Charities (Protection and Social Investment) Bill [HL]
Lord Watson of Invergowrie Excerpts(10 years ago)
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Lord Watson of Invergowrie (Lab)
My Lords, Amendments 20B and 22ZA are complementary and seek simply to bring some rigour to the duty of charity trustees to review their charity’s social investments. Amendment 21, in the names of the noble Baroness, Lady Barker, and the noble Lord, Lord Wallace of Saltaire, seek to broaden that to cover all investments, and we see no reason why that should not be supported.
The term “from time to time” seems, and I have to say sounds, oddly vague wording to form part of legislation. After all, what does it mean? I suspect that, if you asked 100 people for their understanding of the term, you would almost certainly receive not far short of 100 different answers. Finding a definition to fit those four words would be comparable to attempting to answer the conundrum, “How long is a piece of string?”. Throughout the consideration of this Bill, there have been numerous occasions where noble Lords have sought to introduce greater clarity to its wording. I could not find any other line of this Bill where greater clarity is more necessary, and I believe that the wording must be changed.
To a significant extent, charities will enter uncharted territory when this Bill becomes law and they gain the new power to make social investments. Some will adopt and adapt quickly, and others less so, but it will be essential that all of them keep a close eye on how their social investments are progressing and how they are influencing the work of the charity, not least alongside their traditional investments. For that to happen, at least initially the social investments should surely be maintained under constant review, until they settle down and become an accepted and established part of the charity’s wider activities.
We believe that charities should be as open and transparent as possible about their investments—and not just social investments—and how these investments further the purposes of the charity. There is at least a possibility that the general public could be concerned about their donations being used for social investment, particularly if they are not clear just what social investment is and what it involves or, indeed, where the investment might go in terms of the companies involved. It is important that such concerns are acknowledged and are met with a willingness on the part of charities to be fully open as to what they are doing in terms of social investments. Those donating have a right to be certain that they are not giving their money, however indirectly, to companies that undertake activities of which they may disapprove and may not wish to support.
Also, there would be a double benefit here, we believe, because it is surely the case that the social investment market itself would benefit from greater information being made publicly available as charities begin to delve into it. That is what informs the first provision in Amendment 22ZA, together with an assessment of how the investments further the charity’s purposes. It is difficult, I suggest, to envisage an argument against the amendment, although I suspect that the Minister will have been provided with one by those sitting behind him.
Finally, we believe that the term “from time to time” should be replaced with a requirement to publish charities’ reviews of their social investments after the first three years of this Bill becoming law. I have already referred to the uncharted territories in which all charities that choose to make use of social investment provisions will be sailing. For that reason, we believe that it will require an early assessment to identify any difficulties, how these were resolved and what lessons have been learnt. Publication of these reviews will enable charities then to benefit from each other’s experiences. Thereafter, we believe that reviews at five-yearly intervals would be quite appropriate. I beg to move.
Baroness Barker (LD)
My Lords, it may be useful if I speak to Amendments 21 and 22. Like the noble Lord, Lord Watson of Invergowrie, we are seeking to make the concept of social investment clear in legislation. Part of the aim of doing so is to make sure that social investment policies sit alongside the overall investment policies of a charity and are treated in much the same way.
Our first amendment, Amendment 21, seeks to delete “social” in subsection (3) of new Section 292C. This is one of those cases where a deletion is meant to lead to more inclusivity, so in fact we are suggesting that all a charity’s investments should be the subject of a periodic review. Amendment 22 seeks to ensure that trustees are under an explicit duty to make their investment policy available publicly to their donors and beneficiaries.
One of the big challenges of social investment is that, by its very nature, most of the time it is unlikely to bring about significant financial return. For example, if a charity invests in a business to be carried out by its beneficiaries—for example, former prisoners and so on—any such business is unlikely to turn a profit in the first few years of its existence. Therefore, it is doubly important that charities are able to do double accounting—that is, they have to be able to explain to the public what has happened to the financial return and also how they have calculated the social return or the return in terms of the benefits to them in furthering their charitable objects.
I happen to be of the school that says that there ought to be a greater degree of transparency overall regarding charity investments. Sometimes in our sector, charities can be somewhat fearful of being attacked for the sorts of investments they have to make in order to obtain a financial return. With the development of social investment, there is a need for charities to up their game across the board, and therefore such transparency would be helpful.
I also agree with some of the points made by the noble Lord, Lord Watson of Invergowrie. The term “from time to time” is probably a well-understood legal phrase: it is something that should happen but it is difficult to put an exact timeframe on it. Some investments will take place over a long time, and therefore an accounting period of three years would not make sense for charities. Equally, the point made by the noble Lord, Lord Watson, that they must be reviewed stands. Therefore I, too, shall be interested to hear the Minister’s reply, and I hope that between us we can flesh this out to make it just a bit clearer.
Lord Watson of Invergowrie
My Lords, I thank the Minister for that response. I welcome the fact that he joined the noble Baroness, Lady Barker, and my noble friend Lady Pitkeathley in supporting the need for that.
It is important that charities are as open and transparent as possible. There have been examples of this involving charities: one within the remit of the Charities Commission—after a “Panorama” investigation when some of Comic Relief’s investments were revealed, it was somewhat embarrassed and rowed back from them—and one outside the Charity Commission’s remit. As noble Lords may remember, when it was discovered that the Church of England was investing in Wonga, that was pretty hastily stepped back from. At this stage we do not know what other charities may or may not have in their investment portfolios, and I think that that is to be regretted. People giving money to charities have a right to know not just that the money is going to the charity’s stated purposes but how the money that they give could be used for investment, whether for social investments or traditional investments.
For that reason, I find it hard to take on board the Minister’s comment that we do not want to overburden charities; of course we do not, but we want things to be done properly. We are going into an area where charities have not previously been, and social investments are going to take some time to become widely accepted. During that period, charities being as open as possible and saying exactly whom they were investing in would help with the public identification of social investments as an aspect of charity life that they were comfortable with when making their investments. So I do not find it a convincing argument on the Minister’s part that the burden placed on charities would be a reason for not accepting these amendments.
On the question of “from time to time”, I was not quick enough on my feet and the Minister had moved on to something else before I could ask him about it. The phrase “from time to time” may be a legal term, but I still do not know what it means. How long should the Charity Commission wait before it says to a charity, “It’s now been five, 10 or even 15 years and you’ve never yet reviewed your social investment”? There has to be some cut-off point, whether that be decided by the size of the charity, the field in which it is involved or whatever. Surely charities have to have some idea and it cannot just be a case of saying, “Well, this has been a bit of a quiet year, so let’s just put out a review”—or, even worse, “We’ve had a busy year, so let’s not put out a review”, which would perhaps be open to misinterpretation.
So there is a looseness to this part of the Bill that I do not think the charities themselves will particularly welcome. Nevertheless, I have heard what the Minister has said. There are issues here that we could return to on Report, but for the moment I beg leave to withdraw the amendment.
Baroness Barker
My Lords, my noble friend Lady Kramer was one of that small band of people banging away during the passage of the Financial Services Bill, and if she were here, she would be very strongly in favour of this. She is one of the very few people in your Lordships’ House who has had the experience of running a bank in her time, in the United States, and makes the simple point that it is wrong that individual people can only give grants or money to a social entity in their community and cannot invest in it. That is because of the restrictions that apply to soliciting such investments. It is perfectly possible, as the noble Lord, Lord Hodgson of Astley Abbotts, set out in such detail, to make a distinction between a strict financial investment, which has to have with it all the safeguards which the noble Lord, Lord Cromwell, set out for us so clearly last week, and a social investment. If the Government were willing to stop throwing this proposal around like a hot potato between departments and move on with it, it could bring about not only a new source of investment for small charities but, at the same time, an increase in the skills level of small organisations to build business cases. That is something the charitable sector has not traditionally been good at but which it will need to be increasingly able to do in future. There is a lot to commend in this proposal.
Lord Watson of Invergowrie
My Lords, this amendment would enable charities to market social investments to individual investors but exempt charities from the restrictions of the financial promotions regime. It would provide rules for the development of a regulatory regime for marketing by charities and allow the Treasury to set out rules for the communication of financial promotions by charities through regulations, if it chose to do so.
From our point of view, three of those sound quite reasonable, but I have to ask the noble Lord, Lord Hodgson, whether an exemption from the Financial Services and Markets Act 2000 and the 2005 order means less protection for consumers—by which of course I mean investors. Would the new rules specifically for social investments come into force at the same time as social investments were no longer required to meet the demands of the 2000 Act? In my view, the noble Lord, Lord Hodgson, did not spell out in sufficient detail why exemption from the Act is necessary. We believe there are potential difficulties in freeing up charities from those laws.
Lord Hodgson of Astley Abbotts
It is perfectly possible, although it is exceptionally expensive, to have a financial promotion involving an authorised offer of shares because it goes to everybody. Such an offer has to deal with people who are quite unsophisticated and therefore it must be done carefully: the process is lengthy and expensive, and hundreds of thousands of pounds have to be spent in preparing a prospectus that is fit for the general public. That is quite right and entirely appropriate—I am not complaining about that.
What we have here is people who might be interested in making a social investment and who would understand—I am sure the Treasury rules and regulations would make this clear—that the primary purpose was not to have a financial return and that they should act accordingly. This is designed to enable social companies such as charities to raise relatively small sums of money without the commensurately high costs that would be required if you were offering the promotion to the general public. This would be a new category of investor, and if the noble Lord were to ask whether that was better or worse, I would answer that it is different—not better or worse. This would be designed, or purpose made, for this particular area.
Lord Watson of Invergowrie
I thank the noble Lord for that clarification. However, again, are we to constrain the development of social investments on the grounds of cost? Obviously there is no maximum or upper limit as to what a charity will or will not be able to afford when trying to pursue the provisions of the Bill in relation to social investment, and that is part of the problem. I certainly do not want to see that restrained at all; I would like to see all charities, even smaller ones, feel that they can enter this field with confidence. I think that is what all noble Lords present in this debate would want to see.
However, we have some fears. It would not require too great a leap of the imagination to arrive at a situation where, for example, a charity working for older people might devise a product that offered attractive-sounding investment opportunities to the elderly, showing how they would do great good for the cause even if the return was not quite what other products might have produced. That could be fraught with potential pitfalls that could make telephone cold calling, which noble Lords will recall we discussed in Committee last week, seem quite innocuous, and I would want to make sure that such difficulties did not arise. It might also be possible for cold calling to be used to market those bonds or whatever the products on sale were to be termed. I do not want to overdramatise such possible scenarios, but we have to be aware that they could arise. Certainly in the early days of social investment for charities, it will not all be plain sailing.
I want to ask the noble Lord why the amendment states that the Treasury “may” set out rules for the communication of financial promotions by charities. Again, that seems a little loose. If it is thought that such rules are necessary, I would have thought that “may” should have been replaced by “must”. It might be thought that the need for such rules would be paramount at the start, when the whole area of social investment is introduced, with many charities being less than absolutely clear about what is required of them.
Lord Hodgson of Astley Abbotts
By some alchemy of draftsmanship, “may” equals “shall” in drafting legislation. Do not ask me how it comes about, but they mean the same. We have had this discussion many times in these Committees. “May” and “shall” are the same word for a parliamentary draftsman.
Lord Watson of Invergowrie
Alchemy, the noble Lord says. I am not a chemist, but that still seems rather opaque to me.
To return to the rules, it may not be necessary for them to be compulsory further down the line, but if there are to be such rules, they should apply right from the start and to everybody if we want to ensure that social investment takes off smoothly. Further, how might any rules proposed by the Treasury be consulted on? It is an important aspect whether the sector would have an opportunity to feed in and have its views given appropriate weight.
We are largely in agreement with the amendment proposed by the noble Lord. Some of the clarification that he has provided is helpful. I look forward to the Minister’s response.
Lord Bridges of Headley
My Lords, I pay tribute to my noble friend Lord Hodgson for his determination, if not doggedness, on this issue and in seeing it being addressed. I should pay tribute also to his excellent eyesight for being able to read my brief and especially my handwriting, which is a first.
Before I go into the detail, let me take a step back and put this debate in a little context. We recognise that, increasingly, the public are looking to invest their money socially in a range of social investment sector organisations, including charities. This is a growing area of activity alongside areas that we are already familiar with, such as donations to charities, which of course remain significant.
In particular, we know that there is an increase in the number of members of the public making small, direct investments in charities and social enterprises. Specifically, we know that there has been an increase both in the value of investment offers—the market was worth £249 million in 2014, up 78% from 2013—and in the number of participants. More than 15,000 individuals invested in co-operatives, to which my noble friend referred, and community benefit societies in 2014—up 33% from 2013—so this is a growing market.
Such investments might take the form of shares in community enterprises, such as the more than 3,000 people who recently bought shares in Hastings Pier Charity, or they may take the form of bonds in charities. As my noble friend alludes to in his amendment, we know that for such investors the decision to make an investment in the charity or the social enterprise is often motivated by factors other than, or in addition to, the prospect of financial returns.
A recent study found that doing social or environmental good was an important factor in deciding to invest for 90% of investors in community shares, such as those in the Hastings pier project. I understand, however, that the effect of the financial promotion regime is an increasingly important issue for charities and social enterprises looking to raise funds from the public in this particular way. These financial promotion rules, which are designed to protect consumers, apply to many of these deals. Where they do not apply there are emerging voluntary regimes, such as the community shares mark, which was launched last week.
I understand that the aim of today’s amendment is prompted by concerns around the appropriateness of these rules for charities which want to raise investment funds from members of the public, just as they might ask for donations. These concerns indeed reflect reports from the social investment sector that issues around inconsistent treatment for the different types of social enterprises under these rules lead to disproportionate costs and unnecessary complexity. I also understand, as my noble friend said, that this is not the first time that these issues have been raised.
I want to assure noble Lords that the Government are indeed aware of these issues and, in response to interventions from your Lordships during the passage of the Financial Services Bill, the Government made very valuable changes to ensure that the FCA had the proper incentives to take into account the differing needs of different types of organisations that it regulates, including those of charities and social enterprises. Since then, the Government and the FCA have been working with the sector to consider evidence about the effectiveness of the regime, particularly in light of the report Marketing Social Investments—An Outline of the UK Financial Promotion Regime, which was published by the Social Investment Research Council last year. These discussions between the sector and the Treasury are live and ongoing, but I believe—indeed I am told—that real progress is being made in understanding the challenges faced by charities and social enterprises.
I also think that it is important that the issue of changes to the scope and substance of regulation raised today should be considered as part of those discussions between industry representatives, the FCA and the Treasury. I have, therefore, written to the Treasury to make it aware of the issues that have been raised to ensure that they are given full consideration. I will be meeting my right honourable friend the Economic Secretary to the Treasury to discuss them.
I am sorry to say that this is one of those issues that is a large hot potato—as the noble Baroness, Lady Barker, said—that sits both in the lap of the Cabinet Office and in the Treasury, but I am grasping my end of it with both hands and trying to ensure that action is taken. It is, of course, in all our interests that any regulation is proportionate, consistent and clear. Protection of consumers must be paramount, as the noble Lord, Lord Watson, said—a point with which I entirely agree. We also need to be careful that investors understand what they are investing in, as the noble Lord said, and that the reputation of the growing social investment market is protected. That is why the Treasury is engaging with key stakeholders and interested parties on these issues.
In addition to looking at suggestions, including in this amendment and what has been said in the debate, the Treasury will explore whether there are other non-legislative ways of mitigating burdens or costs to social investment offerings. Obviously there will need to be consultation on this point if further action needs to be taken. I warmly welcome my noble friend’s input to the Treasury on these points and, as I said, I am meeting my right honourable friend the Economic Secretary to the Treasury to discuss them. I invite my noble friend to withdraw his amendment.
Lord Watson of Invergowrie
My Lords, the Labour Party has no objection to Amendment 26, with the exception of the first six words. It does not seem appropriate to ask that the Chancellor become involved in a review such as this because it would seem unnecessarily to broaden the aegis of this part of the Bill relating to social investment, and we do not believe that it would be welcomed by charities.
I am aware that this amendment is supported by Social Enterprise UK and the Charity Finance Group, and I understand the rationale behind it, which is that the Treasury controls fiscal and regulatory levers with regard to investment and therefore should have a say in this area as well. However, at a stage in the process when some charities will remain sceptical of entering the field of social investment, the shadow of HM Treasury lurking in the background does not seem to us to create the kind of setting designed to assuage such concerns.
I wrote in my note of this speech that Amendment 27 is uncontentious, but I have just heard the noble Baroness, Lady Barker, outline why she has included it. She basically said that the amendment has been included to allow for the review of the activities of the Charity Commission. I do not think we necessarily disagree that that might be appropriate in some circumstances. I assume that behind the scenes it goes on anyway, but the amendment says,
“any other areas deemed relevant by the Minister”,
which leaves the door open for the Minister to say, as I imagine he might well do, “Well, I don’t deem it relevant for us to carry out a review of the Charity Commission—certainly not in this context”. By and large, we would not be unhappy with an open door in this situation. As the noble Baroness, Lady Barker, said, it is in many pieces of legislation that come before us.
That leaves only Amendment 29, which stands in my name and that of my noble friend Lady Hayter of Kentish Town. This is similar to Amendment 22ZA, in which we argued for the inclusion of an initial review of charities’ social investments after three years, with subsequent reviews at five-yearly intervals. The arguments in favour in Amendment 29 are similar too, mainly to the effect that, with a number of significant changes being introduced in this Bill, it will be important to review their effectiveness at an earlier stage to enable progress to be assessed and any difficulties encountered to be highlighted. Doing so will enable all charities to benefit from the experience of others, while the Cabinet Office might wish to seek to amend the Act in the light of experience. Each of the factors listed in paragraphs (1)(a) to (c) are easily measurable and will inform the reviews with the most up-to-date information available.
Publication of the reports of the reviews will also provide Parliament with an important opportunity to examine the impact of the Act at that point. A period of five years seems to us to be too long to await that kind of appraisal initially and for it to be laid before Parliament, and we believe that it would be in charities’ best interests to initiate the review after three years, with further reviews every five years.
Lord Bridges of Headley
My Lords, this has been an interesting contribution to the debate. Let me start by setting out the aim of the review provision in the Bill before commenting in detail on the amendments.
Clause 14 makes provision for the operation of the Act to be reviewed by the Minister at least every five years, in line with government policy on reviewing legislation that imposes a regulatory burden. I should add, on the point made by the noble Baroness, Lady Barker, about the Charity Commission per se, to which the noble Lord, Lord Watson, referred, that I am reminded that the Public Accounts Select Committee reviews the Charity Commission every year and the NAO will undertake a follow-up review of the Charity Commission’s progress. The review of this legislation will, by considering the operation of the Act, consider the Charity Commission’s use of powers, guidance, and so on.
The purpose of such a statutory review is to establish whether, and to what extent, the provisions in the Bill have achieved their original objectives. The review must also consider whether the objectives are still valid, whether the measures are still required and the best option for achieving those objectives—and if so, whether the provisions can be improved to reduce burdens on businesses, including charities. The review must address three related questions. First, are the policy objectives that led to the introduction of the measures still valid and relevant? Secondly, if the objectives are still valid and relevant, is regulation still the best way of achieving those objectives compared with the possible alternatives?
Thirdly, if regulation is still justified, can the existing measures be improved? Additionally in this Bill, the review must include consideration of how the Act affects public confidence in charities, the level of charitable donations and people’s willingness to volunteer. As I am sure noble Lords know, this follows on from similar requirements in the Charities Act 2006 but should not be considered limiting on the scope of any review. The standard period for such a review to take place is within five years of the legislation being enacted, a point I shall return to.
I turn to Amendments 26 and 27 in the names of the noble Baroness, Lady Barker, and the noble Lord, Lord Wallace of Saltaire. As the noble Baroness said, social investment is a relatively new field but it is growing very fast, and the UK is already a world leader in many respects. I do not believe that the review clause of the Bill is the right place to propose a wide-ranging review of the social investment market, public perceptions of social investment and any impact on grant-making. In relation to social investment, the Bill makes a modest contribution by clarifying the existing law for charities in a way that we hope will encourage more charities to consider whether making social investments is right for them. For many, as I have said, it will not be.
The Cabinet Office and the Treasury have worked closely together for several years on growing the social investment market, a point I made earlier—for example, on the social investment tax relief that was launched in April 2014, the first of its kind in the world, or on the establishment in 2012 of Big Society Capital, the Investment and Contract Readiness Fund and the Social Outcomes Fund. The then Government also published annual progress updates on growing the social investment market. These covered a broad range of policies, including those owned by the Cabinet Office and the Treasury, so a lot is being done here already. All this was done without a statutory requirement for a review. I do not believe that a statutory review requirement would achieve much that is not already being done more frequently and with much broader scope.
There is nothing in the review clause that would prevent the Minister from specifying other matters to be considered in or alongside those required in the statutory review, so I do not think that Amendment 27 is really needed. I would strongly argue that the scope of the review clause is right as it is, and that it would be wrong to start focusing it on matters beyond the direct scope of the Bill when these are already being considered and reported on regularly by the Government. I hope that I have been able to persuade the noble Baroness to withdraw her amendment.
On Amendment 29, in the name of the noble Lord, Lord Watson, I have some sympathy with his arguments about bringing forward the first review but should also point out some of the downsides to holding the review within three years rather than five. Once the Bill becomes law, the clock begins to count down towards the review, but the Commission will need to develop and consult on guidance in relation to its new powers as well as putting in place systems and processes, training and internal guidance for its staff. It is not unrealistic to expect this process to take at least six months. The review clause requires the review to be published within so many years of enactment, which means that the review itself will have to begin earlier—say, six months. So it is easy to see how in practical terms a “three-year” review would actually be a two-year review, losing six months to preparation and guidance at the beginning and six months to the review itself at the end.
Then there is the important point that the commission itself has said that it would expect to exercise some of the powers on only a very few occasions each year—for example, the power to direct the winding up of a charity, which the commission expects to use on only two occasions each year. Factor in the time that it takes for an appeal to be determined, and one can see that there would be a real risk that some of the powers in the Bill may have been exercised only a couple of times by the time of a three-year review. That is unlikely to provide a sufficiently useful sample on which to base an assessment of the powers’ efficacy.
The standard period for reviewing legislation is within five years. The provision in the Bill as it stands does not prevent the review from taking place earlier than five years after enactment. It is also worth pointing out that the Charity Commission publishes an annual report on its compliance work called Tackling Abuse and Mismanagement, which I referred to last week, to help explain its case work and to help trustees learn any important lessons. This annual report would represent a good opportunity for the commission to report on the use of its new powers as and when they are used.
Having said all that, the noble Lord, Lord Watson, has made some helpful points about the timing of a review and I would like to consider them in more detail. For now, however, I hope that he will feel able not to press his amendment.
Charities (Protection and Social Investment) Bill [HL]
Lord Watson of Invergowrie Excerpts(10 years ago)
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Baroness Deech
My Lords, I will of course defer to the noble Lord, Lord Gold, who is much more of a lawyer than I am, but I do not believe that the purpose of the amendment is to turn all charities into incorporated bodies. It is simply to ensure that when something does go terribly wrong, an example being sexual abuse, innocent trustees should not lose their houses. The other side of that coin is that the value of the innocent trustee’s house may not be nearly enough to cover the damages that ought to be paid to the victim. It is simply a question of protecting the innocent trustee while of course respecting and honouring the long history of trustees being very involved and feeling personally liable. However, when there is a serious issue in which a victim has been seriously harmed either physically or mentally, the assets of the trustee may be insufficient for the victim, while at the same time the wrong trustee is being punished. The damages should come out of the collective assets of the charity. However, in every other respect, the long-standing, noble notion of the unincorporated charity should of course remain.
Lord Watson of Invergowrie (Lab)
My Lords, we support the amendment in the name of the noble Lord, Lord Bew. Change is needed because, as we have heard, many people who have suffered in a manner that would allow them to seek at least adequate redress against an unincorporated charity are currently in effect unable to achieve that. There are a lot of unincorporated charities. The Charity Commission has around 125,000 of them on its register, which gives some idea of the scope of those that may be covered by this amendment.
Surely there is a need for parity, because where a tort has been committed in the course of a charity’s activities, the remedy should not be different simply because of the charity’s status. An example of an unincorporated charity being able to escape the consequences of its actions arose a few years ago, and I had personal contact with it. Noble Lords may recall that a number of charities became involved in fundraising to assist countries in sub-Saharan Africa. Huge amounts of clothing, toys and other portable goods which had been donated by the public in the UK were transported by road to people in need in those countries. I had a friend who was involved in delivering those goods as part of one of the convoys. Sadly, during the journey his convoy met with an accident in which he suffered a serious leg injury. He is now unable to drive and has lost his job, because driving was an essential part of it. However, the charity was unincorporated so he had no effective means of redress in the form of compensation. He did receive some, but not nearly as much as he would have done had he been able to take action against an incorporated charity.
I do not think that there is any point in repeating the comments made by noble Lords in this debate. I simply wish to say that the amendment is a sensible one and I hope that the Minister will agree to bring forward an amendment on Report that incorporates its aims.
Lord Bridges of Headley
My Lords, I thank the noble Lord, Lord Bew, and the noble Baroness, Lady Deech, for their explanation of the amendment. This has indeed been an illuminating debate and I thank them for it. As has been alluded to, an amendment along these lines was first proposed by the Henry Jackson Society in its submission to the Joint Committee on the Bill, and the submission was published in the committee’s report on the evidence it received. It is worth pointing out that the Joint Committee did not recommend changing the law as proposed in that submission.
Perhaps I may briefly summarise our view around this point. As noble Lords will know, “charity” is a status rather than a legal structure. Organisations can choose from a range of different legal structures when establishing a charity. An unincorporated structure, as has been said, has no separate legal identity of its own, and so the trustees must hold the charity’s property and enter into contracts for the charity, where this is required, in a personal capacity. Unincorporated structures are usually simpler, and have fewer and less demanding reporting obligations than corporate structures, as the noble Baroness, Lady Barker, pointed out. The downside is that a trustee’s personal assets are at risk if the charity is sued and its assets cannot pay the debt. This personal liability is often a reason that many charities choose to adopt a corporate structure. Even so, many smaller organisations opt for an unincorporated form, such as a trust or unincorporated association, as the noble Lord just said.
In a corporate structure, the charity itself has a legal identity enabling it to hold property and enter into contracts in its own name. As directors, the trustees act as agents of the charity. If they act properly, they and the charity’s other members have the benefit of limited liability, protecting their assets from being available to creditors in the event that the charity’s assets are exhausted. However, the accounting, reporting and insolvency requirements that apply to corporate structures are usually more demanding. Many charities choose the structure of a company limited by guarantee, and an increasing number of small and medium-sized charities are opting to incorporate as charitable incorporated organisations—a structure designed specifically for charities and implemented in 2012.
If an individual or entity commences litigation against an unincorporated charity, usually all the trustees of that charity would be named as parties. This is because an unincorporated charity has no separate legal identity. This would include proceedings for tortious liability against a charity trustee in his capacity as a trustee of that charity or an employee in the course of his employment. The trustees of an unincorporated charity are jointly and severally liable for their actions, where taken on behalf of an unincorporated charity. If damages were awarded against the trustees, they ordinarily would be entitled, if they have acted properly and reasonably, to indemnify themselves from the assets of the unincorporated charity under the charity’s governing document. They could, however, be jointly and severally liable for any shortfall where the charity’s assets are insufficient to meet the level of damages awarded.
As an employer, the trustees of an unincorporated charity would be vicariously liable for the actions of an employee if they were acting on behalf of the charity and the same principles would apply, enabling a claim to be paid out of the charity’s assets. Indeed, a person suing the trustees of an unincorporated charity 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. If a third party reasonably believes a trustee is acting on behalf of a charity, it may sue all the charity’s trustees. Ordinarily, the trustees would be entitled to an indemnity from the funds of the charity under the charity’s governing document. However, a trustee in breach of trust or duty would be unlikely to be able to rely on this indemnity, so would remain personally liable. In either case of a trustee or employee acting on behalf of a charity, liability is not likely to be, nor should be, automatic, as the amendment seems to propose; it would still need to be established by the court where the liability should lie, based on the facts of the case.
In our view, the current legal position already supports the provisions within the amendment that damages may be recoverable from the assets of the charity, whether it is incorporated or unincorporated. Apportionment of liability between the trustees of an unincorporated charity is already possible under the Civil Liability (Contribution) Act 1978 if a claim is not brought against all of the trustees. The amendment would also run counter to the long-established principle that unincorporated associations do not have legal personality. I would be delighted to meet the noble Lord, Lord Bew, and the noble Baroness, Lady Deech, to discuss all this further, but, in the mean time, I invite the noble Lord, Lord Bew, to withdraw his amendment.
Lord Watson of Invergowrie
My Lords, I am in favour of these amendments. It is important to ensure that the Bill is drafted as clearly and concisely as possible to enable charities to make the most of social investment in furthering their purposes.
In 2012, the noble Lord, Lord Hodgson of Astley Abbotts—who has, as ever, provided us with an insight into some of the work that led to the Bill before us today—said in his review of the Charities Act 2006 that while charity law did not actively prohibit social investment, it was,
“certainly not set up to support it”.
He went on to advocate a statutory power for charity trustees to engage in social investment and statutory clarification of just what social investment is and involves. That makes it all the more puzzling why the previous Government chose not to include the social investment aspects in the draft Bill that was the subject of pre-legislative scrutiny by a Joint Committee of both Houses. If social investment is suitable for inclusion in this Bill, why was it not suitable for the draft Bill? Is there an answer? Of course, it is not a new idea but we are where we are and it is certainly to be welcomed that we now have this clause in the Bill.
In preparing for this part of the Bill, I tried to answer the question: what is social investment? I am not alone in that. The term is often confusing to many, and a lack of transparency could undermine its potential. As I understand it, this is the first time that social investment has been defined in statute, although neither the Bill nor its Explanatory Notes are particularly helpful in their attempts to define it. Am I the only one to have read the Explanatory Notes on Clause 13, paragraph 80 in particular, and found myself little more aware of what social investment really is and how it might operate as a result?
According to the Big Society Capital website, social investment is,
“the use of repayable finance to achieve a social as well as a financial return”,
which certainly has the benefit of being both clear and concise. Big Society Capital was the first ever social institution of its kind, established by the coalition Government in 2012 as an independent organisation with an investment fund of some £600 million. However, the concept actually emerged under the Labour Government of 2005 to 2010, who established the Commission on Unclaimed Assets to examine how funds released from dormant bank accounts could be used to generate the maximum public benefit. The creation of a social investment bank was a key recommendation of the commission and, following a consultation, the Labour Government proposed naming it the Social Investment Wholesale Bank. Fast-forward to the arrival of the coalition Government, for whom the title was perhaps a tad too left-sounding, hence the incorporation of what I regard as the largely meaningless big society name—whatever became of that concept, I wonder?
Whether Big Society Capital is now succeeding in supporting the third sector in the way it was intended to do is open to question and there are arguments both for and against within the sector. Certainly, Big Society Capital should have a positive impact on the social investment market by facilitating the provision of funding capital to the third sector. It is also charged with increasing awareness of and confidence in social investment by promoting best practice and sharing information; improving links between the social investment and mainstream financial markets; and working with other investors to embed social impact assessment into the investment decision-making process.
A new social investment market is emerging, developing ways to connect socially motivated investors with social sector organisations that need capital so that they can grow and make a greater impact on society. All this is to be welcomed, and the fact that every organisation that has sent noble Lords a briefing has welcomed the addition of social investment to the Bill demonstrates that it is an idea whose time has come, certainly in the third sector. The key is to make sure that it is as effective as possible in enabling charities to further their stated purposes while achieving a financial return for them.
Clause 13 is, by consensus, necessary. Noble Lords have already referred to the Law Commission consultation, which highlighted that there are differences of opinion regarding the ability of charities to make social investment based on their existing charitable powers. Clause 13 removes any such doubts and will enable charities to undertake social investment more easily and without the need for legal advice, at least as to the principle of the investment.
It is self-evident that social investments should be made only after careful consideration of the risks of the investment and evaluation of the benefit that will accrue as a result of it. Trustees should also be clear as to how they will evaluate the social investment and how regularly the investment will be reviewed. Such reviews should consider the effect that the social investment may have on the rest their overall investment portfolio and other activities, such as grant-making. Social investments are not made in isolation and it is surely sensible for trustees to take this into account when making a decision.
We support the amendments in this group. As has been stated, there is a need for clarity on what social investment is and how it will operate. The noble Lord, Lord Hodgson of Astley Abbotts, made the important point that the current wording of new Sections 292A and 292C does not reflect adequately the suggestions made by the Law Commission in its report. It is important for the Bill to be as clear as possible and I hope the Minister will be open-minded on this broad point and that he will not dismiss the amendments but will undertake to look at them in the way they have been brought forward. I hope he will give an undertaking to bring forward his own rewording 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.
Lord Bridges of Headley
My Lords, I am grateful to the noble Baroness, Lady Barker, and my noble Friend, Lord Hodgson, for tabling these amendments. I entirely share the sentiments of many noble Lords that we need to examine the definitions in detail, although this might get very technical. This is clearly the first time that we have attempted to define social investment and set it out in statute. It is entirely right and proper that we take time to debate and define to make sure that what we are doing is fit for purpose.
I will pick up on what has been said about the definition of social investments. Traditionally, as your Lordships know, those charities that have money to invest have taken a two-pocket approach to pursuing their goal. On one side, they seek to maximise financial returns from their investments. On the other side, they distribute those returns to further their mission. Sometimes, but not always, they try to measure the impact they are having. I would argue that social investment is different, because it sits between these two pockets. It involves investments that further the charitable mission but also expect to generate a financial return. This means the capital can be recycled again and again, contributing to a sustainable model and reducing dependency on grants and donations. In the right conditions, it can enable a greater impact than the traditional model, and further benefits from the focus on measuring and reporting on the outcomes that have been generated.
Turning to the amendments, it may first be worth recognising that Clause 13 has been prepared by the Law Commission, as the noble Baroness, Lady Barker, said, in order to implement its recommendation for the creation of a new power, and associated duties, when making social investments. The Bill is not the Government’s interpretation of what the Law Commission recommended; rather, it is drafted by the Law Commission to reflect its own recommendations. In this way, the definition of social investment used for the purpose of this Bill has been deliberately drafted to be as wide as possible while retaining the distinctiveness of the “social” element. It covers a spectrum, from investments that are mostly intended to further charitable purposes but involve some return of capital, through to those that are primarily financial but have a small mission benefit. I think of these as the two poles at the extremes of the spectrum. At one end are social investments that look much like grants, with a very limited expected return of capital. At the other are social investments that look very similar to traditional financial investments, but have a small role in furthering a charitable purpose. Social investment must combine some aspect of each pole, but the nature of the combination is entirely flexible.
Neither the furtherance of the charity’s purposes nor the financial return should be required to take precedence. 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, I hope the noble Baroness will withdraw her amendment.
On the other hand, the definition of social investment used here seeks to ensure that there is a direct relationship between the social investment and the charity’s purposes; in other words, there should be a clear causal connection between the act done by the charity and the charitable service ultimately provided. Allowing for indirect furthering of the charitable mission would mean that the power of social investment applied to investments that were purely financial but where the returns were used for charitable purposes. I thank my noble friend Lord Hodgson for raising this important consideration with me, but in order that the clear causal connection should be maintained I hope that he will be content to not move his amendment.
Turning to Amendments 16A, 18B and 20A, I thank my noble friend Lord Hodgson for the work that he has done and continues to do in this area. His input is of great help and has been of real benefit to the charity sector. My understanding is that these amendments are intended to ensure that the definition of social investment is wide and can cover all potential situations, even those where the furtherance of the charity’s mission is slight or occurs piecemeal. In particular, I understand that the intention is to make explicit that mixed-motive investments, as described in Charity Commission guidance note CC14, are covered by the definition.
I take this opportunity to state explicitly that the Bill has been drafted by the Law Commission to include MMI as one aspect of social investment. Furthermore, officials have been in continued dialogue with the Law Commission on this and other points, and the commission is satisfied that the drafting properly reflects the intent. So long as some direct furthering of the charity’s purposes is intended, no matter how small or partial, along with some anticipated return of capital, no matter how minimal, the investment is covered by the definition. Mixed-motive investment clearly falls within this. It partly furthers charitable purposes and partly achieves a financial return. I hope that this provides assurance to my noble friend and that he will feel comfortable not moving the amendment. I know that we seek a similar destination here, and I hope I have shown that the vessel that we are embarking in stands good for the journey.
Lord Cromwell
Perhaps I may have one more try at this. I hear what the noble Lord says but I have to say to him that I think that trustees should be careful. Batting this aside and saying, “Oh, there will be scandals and mis-selling” is not the approach that perhaps he meant. I could offer one further comment that may be helpful. The FCA currently offers guidance to investors on proportional investing—that is, the sort of recommended amount that it would say you should put into a particular type of investment, be it a private equity fund, a structured product or whatever. Perhaps here there is something about which the Minister could talk to the FCA. A social investment could be a very exciting but possibly, in risk management terms, relatively modest part of an investment portfolio. I still stick to my dictum that trustees are required to be careful. On the prospect of the noble Lord giving me £100,000, I would be very happy to discuss it with him afterwards.
Lord Watson of Invergowrie
My Lords, I was slightly taken aback by the response of the noble Lord, Lord Hodgson of Astley Abbotts, to Amendment 20. We believe that these amendments would enhance the Bill. In respect of the noble and learned Lord, Lord Hope of Craighead, who is a signatory to Amendment 20, perhaps I may further record my congratulations on his election as Convenor of the Cross-Bench Peers. New Section 292C(2) to (4) covers the scope of the duty applying to trustees. This will apply in relation to social investments made after this part of the Bill comes into force, whether or not these were made by the exercise of the new statutory power. The duty in the Bill will require charity trustees that have existing powers to make social investments to adapt their current processes in so far as they do not currently comply with the duties set out in the aforementioned sections.
The Bill is not clear as to how the duty in new Section 292C would apply where the trustees delegate their power. We believe that Amendment 19 offers clarification on this point. The section does not take into account that larger charities are more likely to want to set a social investment policy at board level and delegate to staff the responsibility for putting the policy into practice when implementing individual transactions.
Amendment 20 adds two further requirements that charity trustees must consider before exercising the power to make a social investment. I can only echo the comments made by the noble Lord, Lord Cromwell: surely it is important that care is taken and that trustees are absolutely clear that they are doing what is in their charity’s best interests. This amendment would require trustees to reflect on what type of investment they are making and the associated level of regulation, risk, concentration versus diversification and the type of qualified advice that was taken, all of which seems to be sound common sense. I cannot ascribe to the chilling effect that the noble Lord, Lord Hodgson of Astley Abbotts, suggested.
Lord Hodgson of Astley Abbotts
Does the noble Lord accept that charity trustees now understand that if they are making financial investments they must get advice? Do we need to write into the Bill that charity trustees ought to get appropriate advice before making financial investments? It is understood that they must do that—everyone understands that. All that is happening here is that social investment will have exactly the same requirements. At the moment, everyone understands that if you are going to make financial investments you will take advice. You will now take advice over social investments too. It does not need special categorisation. If it were categorised especially, people would start to say, “That is more difficult. We should not do it”.
Lord Watson of Invergowrie
Of course I accept that advice would be taken; advice has been taken with normal investments up to this point. However, we are going into new areas here and, at least at the start, there needs to be caution and careful consideration by charity trustees. I do not think that because something is in the Bill it will have a chilling effect. If, as the noble Lord, Lord Hodgson, says, it is being done anyway, I do not see a problem. However, some charities might not be as circumspect as others and I would like to see that measure in the Bill as a back-up.
The amendment would require trustees, in deciding whether a social investment would be in the interests of the charity, to consider how far they think a social investment would further one or more of the charity’s purposes and to consider the financial return. The trustees would have to be comfortable with the social investment.
As I say, I was rather taken aback by the noble Lord’s response. I defer to his vast experience in this field, and in many other aspects of the Bill I have agreed with most of what he has said; that is why I was rather surprised. However, it is perhaps important to ask the Minister what consultations he has had or intends to have—I hope he has had them—with the charity sector on this point. Equally, we should consider the point made by the noble Lord, Lord Cromwell, about meeting with the FCA in future.
We have now completed three days in Committee on the Bill and, unless I have missed them, there have not been any concessions by the Minister, which is quite unusual. The wording of the Bill is not beyond improvement and I invite the Minister to bear that in mind—hopefully, in relation to these amendments—when we return on Monday. The point of the Committee is to seek to improve the Bill. We are not dealing with different political agendas on the vast majority of the amendments, and I hope that the Minister will take these comments in the spirit that I have made them.
Lord Bridges of Headley
I thank the noble Baroness, Lady Barker, and the noble Lords, Lord Cromwell and Lord Watson, for their contributions. As to what the noble Lord, Lord Watson, has just said, I have said that I will consider a number of amendments. Obviously I am always looking for ways in which we can improve the Bill. Before I turn to the amendments, I too would like to put on the record my congratulations to the noble and learned Lord, Lord Hope, on his election as Convenor of the Cross Benches.
I thank the noble Baroness, Lady Barker, for drawing attention in Amendment 19 to the important role of a charity’s beneficiaries, as well as its wider stakeholders, in the process of good governance. Trustees would be well advised to maintain close contact with their stakeholders and to make sure that they understand the full range of views that such a broad group is likely to represent.
As to social investment, there is a clear duty on trustees to consider all the circumstances relating to the proposed transaction before deciding whether to take advice and from whom. The scope is deliberately wide and inclusive, such that if it is determined that beneficiaries or other stakeholders should be asked for advice, there is no impediment to this course of action. However, the breadth encompassed by the duty does not benefit from an enumeration of the range of possible advisers to whom trustees might turn. It might also lead to practical difficulties relating to identifying the relevant stakeholders, as well as ambiguity as to what is represented here by the term “reasonable”, a point made by my noble friend Lord Hodgson. I hope that the noble Baroness will be content that the aspiration and intent are there in the Bill and will feel able to withdraw the amendment based on this existing breadth.
With regard to Amendment 20, I thank the noble Lord, Lord Cromwell, for his extremely thoughtful and thorough speech, which I will read with care in Hansard. My understanding is that the amendment’s intention is to strengthen the duties of trustees relating to the financial characteristics of social investments, and in particular that they should make a comparison with any similar investments that are subject to a stronger regulatory regime and satisfy themselves that the proposed social investment is suitable. The intention, I understand, is to prevent any potential regulatory arbitrage whereby minimal mission benefits might be used as a pretext for making, in effect, financial investments that would not pass muster if they were pure financial investments.
I am in full agreement with the intention here: to ensure that where social investments are made, they are undertaken for the right reasons and with proper analysis of both the mission benefits and financial returns. It would clearly be of detriment to the nascent market in social investments if the social aspect were to be used as a fig leaf to pass off financial investments that would otherwise be unsuitable. So I thank the noble Lord for raising this issue. However, I do not believe that that would be the effect of the Bill.
Under the current law, when making a financial investment the trustees of a charitable trust must comply with three principal investment duties under the Trustee Act 2000: first, to consider the standard investment criteria—namely, the suitability of an investment and diversification of investments in a portfolio; secondly, to take advice unless it is reasonable not to do so; and, thirdly, to review the trust’s investments from time to time.
Sometimes, but not always, a social investment will be an “investment” under the Trustee Act 2000 and the three investment duties will apply to the social investment. The Law Commission reported:
“There was general agreement amongst consultees that the duty under the Trustee Act 2000 to consider the standard investment criteria (suitability and diversification of investments) created difficulties for trustees making social investments and should be removed, or at least tailored to suit social investment, but that the duties to review investments and to consider obtaining advice were appropriate”.
In relation to the first duty, the Law Commission said:
“A particular problem is the duty to consider diversification of investments, as part of the standard investment criteria. A social investment is unlikely to play a part in a diversified portfolio, because it is selected not with a view just to financial return but also for the mission benefit that it will produce. When compared with a mainstream financial investment, a social investment may carry a particularly high risk or it may be unjustifiably large within a charity’s investment portfolio (or conversely, unjustifiably small and disproportionate to the fixed transaction costs), and all the more so where the expected financial return is modest”.
The Law Commission concluded that the second and third duties were, with some modification, appropriate for social investment. The commission therefore recommended tailored duties which are set out in the Bill. It said:
“The new duties, being tailored to social investment, should apply in place of the duties imposed on trustees by the Trustee Act 2000”.
For completeness, I should say that in so far as there are any other duties on charity trustees in respect of financial investments, the Bill does not change them, so classifying a financial investment as a social investment would not change those duties. All the Bill does is exclude the Trustee Act investment duties if they would otherwise apply. It may be that the Trustee Act investment duties would not have applied to a social investment in any event. For example, if the charity takes the form of a company rather than a trust, the Trustee Act investment duties will not apply.
I return to the question of whether there would be any regulatory arbitrage; whether a social investment could be used as a fig leaf to pass off financial investments which would otherwise be unsuitable. The new duties are not less stringent for social investment; rather, they are tailored to social investment. The Bill has been drafted such that both sets of duties would generally produce the same result.
Tailoring the duties means that trustees do not have to try to shoe-horn a social investment into the Trustee Act regime for financial investments. The Law Commission reported that this approach,
“creates consistency between the duties that apply to financial investment under the Trustee Act 2000 and social investment, whilst properly catering for their differences”.
While in theory unscrupulous trustees might try to justify an inappropriate financial investment under the guise of a social investment, I do not think that they would succeed in this endeavour; the tailored duties should still produce a sensible result that showed the transaction to be inappropriate. Furthermore, the Charity Commission and the courts would be astute to shams; they would look at the substance of a transaction and if it is a financial investment, the trustees will be expected to comply with the financial investment duties. Taken as a whole, I believe that the Bill already contains sufficient safeguards in respect of financial regulation. In response to the good point made by the noble Lord, Lord Watson, about the FCA, I am happy to talk to the authority and to other financial advisers about this new power. I hope that the noble Lord, Lord Cromwell, feels comfortable about not pressing the amendment.
Charities (Protection and Social Investment) Bill [HL]
Lord Watson of Invergowrie Excerpts(10 years ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Hope of Craighead (CB)
My Lords, Amendment 6 is the sole amendment dealing with Clause 8 of the Bill, which is a comparatively short clause on the “Power to direct property to be applied to another charity”. As it appears in the Bill, Clause 8 makes one amendment to Section 85 of the Charities Act 2011, which is dealing with a different matter from the one that is of concern to me. Amendment 6 seeks to insert two words into Section 85(1)(a) of the 2011 Act so that the phrase,
“persons in possession or control of any property … unwilling to apply it … for the purposes of the charity”,
would also deal with those who say that they are willing to do so but are unable to do so.
The draft Bill, as it appeared before us in the Joint Committee, included the words that I am seeking to insert into Section 85. The description of the draft Bill can be seen in paragraph 141, read with paragraph 142, of the Joint Committee’s report. As paragraph 141 records,
“Clause 7”—
as it was in the draft Bill—
“would amend the 2011 Act to allow the Commission to direct the application of charity property in the event that the person is either ‘unwilling’ or ‘unable’ to do so, rather than just ‘unwilling’ as is currently the case. The explanatory notes to the Bill refer to ‘several cases in which financial institutions holding charity property were contractually unable to transfer it to secure its proper charitable application but would have been willing to do so.’”
In paragraph 142, we go on to say that,
“The evidence received by the Committee was supportive of this provision”,
and the footnote refers to Professor Gareth Morgan, the Charity Commission for Northern Ireland and the Joseph Rowntree Charitable Trust. Paragraph 142 continues:
“The Charity Law Association”—
which had made a number of very helpful comments on the wording of the draft Bill—
“did not oppose this change, but questioned whether the meaning of the term ‘unable’ was sufficiently clear and whether banks in such situations were really ‘unable’ to transfer charity money or just ‘unwilling’ to breach a contract to do so”.
Since the current Bill was published, I have had a meeting with William Shawcross of the Charity Commission, who has explained to me that he would much prefer that the words “unwilling or unable” were put in—in other words, that the words “or unable” were restored, as my amendment seeks. He explained that, from time to time, he encounters cases of this kind where a direction is proposed and the response is, “Yes, indeed, we are willing to do this, but for a variety of reasons we are simply not able to do so”. As he put it to me, it would be possible by sleight of hand to fudge the thing a little bit, as it were, and treat unwillingness on such a ground as being within the scope of the section, but he would rather that the section was really upfront about the fact that both situations that he encounters in practice were actually dealt with in the wording of Section 85, so that unwillingness, which certainly occurs and is a source of concern, was dealt with but inability—where the persons involved are perfectly willing to comply with the direction but for various reasons say that they cannot properly do so—was covered as well.
This is a very short point. I am a little puzzled as to why the draft Bill which survived scrutiny by the Joint Committee should have been altered in this way. I hope that the Minister will pay attention to the wishes of the Charity Commission, which would find it useful if the amendment were accepted. I beg to move.
Lord Watson of Invergowrie (Lab)
My Lords, as one who was a member of the Joint Committee under the excellent chairmanship of the noble and learned Lord, Lord Hope, I share his puzzlement as to why this change has been made to the draft Bill. I have no wish to repeat the words of the noble and learned Lord, but those of us in opposition do not fully understand why such a change should have been made and we invite the Minister to explain that if he can, and to say why, after the Joint Committee recommended acceptance of the draft proposal, and given that, as we have heard, the Charity Commission wants this change, the original wording of the draft Bill should not be reinstated. There is little more to say than that. I look forward to the Minister’s response.
The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)
My Lords, I, too, will keep my remarks relatively brief, by reason of the conclusion that I have come to as a result of what the noble and learned Lord and the noble Lord have said.
The provision corresponding to Clause 8 in the Bill made reference to “unable” in the manner proposed by this amendment. The Charity Commission asked for the change following several cases where financial institutions holding charity property were contractually unable to transfer it to secure its proper charitable application but would have been willing to do so. As the noble and learned Lord said, the Joint Committee which considered the draft Bill supported the provision.
However, as is noted in the report, the Charity Law Association, while it did not oppose the change, questioned whether the meaning of the word “unable” was sufficiently clear and whether banks in such situations were really unable to transfer charity property, or simply unable to breach a contract to do so. Therefore the Joint Committee recommended that the Government consider the inclusion of some form of 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. The Government therefore followed this recommendation and amended Clause 8 to provide for such statutory protection. Since the clause was aimed at dealing with financial institutions which are contractually unable to transfer property, this statutory protection was considered sufficient and the reference to “unable” was omitted.
The amendment tabled by the noble and learned Lord, Lord Hope, proposes to reinstate the reference to “unable”, as we have heard, and further examples have been provided as to when this would be needed beyond the contractual liabilities of banks. I also note what the noble and learned Lord said about his conversations with the Charity Commission. In light of this, I am happy to give further consideration to the amendment and to return to this on Report.
Lord Watson of Invergowrie
My Lords, I argue that Clause 9 should not stand part of the Bill. I do so not because we do not wish this clause to stand part of the Bill but because we want to raise issues that have not had an airing through another amendment, and we have particular concerns over issues surrounding charities working in areas of conflict.
The Minister will remember that I raised that issue at Second Reading when I asked if he would speak with his ministerial colleague at the Home Office. I hope that he has now done so and will be able to make noble Lords aware of what that discussion produced. Again, I draw attention to the difficulties posed by current counterterrorism legislation to the protection of charities working overseas to deliver humanitarian aid. I accept that changes to the various laws that cover counterterrorism are not capable of being dealt with within the confines of the Bill. However, concerns were raised with the pre-legislative Joint Committee on these matters by several of those who gave evidence, in particular two umbrella organisations that cover NGOs that work abroad: Bond and the Muslim Charities Forum. They would welcome greater clarity from the Government, which would be helpful for all of us.
In response to the Joint Committee’s report the previous Government stated:
“Terrorism legislation is in no way designed to prevent the legitimate humanitarian work of charities, but it needs to be widely drawn to ensure that it captures the ever diversifying nature of the terrorist threat”.
That is understandable, not least in light of the unspeakably appalling events in Tunisia, Kuwait and France three days ago. However, in his evidence, the Government’s Independent Reviewer of Terrorism Legislation, David Anderson QC, told the Joint Committee that the use or suspected use of property for the purposes of terrorism was “monstrously” broadly defined in legislation. Coming from that source, such a comment carries significant weight, and you do not leave yourself open to charges of being weak or soft on terrorism—which we in the Labour Party most certainly are not—by seeking comment on a matter previously highlighted by the Government’s own Independent Reviewer of Terrorism Legislation.
Indeed, Mr Anderson pointed the Joint Committee in the direction of Australia and New Zealand, where specific exceptions exist in terrorism law to cover charities involved in the delivery of humanitarian aid. I am not comparing the UK to either of those countries with regard either to their size or the level of terrorist threat they face. However, given the similarities of the legal systems of all three countries, the possibility that such legislation might prove of value means that it should at least be examined. Again, I mention that the man who drew it to the attention of the Joint Committee can hardly be characterised as being other than committed to ensuring that the UK’s counterterrorism measures are as tight and effective as they possibly can be.
We acknowledge that the Charity Commission has been proactive on this subject and has meet with some of those NGOs faced with the kind of difficult circumstances to which I have referred, and the commission issues alerts and seeks to make charities as aware as possible of the risks involved. However, the current counterterrorism legislation, despite the fact that no prosecutions have been brought against UK NGOs that operate in conflict zones, is having a chilling effect on them, and undoubtedly makes it more difficult for those NGOs to deliver humanitarian aid.
The pre-legislative scrutiny Joint Committee highlighted this matter to the previous Government, who said in their response that they would,
“draw the Committee’s recommendation to publish guidance relating to prosecutions under counter-terrorism legislation … to the attention of the Director of Public Prosecutions”.
Given that three months have now elapsed and that—I think I can say this to the Minister—a clear line exists between the previous Government and the current one, will the Minister tell the Committee whether that has been done and, if so, what conclusions have emerged?
Finally, we believe that the commission and those charities which presently fear to tread in certain situations would welcome a form of words which went some way to providing more clarity—perhaps even legal certainty —on this important matter.
Baroness Warwick of Undercliffe (Lab)
My Lords, I support the probing questions of my noble friend Lord Watson of Invergowrie. At several stages in our pre-legislative scrutiny of the Bill, we became anxious about the breadth and vagueness of the powers which it bestows on the Charity Commission. These concerns were reinforced by a letter from the chairman of the Joint Committee on Human Rights, Dr Hywel Francis MP, in which he said:
“In the absence of further definition in the Bill itself, or other guidance, such broad and vague language significantly increases the power of the Commission and provides insufficient certainty to both individual trustees and charities about the possible consequences of their conduct”.
At each stage, when we had these concerns, we looked carefully at the evidence and concluded, as noble Lords will see from the report, that the powers were indeed justified in that they were likely to help to increase public trust and confidence in charities.
However, when it came to the inclusion of terrorism offences, as my noble friend has indicated, we received evidence that disturbed us. As noble Lords will know from our report, a number of witnesses expressed concerns over the difficulties presented by terrorism legislation in relation to the operational requirements of NGOs in challenging circumstances overseas. They were particularly concerned about charities operating in dangerous parts of the world for humanitarian purposes. My noble friend referred to the chairman of the Muslim Charities Forum, Dr Hany El-Banna, who told us that he thought counterterrorism legislation was,
“preventing us from having access to the neediest people”.
David Anderson QC, the Government’s Independent Reviewer of Terrorism Legislation, who has already been referred to, said concepts such as the provision of “indirect support” to terrorist organisations had,
“an impact on humanitarian charities, particularly when working abroad and when working in areas that are under the de facto control of a proscribed or designated group”.
He went on to say that charities operating in these areas ran the risk of falling foul of terrorism law by, for example, delivering relief to a general population which might include individuals or groups designated as terrorists. He suggested that an increased risk could deter charities and their trustees from delivering humanitarian support. Bond, the umbrella group, went on to suggest, in our words, that,
“the withdrawal of banking services exposed donor assets to greater risk because international NGOs had no option other than to use less secure money service bureaux or to carry sums of cash across borders”.
Nothing in what I have said undermines the need to deal with terrorism offences and to address legitimate concerns about the abuse of charitable funds in connection with terrorism. It does, however, raise questions about the uncertainty surrounding the application of terrorism legislation when it comes to charities operating in dangerous circumstances overseas. The pre-legislative scrutiny committee was offered the examples of Australia and New Zealand as places where Governments had addressed this issue and where specific exceptions in law existed to meet this point. We thought that this was worth pursuing, but when we raised it with the Minister for Civil Society, he said it fell outside his remit and was essentially a matter for the Home Office. He went on to say that it could be,
“chasing a problem that does not exist”,
since,
“no one has been prosecuted”.
I do not think that that is good enough. Clearly these charities are expressing real anxieties about the risks they might face and about the chilling effect of this legislation. The difficulties facing these charities are already enormous in Afghanistan, Iraq, Chechnya and Somalia, among other places. If it is possible to provide them with greater certainty in pursuing their important work and overcome this worrying and chilling effect, then we should try to do that.
Like my noble friend, I was disappointed with the Government’s response. The Government recognise that there are concerns, but points only to the problems of creating loopholes without even addressing the suggestion that they might look at the examples of Australia and New Zealand to see whether and how those countries have overcome this danger. I ask the Minister to think again and at least to consider whether other countries can provide some inspiration about whether there are ways to provide greater legal certainty.
Finally, the Government have said they will draw to the attention of the Director of Public Prosecutions our recommendation to publish guidance. I hope they will agree to do rather more than that and to put their weight behind the need for guidance to address the current uncertainty, which was revealed in our evidence and which the Government acknowledge.
Charities (Protection and Social Investment) Bill [HL]
Lord Watson of Invergowrie Excerpts(10 years ago)
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Lord Watson of Invergowrie (Lab)
My Lords, I am very pleased to welcome the noble Lord, Lord Bridges, to his first Committee. I am sure that we will have some productive discussions over this and the other Committee sessions, and, indeed, beyond that.
When I looked at the amendment in the names of the noble Baroness, Lady Barker, and of the noble Lord, Lord Wallace of Saltaire, I thought that there is not really much to disagree with, but because they are Lib Dems I thought it was worth a go anyway. As it appeared, we on these Benches reached the conclusion that we could not really see anything untoward about it. But perhaps not unsurprisingly, given his legal brain, the noble and learned Lord, Lord Hope of Craighead, has raised an issue that certainly had not occurred to me.
With noble Lords’ indulgence, as a brief aside, the noble and learned Lord and I take our titles from the same county, Perth and Kinross. I am more towards the eastern end, on the outskirts of Dundee where I grew up. The noble and learned Lord mentioned the word “how” and how such a small word could, perhaps, have significant meaning. Let me just enlighten noble Lords that, in Dundee, “how” has a different meaning than is more normally associated with it. If you are at your desk at work in Dundee and you turn to your colleague and say, “It’s 15.47, I’m going home now”, he or she might say to you, “How?”. You might say, “By train or bus”, but the answer would be, “Because I’m not feeling very well”. “How” tends to mean “why” in Dundee. I use that as an illustration of the fact that the noble and learned Lord, Lord Hope, was indeed right in pointing out that that little three-letter word can contain a bit more than might at first be obvious.
More seriously, I take the noble and learned Lord’s point that it could be seen to be narrowing the wording in the Bill. It is certainly right that, wherever possible, individuals should not be identified unless the Charity Commission is very clear that that is the appropriate thing to do. If they are to be identified, they have to have as much notice as possible and an indication of the form in which the commission proposes to publish the warning. Whether that means them saying, “We will put it in these newspapers”, or whether they say just “in the media”, or “on such and such a date” I do not think is of huge concern. But I accept that the main thrust of this part of the legislation should be to ensure that the individual is given the protection that he or she deserves until such time as the commission reaches its conclusions.
Like other noble Lords, I was a member of the Joint Committee that looked at the draft Bill. In response to the Joint Committee’s report, the Government set out new criteria in Clause 1, which are very welcome. However, the remarks we have heard, particularly those from the noble and learned Lord, Lord Hope, mean that we should perhaps return to this issue on Report with a view to coming up with some wording that would be more appropriate. I am not going to suggest anything off the top of my head because I initially thought there was nothing to which you could object in this amendment. Given what we have heard, it may well be that further consideration is needed. It is important for the commission to have this power, but the individual has to be given some consideration. What happens to charities is important, and it is the Charity Commission we are talking about, but let us not forget that individuals as trustees do invaluable work for charities and we have to give them due consideration.
Baroness Barker
My Lords, as a member of the committee, I want to support the noble and learned Lord, Lord Hope. I love going to Hampton Court. When you go there, particularly if you are a kid, you get to understand how this term came to be. We are not in Tudor times but it is a very important matter. A number of the charities we talked to in the course of our discussions work internationally. They work in very difficult situations, such as in war situations around the world, and at times it can be quite difficult to ascertain the extent to which the trustees know what is happening in their charities.
On the last set of amendments, the noble Baroness, Lady Hayter, tried to take us to a place where we could understand the difference between management and governance. We are talking very much about governance here, not about the people who run or manage charities and are therefore close to the day-to-day activities of those charities. If the question is about the extent to which trustees in a position of governance need to know what is being done by their charities or can inadvertently be assumed to have known that something adverse happened, then that is absolutely wrong.
I am always interested in things that clarify governance for trustees. Governance is very difficult to pin down. This change of language is an attempt to help the trustees of today understand that distinction between governance and management, and that is laudable.
Lord Watson of Invergowrie
My Lords, I start by saying that the Opposition support these amendments as well. One of the issues arising among a number of organisations in response to the Bill is that it lacks clarity in various ways. If one of the more straightforward means of overcoming some of that lack of clarity is changing the wording as suggested here, then we should all welcome that.
The noble and learned Lord, Lord Hope, mentioned the recommendation of the Joint Committee and that the wording “aware of” was suggested. In response to the committee’s recommendations, the Government stated in their report of March this year:
“The Government will explore implementing the Committee’s recommendation to replace ‘privy to’ with ‘aware of’ with Parliamentary Counsel. The term ‘privy to’ is already widely used in the existing legislation and we want to carefully consider the implications of any change before committing to a change of wording”.
Following that consideration, the Bill was not changed and, of course, “privy to” remains in it.
The noble and learned Lord, Lord Hope, told us why he came back with amended wording. My only thought on the matter is that a former Law Lord’s understanding of the law would be something to which I would give weighty consideration—to put it mildly. Can the Minister say why, and indeed whether, Parliamentary Counsel continues to believe that that wording is right? This is a fairly straightforward change that should be made to the Bill.
Lord Bridges of Headley
My Lords, I stand with some trepidation to debate with the noble and learned Lord, Lord Hope, on this matter. Mention has been made of my right honourable friend the Justice Secretary and his remarks yesterday. I have been very careful in this debate not to use “impact” as a verb. I am also very intrigued by this area. This debate over the word “privy” makes me wonder whether it needs to be modernised in terms of the Privy Council, but I do not want to get into that right now.
It strikes me that what we are debating is what the layman understands versus what is legally accurate and watertight. The Joint Committee that considered the draft Bill, chaired by the noble and learned Lord, recommended, as the noble and learned Lord just said, that the term “privy to” be removed and replaced with “aware of”, so that the Bill referred to a person who was aware of an action that constituted misconduct.
Lord Hodgson of Astley Abbotts
My Lords, having served on the pre-legislative scrutiny committee, I understand the concerns about the width of this clause, but if we were to accept this amendment, we would go from a very broad power to a very narrow one. As I read it, we have to take into account, first, the effect of a person’s behaviour within the charity about to be inquired into and secondly, the conduct of that person in any other charity. That does not seem satisfactory because there are clearly issues that range more widely. The behaviour of a trustee in general life is an indication of their seriousness. For example, the existence of county court judgments would indicate that their personal financial behaviour may be a bit erratic. It may be that they had been a director of a commercial company which had gone bankrupt and which had been unfavourably commented upon by the companies’ inspectorate. It might even have resulted in them being banned as a company director for a time. These are all issues which the Charity Commission might reasonably take into account when considering a particular situation, if what can be seen as a proven rotten apple is likely to result in damage to the position, reputation, trust and confidence in the charitable sector generally.
While I have some sympathy with the concerns of the noble Baroness, I do not think striking out subsection (3)(b) of new Section 76A is the right answer. It would be too narrow a prism and the Charity Commission would have its hands unduly tied. We must find some better way to sort it out.
Lord Watson of Invergowrie
My Lords, we think this clause in its generality provides an important addition to the powers of the commission. It is appropriate that a person’s activity outwith their work with or for a charity should be taken into consideration. That is not to say that we are uncritical of the wording of the two paragraphs referred to in these amendments in the name of the noble Baroness, Lady Barker.
One reason it is a useful addition is that it would only apply after a statutory inquiry had begun. That would be a sign that the Charity Commission already believed that there was evidence of misconduct or mismanagement. That is clear from the last two lines of page 2 of the Bill. Of course, there are concerns—some of which noble Lords have referred to in the Joint Committee’s report. It is again a question of provisions being drawn too widely and lacking clarity.
The Government’s response to the Joint Committee’s report stated that they would,
“look to revise the draft Bill to make this clearer”.
Unfortunately that has not been done. I invite the Minister to say why the Government eventually proved unable or unwilling to do so. It is regrettable, although I do not think it constitutes a reason to remove the wording completely from the Bill. I do not think that is appropriate. We agree with comments that have been made about the need to refine the wording, and perhaps some attention might be given to the report published yesterday by your Lordships’ Select Committee on the Constitution on this and two other Bills. Paragraph 41 of the Select Committee’s report was critical of new Section 76A to be inserted by the Bill. I am sure the Minister has already read that report and taken it on board. It is important that that should be considered further before Report.
The final paragraph of that report states:
“The concerns identified by the JCHR from a human-rights perspective are mirrored by corresponding constitutional concerns on the grounds of legal certainty. We draw these concerns to the attention of the House”.
That simply adds to the arguments we have already heard in relation to these amendments.
An important suggestion of the Select Committee’s report is that conduct should be qualified in terms of its seriousness. It must be recalled that this activity does not need to lead to a charge or a conviction. On these amendments, and I think in a previous amendment, the noble Baroness, Lady Barker, mentioned that things that you do at one stage in your life these days follow you around through social media. It is very possible that a person a lot younger than me and a lot more able on social media might well do something that seems relatively trivial but that could come back to haunt them in later years. That has to be borne in mind.
The noble and learned Lord, Lord Hope, referred to evidence that the Joint Committee received about political causes. That is a concern. It could be that somebody who was publicly critical of government policy or of the Charity Commission might find that coming back to them. I do not mean that as a trivial point. The point is that we do not know what would be regarded as something that could effectively add to charges already assembled by the Charity Commission in targeting an individual. It is a question of uncertainty. We have heard this point several times this afternoon. In light of what the Minister has heard, I hope he will reconsider this matter, possibly with a view even to bringing forward a government amendment on Report. Given those remarks and the report of the Select Committee on the Constitution, I hope we may be able to look forward to that when we consider this matter again.
Lord Bridges of Headley
My Lords, this has been a very stimulating debate and I pay tribute to the noble Baroness, Lady Barker, for provoking it. I shall first address Amendment 5 about the proposed powers of the commission to take into consideration the conduct of a person outside a charity. I recognise that these are broad powers in that they allow the commission to take into account any outside conduct. However, these powers are necessary to enable the commission to address conduct which could seriously damage public trust and confidence in charities and need to be viewed in the context of the other criteria that apply to their use, along with the various safeguards in place.
Just as we have to place a large degree of trust in charity trustees to exercise their discretion properly in running their charities, we need to trust the Charity Commission to regulate independently and in the public interest. Of course, there is a range of safeguards, not least the independent judicial oversight provided by the Charity Tribunal, which has shown since it started work in 2008 that it is not afraid to criticise the Charity Commission in the few cases where it considers that the commission has overstepped the mark and acted disproportionately.
As I and others said on Second Reading, the Bill seeks to achieve a balance. The powers that it would confer on the Charity Commission need to be broad enough to make them useful. If they are too narrow they would be impractical and go unused—a point that my noble friend Lord Hodgson made. But charities need to know the circumstances when the powers may be used and I believe that the Bill achieves that balance.
The purpose of the noble Baroness’s first amendment would be, as we have discussed, to limit the other conduct that the Charity Commission could take into account when considering the exercise of its compliance powers. It is important that we retain this part of the clause as it prevents the undermining of public trust and confidence in charities, as all relevant—I stress “relevant”—conduct ought to be taken into consideration before the commission determines how to act accordingly. The commission could not take account of any irrelevant conduct. Indeed, I argue that the commission could be criticised for failing to act, or for taking only weak regulatory action, if it were unable to take into account relevant evidence of misconduct of an individual outside of a charity.
I shall illustrate this with an example. The Charity Commission opens an inquiry into charity A regarding concerns of financial mismanagement. It establishes misconduct and mismanagement against trustee X, an accountant, as large payments have been taken out and not accounted for. Blank cheques have also been signed by trustee X. The commission then approaches other relevant regulators which provide them with information that trustee X has had two cases of professional misconduct for accountancy irregularities in previous employment. Under Clause 3 as proposed, the commission would be able to take this other evidence into account before deciding what action it would be proportionate to take in the circumstances. If the amendment were to be accepted, the commission would be able to give no weight to this other, potentially compelling, evidence.
I emphasise that safeguards would be in place to ensure that any conduct outside of a charity would be only that which was relevant to the decision being considered by the commission. I shall illustrate those safeguards. First, there must be a statutory inquiry open and the Charity Commission must be satisfied that there is misconduct or mismanagement linked to the individual in the charity under inquiry before it can rely on any conduct from outside the charity as a makeweight in its decision-making.
Secondly, the commission, when exercising its powers, must provide a statement of reasons under Section 86 of the Charities Act 2011, which would set out the evidence it relied on in making the decision. This would include any evidence it relied on from outside the charity. No amendment to the Bill is needed to ensure that that is the case; we can amend the Explanatory Notes to make that clear.
Thirdly, as with all the Charity Commission’s compliance powers, the commission would have to be satisfied that the exercise of the power would be in line with the principles of best regulatory practice, including that it is proportionate, accountable, consistent, transparent and targeted only at cases where action is needed, as set out in Section 16 of the Charities Act 2011.
Finally, there is, of course, a right of appeal to the Charity Tribunal in relation to the exercise of the commission’s compliance and remedial powers, ensuring judicial oversight of the exercise of the relevant power.
The noble Baroness’s second amendment would remove the condition that enables the Charity Commission to consider disqualification on the basis of conduct likely to damage public trust and confidence in charities. The power to disqualify from charity trusteeship and senior management positions is indeed a significant power. As such it is important that the process is rigorous but fair, and, once again, balanced.
I shall explain what that will mean in practice. First, the individual must have met tougher new criteria to become a trustee and not be automatically disqualified in the first place. Secondly, before the commission can decide to disqualify an individual, three new conditions need to be met, as set out in the guidance issued by the Charity Commission. First, one of criteria A to F is met; secondly, the individual is considered to be unfit to be a charity trustee, defined by that guidance; and, thirdly, the commission considers it,
“desirable in the public interest in order to protect public trust and confidence”,
in charities.
The commission then has to give notice of its intention to disqualify and give a period for representations to be made before any decision is made. If a decision is made to disqualify, the disqualification could take effect only after a period of time has elapsed in which the individual can lodge an appeal with the tribunal—that is, 42 days. If the decision is appealed to the tribunal, obviously the tribunal would be able to confirm or overturn the disqualification. In making a decision, the tribunal would consider the case entirely afresh on the basis of all the evidence before it; it would not simply review the Charity Commission’s original decision. Lastly, all the commission’s actions in this process would have to abide by Section 16 of the Charities Act 2011.
As was said just a moment ago, the Joint Committee that undertook pre-legislative scrutiny agreed that there was a,
“need for a broad power to disqualify an individual in certain instances, not all of which can be specifically identified and encapsulated in legislation”.
The noble Baroness, Lady Barker, referred to one scenario and asked whether a person could be disqualified on the basis of an overseas conviction in a country where homosexuality is illegal. An overseas conviction is not enough on its own. As I have said, the commission must also be satisfied that a person is unfit to be a charity trustee and that disqualification is in the public interest to protect public trust and confidence in charity. Furthermore, the conviction must concern a charity; on its own, it would not trigger disqualification. I draw the noble Baroness’s attention to that point in the little box on page 3 of the guidance, where it talks about a,
“conviction abroad for bribery or terrorist financing in connection with a charity or similar body”,
and says that such a conviction,
“would take account of any concerns raised about any court or other legal processes, their compliance with right to a fair trial … and whether the standards of evidence and justice would not be accepted in a UK or European court”.
I think that that is all pretty relevant with regard to her scenario.
Charities (Protection and Social Investment) Bill [HL]
Lord Watson of Invergowrie Excerpts(10 years, 1 month ago)
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Lord Watson of Invergowrie (Lab)
My Lords, I am pleased to add my name to those of other noble Lords who have welcomed the Minister to your Lordships’ House, and to congratulate him on a distinguished maiden speech. There cannot surely be many legislatures where a maiden speech can be delivered from the Front Bench—although I was privileged to be an elected Member of the resumed Scottish Parliament in 1999, when, of course, all ministerial speeches were maiden speeches.
The noble Lord is perhaps fortunate in being allowed to cut his ministerial teeth on one of the least controversial Bills likely to come to your Lordships’ House in this parliamentary Session, but that does not mean, I suspect, that our days in Committee will be tame. We on these Benches will seek to improve the Bill where we believe that that is necessary—although, given the Minister’s experience to date, I have no doubt that he will take that in his stride, his tender years notwithstanding. I say that from the slightly unnerving position of facing a Minister more than 20 years my junior.
We have heard an interesting debate reflecting the considerable experience of noble Lords in various forms in relation to the charity and voluntary sector. I like to call it the third sector—a term which I think my noble friend Lord Chandos used—but perhaps that seems to be a bit out of favour at the moment. However, we understand clearly what we are talking about. As those contributions demonstrated, the Bill is not one likely to cause much controversy or disagreement, providing, as it does, for greater freedom for the Charity Commission to act where there has been abuse within a charity, either by the charity itself or by a trustee. The new powers for charities to make social investments were a welcome, if surprise, addition to the Bill, not having been part of the draft Bill that was the subject of pre-legislative scrutiny between November last year and February this year.
I was fortunate in being a member of the Joint Committee of both Houses which undertook that scrutiny, and I pay tribute to the noble and learned Lord, Lord Hope of Craighead, who chaired the committee with distinction and who has brought his wealth of experience to bear on the debate today. Like him, I welcome the Government bringing forward this Bill without delay.
The Government have accepted many of the Joint Committee’s recommendations, although it is disappointing that a comparison of the Bill with the undertakings given by the previous Government in response to the committee’s report reveals that eight commitments given then have not been met. Clearly, I do not expect the Minister to respond to those points this evening, but I and colleagues will raise them in Committee, seeking to ascertain what changed between March and May—apart, that is, from the disappearance of the Liberal Democrats from government.
The Charity Commission has a statutory role in maintaining public trust and confidence in charities—a duty which is more necessary than ever at a time when criticism of charities, not least in terms of fundraising, is increasing. However, the commission also acts as the regulator for the sector. It could be argued that there is an inherent contradiction in those two roles rather in the manner that applies to the BBC Trust, but the commission has those dual responsibilities and it is important that it has the necessary powers to ensure that charities are compliant with their legal obligations. Many noble Lords, most notably perhaps the noble Baroness, Lady Pitkeathley, and the noble Lord, Lord Low, made the point that one must not be pursued at the expense of the other. However, I think that the noble and learned Lord, Lord Hope, captured it best when he said that the two were inextricably linked—as I believe they are.
The Association of Chief Executives of Voluntary Organisations stated, in a briefing which I believe all noble Lords will have received, that,
“timely, expert advice from the Commission can prevent problems before they arise”—
a sound point which I believe should never be lost sight of. That said, regulation of charities is, of course, essential, although it should be proportionate. The Charity Commission must ensure that charities are given sufficient room to operate without excessive intervention and regulation.
Although, as I said, the Bill is to be welcomed, there are nevertheless some concerns relating to certain measures, either because they are too vague or too wide—both issues have been referred to by noble Lords today—as well as some provisions that might be added to those already in the Bill. The first of those relates to the additional offences that automatically disqualify someone from acting as a trustee of a charity. The addition of offences under terrorist legislation has, of course, some merit. However, given the breadth of the definition in the Bill, it is quite likely to have a negative impact on some NGOs working overseas, particularly in conflict zones. This was referred to by several noble Lords, who in a sense reflected the experience that they have had with various charities.
These measures could also impact disproportionately on some Muslim charities, as was mentioned by the noble and learned Lord, Lord Hope, and, in a slightly different manner, by the noble Lord, Lord Green. However, the comments which struck me most were those made by the noble Lord, Lord Hodgson, who, in highlighting the awful plight of the Yazidis in the face of so-called Islamic State, gave a very good example of how a charity could get into real difficulty. However, I take issue with the noble Lord’s description of these people as freedom fighters. I believe that they are absolutely nothing of the sort. They are psychopaths with a medieval mindset who must be rooted out and put out of business as soon as possible, however that may be done. However, that is an important example of some of the difficulties that charities can get into.
An example was given to members of the Joint Committee scrutinising the draft Bill of an NGO seeking to provide humanitarian aid in a conflict zone, where perhaps the only means of getting aid to people desperately needing it is to make a payment to so-called “gatekeepers” controlling access to those zones. These “gatekeepers” might be representatives of organisations deemed to be terrorists, and any money paid to them could be treated under this Bill as assisting terrorism—but how else could the humanitarian aid be delivered, and would it be in any way appropriate to pursue a charity, or individuals involved with a charity, for simply delivering humanitarian aid?
I certainly would like to see the suggestion made by the noble Lord, Lord Low, taken up—namely, for the Charity Commission to bring together the various organisations involved in providing such aid to discuss the matter, and, I hope, find a way forward. Both Australia and New Zealand already have legislation that exempts NGOs in such situations. However, in response to the Joint Committee seeking the Government’s views on the prospect of similar legislation being introduced in this country, the noble and learned Lord, Lord Hope of Craighead, was told by the then Home Office Minister that the previous Government were quite unsympathetic to the prospect. When the Bill goes into Committee, there will be an opportunity for an amendment on the matter to be considered. Will the Minister give an undertaking that, in advance of Committee, he will hold discussions with his opposite number in the Home Office to seek to bring about a more flexible and practical response to this important matter?
Further, in relation to additional offences that automatically disqualify a person from being a charity trustee, there is a lack of any mention of a person placed on the sex offender register. The Charity Commission has published a strategy for dealing with safeguarding issues associated with vulnerable groups, but it seems strange, to put it mildly, that those found guilty of behaviour serious enough to have them placed on the sex offender register do not constitute a category to which automatic disqualification applies. My noble friend Lady Hayter raised this issue. We believe that this should appear on the face of the Bill, and I hope that it will be possible for this to be achieved in later stages as we progress.
Charities depend, of course, on the trust and confidence of the public, and high standards of fundraising practice are essential to uphold levels of public trust. Recent events and media reporting that many noble Lords will have seen have highlighted that all is not well in this area of the charity sector, although the ability of the Bill to introduce meaningful changes may be limited. However, we shall see. The Fundraising Standards Board needs to raise its public profile and convince the remaining 35% of charities that voluntarily raise more than £1 million a year to affiliate to it.
On the latter point, perhaps it is now time to adopt the suggestion of the noble Lord, Lord Hodgson, to require all such organisations to be part of the Fundraising Standards Board. That was in his report of 2012, but he suggested that it should be revisited if the situation regarding fundraising was not resolved satisfactorily. Recent events demonstrate that that is where we are just now, and I can tell the Minister that it is a view supported by the CEO of the board itself that the time has now come to require charities within that sector—that is, those that voluntarily raise more than £1 million a year—to be part of the board. This could be achieved by the Minister for the Cabinet Office utilising the reserve powers given to that office by the Charities Act 2006 to introduce regulations,
“in connection with regulating charity fund-raising”.
Of course, the Minister is in an ideal position to progress that, should he choose to do so.
Other important issues have emerged from today’s debate, one of which is the ability of the Government to force housing associations that are charities to sell off properties against their will. I am rather surprised that only my noble friend Lady Hayter has raised this issue, because it certainly is exercising a lot of minds within housing associations, the vast majority of which are indeed charities. Perhaps the Minister can tell us whether he anticipates that in order to progress the policy that the Conservative Party announced during the election campaign and now intends to implement, primary legislation will be necessary so that properties that are owned by housing associations—in other words, not public property—can indeed be sold off, as the Government intend.
Many noble Lords referred to the vexed question of the demands for the additional responsibilities being placed on the Charity Commission to be matched by the resources to enable those additional responsibilities to be carried out. Although the Prime Minister announced last year that additional funding would be provided to coincide with the introduction of new powers, concerns remain about the resourcing of the commission, which saw a significant reduction in funding during the previous Parliament, as many noble Lords said. The additional powers will be effective only if the commission has the resources to use them properly.
Clause 14 states:
“The Minister for the Cabinet Office must carry out reviews of the operation of this Act”,
with the initial one being required within five years of the Bill becoming an Act. We believe that to be too long a delay and that three years would be more appropriate. To some extent, this relates to my previous point about adequate resources being made available, but in any case a shorter period than that envisaged in Clause 14 would enable any changes required to be identified and acted upon as soon as possible; thereafter, five-yearly reviews would be reasonable. This does not cut across the recommendation by the Joint Committee that there should be a broader review of the operation of the Charity Commission: rather, Clause 14 refers to this Bill specifically, so if that is what is carried forward, it should be three years rather than five years in the first instance.
Although it is not explicitly part of the Bill, an important issue was raised by my noble friends Lady Hayter and Lady Pitkeathley: a charity’s ability to speak out on behalf of others in pursuit of its objectives. My noble friend Lady Pitkeathley commented on the reduction in the number of charities involved in the recent general election. I believe that that is a natural consequence of the lobbying Bill which went through your Lordships’ House last year, and it represents a democratic deficit because it ought to be perfectly possible for charities to enter the debate without adopting a party-political stance—indeed, it is perfectly possible—and it is much to be regretted that many felt constrained from doing so during the election campaign.
There were also some excellent contributions on the question of social investment, not least from the noble Lord, Lord Hodgson, to whom we are indebted for highlighting this issue some years ago. But I particularly enjoyed the contribution of my noble friend Lord Chandos, whose thoughtful and thought-provoking comments I found very interesting. I look forward to hearing those developed further in Committee.
In conclusion, perhaps there has not been too much disagreement on these Benches or indeed the Benches opposite, but there is no shortage of issues for noble Lords to get involved in when the Bill enters Committee. I am sure that that will prove enjoyable for all noble Lords who have participated today, not least the Minister.
English Premier League Football
Lord Watson of Invergowrie Excerpts(11 years, 11 months ago)
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Lord Ouseley
My Lords, I pay tribute to the noble Lord, Lord Bates, for initiating this debate and enabling the very interesting contributions that we have already heard on the Premier League and its contributions to our society and in a global context. From the outset, I declare an interest as the chairman of Kick It Out, which was set up in the second year of the Premier League. I also pay tribute to the noble Lord, Lord Faulkner of Worcester, for the contribution he made in supporting the start-up of Kick It Out through his work at the time with the Football Trust, which has been superseded by the Football Foundation, of which the noble Lord, Lord Pendry, who spoke earlier, is the president.
Kick It Out was set up at a time when racism was rampant not only in football but on the streets of Britain—1993 was the year that Stephen Lawrence was murdered. Football’s reputation was clearly in the gutter at the time, so it was very important during the Premier League’s second year that notable figures such as David Dein, who was at the Premier League at the time, took an interest in the formation of Kick It Out and supported the Premier League in joining the Professional Footballers’ Association and the Football Association in enabling the challenge to racism, and to other forms of unacceptable abuse that were going on in football, to be taken up and supported.
I suppose that the Premier League owes its creation to many visionaries, who are probably all queuing up to claim credit for it. In addition to David Dein, I mention Greg Dyke, the current chair of the Football Association. He had the vision, way back when he was at London Weekend Television, in collaboration with others, to enable the formation of the Premier League, which has led to the successes that we have heard about. The noble Lords, Lord Bates and Lord Wei, and others have mentioned that success very eloquently.
With all its achievements and its high profile, there is an inevitable elitism about the Premier League. However, it is counterbalanced—which is really what I want to talk about—by admirable community programmes, some of which have been mentioned already, which the Premier League sponsors. With a focus on vulnerable young people and deprived communities, its contributions have been crucial for good community relations and social cohesion, but there is much more that could be done and must be done if we are to stimulate the next generation of young players, supporters, administrators and volunteers to be part of a sport that should be seen as a source for good, not just in the context of the riches it generates and the global position it holds but how it influences particularly the next generation.
That is an area in which I am most concerned that football must do more, particularly in boys’, girls’ and disabled football. In this regard, the programmes that support the mentoring, education and upskilling of individuals will be vital to freeing the game from racist, sexist, homophobic and Islamophobic abuse, harassment, bigotry, prejudice and other forms of unacceptable behaviours and attitudes. We have heard of the transformation that has taken place during the past 20 years, but all those features still exist in English Premier League football and, indeed, right across the football terrain.
The Premier League’s programmes generate partnerships of joint funding. We have heard already of Premier Skills English with the British Council. There is also Premier League Reading Stars with the National Literacy Trust. Its Kickz programmes, in partnerships with the police, have attracted universal acclaim, with benefits for thousands of vulnerable young people. Its current pride and joy is the Creating Chances programme, which has attracted some 4 million young people who attended projects during 2011.
In spite of all the deserved acclamation, there are feelings that the relatively poorer sections of our community are unable to afford to go to Premier League football matches. In fact, they pay a disproportionate amount of their income in trying to sustain their interest in the Premier League. Their BSkyB contributions, as they go up, compete with the need to put bread on the table for their families and to deal with their essential costs of rent, transport and fuel against a background of decreased earned income. Such resentment is understandable when it is known that many Premier League clubs pay their players considerable sums of money that can only be dreamt of by the fans. Agents take huge commissions. An increasing number of clubs are foreign owned, and many carry huge debts, as we have heard, with their foreign owners bailing them out. Without that bailout many would be insolvent. There are different realities at play here.
While the Premier League continues to grow as a dominant force, it must never be overlooked that football’s past, present and future development in England relies on the responsibilities and duties of the Football Association, the oldest national football association in the world, currently enjoying its 150th year of existence. The FA is the national governing body for football in England, charged with running grass-roots football for the 7 million individuals who play the game across the country, with 32,000 clubs and 113,000 teams affiliated to local leagues in a variety of ways. The FA also relies on more than 400,000 volunteers, 300,000 qualified coaches and 27,000 trained referees to facilitate and enable participation in and enjoyment of football being played regularly across the country. I will not list the many achievements attributed to it, as time is running short.
Following a summit convened in 2012 by the Prime Minister about racism in football, the FA launched last December the English football inclusion and anti-discrimination action plan with the full support of the football clubs, the leagues, the PFA, the League Managers Association and Professional Game Match Officials Limited. One of the main goals of the plan is to widen football’s talent pool for coaching, refereeing, licensing tutors, adjudicating and decision-making. For football to achieve its diversity and equality goals will require all administrators, decision-makers, managers and power brokers in the game to accept personal and professional responsibility to pursue the right actions to achieve the equality outcomes. The present composition of boardrooms, senior management teams, coaching teams and administrators in the authorities and in the clubs illustrates that there is a long haul ahead to take the next generation of fans and players to a point when it can be seen that all forms of bigotry, discrimination and hatred in the game have been eliminated.
Lord Watson of Invergowrie
My Lords, I begin by apologising to the noble Lord, Lord Ouseley, for trying to jump the queue a few moments ago. My enthusiasm must have got the better of me. I also congratulate the noble Lord, Lord Bates, on securing this debate, but perhaps I can ask him rhetorically why he did not get together with my noble friend Lady Jones of Whitchurch to combine this debate with the one taking place later today on the contribution of the arts to the educational and emotional well-being of society. I think the two could have been put together and, as I cannot be here to participate in that debate, that would have served my own interests as well.
It is perhaps appropriate that I talk of serving one’s own interests, because that really was the basis on which the FA Premier League was started in 1992—there are no two ways about it. It was a breakaway from the Football League on the basis of seeking a greater share of television revenues and getting more of that for the top clubs. It is unfortunate that that kind of hubris has also manifested itself in the very fact that the competition is now called “the Premier League”. I am sorry but it is not the Premier League. The Premier League was formed in 1988, and in 1998 in Scotland. When the FA was formed in 1863, it had the right to call itself that because it was the first in the world, and when the Football League was founded in 1888, it was the first in the world to have that title, but “the Premier League” is not a title that this organisation has the right to use, and I wish that it would not use it. None the less, I think that is symptomatic. The organisation was formerly called “the FA Premier League” when it started, but the hubris to which I referred earlier has led to a break with the FA and a difficult relationship between the English Premier League, as it is referred to by all people outside England, and the FA. I think that has to be recognised.
I turn now to the specific subject of this debate, the question of the economic and cultural contribution to society of the English Premier League to the United Kingdom—the international aspect is different, and I will say a bit about that in a moment. The Premier League’s contribution is self-evident. Of course it is there; that is absolutely clear. A classic example is Swansea City, a club that got into the top level for the first time, I believe, in 2011. In that first season, a university study showed, it brought about a £58 million boost to the local economy of Swansea and the surrounding area. That, perhaps, is not surprising when you consider that, given where Swansea is, people who travel there for games probably stay there overnight and spend a lot in the local economy. There are many other examples of that, and it is very much to be welcomed. Swansea City is an interesting example because in 2003 that club had to win its last game of the season to avoid dropping out of the Football League entirely. Of course, it did win, and eight years later it was in the English Premier League, which I am very pleased about.
However, 20% of that club is owned by a supporters’ trust. It is the only English Premier League club that has supporters’ trust ownership of it, and it has a director on the board as well, which is important. To some extent, I declare an interest in two supporters’ trusts—not in the English Premier League—one in Dundee United, ArabTRUST, of which I was a founder member, and, in AFC Wimbledon, the Dons Trust, of which I am also a member. I would like to see more of that kind of ownership, as is the case at Swansea, with other English Premier League clubs. I know that it is difficult because they are much bigger than the Dundee Uniteds and the AFC Wimbledons of this world, but it is possible and I hope that clubs will look at some means of doing that.
The way in which the clubs have developed in the 21 years since the English Premier League was formed is in some ways unfortunate. Unlike the noble Lord, Lord Bates, I have not welcomed the international ownership. He said that he is an internationalist. I am certainly an internationalist, but it has not always been for the benefit of clubs in England that some international owners have come in clearly knowing little about the clubs, the fans and the traditions, and sometimes knowing little, it would seem, about football. Blackburn Rovers is a classic example of that. It was a mid-range Premier League club. It had been in Europe. It had won, I think, the league cup under Graeme Souness, and it was doing reasonably well without ever seeking to repeat its feat in the mid-1990s of winning the championship. At the end of last season, having dropped out of the English Premier League last year under, I believe, Indian ownership, it very nearly went into the league below, but it just escaped doing so. That, I think, is down to bad management. The example of Portsmouth to which the noble Baroness, Lady Young, referred, is well known. Now run, incidentally, entirely by a supporters’ trust, it has gone from the English Premier League to the fourth tier at League Two in four or five years. I pay tribute to the Portsmouth MP Penny Mordaunt, who has played a heroic role in saving that club and ensuring that the supporters are now able to run that club and, I hope, build it back up again. With the support base of Portsmouth, I see no reason why it should not rise up again fairly quickly. That is another example of fan involvement, which is very important. The role of an organisation called Supporters Direct is absolutely fundamental. It supports supporters’ trusts at all levels of the professional and semi-professional game. Much of what it does goes unrecorded.
Touching on points made by the noble Lord, Lord Addington, and my noble friend Lord Faulkner of Worcester about the international aspects of the English Premier League, I think it is incontestable that it has been damaging for the English national football teams—I use the plural deliberately. The noble Baroness, Lady Young of Hornsey, mentioned the women’s team; although not directly related to the Premier League, it had a rather bad experience last week as well. At all levels, the English teams are certainly underperforming.
Since the English Premier League came into being 21 years ago, there have been five World Cups and six European Championships. Germany has been in four finals, Italy four, Spain three and France three—England has not reached even a semi-final. That cannot just be coincidence. Equally, on the performance of clubs since the English Premier League came into being, in the 21 years before it started England was the best and most successful country in Europe. Since the English Premier League came into being, England is the third most successful, behind Italy and Spain, in terms of wins and places in European finals.
Is the Premier League the best league in the world? It is the best league if you look at the worth—the TV deal. It is a little unfortunate that the recently ennobled noble Lord, Lord Livingston of Parkhead, is not here because he played a major role at BT in getting a huge amount of money into the television deal that kicks in this season. In terms of worth, there is no doubt that it is the best in the world. In terms of excitement, that is subjective. My own view is that the Bundesliga in Germany is slightly better, but it is a very exciting league. The average crowds are 35,000 in England versus 42,000 in Germany, so it has some way to go there.
It comes back to the overall product that is available. Unequivocally, the number of foreign visitors who come to this country to go to an English Premier League match and then of course do other things such as shopping and going to the theatre is a real benefit. I am not denying that it is a success. We just have to remember how it was born and the ethos it has, which is not by any means always in the interests of fans or indeed clubs at a lower level within the pyramid.
Lord Lyell
My Lords, what a treat this is. First, I thank my noble friend for allowing me the chance to express my passion in the afternoon. It is interesting that as we discuss the Premier League in England, one Scot follows another. The noble Lord, Lord Watson of Invergowrie, is a neighbour of mine. I declare an interest that I am patron of a magnificent club six miles from my home that is known colloquially as Atletico di Forfar. In our local newspapers, the Forfar Dispatch and the Kirriemuir Herald, no doubt next week it will say, “Loons mentioned twice in the House of Lords”. We very much cherish the support of the noble Lord, Lord Hunt of Kings Heath, who will speak later.
My noble friend has included in his Motion the economic aspect of the Premier League. I have received much briefing and many figures have been bandied about as to the actual visitors who come to England to watch the game. I recall the European Championships in 1996, when on wonderful summer evenings one would see football fans from all over Europe enjoying themselves not just in London but in great cities and towns throughout England, enjoying the very best hospitality and football and everything that is good about football in England—not just the Premier League.
As far as the economic aspect of the Premier League is concerned, it is also the worldwide audience, both with television and the opening up of satellite. Joined to that, anyone who looks at the accounts of the Premier League clubs will find that an enormous percentage of the revenue is from kit and what I call regalia. It is a major item in those clubs’ accounts.
As for the tickets, I am not sure what is paid elsewhere in Europe but I know that the last time I, as a mean Scot, had to pay to go to a match in London, it was £56. The team that my beloved team was playing was not purported to be in the top four so it was “only” £56. That is what I call “London rules”.
Taking the aspect of the players, your Lordships have spoken about the proportion of English players and international players. They are certainly la crème de la crème. I suspect that the Premier League in England has some of the highest quality, if not the highest quality, of players from all round the world in one league in one nation. As far as the managers are concerned, well, there are a good few of them.
My noble friend’s Motion also mentions the international aspect. As a Scot, I do wish England the very best in 2014. As the noble Lord, Lord Watson, and I will know, the TTIN syndrome comes into play here. It is nothing to do with Tintin, the cartoon character, but I always call it the “Third Thursday in November” of the odd years, when it is normal that we hear once again that Scotland has not quite made it to the final of the upcoming international championships.
Lord Watson of Invergowrie
Would the noble Lord, Lord Lyell, like to comment on the fact that as the Football Association celebrates its 150th anniversary this year, Scotland has been invited to provide opposition at Wembley Stadium next month?
Lord Lyell
Perhaps the noble Lord might be going. I have not received my invite yet. I probably will be at Station Park, Forfar, instead.
My noble friend’s Motion refers to culture. I worry mildly about that. When I had more time to devote to sporting activities, having finally qualified as a chartered accountant under Scottish rules, I recall in 1967-68 large crowds singing happily, “We shall not be moved”. That was usually once their team was on top and they were putting a thumb to their nose at the television cameras and the great ones from the FA. I will not go into the culture north of the border. The noble Lord, Lord Watson, will know—the supporters of his club are known as the Arabs—that even in Dundee there is a religious aspect to it. Certainly, north of the border you have to be very careful what you do because the Scottish Government, I understand, are going to have cameras on the crowds, not just to hear the melodies you are singing but to lip-read the words you are using. I am not likely to do that at Forfar.
As far as the English Premier league is concerned, I find that wit, jokes and nice jests are very much appreciated. Indeed, my attempts at speaking foreign languages have been blessed by learning three particular phrases, at the grounds in England as well as abroad. One is, “New glasses”, another is, “White stick”, and the third is, “Guide dog”—normally aimed at any one of the three or four match officials. I can assure your Lordships that it goes down particularly well.
I thank my noble friend Lord Bates for introducing this debate because for me and, I suspect, the millions of spectators of the Premier League both here and around the world, football is fun. You can laugh, admire and commiserate but most of all you make lifelong friends. I support a club that is not in the top four. I was struck down in 2006 with a mild stroke. I spoke to one of the directors of this club and he said, “I am so sorry, are you desperately ill?”. Within one hour, you could not have got in through the door of my room because a vast bouquet had appeared. The card said, “From the manager and players of Everton Football Club”. There was a motto underneath, saying, “Get well, YB”—not standing for Young Boys of Bern, but “you something”—“We need you”. An hour later, another bouquet appeared from the youth academy to me, a mere supporter of that club. That is the link that binds us in the Premier League in England and, above all, what a marvellous job it does not just for economics but for relationships in England as well as all over the world.
I thank my noble friend and give every good wish to the Three Lions in 2014. As the noble Lord, Lord Watson, will know, the Lion Rampant still rules.
Commonwealth and Commonwealth Charter
Lord Watson of Invergowrie Excerpts(12 years, 4 months ago)
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Lord Watson of Invergowrie
My Lords, the Commonwealth is a force for good in many ways and I welcome the charter. It gives the organisation, for the first time in its 64-year history, a single document setting out its core values. Yet the Declaration of Commonwealth Principles from 1971 includes this:
“We believe in the liberty of the individual, in equal rights for all citizens regardless of race, colour, creed or political belief, and in their inalienable right to participate by means of free and democratic political processes in framing the society in which they live. We therefore strive to promote in each of our countries those representative institutions and guarantees for personal freedom under the law that are our common heritage”.
However, the Foreign Affairs Committee report, published last November, stated in paragraph 22:
“Several of those we met in Commonwealth countries called for Commonwealth institutions to set out a more vigorous human rights agenda, and to be effective and influential in pursuing it among its members”.
It went on to say in paragraph 25:
“On certain human rights issues, the record of many Commonwealth countries is out of step with much of the developed world … The FCO’s 2011 report on human rights and other sources have recorded intolerance of homosexuality in a number of Commonwealth countries … and the FCO reported that it had recently found it necessary to raise concerns about the possible criminalisation of same-sex marriage in Nigeria and the human rights of homosexual people in Cameroon”.
The language used was guarded and the report gave no suggestion that the Committee had pursued this fundamental issue of human rights any further, but at least it mentioned homosexual repression, unlike the Government’s response to the Foreign Affairs Committee’s report, which did not mention it at all. That is a matter of great regret, because the attitudes and policies of many Commonwealth Governments are shocking. I argue they require urgently to be dragged into the 20th century, never mind the 21st. Article II of the newly signed charter states:
“We are implacably opposed to all forms of discrimination, whether rooted in gender, race, colour, creed, political belief or other grounds”,
as other noble Lords have already referred to. The “other grounds” are not specified but they clearly include lesbian, gay, bisexual and transgender people, even though consensus could not be achieved for spelling that out in the charter. Of course, that serves merely to highlight the bigotry and discrimination that is rampant among so many of the Commonwealth’s member countries, a disgrace that should give every Member of this House pause for thought.
Indeed, the level of homophobic persecution in the Commonwealth beggars belief. More than 40 Commonwealth countries—80% of the total—currently criminalise homosexuality, mostly as a result of laws imposed by Britain during the colonial era that were not repealed when these nations won their independence. For example, penalties for homosexuality include 25 years in jail in Trinidad and Tobago, and 20 years plus flogging in Malaysia. Several Commonwealth countries stipulate life imprisonment for sex between men: Bangladesh, Guyana, Pakistan, Sierra Leone, Tanzania and Uganda. There are currently, or have been, severe homophobic witch-hunts in several other Commonwealth countries including Cameroon, Ghana, Malawi, Nigeria, the Gambia, Uganda and Zimbabwe.
The Government have already expressed concern about the anti-gay Bill that is currently in front of the Nigerian Parliament. Nigeria already has extremely tough anti-gay legislation that designates up to 14 years in jail for men who have sex with men. In the north of the country, where Sharia law prevails, gay and bisexual men can face the death penalty.
Enough is enough: it is time the Commonwealth took a stand against such barbaric behaviour. There are four policies that I believe Her Majesty’s Government should urge all Commonwealth member states to agree to enact: first, the immediate decriminalisation of homosexuality; secondly, the introduction of laws prohibiting discrimination based on sexual orientation and gender identity; thirdly, the introduction and/or enforcement of legislation against threats and violence, to protect lesbian, gay, bisexual and transgender people from hate crimes; and fourthly, the offer of consultation and dialogue with lesbian, gay, bisexual and transgender organisations.
Until such steps are instigated, the reputation of the Commonwealth as a body that seeks to uphold and advance human rights throughout its membership will remain indelibly tarnished. Indeed, until such steps are instigated, I believe that the Commonwealth is not an organisation that deserves to be taken seriously in that area of its work, which is a statement that I make as much in sorrow as in anger.
Voluntary Sector and Social Enterprise
Lord Watson of Invergowrie Excerpts(13 years ago)
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Lord Watson of Invergowrie
My Lords, I congratulate the noble Baroness, Lady Scott, on identifying this important subject for debate. The standard of the debate has been very high and it has been varied.
I declare an interest of sorts. After graduating from university, my first two jobs were in the voluntary sector. The first was with the Workers’ Educational Association, as a tutor organiser, and while there I became active in my trade union, then known as ASTMS, which is now part of Unite. I am surprised that no one has mentioned the trade union movement. With 6.5 million members, many of whom work unpaid on behalf of their colleagues, it is the UK’s largest voluntary sector organisation, although it is not typically seen as such.
I think that the voluntary sector is imagined by many people to have developed relatively recently, certainly since the Second World War, but that is not the case, as demonstrated by the fact that the National Council for Voluntary Organisations, the umbrella body for the sector in England, will celebrate its centenary in 2019. According to the NCVO, there are more than 163,000 voluntary sector organisations throughout the UK. As noble Lords have mentioned, the total income for the sector is around £37 billion, with more than a third coming from statutory sources. It is important to point out that, by a ratio of 3:1, that public funding is in the form of contracts for services delivered, rather than straightforward grants.
The effects of public spending cuts on the voluntary sector are already dramatic. A survey by the NCVO in August 2011 found that the sector stands to lose £3.3 billion from the Government over the current spending review period from 2011 to 2016. That is a conservative estimate based on analysis of the Government’s figures published by the Office for Budget Responsibility. The figures assume that cuts will be made proportionately. However, in practice we know that many local authorities have been making disproportionate cuts to voluntary sector funding. Hard hit by cuts in their own funding, councils are putting charities and voluntary organisations that deliver services in the firing line when it comes to cuts. For councils, cutting their own staff means paying redundancy, whereas cutting contracts means that the voluntary sector takes the redundancy hit.
When combined with the wider impact of cuts on vulnerable people and communities, many charities are facing what might be described as a perfect storm of rising demand for services, combined with falling income. As a result, the voluntary sector workforce has been significantly reduced, with the latest figures suggesting a fall of 33,000 over the past year. There are 162,000 registered charities in England and Wales, with another 23,000 in Scotland. They have a combined annual income of more than £60 billion and employ around three-quarters of a million staff. These figures are testament to the power and importance of the voluntary sector.
Social enterprises complement much of what the voluntary and charity sectors do, although they differ from registered charities in that they expect to be revenue-generating from the service that they provide. Social entrepreneurs are establishing businesses that operate to different values. They believe that their business has a moral purpose and they use their entrepreneurial skill to benefit wider society. Traditionally, capital hires labour with the overriding emphasis on making a profit over and above any benefit either to the business itself or the workforce. In contrast, in a social enterprise, labour hires capital, with the emphasis on social, environmental and financial benefit.
My noble friend Lord Giddens commented that the Cabinet Office figure of 62,000 social enterprises currently in the UK was a considerable underestimate, and I go along with that. However, even those 62,000 contribute £24 billion to the UK economy, which is a considerable amount. Some social enterprises in the UK are major players in their sectors, including the Co-operative Group, John Lewis, Welsh Water and Cafédirect.
All that begs the question as to whether voluntary organisations, charities and social enterprises fit into the coalition’s big society project. The voluntary sector has given the big society a qualified welcome, although a number of concerns have been raised, including the impact of public spending cuts, to which I referred, on the sector’s ability to play an increased role in the provision of public services and whether the sector’s independence might be compromised. Some have gone further, claiming that the big society is little more than a cover for the privatisation of public services. Indeed, the union, UNISON, was unequivocal, stating:
“The government is simply washing its hands of providing decent public services and using volunteers as a cut-price alternative … Public services must be based on the certainty that they are there when you need them, not when a volunteer can be found to help you”.
Many noble Lords will have seen in March 2011 the Channel 4 investigative programme “Dispatches”, which concluded that the big society was about,
“privatising the welfare state on a massive scale”.
The programme explored the increasing degree to which the companies Serco, G4S, and Capita are being paid to carry out work previously performed by central and local government. Charities and the voluntary sector, which might like to deliver some of that work, are increasingly unable to compete with those groups, which are making large profits from outsourcing contracts.
When the Office for Civil Society was formed in 2010, one of its first acts was to cut £11 million from existing organisations aimed at encouraged volunteering. The youth volunteering charity, v, lost a further £8 million and almost 100 jobs with the abolition of its schools programme. When you have a stated aim, as the big society does, of seeking to encourage people to become involved locally, where is the sense in cutting experienced organisations and staff who know how to do the job?
Criticism of the big society has also come from within the House of Commons, but the coalition Government are not listening. In December 2011, the Public Administration Committee published a report calling on the Government to re-assess their delivery of the big society by appointing a single Big Society Minister with a cross-cutting brief to ensure that the work involved was consistent between departments. Having received the Government’s negative response, the committee was forced to reiterate its recommendations last month. Perhaps the Minister might enlighten us as to whether, this time, the committee can anticipate a more conciliatory response.