Surrogacy
Baroness Barker Excerpts(7 years, 4 months ago)
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Baroness Barker
To ask Her Majesty’s Government whether they have plans to update the law on surrogacy.
Baroness Barker (LD)
My Lords, for 30 years this Parliament has shown the world how to legislate and regulate matters regarding human fertilisation and embryology. This House remains indebted to the noble Baroness, Lady Warnock, for her landmark report of 1978, which set out with such clarity the enduring ethical basis upon which parliamentarians, the judiciary, scientists and academics still judge the permissibility and advisability of successive scientific and medical innovations in the treatment of infertility.
The legislation that was drawn up three decades ago was designed with one overarching aim: to prevent the development of commercial surrogacy in the UK. In that respect, it has been successful. The authors of the Warnock report hoped in the 1980s that a restrictive legal climate in the UK would make surrogacy “wither on the vine”. It did not, but it has restricted the development of ethical, altruistic surrogacy. That is what I wish to talk about today.
In the last 30 years there has been considerable change in societal understanding of the composition of families. Parliament has, thoughtfully and rightly, updated the Human Fertilisation and Embryology Act 1990, most notably in 2008, to include same-sex parental couples and to regulate new developments in scientific knowledge and medical practice—for example, the banning of sex selection of embryos. However, one element of the legislation was founded on flawed assumptions from the start, the element that dealt with surrogacy. Thirty years on, it is referred to by academic researchers as “the fertility treatment that time forgot” and the law that relates to it as “thoroughly confused”. It should be changed.
The people who say so are judges in the Family Division who repeatedly state in their judgments that they are forced to make rulings that are not in the best interests of the children; intended parents, the people who at every stage intend to give lifelong care to the children; and surrogates. Here it is necessary to address a fundamental confusion that stems from terminology.
Earlier this year, I was privileged to listen to some young women who have been and are surrogates. They are absolutely clear that they are surrogates: they are never surrogate mothers; they are not the mothers of the children. In reality, the protection that the law gives to birth mothers is almost never wanted by surrogates, and it is not in the best interests of newborn children, whose intended parents are labelled as legal strangers, unable to make medical decisions at the early time of a child’s life, close to birth.
Leading researchers include Professor Margaret Brazier from the University of Manchester Law School, who chaired the review of surrogacy arrangements between 1996 and 1998, and others whom noble Lords will know, such as Professor Susan Golombok, Professor of Family Research at Cambridge, and Dr Kirsty Horsey, senior lecturer at Kent School, who has researched surrogacy for 18 years.
In May 2016, on “Woman’s Hour”, Baroness Warnock herself admitted that, back in the 1980s, she did not fully understand the motivation of surrogates and that now, as in the intervening years it has proved possible to encourage non-commercial surrogacy, she believes that the law should be changed.
Surrogacy is a subject that suffers greatly from sensationalist journalism and broadcasting. We are very fortunate, therefore, to have the research published by organisations such as Surrogacy UK, which has had a working group on surrogacy law reform. Those researchers admit that, while existing data on surrogacy are inadequate, in so far as it is possible to gather information from passport applications and applications for parental orders, the number of surrogacy arrangements is small but growing. In 2007, fewer than 50 parental orders were granted. In 2011, the number was 149, and of those approximately a quarter took place overseas. It is therefore safe to assume, in a way that the Daily Mail does not, that the majority of surrogacy arrangements are domestic.
The research also showed that only 15% of intended parents were gay male couples. Many intended parents are women who have survived cancer treatment. Happily, they are alive; but unhappily, they either cannot conceive or cannot carry a pregnancy to term, which is what they would wish. The majority of surrogates had been introduced to the intended parents through a surrogacy agency or support group; others were friends or family—as in a case recently in the news. None met through a commercial agency.
Of those who have given birth, 95% remain in contact with the children and the intended parents, which would suggest an openness and an ongoing affection in the relationship. The majority—just under 95%—of surrogates received less than £15,000 compensation. At first glance, that might sound like a significant payment, but when one stops to consider what it may cover—loss of earnings, because some employers do not give maternity pay to surrogates, although the law was recently changed to allow them to do so; rent or mortgage payments; income for the surrogate’s existing children, which many of them have; and travel costs—it soon becomes obvious that those payments rarely cover more than expenses, and they are closely monitored by the courts. Surrogacy UK uses a surrogacy calculator to help surrogate and intended parents to estimate the degree of the likely costs, and that is how most surrogates want it. They are surrogates because they want to help people for whom pregnancy is impossible. Their motivation is much misunderstood, and they can well do without unjust accusations that money is a dominant factor in their decision-making, when for most of them it is not.
Time is short, so I will leave it to more learned noble Lords to explain how the current law on parental orders causes problems not just for families but for the judiciary.
The number of people involved in surrogacy in the UK is small. A few, non-commercial organisations are developing surrogacy. For example, Surrogacy UK runs a Friendship First programme in which potential surrogates and intended parents can meet and, free from pressure, work out whether they could have a successful, enduring relationship—a relationship in which there is openness, transparency and pride for the children, the intended parents and the surrogates.
I suggest to the Minister that the rules on surrogacy-related advertising and its criminalisation could and should be reviewed, but only for not-for-profit organisations. Only charities or social enterprises registered as community interest companies should be allowed to advertise, and they should be required to include evidence of their legal status on all advertising. Nobody who is campaigning for a change in the law today wants the development of commercial surrogacy; all they want is to enable more people who freely choose to do so to be involved in surrogacy.
Noble Lords will be aware of a case that came before the courts recently in which a single person who had entered into a surrogacy arrangement abroad could not be considered the legal parent of a child in this country. That law will have to be reviewed because of incompatibility with the Human Rights Act. I suggest to the Minister that challenges such as that will become more frequent. We could amend this law in a piecemeal fashion, but we really ought to take the opportunity to legislate for surrogacy on an entirely different basis: not as a transaction but as a relationship between surrogates and intended parents.
I know that the noble Baroness has been dropped in to cover at short notice, and I wish her well with that, but I want to ask her some questions. She may choose to write to me; I will understand. Will the Government encourage the Law Commission, whose consultation on this closed on 31 October, to include a review of surrogacy legislation in its next programme of work? Will they commit to review parental orders, including parental orders in cases in which neither partner has been able to use their own gametes—the so-called double donation orders? Will they agree that parental order and surrogacy birth data should be centrally and transparently collected and published annually, and that IVF surrogacy cycles and birth should be accurately recorded by fertility clinics and the Human Fertilisation and Embryology Authority?
We have shown the world that, in this field of assisted reproduction, it is possible to make laws that reflect the realities of modern life while protecting the best interests of children. Surrogacy is, and will remain, a matter of intense importance to a very few people, many of whom are often misunderstood. I submit that this is an area in which there will never be a widespread, popular clamour for change in the law. It is a matter which needs detailed consideration. It is one in which Members of your Lordships’ House, even those who disagree in principle, should be involved in lengthy debate. Above all, it needs the Government to put their shoulder behind law reform which, in the interests of children, is now urgent.
Queen’s Speech
Baroness Barker Excerpts(7 years, 11 months ago)
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Baroness Barker (LD)
My Lords, the noble Lord, Lord Carlile, set out a hope that, one day, the gracious Speech might contain no legislation at all. I tend to share his view, not because of the speech itself—Her Majesty delivers that with all her customary grace—but because our debate days are so wide and sprawling that taking part in them is about as satisfying as punching a jelly. You might get a point through to the Minister, but something else will disappear.
I have listened to so many gracious Speeches that I tend these days to stand back and judge them by one criterion: what if I was a young person, not living in London but somewhere in a poor community? What would I get out of it and what hope would it give me? I think in those terms because I have spent my entire life in the charity and social enterprise sector. I have chosen to work there for two reasons. The first is that the charity and voluntary sector is where problems and issues of society first come to attention, because they are usually experienced by people who are from minorities. Secondly, they are the organisations in which it is possible to be innovative in finding solutions.
The charity sector had an annus horribilis last year. The Charities Aid Foundation has today produced a report that shows a £0.5 billion decrease in individual giving, which is not surprising given what happened last year. The state of funding across the piece for charities is actually quite interesting. Overall, it is up—there has been a very slight increase of about 3.4%. But behind that overall figure there is a story. Large charities—the top 100—are doing rather well, and that is because they are getting very big government contracts. Very small charities are not doing at all well. The charities that are in severe trouble and those that are closing are local and were previously dependent to a large extent on local authority funding. Imagine being the governor of one of these new prisons, with all the powers to do the marvellous and innovative things that you have been charged to do. When you open the doors of your prison, all the people in the organisations who used to be there to help integrate people into society and to sustain them when times are hard are not going to be there any more.
That is an interesting point when one realises that the level of volunteering among young people is increasing. Young people in the millennial cohort are now intent on putting right all the problems that they believe the previous generation—you and me—have caused, and they are busy volunteering much more than was ever the case in the past. Overall, volunteering levels in the whole community remain static but among young people they are up.
I have some questions for the Minister. The National Citizen Service, which has been welcomed but the results of which are as yet unproven, is being put on to a statutory basis and is being given funding. What evidence do the Government have that that is the correct way in which to support the aspirations of young people who want to help in their community? Is it evidence based or is it just a Government trying to secure one bit of their own agenda?
Charities would be churlish not to say thank you to the Government for changing the gift aid donation service. I was one of the people, along with Members of the Bishops’ Benches, who had the great privilege of taking that little piece of legislation through your Lordships’ House. To say that the system was Dickensian would be an understatement, so we are really pleased that it is changing. However, will the Government enable charities to increase their capacity to take digital donations? That is quite important.
One thing that caused a severe shock to the charity system was the Government’s decision to bring in the gagging clause earlier this year. The Government have now thought better of that decision and have agreed to have a review. Who will be engaged in that review and what will its terms be? When will it report, and will there be consultation on it?
Charities and social enterprises in this country have a great deal to give to our society. They have much to bring that is good, innovative and of great value in relation to many of the issues in the gracious Speech, such as adoption and prison reform. This is the Government who started out with a vision of a big society. Of late, they have acted like a big brother towards the charitable sector. Perhaps, with the help of those of us on this side of the House, they will become a big supporter of that very innovative bunch of people.
Elections: Campaigning
Baroness Barker Excerpts(8 years ago)
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Lord Bridges of Headley
I echo the words of the noble and right reverend Lord. I once again thank my noble friend Lord Hodgson for his work and thank the many organisations for the contributions they made to his report. The noble and right reverend Lord is absolutely right: this is a package of measures and we need to consider it carefully. There are 28 different recommendations, 13 of which require changes to primary legislation. This needs to be seen in the light of other reports on the last general election from the Electoral Commission and the Law Commission. We are looking at all these. I am unable to give a date with regard to what further steps may be taken but we are looking carefully at them.
Baroness Barker (LD)
My Lords, the transparency of lobbying Act implemented constituency-level controls on nationally declared spending by non-party campaigners. The review by the noble Lord, Lord Hodgson, endorses this approach. When will the Government make elections fair by introducing a limit on so-called national spending at a constituency level on targeted mail, battle buses and that sort of thing by political parties, including the Minister’s?
Lord Bridges of Headley
As I say, we are carefully looking at all these recommendations and how they might be applied. Paragraph 6.14, on spending limits, states that:
“The Review found no evidence that the spending of third parties at the 2015 General Election was inhibited by”,
those spending limits. The paragraph continues:
“No third party spent up to the new limit”.
However, there are clearly concerns about this and the Government are considering their position.
Charities: Government Grants
Baroness Barker Excerpts(8 years, 3 months ago)
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Baroness Barker (LD)
My Lords, the Government have adopted this policy following a lobbying campaign by the Institute of Economic Affairs, according to its 2014 accounts, funded by a source which it declines to disclose. Is it the Government’s intention that charities commissioned by the Government for their expertise will have their ability to influence government policy restricted, while charities funded by anonymous donors, such as tobacco companies, will not?
Lord Bridges of Headley
I slightly dispute the second point. I draw the noble Baroness’s attention to the fact that DCLG has used this clause in 56 contracts since February 2015. For example, the Church Urban Fund, which the noble and right reverend Lord will know, the LGA, Mencap and the Royal College of General Practitioners have all received grants under the new clause. Shelter, likewise, has received a grant, and is currently running its Power to Renters campaign. A number of noble Lords will no doubt have received communications from it as regards the housing Bill.
Charities (Protection and Social Investment) Bill [HL]
Baroness Barker Excerpts(8 years, 3 months ago)
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Lord Hope of Craighead (CB)
My Lords, as the Minister will recall, I had the privilege of chairing the Joint Committee that conducted pre-legislative examination of what was then called the Protection of Charities Bill. I cast my mind back to a year ago, when our committee was still sitting and considering the terms of our report. It is a pleasure to see some members of my committee in the House this afternoon. It is against that background that I pay my own tribute to the Minister and his Bill team for bringing the Bill to this stage: we are now truly at the last lap. One of our main concerns was that there should be no delay in the legislation we were examining. It is a great pleasure to see that matters have been taken this far forward with the changes made.
The only amendment I wish to comment on—I do not want to arouse too much controversy about this—is Amendment 2. I listened with great care to what the noble Baroness, Lady Hayter of Kentish Town, said and I appreciate the concern on the point she mentioned. However, the one feature I stress is that we did not as a committee have the chance to examine Clause 9. As the noble Lord said, that was introduced to the Bill on Report. It is the kind of clause that, speaking for myself, we would have wanted to examine with great care because of not only its implications on the point that the noble Baroness made but also its width. It is completely unqualified. If it had been more precisely targeted, we might have been a little more inclined to support it. I rather suspect that a clause as general as this would impose a very great burden on the Charity Commission. To a large extent, because of the protection of charity law generally, the clause would not be needed. I stress that I speak only for myself but I am relieved, against the background of what I have mentioned and having heard the Minister explain the reasons for it, that this amendment has come forward. I very much support it. My main point in rising to speak at all was to express my thanks and appreciation for the fact that we are now at this stage, in effect bringing the matter to an end.
Baroness Barker (LD)
My Lords, I, too, congratulate the Minister on getting his first piece of legislation through to its conclusion. I thank him also for the way in which he took us through the amendments today.
I will concentrate initially on one aspect of these amendments that has not so far been discussed: Amendments 3, 4 and 5, dealing with matters to do with the rehabilitation of offenders. I and other members of the committee had great sympathy with the case made to us by the charity Unlock about the problems that this Bill would pose particularly for charities that specialise in the rehabilitation of offenders. Their great concern was that up to approximately 50,000 people in this country with past convictions would find themselves now unable to take part in the process of being a trustee, even though they had committed those offences some considerable time ago and had managed to rehabilitate themselves. Last week in court there was a ruling on the matter of the severity of minor offences and their duration in relation to people having to make declarations. I rather suspect that, if that judgment is upheld, this legislation will have to be revisited fairly swiftly. I simply draw that to noble Lords’ attention.
Charities (Protection and Social Investment) Bill [HL]
Baroness Barker Excerpts(8 years, 7 months ago)
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Lord Moynihan (Con)
My Lords, in the context of the regulation of funding and the regulatory framework for charities, I have a brief question for my noble friend of which I have given him notice. On Report, my noble friend gave a number of commitments to the noble Lord, Lord Wallace of Saltaire, myself and the whole House on the question of public benefit. A lot of work has been done on this during the summer. He said that the Charity Commission would issue new guidance on public benefit and running a charity, that it would do further work on public benefit reporting guidance, that the ISC was going to provide guidance, that the Charity Commission would undertake a 12-month research programme and the ISC would launch a website this autumn. All of that would then be subject to a debate a year on, when the House could see how much progress was being made.
It is appropriate to mention to the House that a lot of work has been done. I could not be more grateful personally, and all those interested in the subject will also be grateful to the ISC and the Charity Commission for a very good start. We hope that, as the Opposition Front Benchers made clear during the latter stages of the debate, the website will be proactive regarding the facilities and engagement with local communities and be a point of contact—an effective method of linking with their local communities schools with charitable status and outstanding facilities.
I am certain that noble Lords in all parts of the House will continue to push for change not just in the sports world but in the arts world, and for engagement between schools that are endowed with superb facilities, excellent teachers and coaches, and the wider community. I would therefore be grateful if the Minister took this opportunity to update the House on the work undertaken during the summer and join me in offering congratulations on the good start, although there is clearly a long road to travel before we achieve the sort of developments that are essential to meet the mood expressed in the House in a number of previous debates. We must ensure that we have the material necessary to have a full debate in a year’s time.
Baroness Barker (LD)
My Lords, it has been a pretty miserable summer for the charitable sector and it has not been a great summer for the Charity Commission either. It is in the nature of being a charity to go through periods of being tested, and good charities come out the other side a lot stronger. One can but hope that that will happen as a result of what has transpired over the past few months.
I am not a member of this august committee—I never made it to the shortlist—but I had the great privilege of attending one of its sessions. It was really interesting—one of the most interesting breakfast discussions that I have had for a very long time. While it was absolutely true, as the noble Lord, Lord Leigh of Hurley, said—he was also present on that occasion—that some people still did not quite get it, as the noble Baroness, Lady Pitkeathley, said, a lot of people in the charitable world now absolutely understand that they cannot continue as before and that things must change.
I applaud the amendment moved by the noble Baroness, Lady Hayter, as it is keeping the pressure up on the issue, but I think that it is premature in terms of process. What was most interesting over the summer was the number of people who wanted to chat to me about the ongoing issues. Time and again, people within the charitable sector talked not just about the severe economic pressures but their wish that that sector could be better than the commercial sector and better regulated than the private sector.
I hope that the report from Sir Stuart Etherington’s committee is hard hitting, not ambiguous in any way and issues a real challenge to charities. I am mindful that charities have to continue to raise funds and that people want to continue to donate to them. Although the reputation of individual charities has taken a battering over the summer, they are still among the most efficient and effective organisations tackling some of the biggest problems in our society.
The Charity Commission has not covered itself in glory this summer either, and I want to think long and hard about what responsibilities were given to it and the reserve powers to oversee fundraising. Charities know about the lives of vulnerable people much better than anybody else, and I want to give them the chance to come forward with a regulatory system that is better than the private sector’s.
I, too, add my congratulations to the Minister, who has conducted himself throughout our proceedings in the most exemplary way. He has been extremely good to work with and I thank him very much. In saying that, I do not want him to accept the amendment moved by the noble Baroness, Lady Hayter, and I ask him to ensure that, when the Bill returns from the Commons, we are given sufficient time, through the usual channels, to pay detailed attention to these matters.
Lord Low of Dalston (CB)
My Lords, I refer to my interests, which are declared in the register: I am vice-president of the RNIB and have had a long-standing involvement in the charity sector; and, most recently, I have been asked to chair a commission by ACEVO— the Association of Chief Executives of Voluntary Organisations—on better charity regulation.
I have not taken a large part in the proceedings on this Bill because I felt that its provisions were pretty uncontroversial. Indeed, that has emerged from the debates as the Bill has gone through its various stages. It has been discussed in matters of detail but the proposals have been broadly—indeed, widely—welcomed. I, too, pay tribute to the Minister for how he has conducted the debates on the Bill. He was kind enough to consult me at an early stage to take my views about the Bill. I appreciated that very much, and I appreciate how he has conducted the Bill from the point of view of the Government.
I was not planning to speak today at Third Reading but, listening to the debate, as I have been, I am prompted to make just one remark. It is perfectly true that charities have not had a very good summer, particularly on fundraising, but we have to be careful of tarring all charities with the same brush. I am sure that noble Lords have not intended to do that, but we need to be aware of it—I am sure that Sir Stuart Etherington’s committee will be. The charities sector reflects a good deal of diversity. It is important that we register the point that, as well as the bad practice that has been exposed, there is still quite a lot of good practice among charities. It is important that we retain a sense of perspective in that light.
Kids Company
Baroness Barker Excerpts(8 years, 8 months ago)
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Baroness Barker
To ask Her Majesty’s Government what action they intend to take as a result of the closure of Kids Company.
The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)
My Lords, the welfare of the young people who used Kids Company services has always been and continues to be our top priority. We are working with local authorities, charities and youth clubs in Lambeth, Southwark, Camden and Bristol to support young people with the services they need. Meanwhile, investigations into Kids Company are being conducted first by the official receiver and then by the Charity Commission.
Baroness Barker (LD)
My Lords, I thank the Minister for his Answer. A cursory examination of the Kids Company annual reports, which are available on the Charity Commission website, shows that the organisation repeatedly ignored warnings that failure to put money into its reserves was putting the charity at risk. Does the Minister agree that that is a significant failure on the part of the regulator, which had the information and did nothing, and that that should be the subject of a future inquiry, as should the Government’s continued funding of an organisation that was clearly inadequately managed?
Lord Bridges of Headley
My Lords, I should like to say first that obviously the noble Baroness speaks with a great deal of experience of the sector, so I take great note of what she is saying. She needs no reminding, but I would like to stress that it is ultimately the legal responsibility of a charity’s trustees to protect the charity and its assets. The Charity Commission has neither the legal authority nor the ability to assess the financial health of the more than 160,000 registered charities; that is the job of each charity’s trustees. However, I hear what the noble Baroness is saying. As I have mentioned, the Charity Commission will be conducting a statutory inquiry into Kids Company, and I am sure that it will wish to consider what lessons the sector as a whole and the commission itself might learn from this episode.
Charities (Protection and Social Investment) Bill [HL]
Baroness Barker Excerpts(8 years, 9 months ago)
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Lord Best (CB)
My Lords, I will raise a somewhat technocratic reason why the amendment could be very important. If government compels charitable housing associations to sell their assets—even if they are reimbursed by the Government—and then tells them how to spend the money they receive from selling their assets, these charities may become classified by the Office for National Statistics as “public bodies”. If government takes away the autonomy of charities and assumes the role of their boards or trustees in crucial decision-making, a line may be crossed. Already, government heavily regulates the activities of charitable housing associations and determines their income by instructing them on the rents that they must charge. In the event that government also tells them when to dispose of their assets and at what price, and subsequently instructs them on how to use the money, intentionally or not, the charitable housing associations could be deemed by the independent Office for National Statistics as public bodies.
Does that matter? I am afraid that it matters a lot. At present, only the grants these bodies receive from government count as public expenditure, so their borrowing from banks, building societies, et cetera, adds nothing to government debt. All that changes if housing associations are classified as public bodies. The £60 billion they have already borrowed would be added to the national debt and all their new borrowing—around £4 billion this year—would be added to the Government’s annual deficit. So if compelling housing associations to sell their homes—and compelling them to use the proceeds, perhaps to replace the ones they have sold—leads to these bodies being classified as public bodies, government finances will take a huge hit. Government would then feel obliged to curtail drastically further borrowing by housing associations, which would stop them delivering the affordable homes that the nation so clearly needs. There are other reasons for not pursuing the latest right to buy sales policy, but this may be the one that causes the Treasury the greatest concern. This amendment would prevent government making a mistake that it could later regret deeply.
Baroness Barker (LD)
My Lords, at the moment I am training for a charity event and I spend quite a lot of time, mostly at weekends, cycling rounds the parks of south London and north Surrey. The existence of alms houses and charitable housing associations is a timely reminder of the importance that the charitable sector has always had in this field and of the extent to which the charitable housing sector has always been an irritant to government, both locally and nationally. There is something marvellous about preserving its values in concrete.
We should remind ourselves that this is the protection of charities Bill. It is principally concerned with the extent to which the Charity Commission has the power to act against charities and individual trustees to ensure that the general public continue to have faith and confidence in charities. The amendment moved by the noble Baroness, Lady Hayter, may not be perfect for her intent, but the way that I read it is that she is seeking to get from the amendment and the discussion of it an undertaking that, should the Charity Commission be called upon to judge the performance of a charity or its trustees under the policy that is being brought in—as the noble Lord, Lord Cormack, explained, it still being formulated—the test which the commission will apply is: did the trustees act in alignment with the charity’s objectives? Of course, those objectives may not change in ways that are consistent with government policy. That is simply what the noble Baroness is trying to get on the record. For that reason, although the wording may not be perfect, the intent behind the amendment is worthy of our support.
Lord Graham of Edmonton (Lab)
My Lords, the Government’s housing policy is in a mess, and I speak of the problems being faced by a number of good people who have so far done well from legislation. The right to buy was approved by everyone who was interested in wanting to give people an opportunity to get their foot on the property ladder. However, I remind the House of what has happened. The right to buy carries with it the right to sell. Over the last 30 years those who have bought their houses at a discount, having justified and verified their entitlement to it, have been glad to have the opportunity not only to buy but to sell. As a consequence, the whole policy has been warped and needs to be looked at in general. I shall give your Lordships an illustration.
There is a couple who operate in the Ashford area. The Guardian newspaper last year reported that they have amassed not just one or two properties but, by purchasing in the main ex-council houses, a portfolio of 1,000 properties. That situation, with people looking for an opportunity to make money, existed when I was the Member of Parliament for Edmonton. They bought their house and then rented it out. I hope to speak in tomorrow’s debate on the Budget and extend this argument. People should not kid themselves that the main beneficiaries of the purchase of council houses have been the people who occupied them at the time. The people quoted in the newspaper said that they were thinking of selling their portfolio. They already had an estimate of its value: through their empire having grown and grown, it was estimated to be worth £100 million.
Lord Bridges of Headley
My Lords, I am again grateful to the noble Baroness for tabling her amendments and for bringing this issue to the attention of the House. I will first speak to Amendment 14 tabled in my name.
When this issue was debated only a few weeks ago, I said that three questions needed to be answered: first, whether the standards fundraisers have set themselves are set high enough; secondly, whether the structures for self-regulation are the right ones; and thirdly, whether fundraisers and the charity trustees who oversee them accept the need for change to ensure that donors are treated with honesty, respect and decency. We now know rather more about all three issues, and on all three, more needs to be done to maintain and strengthen public trust in charities—which is a key underlying aim of the entire Bill.
On the first, the news since that debate has been profoundly depressing. The revelations in the Daily Mail did what investigative journalism is supposed to do: shine a light on people who are treating others badly because they think no one is looking. I thank the newspaper for doing that. Of course, the stories in the Mail do not typify the majority of fundraisers, who are in the main thoroughly decent people doing a vital job, be it holding jumble sales, doing fun runs or hosting large charity events. However, allegations of inappropriate pressure being placed on those with dementia and of ludicrously self-serving interpretations of the law on data sharing have rightly angered broad swathes of the community, and many in the charity and fundraising sectors too.
I know that the fundraising sector has tried to respond and that the self-regulatory bodies are working on a number of proposals on issues such as cold calling, data sharing and regularity of contact. In part this has been in response to the challenge laid down by my honourable friend in the other place, the Minister for Civil Society, Rob Wilson, who has been working hard on this matter and has put in place some swift measures to bolster public confidence. He and I—and I think the noble Baroness, Lady Hayter—agree that this work needs to continue apace. But the answers the fundraising bodies have so far provided are piecemeal and do not comprise a convincing answer to the second question, which is whether the system as a whole is the right one. Indeed, I think few observers would argue that the system’s response under the stress of the last few weeks has made a compelling case that it is.
I therefore very much welcome the fact that Sir Stuart Etherington has accepted the Minister for Civil Society’s request to chair a cross-party panel to address just this question. I am delighted, too, that my noble friend Lord Leigh of Hurley, the noble Baroness, Lady Pitkeathley, and the noble Lord, Lord Wallace of Saltaire, have agreed to join that panel. The review will take a root and branch look at what is needed to ensure that we have a system that is fit for purpose and that supports public trust and confidence in charities. Sir Stuart has the licence to be bold and imaginative. His panel has set a brisk pace. It has met once and will report in late September. Its members have our full support.
The response of sector leaders to Sir Stuart’s findings will in part form the answer to the third question, of whether fundraisers and the charity trustees who oversee them accept and fully embrace the need for change. It is now quite clear that the leaders of some of our charities need to take much greater responsibility for the fundraising carried out in their name. We cannot have a “don’t ask, don’t tell” approach in the sector, where a charity’s CEO and trustees choose not to attend in any great depth to how their organisation engages the public when fundraising. The CEO’s responsibility for fundraising cannot end with simply demanding that the fundraising director brings the money in while he or she focuses exclusively on the charity’s mission in the field.
Our amendment seeks to address just this point in two ways. First, it would require third-party fundraising organisations, of the sort that featured so heavily in the recent Mail articles, to write their fundraising standards into their contracts with the charities that employ them. That would include how the fundraiser will protect vulnerable people and how the charity will monitor how standards are met. That way, all parties will be clear and upfront about what will be done in the charity’s name, and about their respective responsibilities.
Secondly, the amendment would require charities with incomes over £1 million to set out in their annual reports their approach to fundraising, whether they use paid third-party fundraisers and how they protect the wider public and vulnerable people in particular from undue pressure in their fundraising. Again, the point is to require the leadership of a charity to take responsibility for their fundraising practice and set it out for all to see. We know that this is only part of the picture and it is intended to complement a strengthened self-regulatory system, not to replace it. Furthermore, in keeping with our entire approach, these measures seek to be proportionate and targeted to address the issues as we see them today.
I know, too, that the noble Baroness’s amendments are intended to ensure a well-regulated system, bringing in the valuable funds that serve beneficiaries while protecting the interests of the public who give that money. Clearly, the adequacy of the existing self-regulatory system—the elements of it and how they combine together—must be looked at afresh but state regulation is far from a panacea. We firmly believe that Sir Stuart’s panel should be given the chance to succeed and self-regulation to succeed with it. My concern is that the amendment pre-empts the review and in effect moves straight to statutory regulation, even as it cements one part of the existing self-regulatory landscape in place. I suggest we await Sir Stuart’s findings before we invest so heavily in the FRSB. As the noble Baroness said in Committee, the FRSB’s self-regulation system has so far “failed to work”.
As for the reserve power, that remains at Ministers’ disposal should self-regulation be found to be unworkable. However, I do not believe that we are yet at that point—I repeat, yet. Furthermore, statutory agencies such as the Information Commissioner and the Charity Commission are already permitted to intervene where there are serious abuses. I know that the former is investigating the GoGen allegations and has very significant sanctions at his disposal should serious wrongdoing be proved. I therefore continue to hope that the jolt the fundraising and charity sectors received in the last few weeks and the action we are taking will usher in an era of greater awareness and responsibility for fundraising within the sector.
I hope that on reflection the noble Baroness will not press her amendments. I thank the noble Lords, Lord Watson and Lord Wallace, the noble Baroness, Lady Pitkeathley, and my noble friends Lord Hodgson and Lord Leigh for their contributions on this issue. I beg to move.
Baroness Barker
My Lords, I thank the Minister for introducing this new amendment in such detail and making time available to explain its purpose to Members in meetings. I preface my remarks by returning to an observation I made at Second Reading about the alacrity with which some matters have been attended to. This is one of those occasions on which there is a great deal of haste which is perhaps not warranted and may not be helpful in trying to get to the root of the problem.
While the Minister wishes to commend the Daily Mail for its attention to this issue, I simply wish that the Daily Mail would turn its attention to the activities of many of the financial institutions of this country, not least the banks, in their treatment of people with Alzheimer’s and other vulnerable adults. If it were to do that, it would rise in my estimation—not a difficult thing, I have to say. But if it genuinely cares about people who are vulnerable, rather than just wishing to have a go at charities, it will continue its campaign and look at the issue in a much wider way.
That said, everybody in the charity sector understands that there is a problem—and the charitable sector has sought for some considerable time to deal with this issue. It has been a long-standing problem. I remember when I started working with charities 25 years ago, we were not dealing with the internet and there was not so much direct marketing, but there was direct marketing, and still the same complaints happened, although perhaps not to such a degree. I do not know whether noble Lords heard the Information Commissioner, Christopher Graham, on the “Today” programme a couple of weeks ago, addressing this exact issue. He was quite clear; he said that we did not need further legislation—that we have the legislation that we need.
The key issue is about the multiple use of donor lists by charities. We need to make sure that all charities are fully observant of existing data protection laws. We do not need the legislation. That said, the Government are to be commended on what they propose in this amendment. At the very least, it will cause the charitable sector to think long and hard about the regulation and guidance, which is what will really matter to charities’ daily activities. We should be in no doubt that charities have the right to continue to try to raise money, and they need to do so. It is not a question of whether they should—it is just how.
The Minister would expect on his first outing that an amendment of this nature would be subject to a number of queries and criticisms in your Lordships’ House. I would focus noble Lords’ attention on new subsection (8) in Section 59 of the Charities Act 1992, as proposed in the amendment. It talks about,
“unreasonable intrusion on a person’s privacy … unreasonably persistent approaches for the purpose of soliciting or otherwise procuring money or other property”,
and,
“placing undue pressure on a person to give money or other property”.
That is fine—but who decides what the definitions are, and who decides whether the activities of a charity have been unreasonable or have placed “undue pressure” on someone? When it has been decided that a charity has acted inappropriately, who is responsible for administering what sanctions to a charity that is found to be deficient?
A further point that I would like the Minister to address is how having this legislation would help a member of the public to understand what they should do were they to be on the receiving end of “undue pressure”, or if they knew of somebody else on the receiving end of such pressure. How would they know what to do?
I draw noble Lords’ attention to subsection (1)(e) of new Section 162A of the Charities Act 2011, as proposed in the amendment. It deals with the annual reports on fundraising standards that charities are supposed to bring forward under this legislation. They have to talk about,
“the number of complaints received by the charity or a person acting on its behalf about activities by the charity or by a person on behalf of the charity for the purpose of fundraising”.
Charities (Protection and Social Investment) Bill [HL]
Baroness Barker Excerpts(8 years, 9 months ago)
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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 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 thorough 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 has 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 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”.
Baroness Barker
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.
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.
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.
Baroness Barker
My Lords, the House might find it useful to hear from the noble Lord, Lord Bridges, on the Government’s Amendments 26, 27 and 28, which were not grouped with the previous group starting with Amendment 25. I would find that helpful.
Lord Hodgson of Astley Abbotts
My Lords, these amendments are about the royal charter charities, so they are very different. We had so far been dealing with social investments and the definition of that. This group is about the special position of royal charter charities. I am not sure that it will detain us very long, but nevertheless it is a different topic and they have been separated by the Bill team into two different groups.
Lord Bridges of Headley
My Lords, if I am right, I will address Amendments 26 and 28, which relate to very minor improvements to language, adding an active grammatical formulation and a specific rather than generic identifier respectively. I trust that they will not require further explanation.
The amendment to new Section 292B(4) improves the wording of the specification around the exclusion of charities established by legislation or by royal charter. They have been excluded from the social investment power because of the differences in governance structure. The amendments here simply offer an improved form of wording to reflect this.
The addition of new Section 292B(5) is needed to explain better the territorial extent of the subsection on charities established by legislation, as set out in new Section 292B(4). It clarifies that the exclusion relates specifically to charities established by, or whose functions are set out in, legislation or secondary legislation authorised by Acts of Parliament or measures of the Welsh Assembly. I expect that these measures will not trouble noble Lords unduly, being of a rather technical nature without policy implications.
Baroness Barker
My Lords, it was very helpful of the noble Lord to give us that explanation of Amendments 26 and 28, which, as he said, were minor and technical, but they set out the geographical differences of certain charities. That was very helpful. I invite the noble Lord to address Amendment 27, which deals with charities established by royal charter. Noble Lords would find that helpful.
Lord Bridges of Headley
My Lords, forgive me. I thought that I had addressed that in what I have just said but, clearly, I have not. As far as I understand it, I thought that the amendment as set out relates to what I have just addressed as regards the wording of the specification around the exclusion of charities established by legislation or by royal charter. I thought that I had just explained that to the noble Baroness, but I hope she will forgive me if she wishes to be clearer about the purpose of her amendment. My apologies, I am not entirely clear why we are in this situation.
Baroness Barker
My Lords, the noble Lord has made it clear to the House that certain charities established by royal charter are exempt from the provisions of social enterprise. I, for one, am content to leave the matter at this stage.
Baroness Barker
“( ) the relationship between grant-making and social investment,”
Baroness Barker
My Lords, we come to the last group of amendments on the list of groupings, although the noble Baroness, Lady Hayter of Kentish Town, may be somewhat upset if we do not cover Amendments 36 and 37 on the Marshalled List.
Clause 14 deals with reviews of the operation of this Bill. I think the review clause was drafted before the new clauses on social investment were added to the Bill. The original substance of the review was about the main purposes of the original Bill—that is, in Clause 14(1),
“public confidence in charities … the level of charitable donations, and … people’s willingness to volunteer”.
That is entirely right. But there is nothing in the substance of this review about the matters of social investment which we have been discussing.
My Amendment 34 simply asks that in the review of the Act the relationship between grant-making and social investment be reviewed, because if the new powers to make social investment work as the Government envisage they will, my assumption is that there should be an effect on grant-making, which should be reduced. To put it another way, the total amount of income to the charitable sector should change. The composition of the income should change, too, not least in the balance between the amount of grant-making and the amount of investment.
Lord Bridges of Headley
My Lords, I am grateful to the noble Baroness, Lady Barker, for explaining the rationale behind her amendment and to the noble Lord, Lord Watson, for what he just said.
Clause 14 currently makes provision for the operation of the Act to be reviewed by the Minister at least every five years, in line with government policy. We agreed a requirement for the review to include specific consideration of certain matters based on requirements in the statutory review provision of the Charities Act 2006, but that should not be considered as limiting the scope of any review of this legislation.
As noble Lords know, this Bill makes only a modest contribution to the growth of the social investment market, by clarifying charity trustees’ social investment powers and duties. At the moment, charitable foundations hold some £80 billion in assets, of which less than £100 million is invested as social investment. While we certainly hope that more charities will consider the total impact that social investment can deliver, I expect that it will be an incremental growth rather than a sudden swing of the pendulum.
That said, I do not believe that a statutory review requirement to consider a specific aspect of social investment and its interaction with grant-making would achieve much that is not already being done more frequently by many parties, not just the Government, and with much broader scope. I am reluctant to say so, but I do not accept the rationale for Amendment 34.
As the noble Lord, Lord Watson, said, I have sympathy, as I demonstrated in Committee, with several of his arguments for bringing forward the first review from five years to three. I do so not least because of the measures being introduced on social investment, because of the point the noble Baroness, Lady Hayter, made about the disqualification power, and because of the issue of fundraising more generally and ensuring that we continue to maintain the public’s trust and confidence in charities as a whole.
As the noble Lord said, my concern was that if we said the review would have to report within three years, that would be seen as too soon, particularly when one factors in the time it would take to prepare guidance and commence provisions, and for the review itself. That is why I have come back with government Amendment 35 which requires the first review to begin within three years and to report within four years. This strikes me as a sensible compromise which I hope noble Lords will support.
Baroness Barker
My Lords, I am disappointed that the significant change to the substance and purpose of the Bill made by the insertion of the new clauses on social investment will not form part of the review of the Act. I do not have a problem with the timing of the review; I welcome the fact that it will be sooner than it would otherwise have been.
I do not understand the Government’s reluctance to subject the new proposals on social investment to the scrutiny which will be applied to the rest of the Bill. Like others in this House, I am keen that we take every opportunity to try to increase social investment. Over the past 20 years, social investment has been very slow, despite the support of successive Governments. Therefore, it is a shame that we pass over an opportunity to look at how this first attempt to put a definition into legislation is working and its impact on the funding of the sector. Reluctantly, I beg leave to withdraw the amendment.
Charities (Protection and Social Investment) Bill [HL]
Baroness Barker Excerpts(8 years, 10 months ago)
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Lord Watson of Invergowrie (Lab)
My Lords, Amendments 20B and 22ZA are complementary and seek simply to bring some rigour to the duty of charity trustees to review their charity’s social investments. Amendment 21, in the names of the noble Baroness, Lady Barker, and the noble Lord, Lord Wallace of Saltaire, seek to broaden that to cover all investments, and we see no reason why that should not be supported.
The term “from time to time” seems, and I have to say sounds, oddly vague wording to form part of legislation. After all, what does it mean? I suspect that, if you asked 100 people for their understanding of the term, you would almost certainly receive not far short of 100 different answers. Finding a definition to fit those four words would be comparable to attempting to answer the conundrum, “How long is a piece of string?”. Throughout the consideration of this Bill, there have been numerous occasions where noble Lords have sought to introduce greater clarity to its wording. I could not find any other line of this Bill where greater clarity is more necessary, and I believe that the wording must be changed.
To a significant extent, charities will enter uncharted territory when this Bill becomes law and they gain the new power to make social investments. Some will adopt and adapt quickly, and others less so, but it will be essential that all of them keep a close eye on how their social investments are progressing and how they are influencing the work of the charity, not least alongside their traditional investments. For that to happen, at least initially the social investments should surely be maintained under constant review, until they settle down and become an accepted and established part of the charity’s wider activities.
We believe that charities should be as open and transparent as possible about their investments—and not just social investments—and how these investments further the purposes of the charity. There is at least a possibility that the general public could be concerned about their donations being used for social investment, particularly if they are not clear just what social investment is and what it involves or, indeed, where the investment might go in terms of the companies involved. It is important that such concerns are acknowledged and are met with a willingness on the part of charities to be fully open as to what they are doing in terms of social investments. Those donating have a right to be certain that they are not giving their money, however indirectly, to companies that undertake activities of which they may disapprove and may not wish to support.
Also, there would be a double benefit here, we believe, because it is surely the case that the social investment market itself would benefit from greater information being made publicly available as charities begin to delve into it. That is what informs the first provision in Amendment 22ZA, together with an assessment of how the investments further the charity’s purposes. It is difficult, I suggest, to envisage an argument against the amendment, although I suspect that the Minister will have been provided with one by those sitting behind him.
Finally, we believe that the term “from time to time” should be replaced with a requirement to publish charities’ reviews of their social investments after the first three years of this Bill becoming law. I have already referred to the uncharted territories in which all charities that choose to make use of social investment provisions will be sailing. For that reason, we believe that it will require an early assessment to identify any difficulties, how these were resolved and what lessons have been learnt. Publication of these reviews will enable charities then to benefit from each other’s experiences. Thereafter, we believe that reviews at five-yearly intervals would be quite appropriate. I beg to move.
Baroness Barker (LD)
My Lords, it may be useful if I speak to Amendments 21 and 22. Like the noble Lord, Lord Watson of Invergowrie, we are seeking to make the concept of social investment clear in legislation. Part of the aim of doing so is to make sure that social investment policies sit alongside the overall investment policies of a charity and are treated in much the same way.
Our first amendment, Amendment 21, seeks to delete “social” in subsection (3) of new Section 292C. This is one of those cases where a deletion is meant to lead to more inclusivity, so in fact we are suggesting that all a charity’s investments should be the subject of a periodic review. Amendment 22 seeks to ensure that trustees are under an explicit duty to make their investment policy available publicly to their donors and beneficiaries.
One of the big challenges of social investment is that, by its very nature, most of the time it is unlikely to bring about significant financial return. For example, if a charity invests in a business to be carried out by its beneficiaries—for example, former prisoners and so on—any such business is unlikely to turn a profit in the first few years of its existence. Therefore, it is doubly important that charities are able to do double accounting—that is, they have to be able to explain to the public what has happened to the financial return and also how they have calculated the social return or the return in terms of the benefits to them in furthering their charitable objects.
I happen to be of the school that says that there ought to be a greater degree of transparency overall regarding charity investments. Sometimes in our sector, charities can be somewhat fearful of being attacked for the sorts of investments they have to make in order to obtain a financial return. With the development of social investment, there is a need for charities to up their game across the board, and therefore such transparency would be helpful.
I also agree with some of the points made by the noble Lord, Lord Watson of Invergowrie. The term “from time to time” is probably a well-understood legal phrase: it is something that should happen but it is difficult to put an exact timeframe on it. Some investments will take place over a long time, and therefore an accounting period of three years would not make sense for charities. Equally, the point made by the noble Lord, Lord Watson, that they must be reviewed stands. Therefore I, too, shall be interested to hear the Minister’s reply, and I hope that between us we can flesh this out to make it just a bit clearer.
Baroness Pitkeathley (Lab)
My Lords, I support all these amendments because they encourage trustees to focus more attention on the progress of social investments and to review them regularly. I, too, think that “from time to time” is a bit vague, although I understand that it has a legal meaning.
There are two reasons why I support the amendments. The first is that I think they will make the position of trustees and their responsibilities clearer. Social investment is a fairly new concept and trustees on the whole are not very familiar with it. We are trying to encourage them to be more so, and I believe that these amendments would help in that. The second reason—and here I declare an interest as chair of the Big Society Trust—is that I agree with the noble Baroness, Lady Barker, that the financial return on these social investments is often not realised for some time, although the social return may be obvious at an earlier stage. To some extent, charities and trustees are learning as they go in this area, so any further guidance or direction we can give them would be of benefit.
Baroness Barker
My Lords, my noble friend Lady Kramer was one of that small band of people banging away during the passage of the Financial Services Bill, and if she were here, she would be very strongly in favour of this. She is one of the very few people in your Lordships’ House who has had the experience of running a bank in her time, in the United States, and makes the simple point that it is wrong that individual people can only give grants or money to a social entity in their community and cannot invest in it. That is because of the restrictions that apply to soliciting such investments. It is perfectly possible, as the noble Lord, Lord Hodgson of Astley Abbotts, set out in such detail, to make a distinction between a strict financial investment, which has to have with it all the safeguards which the noble Lord, Lord Cromwell, set out for us so clearly last week, and a social investment. If the Government were willing to stop throwing this proposal around like a hot potato between departments and move on with it, it could bring about not only a new source of investment for small charities but, at the same time, an increase in the skills level of small organisations to build business cases. That is something the charitable sector has not traditionally been good at but which it will need to be increasingly able to do in future. There is a lot to commend in this proposal.
Lord Watson of Invergowrie
My Lords, this amendment would enable charities to market social investments to individual investors but exempt charities from the restrictions of the financial promotions regime. It would provide rules for the development of a regulatory regime for marketing by charities and allow the Treasury to set out rules for the communication of financial promotions by charities through regulations, if it chose to do so.
From our point of view, three of those sound quite reasonable, but I have to ask the noble Lord, Lord Hodgson, whether an exemption from the Financial Services and Markets Act 2000 and the 2005 order means less protection for consumers—by which of course I mean investors. Would the new rules specifically for social investments come into force at the same time as social investments were no longer required to meet the demands of the 2000 Act? In my view, the noble Lord, Lord Hodgson, did not spell out in sufficient detail why exemption from the Act is necessary. We believe there are potential difficulties in freeing up charities from those laws.
Baroness Barker
“( ) The Chancellor of the Exchequer and the Minister for the Cabinet Office must carry out a review into the operation of this Act as it relates to social investment, including—
(a) the effectiveness of the social investment market;(b) public understanding of how funds are used by charities for the purposes of investment;(c) the interaction between grant-making and social investment.”
Baroness Barker
My Lords, Amendments 26 and 27 have been proposed by Social Enterprise UK. Many of us welcome the fact that we have Clause 14 as it stands in the Bill. The proposal that there should be a full review of the Act within five years and subsequent reviews every five years thereafter is important, not least because it should concentrate the mind of the Charity Commission, which is being given extensive new powers in the Bill. By including provision for a review, we might also move away from the traditional method of developing charity law in this country, which has often been to wait for some kind of scandal to happen, have a big inquiry into it and subsequently move forward into legislation. There will always be scandals in the charity world, just as there are in the world of business, and they will always be useful implements for change, but something rather more considered would be helpful.
Baroness Barker
My Lords, I thank all noble Lords for their contributions. I am surprised by the statement by the noble Lord, Lord Watson of Invergowrie. The Treasury has control over the fiscal and regulatory powers that have a direct bearing on the ability of charities to raise money through these different instruments. I am surprised because I remember that when Gordon Brown was Chancellor he did a great deal to address the issues that charities were facing at the time, particularly on the limitations on their powers to raise revenue. It is not only under this Government but under Governments of his party that we have seen a much more forward-looking view and attitude taken by the Treasury towards different forms of charitable finance.
I take the points made by the Minister about my amendments, and it has been helpful to have him set out what he believes the scope of the review would be. I make it clear that I want the review to look at the performance of the Charity Commission in relation to the powers set out in the Bill. The legislation is now before us because the Charity Commission has told us that it lacks all these different powers in its armoury. Some of us remain less than convinced that that is the case, so it would be helpful to see whether we were right in five years’ time.
I accept the Minister’s point about a wide-ranging review of social investment and I understand that that can be done at any time of the Government’s choosing. However, given that the Bill has the new clause on social investment, it would be helpful if that in particular was reviewed in five years’ time. I have listened to the Minister’s answers to the debate, and on that basis I beg leave to withdraw the amendment.