Charities Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

Wednesday 7th July 2021 Grand Committee

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, my noble friend the Minister was kind enough to refer to the official review of the 2006 Act that I carried out now nearly 10 years ago. I take a certain paternal pride that a large number of the recommendations that I made in that report have survived and appear in the legislation before us this afternoon, but it would be quite wrong for me to say that a report that took more than a year to produce and ran to 150 or 160 pages could be produced by one person. I should begin, therefore, by placing on record my thanks to the team—then at the Cabinet Office, now at the DCMS—led by Ben Harrison, which provided such wonderful advice and support. I would also like to thank more broadly the Law Commission, whose work I think is often undervalued in your Lordships’ House, for the way in which it has picked up and improved many of the suggestions that I made. The Bill has my 100% support except in one serious matter, of which I have given prior notice to my noble friend and which I will return to in a minute.

The underlying principles for my review could be seen as follows. The charities sector has very deep roots—witness the fact that the first recorded charity, the King’s School, Canterbury, was started in 597—and therefore it reflects the very rich and diverse social life of our country built up over hundreds of years. One consequence of that is that it is not neat, and there are those who would like it to be neat. They would say, “Why don’t we just have one cancer research charity so that we can avoid duplication and waste of money?” I certainly resisted that, and I am glad that the Government have, because to do that would drive a stake through the heart of a lot of the voluntary endeavour from which our society benefits. But a consequence is that a lot of charities are pretty small. We need as simple and clear a regulatory system as possible so that charities do not have to go to lawyers and spend a lot on fees to understand what they can and cannot do. I hope that, when the Bill passes, my noble friend’s department will urge the Charity Commission to bring forward user-friendly, understandable advice about the brave new world that we will enter.

Thirdly and finally, as background, I argue strongly that whenever in the past people gave money to charities they did so to put it to work; they did not want it stuck in a bank account on some technicality. We have to find ways to make sure that the structure remains up-to-date with modern conditions.

Against that background, what are my top picks from the Bill? First, as my noble friend said, there is the commitment to a quinquennial review of financial thresholds, without which they will rapidly become of little value with inflation, and in particular applying them to the permanent endowment figures of £25,000.

Hurrah for the simplification of the procedures for selling land. I was quite astonished to find that a charity selling land is bound by all sorts of procedures, but a charity buying land, which by definition must be just about as dangerous, had almost no procedures and prohibitions at all.

Hurrah for relaxing the rules on permanent endowment so that more money can be put to work, for the reasons that I have explained.

Hurrah for simplifying the merger regime, in particular the rules that my noble friend mentioned around bequests. It was astonishing how many charities that had merged still had to be kept in existence because they still anticipated some future bequests and legacies.

Hurrah for the changes to the rules regarding failed, or indeed overly successful, appeals, with charities spending a long time trying to find people who had donated money because the appeal had got either too much or not enough money. That was a complete waste of time. People almost certainly did not want the money back. There are limits in the Bill, and I am sure that is right.

Finally, hurrah for some loosening of the way that trustees can be reimbursed for their real efforts.

Those are my top picks, but they take me to my really serious concern about the Bill. I imagine that most Members will think of the Charity Commission as the all-powerful regulator of its sector. I certainly did before I began my review. In fact, it is not. Its ultimate power is subject to the permissions of the Attorney-General. Under Section 325 of the Charities Act 2011, if the Charity Commission faces

“A question which … involves … the operation of charity law in any respect”,


it can appeal to the Charity Appeal Tribunal for a ruling

“only with the consent of the Attorney General.”

This is, I submit, an extraordinary position for the sector regulator to find itself in. It is as though one of the financial regulators, seeking a ruling on a point of law, had first to go to the Treasury to get the go-ahead. People would think that an extraordinary restriction on a regulator’s independence and power, and so it is.

I recommended that the commission should be free to appeal to the tribunal but that it should have to inform the Attorney-General of the action that it was taking. The Law Commission supported that proposal. The Government have turned it down. Therefore, the Bill as drafted means that the Charity Commission remains in the last resort under the sway of the Attorney-General.

However, this in-principle defect is made worse—far worse—by the real-life performance of the Attorney-General’s duties. I refer to the case of the Royal Albert Hall, which is a Victorian charity built in the 1880s by public subscription. It is one of London’s great cultural venues, being home to the Proms and so on. As part of the original financing, subscribers were offered seats in the hall in perpetuity. The original idea was that, on the nights that the holders did not wish to attend, they could sell their seats to the Royal Albert Hall box office for face value, less a 10% handling charge.

A few years ago, seat-holders decided that they could sell their seats much more profitably through a third-party website, so today seat-holder tickets for an Eric Clapton concert next year, with a face value of £175, are on sale through viagogo at £946—a short £800 uplift or, in the words of a television sitcom, a nice little earner. It will come as no surprise that, pre pandemic, seats were allegedly earning £10,000 to £20,000 per annum and are changing hands for more than £150,000 each. As I said before, the Royal Albert Hall is a charity and, as such, has a board of trustees. There are 24 of them, but 19 are seat-holders—80% of them. I have no objection to seat-holders seeking to enjoy their private property; that is one of the provisions of the European Convention on Human Rights. But when a seat-holder becomes a trustee, a conflict of interest must surely arise.

It was on this point of a conflict of interest that the Charity Commission sought a legal ruling for which, under the present law, it had to obtain the Attorney-General’s permission. The original application to the Attorney-General was made—wait for it—in August 2017. Four years later, we are still waiting for a decision from the Attorney-General as to what the Charity Commission can and cannot do.

In the meantime, I understand that the commission has tried to engage the trustees of the hall and suggested that, if a majority of the trustees were not seat-holders—for example, 13 out of 24—that would be a satisfactory compromise. The trustees rejected this proposal and, in a letter dated 27 April this year, the chairman of the RAH Seatholders Association described the purpose of that association, which was set up only last year, as being “to protect members’ interests from the very real threat posed by the Charity Commission”. These are strange words to use about your sector regulator.

To conclude, I stick to the proposal made in my report and supported by the Law Commission that the Charity Commission should be free to approach the tribunal for rulings on a point of law, but that the commission should be required to tell the Attorney-General that it was so doing. This is otherwise an excellent Bill, which has my enthusiastic support, but in my view we need to discuss and amend Section 325.