Bank of England and Financial Services Bill [HL]

Lord Bridges of Headley Excerpts

Monday 26th October 2015 Lords Chamber

Moved by

[Lord Bridges of Headley]

That the Bill be now read a second time.

[The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)]

My Lords, it is now over seven years since the height of the financial crisis. In that time, many steps have been taken not simply to repair the damage done but to reform the entire financial sector. The regulatory system and regulatory standards are now vastly different from those which existed before the crisis—and rightly so. Those reforms, many of which were enacted by the last coalition Government, bear the imprint of a number of your Lordships. I would like to thank in particular noble Lords who were part of the Parliamentary Commission on Banking Standards. Although I cannot claim the considerable expertise that many of your Lordships have on financial matters, I have worked for two banks—HSBC and, more recently, Banco Santander. I mention this not just for the record but to say that, from that vantage point, I have seen the painstaking efforts your Lordships take to ensure that we fully address the failings of the previous regulatory regime, doing so in a robust but proportionate way.

Today our financial services are far more resilient than they were seven years ago. The Chancellor has talked of the British dilemma of being a host for global finance without exposing taxpayers to the costs of financial failures. We have made real progress in tackling this dilemma, but it would be hubristic to say that this is job done. Even if memories of what happened in 2008 may begin to fade, we must never forget the lessons that that crisis taught us. Eternal vigilance is required—but this should not be mistaken for ever more regulation. We must never fall victim to the belief that we can somehow magically regulate risk out of the system. Nor should we try to do so: risk and innovation are two sides of the same coin. Our challenge is to get the balance right—to deliver stability and protect taxpayers, while allowing free markets, enterprise and innovation to flourish.

This is the backcloth to the Bill, which seeks to implement a series of evolutionary changes to the regulatory system as part of this Government’s commitment to deliver a new settlement for financial services. There are four main elements to this.

First, the Bill will strengthen the governance, transparency and accountability of the Bank of England, as well as updating resolution planning and crisis management arrangements between the Bank and the Treasury. Secondly, it will extend the senior managers and certification regime across the whole financial services industry to increase the accountability of the sector and will build a new duty of responsibility into the regime, ahead of its introduction next year. Thirdly, it extends the scope of the Pension Wise guidance service. Finally, it makes technical changes to the Scottish and Northern Irish banknote issuance regime to allow new issuers to be authorised in place of an existing issuer to facilitate group restructuring.

I turn first to the measures which will strengthen the governance and accountability of the Bank of England. As noble Lords will be aware, the Bank was established in 1694 to finance the War of the Grand Alliance against France. At that time, the 24 directors of the Bank were each required to hold £2,000 of Bank stock. The first matter the new court discussed was “the method of giving receipts for cash”. At its third meeting, the court appointed the first officials of the Bank; there were only 19, including two doorkeepers. The new court also made a number of other important decisions, including appointing a committee to inspect the cash, and recommending that the cashiers should be “fenced in to keep off people from disturbing them”. Scroll forward to the 20th century and much had changed, but even in the interwar years the long-serving executive director of the Bank, Sir Otto Niemeyer, observed, “When the Permanent Secretary of the Treasury visited the Bank of England … he took a taxi because he was not quite sure where the Bank was”.

It is fair to say that both the role of the Bank and its governance have seen some changes in the intervening years. From a macroeconomic perspective, some of the most important developments have been in the recent past. In 1997 the Bank was given operational responsibility for monetary policy. During the last Parliament, the Government put the Bank at the centre of a fundamentally reformed regulatory architecture, giving it significant new responsibilities and the powers it needs to deliver its financial stability mandate. The Bank is tasked with delivering monetary and financial stability, and as such plays a critical role in maintaining the stable macroeconomic conditions that are a prerequisite for delivering the Government’s long-term economic plan. It is vital, therefore, that the structure and governance of the Bank put it on the best possible footing to fulfil its critical role in supporting UK economic stability.

The Bank itself recognises this need. Through its “One Mission. One Bank” strategic plan and its 2014 publication Transparency and Accountability at the Bank of England, the Bank has set out a series of changes to reinforce its transparency, accountability and governance and contribute to its strategic objective of operating as a single, integrated institution. The Bill brings forward a set of evolutionary changes that are complementary to the steps the Bank itself is taking. The key measures that I would like to highlight are as follows.

First, the Bill will strengthen the role and governance of the court, including by implementing the recommendation of the Parliamentary Commission on Banking Standards to remove the Oversight Committee and transferring its functions to the court. This will complete the job to enable the court to act as a modern unitary board, with performance overseen by the executive and non-executive together. Next, the Bill will end the Prudential Regulation Authority’s status as a subsidiary of the Bank, integrating microprudential supervision more fully into the Bank. The PRA board will be replaced by a new Prudential Regulatory Committee, modelled on the Monetary Policy Committee and Financial Policy Committee, with sole responsibility within the Bank for the PRA’s functions. These changes will support the Governor’s strategy,

“to conduct supervision as an integrated part of the central bank and not as a standalone supervisory agency that happens to be attached to a central bank”.

The Government also recognise that the PRA’s strong brand and operational independence need to be protected, and that transparency around the use of the PRA levy activities must be maintained. The Bill will therefore ensure that supervision continues to operate with appropriate independence and adequate resources, and the statutory objectives of the PRA, which underpin its forward-looking, judgment-based approach to supervision, will remain unchanged. In line with the approach taken to the MPC and FPC, the Bill will provide for a new remit letter from the Government to the PRC, to highlight those aspects of government economic policy that are most relevant to the PRC’s duties.

Turning to the Monetary Policy Committee, the Bill includes provisions to move the MPC to a schedule of at least eight meetings a year and updates requirements for the timing of MPC publications, implementing the remaining recommendation of the Warsh review, Transparency and the Bank of England’s Monetary Policy Committee, published in 2014. The Bill also includes a set of measures to strengthen and harmonise the legislative underpinnings of the Bank’s three policy committees; the MPC, the FPC and the proposed PRC. As part of these changes, the Bill will harmonise the provisions around conflicts of interest for the MPC, FPC and new Prudential Regulation Committee and put in place a requirement for each committee to publish a code of practice detailing how potential conflicts of interest will be managed.

Next, the Bill will give the National Audit Office the power to launch value-for-money studies across all parts of the Bank, thereby bringing the whole Bank within the purview of the NAO for the first time. This is a significant strengthening of the accountability of the Bank to the public and to Parliament. The Bill implements this important change in a way that protects the independence of the Bank’s policy-making functions. Alongside these changes to the Bank’s governance and accountability, the Bill builds on the existing arrangements and the strong working relationship between the Bank and the Treasury by updating the formal framework for how the Bank and the Treasury should engage with each other on the public fund risks and the financial stability risks of firm failure. These changes improve co-ordination while maintaining the existing clear and separate roles of the Bank and the Treasury in the event of a crisis. It is essential that both the Government and the Bank are in the best possible position to respond to a financial crisis. This will be supported by these measures. These measures concerning the Bank of England form one part of the Bill.

I turn next to the changes that we propose to make to extend the principle of personal responsibility to all sectors of the financial services industry. As noble Lords will be aware, following the report of the Parliamentary Commission on Banking Standards in 2013, we legislated for a senior managers and certification regime to replace the discredited approved persons regime. At the moment, this new regime, which is due to come into force in March 2016, would apply to banks, building societies, credit unions and PRA-regulated investment firms, but not to any other authorised financial services firms. The new regime consists of three key components. The first is regulatory pre-approval of senior managers at the top of the firm. The second is certification by the firm of other key individuals as fit and proper, both at hiring and annually thereafter. Thirdly, the regulators will be able to make rules of conduct for senior managers, certified persons and other employees.

The Government now propose to extend the senior managers and certification regime to all sectors of the financial services industry, replacing the approved persons regime, so as to have a single approach for the entire sector. In 2014 former members of the PCBS called for the regime to be extended, as did the fair and effective markets review. This expansion will create a fairer, more consistent and rigorous regime for all sectors of the financial services industry, enhancing personal responsibility and accountability for senior managers as well as providing a more effective and proportionate means to raise standards of conduct of key staff more broadly, supported by robust enforcement powers for the regulators.

The Bill will also introduce a statutory duty of responsibility to be applied consistently to all senior managers across the financial services industry. This supersedes the “reverse burden of proof”, which would, in the absence of legislative change, apply to banking sector firms when they become subject to the regime in March 2016. Under the statutory duty of responsibility, the same underlying obligation will remain on the individual to ensure that they take reasonable steps to prevent regulatory breaches in the areas of the firm for which they are responsible, but the burden will be on the regulators to prove that a senior manager has failed to do this.

A third part of the Bill extends the remit of the Pension Wise guidance service. As noble Lords will be aware, the Government are making fundamental changes to the pension system to allow people to access their pension pots flexibly without being hit with punitive tax rates. These reforms give people freedom and choice over how they spend their money. Following the decision to extend pension freedoms to those who already hold an annuity in 2017, the Bill will extend the scope of the Pension Wise guidance service, so that pensioners can access a free, impartial service to discuss their new options.

Finally, the Bill makes changes to the legislative framework governing the issuance of Scottish and Northern Ireland bank notes; it gives the Treasury power to make regulations authorising a bank in the same group as an existing issuer to issue banknotes in place of that issuer. This will increase the flexibility for banks to restructure their operations, while preserving the long-standing tradition of certain banks in Scotland and Northern Ireland issuing their own notes. This is a particular issue currently, as some banking groups will be adjusting their group structure in order to ring-fence their retail banking operations.

In summary, the Bill builds on previous reforms to financial regulation with a number of important measures that will contribute to the Government’s commitment to deliver a new settlement for financial services. I am aware that a number of noble Lords have great experience and expertise in these matters, and my door is always open to meet them and discuss the measures in the Bill as it progresses through Committee. I look forward to hearing your Lordships’ views. I beg to move.

--- Later in debate ---

[Lord Bridges of Headley]

My Lords, I begin by thanking all those who have spoken and for their excellent contributions. I am very conscious that the hour is late, so I am delighted that the noble Lord, Lord Davies, says that I do not have to respond to every single one of his points, as we would all need our sleeping bags if I were to do that. I think that the noble Lord also said that this Bill is exciting, and on a typically dull day in your Lordships’ House, I am sure that we could all do with some excitement to pep up our lives. Let me assure noble Lords that if I fail to respond to points that have been made, my door is open and I will certainly either write or meet to discuss them.

Let me start by addressing points that were raised by the right reverend Prelate the Bishop of Portsmouth and my noble friend Lord Naseby. They both stressed the importance of the diversity of business models, especially mutuals and credit unions. I agree entirely with the noble Lord, Lord Davies, on the need for diversity. As noble Lords will know, the PRA is required to have regard to differences in the nature of and the objectives of businesses. This important recognition of diversity is preserved under the new arrangements, but I would be delighted to meet and discuss these matters further.

My noble friend Lord Lawson talked about ring-fencing, as did the noble Lord, Lord McFall. Let me tell your Lordships that the implementation of the ring-fence is obviously the primary responsibility of the PRA, but we are monitoring the way in which firms are implementing it. There is no evidence to date that firms are gaming the ring-fence, and as noble Lords know, we discussed at length whether it was necessary to have full separation during the debates on the banking reform Bill, but obviously we decided to go for ring-fencing. The Government remain of the view that it is appropriate.

I turn to the issue of dividend payments, raised by my noble friend Lord Northbrook. The PRA proposed rules on dividend payments are entirely consistent with the ring-fencing legislation and the recommendations made by the Independent Commission on Banking. There has not been a watering down of what are very robust requirements. The ring-fenced bank will be required to be legally, economically and operationally separate from the wider banking group and will have to interact with entities in the wider group on an arm’s-length basis. It is entirely appropriate that excess profits from the ring-fenced entity can be used to capitalise the parent company. This must be viewed in the context of the significant extra capital that the ring-fenced banks will be required to hold. Only excess capital above and beyond this would be eligible to be moved to the parent company. The PRA has rightly retained the power to prevent these payments, which the ring-fenced bank must inform the PRA of in advance if it feels that they would impact on the resilience and resolvability of the ring-fenced bank. There is no threat that these rules will result in a poorly capitalised ring-fenced bank.

I am sure that we will return to that issue, as we will to the next one I wish to address, which is the oversight function and committee and groupthink, which the noble Baroness, Lady Kramer, and others referred to. Let me start by saying that the court will have the ability to appoint independent experts to manage reviews as well as the continued ability to delegate to a sub-committee, including a sub-committee of non-executives. The balance of non-executive and internal members will ensure external challenge, while the abolition of the oversight committee will ensure that the statutory oversight functions are the responsibility of the whole court. It is worth noting that Andrew Tyrie has welcomed this change. I suspect—although I do not want to put words into his mouth—that Mr Tyrie, like me, sees this as an issue of transparency and accountability, both of which I believe are improved by this Bill. The noble Lord, Lord Eatwell—who has had a lot more experience of these issues—described the Bill as,

“opaque and not fit for purpose”;

I dispute that, but I am sure we will return to that issue in Committee.

I would like to refer briefly to one of the problems caused by the oversight committee. I shall just quickly outline this, if I may. In 2013-14, the foreign exchange market investigation sought to establish whether any bank officials had been involved in or aware of FX market manipulation. As your Lordships may know, the Bank governors initiated an extensive internal review on this and made regular briefings to court. In March 2014, when it became clear that an independent investigation would be appropriate, the oversight committee took over the investigation, appointing the noble Lord, Lord Grabiner QC. That was a good use of the oversight functions, but in practice the executive needed to join the oversight committee discussions for them to function and be effective, both as the investigation progressed and once attention turned to delivering recommendations. It would have been better, in practice, to make the oversight function the responsibility of the whole court, which is what we are now doing.

I turn now to the question—which I believe the noble Lords, Lord Davies and Lord Sharkey, asked—of why the number of non-executive directors will be reduced to seven. This is to make the court a smaller, more focused unitary board, as I said at the start. The Bank’s 2014 report Transparency and Accountability at the Bank of England said that,

“consistent with best practice in the private sector, the Bank sees the value of continuing to evolve towards a slightly smaller body, with a non-executive chair and majority”.

It cited the Walker report—the review of corporate governance in UK banks and other financial entities, published in 2009—which identified the optimum size of a board as between eight and 12 people.

On the subject of the board, the noble Lord, Lord Eatwell, raised concerns about the shift of financial stability strategy from the court to the Bank. Under current legislation, the court is responsible for determining the financial stability strategy, but this Bill will make the Bank responsible for determining the strategy. The noble Lord suggests that this was a shift to an “amorphous entity” and may serve to weaken the production of the strategy. This Bill ensures that aspects of its preparation can be delegated, so that the full expertise of all relevant areas of the Bank can feed into production of a single overarching strategy for delivering the Bank’s financial stability objective. The court, as the governing body of the Bank, will retain ultimate responsibility for the strategy, as it has now.

I turn now to those who have made an eloquent defence of the reverse burden of proof. I would like first to address a small point that the noble Lord, Lord Eatwell, raised about lobbying. Concern has been expressed that the Government have removed this provision in response to lobbying from big banks. I wish to be very clear. We are aware of the views of the banks on this matter. It is no secret and no surprise that they were not in favour of the reverse burden of proof policy, but the Government did not discuss their intention to make this change with any Bank before they made their decision.

I ask noble Lords to let me explain why the Government believe that the reverse burden of proof should be superseded by the duty of responsibility. I am sure we will return to this in Committee, but I would like to make some points now. In the interests of fairness and regulatory coherence, it is vital that the regime is rolled out consistently across the industry. Otherwise, a senior manager in a small building society would become subject to the reverse burden of proof, but one in a large investment firm that did not quite meet the criteria to be PRA-regulated would not. That is not fair, nor is it proportionate. While misconduct by firms of any size can seriously impact on the welfare of consumers or on market integrity, the potential impact is larger in the case of the large investment firm than the small building society.

Secondly, it would clearly not be proportionate to apply the reverse burden of proof across the financial sector, including to the small organisations that will now make up the majority of firms which will come under the regime, and which pose more limited risks to market integrity and consumer outcomes. The reverse burden of proof makes it much harder for such firms to recruit senior managers, since they cannot offset the personal risk attached with high remuneration. This is particularly problematic for credit unions, for example, which provide vital services to vulnerable people.

Our solution is a tough statutory duty for senior managers to take reasonable steps to prevent regulatory breaches in the areas of the firm for which they are responsible, applied consistently across all authorised financial services firms and coupled with the other elements of the regime. This will deliver the intended benefits of the reverse burden of proof in a much more proportionate way. I draw your Lordships’ attention to my phrase “coupled with other elements of the senior managers and certification regime”. It is important that we do not underestimate the step change that the other reforms recommended by the Parliamentary Commission on Banking Standards, and those noble Lords who were part of that, will deliver.

As I pointed out earlier, the SM&CR marks a move to a situation where firms and senior managers must take responsibility for how a firm conducts its business. Crucial among the provisions that deliver this are the statutory statements of responsibility that each senior manager must keep up to date, sign and submit to the regulators, setting out clearly the areas of the firm’s business for which they are responsible.

The noble Lord, Lord Eatwell, raised the issue of transparency. I argue that these steps will mean that there can never be any doubt for the individual concerned, the firm or the regulators what each senior manager can be held accountable for. This makes a statutory duty to prevent regulatory breaches in these areas a powerful incentive for senior managers to run their businesses well and a formidable enforcement tool if they fail to do so. Let us not forget that if a senior manager does not fulfil this duty, the regulators can and will enforce against them. Penalties could include prohibition and/or an unlimited fine.

I will briefly touch on the point that my noble friend Lord Flight made. I believe that he is concerned about the mounting cost of regulation. The PRA and the FCA are committed to implementing the SM&CR in a proportionate way, particularly for small firms. The SM&CR will lead to a significant reduction in the number of appointments subject to prior regulatory approval, from just more than 200,000 approved persons to just more than 100,000 senior managers. The extended SM&CR will not include the obligation to report to regulators all known or suspected breaches of rules of conduct for employees. Feedback during the SM&CR implementation process for banks has shown that these obligations can have significant cost implications for firms, quite apart from their other burdens on firms or the individuals concerned.

I turn to the other major issue discussed, which is the issue of the NAO conducting value-for-money studies. The noble Lord, Lord Bichard, was concerned that the mechanism built into the Bill to protect the Bank’s independent policy-making goes too far and could impede the NAO’s ability to conduct independent value-for-money reviews. I note the noble Lord’s extensive experience in this field. His concerns are well argued and should be taken very seriously. No doubt we will debate them and I look forward to meeting him to discuss this in due course. However, pulling in the other direction are equally serious concerns for the vital policy-making independence of the central bank, where drawing the line between what does and does not constitute policy is particularly complex.

We have had to strike a balance in the Bill to protect the independence of two vital public bodies. That is why the Bill requires that, in the event of disagreement between the NAO and the Bank over the definition of policy, the NAO must make public the disagreement, ensuring that the process will be transparent and open to full public and parliamentary scrutiny. I hope that noble Lords will understand the desire for this balance and I look forward to discussing the mechanism we have chosen to achieve this in more detail in meetings and in Committee should that be useful.

The noble Lord, Lord McKenzie, raised some very specific questions on Pension Wise. To do him justice and merit, I will write to him to address them specifically. The noble Baroness, Lady Kramer, raised the issue of distinguishing between advice and guidance—a point very well made. The financial advice market review, which published its consultation document on Monday 12 October, recognises that the distinction between advice and guidance is not always consistent with people’s understanding of what advice is. It seeks views on how there could be greater clarity in this respect. As I am sure the noble Baroness knows, the consultation period for this will close shortly before Christmas.

I am very conscious that, at a late hour, I have not done justice to the excellent points that have been made. I look forward in the weeks ahead to debating and discussing these measures with your Lordships in more detail, and my door is always open. I thank noble Lords for their contributions today. To conclude, I would argue that—

[Baroness Kramer]

My Lords, before the Minister sits down, can he comment on the sustainability issue that was raised by the noble Baroness, Lady Worthington, and that I happened to overlook?

[Lord Bridges of Headley]

Indeed I can. These issues were raised and I am more than happy to meet the noble Baroness to discuss them in due course. This issue was raised by the Governor, Mark Carney, in a recent speech, and it is one that the Bank is always looking at. I am happy to discuss that in due course.

To conclude, the reforms in the Bill will strengthen the governance and accountability of the Bank of England, update resolution planning and crisis management arrangements between the Bank and the Treasury, and extend the principle of personal responsibility to all sectors of the financial services industry.

Finally, I return to a point raised by the noble Lord, Lord Sharkey, about the balance on the PRC and the role of the FCA CEO. First, it is right to consider the FCA CEO as external to the Bank: he or she is not a Bank appointee. The legislation therefore ensures that there is a majority of externals on the PRC, since the legislation provides for at least six externals plus the FCA CEO, compared to five Bank committee members. It is also worth noting that, for the PRA board, the legislation requires a majority of externals on the board and includes the FCA CEO as an external for these purposes. The legislation, therefore, will reinforce the independence of the PRC compared with the PRA board.

[Lord McFall of Alcluith]

In the debate I raised the issue of transparency and disclosure regarding the Investment Association. This is a current issue and I would like an assurance from the Minister that they will take this issue up with the regulators—both the Bank of England and the FCA—to see if we can do something to assist transparency and disclosure in this industry.

[Lord Bridges of Headley]

My Lords, I am all in favour of transparency and am happy to meet the noble Lord to discuss those issues. I hope the noble Lord will forgive me for not giving a blanket commitment here and now, but I am more than happy to meet him. Transparency must be in the interests of everyone, as long as it is applied proportionately. I am acutely aware that the noble Lord has a lot of experience in this field, so he will forgive me for not agreeing to that request here and now.

I thank your Lordships for all your contributions today.

[Lord Davies of Oldham]

It would be helpful if the Minister, after reading the debate, and after his officials have looked at it and seen areas in which he could usefully enlighten us before the Committee stage, could write to the Members concerned. Everyone in the House would appreciate that.

[Lord Bridges of Headley]

I certainly will do so, my Lords. Communication between us all will be very fruitful as we proceed. There are many technical issues here that we cannot perhaps do justice to on the floor of the House. It would be good to meet beforehand. I should also extend my apologies to the noble Lord, Lord Davies, because I believe he was unable to come to the briefing we had on this Bill, but that is my fault, not his. I am entirely in favour of good communication.

[Lord Sharkey]

Can I simply ask whether the Minister agrees that we will see the new impact assessment, promised in the current impact assessment, prior to Committee?

[Lord Bridges of Headley]

My Lords, I can agree that it is certainly being worked on. We will continue to work on it, and share and discuss the issues of the impact of these measures with the noble Lord. I absolutely agree that we need to make sure that the measures on the extension of the SM&CR, which is what I presume the noble Lord is referring to, are done in a proportionate and careful way. We must heed previous cases where that has not been properly, so I entirely agree on that.

Let me end by thanking your Lordships for your contributions today. I ask the House to give the Bill a Second Reading.

Bill read a second time and committed to a Committee of the Whole House.

Chilcot Inquiry

Lord Bridges of Headley Excerpts

Thursday 22nd October 2015 Lords Chamber

[The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)]

My Lords, I congratulate the noble and learned Lord, Lord Morris, on securing this debate on the Chilcot inquiry. I also thank all noble Lords who have contributed to this debate—there have been some extremely good and informative speeches. Once again a number of your Lordships, but by no means all, have spoken eloquently of the need for the inquiry to publish the report as soon as possible. As the noble and learned Lord, Lord Morris, and my noble friend Lord Dykes, said, uppermost in our minds are the families and friends who lost loved ones in Iraq, as well as those who were severely injured, who have been waiting for years for the publication of the report.

Despite this sense of disappointment that the report has still not been published, I am sure that everyone here would agree that, as my noble friend Lord Finkelstein remarked, this inquiry is unprecedented in its scope and scale. Never before has a UK public inquiry examined in such depth and detail a decision to go to war and its consequences with unprecedented access to question the people who took those decisions and advised on those decisions, as well as having access to the papers surrounding discussions. I think there will be surprise at the number and extent of highly classified and sensitive material that will be published with the report.

As has been said, it is more than six years since this inquiry of privy counsellors was set up by the previous Labour Government and no one at the time expected it would still not have published its findings in 2015. Sir John himself said, not long after the inquiry was launched, that he expected it to conclude within 18 months. However as Sir John said earlier this year:

“I don’t believe it was possible then … to have foreseen the nature and range of issues that would be disclosed progressively from the examination not only of witnesses in the oral hearings, but of the extraordinarily wide-ranging and voluminous archive”.

As a number of noble Lords have said, I am sure that when the report is published and its conclusions have been considered, we will also wish to debate what lessons we can learn from this inquiry, as the noble Baroness just said, in terms of the process that has been followed, be it on Maxwellisation, that the noble Lord, Lord Marks, spoke about or other matters, such as its remit or how it was established. However, I would argue that that debate is best had when the report is published. As to the publication of the report, since I last answered the noble and learned Lord’s Question in the Chamber last July there has been some progress. As we have heard, Sir John has confirmed that all the individuals who received provisional criticisms under the Maxwellisation process have responded and Sir John is currently evaluating those responses. Crucially, last week, the inquiry informed No. 10 that Sir John would write to the Prime Minister by 3 November with a timetable for the completion of the report. Therefore, by early next month, we should know when the report will be delivered.

I turn now to the noble and learned Lord’s question for debate. In the light of these developments, he will not be too surprised when I say that the Government do not believe there is a case for discharging the chairman and members of the inquiry and inviting the Cabinet Secretary to set out a mechanism for an interim report to be produced on the basis of the evidence gathered. As the noble Lord, Lord Butler, said, in less than two weeks we will have a timetable for publication, and we owe it to the families to continue with this inquiry as it aims to provide the answers that they desperately want. Discharging the inquiry at this stage would obviously not help that process.

As has been mentioned, the inquiry is fully independent of government. As the noble and learned Lord, Lord Morris, said, this inquiry was not set up under the Inquiries Act. This means, of course, that it has no statutory basis as such. If the Government were to accept the course of action set out in the Question, it would undermine the fundamental independence of the inquiry. Therefore, we have to see it through, otherwise any outcome will be significantly devalued and it will delay closure on what has been such a controversial episode in British political history, as the noble Baroness, Lady Williams, set out very eloquently.

Once the report is published, there will be an initial Statement from the Government in both Houses. Then, once we have all had the opportunity to read and digest what the report has to say, there will be an opportunity for a full debate in both Houses.

I will now touch upon a couple of points that the noble and learned Lord, Lord Morris, mentioned, in particular about the release of papers relating to Tony Blair’s correspondence with President Bush, a point that the noble Lord, Lord Butler, also referred to. I should make it completely clear at the outset that the inquiry has had full access to the information that it has requested. The discussion was about the disclosure of the information that the inquiry had access to. I hope that noble Lords will forgive me for setting out in a little detail what actually happened.

On 15 July 2013, Sir John Chilcot wrote to the Prime Minister confirming that he had begun a dialogue with Sir Jeremy Heywood about the material that the inquiry wished to reflect in its analysis of discussions in Cabinet and Cabinet Committees and the references that the inquiry wished to make about the contents of Mr Blair’s notes to President Bush and discussions between Mr Blair and Mr Brown and Presidents Bush and Obama. As Sir Jeremy Heywood made clear when he addressed the then Public Administration Committee in the other place in January this year, he approached the question of declassification with a bias towards transparency, including Tony Blair’s memos to George Bush and the Cabinet minutes. I should add that Sir John told the Foreign Affairs Select Committee in the other place:

“I have no indication that Sir Jeremy acted otherwise than properly throughout”.

On 28 July 2014, Sir John wrote to Sir Jeremy Heywood confirming that agreement had been reached on principles underpinning the disclosure of notes and records relating to the Prime Minister and US President’s discussions, and that agreement had been reached on the detail of what the inquiry would release in relation to the Cabinet and Cabinet Committee discussions. As Sir John told the Foreign Affairs Select Committee, this process took 13 months.

The noble and learned Lord is perfectly justified to ask why this process took so long. The simple answer is that disclosure in this way of papers involving communications between a Prime Minister and a US President is, as far as I understand it, almost unprecedented. I say almost, because the Franks report into the Falklands War did refer to the contents of communications between Margaret Thatcher and President Reagan, although these were direct references rather than extracts.

As the noble Lord, Lord Butler, said, the inquiry’s request for disclosure raised issues of long-standing principle; for example, the importance of preserving the privileged channel of communication between the Prime Minister and the US President. In taking the decision to allow disclosure of this information, Sir Jeremy had to balance the possible damage to UK-US relations, and the potential that, in future, free and frank exchanges might be inhibited by this disclosure, against the exceptional nature of the inquiry and the central importance to the inquiry’s work of these exchanges. The negotiations were worked through in good faith, with the aim of enabling the inquiry to publish as much material as possible. However, all this took time to resolve.

I turn to an issue that the noble and learned Lord, Lord Morris, the noble Lord, Lord Parekh and the noble Earl, Lord Attlee also raised—about the value and worth of releasing such material if it is redacted. Clearly, the best time for us to judge the answer to this question will be when the report is actually published. However, as Sir John Chilcot made clear earlier this year when he appeared before the Foreign Affairs Committee in the other place, it is essential to establish an account of what happened—an account that people can trust.

The inquiry has spent time and effort in ensuring it can publish the material it needs from those documents. I would, however, make a few observations. First, as Sir John Chilcot wrote to the Cabinet Secretary on 28 May 2014, regarding the use of quotes from the gist of notes pertaining to communications between the Prime Minister and the President of the United States:

“Consideration will be based on the principle that our use of this material should not reflect President Bush’s views. We have also agreed that the use of direct quotation from the documents should be the minimum necessary to enable the Inquiry to articulate its conclusions”.

Secondly, in all inquiries where national security is an issue, documents have to undergo a declassification process to protect sensitive information. As your Lordships will know, for the Iraq inquiry this process was conducted under a protocol agreed between the Government and the inquiry which established strict parameters within which the Government could seek redactions, principally on national security or international relations grounds. This states that, if the inquiry believes proposed redactions are not desirable, it can write to the Cabinet Secretary to seek a redaction. If no agreement is reached and the material is not published,

“it would remain open to the Inquiry to refer, in its report, to the fact that material it would have wished to publish had been withheld”.

Our aim has always been to allow the inquiry to publish as much material as possible.

In conclusion, we all agree that this inquiry must be fair and impartial but, above all, rigorous, with its conclusions firmly based on the evidence. To do that, it must be independent of Government and therefore, however frustrating it may be that the inquiry has not published its report, it must be allowed to complete its job.

House adjourned at 5.27 pm.

Government Digital Service

Lord Bridges of Headley Excerpts

Tuesday 13th October 2015 Lords Chamber

[Lord Wallace of Saltaire]

To ask Her Majesty’s Government what changes in the Government Digital Service will follow from projected cuts in its budget and the departure of senior staff.

[The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)]

My Lords, the future budget for the Government Digital Service will be determined in the spending review. The Government are 100% committed to the digital strategy set out in the previous Parliament and to the vision of government as a platform, so we can solve digital challenges once on behalf of all government. We will continue to strengthen the team in GDS and capability across government so as to transform the public delivery of services, making life easier for the citizen and cheaper for the taxpayer.

[Lord Wallace of Saltaire (LD)]

My Lords, does the Minister accept that this was a Conservative initiative—from the noble Lord, Lord Maude—in the last coalition Government, which had active Liberal Democrat support and much wider support from those in the technological community outside, and that it has been so successful that, as the Financial Times reports today, the United States, Australia, New Zealand and Israel have modelled their approaches to digitisation on the British scheme? Now, since the chief executive has resigned, six senior executives have left the GDS in the last six weeks and there are increasingly worrying reports of what is going on. Can we have at least a Statement and preferably even a White Paper on the future of GOV.UK, or are we going back to piecemeal approaches by departments which were demonstrated to be so ineffective in the past?

[Lord Bridges of Headley]

First, I thank the noble Lord for what he did when he was in government in supporting the GDS. I can say that we are utterly committed and remain committed to the strategy that was set out in the last Parliament. Plans will be announced before Christmas that will set out our strategy. The plans to create government as a platform continue, and the noble Lord is absolutely right—from my own experience in the private sector it is right that the entire organisation continues to embrace digital technology and build government as a platform.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, yesterday we gave a Second Reading to the Enterprise Bill to help businesses, big and small. However, we know that on average businesses are losing 33 working days a year because of outdated government online services. This is where they need help. Can the Minister therefore tell the House whether the Cabinet Office is one of those departments refusing the cuts that other bits of the Government are trying to make to it, and what guarantees business can have that there will be no cuts to the Government Digital Service?

[Lord Bridges of Headley]

My Lords, I may have been in this House a very short time but I think your Lordships would agree that it is probably more than my life is worth to start predicting the outcome of the spending review. However, I am delighted to use this opportunity, given that the noble Baroness has asked me this question, to remind the House and indeed the Treasury, should it be listening, that during the last Parliament £1.7 billion was saved thanks to digital transformation and the Government Digital Service cost £58 million. This is therefore a very good return on investment. Obviously, discussions continue, but I entirely share the noble Baroness’s view that we need to do more to support businesses.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend agree that my noble friend Lord Maude, as he now is, did a brilliant job in transferring services that would otherwise be extremely expensive so that they are online? That has saved the taxpayer a huge amount of money. Is not the quid quo pro for that that people, particularly those in rural areas, have access to broadband? It is no good if you have to fill in your tax return or your claim for agricultural subsidies, or whatever it is, if you do not have a proper online service, and BT is not providing that service. It is not good enough to say that it should be available to 95% of the country—100% of the country should be able to access government services online.

[Lord Bridges of Headley]

My Lords, I entirely sympathise and share this point of view, Headley being a place—at least in my mother’s house—that does not enjoy the full benefits of superfast broadband. However, I remind the House that the Government are investing over £780 million to bring superfast broadband to areas of the UK, total public investment is nearly £1.7 billion, and 3 million additional homes and businesses have superfast broadband available for the first time thanks to the Government’s investment. However, I entirely concede that more needs to be done.

[Lord Knight of Weymouth (Lab)]

My Lords, the Government Digital Service is a success thanks to the leadership of Mike Bracken and the noble Lord, Lord Maude. I wish them well in their new roles. However, I share the concerns of the noble Lord, Lord Wallace. Digital successfully implemented is by definition risk taking and innovative, and the Civil Service is not famous for embracing risk taking or innovation. What are the Government doing to nurture the next generation of political intrepreneurs within departments, across government, to drive this innovation and achieve the improvements in quality at potentially lower cost that we can get out of digital?

--- Later in debate ---

[Lord Bridges of Headley]

My Lords, the noble Lord makes an extremely good point and the Government are very focused on this, as is the Cabinet Office. The Cabinet Office today has announced the appointment of a new chief people officer who will lead HR, and I am sure he will put this at the top of his agenda.

[Lord Clement-Jones (LD)]

My Lords, the GDS and GOV.UK have made a huge contribution to better government. We heard the Minister’s assurances about strategy, but can he give the House an absolute assurance that we are not going to return to a free-for-all where each government department sets up its own website again?

[Lord Bridges of Headley]

My Lords, the noble Lord makes an extremely good point. During the previous Government a number of websites were shut down—scores indeed—some of which were competing against each other. I hope this is not a party-political point, but I think we have all learnt the lessons from the early days of digital. We need to make sure we continue on the approach we have set.

[Lord Wills (Lab)]

My Lords, the previous Government had an excellent record in promoting the use of open data in government. Can the Minister give an assurance that this Government will be equally vigorous in its use in this Parliament?

[Lord Bridges of Headley]

Absolutely, my Lords, and we need to continue to use our data better. It surprises me that we still have silos of data that we do not use and do not mine, and we need to continue to make the data more open and more available.

[Lord West of Spithead (Lab)]

My Lords, one of the greatest challenges with digitisation is protecting personal data, and the ability to access government services is much easier when you can do that. Is any consideration being given to a card that will allow people to prove exactly who they are when they try to get this data?

[Lord Bridges of Headley]

As the noble Lord will know, there is a project underway led by GDS on Verify, but that is a very good point and I will draw it to the attention of GDS.

Charities (Protection and Social Investment) Bill [HL]

Lord Bridges of Headley Excerpts

Monday 14th September 2015 Lords Chamber

[Baroness Chalker of Wallasey (Con)]

My Lords, I have read the proceedings on the Bill in earlier sittings of your Lordships’ House. I was not able to be present because, as many noble Lords will know, I have responsibilities in Africa connected with many of the charities which fall into the categories we are discussing. I support what the noble Baroness, Lady Young of Old Scone, has just said. The interactions between certain charities and the Charity Commission of late reflect a sad situation. I believe that Sir Stuart Etherington’s committee will give us very valuable advice. I realise that it cannot report before we finish our discussion on the Bill. However, it must be very clear that future regulation has to be very transparent because there have been too many occasions when certainly I have wondered at the meaning behind the work of certain charities. Therefore, we need to have clear guidance determining charities’ declarations of the management of their organisations. Many of them are now so large that they require much more financial supervision than they have at present. I am certain that the committee will respond on that basis.

I will say no more at present but I, too, emphasise that it is important to have a further debate in the months ahead when the Bill comes back from another place. I very much hope that I can arrange to be here rather than in Africa when that happens.

[The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)]

My Lords, I thank all those who have just spoken and those who said some very kind words about me. I would like to put on record my thanks, and those of the Government, for the significant contribution to the fundraising review that my noble friend Lord Leigh of Hurley, the noble Baroness, Lady Pitkeathley, and the noble Lord, Lord Wallace of Saltaire, have made, as well as our thanks to Sir Stuart Etherington himself. They have given up their time and expertise over the summer to help develop a new approach to tackling the problems of fundraising that have been exposed in the media in recent months.

I fully accept that, as a number of noble Lords have said, the timing of the debate today is somewhat unfortunate, given that Sir Stuart is not due to report until later this month. However, as I am sure your Lordships understand, this was agreed through the usual channels and needs to fit in with the competing demands of other parliamentary business.

My honourable friend in the other place, the Minister for Civil Society, Rob Wilson, has engaged over the summer with the noble Baroness, Lady Hayter, and other noble Lords who have been supporting Sir Stuart Etherington’s review. He has committed to continue that engagement when he pilots the Bill through the other place. I am very keen that your Lordships continue to debate and discuss these issues while the Bill is in the other place. My door is open to anyone who has been unable to express views as the Bill progressed up to this point or who has thoughts on the Etherington review’s findings when they are published. We will also, of course, have an opportunity for further debate in this House on any amendments that may be made to the Bill. I would entirely support such measures, as I know that this House has an immense amount of expertise on the matters that we are discussing.

Before responding to the points raised in this afternoon’s debate, and looking at the specifics of the amendment, it is worth reminding ourselves, as a number of speakers have, that the vast majority of charity fundraising is undertaken responsibly. The noble Baronesses, Lady Barker and Lady Young, made that point, and I entirely agree. It is the actions of a minority of charities, albeit high-profile ones, and in relation to particular fundraising methods, that have damaged public trust and confidence. Furthermore, charities need to ask the public for donations in order to carry out their vital work. In addressing the poor fundraising practices of the few, it is important to keep those points in mind and not to overburden the majority of charities, particularly small charities, whose fundraising activities are not at fault. As I said before while debating other points relevant to the Bill, it is absolutely critical that we get this balance right and keep a sense of proportion in what we may do.

One point on which I think there is now broad agreement is that the current system is too complex and has failed to deliver the standards that the public and Parliament expect. I owe a nod to my noble friend Lord Hodgson of Astley Abbotts, who got this spot on in his 2012 charity law review when he said:

“Potential donors are currently faced with a confused landscape, with unnecessary duplication or division of functions … To date the sector has tended to dance around these issues”.

It would appear that we are only now catching up with him. The current system has to change if we are to meet one of the overriding objectives of the Bill: to maintain and strengthen public trust and confidence in charities. The exam question posed to Sir Stuart Etherington and his review earlier this summer was: what should those changes be?

We have acted with the amendments to the Bill on Report, which will require charity trustees to take proper responsibility for their charity’s fundraising and, in larger charities, to be more transparent and accountable about their fundraising activities in their annual reports. These changes will help, but Sir Stuart’s review will provide the blueprint for the future of self-regulation.

I am sorry to disappoint noble Lords, but I do not want to pre-empt the outcome of Sir Stuart’s fundraising review—and if the noble Baroness thinks that it is going to be published at the Conservative Party conference, I will make sure that I accompany her there. I know that several of the largest charities have already committed to making changes and supporting the recommendations of the fundraising review. As the noble Baroness, Lady Pitkeathley, said, this change of heart is about time, too. It is to be welcomed, as the whole charity fundraising sector will need to get behind the recommendations of the review and swiftly implement the necessary changes. As I said on Report, the response of sector leaders to Sir Stuart’s recommendations will in part answer the question of whether fundraisers and the charity trustees who oversee them accept the need for and fully embrace change.

We take the view that charities should have the opportunity to redeem themselves and that they are capable of putting their own house in order and making self-regulation work so as to restore and protect the public trust and confidence on which they depend, as well as to show, as the noble Lord, Lord Wallace, said, that they are fulfilling the responsibilities that charitable status confers.

Some have suggested that we should legislate to make charities submit to self-regulation. That would effectively be statutory regulation, not self-regulation. We will need to see what Sir Stuart recommends, but we do not want to legislate for a new bureaucracy. In particular, we do not want to entangle with red tape the vast majority of small charities which have not had anything to do with the unacceptable practices reported in the media. Our preference therefore remains self-regulation, not a government-regulated solution.

Succession to Peerages Bill [HL]

Lord Bridges of Headley Excerpts

Friday 11th September 2015 Lords Chamber

[The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)]

My Lords, I, too, congratulate my noble friend Lord Trefgarne on securing this Second Reading, which has provoked an engaging, thoughtful and at times entertaining debate. Among his many accomplishments, I know that my noble friend has spent much time supporting the excellent Brooklands Museum, which I thoroughly recommend to your Lordships, where he has helped to conserve and restore to life the gems of British motoring and aviation. Today his intention and energy has turned to protecting and conserving that other part of our nation’s history, the peerage.

My noble friend’s energy and tenacity is obviously shared by a number of your Lordships who have spoken today. Although it is invidious to single out anyone in particular, I thank my noble friend Lord Fellowes for his passionate contribution to the debate. He is clearly following in the footsteps of the great Lord Kitchener and becoming the recruiting sergeant for this campaign. I can see the poster now: “Your peerage needs you!”.

This debate reminds me that while a number of your Lordships have spent many years looking into this issue I am a mere novice, trying to get my GCSE on issues such as abeyance while many of your Lordships clearly have doctorates on the subject, so forgive me for stating the obvious and repeating a point made before. This Bill, as its title suggests, is about the succession of peerages. Its purpose is to ensure hereditary peerages do not die out and like that noble prince in Sleeping Beauty, it aims to give the kiss of life back to peerages that now lie dormant. Its primary purpose is not therefore to address the inheritance of peerages discriminating against women, which I know that a number of your Lordships have debated before.

This latter issue—the equality of treatment before the law—is one that this Government take seriously in every walk of life. As the noble Lord, Lord Pannick, and others have said, during the last Parliament the coalition introduced what became the Succession to the Crown Act 2013, which removed, as your Lordships know, the male bias with regard to the descent of the Crown. We therefore sympathise with the concerns over gender inequality in the area raised and discussed by your Lordships today.

However, as your Lordships know better than me, and as has been pointed out, addressing this area of discrimination means tackling a very thorny legal thicket. Over the summer, I asked my officials to give me the relevant debates on this issue. I rather regretted that, as I got a very large pile of reading for my deckchair. As I ploughed through those previous debates, I must confess that I felt as if I was reading a mix of Jarndyce v Jarndyce and “Kind Hearts and Coronets” with a good sprinkling of “Downton Abbey”. Indeed, as Dickens described Jarndyce v Jarndyce:

“Innumerable children have been born into the cause; innumerable young people have married into it; innumerable old people have died out of it”.

The same could be said of this issue.

With that in mind, while it is obviously true that the succession of most peerages does not treat men and women equally, one must ask whether the Government ought to be devoting time and resources, both of which are limited, to addressing this extremely complex subject. Discrimination on the grounds of not just gender but race and age is clearly and sadly present in many parts of society and, despite the efforts of this Government and their predecessors, continues to blight the opportunities of many people—many more than those affected by the issues we are discussing today. When it comes to our approach to tackling discrimination, addressing these wider aspects is the Government’s priority.

I realise that these words will irk some of your Lordships and those who have campaigned on the issue that we are discussing. As has been mentioned, I see that a group called The Hares has been specifically created to lobby for a change to the law to create gender equality in the peerage by ending male primogeniture. I fear that to them I am yet another tortoise whose plodding is holding up progress but I assure your Lordships that I am more than willing to hear of ways in which this area of discrimination might be tackled. Let us not forget that, in the end, the tortoise wins the race.

The fact is that the Bill would have a very limited impact in addressing the fundamental issue here, namely gender inequality in the succession of hereditary peerages. As the noble Lord, Lord Pannick, pointed out, Clause 2(3) of the Bill explicitly states:

“Within each group of siblings”,

male heirs,

“in order of birth and their issue”,

would succeed before female heirs in order of birth and their issue. The Bill therefore permits women to inherit hereditary peerages only when there is no direct male heir. Surely, if we are to achieve equality in this area, the first born should inherit the title irrespective of their gender. I am not alone in saying this. The campaign group The Hares described the clause in an email to me as,

“clearly gender discriminatory. Under present equality legislation this is unacceptable”.

I also draw your Lordships’ attention to Clause 2(2), which states that,

“any daughter (‘D’) and her issue shall be treated for the purpose of succession as they would be treated if D had been male, save as provided by subsection (3)”.

It is not clear whose daughter is being referred to and whether this provision excludes female relatives, other than a daughter of the incumbent, from inheriting a peerage. If that is the case, this further highlights the Bill’s inadequacy in promoting gender equality.

I will now explain the concerns that the Government have with Clause 3, which provides for the revival of peerages that have become extinct. Given that we believe that many peerages have the potential to fall within the scope of this clause, it is vital that there is thorough consideration of and consultation on the significant impact this clause could have. To begin with, the effect of immediately reviving a large number of extinct peerages should not be underestimated. Before a peerage can be revived, its provenance and the right of the individual in question to inherit must be proven before the peerage can be entered on the Roll of the Peerage. The Bill would therefore create a considerable amount of additional work for the Crown Office and, most probably, the College of Arms. If the descent of a title were in any way unclear or contested, it could take years for matters to be resolved. I can almost hear the solicitors in Lincoln’s Inn rubbing their hands with glee.

Clause 3(1) states:

“For any peerage which became extinct on or after 6 February 1952”,

the Bill shall vest the peerage,

“in the person who would have succeeded to that peerage if the universal rule of succession had applied”,

to it since 6 February 1952. The Bill therefore proposes that the line of succession for all peerages that became extinct on or after 6 February 1952 is to be traced back and potentially altered from that exact date. This is very likely to have odd, and potentially unfair, consequences in some cases. For example, suppose a now-extinct peerage had been inherited by a distant male relative after 6 February 1952 and that male relative had since died. It may be the case that, applying the “universal rule of succession” from that date, the title would not have been inherited by that male relative but by a closer female relative instead. In that case, according to Clause 3(1), the fact the peerage had been inherited by the male relative would be ignored. Instead, the inheritance would be retrospectively redirected through the female. This is not only a somewhat strange method to adopt but could affect the legitimate expectations of the male relative’s successors who wished to revive the peerage. Clause 3(1), which applies the new rule of succession on and after 6 February 1952, would therefore appear to be incompatible with Clause 5(3)—which states that the Bill will not affect any succession to a peerage which has already taken place. Similar issues arise in respect of Clause 3(2) and (3), which make provision for peerages which became extinct before 6 February 1952. These are changes that should not be undertaken lightly without proper consideration of their effects or of any potential unfairness or conflict they could cause.

Turning to the issue of the inheritance of land associated with some peerages, Clause 5(2) states that the Bill, if it were to become law, would,

“not affect the succession to land or any other property real or personal”.

It should be noted, however, that there are a number of hereditary peerages which carry estates, either by virtue of the terms of the instrument creating the peerage or as a result of a trust arrangement which has been put in place in order to ensure that the peerage and property descend together. In those cases, the Bill would create a strange system whereby property would continue to be inherited by the oldest male heir even if, under the Bill’s provisions, the title went to a female heir, leading to titles being split from their associated estates. It would be impossible to say how many titles would be affected by this provision, given that trust arrangements are often confidential matters. This is another aspect of the Bill that would have to be carefully considered in order to prevent any unintended consequences.

My noble friend Lord Northbrook raised the issue of the ECHR and Article 14. During my summer reading, I also had the opportunity to look into it. The prohibition of discrimination set out in Article 14 of the ECHR applies only in conjunction with other rights set out in the convention. The right to peaceful enjoyment of one’s possessions is set out in Article 1 of Protocol 1 to the convention. It has been argued—unsuccessfully—that Article 1 of Protocol 1 applies to hereditary peerages and the right to inherit a peerage, and therefore that accession to hereditary peerages engages Article 14. Although peerages have been described as a type of property under English law, there is Strasbourg case law to the effect that nobility titles cannot be regarded as possessions within the meaning of Article 1, Protocol 1.

The High Court of England and Wales has confirmed that the right to sit and vote in Parliament by virtue of a hereditary peerage is not a possession. Furthermore, Strasbourg has held that Article 1 of Protocol 1 applies only to a person’s existing possessions, not future ones. It does not guarantee the right to acquire or succeed to possessions. Therefore, as Article 1 of Protocol 1 does not extend to peerages or the right to succeed to a peerage, Article 14 cannot be engaged. It is highly unlikely that a successful claim could be raised under the Human Rights Act 1998 in the UK domestic courts, as the Act does not apply to the Lords Select Committee on Privileges and Conduct, which is the only domestic court with jurisdiction to hear peerage claims.

To conclude, I fully understand the interest and passion that this issue raises for some families, but as your Lordships would, I hope, agree, one of the great strengths of this House is to legislate with care and caution, to kick the tyres of policy and to think through the consequences of our actions. In that spirit, I hope that I have clearly set out the Government’s reservations about the approach set out in the Bill.

The Bill itself fails properly to address the issue of gender discrimination in the succession to hereditary peerages: rather, it provides a means by which hereditary peerages which have died out can readily be revived. In addition, the Bill raises numerous problems and concerns, particularly relating to Clauses 2 and 3— problems which would take up a significant amount of parliamentary time and consideration in attempting to work out. Indeed, they may never be resolved, due to considerable uncertainties as to whom the provisions of this Bill may adversely affect and the likely unintended consequences were it to become law.

By making a single, rather sweeping change to the descent of all hereditary peerages, potentially the Bill would affect a considerable number of families in different ways, according to their own individual circumstances.

[The Earl of Caithness (Con)]

My noble friend has spoken on this point, and we have listened with care. Can he tell us how many peerages have become extinct since 6 February 1952?

[Lord Bridges of Headley]

I will have to write to confirm that, but I am led to believe that there are scores. I will need to write to my noble friend to confirm that.

In some cases, the Bill will lead to the disinheritance of individuals with legitimate expectations to inherit an hereditary peerage. Whereas the Succession to the Crown Act could be introduced without disturbing the legitimate expectations of anyone in line to the throne, I suggest that even with lengthy and detailed consideration and research, it would be impossible to foresee clearly all the effects of the Bill. At the very least, such a change should not be undertaken without extensive consultation and public discussion.

Above all, I hope that your Lordships would agree that given this complexity, the Government’s priorities should rightly lie elsewhere, as I said at the start.

Let me conclude by stressing that I hope that all I have said will be seen as constructive criticism. The Government recognise the inherent inequality in the succession of hereditary peerages and are happy to consider further attempts by interested parties to address the multitude of issues of gender discrimination which overcome the complexity that I have outlined.

Kids Company

Lord Bridges of Headley Excerpts

Tuesday 8th September 2015 Lords Chamber

[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.

[Baroness Armstrong of Hill Top (Lab)]

My Lords, I declare my interests as set out in the register, as I am involved with a number of charities. I hope the Minister recognises that the sector is highly regulated, and that it is largely well regulated. The vast majority of charities pay attention to good governance, make sure that they have reserves and fully accept that they are accountable to those who fund them. Will the Minister and the Government relook at what they can do to encourage the many rich people we have in this country to take up philanthropy? One of the possible consequences of the panic and concerns around Kids Company is that charities which are struggling will actually continue to lose money when really they need to be supported.

[Lord Bridges of Headley]

I entirely agree with the noble Baroness that the large majority of charities do a very good job and that we need to tread with extreme care and caution. I also entirely agree that charities need to be able to raise funds and donations in a way that is not overly burdensome when it comes to regulation. I am sure that my right honourable friend the Chancellor will heed what she has to say about encouraging giving. I would note only that there has been a considerable amount of public donations to a number of the causes that have asked for money, especially the Nepalese earthquake and, of course, the Syrian refugees in the last few months.

[Baroness O'Cathain (Con)]

My Lords, does my noble friend feel that people who are asked to be trustees of charities are given enough information beforehand against which they can check whether they have any experience in those areas and are able to deal with things such as accounts? I know that friends of mine who are willing to work for charities do not really understand things such as balance sheets or income and expenditure—they do it because they have time and they want to help the charities. Something has got to be done about that.

[Lord Bridges of Headley]

My Lords, I should declare an interest as I am a trustee of a charity. I entirely agree that there are a number of responsibilities and obligations that every trustee needs to heed. As a number of your Lordships will know, the Charity Commission provides clear guidance on the role and responsibility of charity trustees; indeed, it has recently updated its guidance, The Essential Trustee, which is designed to be easy to use and to support trustees in complying with their duties. That said, as I mentioned at the start, I very much hope that the Charity Commission will use this as an opportunity to look at what lessons the commission itself may learn from this episode.

[Lord Morris of Handsworth (Lab)]

My Lords—

--- Later in debate ---

[Lord Bridges of Headley]

My Lords, I hear what the noble Baroness has to say. When a ministerial direction is given, it is automatically referred to the NAO, as a number of your Lordships will know. It is then expected to be passed to the Public Accounts Committee, and it is up to the PAC to decide what it wishes to do.

[Lord Tugendhat (Con)]

My Lords—

--- Later in debate ---

[Lord Tugendhat]

My Lords, the Minister will be aware that in the corporate sector, rotation is the normal rule. It is very rare for non-executive directors to stay for more than three terms of three years. I read in the press that the chairman of the trustees of Kids Company has been in office for some 18 years. I do not know whether other trustees have been in office for an equally long time. Does the Minister agree that the lack of rotation is perhaps one of the causes of the difficulties that have occurred and that bringing new blood on to boards of directors or trustee boards is one safeguard against the sorts of problems that have arisen on this occasion?

[Lord Bridges of Headley]

I entirely agree. That is a very interesting point. Again, I point to the Charity Commission’s investigation into this. It will look at the role of trustees—not just in Kids Company but more broadly, I hope—and the lessons it can learn from that. I hasten to add that trustees obviously provide a considerable wealth of experience. One needs to get the balance right between rotation and retaining that experience on a board of trustees.

[Lord Morris of Handsworth]

My Lords, the House will note the steps that the statutory authorities and others are taking—but in the mean time, can the Minister tell us what is being done to safeguard the immediate and short-term interest of the children concerned?

[Lord Bridges of Headley]

The noble Lord makes an extremely valid point. I entirely share his concern, which is and has been paramount since the closure of Kids Company. Government officials have been working closely with local authorities. I take this opportunity to thank the local authorities in Lambeth, Southwark, Bristol and Camden for all they have done. This work has encompassed not just the Cabinet Office but other departments in government. I also pay particular thanks to the dioceses of Southwark and Lambeth, which have offered to provide practical support to local authorities, including food.

Charities (Protection and Social Investment) Bill [HL]

Lord Bridges of Headley Excerpts

Monday 20th July 2015 Lords Chamber

[Lord Gold (Con)]

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

[The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)]

My Lords, I thank the noble Baroness, Lady Deech, and the noble Lord, Lord Bew, for their thoughtful explanations of this amendment and for sparing the time to discuss this issue with me privately. I also thank the noble Baroness, Lady Barker, and my noble friends Lord Deben and Lord Gold, for their contributions. When we discussed this in Committee I made several points that noble Lords will be glad to know I will not repeat in great detail now as this can be quite a complex matter—as noble Lords will have gathered. I will stick to the principal points.

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

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

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

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

I understand that the Charity Commission shares a number of the concerns raised and it would be happy to write to the noble Lord, Lord Bew, in more detail on this point as our deliberations progress. I am sure that the Charity Commission would be happy to meet with the noble Baroness, Lady Deech, and other noble Lords should they so wish. With all that said and in mind, I hope that the noble Baroness will not press her amendment.

[Baroness Deech]

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

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

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[Lord Watson of Invergowrie]

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

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

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

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

We also learn that the Charity Commission is to commission a research report 12 months from the introduction of the agreement. Crucially, it seems that only the commission and the ISC will have detailed discussions around the terms of this research project in advance. Again, there will be no input from the state schools this is meant to assist. Will the Minister insist that state schools and local authorities be involved in the discussions relating to this research report? I very much hope that he will acknowledge the importance of that happening.

In Committee, the Minister said:

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

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

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

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

[Lord Bridges of Headley]

My Lords, I start by saying that I remain strongly in sympathy with the aims of the noble Lords whose names are down on this amendment. Before I address the amendment, I will make a general observation. Charitable status confers on charities a number of benefits, and that is right. Charities deserve our support in fulfilling their purposes. However, those benefits come with responsibilities, which trustees must ensure their charity fulfils. A core purpose of the Charity Commission, helped by this Bill, is to ensure that every charity fulfils those responsibilities and obligations. How they do so is up to them, but do so they must. I repeat: every charity must fulfil them, no matter what they do. It is important that law and regulations be applied and enforced without favour or prejudice to any one sector of the charitable world. There must be no light touch or heavy hand towards schools with charitable status as opposed to religious groups, or towards animal charities as opposed to environmental charities. They all—I repeat, all—must abide by the law and fulfil their obligations.

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

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

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

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

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

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

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

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

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[Lord Watson of Invergowrie]

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

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

[Lord Bridges of Headley]

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

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

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

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

As to Amendments 22 and 23, let me state for the sake of clarity that the definition of social investment used in the Bill covers anything short of a total loss of funds. It includes both a neutral and a negative return, short of such total loss. In this way, repayment of any part of the capital invested would be a “financial return” within the definition. The amendments seek to include cases where the expected financial return may be equal to, rather than greater than, a total loss of the investment. This would move us firmly into grant-making territory and mean that grants and other spending, where there is no expected financial return, would fall under the category of social investment. I do not think that this would be a desirable change to the Bill.

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

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

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Moved by

[Lord Bridges of Headley]

25: Clause 13, page 16, line 36, at end insert—
“( ) The fact that a relevant act may also have results other than those mentioned in subsection (2)(a) and (b) does not prevent the carrying out of that act being regarded as the making of a social investment.”

[Lord Bridges of Headley]

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

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

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

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

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

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

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

To put this in a more generic formulation, the social investment power will enable charities with wide charitable objects to invest in a wide range of social enterprises on an unrestricted basis, and by way of equity or debt or a combination of the two, or indeed through any other suitable financial instrument. With this in mind, and following discussions with the Law Commission and others, we have decided to amend the definition used by the Bill in a way that will make this even clearer, and to put it beyond any doubt in relation to matters of interpretation that could be raised some years hence. This explains Amendments 25 and 29.

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

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

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

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

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

and that they,

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

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

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

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

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

[Lord Cromwell (CB)]

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

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

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

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[Lord Watson of Invergowrie]

My Lords, on the first day of this month in Committee, I said:

“It is important for the Bill to be as clear as possible and I hope the Minister … will give an undertaking to bring forward his own re-wording to improve this section on Report. We have a singular aim: to make this section of the Bill as effective as possible. It would be in the interests of everybody, not least the charities themselves, for the wording to be tightened up”.—[Official Report, 1/7/15; col. GC 191.]

The section was on the meaning of social investment, so it is pleasing that the Minister has heeded my words and has indeed strengthened the Bill both in terms of the government amendments in this group and in the group that follows. I thank him for that.

We also believe that the two amendments in the names of the noble and learned Lord, Lord Hope of Craighead, and the noble Lord, Lord Cromwell, would enhance this clause, but the Minister has already set out his stall on these matters, so there is not much more that I can say on that.

[Lord Bridges of Headley]

My Lords, first, I apologise for getting carried away with excitement so that I gave my answer before the noble Lord had even posed the question. It is a novel way, especially for the noble and learned Lord, Lord Hope, who knows far more about most of these matters than me.

I entirely agree with what the noble Lord, Lord Watson, and my noble friend said about the need for simplicity and clarity in these matters. I also think we all agree that this is a new area of the law and we need to proceed carefully, cautiously and make sure that what we are doing meets the needs of the sector and that we do not land up in a world with unintended consequences.

In response to the noble Lord, Lord Hodgson, who asked whether I would consider what he had to say on the amendment, I am perfectly happy to reflect further but I am sorry to say that I can absolutely make no commitment on this matter. I point out, as the noble Lord, Lord Watson, said, that the next review of the Charities Act will be not in five years but before that. That decision has been made for the specific reason that this one area of the law, like many others, merits further consideration at that point. I am sure that well before that we will want to consider all those points on how the law is settling down and bedding in. I very much hope that the noble and learned Lord, Lord Hope, and the noble Lord, Lord Cromwell, will be part of that discussion and those deliberations. I am sorry I cannot meet what they want right now but I certainly assure them that we will be beating a path to their door, even if they are not coming to ours, to ask for their views.

Amendment 25 agreed.

Moved by

[Lord Bridges of Headley]

26: Clause 13, page 16, line 37, after “that” insert “carrying out”

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Moved by

[Lord Bridges of Headley]

27: Clause 13, page 17, leave out lines 17 to 21 and insert—
“(4) This section and section 292C do not apply in relation to—
(a) charities established by, or whose purposes and functions are set out in, legislation;(b) charities established by Royal Charter;but they apply in relation to all other charities, whether established before or after this section comes into force.(5) In subsection (4) “legislation” means—
(a) an Act of Parliament or an Act or Measure of the National Assembly for Wales; or(b) subordinate legislation (within the meaning of the Interpretation Act 1978) made under such an Act or Measure.”

[Lord Bridges of Headley]

Moved formally.

[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.

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Moved by

[Lord Bridges of Headley]

28: Clause 13, page 17, line 24, leave out “this Part” and insert “section 292B”

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Moved by

[Lord Bridges of Headley]

29: Clause 13, page 17, line 33, at end insert “, having regard to the benefit they expect it to achieve for the charity (by directly furthering the charity’s purposes and achieving a financial return)”

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[Lord Bridges of Headley]

My Lords, first, I apologise to the noble Baroness, Lady Barker, and others for my slight confusion over the previous amendment. I seem now to be a bus or a bus conductor—I am not sure which—but I hope to bring a smile to my noble friend Lord Hodgson’s lips.

As my noble friend says, the amendment aims to insert a new section into the Charities Act to exempt charities from the FCA’s financial promotion rules and to give the Treasury a power to create a new regulatory regime for charities marketing financial promotions, taking this out of the hands of the FCA. This amendment was tabled by noble Lords in Committee. I repeat what I said then: I understand that the effect of the financial promotion regime is an important issue for charities and social enterprises looking to raise funds from the public in this particular way. I also understand that my noble friend’s amendment is prompted by concerns around the appropriateness of these rules for charities that want to raise investment funds from members of the public, just as they might ask for donations.

The amendment suggests that the Treasury should become the regulator, and may be probing in that respect—indeed, I am sure it is. However, I believe that the model of independent expert regulation by the FCA is the right one. That said, it is of course in all our interests that any regulation is proportionate, consistent and clear. As my noble friend knows well, the Government are supportive of social investment and very keen to ensure that regulation is proportionate for the charities and social enterprises involved and, crucially, for the consumers who want to invest in these products. Indeed, very valuable changes were made to the remit of the FCA in 2012 to give it duties to have regard to the desirability of sustainable economic growth and to the differing needs of different types of organisations it regulates, including those of charities and social enterprises. None the less, I am aware of the ongoing concerns about regulatory approaches to retail social investment, and the Government are committed to doing anything they can to remove any unnecessary burdens, while of course not eroding consumer protection or the integrity of the financial system.

As my noble friend said, following Committee, I met my honourable friends the Economic Secretary to the Treasury and the Minister for Civil Society to discuss the issues around financial promotions and social investments that were raised by my noble friend Lord Hodgson in Grand Committee and supported by a number of other noble Lords. We agreed that the model of independent expert regulation by the FCA is the right one and that consumer protection must be paramount. It is therefore important to ensure that the current regime supports social investment rather than looking to shift responsibility to the Treasury. We also agreed that the Treasury and the Cabinet Office will write jointly to the FCA to consider regulatory approaches to how members of the public make social investments, with a specific focus on the financial promotion rules.

As I mentioned in Committee, the Government and the FCA have been working with the sector to consider evidence about the effectiveness of the regime, and this work will continue. The important issues raised in these debates will of course be considered as part of these discussions with industry and the FCA. I believe we are making progress and, as I said, my honourable friend the Economic Secretary to the Treasury will be writing to my noble friend, as well as the other noble Lords who raised this important issue, to update them on progress. In the light of this, I hope my noble friend will think that a bus may have at last arrived and will understand that work is ongoing in this area. On that basis, I invite him to withdraw his amendment.

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[Lord Hodgson of Astley Abbotts]

My Lords, I am going for a third major prize now. I have retabled this amendment, which proposes a wholesale redrafting of Schedule 6 to the 2011 Act.

As I said before, this may sound a rather technical matter but, as I explained in Committee, it has a very important purpose: to improve access to justice for charities, especially smaller ones. The last Labour Government set up the Charity Tribunal in the 2006 Act, which was a very good development. Prior to that, only the High Court could provide a means of redress for small charities, which was expensive and slow. Charities, especially smaller charities, had no option but to submit to the directions and decisions of the Charity Commission. However, what was a good idea and gave with one hand took away with another. Schedule 6 is 10 pages long and complex in that it says what can be appealed against, who can bring the appeal and what the remedy is. It is difficult for charities and many charities’ lawyers to understand. The evidence to my review was that the sector found it complex and difficult to follow. My amendment is designed to sweep these complexities away.

In response to the amendment in Committee, my noble friend said:

“I am not sure that everyone shares my noble friend Lord Hodgson’s viewpoint on the difficulty of interpreting Schedule 6 to the Charities Act 2011. There are some who are attracted to the structure of Schedule 6 and find it easy to navigate. It allows one to look up a particular provision and quickly see who can appeal and what decisions are available to the tribunal. It is not something that has been raised with the Government as causing particular difficulty, other than by my noble friend”.—[Official Report, 6/7/15; col. GC 17.]

That stung me into action, and I decided that I was going to find out all about it. I have done some more research and discovered three things. First, there is a widely supported view that Schedule 6 is too complex and difficult to navigate. That supports my case for reform. Secondly, my amendment is too widely drafted as regards standing—that is, who may make an appeal. By way of example, many of the appeals that have been lodged to date in the tribunal in relation to schemes have been brought not by the charity trustees who had sought the proposed scheme themselves but by third parties objecting to the scheme, such as local residents objecting to a scheme in relation to parkland or parents at a school objecting to a scheme for the school. There have also been some politically motivated complaints. As a result, I have to accept the weakness of my amendment as drafted. Finally, and most importantly, my research revealed that my noble friend already has some powers to improve the operation of Schedule 6 without resort to primary legislation. Under Section 324 of the 2011 Act, entitled, “Power to amend provisions relating to appeals and applications to Tribunal”, my noble friend can act to improve the way the schedule operates.

If I accept that my amendment cannot do the business as presently drafted, all I am asking my noble friend to do tonight is to accept that there is a consensus among charity lawyers that Schedule 6 is absurdly complicated and not consistent in its principles and application and to say that he will initiate a review of the operation of Schedule 6 with the objectives of obtaining: first, a clear, generally applicable definition of a decision, including a non-decision; secondly, a clear principle of locus standi, which could and should include limitations based on remoteness from the decision’s effect; thirdly, recognition that the tribunal was intended to provide a straightforward basis of objective appeal against a regulator making decisions of direct impact, which justifies something beyond the judicial review principle; and fourthly, a logical staging through the Charity Commission’s internal review process to the tribunal as a next level. He can then use his Section 324 powers to introduce whatever interim improvements are possible until the next bus comes along to enable statutory improvements to be made.

It is easy to pass this off as a very technical matter, but access to justice is a very important principle and this undertaking to have a review would lead to improvements to that access for the charity sector. I beg to move.

[Lord Bridges of Headley]

My Lords, my noble friend Lord Hodgson has fought the corner of rationalising Charity Tribunal appeal rights for many years. Every time he gets knocked down, he gets straight back up and continues to fight from the blue corner. I applaud his persistence.

In principle, the Government have maintained a consistent position that they are not averse to rationalising the rights of appeal and review to the Charity Tribunal set out in Schedule 6, as my noble friend pointed out, but—it is an important “but”—we would not want to create new appeal rights where none currently exists that would add to the tribunal’s caseload. Neither would we want to expose the Charity Commission to challenge where it decides not to take action and where an appeal right does not currently exist. Creating rights of appeal where the Charity Commission decides not to take action could well result in an unmanageable workload of cases for the Charity Commission, diverting its resources. It would also effectively enable the tribunal to direct the use of the commission’s powers and resources. As I said before, we consider that the balance is about right under Schedule 6 as it stands in terms of what decisions can be appealed.

In terms of who can appeal, my noble friend Lord Hodgson made some fair points about legal standing to bring an appeal. For many appeal rights, the legal standing in relation to the Charity Tribunal is widely drawn, encompassing,

“any other person who is or may be affected by the decision”.

That is very wide compared to most other jurisdictions. However, it recognises that charities exist for the public benefit and that the regulator’s decisions about a charity can have a significant impact on people who would not normally be able to bring an appeal. I accept my noble friend’s point that some people find Schedule 6 clunky and difficult to use, but I am not sure how it could be condensed into a simple provision without inadvertently making the sorts of changes that we want to avoid.

The Government have agreed with many of my noble friend Lord Hodgson’s recommendations over the years. We find that he is usually right. I am sorry to say that this is a rare case where we will have to part company and agree to disagree on some of his points. I hope my noble friend will not be too disappointed to learn that I will not commit to any amendments on this subject. I am happy to reflect on the points that he raised—they were detailed points and I will not simply wave them away right now—and will listen if he thinks we can make improvements to Schedule 6 through the power to do so in secondary legislation. Again, I should be clear that I make no promises. As I already said, we do not want to introduce new appeal rights. I thank my noble friend for all he continues to contribute to this debate. While I cannot agree to his amendment, I very much hope that we can continue to have conversations about this matter.

[Lord Hodgson of Astley Abbotts]

I am grateful to my noble friend for his extensive response and kind remarks. I understand that my amendment is faulty. I have no wish to press it to a Division. That would be entirely wrong as it does not work. I just hope that at some point we can look at how Schedule 6 works and see whether there are ways that it can be made clearer, and if that can be done by secondary legislation. It would be wonderful if we could do that. If we have to come back to consider it another day then so be it. For tonight, I seek leave to withdraw the amendment.

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[Lord Watson of Invergowrie]

My Lords, I am in the surprising and mildly embarrassing position of having to say to the Minister that I am glad that he did not take me at my word when we dealt with reviews in Committee. I have studied the Hansard and, under what was then Amendment 29, I sought the first review to be completed within three years. However, I am quoted—so I believe that I would have said it—as saying that,

“it would be in charities’ best interests to initiate the review after three years”.—[Official Report, 6/7/15; col. GC 36.]

The Minister has now come along with an amendment that says that the first review must begin “within 3 years”. I certainly welcome that. I was looking for a completion in three years, but I took on board the Minister’s comments in Committee when he said that the system would have to get up and running and the commissioner would need to take people on and put them in the proper positions, with all the various arrangements that have to be put in place, such as internal guidance. On that basis, he has made a very reasonable offer. In terms of what I actually intended, he has come halfway towards meeting me. Where I come from, that is called a score draw—and, on this occasion, I am prepared to settle for that.

I would be supportive of the amendment in the name of the noble Baroness, Lady Barker, because it adds an important issue that we should take into consideration, after all that was said about social investment earlier.

[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.

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Moved by

[Lord Bridges of Headley]

35: Clause 14, page 18, line 23, leave out from “apart” to end of line 24 and insert—
“( ) The first review must begin within 3 years after this Act is passed, and the report of that review must be published within 4 years after this Act is passed.”

Charities (Protection and Social Investment) Bill [HL]

Lord Bridges of Headley Excerpts

Monday 20th July 2015 Lords Chamber

Moved by

[Lord Bridges of Headley]

1: Clause 3, page 2, line 42, leave out “or privy to”

[The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)]

My Lords, before I address this amendment, I thank all those who have debated, scrutinised and kicked the tyres, so to speak, of this Bill, not just in Committee but also during its pre-legislative scrutiny. Although I know there may be points on which some of us may differ, the Bill before your Lordships today has greatly benefited from the wisdom, experience and insight that a number of your Lordships, sitting on all Benches, have brought to the debate. The fact that we have managed to agree on so much reflects the overwhelming wish of this House to ensure that charities continue to have the trust and confidence of the general public.

This group of amendments is focused on providing greater clarity in the Bill, and more modern language. The noble and learned Lord, Lord Hope of Craighead, who has been involved in this Bill since its publication in draft last year, raised these points in Committee.

These amendments address the old-fashioned language of “privy to”, replacing it with a much clearer form of words while maintaining the threshold for intervention at the same level. Being “privy to” something can comprise more than mere knowledge, and includes an element of concurrence, or agreement, as well. We believe that the new formulation captures that.

There are two elements to the new wording: first, that the person,

“knew of the misconduct or mismanagement”;

and, secondly, that they,

“failed to take any reasonable step to oppose it”.

We believe that, together, both elements equate as closely as possible to “privy to” but are much clearer for the lay reader of the legislation. The amendments replace “privy to” throughout the Bill and the Charities Act 2011, except in one place in the Charities Act 2011, in Section 71. Here the context is quite different and privity does not appear to refer to anything more than just knowledge.

I apologise for the late tabling of Amendments 13A, 13B and 13C. I confess that there was an oversight on our part but we decided to table them late because without them we would have left “privy to” in one part of the Bill while addressing it in all others.

These amendments, while relatively minor changes, will improve the clarity of the Bill and make the law more understandable for the lay reader. I beg to move.

[Lord Hope of Craighead (CB)]

I am very grateful to the Minister and those who have been advising him for this group of amendments. As the Minister pointed out, it achieves much greater clarity than the rather old-fashioned word “privy”—being used as an adjective—did. It has been replaced by two very important verbs. The value of the clarity is that there are two sides to each of these clauses that one has to consider: the person who is being suspected of having engaged in the prohibited activity; and the commission itself, which has to police the activities of the person. Clarity is needed on both sides and the way in which the clauses have been reworded achieves that.

I congratulate the Minister on finding a better form of words than I think I was able to do—or indeed the Joint Committee was able to do when it was looking at the matter. The formula is much improved. I think I must bear some responsibility for not having searched through the whole Bill and traced all the various places in which “privy” was being used. I think we have now reached finality on that issue and for that, too, I am extremely grateful.

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Moved by

[Lord Bridges of Headley]

2: Clause 3, page 2, line 43, after “mismanagement,” insert—
“( ) that a particular person knew of the misconduct or mismanagement and failed to take any reasonable step to oppose it,”

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Moved by

[Lord Bridges of Headley]

3: Clause 4, page 3, line 31, leave out “or privy to”

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Moved by

[Lord Bridges of Headley]

5: Clause 8, page 6, line 41, leave out “In”

[Lord Bridges of Headley]

My Lords, this second group of amendments also responds to a point raised by the noble and learned Lord, Lord Hope of Craighead, and I am grateful to him for bringing this to our attention as well.

Amendments 5 and 6 relate to Clause 8, which amends the Charity Commission’s power in Section 85 of the Charities Act 2011 to direct the application of charity property where the person holding it is unwilling to apply the property. The purpose of Clause 8 is to enable the commission to make an effective direction in cases where the person holding the charity property may be willing but is unable to apply it. The most common example of this problem was considered to be where financial institutions hold a charity’s property but are unable to comply with a commission direction to transfer that property because to do so would result in a breach of their contract with the charity.

I am conscious that we have gone back and forth on this issue. Our initial drafting sought to remove any obstacles by allowing the commission’s direction to overcome a contractual obligation owed to the charity. Importantly, Clause 8 continues to provide the specific statutory protection for a financial institution in cases where compliance with a Charity Commission direction in these circumstances might constitute a breach of its contract with a charity.

However, we have been made aware that there are other barriers that may make a person unable to comply with a commission direction of this type; for example, a person may be willing in principle to apply a property properly but lack the power to do so. Therefore, our new formulation in Amendment 6 clearly amends Clause 8 to reintroduce “unable” so that it is clear that the commission’s power to direct the application of charity property can be exercised where the person holding the property is either unwilling or unable to transfer it.

Again, this is a relatively modest amendment but it will, I believe, improve the effectiveness and practicality of this provision. I beg to move.

[Lord Hope of Craighead]

My Lords, here again I express my gratitude to the Minister for bringing this amendment forward. He has explained very precisely the value which can be seen in the introduction of the additional word. I know from communications with the Charity Commission that it is delighted that this amendment is being made. As I endeavoured to explain in Committee, the wording in the Bill when it was introduced left it with a problem, which has now been solved. On behalf of the commission, I am extremely grateful.

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Moved by

[Lord Bridges of Headley]

6: Clause 8, page 6, line 42, after “unwilling)” insert “is amended as follows.
(00)”) In subsection (1)(a), after “unwilling” insert “or unable”.
(00)”) ”

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[Lord Bridges of Headley]

My Lords, at the start of the debate, I said that I was delighted at the level of cross-party agreement on so much of this Bill. However, this is clearly one of the very few clauses and amendments on which we differ. I have obviously listened to the speeches that have been made this afternoon and read the debates with other points that have been raised by a number of noble Lords in recent weeks. Clearly, a number of noble Lords feel extremely strongly on this issue. We have heard passionate speeches from the noble Lords, Lord Kerslake, Lord Palmer and Lord Campbell-Savours, to name just three.

While I may disagree with some—and in some cases a little more than some—of what has been said, I obviously respect the arguments that have been made. As has been said by a number of noble Lords, I know that my right honourable friend the Secretary of State for Communities and Local Government will read this debate with not just interest but great care.

Noble Lords will be pleased to hear that I will not bombard them with statistics or facts to try to underpin the rationale behind the Government’s policy for right to buy—for which, as noble Lords all know, the Government secured a mandate at the general election. Neither, at the risk of aggravating and frustrating noble Lords still further, will I get into the detail of how that policy will work. I regret that I cannot do so and I will not insult noble Lords’ intelligence by trying to pretend that the right-to-buy policy has nothing to do with the charities sector—of course it does. But I ask noble Lords to consider the point has been made by a number of previous speakers—surely the time and place to debate the right-to-buy policy will be when the Housing Bill is before Parliament and the details of that policy are before this House.

Furthermore, many of us agree that although the Bill touches on the issue of other areas of law such as the financing of terrorist organisations, we should not in that case attempt to review counterterrorism legislation in the Bill. So, too, here and now is not the time to debate and decide on housing policy and how it interacts with the charities sector. Furthermore, I know that my noble friend Lady Williams of Trafford has an open door to any noble Lord who may wish to discuss this with her in the weeks and months ahead.

On the actual amendment, I beg to differ with the noble Baroness, Lady Hayter. It does not simply state the existing legal position. I will explain why. The law governing charitable assets is rooted in case law. As I am sure many noble Lords will agree, a real difficulty with creating a simple statutory provision for a large area of case law is that it will invariably fail to cover the many complexities that often arise, and it will be exceptionally difficult to find a satisfactory expression that would properly cover the explanation and nuanced analysis that is often afforded in judgments in case law. Moreover, there is a real danger of agreeing to a statutory provision that could give rise to unintended consequences.

The wording in the amendment that charities may not,

“use or dispose of their assets”,

will cover property assets other than land, such as investments. This raises a whole separate issue with the duties that apply to a charity’s assets that are not land.

Furthermore, Charity Commission guidance on the disposal of land makes clear that such disposal must be in the best interests of the charity and in furtherance of the charitable purposes, or for the best price available, rather than be consistent with charitable purposes. These concepts have very different meanings, the latter being much wider in its potential application. Giving the Charity Commission a new and enhanced role in policing the disposal of charity assets is inconsistent with the current aim of helping the commission to focus on its core regulatory responsibilities. Requiring it to ensure that charities are not required to dispose of assets would be more than just an unwelcome distraction for the regulator.

As I mentioned in Committee, there is also the preserved right to buy in relation to housing associations, and the right to acquire. These existing rights could be undermined by this amendment.

I hope that noble Lords will see that the amendment proposed is problematic for a number of reasons. That being said, I repeat: I recognise that there are significant concerns about how the proposed policy to extend right to buy will be applied to charitable housing associations, but I would respectfully reiterate to your Lordships that the time and the place for that debate is the housing Bill. Finally, although we clearly disagree on this issue, I should like to repeat my thanks to the noble Baroness, Lady Hayter, for her co-operation on and contribution to many aspects of the Bill. I hope that, on reflection on this point, she will decide not to press the amendment.

[Baroness Hayter of Kentish Town]

My Lords, I thank the Minister for that and I thank all speakers who, on the substance, it seems to me, agreed with what we are trying to achieve. The difficulties are over whether this is the right Bill or the right wording, which basically says that the Charity Commission must make sure that,

“independent charities are not compelled to use or dispose of their assets in a way which is inconsistent with their charitable purposes”.

If the wording can be better than that—if it should be something such as the “best interests” of charities, as the Minister says—I will be very content, if the amendment is passed, to work with him at Third Reading to make the wording correct and acceptable to the Charity Commission and to the charity lawyers, who know far more about wording than I do.

On the issue, there are two things that I want to say. The first comes from what the noble Baroness, Lady Barker, said. This is a Bill about the protection of charities, and we are trying to protect charitable assets so that the money can be used for what the donors wanted when they bequeathed it. The idea of putting it on to the Charity Commission is that, basically, somebody has to protect charities from being compelled by someone else—not by their charitable trustees—to do something with the money that those who gave it did not intend.

The noble and learned Lord, Lord Mackay, asked about compulsory purchase for a road. In a sense it is always the public sector that does that; it is nationalisation. The land is taken over so that a road can be built. I said in a meeting with the Minister that it was not normally his party that wanted to nationalise things, so I am interested that over charitable housing that is what the Government want. We are talking about a swathe of housing—not one or two in the way of a new train line—that over time will undoubtedly be held by the private sector.

My second issue is that we are not talking just about housing—albeit that we have heard about the Peabody, Keswick and Sutton housing associations. We are also talking about that wider big society. I used to work in alcohol misuse issues; we ran a lot of social care. It could be our assets, under another Bill, where the Government felt that they wanted to use them in a certain way that we as an independent charity, which had raised the money, did not want to do. We have heard about the National Trust—or indeed, it could be hospitals or hospices.

The issue is not just about housing, which is why it is not appropriate to leave it to a housing Bill. We want to state something very simply: where money has been donated to an independent charity for a particular purpose, the trustees must abide by their trustee duty to make sure that the assets are used there. That is something on which this House would like to take a view.

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Moved by

[Lord Bridges of Headley]

8: Clause 9, page 7, line 10, after “D” insert—
“(a) ”

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Moved by

[Lord Bridges of Headley]

10: Clause 9, page 7, line 26, at end insert—
“Case KP is subject to the notification requirements of Part 2 of the Sexual Offences Act 2003.”

[Lord Bridges of Headley]

My Lords, I rise to move this amendment, which is also in the names of the noble Baroness, Lady Hayter, and the noble Lord, Lord Watson of Invergowrie.

Despite what has just happened, I must start by paying tribute to the noble Baroness, Lady Hayter, for her pursuit of this cause. The very first time I met the noble Baroness, just minutes after my introduction, she highlighted this flaw in the Bill, with great charm but with her characteristic force of conviction. As I have said before, I am in complete agreement with her and other noble Lords in wanting to protect children and vulnerable adults from the risk of abuse in charities.

In Committee, the noble Baroness presented a compelling case for automatic disqualification to extend to sex offenders. I am pleased, therefore, to respond with Amendment 10, which will do just that. I was delighted that the noble Baroness, Lady Hayter, and the noble Lord, Lord Watson of Invergowrie, put their names to this amendment. I think it goes to show the breadth of support for this measure. I just hope that the noble Baroness will not reprimand me for stealing her thunder.

Amendment 10 adds a new case, case K, to the criteria that give rise to automatic disqualification from charity trusteeship and senior management positions. Case K is a person who is subject to the notification requirements in Part 2 of the Sexual Offences Act 2003, often referred to as being on the sex offender register. Such a person is considered to require monitoring in order to manage the risk of sexual harm they may pose to the public. Our policy rationale is that they are unfit to be in a position of trust, controlling funds held and activities carried out for the public benefit, and should be disqualified from being a charity trustee or being in a senior management role within a charity unless and until they are no longer subject to notification requirements or are granted a waiver from the disqualification by the Charity Commission; for instance, the commission might consider it appropriate to grant a waiver to enable someone to take up a position in a charity that works with ex-offenders.

The unfitness results not just from the fact that it would damage public trust and confidence in charities if someone in that position were able to serve as a trustee or in a senior management role but because people in such roles may well have privileged access to children or vulnerable people, even if the charity is not routinely working with such groups; in other words, its trustees and employees would not necessarily be subject to Disclosure and Barring Service checks. The noble Baroness, Lady Hayter, gave a good example in Committee of a charity which provides a community hall that is used by Girl Guides or for children’s parties.

As I said in Committee, automatic disqualification of sex offenders does not in any way mean that charities can lower their guard. Charities must still have in place robust policies and procedures to safeguard their beneficiaries, and where charities are undertaking regulated activity they will still need to obtain Disclosure and Barring Service checks. But the amendment will, I am sure, result in greater protection of children and vulnerable adults from risk of abuse in charities. Given the number of historic cases that have come to light across all sectors of society, anything that reduces that risk is to be welcomed. I thank the noble Baroness and the noble Lord for their support, and I commend the amendment to the House.

[Baroness Hayter of Kentish Town]

My Lords, I have only two things to say: thank you and sorry. The Minister had only just taken off his red gown after being introduced when I got at him about this, and that does need an apology. I also want to thank him for engaging with us on this, for having got exactly the right amendment and for describing it far better than I could. I also think it shows the value of your Lordships’ House that, on an issue such as this that does not divide us politically, we have the same aims of protecting young people and we are able to work together to move this forward. My noble friend and I are very happy to support this amendment.

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Moved by

[Lord Bridges of Headley]

11: Clause 10, page 11, line 4, leave out “either”

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Moved by

[Lord Bridges of Headley]

14: After Clause 12, insert the following new Clause—
“Fund-raising
(1) Section 59 of the Charities Act 1992 (prohibition on certain fund-raising without agreement in prescribed form) is amended as follows.
(2) In subsection (6) for “such requirements” substitute “the requirement in subsection (7) and such other requirements (including any requirements supplementing subsections (7) and (8))”.
(3) After that subsection insert—
“(7) The requirement in this subsection is that the agreement must specify all of the following—
(a) any voluntary scheme for regulating fund-raising, or any voluntary standard of fund-raising, that the professional fund-raiser or commercial participator undertakes to be bound by for the purposes of the agreement; (b) how the professional fund-raiser or commercial participator is to protect vulnerable people and other members of the public from behaviour within subsection (8) in the course of, or in connection with, the activities to which the agreement relates;(c) arrangements enabling the charitable institution to monitor compliance with subsection (1) or (2) by reference to the agreement.(8) The behaviour mentioned in subsection (7)(b) is—
(a) unreasonable intrusion on a person’s privacy;(b) unreasonably persistent approaches for the purpose of soliciting or otherwise procuring money or other property;(c) placing undue pressure on a person to give money or other property.”(4) In the Charities Act 2011, after section 162 insert—
“162A Annual reports: fund-raising standards information
(1) If section 144(2) applies to a financial year of a charity, the annual report in respect of that year must include a statement of each of the following for that year—
(a) the approach taken by the charity to activities by the charity or by any person on behalf of the charity for the purpose of fund-raising, and in particular whether a professional fund-raiser or commercial participator carried on any of those activities;(b) whether the charity or any person acting on behalf of the charity was subject to an undertaking to be bound by any voluntary scheme for regulating fund-raising, or any voluntary standard of fund-raising, in respect of activities on behalf of the charity, and, if so, what scheme or standard;(c) any failure to comply with a scheme or standard mentioned under paragraph (b);(d) whether the charity monitored activities carried on by any person on behalf of the charity for the purpose of fund-raising, and, if so, how it did so;(e) 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 fund-raising;(f) what the charity has done to protect vulnerable people and other members of the public from behaviour within subsection (2) in the course of, or in connection with, such activities.(2) The behaviour within this subsection is—
(a) unreasonable intrusion on a person’s privacy;(b) unreasonably persistent approaches for the purpose of soliciting or otherwise procuring money or other property on behalf of the charity;(c) placing undue pressure on a person to give money or other property.(3) In this section—
(a) “commercial participator” and “professional fund-raiser” have the meaning given by section 58 of the Charities Act 1992 (control of fund-raising: interpretation);(b) “fund-raising” means soliciting or otherwise procuring money or other property for charitable purposes.(4) Section 58(6) and (7) of the Charities Act 1992 (references to soliciting money etc) apply for the purposes of this section as they apply for the purposes of Part 2 of that Act.””

[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”.

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[Baroness Hayter of Kentish Town]

My Lords, before I turn to the wording of this amendment, I say that in Committee the noble Baroness, Lady Barker, had to hear about the horrendous experience that Barclays Bank had just put my uncle though; he has Alzheimer’s. In response to her comments, I have today tabled a Question for Short Debate about how banks deal with vulnerable clients, so perhaps we can move together on that.

Unfortunately, other than on that, I take a different view on the amendments the Government have tabled. I thank the Minister for bringing forward these amendments. They are significant, and we warmly welcome them and the work set in hand with the committee he mentioned, whose recommendations we anticipate the second week in September. Looking round at the members, they will keep to that deadline, I am sure.

I, too, pay tribute to the Cooke family, who had to go through the inquest just last week, but who have been willing to share Olive Cooke’s experience of being bombarded with requests for charitable donations. I also join the Minister in congratulating the Daily Mail—coming from me, it may not like that—on its investigation and campaigning which revealed unacceptable practices, shortfalls in monitoring by the charities themselves and, as the Minister said, the weakness of the current self-regulation model.

It is perhaps odd that we have a regulator which does not regulate one vital bit of charitable activity, which is fundraising. This lies in the hands of a voluntary organisation, the Fundraising Standards Board, which works to a code adopted by the Institute of Fundraising. Three years ago, the noble Lord, Lord Hodgson, gave it five years to get more into line, and it has not yet done so. The Fundraising Standards Board and the Institute of Fundraising have not done their work particularly well. Interestingly, the code does not outlaw nor even limit cold calling, or even require caller line identification. The Fundraising Standards Board, in addition to signing up only two-thirds of those who ought to belong, does not publicise itself, so no one knows to take complaints there, and it does not monitor compliance, or it would not have to have been Mrs Cooke’s family or the Daily Mail that did that job. Even when it threw out a professional fundraising company, it seems to have taken it back in under another name.

That all lets down the charity sector and the enormous generosity of Britain’s charitable donors. I also believe, as noble Lords will understand from our amendment, that it questions whether self-regulation can work in this sector. Hence our Amendment 16, which would require charities and professional fundraisers to belong to the standards board. We recognise that that would have enormous consequences should they be removed from membership for misbehaviour. The NSPCC, one of the charities let down by the professional fundraisers, itself favours compulsory membership of the Fundraising Standards Board as, in its words, the current self-regulation system is too weak. We also think that it is time that the Charity Commission’s reserve powers were brought into play. I am reassured by the Minister’s words that that can be done fairly quickly if the Minister feels it is necessary. So for the moment we want to put our amendment on hold, as we warmly welcome the Government’s own amendments and we await Sir Stuart Etherington’s report.

Government Amendment 14 achieves a number of things. First, and I hope the family can take the benefit from this, it can indeed be seen as Olive’s law; it will mean that something will be on the statute book as a consequence of her experience. Secondly, it puts into the Bill the essence of a code, describing as unacceptable:

“unreasonable intrusion on a person’s privacy … unreasonably persistent approaches for the purpose of soliciting or otherwise procuring money … placing undue pressure on a person to give money”.

As the noble Baroness, Lady Barker, intimates, the Charity Commission may well have to flesh that out a bit, but having that in the Bill is excellent. It makes it clear that such behaviour is unacceptable with regard to vulnerable people but also, in the Government’s words, to the wider public. We particularly welcome that; it is important. Oxfam’s submission to us, for example, concentrates very much on the vulnerable, especially those with Alzheimer’s. However, we believe that all unethical methods need to be stamped out, regardless of the target, so we welcome the Government’s wording on that.

Thirdly, the Government’s amendment will force large charities to state whether they are members of the FRSB. We hope, along with the Government, that that will shame non-members and their trustees because the trustees have to sign off in their annual reports their approach to fundraising and any complaints received. Boards of trustees will no longer be able to be grateful for the income without asking too many questions, as the Minister said. Importantly, the Government have set up what we think is a pretty powerful group—I am looking around at its members in the Chamber today—and we look forward to it reporting back before Third Reading about whether Amendment 14 will indeed do the trick. We welcome the group, as do the NSPCC and Oxfam, which has also suspended its contract with commercial fundraisers, and we look forward to its recommendations.

Should the group suggest that further amendments are needed, we will be happy to work with the Government to facilitate this. We might therefore want to pursue our amendment or some other at Third Reading, depending on what the Government’s review group advises and the Government’s own response to that. We have yet to be persuaded that membership of the FRSB should not be mandatory, or that the Charity Commission’s reserve powers should not be brought into force. However, we are reassured by the Minister’s words on this.

For the moment, I thank the Minister, and indeed his colleague in the Commons, who found time to meet us to discuss this, and for coming forward with such a good amendment. We will be very happy to support it when it is put to the vote shortly.

[Lord Bridges of Headley]

My Lords, I thank the noble Baronesses, Lady Barker and Lady Hayter, for their words. As with many other issues that we have discussed and will discuss, this is clearly one where we have clear agreement on both the changes that are necessary and the change that we want to bring about. I stress that the amendments we are looking at today represent a start of measures that are targeted at where we know the real problems have arisen: in fundraising agencies and where charity trustees have failed to ensure proper oversight of their charity’s fundraising practices. As the noble Baroness, Lady Hayter, just said, the review that Sir Stuart is conducting is now under way. If further legislation is needed, we will be able to consider that when the Bill goes to the other place. My honourable friend the Minister for Civil Society, Rob Wilson, has said that he will be happy to discuss the findings and recommendations on a cross-party basis; we will be happy to take that further.

As usual the noble Baroness, Lady Barker, made some forensic points on these clauses. I will attempt to answer them now, but if I fail to address them, I will be happy to pick them up with her after we have finished proceedings today. She asked who decides on the definition of “unreasonable”. In the first instance, the charity itself decides in setting the terms of its fundraising agreement, but ultimately the Charity Commission can intervene, using its existing powers, if the charity is not doing enough. That said—and this is an important point—the Charity Commission has already committed to updating its fundraising guidance later this year and will take these new requirements into account when it does so.

The second good question the noble Baroness asked was: what are the sanctions where charities are deficient? Here, it would be for the charity commission to decide where the charity fails to meet its obligations. The third question was: how will a member of the public know what to do if they feel that the charity is not meeting these new requirements? That is an extremely good point, and I can see that Sir Stuart’s review is absolutely key. We need to ensure that we focus on this issue from the point of view not just of the charity but of the public as well. Finally, as regards the number of complaints, that is another good point that we need to return to with Sir Stuart and in guidance, and I will make sure that is reflected by the Charity Commission.

To conclude, these amendments, coupled with the review being undertaken by Sir Stuart Etherington, give us a real opportunity to restore public trust and confidence in charity fundraising where, in the last few weeks, it has been found wanting.

Amendment 14 agreed.

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The UN Secretary-General is now recommending that this autumn the General Assembly should agree to him pursuing requests for specific information made available by the panel to certain member states and urging all member states to declassify any relevant documents, having regard to the fact that it is now more than 50 years since the event. This is not referred to in the Minister’s letter dated 13 July. However, will he comment on it and will Her Majesty’s Government now co-operate fully with the United Nations in its further investigations?

[Lord Bridges of Headley]

My Lords, I understand that the noble Lord, Lord Lea, was obviously frustrated by the approach of the Charity Commission when he tried to register the Dag Hammarskjöld trust, and that his impression of the commission has been informed by and reflects that particular case. I must say that waiting several months for a response to a letter does not seem to be good customer service and I, too, would have been extremely frustrated.

For most charities with standard charitable purposes, the process for registration with the Charity Commission is quick and straightforward. In 2014-15, the commission registered over 4,600 charities. For organisations with purposes that are innovative or do not fall within previously recognised charitable purposes, the process of registration can indeed take longer. The law does not recognise wholly novel charitable purposes, but purposes can still be charitable if they are analogous to or within the spirit of charitable purposes specifically identified in the 2011 Act or if they were charitable purposes recognised by the common law before 1 April 2008. Where people want to register as a charity an organisation which has purposes that may not fall clearly within established categories of charitable purposes, the commission must proceed with caution in assessing whether the organisation really has been established for purposes that are charitable in law.

I turn to the specific issue of the Dag Hammarskjöld trust. I do not know all and every detail of the case and it is right that I should not, as the commission is operationally independent. However, as the noble Lord, Lord Lea, said, I have written to him responding to some of the specific questions he raised in Committee about what the Government knew about the case. I apologise to the noble Lord, but I cannot at this Dispatch Box add to the detail that was in the letter sent to him. I regret that, but I absolutely cannot—it is a very detailed case.

On his amendment—which is really what we are debating—the Charity Commission already reports its performance against principles of best regulatory practice, usually framed in terms of proportionality. It does this in its annual report, in its annual Tackling Abuse and Mismanagement report and in stand-alone case reports. I hope your Lordships will forgive me for not repeating the detailed ways in which it does all this as I set it out in Committee at length. This amendment, by highlighting one particular aspect of Section 16, casts doubt on the extent to which the commission should report on other aspects of its general duties. It is, in that respect, undesirable.

Finally, I hope the noble Lord, Lord Lea, will reconsider the offer from the Charity Commission’s chairman to meet him and discuss this case. I fear that I have not been able to reassure the noble Lord that his amendment is not necessary—although I hope that I have done so. I assure him that his difficulty in trying to register the Dag Hammarskjöld trust was not representative of the norm.

[Lord Lea of Crondall]

My Lords, I thank the Minister for that reply. On the first point, he clearly does not feel that there is anything amiss with the accountability of the Charity Commission. I think he is hiding behind the phrase “operational matter”. When a matter of this importance is put before the House, and with the detail that I have presented, is it not incumbent on the Cabinet Office or the Minister and his officials to look further into it? In other circumstances or areas, one could call it a miscarriage of justice.

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

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

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[Lord Judd (Lab)]

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

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

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

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

[Lord Bridges of Headley]

My Lords, I have no difficulty at all in accepting the premise of the amendment—and much that the noble Baroness, Lady Hayter, said—which states that charities should be free to campaign where that is an effective means of furthering their charitable aims. Speaking up for their beneficiaries, who may have no voice in the democratic debate, stands long in the tradition of the charitable sector. Yes, it may be uncomfortable for some to hear the hard truths that they are told, but that is democracy at work and freedom of speech in action.

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

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

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

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

This Government welcome and support the campaigning role of charities, properly regulated and properly understood, and acknowledge the benefit that that brings to wider society. I hope that on that basis, and given what I have said to reassure the noble Baroness, she will feel able to withdraw her amendment.

[Lord Lea of Crondall]

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

--- Later in debate ---

[Lord Bridges of Headley]

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

[Baroness Hayter of Kentish Town]

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

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

Constitutional Convention Bill [HL]

Lord Bridges of Headley Excerpts

Friday 17th July 2015 Lords Chamber

[The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)]

My Lords, I congratulate the noble Lord, Lord Purvis of Tweed, not merely on securing this debate on his Bill but also on his considerable and thoughtful contribution to the debates on our constitution over a number of years. In preparation for this debate, I have read a number of his great works on devo-plus. I also read a very interesting lecture given some years back by the noble Lord, Lord Kerr, at the British Library. I see in the questions and answers at the end that he said,

“perhaps I should put on record that, if anybody is thinking of having a Constitutional Convention to write a UK Constitution, I am 100 per cent sure that I don’t want the job”.

I am sure that the noble Lord, Lord Purvis, will take note of that. I thank all those who have spoken in this extremely interesting debate for their thoughtful contributions.

While we may have our differences about the Bill and the matter under discussion today, I hope the debate shows that on all Benches there is a strong wish to ensure that while our constitution will continue to evolve, it does so in a way that safeguards its stability and fairness, the unity of the nation and the sovereignty of Parliament. It is clear that we all agree on the importance of getting constitutional change right. The issue that we are debating today, and which is the Bill in front of us, is not our intent or goal; rather, it is about how we achieve that aim and, specifically, whether a constitutional convention of the kind proposed by the noble Lord, Lord Purvis, would help as things stand today. Furthermore, while I disagree with some of what has been said by some noble Lords, obviously I respect the arguments and applaud the passion with which they are made, especially by the noble Lords, Lord Maclennan and Lord Soley. I assure the noble Lord, Lord Soley, that in no way would I wish to suggest that the Government are in any shape or form complacent about these matters.

Before I talk about the Bill itself, I should like to take a step back. I believe that the British constitution has proved to be one of the most successful and enduring political structures thanks to its flexibility, its sensitivity and its almost infinite capacity to evolve. That adaptation takes place in response to the ever-changing nature of our society, our economy and the world. The shape of our constitution evolves in parallel with the needs and expectations of the nation and all its constituent parts. I respectfully suggest that a convention established as a static entity with restricted membership, defined terms of reference, limited time and specific recommendations might well fit unnaturally in that context.

Here I agree with the noble Baroness, Lady Suttie, that we do not have a revolutionary approach to constitutional change. Lord Hailsham added to the twin pillars of the constitution identified by Dicey—those of parliamentary sovereignty and the rule of law—a third that he described as,

“derived from its essentially flexible and evolving nature”.

He went on:

“This is our inveterate and, to my mind, highly desirable habit of being governed as much by convention as by the strict letter of the law. That is what makes the importation of foreign conceptions, American or continental, or otherwise alien constitutional language or thinking, into our constitutional debates so questionable. All may be admirable in themselves. But all are foreign to our way of doing things. Both may be admirable fruits, but you cannot graft a pear on a peach”.

I suggest that a constitutional convention of the kind suggested today would be just such a pear and would not graft naturally on to our constitutional tree.

Furthermore, as my noble friend Lord Forsyth suggested, I, too, am a strong believer in the wisdom and sovereignty of Parliament. People look to your Lordships and the other place to debate, scrutinise and legislate, perhaps particularly so on constitutional matters. For example, I warmly welcome the diligent and thorough work of this House’s Constitution Committee, which is admirably and ably led by my noble friend Lord Lang. Its reports, so rightly held in high esteem in this House and beyond, provide rigorous and perceptive analysis on some of the most complex and significant issues of the day. It is for that committee to decide on its work programme for the future, and I am sure that the Government will give careful consideration to any reports that it issues in this sphere.

My noble friend Lord Forsyth made a very passionate and thoughtful speech. In response to his specific point on a Joint Committee of both Houses to consider all these issues, not just English votes for English laws, I am sure that your Lordships will wish to mull that over; it merits consideration, and I will bring it to the attention of my colleagues and reflect on it myself.

However, it is right that our constitutional programme is set by the democratically expressed voice of the electorate delivered within our parliamentary institutions. Of course we need to heed the views of the electorate. However, I simply pose the question: what would it say about our own faith in the parliamentary process if we were to handle a matter of this magnitude in the way suggested by the Bill? I am not persuaded that such an innovation as that put forward by the noble Lord, Lord Purvis, would be an improvement on our current constitutional arrangements, which have been developed over centuries and are often the source of envy or inspiration around the world. I fear that it could diminish or negate the proper role of this Chamber and the other place.

Clearly, a number of your Lordships disagree with me. Therefore, my next question is: is there a great appetite for such a convention? Are the guts of the British body politic rumbling and growling with discontent at the lack of a convention? Among some hardened constitutional activists, if I may use that phrase, there is indeed such a gripe, but what about among the general public? I suggest not. That said, there is an appetite for change, and a Government with a mandate to deliver on their commitments to change; not just change as regards devolution and the English question but, for example, change to our human rights laws and to our relationship with Europe.

We are delivering on our pledge to hold a referendum on Britain’s renegotiated membership of the EU, which is surely one of the biggest constitutional issues there is, and one that clearly matters to people. Therefore it cannot be argued that the Government wish to stifle public debate about the constitution and how our country is governed. We are more than willing to have that debate and to deliver on our commitments.

Those commitments aim to ensure the continuity and stability of our union and broader constitutional settlement. We are pursuing our policies in accordance with the principles of fairness, respect and opportunity for all. We will govern as one nation to deliver a balanced and strong union, but one that recognises the unique histories and nature of our nations and regions. As Lord Hailsham also once said,

“diversity in unity and unity in diversity are at once the glory and the characteristic of our”,

constitution.

A constitutional convention risks undermining the role and the place of Parliament, is unnecessary and has no public support. However, to those who want a convention I say: let us use the Bill before us today to consider how it might work in practice. I start by gently reminding the House of our Constitution Committee’s nervousness of skeleton Bills. As recently as last week, when it took evidence from my right honourable friend Oliver Letwin, the committee described such Bills as those which contain few specific provisions and provide significant powers for Ministers to make decisions through regulations. My fear is that the noble Lord may well find that such a description could apply to the Bill, which makes very little provision for the convention that it seeks to establish—perhaps intentionally, to avoid answering some difficult questions —and leaves the Secretary of State to determine much of the detail. Indeed, as skeletons go, the Bill would certainly earn a place in the Natural History Museum.

I turn to the convention’s remit, a point to which a number of noble Lords made reference. I suggest that the electorate have already spoken on the issues outlined in Clause 1 and have given this Government a mandate to address them—on Scotland, Wales, Northern Ireland and England. In terms of devolution, for example, only yesterday my right honourable friend the Prime Minister set out our plans for Cornwall. Nevertheless, the Bill rather optimistically provides for the convention to give recommendations on all these complex issues, and to do so within a year. As a number of your Lordships have remarked, this is incredibly ambitious. I know that a week is a long time in politics but, with a scope so broad and varied, I wonder whether the Bill risks setting the convention a truly impossible task. While the ambition may be noble, would a convention really be able to come to a meaningful and considered decision about all these topics in just a year? I am reminded of what Professor Robert Hazell of the Constitution Unit of University College London, warned when he considered a similar list of constitutional conundrums:

“A convention charged with resolving such a wide range of different issues would face an impossible task. Each issue has proved intractable; in combination they are insuperable”.

Before I leave that point, I want to highlight a matter raised by the right reverend Prelate the Bishop of Southwark and the noble Lord, Lord Kerr. This convention would spawn a number of other conventions. It would be not the end of the process but the start.

However, let us imagine for a moment that a convention proceeds and helter-skelters down this track. The noble Lord has argued that his proposed convention would run in parallel with the devolution of powers to Scotland and Wales. I am glad he concedes that, for the priority must be for the Government to deliver on what was promised to the people of Scotland after the referendum and to fulfil the commitment made to the electorate right across England at the general election in May. However, this begs another interesting question. How could a convention usefully engage in a constitutional deliberation in such a dynamic environment in parallel with legislation on Scotland, Wales and Northern Ireland, consideration of proposals for English votes, an EU referendum and a Bill of Rights?

Turning to the composition of the convention, I note that the Bill suggests that the convention must comprise registered parties—a point mentioned by my noble friend Lord Forsyth. He asked how many registered parties there are. I can tell the House that there are 458. Which of these would be invited to the convention? Would the Fancy Dress Party get a look in, or the Birthday Party? What about the Church of the Militant Elvis party or—my favourite—the Grumpy Old Men Political Party?

[Noble Lords]

Hear, hear!

[Lord Bridges of Headley]

Who would determine which parties were represented? Would it be the Secretary of State, the convention chair—if, indeed, there is one—or the public? Then there is the reference to local authorities. Which local authorities, and should this be determined on size? Would it be—I ask this with a certain interest—Surrey County Council or Mole Valley District Council, or would we simply be represented by the LGA? Then there is a vague reference to nations and regions of the UK. Would that include members of your Lordships’ House? How many of these representatives would come from England, where most of the population live, and who would choose the regional spread?

That begs another interesting question. Should there be one unified convention or a series of mini-conventions? If just one, how would the voices of each constituent part of the union be fairly heard within that group? Should they have a veto? What if representation from one nation disagreed with that from another? Here, I quote—

[Lord Kerr of Kinlochard]

The noble Lord picks the nits with great skill and precision but I wonder whether he is going to address the big issues here, particularly that raised by the noble Lord, Lord Soley—the need for a union narrative.

[Lord Bridges of Headley]

My Lords, I entirely agree that there is a need for a union narrative. I believe that this House has heard that many times—perhaps not many times but a number of times—from my noble friend Lord Dunlop and from me. As I said, it should be based on the principles of fairness, balance, proportionality and respect for different parts of the union, and I believe that, as we continue to debate these issues in, for example, the Scottish Bill and other pieces of legislation coming to this House, we will continue to flesh that out.

As I was saying, Alan Trench, a fellow at the Constitution Unit, commented:

“What is vital for Wales is of much less importance in eastern England. To the extent there is a ‘Scottish’, ‘Welsh’ or ‘north-east English’ interest in the Union, each of these is different. Trying to set up a convention to resolve these issues without being clear about what the interests of the various groups are, and how they relate to each other, will be impossible”.

Finally, there is an interesting reference to the fact that:

“At least 50% of the members of the convention must not be employed in a role which can reasonably be considered to be political”.

I understand the gist of the clause, but I think that a lawyer would be able to rack up quite large bills contesting its implementation. Those considered political might include trade union workers, pollsters and even journalists, while a seasoned activist with very clear political convictions could be considered an ordinary member of the public just by nature of his or her employment. Who these people are and how they are to be chosen is another potentially contentious issue on which the Bill gives little indication. As the outcome of a convention depends on its members, does it not worry noble Lords that there appears to be significant confusion and inconsistency as to who should participate in this one?

Those points may sound frivolous, and the noble Lord, Lord Kerr, may say that I am nitpicking, but they reflect a serious flaw, because the debate over who gets to debate these matters would be acrimonious, generating heat not light. As I said, we would need a convention before the convention has begun just to deliberate on all that.

[Lord Forsyth of Drumlean]

My noble friend has done the easy bit, which is taking apart the Bill. Will he address the point made by my noble friend Lord Norton of Louth? What about looking at the way that all these piecemeal reforms hang together and where we are now? What are the Government going to do to provide a lead?

[Lord Bridges of Headley]

I am sorry to beg to differ with my noble friend, but I believe that we are providing a lead by setting set out our plan in our manifesto and now delivering on that plan. That is the lead for which we got the mandate. I am sorry that we disagree on this point, but we clearly do.

[Lord Soley]

I just want to follow that up, if I may. The noble Lord has done the easy bit of saying what he is against. I understand that. Can he say what he is for? He could perhaps address whether he will consider a committee of the two Houses to look at what the role of the United Kingdom bit should be, because that would help the rest to fall into place.

[Lord Bridges of Headley]

As I said, this is an idea that my noble friend Lord Forsyth has put forward with great passion and eloquence, and I will certainly take it away to give it further reflection and bring it to the attention of my noble friend the Leader of the House. But I am in no position to make promises from the Dispatch Box here and now. The noble Lord, Lord Soley, says that this is the easy bit, but this is in fact the essence of what we are debating today: the impracticalities and flaws behind such a convention.

Let me conclude by repeating—I am sorry that a number of your Lordships disagree with it—that now is not the time to attempt to delay the constitution’s adaptation in response to the express wishes and needs of the people and communities across the UK. This Government believe that our focus must be on delivering the fair and stable settlement that will ensure the stability and continuity of our uniquely successful constitutional arrangements. I am sure that there will be plenty of opportunities for constitutional scrutiny and debate. I look forward to benefiting from the insight and experience of all noble Lords, especially the noble Lord, Lord Purvis, who, as I said, has done so much to contribute to this debate as a whole.

Security: State Procession

Lord Bridges of Headley Excerpts

Thursday 9th July 2015 Lords Chamber

[Lord Wallace of Saltaire]

To ask Her Majesty’s Government what assessment they have made of the potential security risks posed by converting former government buildings into privately owned hotels along the State Procession route between Buckingham Palace and the Palace of Westminster, including along Whitehall.

[The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)]

My Lords, the former government buildings to be converted into hotels along the state procession route are Admiralty Arch and the Old War Office. The freeholds remain under government ownership in perpetuity and continued oversight and security measures will be implemented as part of the commercial arrangements with the private sector. Long-term protocols and operating procedures are agreed and built into both schemes. The security and intelligence services and the Metropolitan Police are closely involved in this process.

[Lord Wallace of Saltaire (LD)]

My Lords, does the noble Lord recall that when President Bush made a state visit to London, the entire Whitehall area was cordoned off, including to Members of Parliament? Does he also recall that the IRA, from within the area of Whitehall, managed to mortar No. 10? Further, he will remember that the bombing of the Brighton hotel, which affected Mrs Thatcher and others, was placed in the hotel some time in advance of the incident? Do the security services intend to vet positively all the staff of these hotels; has that been agreed? Will the hotels be closed to all visitors during state visits or will the visitors be vetted as well?

[Lord Bridges of Headley]

The noble Lord has raised interesting questions based on his own experience. I have looked into the clauses of the leases for both the Old War Office and Admiralty Arch and I am satisfied that they allow for appropriate access for both security and ceremonial purposes. The hotels will employ their own staff, and while the Government have not insisted on security clearances for each member of staff, it is obviously in the hoteliers’ interests to take their security checks on their staff into consideration. Furthermore, I should point out that both the Metropolitan Police and the security services are very involved, as always, in ceremonial processions and major events, and will continue to be so to make sure that security is upheld.

[Lord Foulkes of Cumnock (Lab)]

My Lords, this is privatisation gone mad. Does the noble Lord really think that selling off the Old War Office building, just up the road from the Cenotaph, to a private foreign company for use as a hotel and private apartments will not cause major security risks? Of course it will. There will be Remembrance Day services and the Queen coming to open Parliament; it is extremely dangerous. Surely he must think again.

[Lord Bridges of Headley]

My Lords, I would take the noble Lord’s advice a lot more seriously if his own party had not recommended that we sell Inn the Park, the Civil Service Club and Marlborough House at the last general election. However, putting that to one side, I also point out that once again the Labour Party seems to be in a state of sleep as regards the deficit, as the noble Lord, Lord Mandelson, seems to have suggested. We do actually need to bring down the deficit—

[Noble Lords]

Oh!

[Lord Bridges of Headley]

I am sorry that noble Lords shake their heads but, as my right honourable friend the Chancellor pointed out yesterday, we need to do it. Since 2010 the Government have generated £1.4 billion in land and building sales while the running costs of the estate have fallen by £647 million compared with 2009-10. Moreover we have done that while ensuring that security is upheld, as I have explained to the noble Lord.

[Lord Lisvane (CB)]

My Lords, as someone who sought to buy the Curtis Green building for parliamentary use rather than as a luxury hotel, I commend the noble Lord, Lord Wallace of Saltaire, for raising this issue. It is extremely important that a full formal CPNI security assessment is given to Ministers in the case of each building. I ask the Minister to bear in mind that many of these buildings are connected underground. I also ask him to ignore the siren voices which suggest that security can be assured simply by sealing tunnels. It cannot; ask anybody in Hatton Garden.

[Lord Bridges of Headley]

There are service ducts under many buildings for electricity, telecommunications and other services, and any security risks in relation to them, as with any other part of the buildings, have been assessed and taken into account in the sale of the leases. I need to repeat that the security agencies are involved in all disposals of government property and their advice is always taken into account.

[Lord Reid of Cardowan (Lab)]

My Lords, I must say with some regret to the Minister, who has not long arrived in his post, that I thought his answer to my noble friend Lord Foulkes was not only unsatisfactory but bordering on the disgraceful. He said in his previous answer that it was in the interests of the new private owners to ensure security. National security is a matter for the Government, not for new private owners. As to the reduction of the deficit, while obviously we want to do that, if the cost of reducing the deficit by a couple of hundred million pounds is to put our national security—not to mention the monarch—at risk, it is not a price worth paying. Whichever Government made the decision, will he come back to the House with a more satisfactory answer as to the national security aspects of this particular sell-off?

[Lord Bridges of Headley]

I apologise if I have caused offence but I was being accused of privatisation. I would, however, beg to differ. I do not believe that these decisions have put the national security at risk and I have been assured that they have gone through the appropriate processes. The properties were designated surplus to requirements, following a thorough review which concluded that the buildings could not within the bounds of costs and internal planning be updated to deliver an acceptable, efficient standard of office accommodation for use in government. The commercial arrangements with the private sector allow for government to incorporate security measures, alongside the Metropolitan Police.

[Lord Hamilton of Epsom (Con)]

Has my noble friend denoted a massive security risk from the Royal Horseguards hotel, which is just round the corner from the Old War Office?

[Lord Bridges of Headley]

My Lords, I cannot comment on particular aspects of security but I assure your Lordships that all matters of security within the Westminster area are always taken under review.

[Lord Hunt of Kings Heath (Lab)]

My Lords, will the noble Lord refer this matter to the appropriate Joint Select Committee of both Houses, which looks into these matters? I think that would give a great deal more confidence.

[Lord Bridges of Headley]

My Lords, let me take that concept away with me. I have looked into this matter over the last few days and I am assured that the relevant security matters have been addressed, and that we have balanced those matters with the need to deliver savings in government.

[Lord West of Spithead (Lab)]

My Lords, on a slightly less serious point, are the new owners responsible for ensuring that all the various flag-staffs, with flags and all the things that are flown on state occasions, will be dealt with correctly? There is a strict format for this and a cost involved. Is that their liability?

[Lord Bridges of Headley]

The flags for ceremonial events will remain on Admiralty Arch. This is a provision in the lease arrangements. Should the hotel wish to use its own flags, a proposal will have to be made to government to consider how that will be done.