the Charity Commission under Section 3 of the Charities Act 1993. However, as a consequence of the commencement of Section 9 of the Charities Act 2006, the register will be kept under Section 3A of the 1993 Act. This amendment therefore amends Clause 209(4)(b) to cater for this change when it comes into force.
This has been an iterative process, and, as far as we have been able, we have taken on board the concerns of noble Lords at every stage of the Bills passage. Beginning with only the general power to make exemptions in Clause 221(1)(c), we have, at every step, attempted to provide greater detail, and indeed a duty on the sort of exemption which would be offered to charities. We have listened to what Peers and those in the charity sector have told us and acted appropriately. I believe that the provision we now have, as modified by these government amendments, delivers the reassurance which the sector seeks.
The noble Lord, Lord Hodgson of Astley Abbotts, invited me to put on the record the point about the definition of charitable purposes. I reassure all noble Lords that, legally, references to a charitable purpose implicitly include the plural charitable purposes. Section 6(c) of the Interpretation Act 1978 provides that, in any Act, words in the singular include the plural. I say to the noble Lord, Lord Best, that I wish I could give him as simple an assertion as he wants with regard to his question. He understands the complexities of this sector far better than I do, particularly as regards the housing sector and the range of social housing providers, including those in the private sector, and the diversity of development schemes. A single approach cannot be provided because we must avoid unintended consequences. I can certainly promise him that the Government will seek to work with the sector to explore the possibility of achieving our goal of a relief for charitable providers of social housing through the powers provided by Clause 209 to make provision for charities and institutions established for charitable purposes. However, where there may be providers of social housing whose developments we cannot make provision for through those powers, the Government willas I made clear on Reportexplore arrangements for differential rates for social housing development, which would mean that they would be liable to a significantly reduced rate of CIL. The use of powers to impose differential rates to significantly reduce CIL charges could extend to benefit all providers of social housing and help ensure wider and continued provision of affordable housing. So to the extent that the charitable exemption cannot be used to assist a certain social housing provider, we will be exploring how we can provide support through another route.
I distinguish between the amendments tabled by the noble Lord, Lord Shutt, which, as the noble Lord, Lord Hodgson, said, would drive a coach and horses
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I wish to speak to government Amendments Nos. 22 and 23 and then address the other amendments. These amendments make three key changes to Clause 209. First, they include development activity which is not for the charitable purposes of the charity in the duty in subsection (1). Secondly, they limit or even prevent conditions applying to exemptions given under subsections (1) and (2) and finally they clarify the boundaries between subsections (1) and (2). Opposition Amendments Nos. 16, 18, 19 and 24 are all concerned with placing a duty on the Secretary of State to provide exemptions from CIL.
Opposition Amendment No. 16 would delete subsection (1)(b), so the Secretary of State would be under a duty to provide 100 per cent exemption from CIL, regardless of whether the development was to be used for the charitable purposes of the charity. Presumably as a result of this change, the noble Lord, Lord Shutt, has deleted subsection (2) to Amendment No. 18 and replaced it with a similar provision to Amendment No. 24. This would allow CIL regulations to enable institutions other than charities to be exempted from CIL under the duties of section 1, and would require charging authorities to provide exemptions from, or reductions in, liability to pay CIL. Crucially, it would not allow regulations to remove certain kinds of charitable institutions from the purview of the clause. We believe that this is an important safeguard, for example in trying to cover charities from outside England and Wales, for the reasons I explained.
Opposition Amendment No. 19 would put a duty on the Secretary of State to provide exemptions from CIL for institutions established for a charitable purpose, and to require charging authorities to provide an exemption or reduction from CIL. I understand that its primary aim is to compel us to use subsection (2) to exempt charitable investment activity from CIL. However, it would also render otiose subsection (1) and lead to duplication of duties, and could also lead to unworkable results with competing duties.
I am aware of many concerns about development by charities that is not for the charitable purpose, and the fact that it will not be covered by the 100 per cent exemption under subsection (1). We have powers under subsection (2) to provide exemptions or reductions for charities in CIL regulations. These have been specifically taken so that we can build on subsection (1) to do more to help charities, but they need to remain discretionary; may rather than must. I assure noble Lords that our aim in principle is to exempt development by charities for investment purposes. Now we must explore these complex issues in detail, inside and outside government, to set out a final position in regulations.
Unlike development for charitable purposes, development for investment purposes brings into play a much wider and more sensitive range of activities, not all of which we believe should be covered by CIL exemption. Furthermore, development of land for sale by charities has the potential to bring the sector
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Opposition Amendments Nos. 20 and 21 seek to blunt the effect of subsection (3). Amendment No. 20 seeks to delete subsection (3) entirely. Amendment No. 21 prevents subsection (3) from specifying conditions under which the duties of Section 1 would apply. I hope that I have persuaded noble Lords that subsection (3), as it would be amended by Amendment No. 22, cannot be changed any further: it is a starting point for discussions with the charities sector on the conditions that might apply, particularly in relation to state aid and anti-avoidance. If my own amendment is accepted, subsection (3) would be worded in a way that symbolises that, in terms of duty, this clause provides as our starting point a presumption of exemption.
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