Charities (Protection and Social Investment) Bill [Lords]
(Limited Text - Ministerial Extracts only)
Read Full debate16:29 - The House divided: - Ayes: 236 / Noes: 280 - Question accordingly negatived.
16:43 - The House divided: - Ayes: 196 / Noes: 280 - Question accordingly negatived.
The Minister for Civil Society (Mr Rob Wilson)
It might be helpful if I clarify one of points that the hon. Lady raised about the power to direct. An official warning is not the same as a direction power. I am aware of the potential confusion regarding the explanatory notes that she mentioned. If it is helpful to her, I would be happy to ensure that the explanatory notes are updated to make it absolutely clear that the warning power cannot be used to direct charities.
Anna Turley
That is very helpful indeed. I really appreciate the Minister being so quick and forthcoming with his clarity on that, which will give the sector a lot of reassurance.
I now move on to our new clauses 2 and 3. New clause 2 seeks to replace a clause that was put into the Bill during its passage through the other place but removed in Committee. I pay tribute to our noble Friends in the other place who successfully added the clause to the Bill. As with so much legislation at the moment, we are finding them to be great defenders of social justice and fairness.
New clause 2 would support trustees in carrying out their existing duties by ensuring that they can adhere to their charitable aims and objectives, and it would protect them from being compelled to undertake an action at odds with their charitable purposes. As we have always made clear, especially in Committee, the provision is particularly relevant to housing. It aims to protect charities and housing associations if the Government mandates them to sell their charitable property under the right-to-buy proposals.
Labour Members want those who desire to be homeowners to achieve their aspiration. While the number of homeowners has fallen by more than 200,000 under this Government, the number rose by more than 1 million under Labour between 1997 and 2010. I want to be clear that we support people’s aspiration to own their own home.
Mr Rob Wilson
Before getting into the detail of the proposed amendments, I would like to make a few quick points that frame the Government’s position in this afternoon’s debate. I reiterate the really important point that the overwhelming majority of charities are well run, and they are run by hard-working, dedicated people whose motivation is to help others and do good. They perform a vital role and we should never forget that. The protections and strengthened powers that we have set out will protect public trust and confidence for the vast majority, and that is the reason behind the Bill. As a result of the engagement and scrutiny by Members of both Houses, the Bill has most certainly been improved in a number of places. I would like to put on the record my thanks to all those involved in those improvements.
Let me turn to new clause 1. I thank the hon. Member for Redcar (Anna Turley) for her explanation of the new clause. We think that judicial review is more appropriate than a specific right of appeal to the charity tribunal in the case of an official warning. In cases of low or medium-level misconduct or mismanagement, a right of appeal to the tribunal would be disproportionate.
Furthermore, the Charity Commission has said that such a right of appeal to the tribunal would render the power unusable. It anticipates many appeals being made as a means of frustrating the regulatory process. The resources required by the commission to defend tribunal proceedings would be disproportionate to the issues at stake in official warning cases, which are, by their nature, low and medium-level. There is no point giving the commission a power that it would not use.
Judicial review is a well-established means of ensuring that genuine wrongs are put right. Unlike the tribunal system, it discourages unmeritorious cases and those who calculate that delay through litigation is the best tactic to avoid robust regulation. Furthermore, costs are usually awarded against the losing party, providing a financial disincentive to those who might otherwise pursue a weak case.
Some Members have raised concerns about the potentially harsh implications, including adverse publicity, for charities in receipt of an official warning. Let me say this in response: charities exist for the public benefit and should therefore be accountable to the public. One of the Charity Commission’s statutory duties is to promote that, which is why the official warning power will be an important new tool in relation not only to promoting charities’ compliance with their legal obligations, but to improving charities’ public accountability. The concern about adverse publicity is an attempt to avoid accountability to donors, beneficiaries and the general public.
Some have suggested that the warning power would allow the Charity Commission to direct charities. Let me be absolutely clear that it will not. The warning must specify the breach and may provide guidance on how the charity can rectify it, but the decision on how the breach is to be rectified is a matter purely for the charity’s trustees. Others have said that the trustees run the risk of significant regulatory action without a right of appeal, but I disagree. Were the commission to escalate from a warning to a statutory inquiry, the opening of the inquiry would be subject to a right of appeal to the charity tribunal, as would the use of any inquiry powers.
Finally, the Joint Committee that undertook pre-legislative scrutiny of the draft Bill agreed that, provided the power is framed in the right way and with the right safeguards, judicial review was the appropriate means of challenge, rather than an official warning. That was also the view in the other place and we agree, so I cannot accept new clause 1.
I will now speak to amendments 8, 9, 10, 11 and 12, tabled by the hon. Member for Redcar. I group the amendments in that way because all of them, except amendment 9, would serve to weaken a number of important provisions relating to the warning power. However, I will lay out my arguments against each amendment in detail.
Let me start with amendment 9, which seeks to bind the commission’s power to issue a warning to a requirement to notify the charity and charity trustees. I absolutely agree that that is a sensible and proportionate provision, which is why it is already required under the existing drafting of clause 1. Amendment 9 is therefore superfluous.
Amendment 8 seeks to stop the Charity Commission from publishing a warning to a wider audience than just the charity and its trustees. Similarly, amendment 10 would also restrict transparency and accountability by requiring the commission to publish warnings only in such a manner that did not identify the charity or trustees involved. I am afraid that I cannot agree with those proposed changes: charities exist for the public benefit and must be accountable to the public for their work.
The Charity Commission’s ability to publish an official warning will enhance transparency, which is entirely in line with the commission’s objectives of increasing charities’ accountability and promoting public trust and confidence.
Mark Field
Given my earlier contribution, the Minister may recognise that I am slightly concerned about the notion of the Charity Commission having a view at all. Surely the important things are what Parliament has to say and the establishment of the objectives of any particular charity. We should all have concern about the notion of the Charity Commission imposing its will over the objectives of a charity.
Mr Wilson
My right hon. Friend need not worry about the Charity Commission imposing its will on charities; there are many safeguards, including the referral to a charity tribunal, to make sure that that does not happen. Ultimately, the Charity Commission relies on the support of the sector itself to make sure that it can function properly.
The commission already publishes details of its non-inquiry compliance cases when it is in the public interest to do so, and it does that without a specific statutory power. When the regulator has to intervene and issue an official warning, it is right that that should be placed in the public domain, although it should be made clear that when the issue that gave rise to the warning has been addressed, it should be archived after a period. The commission has a published policy on how it reports on its regulatory work, and it is available on gov.uk. The commission would need to update the page with regard to official warnings, so that there would be a clear policy. Charities can and do make representations to the commission about the publication of particular information.
Amendments 8 and 10 would undermine the increased transparency and public accountability of official warnings, turning them into an ineffective tool without real impact. Amendment 11 seeks to limit the Charity Commission’s ability to issue a warning, so that it could do so only after a minimum notice period of 14 days. On the surface, that would ensure that, in all cases, the trustees had sufficient time to consider the notice of intention to issue a warning and co-ordinate any representations that they might wish to make.
I am sympathetic to the aim of ensuring proper notice, but I believe that that should be addressed in the Charity Commission guidance. It is already clear that if the Charity Commission decides to issue a warning, it must give notice of its intention to the charity and the trustees. The warning power may be appropriate in some circumstances when the commission needs the flexibility to act more quickly than 14 days. Following debate in Committee, the Charity Commission has recognised the concerns raised and it has reassured me that it will normally apply a minimum notice period of 14 days. That will be made clear in its forthcoming guidance, which will be published ahead of these powers coming into effect.
Finally, I believe that the changes proposed by amendment 12 are unnecessary as they aim to remedy a problem that does not exist in the current draft form of clause 1. It is already clear that any remedial action that the Charity Commission may suggest in response to a warning does not amount to a direction. The Government have been consistently clear that the commission could not use the official warning power to direct charities, and I am happy to reiterate that position again for the record. What the power does enable the commission to do is provide advice and guidance to the charity on how it can remedy a breach that has been identified in the warning. This gives the offer of support to a charity so that issues can be resolved in a timely and adequate manner. It will also help charities to understand in more detail what processes or actions led to the issuing of a warning and what type of conduct could avoid this in future. I hope that I have laid out in detail to the House and to the hon. Member for Redcar why I do not support her amendments to clause 1.
I turn to Government amendment 2, which relates to clause 1. Previously, the power to issue a statutory warning did not include a provision that would specifically enable the Charity Commission to vary or withdraw an official warning once it had been issued. Amendment 2 rectifies that. Withdrawal could be necessary if it came to light that the warning should not have been issued in the first place or, in some cases, where the charity has addressed the issues set out in the warning. The power to vary a warning would likewise enable the commission to do so where the issue has been partly addressed by the charity, if the commission considered that to be appropriate. This is a sensible amendment and I commend it to the House.
Amendment (a) is unnecessary, because where the Charity Commission does withdraw a warning it will, as a matter of policy, set out the reasons for doing so when it notifies the recipient of the warning and publicises the withdrawal. I am sympathetic to the aim of the second part of the amendment, but do not support it. There could be a host of reasons why a warning is withdrawn, and some of them may warrant the details remaining on the public record for a period of time. The inclusion of this amendment could lead to unintended consequences that are detrimental to charities and to the commission. If a warning is withdrawn, there may still be press articles or other information referring to it, but if a member of the public then went to the register of charities, as the official source of information, they would find no mention of it there. In some cases, it may be better to keep a record of the warning there but explain that it has been withdrawn. The commission has already said that it would address these matters in guidance, which is the right place to consider them in detail. On that basis, I see no need for amendment (a).
The hon. Member for Ilford North (Wes Streeting) expressed concern that official warnings should not be used to force people to follow good practice. I agree. The explanatory notes make this clear, saying:
“Failure to follow good practice could not automatically be considered to constitute misconduct or mismanagement.”
I hope that helps the hon. Gentleman.
I now turn to the disqualification powers in clauses 9 and 10. Government amendments 3 and 4 are relatively modest, but we consider them to be necessary to ensure the proper operation of clauses 9 and 10. Clause 9 extends the effect of automatic disqualification to the most senior executive roles in a charity—that of chief executive officer and, where there is one, chief finance officer. In our discussions with the Charity Commission on this provision and how it would operate in practice, it became clear that there was a risk that a person employed by a charity who did not exercise any management function could be caught by the clause as it stands. This may be the case in a small charity that employs only one or two operational staff who may report directly to the board but do not perform management functions since those are fulfilled by the trustees. In those circumstances, the employee ought not to be caught by the disqualification provision as they are not involved in the management of the charity. Our amendment 3 ensures that this will be tightened up through drafting. Government amendment 4 makes exactly the same provision in relation to the power of the Charity Commission to disqualify under clause 10. I hope that hon. Members agree that these are sensible provisions to add to the Bill.
I am extremely grateful to my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) for tabling his amendment as it gives me the chance to provide some reassurance on the record. He is a strong supporter of and advocate for charities involved in the rehabilitation of ex-offenders, which is an extremely commendable cause. Charities and the voluntary sector play a significant role in the support and rehabilitation of ex-offenders, and we should recognise and encourage their important contribution to reducing reoffending and helping former offenders to reintegrate into society.
I want to ensure that the Bill’s provisions do not have an undue impact on that very important work.
The disqualification provisions are important. Although the existing system has worked well, it needed to be updated. The Bill seeks to extend the disqualification provisions as an important way of protecting charities from individuals who might seek to abuse their position of trust, whether for personal financial gain, to abuse beneficiaries or for some other purpose.
Peter Kyle
Will the Minister join me in congratulating the charity Unlock on working with the right hon. Gentleman? That partnership between a party politician and a charity produced a fantastic speech. He made some very important points, and that is clearly having an impact on legislation on the Floor of the House of Commons. Is that not to be welcomed?
Mr Wilson
I can see the trap that the hon. Gentleman is setting for me, and I am not going to walk into it. I have further comments to make on the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act, but I thank him for his attempt, lame though it was.
Some people who are currently trustees or senior managers will be caught by the extension of the disqualification provisions. Although the number of waiver applications is likely to increase, we do not think that a significant number of people will be affected by the changes. I would be surprised if it ran to more than the low hundreds, based on the commission’s experience under the existing disqualification regime.
I recognise the concerns that have been raised by my right hon. and learned Friend, and I am happy to commit to producing a report on our assessment of the impact of the disqualification changes. I will deposit it in the Library of the House before the commencement of the automatic disqualification provisions in clause 9. I cannot promise that we will cover every point listed in amendment 1, but I will ensure that we provide a very detailed assessment, as he has requested.
I want to ensure that the disqualification powers in the Bill protect charities from individuals who present a known risk, while at the same time providing for the rehabilitation of offenders and a way back into charity trusteeship or senior management on a case-by-case basis. That strikes me as both fair and proportionate.
Sir Edward Garnier
I thank my hon. Friend for his very welcome assurances. I much look forward to the discussions that will follow this debate, as do those I have been speaking with and for today.
Mr Wilson
I thank my right hon. and learned Friend for those kind words. We will certainly work very closely with those organisations.
Amendment 13 seeks to empower the Charity Commission to disqualify several trustees in cases of collective failure. In Committee, I explained that the Charity Commission already has the power to act in such circumstances and, indeed, has done so in cases relating to systemic governance issues. There is no reason why the Charity Commission could not take action against all the trustees of a charity where it was appropriate, proportionate and in accordance with the principles of best regulatory practice to do so. For that reason, I do not support amendment 13.
Amendment 14 would give the Charity Commission the job of consulting on and publishing guidance on how it assesses “unfitness” in relation to the power to disqualify, as set out in clause 10. We discussed a similar amendment in Committee and, although I agree with its intended effect, I do not believe that it is necessary. When the Bill was introduced in the other place, the Charity Commission published a well-received document setting out its initial thoughts on how it would exercise the disqualification power. The document highlights the broad categories that the commission would consider, namely honesty and integrity, competence and credibility. It gives various examples of the sorts of specific conduct that it would take into account. I explained a number of those examples in Committee and do not propose to repeat them today.
The Charity Commission has further committed to develop and consult on its initial thinking in draft guidance on how it would operate the power to disqualify. All of that will happen before the power to disqualify is commenced. As with any commission guidance, it will be kept under regular review to reflect changes in legislation or tribunal findings. On that basis, I do not see that amendment 14 is necessary.
Amendment 15 was previously proposed in Committee by the hon. Member for Redcar. The Charity Commission already considers only conduct that is “relevant and serious”. If it were to take account of other conduct, I would expect any resulting disqualification order to be thrown out by the charity tribunal on appeal. Besides that, the amendment should not be passed because the inclusion of the words “relevant and serious” in condition F would pose potential unintended consequences.
Including those words in the disqualification power could cast doubt on all the Commission’s other powers that do not contain them. The exercise of those other powers, such as the power to remove a charity trustee or the power to direct a charity, already depends on conduct that is both relevant and serious, even though those words are not included in the criteria for exercising the powers. I do not want there to be the risk that the other powers could be interpreted as not requiring relevant or serious conduct in order to be exercised. Although I understand and sympathise with the aims of amendment 15, I hope the House will understand why I do not believe that it is necessary and how it could inadvertently reduce the bar for the exercise of the commission’s other powers, which I would not support.
Amendment 5 is another relatively modest Government amendment that was suggested to us by rehabilitation charities. As I said in relation to the amendment tabled by my right hon. and learned Friend the Member for Harborough, we are keen to work with rehabilitation charities to ensure that the Bill does not undermine their important work.
To make a disqualification order against a person, the Charity Commission will have to meet one of six conditions, from A through to F, alongside a number of other things. Condition B is that the individual has been convicted outside the UK of an offence against a charity or involving the administration of a charity which, had it happened in the UK, would have automatically disqualified the individual. As it stands, the commission can take into account only an overseas conviction that is not spent under the law of the territory where the conviction took place. It was pointed out to me that it would be fairer and more proportionate if the limitation related to the UK rehabilitation period for an equivalent UK sentence, rather than the rehabilitation period of the overseas jurisdiction. I agree that that would be more proportionate, and amendment 5 makes the necessary change.
My right hon. Friend the Member for Cities of London and Westminster (Mark Field) ingeniously managed to speak about independent schools. He made an important point about the variety of ways in which independent schools provide public benefit. There is not one single way to achieve public benefit and the Charity Commission would certainly not direct any independent school that there was.
New clause 2, proposed by the hon. Member for Redcar, represents an attempt to reinsert a provision that the Government removed in Committee. Let me explain why the Government oppose it. It was described by several peers in the other place as sending a signal of opposition to the Government’s plans to legislate to extend the right to buy to tenants of housing associations. That message has been received, considered and responded to. Extending the right to buy to tenants of housing associations is a manifesto pledge on which the Government were elected and are committed to deliver. It will mean that up to 1.3 million more families in England get the chance to own their own home while at the same time ensuring the replacement of housing stock.
We listened to the concerns raised. Rather than legislating to implement the policy, we reached a voluntary agreement with housing associations which will implement the policy while protecting the independence of housing associations.
Mark Field
It is important that the Minister reflects that that was a manifesto commitment—even some of us on the Government Benches had concerns about it, but it was a manifesto commitment. It was rightly brought up in the Housing and Planning Bill, and it is disrespectful to the House, and a dangerous precedent, when one Bill is used to undermine another Bill that is part and parcel of a manifesto commitment. That also happened in the previous Parliament on the boundary changes, when a measure in an entirely different bit of legislation was used to oppose that policy. The House of Lords is abusing its position if it thinks it can do that in that form.
Anna Turley
To take up that point, the right to buy affects charities, and we are debating charities legislation. The right to buy affects the ability of housing associations to control their assets, which is a fundamental change to the balance of the relationship between their role and the Government’s ability to tell them what to do. That is why we have debated it today.
Mr Wilson
The Opposition are obviously entitled to propose whatever amendments they want as long as they are in order, but the problem is not just that new clause 2 is completely unnecessary; it would also be damaging, although I am sure that that was not the hon. Lady’s intention.
Many of the rules that apply to charities’ investments in, and their disposal of, assets, derive from case law that has been built up over hundreds of years. Proponents of the new clause argue that it reflects the existing case law, but I simply do not accept that. A simple statutory provision such as the new clause cannot hope to reflect the accumulated detail of case law derived from many hundreds of judgments.
Case law already requires charities to use and dispose of their assets in a way that supports the delivery of their charitable purposes. That provides flexibility for certain circumstances that a statutory provision cannot provide. For example, how would the new clause affect compulsory purchase orders in relation to charity land? How would it affect the existing rights of more than 1.4 million housing association tenants under the preserved right to buy or the right to acquire? How would it affect the exercise of Charity Commission powers such as its power to direct charity property in the course of a statutory inquiry? There are simply too many questions about the measure to which we have not had satisfactory answers either this afternoon or during the course of the Bill’s proceedings.
New clause 2 would give the Charity Commission a new and very broad role in policing the use and disposal of charity assets. That is inconsistent with our current aim of helping the commission to focus on its core regulatory activities.
New clause 3, which is also in the hon. Lady’s name, is at best unnecessary and at worst damaging. Charity law already sets out clear rules on what charities can and cannot do in relation to campaigning and political activity. I explained those in detail in Committee and do not propose to do so again today. New clause 3 might seek to reflect existing law, but it does not. In a similar way to new clause 2, new clause 3 attempts to include in a statutory provision the existing case law. That seriously risks changing the boundaries of what is permitted.
New clause 3 would allow charities to undertake political campaigning or political activity, but does not define what that means.
Would it, for example, allow partisan political campaigning? If that were the case, it would represent a real shift in the law and I would strongly object to that. In particular, I think the public would be very surprised and disappointed to see charities taking part and campaigning on a party political basis. Existing case law does not allow charities to engage in political campaigning to such an extent that it calls into question whether in fact they are a charity or, rather, a political campaigning organisation. Again, it is not clear to me that new clause 3 would incorporate that crucial limitation, potentially opening up charitable status to organisations with a political purpose.
Mr Wilson
What the hon. Gentleman says is quite extraordinary. We had this debate in Committee. It was quite clear, from the reaction to the concerns about the Badger Trust, that the hon. Gentleman and those on the Opposition Front Bench agreed that party political campaigning was actually a good thing. Even today that has been repeated, with regard to the Badger Trust. The hon. Member for Redcar disagrees with the Charity Commission finding that it was party political.
In Committee, my hon. Friend the Member for Newark (Robert Jenrick) gave us a very strong warning about new clause 3, which sums it up well and bears repeating. He asked us to look across the Atlantic to America, where charities can engage in party politics and support political candidates, and where wealthy philanthropists can set up organisations with blurred aims. He said we should be careful what we wish for. I agree with that sentiment entirely. The new clause would risk setting us off down a very slippery slope of involving charities in party politics. For that reason alone, I strongly encourage the House to oppose it.
On fundraising, I am sure all hon. Members will be aware of the poor fundraising practices uncovered over the summer. They present a real risk to levels of public trust and confidence in charities. I asked Sir Stuart Etherington to review how fundraising had been regulated in the past and to suggest improvements. The Government accepted his recommendations for a new, stronger self-regulatory body, backed up by the statutory powers of the Charity Commission. This new fundraising regulator is currently being set up by Lord Grade of Yarmouth and his chief executive Stephen Dunmore. The new regulator will establish the fundraising preference service, which will give people who feel overwhelmed by the sheer volume of requests they receive a simple way to opt in. I am grateful to the working party, led by George Kidd and supported by the NCVO, which has already started to draft proposals on how the FPS will work in practice.
As I made clear in Committee, this place owes it to the generous British public to ensure that they are not coerced or bullied into giving their hard-earned money to charity. It is because of this that we brought forward Government amendments in Committee that would enable the Government to step in and compel charities to register with the self-regulator should they fail to do so voluntarily and in significant numbers. Should this still prove insignificant, the Government would have the power to mandate the Charity Commission with the regulation of fundraising.
I truly hope that I and my successors are not put in a position to have to resort to those reserve powers, and that charities seize this last chance to make an independent self-regulatory system work. If self-regulation does fail, however, we need to make sure that we are equipped to step in quickly with effective statutory regulation. In that respect, I warmly welcome Opposition Members’ support for the Government’s approach to addressing fundraising regulation. I give particular thanks to the hon. Member for Redcar for her supportive comments on Second Reading and in Committee.
I thank my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) for his work as Chair of the Public Administration and Constitutional Affairs Committee. His Committee has played an important role in investigating the poor fundraising practices we saw last summer. I welcome the Committee’s report, which was published yesterday, and I will give it careful consideration before responding fully in due course. As it highlights, the public rightly expect the highest standards from our charities. Like the Committee, I believe that charities should get a last chance to put their own house in order to restore public trust and confidence.
Lady Hermon (North Down) (Ind)
The Minister will know that people in Northern Ireland give generously to charities. Regrettably, the Bill has been designated as exclusively English. If constituents of mine are oppressed by requests from charities, can they legitimately complain to the Charity Commission and the new regulatory body?
Lady Hermon
The Minister does not seem to grasp the point. There are national charities across the UK, of which Northern Ireland is a part. Thousands of people voted in the referendum on the Good Friday agreement—the Belfast agreement—to remain part of the UK. The donors and supporters of national charities, such as the Salvation Army, the Royal National Lifeboat Institution and others, are also in Northern Ireland, so the first port of call should be here, not Northern Ireland.
Mr Wilson
The hon. Lady makes her case strongly, and it is absolutely right that she should do so here in the UK Parliament. I hope that she will also make her case strongly to the devolved Administration, which many people in Northern Ireland wanted, and got as a result of the actions of subsequent Governments.
New clause 4 would fundamentally change the division of responsibilities between the new fundraising regulator and the Charity Commission. If we were to propose that the commission hold public hearings on matters of charitable fundraising, this would effectively amount to a form of statutory regulation. The commission does not believe that it currently has the resources effectively to exercise the power to hold hearings on fundraising, as suggested in the new clause. It can, in theory, already hold hearings in relation to statutory inquiries under section 46 of the Charities Act 2011, but it does not do so because it would not be an effective means of undertaking its casework. Unlike with other powers in the Bill, the commission does not ask for this ability.
I understand that my hon. Friend the Member for Harwich and North Essex may have intended in new clause 4 to offer to witnesses giving evidence to the Charity Commission in public hearings on charity fundraising the protection of not having their evidence used against them in other proceedings, rather than legal professional privilege. Legal professional privilege protects the lawyer-client relationship and is not what I think he is looking to achieve. However, the proposed hearings would be proceedings undertaken by the commission, not proceedings in Parliament, so parliamentary privilege would not be appropriate, either. The reserve power to regulate fundraising in section 64A of the Charities Act 1992 is a power to make secondary legislation that is necessary or desirable or in connection with regulating charity fundraising. If the commission were to assume statutory responsibility for the regulation of fundraising and this included holding public hearings, we would need to consider, at that point, what protection for witnesses would fall within the scope of the power.
My hon. Friend’s new clause 5 would prematurely task the commission with becoming the primary regulator for fundraising activities. The Government have provided for this already, but through the stronger reserve powers we introduced in Committee. We would also risk undermining public confidence, if self-regulation were to fail while under the oversight of the commission, particularly if the solution to that failure was statutory regulation by the commission. We would also need to do a lot more detailed thinking about whether, and if so how, witnesses could or should be protected by an equivalent to parliamentary privilege, which is what I think he might have been seeking with the new clause.
However, I completely agree with the finding of the Select Committee on Public Administration and Constitutional Affairs that
“It would be a sad and inexcusable failure of charities to govern their own behaviour, should statutory regulation became necessary.”
Perhaps I can reassure hon. Members that, under the reserve powers in the Bill, it would be possible for the Charity Commission to be given statutory responsibility for the regulation of fundraising, but to deliver that through a third party such as the fundraising regulator. New section 64C(2) of the Charities Act 1992, as introduced by clause 14, already specifically enables that.
Martin John Docherty
I am sure the Minister recognises the comments that the hon. Member for North Down (Lady Hermon) made in relation to Northern Ireland, which I also raised during the general debate in relation to fundraising. This legislation should not impact on the right of the Scottish Parliament to legislate on fundraising for charities. Will the Minister reiterate that here on the Floor of the House?
Mr Wilson
The representatives for Scotland were at the fundraising summit recently. This is a devolved matter, and it is up to them what rules they set for Scotland. They do not have to follow; this is an England and Wales Bill, which does not affect Scotland. It is therefore up to the Scottish regulator how they wish to proceed.
I maintain that it is important to keep a clear division between statutory and self-regulatory powers to ensure better regulation of fundraising. The best way to achieve that is to support the new fundraising regulator and, if it should fail, make a decisive and clear move to statutory regulation. Should self-regulation fail, the Government will not hesitate to intervene, which could include tasking the Charity Commission with the regulation of fundraising. However, we think it is too soon to commit the Charity Commission to an enhanced statutory role in fundraising, so I hope my hon. Friend the Member for Harwich and North Essex will understand why I do not support his new clauses 4 and 5.
Let me turn finally to Government amendments 6 and 7. It would not be fair to ask the taxpayer to carry the cost of fundraising regulation if it is the result of a failure by charities to protect the public from their own poor practices. Government amendments 6 and 7 would therefore enable the fundraising regulator or the Charity Commission to charge fees to those it regulates for that purpose. Many of the charities signed up to and paying for the old system of self-regulation were those that followed best practice, and there was a problem of free riders. To guard against that risk, the Etherington review suggested that any charity with fundraising expenditure beyond a certain level should be subject to a levy, requiring the large and medium-sized fundraising charities to pay for regulation.
Should the Government need to compel charities to register with the charity fundraising regulator, it is important that the fundraising regulator is able to levy fees for registration. That is exactly what amendment 6 would enable. Government amendment 7 deals with fees, should the reserve power be exercised for the Charity Commission to regulate fundraising. It would ensure that regulations could provide for the Charity Commission to charge fees across the range of bodies that it would regulate as the fundraising regulator.
I hope my explanations suffice to convince hon. Members that these amendments are an important part of the backstop to self-regulation and will help to ensure the effective regulation of fundraising in future, but I would of course be happy to provide more detailed responses. The main point is that I hope that these amendments are not needed and that charities will support the new, tougher self-regulatory system being established under the leadership of my noble Friend Lord Grade of Yarmouth. I commend these Government amendments to the House.
Anna Turley
For the sake of colleagues, I will be brief. I thank everybody for their contributions this afternoon. There is a wealth of experience from the charity sector in the Chamber, which has added a richness to the progress of the Bill.
Let me turn straight to new clause 1. Although I do not share the Minister’s view that judicial review will be more cost-effective—that may be the case for the Charity Commission, but perhaps not for charities that are appealing, many of which will not be able to afford to go to judicial review—I am willing to work with the Charity Commission, the sector and the Government to monitor the use of warnings outside of primary legislation. Therefore, I do not wish to press new clause 1 to a vote, although I wish to test the House on new clause 3 and amendment 8, because I do not feel our concerns have been met on either issue. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 3
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.”—(Anna Turley.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Mr Speaker
I can now inform the House of my decision about certification. For the purposes of Standing Order No. 83L(2), I have certified that the Charities (Protection and Social Investment) Bill [Lords] relates exclusively to England and Wales on matters within devolved legislative competence, as defined in Standing Order No. 83J. Copies of my certificate are available in the Vote Office. Under Standing Order No. 83M, a consent motion is therefore required for the Bill to proceed. Does the Minister intend to move the consent motion?
Mr Speaker
Even a nod from a Whip would suffice, but instead we have the full throttle of ministerial words. The House is greatly privileged and the occasion, I feel sure, will not be forgotten.
The House forthwith resolved itself into the Legislative Grand Committee (England and Wales) (Standing Order No. 83M).
[Natascha Engel in the Chair]
Sir Edward Leigh (Gainsborough) (Con)
I can reassure the hon. Member for North Down (Lady Hermon) that the Procedure Committee, of which I am a member, is looking at what is happening with this procedure and will report back to the House. It shall be noted that these are matters of great interest, but recently when I have sat in on consent motions for these sorts of debates under English votes for English laws, I have noted that nothing is said at all. It is incumbent on us to draw up procedures that actually make a difference and have a purpose. The problem with EVEL is that, because the Conservative Government have an overall majority, no Bill will be changed one iota in this Parliament as a result of EVEL. Because all the other parties are opposed to EVEL, if the Conservative party does not have a majority after the next general election, the procedure could be abolished in an afternoon. The Committee will be looking at these procedures very carefully and—of course, I cannot speak for its other members—will want to be reassured that the procedures under EVEL are actually changing something.
Matthew Hancock
I will respond briefly to the comments of the hon. Member for North Down (Lady Hermon). She asked why the Bill has been designated as an England and Wales Bill, and that is because it relates in its entirety to England and Wales. On her point about a charity that covers the whole United Kingdom—it hardly behoves me to reiterate, passionately and fulsomely, the Government’s support for the United Kingdom, which we share—regulation of the activities of charities in Northern Ireland is devolved. I cannot speak to, and I do not have responsibility for, the activities of the Charity Commission for Northern Ireland, which regulates the activities of charities in Northern Ireland. Likewise, this section of the debate ensures that there is consent for this legislation among the MPs whose constituencies will be covered by it. The reason I did not speak at the start of this procedure is that, given that the Bill is so clearly restricted to activities that take place in England and Wales, it is plain and obvious that it is therefore an English and Welsh Bill for these purposes.
Lady Hermon
I am grateful to the Minister for allowing me to intervene. I want to make the point—I am sorry to repeat myself—that we have legislation going through the House today that will give increased powers to the Charity Commission based in England. However, were the Charity Commission based in England to take action against a national charity of which my constituents are members and supporters and to which they are contributors and donors, my constituents would be directly affected by its actions in relation to that particular charity. Am not I therefore entitled, as of right, to represent the views of my constituents in this House?
Matthew Hancock
Of course the hon. Lady is entitled to represent the views of her constituents, which is precisely what she has been doing in the stages of the Bill, but it is also right that English and Welsh MPs can have their say on the Bill. I point out that were her constituents involved in a similar way in a charity that was headquartered in France, Germany, America or anywhere else in the world, that charity would of course be regulated by its home regulator in the same way as a charity based in England. It is a consequence of the devolution of charities law, and the actions of support for and regulation of charities, to Northern Ireland that this is an issue not for Northern Ireland but for England and Wales, and therefore, under the EVEL procedures, this is self-evidently an England and Wales Bill.
Lady Hermon
I do not want this to become a one-way conversation, but I have to say that I do not think the people of Northern Ireland would be flattered to be compared to France. I have listened studiously to Government Front Benchers reassuring the House that theirs is a one nation Government. I invite the Minister to come to Northern Ireland and meet those who have contributed to charities in Northern Ireland. He can explain to them face to face why, given that the Government claim to be a one nation Government, Northern Ireland MPs in some cases do not count—apart from Sinn Fein Members, of course.
Matthew Hancock
It is self-evident that if the issues in the Bill relate to England and Wales, as they do, the Bill should, in the view of the Government, be certified as an England and Wales Bill. It is a consequence of devolution that those representing England and Wales should be able to have their vote on a Bill that relates only to England and Wales.
To respond to the point made by my hon. Friend the Member for Gainsborough (Sir Edward Leigh), I should say that it is inconceivable that anybody would unwind these provisions in any future Parliament, given that they protect English and Welsh voters from having legislation imposed on them without the will of the majority of Members with constituencies in England and Wales. The reaction of those who could then be overruled by others who had their own devolved Assemblies and Parliaments would be quite savage.
Simon Hoare (North Dorset) (Con)
On a point of order, Madam Chairman. Like my hon. Friend the Member for Gainsborough (Sir Edward Leigh), I am a member of the Procedure Committee. We were very clear in our deliberations that Mr Speaker would make a ruling as to whether legislation fell within these protocols or not, but that he would not be expected or required to give the raison d’être as to why he made the ruling.
I may be out of order, Madam Chairman, in raising this as a point of order, but having listened to this exchange, I feel somewhat as if the authority of the Chair, and the decision that Mr Speaker has taken, is now being challenged. Critically, that seems to be undermining what we thought was an important principle —namely, that the authority of the Chair should be such that neither a challenge to nor an explanation of his or her ruling would be required or expected.
The Second Deputy Chairman of Ways and Means (Natascha Engel)
I thank the hon. Gentleman for that point of order. I remind the House that we are discussing the consent motion, rather than the rights and wrongs of EVEL. I have allowed the debate—it has been a rather two-way exchange—to go on a little because we are right at the beginning of the EVEL process; this is certainly my first time in the Chair during a Legislative Grand Committee, and it is only the third time that this has happened. However, as the hon. Gentleman said, the Procedure Committee is looking at the EVEL process in the round. The hon. Member for North Down (Lady Hermon) should really make a submission to that Committee. It would be good if we could now move on to discuss the consent motion or put the question.
Matthew Hancock
All I would say is that the decision on the consent motion is, quite rightly, Mr Speaker’s.
The Second Deputy Chairman
I remind hon. Members that if there is a Division on the consent motion, only Members representing constituencies in England and Wales may vote. That extends to expressing an opinion by calling out aye or no when the question is put.
Question put and agreed to.
Matthew Hancock
I beg to move, That the Bill be now read the Third time.
Charities are at the very heart of our society and have held that important place for many generations. The vast majority of charities are run well by selfless people whose motivation is to help others. By way of example, I was struck by the incredible way that charities and the local community mobilised after the devastating floods that took place in Cumbria in December. Cumbria Community Foundation set up a flood relief fund to help all those affected. The fund has already raised well over £4 million, alongside Government contributions. It has involved hundreds of local charities, voluntary organisations, businesses and individuals raising funds to support the appeal. National Citizen Service graduates in Carlisle have helped renovate a local youth club damaged by the floods. We owe a great debt to such charities and the volunteers who freely give their time to make a difference. We celebrate the work of this example just as we celebrate our hospices, universities, housing associations, community fundraisers, global research institutes, and the many, many other charities, from the most local to those with worldwide reach. We salute their effort, their time and their generosity, and the joy that they give in the service of others.
This Bill will help to protect that vast majority of charities from the tiny minority that would seek to abuse the benefits of charitable status and risk undermining the public’s trust on which charities as a whole rely.
Lady Hermon
I am genuinely grateful to the Minister for allowing me to intervene on him again. In the light of the fact that he has emphasised on a number of occasions that responsibility for charities is a devolved matter in Northern Ireland, and given the changes introduced by this legislation, will he kindly confirm that, if he has not already done so, he will make it a top priority to get on the telephone to his counterpart in the Northern Ireland Assembly to say, “Right, this is what we’ve done at Westminster—perhaps you should think of making these changes in Northern Ireland.”
Matthew Hancock
Absolutely—we will certainly make contact with the Northern Ireland Assembly to ensure that we can have exactly that communication, not least because the Bill will support charities that want to engage in social investment, which many can benefit from. It provides a new way for charities to maximise the impact of their investments.
The Bill will also better support regulation of practices for fundraising, which have been found wanting. We all know of and support charities that, week in, week out, do brilliant work in our constituencies. I want to ensure that the regulatory framework for charities continues to support charities like these while supporting the work of the Charity Commission in robustly bearing down on the few bad apples. This Bill will do just that. I will touch on some of the things that I hope, through its passage, we will be able to deliver.
Extending trustee disqualification will better protect charities from individuals who present a known risk. Like many Members during the passage of the Bill, I struggle to conceive how it could ever have been considered appropriate for a convicted terrorist or money launderer, for example, to be involved in running a charity. These changes are long overdue. However, I agree with my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) that, in extending disqualification, we must take extra care not to undermine the vital work done by charities involved in the rehabilitation of offenders. I am confident that the waiver process will allow those who have changed their ways a route back into charity trusteeship or senior management. I hope that the commitments given by my hon. Friend the Minister for Civil Society will provide a degree of further reassurance.
When the National Audit Office reviewed the Charity Commission and reported on it in 2013, it recommended that the Government look at gaps and weaknesses in the regulator’s powers. We have done so, and the Bill addresses those gaps and weaknesses. We should however be clear that the Bill provides only one element of the change that is needed.
The Charity Commission was established in 1853 to take on a number of the court’s functions in relation to charities. At the time, misconduct in charities was a source of public concern, and that led to the founding of the commission. If we fast-forward 150 years, we can see that the Charity Commission’s role is in many ways much the same—focused on ensuring public confidence in charities.
We all want strong, effective, independent regulation of charities. The Charity Commission is making great strides towards that under the strong, clear-eyed and sure-footed leadership of its chairman, William Shawcross, and chief executive, Paula Sussex. They are driving the transformation of the commission into a modern, effective and efficient regulator. However, such a change can happen only with the full commitment and support of the charity commission’s staff, and I pay tribute to them for their hard work, which too often goes unrecognised.
The extensions to the commission’s powers in the Bill have been carefully thought through. Following public consultation, pre-legislative scrutiny and the Bill’s passage through the other House and this place, we have a much-improved Bill. As a result, the commission will be equipped with the tools that it needs to tackle serious misconduct and mismanagement in charities, and to do so effectively and efficiently. I am also reassured by the range of safeguards that accompany the powers, some of which have resulted from consultation and scrutiny.
It is important to stress that most charities will not experience any direct impact from the new powers in the Bill, because most charities are, quite rightly, never on the receiving end of the Charity Commission’s powers. However, ensuring that the regulator can act quickly and effectively against serious abuse will support public trust and confidence in all charities.
On public trust and confidence, I now turn to fundraising. It is clear to me that poor fundraising practices had the potential to undermine public trust and confidence in charities. Sadly, there is already evidence of reduced trust. We acted quickly by commissioning the Etherington review last summer. I am very grateful to Sir Stuart and the cross-party panel of peers who supported him. Sir Stuart recognised the serious risk to public trust in the charity sector generally, and the need for change in the fundraising practices of some charities. His review marks a watershed moment.
I welcome the support from Labour Members for our measures on fundraising. This is something on which we all agree there is a need for change. It really is the last chance for self-regulation. Under the leadership of Lord Grade of Yarmouth, it will have every chance. I very much hope that all across the charity sector are willing and able to embrace that. I do not want to have to resort to statutory regulation, but we will if we must. We now have the reserve powers to do so in case they are needed.
I welcome the important contribution on fundraising published yesterday by the Public Administration and Constitutional Affairs Committee, under the chairmanship of my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), who has followed the proceedings on the Bill closely. We will need to consider carefully the report and recommendations before responding fully, but we completely agree with the central finding that it would be a sad and inexcusable failure of charities to govern their own behaviour should statutory regulation become necessary.
On the new social investment power, the Bill will help charities that want to get involved in this exciting new area of finance for charities. We are committed to growing social investment as a sustainable source of finance for charities and other social ventures. The UK is a world leader in this respect, and the social investment power will help charities to play a bigger role.
I am pleased that there is a review provision in the Bill. After three years, it will enable Parliament to look back at the provisions and their impact. I hope that that will be a happy occasion.
The Bill and the improvements it will bring would not have been possible without a huge amount of hard work by many people. I particularly pay tribute to my hon. Friend the Minister for Civil Society and my noble Friend Lord Bridges of Headley for their sterling work in piloting the Bill through. Charity law can be fiendishly complex; they have not only grasped such complexities, but clearly and succinctly explained them to Members of both Houses. They have met a wide range of stakeholders to discuss all aspects of the Bill, and they have introduced amendments to improve it. I also thank my officials from the Cabinet Office and the Charity Commission who have supported the Bill’s passage.
I thank my hon. Friend the Member for St Albans (Mrs Main) and the hon. Member for Leeds North East (Fabian Hamilton) for their chairmanship of the Public Bill Committee. I thank the hon. Member for Redcar (Anna Turley), the noble Baroness Hayter of Kentish Town and Opposition Members for their broad support for the Bill. It would be fair to say that we have not agreed on everything, although the rows have tended to be about things that are not in the Bill. We have the shared aim of protecting charities and ensuring that the Charity Commission has the right powers independently and effectively to regulate charities. The debates have generally been constructive and positive and are, in my view, an example of the House at its best.
Particular recognition should go to the Joint Committee on the Draft Protection of Charities Bill, which undertook pre-legislative scrutiny under the wise chairmanship of my noble and learned Friend Lord Hope of Craighead. Its pre-legislative scrutiny resulted in a number of improvements before the Bill was introduced. I thank the Law Commission for drawing up the new social investment power. Its expertise was important in getting the detail right. I give enormous thanks to all others who have contributed in any way.
Finally, I thank my noble Friend Lord Hodgson of Astley Abbotts, whose prescient 2012 review of the Charities Act 2006 identified many of the weaknesses in fundraising self-regulation that are being addressed both through the Bill and the implementation of the Etherington review more broadly. That work four years ago showed the path that we have followed and that I hope the House will approve today.
The Bill has had broad support through the long process of consultation and scrutiny. We have listened and acted when we have heard ideas to strengthen it and add additional safeguards. The Bill will support and protect the strong, independent charity sector that is so important to our way of life in Britain, and I commend it to the House.
Mr Rob Wilson
The House will be pleased to know that I intend to keep my comments brief—I had a long session a bit earlier, so I feel that I have been spoiled today.
I am grateful to all hon. Members who spoke today and who contributed their extensive knowledge and expertise to the Bill throughout its development and passage. I thank all members of the Public Bill Committee for their particularly important contributions. After getting off to a bit of a slow start, we got into some lively, engaging debates as we progressed. I also thank the Chairs of the Committee, my hon. Friend the Member for St Albans (Mrs Main) and the hon. Member for Leeds North East (Fabian Hamilton), who I again congratulate on his promotion to the shadow Cabinet, for keeping us on the straight and narrow.
I would like to single out the hon. Member for Redcar (Anna Turley) for thanks. We have not agreed on everything, as she well knows, but we have agreed on many of the Bill’s provisions and, overall, on the importance of an independent regulator for charities—with the right tools to do the job, obviously. Even where we have disagreed, our debates have been good natured and constructive—at least I thought they had been, until Third Reading.
My right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) made an important contribution to ensure that we do not inadvertently damage the important work of rehabilitation charities. I agree with him and thank him for making his points so well.
I should mention the important contribution to the debate on fundraising made by my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) and the Select Committee on Public Administration and Constitutional Affairs. Its timely report yesterday highlights the need for action, but I welcome its conclusion that charities should get one last chance for self-regulation. Also on fundraising, Sir Stuart Etherington is owed a debt of gratitude for his review and report, supported by Lord Leigh of Hurley, Baroness Pitkeathley and Lord Wallace of Saltaire. Their report sets the future landscape for fundraising regulation and gives charities a chance to put things right.
I give particular thanks to my officials from the Cabinet Office and to officials from the Charity Commission who have supported the progress of the Bill throughout its development and parliamentary passage. We are very fortunate indeed to have such high-quality public servants.
I also thank all charities and their representative groups who have contributed their views on the Bill as it has been developed. I particularly single out the Charity Law Association, the NCVO and the Charity Finance Group, along with several rehabilitation charities, for their considered comments and representations. We have not accepted all their points, but the Bill has been improved as a result of their contributions. It now falls on the Charity Commission to implement its provisions in a proportionate and effective manner. I am sure that under William Shawcross’s leadership that will be the case, but of course there is provision for the Bill to be reviewed in three years’ time—something that I am sure we are looking forward to immensely.
I am sure that there are many others I have missed out who have had an important hand in this Bill and who ought to be thanked, in which case I apologise for not giving them a mention. This is a Bill that has been improved following scrutiny in its draft form and following the scrutiny of this House and the other place. It will help to underpin public trust and confidence in charities, ensuring that they continue in their place at the heart of our society. I commend this Bill to the House.
Question put and agreed to.
Bill accordingly read the Third time and passed, with amendments.