Academies Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

Monday 28th June 2010 Lords Chamber

[Lord Hodgson of Astley Abbotts]

My Lords, I have two amendments that address many of the points made by my noble friend Lord Phillips, although they approach them from a different angle. Given the lateness of the hour, it might be for the convenience of the Committee if I speak to them now so that the Minister can deal with the various arguments. I apologise for not having participated in the debates before, although I have read in particular the Second Reading debate carefully. As we are discussing charitable matters, I should declare my interests as president of the National Council of Voluntary Organisations and chairman of the Armed Forces Charities Advisory Company, inelegantly known as AFCAC.

The most important of my amendments is Amendment 164. It would remove the words “is a charity” and replace them with the phrase,

“may be deemed to be an exempt charity if and in so far as it is a charity”.

I am not quite as concerned as my noble friend Lord Phillips about the use of exempt status, but I am concerned about the way in which the charitable status and arrangements are being drawn in this Bill. I do not oppose the principles of the Bill; indeed, I support them, because I am for aspiration in our education system and it seems to me that this Bill will lead to higher aspirations. However, Clause 8 causes me some concern. This is a probing amendment, about which I am much looking forward to hearing from my noble friend on the Front Bench.

I shall take a moment to say a word about the background. The Charities Act 2006, which was a Lords starter like the Academies Bill, went through a high degree of scrutiny, not only pre-legislative scrutiny but also because the parliamentary examination took place twice over. We had reached the end of the process when we came to the wash-up before the 2005 election, when our progress resembled the childhood game of snakes and ladders—we had reached square 99 but then stepped on a very long snake and went all the way back down to square two, from where we had to start again. I had the privilege of serving my party on the Front Bench and, as my noble friend Lord Phillips said, we spent many happy hours with the noble Lord, Lord Bassam of Brighton, and others dealing with the issues in that Bill. The result of what some might say was an inordinately long gestation was that we had a huge amount of input from the sector and the wider public. I must say that the then Labour Government were prepared to listen and I think that we made some sensible changes. I think that the sector believes that a delicate balance that reconciles the many strongly held views about the charitable sector and its position in our society was achieved. This Bill, if unamended, will damage that delicate balance.

What is the balance? First, the Bill reintroduces presumption by the back door. The Charitable Uses Act 1601 stated that there was a presumption of charitable status for three purposes: the relief of poverty, the advancement of religion and, of relevance to us tonight, the advancement of education. Therefore, if you checked into the Charity Commission with the Hodgson educational trust, it would be bound to give you charitable status. However, it became perfectly clear in recent years that that no longer held water in our society and that we therefore needed to find a way in which all applicants for charitable status, with the benefits described by my noble friend Lord Phillips, had to show that they afforded an appropriate level of benefit to the public to offset the tax and other benefits that they received. So we achieved a level playing field.

This public benefit test was to be achieved by the Charity Commission and we wanted to make sure that the commission was insulated from political pressure from all sides of the House. Therefore, written into Clause 6 of the Charities Bill were words to the effect that the Charity Commission should not be subject to the direction of any government agency or any Minister of the Crown. We had a level playing field with an independent regulator.

The Bill as drafted blows a hole in this because Clause 8(1) states:

“A qualifying Academy proprietor is a charity”.

That restores presumption. There is no mention of a public benefit test; it just states that it is a charity. Therefore, we no longer have a level playing field. Above all, we are introducing an unlevel playing field in an area of great controversy. It was on education that some of the most difficult discussions and debates in this House took place because of the existence of fee-paying schools that are charities. Indeed, several schools have had their charitable status called into question or, in certain instances, revoked.

The second worry is that this undermines the authority of the Charity Commission and damages its independence. We went to great lengths to make sure that it was above suspicion; if it could be bypassed at any time, that would be a great mistake. I have absolutely no doubt that these academies will be able to show that they can pass the benefit test, so why damage the balance that we created in the 2006 Act?

Most important, we are creating a dangerous precedent. A future Government—not this Government or any Government that I am thinking of—could use this ability to say that something is going to be pushed through on the ministerial fiat. It would be a great mistake to allow that kind of precedent to be created in the Bill.

On the implications of exempt charity status, I entirely share the views of my noble friend Lord Phillips. We need to know what the regulatory body will be. The sly, shy hint in paragraph 29 of the Explanatory Notes does not go far enough. We need to know whether the regulator will have a public benefit test and, if so, whether it will be the same as that of the Charity Commission. It is essential that it should be so.

When my noble friend replies, will he say whether he thinks that he has the power to enforce this? Section 13(2) of the 2006 Act states:

“The body or Minister must do all that it or he reasonably can to meet the compliance objective in relation to the charity”.

However, as far as the Charity Commission is concerned, that is only one of five objectives. It has a public confidence objective, a public benefit objective, the compliance objective to which I have just referred, a charitable sources objective and an accountability objective. We need to know whether those other objectives will be met in this case. As my noble friend has said, we need to know what will happen to existing charities and whether we will have a further unevenness in the playing field.

I do not expect to reach finalisation on this tonight but I seek from my noble friend reassurances on two or three central points: first, that the Government will not reintroduce presumption by the back door; secondly, that they respect the independence of the Charity Commission and its expertise; and, thirdly, that they see the great dangers of the precedent that we will be creating.

[Viscount Eccles]

My Lords, I will not make any long arguments. My noble friend Lord Phillips has referred to museums and to Kew, but I think that, although the secondary legislation to appoint a charitable regulator other than the Charity Commission is in draft, it has not yet been triggered. I think that the matter is still in limbo.

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Moved by

[Lord Hodgson of Astley Abbotts]

165: Clause 8, page 6, line 14, at end insert “, or
“(b) may apply to be a community interest company (CIC)”

[Lord Hodgson of Astley Abbotts]

My Lords, I shall be very brief on Amendment 165, because it is an alternative route to heaven for academies. It would permit them, instead of becoming charities, to become community interest companies. It is a probing amendment which may repay some study, and I look forward to hearing what my noble friend has to say about it.

The Companies (Audit, Investigations and Community Enterprise) Act 2004—inelegantly entitled, I agree—has in it a bit on community enterprise. Part 2 of the Act, which comprises Sections 26 to 63, establishes the concept of community interest companies. If the Minister’s officials care to look through those clauses, they may be able to or wish to advise him that it could be a useful structure for the new academies to adopt. I shall not weary the Committee tonight with a recitation of how they would all fit together, except to say that Section 35 sets up a community interest test, rather like the public benefit test, while Section 27 establishes a regulator of CICs, as they are known, with extensive powers, and Section 30 caps dividends and distributions, so they are not profit-making in the normal sense of the word. There are a number of less important aspects, which might have value in this approach.

CICs cannot be charities, so they would be travelling a totally separate road. They come under Companies Act regulations. However, this could be a useful alternative—not compulsory, but a possible alternative—to becoming an exempt charity with some of the issues that we have just been debating in the previous group of amendments. This amendment seeks to explore the possibility. I beg to move.

[Baroness Thornton]

My Lords, I know that the noble Lord, Lord Phillips, will probably have something to say on this. The noble Lord, Lord Hodgson of Astley Abbotts and I had several happy hours in the Chamber discussing community interest companies and how they should be formed. The noble Lord is correct—it was a matter of some significant discussion at the time that a community interest company could not be a charity. However, a main feature of a community interest company is the asset lock. That is why it is such a valuable company form for social enterprises. I am not sure how that could be applied as an alternative form to a charity. This is a complex issue, and I am sure that the noble Lord, Lord Phillips of Sudbury, is about to make it even more complicated, because I know that he has very firm views on this, but I cannot see how the asset lock would work here.

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[Lord Hunt of Kings Heath]

My Lords, may I make a point to the Minister? I am concerned about the timing of this Bill because the issues raised tonight are extremely complex. We are due to have Report stage within a week and, knowing that the machinery for getting approval for amendments in government does not move as speedily as one would wish, I am concerned that there will not be enough time to give full consideration to these matters. I hope that he will give some consideration to ways in which this House can really have enough time to deal with these matters appropriately.

[Lord Hodgson of Astley Abbotts]

My Lords, I have been invited to withdraw my amendment, which I am happy to do. I think that there are ways around the asset lock, which I will not bore the House with at 11.40 pm. To my noble friend Lord Phillips, I had thought about putting down an amendment about a CIO—a charitable incorporated organisation—but since the regulations were not yet drafted, that would be otiose to our discussions on this point. I beg leave to withdraw the amendment.

Amendment 165 withdrawn.