As to the question of co-operation regarding the unfinished business of the United Nations arising from the work of the Hammarskjöld Inquiry Trust, we will now have to await the findings of the Secretary-General as he presses the British and other Governments on their failure, to date, to release all relevant records to the UN. It will then be up to the United Nations, not me, to decide whether to point the finger at anyone.

There is one thing of which I am increasingly certain. Historians will take note of the high likelihood of the existence of a second plane and, similarly, of the high degree of suspicion that there was subsequently a cover-up by certain Governments, not excluding the British Government then and subsequently. In time-honoured words, history will be the judge. I beg leave to withdraw the amendment

Amendment 15 withdrawn.

Amendment 16 not moved.

Amendment 17

Moved by Baroness Hayter of Kentish Town

17: After Clause 12, insert the following new Clause—

“Power to make representations

(1) A charity may undertake political campaigning or political activity in the context of supporting the delivery of its charitable purposes.

(2) A charity may campaign to ensure support for, or to oppose, a change in the law, policy or decisions of central government, local authorities or other public bodies.”

Baroness Hayter of Kentish Town: My Lords, the amendment also stands in the name of my noble friend Lord Watson. The House may wonder why we have had to table it, given that it is already law that charities have the right to make representations. In fact, they have the right to make representations to any part of government about policy, laws or their enforcement, provided that it is not their main business, it is to achieve their charitable aims and it is not party political. However, there are many who doubt the Government’s acceptance of this right and their willingness to hear from people who normally have no voice—those without power and influence in society.

Let me rehearse the evidence. The Prime Minister, very early on, stated that lobbying was the next big scandal waiting to happen, and he did not mean lobbying by charities but cash for access, paid-for commercial lobbying and big business influencing

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Parliament or government. We applauded his insight and welcomed the coalition Government’s announcement of a statutory register of lobbyists. But what did we get? We got a wimp of a register that consisted of only consultant lobbyists and, as of last week, just 84 registered lobbying businesses. That is because, of course, in-house lobbyists, whether from airports, the defence industry, IT, food and drink, the energy sector or developers, do not have to register. More than that, the Bill that was actually introduced and since enacted covered, of all things, charities—those who speak out on behalf of their beneficiaries who, almost by definition, are the poorest in society, such as the ill, homeless and hungry in the world. It is these charities which must register with the Electoral Commission, whereas in-house, multimillion-pound lobbyists do not have to go on the register. For no reason at all, unions were also included. They must undergo a double audit to ensure that their membership records are accurate, despite there being no evidence that they are not and no complaints from the existing registrar.

If all that did not suggest that the Government wanted to gag the voices of the least powerful in society or those who they disagree, we got last week a whole new tranche of proposals to weaken the voice of workers. The Trade Union Bill is yet another attempt by the Government to stifle democratic scrutiny, protest and challenge. Indeed, it looks very much like another gagging Bill. In fact, it is worse; it even risks criminalising ordinary working people—from midwives to factory workers—if they challenge low pay or health and safety concerns. Not content with seeking to muzzle charities and restrict access to justice, the Bill smacks of trying to silence critics of the Government and their policy. All the while, big business can lobby.

We fear that the Government will do everything to help big business to lobby, ex-pats to vote and maybe fund political parties, but muzzle working people, their unions and political representatives, and beneficiaries of charities who have no one else to speak for them. For those reasons, we feel the need to assert again that charities have to right to speak out on behalf of their beneficiaries where this helps to achieve their charitable objectives.

As the Charities Aid Foundation said, this amendment reiterates existing law that charities are able to take part in political campaigning or activity as long as it is not party political. This is a principle worth reinforcing after the lobbying Act, which caused confusion for a number of charities, which are less clear about the legitimacy of their campaigning activity. The Charities Aid Foundation believes that the amendment is important in ensuring that charities are able to continue to fulfil their campaigning function and seek to achieve positive change that will help their beneficiaries. It states:

“The campaigning activities of charities might … lead to criticism of government or the policies of political parties, but ensuring that charities are able to continue their advocacy role is a critical part of … civil society”.

The CAF goes on:

“Many countries across the world look to the UK for guidance about the best way to allow civil society to thrive, and we must ensure the ability of charities to speak up for the voiceless remains a part of the remit of the UK’s charities”.

I could not have put it better. That is the reason for this amendment. I beg to move.

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5.30 pm

Baroness Pitkeathley (Lab): My Lords, I want to speak in favour of the insertion of the proposed new clause, and declare an interest as a former chief executive and now vice-president of a campaigning charity, Carers UK.

Last week, I gave a lecture on 50 years of the carers’ movement in which I argued that the fact that carers, their needs and their contribution are now so widely recognised is due almost entirely to the work of campaigning charities such as Carers UK, which have enabled the carer’s voice to grow strong and influential in bringing about policy change. Just to support what my noble friend Lady Hayter said about leading the world, I say that the carers’ movement is indeed an example to the whole world; it is in contact with emerging carers’ movements throughout the world and is a global influence.

I want to ensure that such organisations are confident in the legitimacy of their actions, whether it be campaigning for a change from which all will benefit or opposing a proposed change which is likely to disadvantage that client group. I know that it can be said there is nothing which currently inhibits such action on the part of charities and I believe that the Charity Commission may revise its so-called CC9 guidance to make sure that this is understood. However, like my noble friend, I believe that the passage of the lobbying Act has had the effect—I know that it was not the effect that was necessarily intended—of limiting campaigning by charities. We saw this clearly in the run-up to the general election, where charities did not have the strong voice that we normally expect at such times. It has made charities nervous; it has diminished their confidence. The insertion of the proposed new clause would go some way to remedying this situation and re-establishing that confidence. I emphasise that I want that confidence to be re-established not for the benefit of the charity but for that of the recipients of that charity’s services, by influencing policy in the way which is such a proud tradition in our country.

Lord Lea of Crondall: My Lords, in supporting the amendment, perhaps I may revert to a point which came up in Committee. It concerns what exactly we are to believe is the position under the present law.

The noble Lord, Lord Wallace of Saltaire, gave a long disquisition on party political support—which we knew was not charitable—but there are many examples of where the objection “this is political” is used against the registration of charities which in no sense are party political. The charity that I have been the chairman of is an example which your Lordships have heard about possibly to the point of tedium, but it demonstrates the fact that the dividing line at the moment is drawn in a place which the Government say is different from where it actually is drawn. It is drawn somewhere in the murky middle by arbitrary and subjective decision by the Charity Commission, which is dangerous for its credibility.

I have raised the example of an anti-EU charity putting out in a press release a narrative beginning, “In the latest outburst from the gauleiter of the European Commission, Mr Juncker”. As I pointed out, “gau”

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and “leiter” are two quite straightforward German words—“gau” means district and “leiter” means leader—and until 1933 there was nothing wrong with “gauleiter”. But ever since 1933, there has been a lot wrong with “gauleiter”. And so that is not political. How on earth can the Minister defend the arbitrariness and subjectivity of the commission when it pronounces that it objects to the Hammarskjöld inquiry commission on the grounds of it being “political” and says not a word about other charities which find favour with it?

Lord Judd (Lab): My Lords, I spoke at some length on this issue in Committee and will therefore not try the patience of the House on Report by repeating all that. I simply say that, as somebody who has worked in the charitable field for quite a lot of my life—I have been chief executive of more than one charity; I have been an honorary officer and a trustee, and I am currently a trustee of one charity—there is an underlying issue here which is of profound importance.

Charities with great experience of front-line engagement have come to realise that they are sometimes aiding and abetting the problems which exacerbate the difficulties faced by those whom they are trying to help, because they are removing the unpalatable symptoms of what is wrong and disguising what is causing the problem. They have come to see that through the experience of their own work. There are many trustees and many staff in some of what I think everyone would on balance agree are the better, more experienced charities who have come to realise that they simply cannot go on doing this, because they are treating symptoms and settling for that, and that one of the most important things they can do in the service of those whom they seek to help is to advocate their situation and to seek the changes which will overcome the causes of the problems of those who are the victims, and that it would be dishonest to do anything else.

Personally, I find the way in which the law on charity has operated in recent years to be perfectly acceptable, and charities have responded to that very well by recognising that they have a duty to ensure that what they are advocating really does arise out of the experience of what they are doing. That is not just a matter of legal, moral responsibility; it is also one of effectiveness, because if they can be seen to be speaking out of real experience that is a very strong muscle in their campaigning.

However, we have to face the reality that there are those who have never been comfortable with this situation and there have been noises in recent years that people would like to curb the sector. That in my view would be disastrous and totally unacceptable and unfair to those who are really trying on our behalf, sometimes valiantly, courageously and bravely, to do the things that are necessary. From that standpoint, to have it explicitly stated in the Bill has great merit. I am therefore glad to see the amendment here and I hope that the House will find its way to endorsing it.

Lord Bridges of Headley: My Lords, I have no difficulty at all in accepting the premise of the amendment—and much that the noble Baroness, Lady Hayter, said—which states that charities should be free to campaign where that is an effective means of

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furthering their charitable aims. Speaking up for their beneficiaries, who may have no voice in the democratic debate, stands long in the tradition of the charitable sector. Yes, it may be uncomfortable for some to hear the hard truths that they are told, but that is democracy at work and freedom of speech in action.

Charities have always campaigned, which is as it should be in a free society, and charity campaigns have brought about much good, opening our eyes to issues others have overlooked, often resulting in beneficial changes to the law. Examples are legion and stretch back over generations, and long may that continue. My objection to the amendment is not therefore that what it says is wrong. Indeed, it is not even seeking to have the right to campaign reflected in law, for it already is enshrined in law, through case law, as the noble Baroness said. My concern is that seeking to compress that case law into an amendment in the Bill is difficult, to say the least, and would be likely to inadvertently shift the boundaries of what is permitted under the law in unanticipated and unhelpful ways.

As well as being fraught with difficulty, such an amendment is unnecessary. The implication of the case law is set out in Charity Commission guidance CC9 and, with very few exceptions, that guidance is well understood and observed. Unlike primary legislation, commission guidance can be updated, with proper consultation, to ensure that it remains congruent with case law and up to speed with developments such as the rise of social media.

The introduction of the Transparency of Lobbying Non-party Campaigning and Trade Union Administration Act, to which a number of noble Lords referred, has recently made the relationship of the law and lobbying a matter of intense debate, and I can understand why. That Act is part of electoral law, and this is clearly not the time to rehearse that debate. However, the noble Baroness, Lady Pitkeathley, was one of many noble Lords who referred to the so-called chilling effect that it might have had at the last election, so I am pleased that my noble friend, Lord Hodgson of Astley Abbotts, has explicitly called for evidence from the voluntary sector and from noble Lords in his ongoing review of the third party campaigning rules that were updated by Part 2 of that Act. A clear view of the evidence about what impact the updated rules have, or have not, made in their first year is exactly what is needed on an issue that has aroused such strong feeling. The Charity Commission would obviously need to take account of my noble friend’s findings should it decide to review CC9. If there were any such review, the commission has committed to say so publicly and consult widely and wisely.

On the point made by the noble Lord, Lord Lea, the Charity Commission does indeed take action in cases where charities of all political persuasions are seen to have crossed the line. During the last election, a charity that was making a point that could be construed as being supportive of the Conservative Party was pulled up short. I therefore do not think it strictly true to say that it does not take action.

This Government welcome and support the campaigning role of charities, properly regulated and properly understood, and acknowledge the benefit

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that that brings to wider society. I hope that on that basis, and given what I have said to reassure the noble Baroness, she will feel able to withdraw her amendment.

Lord Lea of Crondall: The Minister has totally misunderstood the purport of my question, which I will repeat. It is clear that the dividing line about what is political has nothing to do with support for a political party. What the Minister just said is a red herring. Of course, things can be ruled out for direct or indirect support for the Labour Party or the Conservative Party. My point was this. That is not in practice the dividing line drawn by the commission, where party political support is ruled out and other matters are ruled in.

Lord Forsyth of Drumlean (Con): Oh!

Lord Lea of Crondall: I would like, on the second time of asking, with the permission of the noble Lord, Lord Forsyth—from a sedentary position if you please—to have an answer to the question that I posed in Committee that was not answered and I now repeat.

5.45 pm

Lord Bridges of Headley: I am sorry if I displease the noble Lord still further this afternoon, but any concerns about inappropriate language or material on the part of a charity should be referred to the Charity Commission, which is the independent regulator and will assess those points on a case-by-case basis. The Charity Commission can and does investigate these sorts of concerns in accordance with its risk framework, which sets these things out. I am sorry if the noble Lord dislikes that answer, but that is it.

Baroness Hayter of Kentish Town: My Lords, I thank my noble friend Lord Judd, who ran Oxfam, and my noble friend Lady Pitkeathley. If my memory is right, the Cabinet Office made Carers UK charity of the year this year, so I am sure that the Minister will have heard particularly from her on that. The Cabinet Office made a great choice.

I thank the Minister. I very much welcome his endorsement of the premise behind this. He gets what we are about. I welcome what he said about the Government listening carefully to the wise words that we know we will have from the noble Lord, Lord Hodgson. We await his report. Having on record his acknowledgement of the role that advocacy can play on behalf of those without voices is to be welcomed. We look forward to that report—no pressure there, then—from the noble Lord, Lord Hodgson, but for the moment, I beg leave to withdraw the amendment.

Amendment 17 withdrawn.

Counter-ISIL Coalition Strategy


5.47 pm

The Minister of State, Ministry of Defence (Earl Howe) (Con): My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State earlier this afternoon on “Counter-ISIL Coalition Strategy”. The Statement is as follows.

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“Mr Speaker, ISIL poses a direct threat to the UK and to countries around the world. Last month, 30 British citizens were murdered on a beach in a brutal and cowardly attack inspired by ISIL. It is right that the UK is making a significant contribution to the international coalition to defeat ISIL and destroy its bases in Iraq and Syria.

More than 60 countries, both within the region and from outside, are part of that international effort, demonstrating the widespread opposition to and abhorrence of ISIL’s barbarous terrorism. There is a well-planned, integrated strategy to defeat ISIL which includes: action to cut off its funding; stopping the flow of foreign fighters; humanitarian assistance to both Iraq and Syria; strategic communications co-chaired by the UK to tackle its poisonous ideology; and the military campaign.

This strategy is overseen by Ministers from all the key nations, including the Prime Minister of Iraq, Haider al-Abadi. Our strategy is therefore comprehensive and broader than simply military action. It deals with the ideology and territory that is ISIL’s centre of gravity that it is committed to expanding. However, the military element is essential. The coalition has helped to halt and hold ISIL after its rapid advance across Iraq last summer. Coalition airpower, including sophisticated UK aircraft, flies daily missions to strike ISIL targets and gather intelligence.

The air campaign is helping to turn the tide and it will support ground forces to ultimately defeat ISIL. The Iraqi Prime Minister has been very clear that those forces must be local forces. Western troops operating in a ground combat role would serve only to promote ISIL’s ideological narrative and radicalise more people.

Our expertise is being used to help train local forces and to support efforts to generate Sunni forces to retake and hold the ground in Sunni areas. So far, the coalition has trained nearly 11,000 Iraqi personnel, with the UK training over 1,700. Iraqi forces, supported by coalition airpower, have had some successes against ISIL, retaking Tikrit, pushing ISIL out of Baiji and away from the Kurdish region of Iraq, and they have recently begun operations to retake Ramadi. Since August last year, ISIL has lost about a quarter of the territory that it held in Iraq.

Roadside and vehicle-borne bombs are slowing the progress of Iraqi forces. I can announce today to the House that the first additional counter improvised explosive device training team will deploy around mid-August. When complete, that will bring the number of British troops inside Iraq to 275.

Tackling ISIL only in Iraq is illogical when ISIL itself does not respect international borders. Its command and control centre is in northern Syria. It is from there that its weapons and fighters flow into Iraq. It is from there that its global influence spreads and from where the direct threat to the UK comes. In Syria, the UK is contributing up to 85 personnel to the US-led programme to train and equip the New Syrian Forces trained outside of Syria, but which will fight ISIL once reinserted back into Syria. Our aircraft are gathering intelligence over Syria for the coalition and we are also the only country flying manned intelligence, surveillance and reconnaissance aircraft over Syria. Some 30% of the entire surveillance operation is British.

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Let me turn now to the issue of embedded personnel. As I reported to the House earlier today, while the UK is not conducting air strikes in Syria, our Armed Forces regularly have embeds in the forces of our close partners. Embedded UK personnel operate as if they were the host nation’s personnel under that nation’s chain of command, but they remain subject to UK domestic, international and host nation law. Ministerial approval is required for UK embeds to deploy with allied forces on operations. Over the last 12 months, a total of five pilots have been embedded at one time or another with forces conducting strikes over Syria; none is currently involved in air strikes. A further 75 personnel have been embedded with US, Canadian and French forces in a range of operations against ISIL.

ISIL has killed many of our fellow citizens and it is actively plotting to kill more. The Prime Minister today set out our plans to tackle extremism and radicalisation at home. We are also determined to use the forces at our disposal to do more to tackle ISIL at its source. I commend this Statement to the House”.

My Lords, that concludes the Statement.

5.52 pm

Lord Rosser (Lab): My Lords, I thank the Minister for repeating the Statement already made in the other place by the Secretary of State updating the position in Iraq and Syria in respect of action against ISIL. The Secretary of State has also issued a Written Statement today on the subject of UK embedded forces in which he confirms that,

“up to 80 UK personnel have been embedded with US, Canadian and French forces”,

since the international coalition commenced military operations against ISIL last year. The Secretary of State went on to say:

“A small number of embedded UK pilots”—

I think it was five—

“have carried out airstrikes in Syria against ISIL targets”,


“none are currently involved in airstrikes”;

and that:

“Ministerial approval is required for UK embeds deployed with allied forces on operations”.

The House of Commons voted against military action in Syria in 2013 and parliamentary authority has only been given to UK air strikes against ISIL in Iraq. The Prime Minister told the House of Commons on 26 September 2014 that:

“I have said that we will come back to the House if, for instance, we make the decision that we should take air action with others in Syria”.—[Official Report, Commons, 26/9/14; col. 1266.]

That undertaking has clearly been broken, unless the Minister is going to tell us that neither the Prime Minister nor the Secretary of State for Defence knew what was going on with UK pilots carrying out air strikes in Syria. Can the Minister tell us, therefore, if the Prime Minister and the Secretary of State for Defence knew? If they did, when did they know, and which Minister gave the required approval, and when, for these UK embeds to be deployed with allied forces on operations? Were they aware that in so doing, they were authorising UK pilots to carry out air strikes in Syria against ISIL targets?

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Did the Prime Minister know that embedded UK pilots had carried out, or had been authorised to carry out, air strikes in Syria against ISIL targets when he made his statement on 26 September last year? If the authorisation for UK pilots to carry out air strikes in Syria against ISIL targets was given during the time of the previous coalition Government, can the Minister say if the then Deputy Prime Minister would have been advised of, or his approval sought for, a small number of embedded UK pilots carrying out air strikes in Syria against ISIL targets?

The involvement of members of our Armed Forces in Syria has come to light only as a result of a Freedom of Information Act request, and the future of that Act is now under threat from this Government. Without that ability to make a Freedom of Information Act request and secure an answer, the involvement of members of our Armed Forces in Syria would not have come to light since it is clear that neither this Government nor perhaps the previous coalition Government had any intention of telling either Parliament or the British people, even though Parliament had voted against military action in Syria and the Prime Minister had pledged to come back to the House if the decision was made that we should take air action with others in Syria.

In his Statement, the Secretary of State said that:

“UK personnel have embedded with other nations’ air forces since the 1950s”;

and in the House of Commons today, the Secretary of State sought to say that the Government had actually been quite open about what had happened because they had responded to a freedom of information request. Can the Minister tell us the last time embedded UK forces have been involved in operations and military action in a country when the House of Commons has voted against our Armed Forces being involved in military action in that country and has not subsequently changed its decision?

On the Secretary of State’s claim of openness by the Government because they had responded to a freedom of information request, the reality is that without that request—and most people would have assumed that, in the light of the Prime Minister’s undertaking last September, there would be no British military personnel involvement in operations in Syria—the first the nation might have known about this activity would have been if something had gone wrong. Can the Minister now give an undertaking that there will be no further use of embedded forces in Syria without parliamentary consent, in accordance with the Prime Minister’s undertaking?

We share the Government’s abhorrence of ISIL’s cold-blooded terrorism and we remain ready to work with the Government to defeat ISIL and will carefully consider any proposals that they decide to bring forward. In so doing, we would need to be clear about what difference any action would make to our aim of defeating ISIL, about the nature of any action, its objectives and legal basis. But going behind the back of Parliament and keeping it in the dark, as it is clear the Government have done with the forced disclosure that UK pilots have carried out air strikes in Syria against ISIL targets contrary to Parliament’s decision, does not help.

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Somebody in government has tried to be too clever by half by maintaining, as the Secretary of State for Defence has done in his Written Statement, that the Prime Minister’s undertaking excluded UK personnel embedded within other nations’ armed forces operating in Syria, on the basis that it applied only to the deployment of UK forces. The Prime Minister certainly did not make that exemption, and neither did Parliament in its decision. That somebody has done a disservice to the nation, to Parliament and to our Armed Forces—which have served, continue to serve, and will always serve us with great bravery and commitment.

Lord Wallace of Saltaire (LD): My Lords, I am most worried about the statement in this Statement:

“There is a well-planned, integrated strategy to defeat ISIL”.

That is not what it looks like to many on these Benches and elsewhere. We are in an extremely complex situation in the Middle East in which some of our partners are on our side in some respects and on the other side for other purposes. I was being briefed at lunchtime today about the complexities around the Kurdish forces which are involved in the conflict both in Syria and in Iraq, and the deeply ambivalent attitude of the Turks and of the Iraqi Government to their activities. That is merely one of the many complexities that we face.

The coalition, after all, includes Turkey, Qatar, Saudi Arabia, Jordan, and many others, many of which have reservations about how we see the conflict. For many purposes, Iran is effectively now an additional member of the coalition, and one of the strongest forces opposing ISIS. I wish I could see a well-integrated strategy. I fear that it is not possible to have one, given the complexity of the situation facing us.

We are talking about local forces that are engaging ISIS. Jabhat al-Nusra is one of the forces that engage ISIS but I am not entirely sure that we want to support it or provide it with more assistance. Some of the Shia militias in Iraq are not as easy as we would like, and sadly the Free Syrian Army, which we have been training, is not one of the strongest forces in the land. I was also worried by what the Prime Minister said at the weekend about domestic radicalisation and counterterrorism because we are all clear that there are direct links between domestic radicalisation and the actions of some of our allies and partners in promoting radical and jihadist versions of Islam against moderate Islamic practices.

We recognise that the Government are edging towards asking for British planes to be involved in bombing in Syria. A small number of British planes bombing ISIS in Syria is no more likely to resolve the multiple conflicts across the Middle East than bombing Damascus would have done two years ago. There is no shortage of aircraft in the Gulf states and Turkey that are quite capable of bombing ISIS from the air. It worries me that we are told that 30% of the surveillance activities over Syria are being conducted by British planes. That suggests that not many other planes apart from American ones are flying over Syria.

Sadly, some of the Governments have themselves supported radical Islamic groups and are still ambivalent about attacking Sunni groups, however radical or brutal, such as Jabhat al-Nusra. It is not in Britain’s interests to cling to the hard-line Sunni side of a

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developing Sunni-Shia conflict. Nor is it in our interests to present ourselves to ISIS as an existential enemy—I note that the Statement downgrades “existential threat” to “direct threat”, which is perhaps a little better—when ISIS is a much more direct threat to moderate Muslims and to regimes across the Middle East. We should be working with others to promote a coherent response from the neighbours of Syria and Iraq, which we can support, not repeating the mistake of the 2003 Iraq war when we followed the Americans into bombing and then occupying an Arab country.

Some of Britain’s allies in the Middle East have actively funded radical Islamic mosques and movements in the UK and elsewhere. The Prime Minister’s commitment to combat radicalisation within Britain would be more persuasive if he spelled out to the Saudi Government, in particular, our condemnation of Saudi money funding radical groups, and that the Saudis must now themselves take responsibility for containing violent jihadism among Sunni Muslims.

The Prime Minister responded positively to a request from our Middle East partners that we should conduct an inquiry into the Muslim Brotherhood. It is now time for the Prime Minister to ask them in return to conduct an inquiry into the funding of radical Islamic groups in our territory.

I have some questions, if I may. Which local forces are responding? Do they include Kurdish forces in Syria and Iraq? Do they include the Shia militias? What is their attitude to Jabhat al-Nusra? How many of our Middle Eastern partners are currently flying air strikes over Syria? I was told the other day that only one was doing so—Jordan. In terms of embedded personnel, how many RAF pilots are embedded in US drone units, which are flying drones, including armed drones, over the Middle East? How many embedded personnel from other states are currently embedded in British forces? I have been told that French pilots are flying in RAF strike fighters, for example. We, of course, know about the Dutch in the UK/Netherlands Amphibious Force. Are there others? Would it not be proper, either now or later, to give us at least a Written Statement telling us what the position is the other way round as well?

Earl Howe: My Lords, I am grateful to both noble Lords for their comments.

The implication, if not the overt proposition, of the remarks made by the noble Lord, Lord Rosser, was that Her Majesty’s Government had been guilty of bad faith towards Parliament. I ask him to accept that there has been no bad faith towards Parliament. Indeed, that is the last thing that Ministers want.

I take the House’s mind back to the vote that took place in the House of Commons on 29 August 2013. The context of that vote was a proposal to approve UK military action to prevent and deter the use of chemical weapons by the Assad regime. The Motion before the House was not about, and significantly did not cover or forbid, anything else. It explicitly did not recognise the rise of ISIS, which had not by then occurred. What has ensued from those votes?

At no time have British pilots or British aircraft been involved in strikes against the Assad regime under the British flag. The will of Parliament has,

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therefore, not been flouted in that sense. Indeed, the United States has not been involved in air strikes against the Assad regime. In accordance with a decision of the House of Commons on 26 September 2014 we have been involved in coalition operations against ISIL in Iraq, and we have supported our allies in their operations against ISIL in Syria—notably in surveillance operations. There have not, on the other hand, been any UK airstrikes over Syria. What we are talking about now are US airstrikes against ISIL in Syria, which have included some embedded UK pilots over the last few months.

Embedded personnel are not acting under a UK chain of command. That is why Ministers did not think it incumbent on them to report to Parliament about the potential use of those embeds. I was asked when formal authority was given. I understand that it was given in early October last year by the Secretary of State for Defence and the Prime Minister. Operations conducted by the United States did not in our judgment fall within the scope of the Government’s commitment to return to Parliament if the UK were ever to propose to take military action in Syria.

I naturally regret it if the noble Lord feels that he would have taken a different view. However, it has been long-standing practice by Governments of all colours not routinely to publicise embeds, as they are not our forces or indeed our operations. Those operations are a matter for the forces concerned. The view of Ministers was and remains that there was no need to change that position as these pilots were operating as members of the host nations’ military, so the House should be clear that this is not Britain conducting airstrikes in Syria. However, of course, we confirm the position, if asked. When my department received a request we were happy to set out the position.

I can say, too, that there is a clear legal basis for coalition operations in Syria, which governs any activity that takes place in that country. Any activity by UK personnel embedded within US or Canadian forces will be conducted in accordance with the UK’s interpretation of international law, and of UK law and the appropriate rules of engagement.

With regard to the future, the House will be aware that we do not regularly update either House of Parliament on this routine area of defence activity. As I said, we respond to parliamentary inquiries when those are put to us. UK forces are regularly embedded in the forces of other nations. They have been for many years, and we have a long-standing exchange programme with allies, meaning that there will always be a small number of UK military personnel operating under the command of foreign nations. It would be quite impractical to have some kind of unwieldy, running commentary on military operations conducted by other nations.

I turn to the remarks of the noble Lord, Lord Wallace, many of which I welcomed and agreed with. ISIL cannot be defeated on the battlefield alone. We continue to work to support the kind of inclusive political settlements that would help to deal with the causes of ISIL’s rise. In Syria, this means that we are working to support the moderate opposition and to push for a political settlement.

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The noble Lord said that, in his perception, there was no visible sign of a strategy. However, I bring his attention to the fact that there is a very concerted political mechanism overseeing the campaign against ISIL, of which the military component is only one part. That strategy involves a number of key nations. There have already been two significant meetings, at Lancaster House and in Paris, to draw up and take stock of the strategy. It has five strands, as the Statement indicated: counterinformation, the flow of fighters, the humanitarian dimension, countering the financial flows that ISIL receives, and military operations. We are supporting the Iraqi Government in their commitment to inclusive governance and reconciliation between communities, particularly as they re-establish security and governance in areas liberated from ISIL’s control. We are also pressing Prime Minister Abadi to progress his national guard law to strengthen the Iraqi security services’ accountability.

The noble Lord asked me what the value-added of a UK component in offensive operations in Syria would be, were we ever to come to Parliament to seek permission for that. He asked me a number of detailed questions. If he will allow me, I will reply in writing to the extent that I have the information, but the United Kingdom can and does offer some unique capabilities that would undoubtedly be seen as extremely helpful if we were to join offensive operations over Syria, not least a capability for precision bombing.

I also ask the House to reflect on the overall context of what we are talking about. ISIL is a ruthless organisation. It has murdered several of our innocent citizens in Tunisia and in other parts of the world very brutally. It is right that we support our United States allies in what they are doing to counter ISIL. As the Statement made clear, ISIL’s centre of operations is in northern Syria. While we are not proposing ever to flout the will of Parliament in terms of conducting offensive operations against Syria ourselves, nevertheless we will continue to play our part in what has become a very effective coalition.

6.13 pm

Lord King of Bridgwater (Con): Does my noble friend recognise that the House thinks the Government are quite right to bring forward, before the House rises, this Statement on their strategy to counter ISIL? It is against a situation that every single Member of this House recognises is extraordinarily grave, in terms of both security and the possible humanitarian catastrophe that might affect some of the countries we are dealing with. Against that background, I find it absolutely mind-blowing that the sole contribution from the Opposition Front Bench was to argue against the system of embedding, which anybody involved in defence knows has been long-established for many years by different countries. We take in officers and other ranks from other countries; we likewise enjoy the benefit of them. They are under other people’s command. It is run as effectively as possible.

The noble Lord, Lord Wallace, made a much more measured contribution on the question of the objectives. In addition to the military objectives and the diplomatic objectives—Russia, Iran and others have a contribution

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to make in this area—is resources and funding. Anyone who has had to deal with terrorism knows that very often, at the back of it, money has a lot to do with it. The greatest effort that can be made, in addition to the military and security effort, is to try to switch off the resources that are undoubtedly available to ISIL in its various activities.

Earl Howe: My Lords, I can say only that the House would be wise to listen to my noble friend. He has immense experience in this area. I fully agree with his comments.

Lord West of Spithead (Lab): My Lords, I am delighted that we now have a well-planned and integrated strategy, because until now we did not seem to have one at all. I thought the Prime Minister’s speech today about the UK aspect of that was very good. We are beginning to tackle this, but my goodness me, we need to get our act together on all the strands that the noble Earl talked about.

My question relates specifically to Syria. Clearly, the Americans are running the air tasking order for that region, which is highly complex. As the noble Earl said, we are using a lot of ISTAR assets over Syria, so the Americans must at the very least be dealing with Assad and his integrated air defence system, talking to him prior to these operations going on. I would be interested to know how much we have been involved in talking to Assad and his people about this. Clearly he has given permission for this to happen, aside from saying that the Iraqis have. Looking ahead, it makes no military sense only to attack targets in Iraq and not in Syria, as has been said. What sorts of deals will we be doing with Assad? In the final analysis, even if we clear Iraq of ISIL fighters—which we will—we will not have beaten ISIL because it has a haven and base in Syria. We will end up having to do something in Syria that is unbelievably complex and difficult. I am not at all clear how we can move forward in that arena.

Earl Howe: My Lords, again, I agree with much of what the noble Lord, Lord West, said. I am not aware of any discussions that have been going on with the Assad regime on the part of UK Ministers. If there is anything I can tell him on that front in writing I will, although he will understand that much of this territory has to remain confidential. Indeed, we do not comment on the detail of specific operations, as he knows. Nevertheless, the overarching point that he makes is fair. We certainly do not want anything we do to assist the Assad regime. I do not believe that we have been guilty of that. However, it is important to counter ISIL wherever it appears and to push it back from the territory that it has gained. After that, we need to address the Assad regime and how, on an international basis, we set about displacing it.

Lord Wright of Richmond (CB): My Lords, at the risk of repeating some of the points already made, does the Minister accept that several members of the international coalition, such as Turkey and Saudi Arabia, attach a higher priority to the removal of the Syrian regime, as part of the Sunni/Shia or Arab/Iranian dispute, than they do to the containment of ISIL?

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The Statement makes clear that any strategy is overseen by Ministers from key nations, including the Prime Minister of Iraq. What about Syria? What steps are the coalition taking to co-ordinate their action with the Syrian armed forces, which after all are taking the main brunt of ISIL’s military expansion in Syria? Finally, would the Minister tell us what contact, if any, we or our European partners have with the Government in Damascus?

Earl Howe: The noble Lord’s question is very similar to that asked by the noble Lord, Lord West. The short answer is that I do not know. If there is an answer I can give to the noble Lord about that, I will be happy to do so. However, these matters are very delicate. As he said, the political forces at play—if I can put it that way—in that part of the world are extremely complex. He rightly points to the priorities of some countries in the region being different from those of the United Kingdom, and I agree. I think the same could be said for Turkey, which perhaps puts greater emphasis on countering the Kurds in the southern part of Turkey than we do. Nevertheless, we are working with our Turkish friends and they are extremely supportive of the work we are doing. I am advised that there are no direct discussions with President Assad or his regime. However, if there is any further detail I can give the noble Lord, I will, as I say, follow up in writing.

Baroness Falkner of Margravine (LD): My Lords, I have great respect for the noble Earl, Lord Howe, so it is sad to see his semantic convulsions to avoid the impression that UK forces are flying in bombing missions over Syria. If one of those five pilots were shot down during a bombing raid, how would he explain in plain English to the country that this was not a military operation by UK forces over Syria? On the broader point, is he aware of the comments over the weekend of the noble and gallant Lord, Lord Richards, former Chief of the General Staff, that an ideology such as ISIL’s cannot be defeated militarily other than through boots on the ground and a full-on war, even if one were to go that far? Therefore, will he tell the House what happens when ISIL is displaced to other countries such as Afghanistan and Pakistan? Are we going to reinvade those countries? What strategy do the Government think they are achieving through the military part of this campaign?

Earl Howe: My Lords, I did see the comments of the noble and gallant Lord, Lord Richards. I simply point out that, as for the proposition that the United Kingdom, or, for that matter, any of the coalition allies, should put boots on the ground in Iraq, or, indeed, Syria, that course of action would not be conducive to a satisfactory end game or resolution. We are in Iraq at the invitation of the Iraqi Government. They have said in terms that they do not wish to see western ground troops in their country for the very good reason that the more we, as western nations, are seen to occupy Iraq, the more likely it is that local people and, indeed, individuals in this country will be radicalised, so that cannot be a way forward there. Let us be in no doubt, though, that the air strikes have achieved very significant results. I am sure all noble Lords agree that no air campaign could hope to win the war. However, the contribution that the air campaign

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has made is beyond question. It has stalled ISIL in its tracks, has enabled ground forces in Iraq to recapture large slices of territory previously occupied by ISIL, and has been effective in keeping ISIL at bay. It is not the whole story. That is why, along with our allies, we are engaged in training Iraqi forces and their officers. This is very welcome to the Iraqi Government. It is necessary, I believe, and this activity will continue.

I hope that the noble Baroness will allow me to avoid her first question about what might happen if a British pilot were captured, as contingency plans are in place for the retrieval of pilots by the coalition if need be. However, I do not wish to go into the detail of what those plans are.

Lord Howell of Guildford (Con): I very much welcome the way in which my noble friend presented this very clear Statement on coalition strategy to the House. It casts new light on an issue about which there has been doubt in the past, and we all understand more clearly what is being done. It is of course complete nonsense to say that Parliament voted against attacking ISIS two years ago. ISIS did not even exist then and the vote two years ago was about a completely different issue. I cannot understand why that sort of “silly season” approach has been used by the Opposition.

My noble friend is also completely right to point out that ISIS makes a thing of ignoring international boundaries and national frontiers. It operates across countries and denies the existence of nations. As I think the Statement implied, it is absolutely clear that, in destroying ISIS, and this barbaric, evil movement, which is a challenge to all civilised nations, we have to operate on the same basis and in more than one country. That is absolutely clear. I am very glad to hear that for the future that is clearly the way the Government are thinking. I believe it is also important to recognise that this is not just a US-led western approach. The entire organised, civilised world is threatened and we need the maximum co-ordination but not from merely the regional powers; it needs to be eastern, Asian, western and southern powers as well—all are involved in bringing together this coalition, and strengthening it should be our prime task from now. Does he agree with that?

Earl Howe: My Lords, I do agree and I am grateful to my noble friend for his comments. He is quite right: ISIL does not respect international boundaries. My Secretary of State has said publicly that he thinks it is logically incoherent that the United Kingdom is unable to engage in offensive operations over the border into Syria, whereas it is able to do so in Iraq. Nevertheless, we have been absolutely clear that we will return to Parliament for a separate decision if we propose to take military action against ISIL in Syria. Having said that, as the Prime Minister has made clear, if there were a critical British national interest at stake, or a need to act to prevent a humanitarian catastrophe, we would act immediately in those circumstances and explain to Parliament afterwards.

Lord Dannatt (CB): My Lords, I have no particular brief to offer an explanation of what my noble and gallant friend Lord Richards said recently. However, if we take seriously the fact that ISIL must be defeated,

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the broad strategy of the coalition must be pursued with all vigour. I am sure that the noble Earl agrees with that. We need to do that to make sure that we do not, in extremis, ultimately have to put British soldiers and British units on the ground. Therefore, we must do everything short of doing that. Does the noble Earl agree that, although it is tremendous that there is now a coalition of 60 nations fighting ISIL, those myriad 60 countries can lead to confusion among those we are trying to help? A country such as the United Kingdom has great expertise in providing training teams, equipment and know-how to those fighting on the ground. Therefore, will the noble Earl bring to bear all the influence he can within the Ministry of Defence to ensure that we deploy our maximum efforts to send British training teams, so that our expertise is maximised and the confusion which a number of the recipient countries are experiencing is reduced?

Earl Howe: I agree with the thrust of the noble Lord’s points and questions. He is absolutely right that, to the extent that we are able to do so, we should use our strongest endeavours to contribute to the anti-ISIL effort. We will contribute around 85 military personnel to US-led training of the moderate Syrian opposition, training thousands of screened members of the opposition over the next three years in, for example, the use of small arms, infantry tactics and medical skills. More than 6,000 Syrians have volunteered for the train-and-equip programme and are in various stages of registration, pre-screening and vetting. It is imperative that we attract, recruit and retain the right candidates. We screen potential recruits thoroughly.

Our focus will initially be on helping the new Syrian forces defend communities against ISIL and eventually lead offences against its brutal attacks. Training will take place in Turkey and other countries in the region. I have already referred to the training we are undertaking in Iraq, which, as I have said, is welcomed by the Iraqi Government and is proving effective.

Lord Ashdown of Norton-sub-Hamdon (LD): My Lords, I am sure I heard the Minister say that were British aircraft to be used over Syria to bomb ISIL, they would bring—I think his phrase was—unique capabilities. Will he explain, within his ability to do so, what those unique capabilities would be that were not already fully supplied in good measure by the United States, apart from anyone else? Were the Government to bring to the House a proposition to use British aircraft over Syria, and were we to believe that that was anything other than token bombing for political purposes and to cheer ourselves up, we would need to be convinced that the very small amount of high explosive that the British could add to the huge weight of high explosive already in theatre, which can in fact not be used because it cannot acquire the targets, would make any material difference whatever. Surely our skills and ability would be better served by following the line proposed by the noble Lords, Lord King and Lord Howell, to see if we can build the wide coalition—building on the Tehran deal, bringing in Iran and bringing in Russia—that will be necessary to make sense of military action, which, without that, seems to have very little.

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Earl Howe: I agree on the need for a wide coalition. As has been said, there are already 60 nations involved in the current coalition. I also agree that it is important that we bring along with us as many other nations as we can.

As regards the proposition that United Kingdom forces under a UK flag should conduct offensive operations in Syria, as I said, that would be subject to a separate vote in Parliament. But it is right for me to make it clear that the Government would not wish to come to Parliament with a half-baked proposal. We would want to garner as widespread support as possible across the political spectrum, including from the Opposition, and that entails demonstrating that the UK could make not only a positive contribution to the coalition effort but one that would in a real sense be unique or nearly unique.

I mentioned precision bombing as one of the capabilities that we have that other nations do not, apart from the United States. We are certainly in a prime position to offer state-of-the-art surveillance capabilities to any operation, and we are second to none in the quality of the training that we supply to foreign countries.

Lord Naseby (Con): Is my noble friend aware—

Lord Hylton (CB): My Lords—

Noble Lords: Cross Benches.

Lord Ashton of Hyde (Con): My Lords, there have been equal numbers on both sides so if we are very quick, we can have the Conservative and then the Cross Benches.

Lord Naseby: Is my noble friend aware that I was an embedded RAF officer responsible to the Canadian Government in the 1950s and that there is nothing unusual about that? Will he please clarify the point about airspace raised by the noble Lord, Lord West? Is he saying that there is an air exclusion zone across the 30% of the ground area of Syria that is controlled by ISIL? Is he further saying that the surveillance drones are surveilling only that 30%?

Earl Howe: There is not an air exclusion zone because, as has been made clear, we are conducting surveillance operations on behalf of the coalition and we have always been open about that. What I hope I have been clear about is that we have not gone that stage further and commissioned or commanded British forces to engage in offensive operations over that territory.

Charities (Protection and Social Investment) Bill [HL]

Report (Continued)

6.34 pm

Amendment 18

Moved by Baroness Deech

18: After Clause 12, insert the following new Clause—

“Damages for torts by trustees or their employees

Damages for torts by trustees of unincorporated charities or their employees

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(1) The Charities Act 2011 is amended as follows.

(2) After section 284 (when and how section 282 resolution takes effect) insert—

“284A Damages for torts by trustees or their employees

(1) This section applies where—

(a) a trustee of an unincorporated charity is liable in tort by reason of his conduct in his capacity as a trustee of that charity; or

(b) a person employed by a trustee or trustees of an unincorporated charity is liable in tort by reason of his conduct in the course of that employment.

(2) Where this section applies, a person entitled to damages for the tort shall be entitled to recover those damages from the assets of the charity.

(3) Subsection (2) shall not affect the liability of any trustee, employee, or any other person.

(4) Where a claim is made under subsection (2), the provisions of the Civil Liability (Contribution) Act 1978 shall apply as if the charity had legal personality.

(5) Where a claim is made under subsection (2), or a contribution is claimed from the assets of a charity under subsection (4), the charity may be named as a party and may be represented by its trustees or such other person as may be appointed by the court in any legal proceedings.””

Baroness Deech (CB): My Lords, this amendment also stands in the name of my noble friend Lord Bew. There is a little link with the discussion we have just had. The noble Lord, Lord King, mentioned the need to cut off the sources of funding that go to terrorists. This amendment is not just about terrorism—far from it, although it would have the side-effect that he has just mentioned if a charity were involved in such activities. It enables the victims of mistreatment by a charity to recover damages from the assets of the charity, not just from the trustees themselves. It by no means removes any responsibility or liability from the trustees personally: that remains. But sometimes when there is a victim—for example, of sexual abuse taking place at a charitable school which is not incorporated—the victim may need and deserve more damages than the personal trustee has at his disposal. It is only right, therefore, to go against the assets of the charity. The amendment would end the disparity between incorporated and unincorporated charities.

Charities, as we have heard frequently today, are not just about helping the poor, underprivileged and disabled. They are moving into the realms of big business. There are many areas now covered by charities, some of which operate without being incorporated: indeed, there is no requirement for them to do so. They include student unions, communes, Scouts, clubs and after-school activities. It is possible for there to be damage. We have heard a great deal about charities that harass the public when they are collecting funds. At the moment, only innocent trustees can be indemnified where there is a claim against them, but they remain liable. The amendment would in no way destroy the personal commitment that trustees feel towards the charity they are supporting.

Injured civilians currently have too little recourse against unincorporated charities that do them harm, some of which may be connected with terrorism. The remedies under the existing law are not adequate where the trustees of an unincorporated charity do not have sufficient personal assets and were themselves involved in the wrongdoing or were reckless or negligent

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and so are not entitled to be indemnified by the charity. While those creating or running a charity may be free to choose the legal structure, the victims are not, and this amendment is ultimately about protecting victims.

The position of a wholly innocent trustee would be ameliorated by the amendment. Instead of the victim having to claim against the trustee and the trustee having to claim against the charity under an indemnity, the victim would be able to claim against the charity directly and the charity will not claim a contribution from a wholly innocent trustee. This is a benefit, not a disadvantage, of the amendment. The amendment would apply where a trustee of an unincorporated charity is liable in tort by reason of his conduct in his capacity as a trustee of a charity, or a person employed by a trustee or trustees is liable by reason of his conduct in the course of that employment. It is just like a company which is liable when a director commits a tort in his capacity as a director of the company or an employee of the company commits a tort in the course of his employment by the company. This applies whether or not the act is ultra vires. This is elementary law.

We are calling for this law to be made more helpful to victims, without in any way disturbing the responsibility that trustees, rightly, bear. In the past, victims of sexual abuse by Scout masters have successfully claimed damages from the Scout Association, because it happens to be incorporated by royal charter. The victims can claim damages from the organisation itself, but many local Scout associations are unincorporated, and there are dozens of them. Victims of sexual abuse, if it were to happen in the course of the activities of these associations, may well find it difficult, or impossible, to recover substantial compensation. It is not right that the availability of a remedy for the victim of such abuse should depend on whether the particular Scout association happened to be incorporated.

A religious organisation may be established as an unincorporated charity. Former adherents may claim that it has been run as cult and seek compensation for being imprisoned and deprived of their property by duress or fraud. The organisation may have substantial assets, since adherents are encouraged to donate generously, but the trustees may have no personal assets—so the claims by the victims are valid but completely worthless, because the trustees have nothing. They cannot demand that the trustees be indemnified out of the assets held on charitable trust since the trustees are themselves involved in the wrongdoing, in breach of trust.

In sum, this amendment will help victims and will bring to an end a difference between the incorporated and the unincorporated charity that has no justification. I beg to move.

Lord Bew (CB): My Lords, this amendment is in my name as well as that of my noble friend Lady Deech. Since we moved this amendment in Committee on 1 July, the issue has in some ways become sharper because of widespread reporting in the press of the harassment of donors by those working for charities. The issue of the circumstances that might arise where a victim is unable to seek compensation from a charity has become sharper than it was even a very short time ago.

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That said, I wish to reassure the noble Baroness, Lady Barker, and others that we are well aware that the charitable sector is fundamentally a source of great good in our society, and we are very concerned that anything that we propose today does not in any way reduce the legitimate freedom of activity of our charities. It is very important to keep this in mind and to try to get the balance right. The essential difficulty here, to which my noble friend Lady Deech referred, is the difference in status between incorporated and unincorporated charities—those in the latter category are now in the great majority. She gave the example of the Scout Association, which is a good one, where issues of sexual exploitation were able to be raised against the national Scout Association because it was an incorporated charity. However, it is a much more difficult and complex matter to do that against local bodies.

It seems to me very difficult to justify this anomaly. The comparator is with company law, and my noble friend Lady Deech convincingly made the case that the comparator is not really operating in the way that one would expect in the case of unincorporated charities. We are arguing for the rectification of an anomaly, as my noble friend Lady Deech said, in the interests above all of victims.

The Minister has been very kind to us and we have had helpful discussions about this matter. I was listening to the discussion of an earlier amendment, when the noble Lord, Lord Hodgson of Astley Abbotts, suggested that this amendment would not be welcomed by the Charity Commission. It would be helpful if we could have some sense of the Charity Commission’s view about the practicalities of this amendment, if that is at all possible—but I support the amendment at this point.

6.45 pm

Baroness Barker (LD): My Lords, I made my views about this amendment known in Committee, and they have not changed. I listened very carefully to what the noble Baroness, Lady Deech, said, and she said one thing that made me believe that this amendment is wrong. She said:

“It is just like a company”.

Well, no, it is not. Charities are distinctly different in law, which is why there are different charitable formats. The noble Baroness said that the majority of charities would be incorporated, but that is not so: approximately 50% of the charities in this country are very small and most of them are not even registered with the Charity Commission. The unincorporated association format is there specifically to enable people who wish to come together for charitable purposes to do so to a standard of operating which is regulated by the Charity Commission in most cases. But they are not held to exactly the same standards as an incorporated association.

The noble Baroness and I often come at things from completely opposite sides, and I disagree with her on this. One reason why the unincorporated association is a valuable framework that is worth retaining for charities is that in the sorts of cases that she raised, it is trustees who have done wrong who are personally liable for what has happened, but the purpose and the

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assets of the charity remain valid. The effect of this would be to obliterate a whole level of charitable activity; the noble Baroness will, in effect, rip the heart out of a lot of community good up and down the land.

One thing I am not sure about, and the one thing that the noble Baroness did not tell us about in her introduction, is the scale of the problem she is seeking to address. If there is evidence that this is a widespread problem, she has a case, but it needs to be made in a different way; there needs to be a thoroughgoing investigation, which would settle for all time whether or not unincorporated associations, in their present form, should continue or not. I would like to see that done in a through and considered way and not on the basis of this debate and this amendment.

Lord Deben (Con): My Lords, the noble Baroness has made a very important point. It is conceivable that we should discuss whether these two forms of charity—the incorporated and the unincorporated—might no longer be entirely fitting for the circumstances of the day. We could discuss wholesale reform, but it seems to me that approaching that in a particular and narrow way is not the right way to do it. Law is not best made that way, not least because if you do it in that piecemeal manner, you can end up with something that is much worse than what you started off with. The law of unintended consequences is very powerful in these circumstances.

The second thing I would say to your Lordships is that Britain has a remarkable reputation around the world for charity, as we have often said in debates. But we have to remember that this is not something that has come about recently; it has happened over a very long period of time. It has resulted in, I have to say, a rather untidy system—there is no doubt about that. There are various different ways of looking at this, and sometimes people want to tidy it up. Perhaps one of the system’s strengths is the fact that there are so many different sorts of charities and so many different groups of people doing things in a slightly different way. With the Charity Commission, we have tried to set some reasonable standards and to ensure that there are very clear reference points.

We have tried hard to do that in a way that corrals people as little as possible. New charities often arise because people feel strongly about something that they have a personal relationship with: something happens, somebody they know have been hurt, they are concerned and they say, “I must do something about that”. Personally, I am a huge supporter of that. When one is canvassing, it always seems the worst thing when you bang on a door and someone says, “Somebody ought to do something about that”. My response is always, “Why don’t you do something about it? It is no good talking about somebody else”. Charities often arise because people say, “I want to do something about it”. That is a really important part of it.

My worry here is therefore, secondly, that we are not just approaching a complex business from a particular, narrow direction but also that we are adding yet again to the complications that face people when they want to turn a spontaneous reaction into a more permanent form. Of course, that leads to duplication of charities

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and I know that there is a real problem there. However, it is a good, healthy and encourageable part of humanity that people want to do something themselves about a matter they feel strongly about. I fear that if we went down this route without thinking very hard about it, we would—as the noble Baroness, Lady Barker, rightly said—put into the small charities some real concerns.

Thirdly, I would have to be much more convinced about the propriety of putting at risk the funds of a charity given for a particular purpose because of the activities of a particular trustee—which would be the result of the amendment. I can imagine amendments that would not produce that response. I can imagine changing the law in a way that might help to solve the problem that the noble Baroness, Lady Deech, put before the House. However, this amendment does not do that and could put a whole lot of other things into serious default.

The noble Baroness, Lady Barker, is right that to bring forward so complex an amendment in a debate of this kind without having some idea of the size of the problem, or the nature of the different parts of it, is not the way to deal with it. If you do not know how big the problem is, you do not know how dangerous it is to make the change. If it is a huge problem, you may want to risk the change, but if the problem is much more limited, you will probably want to say to yourself, “This is better left to a more mature and serious consideration, and there should be a much bigger one about the legal distinctions between incorporation and unincorporation”.

Lord Gold (Con): I support this amendment. My noble friend Lord Deben spoke of an implicit goodness on the part of those people who set up a charity and want to do something good. I understand that entirely but we are faced here with a different problem, unfortunately, of individuals who may wish to hide behind what seems to be a charity for wholly inappropriate purposes. While they are personally liable for things that may go wrong, those people might vanish into the distance and not be there to compensate those who have suffered badly as a result of charitable money being misused. Unfortunately, at the moment it is difficult to bring an action against an unincorporated association. If a trustee acts outside his powers, it is by no means easy to bring such an action. This amendment would make it easier for those who have suffered, where charitable money has been used for wrongful purposes, to look to the charity. It would make it less easy for those who misused that money to be able to hide in the way that perhaps at the moment they can.

The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con): My Lords, I thank the noble Baroness, Lady Deech, and the noble Lord, Lord Bew, for their thoughtful explanations of this amendment and for sparing the time to discuss this issue with me privately. I also thank the noble Baroness, Lady Barker, and my noble friends Lord Deben and Lord Gold, for their contributions. When we discussed this in Committee I made several points that noble Lords will be glad to know I will not repeat in great

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detail now as this can be quite a complex matter—as noble Lords will have gathered. I will stick to the principal points.

If an individual or entity commences litigation against an unincorporated charity, usually all the trustees of that charity would be named as parties. That is because an unincorporated charity has no separate legal identity—the point that others made. This would include proceedings for tortious liability against a charity trustee in his or her capacity as a trustee of that charity, or an employee in the course of his or her employment. If damages were awarded against the trustees, the trustees ordinarily would be entitled—if they acted properly and reasonably—to indemnify themselves from the assets of the unincorporated charity under the charity’s governing document. However, they could be jointly and severally liable for any shortfall where the charity’s assets are insufficient to meet the level of damages awarded.

In that respect, a person who sues an unincorporated charity can be in a stronger position than a person who sues an incorporated charity, where the directors’ liability can be limited, as they could seek redress from the assets of the charity and the personal assets of the trustees. For an incorporated charity, in the absence of any charity assets there is limited redress against the directors and members. Also, the unincorporated charity is in the same position as other unincorporated associations—for example, many trade associations. A trade association could make a flawed recommendation to its members that resulted in tortious liability.

It is important to restate that liability should not automatically attach to the charitable association’s assets, as the amendment seems to propose. In all cases, it should be for the court to establish where liability should lie, based on the facts of the case and the charity’s governing document. There may be other unintended consequences resulting from the amendment which we would also want to avoid.

In our view, damages may be met from the assets of the charity, whether it is incorporated or not, under the law as it stands. However, I recognise that a number of people have raised concerns over how the law operates in this area. As I said, I met the noble Lord, Lord Bew, the noble Baroness, Lady Deech, and my noble friend Lord Gold to discuss the nature of these problems. In response to their thoughtful contributions today, while I cannot give any commitments about amendments to the Bill, I will and certainly do commit to look at this issue in more detail over the summer, and in particular to reflect on whether there is a lacuna in the law as it stands that puts victims of unincorporated charities at a significant disadvantage. I will obviously keep the noble Baroness, Lady Deech, the noble Lord, Lord Bew, and my noble friend Lord Gold informed as to my deliberations. I am happy to keep others who spoke on this amendment informed, too. I fully understand that this is a complex area. We do not wish to rush into it.

I understand that the Charity Commission shares a number of the concerns raised and it would be happy to write to the noble Lord, Lord Bew, in more detail on this point as our deliberations progress. I am sure that the Charity Commission would be happy to meet

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with the noble Baroness, Lady Deech, and other noble Lords should they so wish. With all that said and in mind, I hope that the noble Baroness will not press her amendment.

Baroness Deech: I am grateful to the Minister for his conversations with us and for the very valuable suggestion of bringing in the Charity Commission to get evidence, which is very hard to collect in this field. However, I would like to correct a misunderstanding that seemed to flow around the House. This amendment would not incorporate charities, nor do I recollect saying that most charities were incorporated.

It does no such thing to the charity structure, but would simply enable the victims to access the assets of the charity where the trustee himself or herself does not have enough. In that sense, it would simplify the running of the charity and its structure. As the Minister said, assets will be used in any case, so there is no question of somehow continuing the preservation of a charity’s assets when wrong has been done to a victim. However, given that we need to consult the Charity Commission on that, I beg leave to withdraw the amendment for now.

Amendment 18 withdrawn.

Amendment 19

Moved by Lord Wallace of Saltaire

19: After Clause 12, insert the following new Clause—

“Independent schools’ facilities: public benefit

In section 4 of the Charities Act 2011 (the public benefit requirement), after subsection (4) insert—

“(5) Independent schools which are charities must engage actively with local communities and state schools with a view to sharing resources and facilities.

(6) The Charity Commission must publish guidance setting out the minimum that independent schools which are charities must do to comply with the duty in subsection (5).””

7 pm

Lord Wallace of Saltaire (LD): My Lords, we return to a simplified version of amendments which the noble Lord, Lord Moynihan, and I moved in Committee. Between the two stages there have been a number of discussions with the Minister, for which I thank him, and with the Independent Schools Council along with others. I must apologise to some of those with whom I was attempting to negotiate for much of Thursday and Friday morning, in that I happened to choose one of the few places in Oxfordshire where you cannot get mobile phone reception.

The context is clear: the rise in quality in resources and facilities at most—though of course not all—independent schools, which arises from their ability to raise fees and fundraise, along with endowments that many of them have, is in contrast with the decline in the resources and facilities of state schools, including their playing fields, music and drama facilities and specialised coaching and teaching of specialised subjects, which is unlikely to be reversed under this Government, since they are committed to shrinking government spending further, including on education. The second part of the context is the charitable purposes of

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independent schools, which are often rooted in their founding purposes in education for local communities. I am well aware that the Charity Tribunal in 2011 said that purposes can change, and indeed have changed—although they have not entirely been discarded. We discussed this earlier, with the question of housing associations. A housing association that changes itself into something entirely different would have its charitable status questioned. I remind noble Lords that the ruling of the Charity Commission says that schools can choose how they demonstrate public benefit, not that they can disregard public benefit.

The third part of the context is the increased awareness within the educational world of the importance of resilience and self-confidence as wider elements in education, although, unfortunately—and the Independent Schools Council made this point to me—Ofsted no longer pays any attention in assessing state schools to the wider elements of education that encourage resilience and self-confidence. There is a consensus on how important these things are to individual development. Best practice in the independent schools sector recognises this, and there are a number of excellent examples of partnership between independent schools and the local communities—and their schools—in which they are embedded. There are some examples of less good practice, however, which is why the amendment talks about engaging “actively”. One of the weakest points, in the statement agreed between the Independent Schools Council and the Charity Commission, is to say that there will be a new website through which state schools will have a facility to request involvement in partnership activities. We want independent schools to go out to find, explore, pursue and develop partnerships with their local communities and state schools.

The strongest point of the ISC and Charity Commission is the commitment to a research report, 12 months from the introduction of these changes, which will review data from the annual reports of charitable schools as well as the aggregated data that the ISC collects through its census. At present, the details of how that research project is developed will be agreed between the Charity Commission and the ISC.

We are all conscious of the problems of defining public benefit. The NCVO advice on this amendment repeats that too strict a definition of public benefit gets one into enormous problems—and I am looking at the noble Lord, Lord Hodgson, who has said this to me, and many others, many times. But the Charity Commission must monitor that public benefit of some sort is provided. If the Minister is to say that the Charity Commission is not capable of doing that at present, many of us would say that the Charity Commission have been severely constrained in recent years. Faced with a Government who are cutting public expenditure, this very important third sector may need more effective regulation as we have to depend on it more and more.

We hope that we can avoid going down the road to a further statutory definition of public benefit. What the noble Lord, Lord Moynihan, and I wanted to achieve through this process was a strong nudge to the independent schools sector to move in the right direction. It will help us not to divide in this House if the Minister can give us a number of strong

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reassurances—first, to make it clear to independent schools that they are expected to pursue and develop partnerships, not just to wait and see whether anyone applies. They should see this as part of the social responsibility that all charities should shoulder. Secondly, we should engage with the ISC and the Charity Commission on the terms of the research project to be conducted over the next 12 months and not leave the definition entirely to them. Thirdly, it is important to report to Parliament on the outcome of this research and arrange for it to be debated either through an Oral Statement or otherwise in government time.

I hope that that gives the Minister sufficient space to take us forward, not necessarily to any form of mandatory obligation but certainly to say that we have moved independent schools towards the active partnership with their local communities and schools that we all want.

Lord Moynihan (Con): My Lords, I shall speak to the amendment on the important question of the relationship between independent schools’ charitable status and public benefit and the need for all schools, particularly those with charitable status, to work together with state schools and neighbourhood communities in their vicinity. I intend to concentrate my remarks on the dual use of sports facilities and coaching expertise, although the principles behind my support for progress towards closer educational partnerships extend to all the charitable objectives set out by Parliament in the Charities Act.

In moving a probing amendment in Committee, my intention was to consider the merits and disadvantages in moving from the flexibility of the current system to a more prescriptive approach, reflected in the amendment that we are considering today, which requires all independent schools to engage with local communities, particularly regarding the dual use of sports and arts facilities. A considerable benefit of Committee for me was the opportunity that it provided to delve deeper into proposed legislation and learn significant lessons from the in-depth experience found in this House and outside.

Following Committee, like the noble Lord, Lord Wallace, I have taken the opportunity to meet the Charity Commission, the Independent Schools Council and the Minister to consider how we can make further progress to promote engagement with all independent schools in receipt of charitable status that have the facilities and coaching expertise to engage with local communities and state schools to mutual advantage. I am particularly grateful to my noble friend the Minister, who has upheld his open-door policy to any Member of your Lordships’ House on this Bill.

I spoke in Committee about good practice and cited Tonbridge School as a leading case study of good practice in this country. Under the leadership of Tim Haynes, the head, the school has engaged with 27 primary schools in its vicinity. The reaction from children, parents and the local community can best be described as fulsome praise. His initiative has gone further than engagement through sport, with the subjects of music, drama, dance, chess, art, design, IT, creative writing, science, history, maths, modern languages and classical studies all featuring as part of that

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engagement. Above all, all independent schools, such as Tonbridge School, in showcasing their facilities, should look to work also with governing bodies of sport, local clubs and those responsible in the primary schools for the school sport premium. That comes with £8,000 for schools with 17 or more pupils, plus an additional £5 per pupil, which could be very useful to fund insurance, transport and related costs incurred as a result of these initiatives.

To be successful, this must be a two-way process. Over the past few days, the Charity Commission has confirmed that it will relaunch and publicise the examples for schools of how to provide benefit for people who cannot afford their fees in its existing guidance, Public Benefit: Running a Charity, by sharing sports facilities. In a significant step forward, it will give new examples relating to sharing sports facilities, arts and music in the guidance Public Benefit: Reporting and in the example trustees’ annual report for “Anytown School”. A significant improvement in good practice should be achieved.

The problem I have with mandatory requirements is the one-size-fits-all approach. For example, many prep schools have to work to capacity to survive financially, even with charitable status. Some do not own their own sports facilities, others share and some are in need of significant upgrading. What is needed is for each school not only to follow best practice but, as the noble Lord, Lord Wallace, stated, for the Charity Commission to publicise it through its channels so that each school can tailor its public benefit accordingly and the House can debate the outcome.

The Charity Commission responded positively to the suggestion of a research report, in which I have more faith than the noble Lord, Lord Wallace. According to its guidelines, that report has to be published 12 months from the introduction of these changes. That research should provide us with a comprehensive picture of the extent of partnerships and enable this House to consider whether legislative steps are necessary, for example, when the next education Bill comes before us during this Parliament.

While there are challenges for independent schools with charitable status, the broader question we should also be debating applies not only to all independent schools but to the state sector, whether well-endowed with sports facilities or not. One of the greatest challenges we face in designing a long overdue and effective sports policy is the oft-quoted statistic about the percentage of our Olympic medallists from the independent sector. That reflects the need to do all we can, far more than at the moment, to identify talented youngsters in all our schools and provide ladders of opportunity for them to climb from primary school to podium.

In response to pressure from all sides of the House on this Bill, the Independent Schools Council has agreed to act by building a new website, Schools Together. The site is currently under development and should be ready to receive information from schools in the autumn term. It was not even on the agenda before Committee. I hope the site will be launched as soon as possible in the autumn. It must be two-way. The site absolutely needs to summarise what is on offer at all independent schools with charitable status and to include a facility for state schools to get involved in

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partnership activities. From the conversations I have had, I believe that independent schools will reach out to their community in this way by providing information and contact details of their partnership co-ordinators. State schools will be asked to request involvement in partnership activities. Since this is clearly the intent of all who have contributed to this debate at various stages, there should be no reason why all schools do not engage constructively. Once again, if the combined new commitments of the Charity Commission and the Independent Schools Council do not bear fruit in the way the House and the Minister have indicated, we should be able to produce legislative change through a wider education Bill.

I believe that these initiatives represent more than a nudge in the right direction. They are very significant steps forward and would not have happened had there not been the level of interest expressed in your Lordships’ House from all parties. They are tailor-made for the differences between schools and they avoid the cost and administration that a one-size-fits-all legislative approach would deliver. I believe that what I have sought to address constitutes a very strong example of how cross-party support for the interests of sport and recreation, including the arts and curricular subjects, for all children coupled with the promulgation of best practice can be and has been achieved. That is a rare outcome of negotiation between Committee and Report. I fully appreciate the strength of opinion expressed and I share it, but I believe that the changes we have been offered are far reaching and deserve support. I also believe they are for real. There is genuine consensus on this issue among all interested parties. I believe the approach offered will prove to all concerned that the proposed package will achieve even more with the good will of all involved than a one-size-fits-all amendment would deliver. For these reasons, I hope the amendment will not be pressed to a vote and that we can build on these important initiatives and regularly hold all those involved to account when it comes to the outcome of the research project and the website in a year’s time.

7.15 pm

Lord Watson of Invergowrie (Lab): My Lords, nobody can dispute—

Lord Lucas (Con): My Lords, I am loath to interrupt the noble Lord, except I think he is bringing matters to a conclusion. I want to express my congratulations to the previous Government for putting some steel into the Charity Commission in the process of recalling to independent schools what their charitable status means and what it takes to live up to the—in many cases—very clear opinions of their original benefactors. That process gathered considerable momentum, and many protests, under the previous Government, and I am delighted to see that it is continuing under this Government with cross-party support. It is enormously important that we find a way of reducing the exclusivity and divisions in our current system and that we find ways of reuniting it. On the side of this debate—I know it is not central to it—I very much hope that this Government will take seriously the proposals developed for the reintegration of independent schools and the state system. Some key schools, such as Westminster and St Paul’s, have expressed

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a willingness to engage. If we can get to a system where the independent schools have a role looking after foreigners and the thick sons of the rich, then we will have achieved a lot for this country.

Lord Hodgson of Astley Abbotts (Con): My Lords, we had a long debate on this and I do not intend to detain the House long. This amendment is, at first sight, exceptionally attractive. Who can object to close engagement? The issue before us tonight is whether this is best achieved by the relative inflexibility of statute or the more flexible approach that can be achieved by guidance. My concern about this and the proceedings during our debate in Committee is that this is a Pandora’s box which, once opened, runs in all sorts of directions.

The issue of public benefit came centre stage because of the changes quite reasonably introduced by the previous Labour Government. The noble Lord, Lord Bassam of Brighton, sat through many hours as the Minister in charge. The decision on the way the public benefit test should be set was agreed as being the least worst option, being via the independent Charity Commission, and making sure that the Charity Commission was free from political interference was written into the Bill. Once you move away from that decision, you need to be very careful about where you end up. The debates we had in Committee on 6 July started with an amendment from my noble friend Lord Moynihan about sport. He was followed by the noble Lord, Lord Wallace of Saltaire, on music and arts. At the end of the debate the noble Baroness, Lady Jones, winding up for the Opposition, said:

“Amendments 23A and 23B provide a start by identifying at least three areas”.

She also said:

“Furthermore, we believe that the Local Government Act 1988 should be amended so that private schools’ business rate relief becomes conditional on passing that new standard”.—[Official Report, 6/7/15; col. GC27.]

So we moved quite a long way in the course of one single debate. There is a perfectly respectable argument that nearly 10 years after the noble Lord, Lord Bassam, and I discussed this in the Moses Room there should be a review of what constitutes public benefit. However, as I have explained, this is a big topic with many implications and unforeseen and indeed unforeseeable consequences. In my view, it needs to be looked at thoroughly in the round, not tacked on to a Bill that is concerned with improving the regulation of the charity sector and enhancing the development of the social investment movement. As the noble Lord, Lord Wallace, referred to in his remarks, that is a view with which the NCVO agrees.

My review of the sector revealed gaps in the Charity Commission regulatory powers that the Bill will remedy. It is that on which we should be focusing, not trying to find other issues that may cause difficulties and unforeseen consequences. I very much hope that the mover of the amendment will not put it to a Division tonight.

Lord Watson of Invergowrie: My Lords, various noble Lords have mentioned in the debate today that there are good examples of private schools sharing their facilities with state schools and other community organisations.

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Viscount Younger of Leckie (Con): My Lords, I believe that there is one further contribution before—

Noble Lords: Front Bench!

Viscount Younger of Leckie: On Report, it is allowed.

Viscount Bridgeman (Con): My Lords, I have a small point to make. I declare an interest as chairman of a foundation school, Reed’s School, founded 200 years ago for the orphans of city clerks. It became a member of the Headmasters’ and Headmistresses’ Conference 60 years ago, maintains the foundation and has a considerable outreach, particularly to schools in east London, in parallel, in many ways, with Tonbridge School.

The school is a member of the HMC but, significantly, also of the Society of Heads, the conference of smaller schools, many of which would probably be in the 7% that is accepted as falling behind in the standards of public benefit. Many of these schools—my noble friend Lord Moynihan has made a passing reference to this—are struggling to keep their heads above water, and they simply do not have the resources to undergo the public benefit that is required.

This has been a very hot topic between the Charity Commission and all the governing associations, the various heads and governors, for 10 years now. In Committee I voiced my opposition to the word “minimum”; I felt that that was an unnecessarily prescriptive word on a matter that depends so largely on mutual recognition between the two sectors. I suggest that Clause 1 is already in the Bill, as the Minister said in Committee, and the bar for the second new subsection will have to be so low as to have to embrace the schools that are struggling. We are then into the one-size-fits-all category, which has been mentioned by a number of noble Lords. I suggest that the way forward is this continual dialogue between the Charity Commission and these various bodies. Let us not forget that peer pressure within these bodies will likely play a large part.

Baroness Heyhoe Flint (Con): My Lords, I speak in support of the principles of this amendment. I urge the Minister to spend more time in the summer considering the excellent concessions that my noble friend Lord Moynihan and the noble Lord, Lord Wallace, have managed to achieve. In the past, as has been documented, a high proportion of our medal winners and test series winners—is this perhaps a moment when we should hold a minute’s silence for the England men’s cricket team?—and of the successes and indeed the membership of those teams has come from the public school sector. We should consider the amendments seriously; we can give the opportunities to those at grass-roots level who never get the chance to play on decent facilities. We can build from the grass roots more successful national teams, in which we take such pride.

It is not so much about winning medals and various series, but it should be a matter of good governance for independent schools that are charities. You could almost change the meaning of CSR from corporate social responsibility to charitable social responsibility. We should give those who have never had the chance to play sport on quality facilities a chance to move

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forward and reap the accolades that many of those from public schools have achieved. I am not in favour of statutory legislation to ensure that this happens but hope that independent schools can find it in their hearts to share their facilities with the community, and that the Government will accept the guidance of the Charity Commission to give all youngsters a sporting chance, not just those who have the backing of deep pockets and privilege.

Lord Lexden (Con): My Lords, I begin by declaring, or rather repeating, my interests as a former general secretary of the Independent Schools Council and the current president of the Independent Schools Association, one of the constituent bodies of the council. When I spoke in Committee, I sought to emphasise above all the diversity and variety of independent schools. Diverse and varied though they may be, there are some things that ISC schools as a whole have in common: they are fully committed to working with their communities and state schools. The determination to contribute to and share in the life of their local communities and state schools arises naturally from the charitable ethos and purposes of ISC schools. That point was firmly underlined in the manifesto that the ISC published earlier this year as its contribution to the education debate as the election approached. The manifesto stated that,

“the mission of all schools, whether state or independent, is to educate children to achieve their full potential. Any barriers real or perceived between the two sectors are counterproductive”.

The manifesto went on to give a clear pledge:

“Partnerships between the independent and maintained sectors are an established part of the educational landscape … We propose that … Best practice and current activity is collated and shared to encourage greater participation”.

To that end, the ISC is now involved in detailed discussions with the Charity Commission and, as we have heard, is preparing a large website entitled Schools Together, to be launched later this year, which will set out in greater detail all that is being done now and encourage the rapid expansion of further partnership activity in all possible areas.

The first part of the amendment states:

“Independent schools which are charities must engage actively with local communities and state schools with a view to sharing resources and facilities”.

This pushes at an open door. The issue before us is how the goal, in which we are all united, should best be achieved. Because independent schools vary so greatly in size, resources and facilities, what they can do to carry forward sharing and partnership will inevitably vary too. Think, for example, of the many small schools, particularly those in rural areas or on confined urban sites, one of which I visited a few days ago in order to present the annual prizes. The school has some 200 pupils. It has no playing fields but opens its gym to the local community. It has established a number of means-tested bursaries and has just raised £8,000 for the NSPCC.

I stress the lack of uniformity within the independent sector. Where uniformity does not exist, surely flexibility is imperative. It is for that reason that I believe it would be inappropriate to require the Charity Commission to publish guidance setting out the minimum that

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independent schools that are charities must do, as the second part of the amendment proposes. To be fair and equitable, the Charity Commission would have to lay down a minimum for each of the ISC’s 1,267 member schools, taking the varying circumstances of each one into account. That is clearly impractical. There is also a point of principle at issue here. All charities are required to provide public benefit. Would it be right to single out independent schools alone for binding guidance on minimum standards?

7.30 pm

There is a better way, which was outlined by my noble friend Lord Moynihan and the noble Lord, Lord Wallace of Saltaire. The Independent Schools Council is firmly committed to that better way. The preparation of new guidance by the Charity Commission is likely to include illustrative examples of sports, arts and music partnerships to encourage more independent schools to engage in such partnerships, and there is more information to be gathered and shared with the Charity Commission. A research report has been agreed in principle.

There is also scope for the ISC website Working Together—to which I and other noble Lords have referred—to give additional impetus to collaborative projects by including this facility through which state schools themselves could make direct applications for involvement in partnership activities. I attach great importance to this initiative, which deserves all-party backing and support, perhaps by means of endorsements by every party leader which could appear prominently on this website.

No one has more experience in this vital area, where so much good work is already being done and so much more can be achieved, than my colleague Deborah Leek-Bailey, chair of the Independent/State School Partnership Forum, which is backed and actively supported by the Department for Education. She said recently:

“I applaud any action by government which encourages independent schools to extend their provision to pupils within their local communities but it is important to remember that charities are independent and their trustees need to be able to make decisions in the best interests of the charity, taking into account their individual circumstances. It is vital that we do more to raise standards in the teaching of sport, music, languages, the arts, in state schools but I believe that far more can be achieved by highlighting the benefits of engagement and so spreading them very widely indeed”.

Is it not through such an approach, backed and reinforced by new non-statutory guidance from the Charity Commission and other measures, that steady progress can be made for the benefit of all three partners—local communities, state schools and independent schools themselves— in this vital area? They all need to be willing partners. Compulsion is inappropriate both in principle and in practice.

Lord Watson of Invergowrie: My Lords, I have the greatest respect for the noble Lord, Lord Moynihan, especially on sport-related matters, so it was a little disappointing to hear him repeat the suggestion made in Committee by the noble Lord, Lord Lexden, which he stated again this evening: that the amendment seeks

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a one-size fits all solution. That is absolutely not the case. Precisely because of the sort of reasons the noble Lord, Lord Lexden, just outlined, schools vary greatly in size; therefore, what they can be reasonably expected to do in terms of community engagement will also vary. If a large private school has state-of-the-art sports facilities, it may reasonably be expected to invite pupils from state schools to use them—not just the pitches and courts, but coaching from the staff. In all probability a smaller school would have much less extensive facilities, so it might be appropriate for that school to send one or more coaches out to local state schools to engage directly with them. The same would be true of the assistance with learning issues raised by the noble Lord, Lord Wallace of Saltaire, be it Mandarin or music tuition using instruments perhaps not available in local state schools. To be most effective, the approach would necessarily vary, but it is entirely unacceptable for any school to say, “We cannot do anything because we’re simply too small or too remote”.

The noble Lord, Lord Wallace, referred to the “agreement” reached between the Charity Commission and the ISC. Unknown to anyone else, secret meetings have been taking place while the Bill has been progressing through your Lordships’ House; indeed, only yesterday we became privy—if I may use that contentious term in the context of the Bill—to the outcome. This private agreement was finalised without any discussions with representatives of state schools or local government education authorities; nor were some noble Lords whose names appear on the amendment consulted or even informed, which would have been courteous, if nothing else. Is it not bizarre, to put it no more strongly, to allow the umbrella body for private schools to help write the rules by which it will be judged? Perhaps the Minister can answer that point.

The agreement could result in some limited progress, but it means private schools being allowed to retain an entirely voluntary approach. The ISC says it hopes that the agreement demonstrates that the body is taking steps towards further encouraging engagement between independent schools, state schools and local communities. I suppose it does, but the key word is “encouraging”. Up to now, encouraging has brought us only to the point where the noble Lords, Lord Moynihan and Lord Wallace of Saltaire, felt compelled to spell out in their contributions in Committee why much more needed to be done and why they believed that statutory backing was needed to make it happen.

Further, the website that various noble Lords referred to this evening, Schools Together, which will go online later this year, will merely “request” that member schools provide contact details of the co-ordinators of partnership work at their schools, finishing with the telling statement, “such information to be provided voluntarily”. So there are get-outs at each end, and it seems that the ISC clearly has no intention of forcing its members to do anything they do not want to do. It is difficult to imagine a weaker form of wording, as the noble Lord, Lord Wallace of Saltaire, said himself.

We also learn that the Charity Commission is to commission a research report 12 months from the introduction of the agreement. Crucially, it seems that only the commission and the ISC will have detailed

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discussions around the terms of this research project in advance. Again, there will be no input from the state schools this is meant to assist. Will the Minister insist that state schools and local authorities be involved in the discussions relating to this research report? I very much hope that he will acknowledge the importance of that happening.

In Committee, the Minister said:

“Most of the Bill is about giving the Charity Commission the tools it needs to do its job”.—[Official Report, 6/7/15; col. GC17.]

The talks we have heard about between the Charity Commission and the ISC apparently suggest that both organisations were intent on avoiding compulsion in any form. If, as has been suggested, one of the reasons why the Charity Commission did not want that to happen was that it does not feel it has the necessary resources to enforce it, I suggest that that is not a reason of any substance. We were told the same about compulsory registration with the Fundraising Standards Board, and it is just not good enough. If that is the case, the Government are preventing the Bill bringing about meaningful change in these two areas, contrary to what the Minister said, because they will not give the Charity Commission the tools—that is, the resources, which I suppose are largely financial—to do its job effectively.

Currently the onus is on state schools to apply for support, and the agreement would maintain that position. If, as the noble Lord, Lord Wallace of Saltaire, said, this amendment is carried, private schools will have to be proactive and seek out nearby state schools and say, “How can we help you share our facilities and our expertise?”. It would put the responsibility on charities, which gain from charitable status, to go out and abide by the terms of that status by sharing their resources. How can that be seen as objectionable? Private schools would have to report on their success with such outreach initiatives, enabling the Charity Commission to check that they were observing the terms of public benefit effectively. Currently, as has been said, schools mark their own homework on their charitable work, which the figures show is not sufficient. Surely that is not acceptable.

It is important to have a strong regulator to ensure that standards in public trust and confidence are maintained, and enforcing the public benefit requirement is surely a key part of this. The amendment does that, and I welcome the fact that these important issues have been debated by noble Lords this evening.

Lord Bridges of Headley: My Lords, I start by saying that I remain strongly in sympathy with the aims of the noble Lords whose names are down on this amendment. Before I address the amendment, I will make a general observation. Charitable status confers on charities a number of benefits, and that is right. Charities deserve our support in fulfilling their purposes. However, those benefits come with responsibilities, which trustees must ensure their charity fulfils. A core purpose of the Charity Commission, helped by this Bill, is to ensure that every charity fulfils those responsibilities and obligations. How they do so is up to them, but do so they must. I repeat: every charity must fulfil them, no matter what they do. It is important that law and regulations be applied and

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enforced without favour or prejudice to any one sector of the charitable world. There must be no light touch or heavy hand towards schools with charitable status as opposed to religious groups, or towards animal charities as opposed to environmental charities. They all—I repeat, all—must abide by the law and fulfil their obligations.

With that in mind, I turn to the issue raised by the amendment. To fulfil their charitable purpose, many schools have forged partnerships with state schools, enabling the latter to share private schools’ facilities. This has brought huge benefits, as a number of your Lordships have mentioned. It has widened access to first-class sports facilities, for example, and extended the use of music and drama facilities which might otherwise be unavailable to local state schools. Such partnerships are to be strongly encouraged. I agree with noble Lords that, while there are many terrific examples—and these should be applauded—we could certainly see a lot more of them. A strong nudge to those who have not yet given genuine consideration to the potential for such partnerships to further their charitable aims would surely be widely welcomed.

Where I differ with the amendment is not, therefore, in the aim but in the approach, for it proposes not a nudge but a legislative requirement which would severely limit the charitable purposes that charities which are independent schools can pursue, and I cannot agree that that is the best way forward. There are some important issues of principle here. First, the amendment would single out charitable schools in legislation. As has been mentioned, no other type of charity is treated in this way. Secondly, it would single out only one way in which schools could demonstrate public benefit. Again, no other charity is treated in this way in legislation.

In practice, charitable independent schools can demonstrate their benefit, and satisfy the “public benefit requirement” for the purposes of the Charities Act 2011, in a wide range of ways, including through bursaries—one-third of ISC school pupils receive help with fees—outreach teaching or sponsorship of an academy. Other options include sharing their curriculum or putting on summer schools for state pupils and so on. An important principle of charity law is in operation here. The law places the decision on which approach, or combination of approaches, the charity should take in the hands of the charity’s trustees. That is how it should be, and it should not be for government or the regulator to interfere. Setting particular duties or minimum standards around one particular form of public benefit by one particular type of charity would set a dangerous precedent. I am sure there are those who might like to see particular duties placed upon religious charities, for example, and others who might take a different approach to NGOs from the one they would take to domestic charities, and so on.

Given what I said at the very start, I think it is clear that this is very dangerous territory to get into. Furthermore, it is contrary to the spirit of charity law, which has been tested in the Upper Tribunal. Public benefit must be real and not tokenistic, but it is not for the Charity Commission to dictate to schools, or to any other type of charity, the type or amount of provision they make. That should be a matter for the

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trustees of the charity concerned, taking into account the circumstances of their charity.

Alongside that are issues of practicality. Some schools’ circumstances may mean that it is not appropriate for them to share facilities. Some may not have sports or arts facilities or expertise that they can share, or local state schools may simply not need their drama facilities. Overriding the discretion and judgment of trustees, who are acting in the interests of the community as a whole, as to what is the most practical option in their area seems an odd thing to do if genuine local partnership is what we are aiming at.

As well as impinging on the discretion of trustees, making this a matter of law and regulation impinges on the discretion of the regulator, the Charity Commission. Of course, where the commission doubts that an independent school really is serving the public benefit, it can already step in, but it should be allowed to make that judgment in the round and not be required to give special attention to any one particular means of fulfilling a school’s charitable mission. In some cases, I fear that a statutory approach could be positively counterproductive.

As I have said, I am greatly in favour of encouraging more partnerships for the purposes of sharing facilities, but I am not keen to champion that ahead of, for instance, academic partnerships. Singling out one form of public benefit for special treatment in law rather implies a hierarchy in which this particular approach is elevated above others. I am all in favour of nudging schools towards the sharing of facilities, but inadvertently nudging them away from other means of helping the education of others could be counterproductive.

There is another unintended outcome which would, I fear, be very likely if we were to move to legislation, and that is the loss of good will among the very community we are hoping to influence. I have been quite struck by the significant good will from the independent schools sector in relation to partnerships with state schools of this sort. The ISC has made it clear to me that it is in fact very keen to do more to promote best practice in sharing facilities and expertise—for example, in sports, music and the arts. This enthusiasm has, I am delighted to say, been translated into action through a very welcome dialogue with the Charity Commission, which recognises the spirit of and intention behind the amendment. As has been mentioned, this dialogue has resulted in a package of measures, agreed by the two organisations, which will provide just the “nudge” that I think we are all looking for

7.45 pm

The package contains three sorts of measures, of which the first is guidance. The Charity Commission will relaunch its existing guidance entitled Public Benefit: Running a Charity, publicising for schools examples of how to provide benefit for people who cannot afford their fees. This includes examples of sharing sporting facilities. It will also give new examples relating to the sharing of sports, arts and music facilities in its wider Public Benefit: Reporting guidance and in its example of a good trustees’ annual report for schools. The Charity Commission will commit to ensuring that the

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guidance links to more examples of what constitutes good practice for independent schools to satisfy the public benefit test, which will include encouraging schools to pursue and develop partnerships. I am pleased that the ISC will publicise the relaunched guidance among all its members. In keeping with what I have said, any additions made to the guidance will be examples of good practice and will not introduce any new mandatory requirements.

The second part of the package is research. There are many claims about the extent of the sharing of facilities between schools, and we should base further debate more solidly on a better understanding of what is actually the case. As has been said, the Charity Commission will therefore commission a research report 12 months from the introduction of the revised guidance that I have spoken of. This is likely to be built upon data from the annual reports from charitable schools, as well as aggregated data that the ISC collects through its census. The terms will be worked up by the commission and the ISC together, and I am sure that the commission would be happy to meet the noble Lord, Lord Wallace, my noble friend Lord Moynihan and the noble Baroness, Lady Hayter, or the noble Lord, Lord Watson, to discuss this. The commission will publish the research and a copy will be placed in the House’s Library, and I would be happy to make a commitment to the noble Lord, Lord Moynihan, about a debate on its findings.

Finally, the ISC is in the early stages of developing a web resource which enables local schools to request involvement in partnership activities. The ISC will request that member schools, on a voluntary basis, provide contact details of the co-ordinators of partnership work at their schools.

This is a substantial package, and it is a voluntary one between the ISC and the independent regulator. I think it is clear that this is to be applauded and encouraged. Over the summer the Charity Commission would be happy to discuss these measures with the noble Lords who have put their names to the amendment. I think it is also clear that moving to legislation would undermine such good will and co-operation as has been seen over the last few weeks. The Charity Commission and the ISC have said that they will continue to engage with interested Peers as their work progresses in the months ahead.

I finish with my overriding point. I share the noble Lord’s aims and sentiments. Where we differ—but I hope not enormously—is on the means. The package of measures I have just outlined sits well with the overall approach of the Bill. The measures are targeted, proportionate and balanced. They seek to underscore trustees’ obligations and responsibilities, and, crucially, to foster partnership. I hope that on that basis the noble Lord feels able to withdraw his amendment.

Lord Wallace of Saltaire: My Lords, this has been an important debate and a number of noble Lords, as well as the Minister, have said important things about what we need. I recognise that a number of noble Lords on the Conservative Benches have close links with the independent schools community. I trust that everything that has been said will be taken back and pursued further. I particularly welcome the point made by the noble Lord, Lord Moynihan, that we expect a

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positive response to all that has been said. If necessary when the research report comes out, if good progress and significant movement has not been achieved, we will clearly have to move further again.

We all recognise that charitable status is a privilege and that public benefit has to be part of the response to that privilege. We all also recognise that public benefit is very difficult to define and that there are many other areas, including religious groups, where public benefit can sometimes be extremely contentious. That is an issue to which we may well return during the course of this Parliament.

The research project is key, and I welcome the Minister’s response that we will be able to debate that report when it returns and see how thorough it has been and what it shows. On that basis, I am willing to withdraw my amendment. I am a liberal, not a socialist: I prefer co-operation and partnership to compulsion and the imposition of penalties. I would not vote for Jeremy Corbyn as my party leader. I want to see a strong and diverse charitable sector, including many schools founded as charities serving different purposes. However, it is also clear that schools that have been founded as charities have to pursue charitable purposes and demonstrate public benefit. That is what we have been calling for. On that basis, and on the basis that this discussion will continue with many of us on all sides of the House actively engaged, I am willing to withdraw the amendment.

Some Lords objected to the request for leave to withdraw the amendment, so it was not granted.

Division on Amendment 19.

7.52 pm

Division on Amendment 19

Contents 105; Not-Contents 156.

Amendment 19 disagreed.

Division No.  2


Adams of Craigielea, B.

Anderson of Swansea, L.

Bakewell, B.

Bassam of Brighton, L. [Teller]

Beecham, L.

Berkeley, L.

Billingham, B.

Blood, B.

Bradley, L.

Brookman, L.

Campbell-Savours, L.

Cashman, L.

Clancarty, E.

Clark of Windermere, L.

Collins of Highbury, L.

Corston, B.

Crawley, B.

Davies of Oldham, L.

Desai, L.

Donaghy, B.

Drake, B.

Dubs, L.

Elystan-Morgan, L.

Faulkner of Worcester, L.

Foulkes of Cumnock, L.

Gale, B.

Golding, B.

Gordon of Strathblane, L.

Gould of Potternewton, B.

Hanworth, V.

Harris of Haringey, L.

Haworth, L.

Hayter of Kentish Town, B.

Healy of Primrose Hill, B.

Henig, B.

Howells of St Davids, B.

Hoyle, L.

Hughes of Stretford, B.

Hughes of Woodside, L.

Hunt of Kings Heath, L.

Jones, L.

Jones of Whitchurch, B.

Judd, L.

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Kennedy of Cradley, B.

Kennedy of Southwark, L.

Kennedy of The Shaws, B.

Kinnock, L.

Kinnock of Holyhead, B.

Kirkhill, L.

Lawrence of Clarendon, B.

Layard, L.

Lea of Crondall, L.

Lennie, L.

Liddell of Coatdyke, B.

Liddle, L.

McAvoy, L.

McFall of Alcluith, L.

McIntosh of Hudnall, B.

MacKenzie of Culkein, L.

McKenzie of Luton, L.

Mallalieu, B.

Masham of Ilton, B.

Massey of Darwen, B.

Maxton, L.

Mendelsohn, L.

Monks, L.

Morris of Aberavon, L.

Morris of Handsworth, L.

Morris of Yardley, B.

Nye, B.

O'Neill of Clackmannan, L.

Patel of Bradford, L.

Pitkeathley, B.

Plant of Highfield, L.

Prescott, L.

Prosser, B.

Quin, B.

Rogan, L.

Rosser, L.

Royall of Blaisdon, B.

Sawyer, L.

Simon, V.

Smith of Basildon, B.

Smith of Gilmorehill, B.

Snape, L.

Soley, L.

Somerset, D.

Stone of Blackheath, L.

Symons of Vernham Dean, B.

Taylor of Bolton, B.

Teverson, L.

Thornton, B.

Touhig, L.

Tunnicliffe, L. [Teller]

Uddin, B.

Walpole, L.

Warwick of Undercliffe, B.

Watson of Invergowrie, L.

Whitty, L.

Wilkins, B.

Wills, L.

Wood of Anfield, L.

Worthington, B.

Young of Norwood Green, L.

Young of Old Scone, B.


Aberdare, L.

Addington, L.

Ahmad of Wimbledon, L.

Altmann, B.

Arran, E.

Ashton of Hyde, L.

Astor of Hever, L.

Balfe, L.

Bates, L.

Berridge, B.

Bilimoria, L.

Black of Brentwood, L.

Blencathra, L.

Bottomley of Nettlestone, B.

Brabazon of Tara, L.

Brady, B.

Bridgeman, V.

Bridges of Headley, L.

Brookeborough, V.

Brougham and Vaux, L.

Browne of Belmont, L.

Browning, B.

Buscombe, B.

Byford, B.

Caithness, E.

Callanan, L.

Cameron of Dillington, L.

Carrington of Fulham, L.

Cathcart, E.

Chisholm of Owlpen, B.

Colwyn, L.

Cope of Berkeley, L.

Cormack, L.

Courtown, E.

Crathorne, L.

Crickhowell, L.

Cromwell, L.

Cumberlege, B.

De Mauley, L.

Deben, L.

Dixon-Smith, L.

Dunlop, L.

Eaton, B.

Eccles, V.

Eccles of Moulton, B.

Elton, L.

Empey, L.

Evans of Bowes Park, B.

Faulks, L.

Finlay of Llandaff, B.

Fookes, B.

Forsyth of Drumlean, L.

Fowler, L.

Framlingham, L.

Freeman, L.

Freud, L.

Gardiner of Kimble, L. [Teller]

Gardner of Parkes, B.

Geddes, L.

Glenarthur, L.

Gold, L.

Goldie, B.

Goodlad, L.

Goschen, V.

Grade of Yarmouth, L.

Greenway, L.

Hamilton of Epsom, L.

Harding of Winscombe, B.

Helic, B.

Henley, L.

Heyhoe Flint, B.

Hodgson of Abinger, B.

Hodgson of Astley Abbotts, L.

Holmes of Richmond, L.

Hooper, B.

Horam, L.

Howard of Rising, L.

Howe, E.

Hunt of Wirral, L.

Hylton, L.

Inglewood, L.

James of Blackheath, L.

Janvrin, L.

Jenkin of Kennington, B.

Jopling, L.

Kakkar, L.

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Keen of Elie, L.

Kilclooney, L.

King of Bridgwater, L.

Knight of Collingtree, B.

Lamont of Lerwick, L.

Lang of Monkton, L.

Lawson of Blaby, L.

Lexden, L.

Lindsay, E.

Lingfield, L.

Liverpool, E.

Livingston of Parkhead, L.

Lucas, L.

Lyell, L.

McColl of Dulwich, L.

Macfarlane of Bearsden, L.

Mackay of Clashfern, L.

Magan of Castletown, L.

Maginnis of Drumglass, L.

Mancroft, L.

Marlesford, L.

Maude of Horsham, L.

Mobarik, B.

Moore of Lower Marsh, L.

Morris of Bolton, B.

Moynihan, L.

Naseby, L.

Nash, L.

Neville-Jones, B.

Neville-Rolfe, B.

Newlove, B.

Noakes, B.

Northbrook, L.

Norton of Louth, L.

O'Neill of Gatley, L.

Perry of Southwark, B.

Popat, L.

Prior of Brampton, L.

Rana, L.

Ribeiro, L.

Ridley, V.

Risby, L.

Sassoon, L.

Seccombe, B.

Selborne, E.

Selkirk of Douglas, L.

Selsdon, L.

Shackleton of Belgravia, B.

Sharples, B.

Sheikh, L.

Shephard of Northwold, B.

Sherbourne of Didsbury, L.

Shields, B.

Shrewsbury, E.

Spicer, L.

Stedman-Scott, B.

Stowell of Beeston, B.

Suri, L.

Taylor of Holbeach, L. [Teller]

Taylor of Warwick, L.

Trefgarne, L.

Trimble, L.

True, L.

Tugendhat, L.

Ullswater, V.

Wakeham, L.

Warsi, B.

Wheatcroft, B.

Williams of Trafford, B.

Younger of Leckie, V.

8.02 pm

Clause 13: Power to make social investments

Amendment 20

Moved by Baroness Barker

20: Clause 13, page 16, line 19, leave out “both” and insert “primarily”

Baroness Barker: My Lords, we move on to the issue of social investment, one which we spent considerable time deliberating in Grand Committee. During those discussions, the Minister repeatedly used the phrase, “dancing on the head of a pin”. I am not much of a dancer, and I return to this not to rehearse the arguments that we had then but for what I think is a really important reason. As we said in Grand Committee, this is the first time that social investment has ever been defined in law. The extent to which trustees are acting properly if they make an investment on which they will not receive a financial return is a question on which, as we heard in Grand Committee, there are a number of different points of view. I simply want us once again to go around the question of the difference between financially motivated investment which happens to be in line with the charity’s social purpose and consciously, explicitly socially motivated investment. The reason for doing so is risk. There is a strong possibility, at least for the first few years of any such investment, that there will be, at best, no return and there may even be losses. It is crucial that we protect in law the trustees who are making such investments.

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The noble Lord, Lord Hodgson, and I made the point in Grand Committee that the definition of social investment in the Bill does not reflect the definition given by the Law Commission. The Law Commission’s definition of social investment includes “avoiding financial liability at a future date”. It was, therefore, somewhat difficult for the noble Lord and I to learn during Grand Committee that the Law Commission had helped with the Bill’s drafting. The Law Commission’s definition does not require there to be a positive financial return. That is what it said in its initial report on social investment. However, the Bill includes financial return in the definition. At new Section 292A(5), it defines financial return as,

“if its outcome is better for the charity in financial terms than expending the whole of the funds or other property in question”.

The amendments in this group would add “equal to”. The amendments would allow trustees to make an investment on which there would be simply a social return. There may be a financial return—as opposed to a definite loss, which would be what a grant would amount to—but there may not be. We on these Benches think it important to make that distinction.

The definition in the Bill fails to differentiate between financially motivated investment and consciously, explicitly social investment. That is why we have tabled the amendments, which are slightly different from those which were tabled in Grand Committee. They would require trustees to be open in their investment policy about the fact that they were making social investments, not seeking to make a financial gain but directly trying to achieve a social purpose. As long as they did that and were not harming the capital assets of the charity by completely depleting them, we think that broad definition of social investment would get us to a point where trustees, who are very risk averse under existing law, could begin to develop the whole social investment market. That is what this Government, like the previous Government, have said that they wish to do, but which has so far been constrained by law. That is the reason behind Amendment 20 and all the other amendments in the group. I beg to move.

Lord Hodgson of Astley Abbotts: My Lords, I shall be exceptionally brief. I hope that my noble friend will be able to reassure us when we come to the next group that government amendments largely cover the points that the noble Baroness has made in her amendments, all of which are very worth while. We may be able to probe a bit further to ensure that we are getting where we think we are on that group, rather than at this point, but her amendments are interesting.

Lord Watson of Invergowrie: My Lords, given that this is the first time that social investment has been defined in statute, perhaps it was not surprising that considerable time was spent in Committee in pursuit of its meaning. I am not certain that we nailed it down effectively. Indeed, some, including Social Enterprise UK, continue to argue that the Bill fails to differentiate between financially motivated investment which also happens to be in line with the charity’s social purpose and consciously or explicitly socially motivated investment.

All investment has some kind of social impact and much financial investment produces positive social returns. In Committee, the Minister avoided giving a

20 July 2015 : Column 979

clear answer as to how social investment is to be differentiated from financially motivated investment; rather, he pointed to the Charity Commission and the courts making such judgments. Only time will tell whether that proves to be the case. For that reason, it is to be welcomed that the Bill will be reviewed after a period of three rather than five years. In the mean time, the amendments in this group offer some clarity in the Bill’s provisions on social investment and we are content to offer them our support.

Lord Bridges of Headley: I thank the noble Baroness, Lady Barker, for tabling Amendments 20 to 24. Taking time to consider the definition of social investment used in the Bill has been a valuable exercise and I have no doubt that we are all much the wiser for it.

I will deal with the amendments in turn, but I should make it clear that the Law Commission recommended these powers, the Law Commission drafted these clauses, and the Law Commission has been consulted on the amendments. So I am not sure that I totally agree that the Bill does not accurately reflect the Law Commission’s recommendations.

Amendments 20 and 21 would change the definition of social investment such that directly furthering the charity’s purposes must be the primary consideration over achieving financial return. The range of social investments covered by the Bill would be restricted only to those where directly furthering the charity’s purposes is the primary aim. It would thus exclude those investments where achieving a financial return is the primary aim, as well as introduce a definitional issue around how to determine which of the two purposes is primary.

This is contrary to the intention of the Bill, which deliberately aims for a wide definition of social investment where neither the furtherance of the charity’s purposes nor the financial return should be required to take precedence. Some social investments place emphasis on charitable purpose, some on financial return; in other cases, the trustees will be motivated by financial return and furtherance of purposes in equal measure. None of these cases should be excluded from the statutory definition of social investment and from the scope of the new power; all investments right along the spectrum should be included. To hold one above the other would potentially restrict the breadth of investments that fall under the power thereby making it less likely to be used. In order to maintain as wide a scope as possible for the power’s use, so that the power may have the largest possible impact, it is important that the definition of social investment remains suitably inclusive.

As to Amendments 22 and 23, let me state for the sake of clarity that the definition of social investment used in the Bill covers anything short of a total loss of funds. It includes both a neutral and a negative return, short of such total loss. In this way, repayment of any part of the capital invested would be a “financial return” within the definition. The amendments seek to include cases where the expected financial return may be equal to, rather than greater than, a total loss of the investment. This would move us firmly into grant-making territory and mean that grants and other spending, where there is no expected financial return, would fall

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under the category of social investment. I do not think that this would be a desirable change to the Bill.

The third and final amendment in this group would delete new Section 292A(6), which is a necessary counterpart to the definition of an act of charity used in new Section 292A(4)(b). These parts of the clause are, I recognise, a little cumbersome, but they are necessary to deal with the so-called Rosemary Simmons problem, a case which was raised during the Law Commission consultation. It makes clear that giving a guarantee can count as a social investment despite the fact that money is only put at risk and not actually paid over. As such, it is a necessary inclusion to cover the full breadth of potential social investments. Deleting this subsection would leave the Bill deficient.

The noble Baroness will be aware that the Government have put proper time and effort into getting a definition of social investment that is fit for purpose. As she said, we have been dancing on the head of a pin for some time. I will address this at greater length when I cover government Amendments 25 and 29, referred to by my noble friend Lord Hodgson. I hope on this basis that the noble Baroness will be content not to press her amendments.

8.15 pm

Baroness Barker: I thank the Minister for that answer. I think that we are edging closer to a common position. If my amendments have helped to achieve that, that is worth while. I particularly welcomed the Minister’s statements about my Amendment 22. At this stage, I will curtail this discussion and be delighted to take part in the discussion on the next group of amendments. I beg leave to withdraw the amendment.

Amendment 20 withdrawn.

Amendments 21 to 24 not moved.

Amendment 25

Moved by Lord Bridges of Headley

25: Clause 13, page 16, line 36, at end insert—

“( ) The fact that a relevant act may also have results other than those mentioned in subsection (2)(a) and (b) does not prevent the carrying out of that act being regarded as the making of a social investment.”

Lord Bridges of Headley: My Lords, it is to government amendments to Clause 13, relating to the definition of social investment, that I now turn. It is the dancing on the head of a pin that I promised to undertake, which was mentioned by the noble Baroness, Lady Barker, and follows our fruitful debate in Committee and my meeting with my noble friend Lord Hodgson and the noble Baroness.

Noble Lords will recall that I described the power of social investment as being deliberately drafted to be as wide as possible while retaining the distinctiveness of the “social” element, so that the power covers a spectrum from transactions that are mostly intended to further charitable purposes but involve some return of capital, to those that are primarily financial but have a small mission benefit.

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There are two poles at the extremes of the spectrum. At one end there are social investments that look much like grants, with very little expected return of capital. At the other end, there are social investments that look very similar to traditional financial investments but have a small role in furthering charitable purpose—and one which is deliberately sought. Social investments must combine some aspect of each pole, but the nature of the combination is entirely flexible.

I also took the opportunity to make it clear that the Bill does intend to include mixed motive investment within the definition of social investment. That said, I have remained open to your Lordships’ suggestions that the Bill could be clearer on this point. This is of particular importance given the intent of this legislation to be expressly permissive and to encourage the uptake of social investment by charities. Thus I reiterate that in relation to the power of social investment: first; there is no minimum degree of mission benefit before the social investment power is engaged; secondly, it is the combination of the mission benefit and the financial return which may cause trustees to consider a social investment to be in the interests of a charity; and, thirdly, a charity’s purposes need not be advanced on an exclusive basis—there may be other unrelated outcomes that are features of the transaction as a whole but are not part of the charitable mission of the specific charity investor and are not part of their reason for investing.

For the record and for completeness, the Law Commission recommendation paper which forms the basis of Clause 13 states that,

“we consider that the definition should make clear that insofar as a social investment is justified by its expected mission benefit: (1) only the charity’s objects are relevant; other benefits which do not fall within the charity’s purposes are irrelevant (even if they may be charitable purposes for another charity); (2) for a charity with multiple purposes, a social investment need not further each one of those purposes; and (3) the charity’s social investment must be expected to cause the mission benefit that is relied on to justify the social investment. However, insofar as a social investment is justified by its expected financial return, it need not be used exclusively and directly to further the charity’s purposes”.

It may be worth me unpacking this further by way of an example. A charity might have the care of horses as its charitable purpose. It may wish to invest in a horse and donkey social enterprise, which provides joint facilities for both. The social enterprise may also expect to make a financial return, perhaps from charging visitors. It is entirely right that, having weighed the benefits to horses along with the expected risk-adjusted financial return, the horse charity is able to invest in the horse and donkey social enterprise. So long as the trustees have satisfied themselves that the combination of expected financial return and mission benefit in relation to horses is appropriate, this is covered under the social investment power. For the avoidance of doubt, this would also be the case for a horse and zebra charity investing in the horse and donkey social enterprise.

To put this in a more generic formulation, the social investment power will enable charities with wide charitable objects to invest in a wide range of social enterprises on an unrestricted basis, and by way of equity or debt or a combination of the two, or indeed through any

20 July 2015 : Column 982

other suitable financial instrument. With this in mind, and following discussions with the Law Commission and others, we have decided to amend the definition used by the Bill in a way that will make this even clearer, and to put it beyond any doubt in relation to matters of interpretation that could be raised some years hence. This explains Amendments 25 and 29.

I hope that this meets with the approval of the noble Lords who raised concerns in this area. I recognise that it may not go as far as some may like, but it is as far as we feel able to go without raising the spectre of private benefit. The Bill does not change the law on private benefit, which was deliberately excluded from the scope of the Law Commission review. However, for the record, the Law Commission recommendation paper states that,

“there was broad agreement that the law relating to private benefit does not generally prevent charities from making social investments … It does not seem to us that it is an obstacle, if properly understood, to social investment done with the aim of furthering a charity’s purposes”.

I trust that my laying out of the definition and the thinking behind it in some detail has served to make the case clear.

I thank the noble Lord, Lord Cromwell, for Amendments 30 and 31. It is, of course, important for charity trustees to be prudent and to think about the long-term management of their charity’s assets, whether they are making a social investment or engaged in any other activity. This month, the Charity Commission published its revised guidance, The Essential Trustee, (CC3), which says, for example, that trustees must,

“make balanced and adequately informed decisions, thinking about the long term as well as the short term”,

and that they,

“must act responsibly, reasonably and honestly. This is sometimes called the duty of prudence. Prudence is about exercising sound judgement”.

Trustees are therefore already subject to duties that cover the points made by the noble Lord’s amendment.

The purpose of Section 292C is to set out certain duties that apply specifically to social investment, not to codify the entirety of trustees’ duties when making social investments. In addition to these duties, trustees will of course also be subject to the duties imposed by the general law, including the law of prudence. The specific duties in 292C also modify the duties imposed by the Trustee Act so that they are tailored to social investment. Just as the Trustee Act does not include an express duty to consider prudence and the long-term management of a charity’s assets, nor should the social investment duties.

The Law Commission’s recommendation was that the trustees should be satisfied that a social investment is in the charity’s interests, having regard to the two limbs of the definition in Section 292A: namely, furthering purposes and the financial aim. The wording of the government amendment deliberately refers back to those two limbs of the definition; it does not need to do more than that.

Finally, the long-term management of a charity’s assets will not always be a relevant consideration when making a social investment. It would be relevant if a charity is using its investment assets to make a social

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investment, but this will not always be the case. A charity might use its disposable income to make a social investment. For example, if a charity’s endowment produces an income of £10,000 to be spent this year, the charity might decide to use £2,000 of that to make a social investment that is expected to further the charity’s purposes and might result in a payment of, say, £500. That might not be a prudent long-term management of that £2,000 as an asset, but it is an excellent use of the charity’s funds and the possibility of getting £500 back is better than simply giving £2,000 away. I fear that the wording of the noble Lord’s amendment might suggest, even if it is not intended to, that such a social investment is not permitted, and I hope that he will be content not to press it. I beg to move.

Lord Cromwell (CB): My Lords, I shall speak to Amendments 30 and 31, which are amendments to government Amendment 29. In doing so, I remind the House of my involvement in the charity sector and in financial investing. I am grateful to the Minister for government Amendment 29, which I support. I sense that I may be swimming against the tide here, but I hope that he will feel able to reconsider his approach to the text by adding what we have suggested in the amendments tabled in my name and that of my noble and learned friend Lord Hope of Craighead.

The Minister’s amendment highlights the need for trustees to consider a social investment in respect of two factors: the charity’s purposes and the financial return. I am sure he is right in that. No financial return is not, in my definition at least, an investment. The missing element in our view is to consider how a social investment fits into the pattern of overall investments and the long-term plan for the charity’s assets as a whole, not just considering the investment in isolation, which I think Amendment 29 seems to imply.

Some might say that prudence and long-term planning are motherhood and apple pie because they are self-evident. However, the Bill is breaking new ground. It invites trustees to engage with a new type and class of investment. These are welcome additions to the investment universe, but they are different from and less regulated than mainstream financial investments. Furthermore, these investments are likely to be presented in different ways, separately, and by different people. I hope that the Minister will agree that, first, the wording we suggest does not place any barriers in the way of social investing, or certainly none that a worthwhile social investment could reasonably object to. Secondly, they provide a context to such investments, and given that this is a new area of investing, a reasonable sense check that trustees should observe when making or considering them.

Lord Hope of Craighead (CB): My Lords, I am in the unusual position of having heard the Minister’s reply before we move our amendments, so I know what he is saying. Perhaps I may say in support of the amendment tabled by the noble Lord, Lord Cromwell, to which I have also put my name, that what we are trying to do is refine the exercise which the Minister is himself engaged upon. For myself, I very much welcome government Amendment 29.

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The starting point for this is to look back to new Section 292C(2)(c), where the charity trustees are asked to,

“satisfy themselves that it is in the interests of the charity to make the social investment”.

It was because that in itself seemed rather bald that we suggested in Committee that the phraseology should be expanded upon to give further guidance to the charity trustees. The noble Lord has very properly expanded on that, but our point is that it does not go quite far enough. It tells the trustees that they should have regard to the benefit that they expect the social investment to achieve for the charity, stating,

“(by directly furthering the charity’s purposes and achieving a financial return)”.

That is a specific and immediate task; namely, looking at the information and the task before the charity trustees at the moment. The problem may be that if a step is taken today, it may undermine or at least put at risk the assets of the charity in the longer term. It is to try to balance these two things out—the way things seem today as against how they might seem in two or three years’ time—that we are making this additional suggestion.

The Minister has said that he is not persuaded, but I wonder whether he would be kind enough to at least think again about whether he might give some little step in our direction to balance out these two things. Long-term management of the assets is obviously essential to the charity if it is to remain alive, and it is to balance out the immediate task with the long-term future that we suggest the wording should be expanded further.

8.30 pm

Lord Hodgson of Astley Abbotts: I rise briefly to thank my noble friend for the trouble that he has taken over this. The sector said to me: “These are the three things we’d like him to say”, and I am glad to say that he has nailed all three issues, so I thank him very much for that. It greatly reassures us and clarifies the situation, which was somewhat obscure when we left the Moses Room a couple of weeks ago.