Charities (Protection and Social Investment) Bill [ Lords ] (Fourth sitting)

Anna Turley Excerpts

Tuesday 5th January 2016 Public Bill Committees

[The Minister for Civil Society (Mr Rob Wilson)]

I welcome you to the Committee, Mr Chairman. It is a pleasure to serve under your chairmanship.

Clause 12 extends the duty of the Charity Commission to keep a publicly accessible register of people who have been removed from office by either the commission or the High Court. The register includes the name of the removed trustee, their address at the time of removal, the date when the order was made and the name of the charity concerned. It contains details of individuals who are disqualified only because they have been removed by the commission or the court; it does not contain details of those disqualified for reasons such as an unspent criminal conviction or bankruptcy.

The register can be searched by name on www.gov.uk. It is an offence to act as a trustee while disqualified, so all charities should have a vetting procedure in place to check that new and existing trustees are eligible to act, and checking the Charity Commission’s register of removed trustees is a good way to do that. It is also good practice for trustee boards to ask prospective trustees to confirm in writing that they are not disqualified. The Charity Commission provides a model declaration form that charities can download from the aforementioned website.

Under clause 12, the register of removed trustees would be extended to include details of persons who are subject to disqualification orders made under clause 11 and those disqualified trustees removed from office by the commission under clause 5.

[Anna Turley (Redcar) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Hamilton. I welcome you to the Committee.

The Opposition support clause 12. We have tabled no amendments to it because it is an important measure in ensuring public scrutiny and accountability regarding the decisions taken by the commission and the court, along with the circumstances surrounding, and any learning that might come from, them. The clause provides that the commission must maintain a publicly accessible register of persons who have been removed from office by the commission or the High Court, and extends the register to include details of persons subject to a disqualification order.

My only question at this stage is whether the Minister envisages any scenarios in which it would not be appropriate to take that action. The clause states that “the register must include”, but the Minister mentioned exemptions in the case of bankruptcy and so on. Given that addresses and other details will be publicised, might he envisage a scenario in which, for reasons of public or individual protection, or any other reason, someone would not be included in the register?

[Mr Wilson]

I will give some thought to that question, but the commission already processes a vast amount of information in accordance with a number of legal obligations, including data protection legislation. It is important to mention that, because there might be concerns about publicly available information being in some way misused.

The commission currently maintains, in accordance with its statutory duties, including data protection considerations, a register of 164,000 charities. The commission fully accepts its responsibility to protect individuals from any unauthorised and unreasonable case for disclosure of personal information, while balancing that with legitimate considerations. The commission is overseen in its management of personal data by the Information Commissioner’s Office, as are all public bodies. I will write to the hon. Lady in answer to her question.

Question put and agreed to.

Clause 12 accordingly ordered to stand part of the Bill.

Clause 13

Participation in corporate decisions while disqualified

[Mr Wilson]

The provision is relatively straightforward and I hope to be able to provide the Committee with a quick and short explanation.

Trustees do not need to be natural persons; they can be legal persons. That means it is possible for a corporate body to be a trustee of a charity. This gives rise to a loophole relating to disqualified trustees. As the law currently stands, a disqualified trustee is not prevented from acting as an officer of a corporate body—where that corporate body is a charity trustee—and participating in decisions about the management and administration of the charity. This can potentially be used to circumvent disqualification. Clause 13 enables us to put this matter right. It prohibits disqualified individuals from participating in decisions about the administration of a charity where they are an officer of a corporate body and that corporate body is a charity trustee. It also extends the civil and criminal sanctions that apply where a disqualified individual acts as a trustee. It is a common-sense provision and I commend it to the Committee.

[Anna Turley]

I support the Minister’s view on the provision. It is technical, but important. The clause inserts into the Charities Act 2011 new section 184A, which sets out that where a person is disqualified either under section 178 or new section 181A of the Charities Act 2011, which we have discussed in some detail in Committee, and where they are an officer of a corporate body that is a charity trustee, the provision prohibits that person from participating in decisions relating to the charity’s administration. We think it is absolutely right that we abide by the decision that the Charity Commission has made and that the person is not able to continue to participate through that loophole.

It is right that new section 184A extends the existing criminal and civil sanctions to apply to officers who participate in decisions relating to a charity’s administration when they have been disqualified from being charity trustees, and we therefore support the provision.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clause 14

Fund-raising

Question proposed, That the clause stand part of the Bill.

[Mr Wilson]

You have me working hard this evening, Mr Hamilton.

The clause introduces important new requirements that will greatly increase transparency in relation to a charity’s approach to fundraising. These provisions were added to the Bill in the other place following a series of media exposés of poor fundraising practices in which elderly and vulnerable people were targeted by charities or subjected to undue pressure to donate. Many of those poor practices are completely and utterly unacceptable. It is important to remember that although bad practice has been uncovered, most charities fundraise well. They need to be able to ask people to donate to raise funds, and we should not forget that many do so responsibly and in line with best practice.

The sorts of poor practices that we have seen in the media recently are mainly in the areas of mass marketing fundraising, such as direct mail or telephone fundraising. In these high volume data-driven areas, some charities have been treating donors as a means to an end, rather than focusing on the charity’s relationship with the donor as an individual. The first new requirement under subsections 7 and 8 will ensure that charities put in place explicit safeguards for potential donors when they wish to fundraise through third party contractors.

The provision prohibits a contractor from fundraising for a charity unless the written agreement between the fundraiser and the charity includes standards such as how it will protect vulnerable people from undue pressure and how the charity will monitor the contractor’s compliance. It has become clear that much of the poor practice we have seen over the past year or so occurs when there is a lack of accountability over how charity fundraising is conducted. The new requirement aims to make it absolutely clear that charities are responsible for ensuring that third parties who are paid to fundraise on the charity’s behalf act in a moral, respectful and responsible manner when asking the public for money.

The second requirement under new section 162A will introduce much greater transparency in relation to a charity’s track record in fundraising. It will require charities to publicly disclose information on how they conduct fundraising, whether they subscribe to appropriate self-regulation, and whether any good practice requirements have been breached. They will also need to publicise more details on the number of complaints that they have received, as well as what principles they follow in order to protect vulnerable donors and the wider public from poor practice. That will ensure that high-quality fundraising becomes a board-level issue and returns to the heart of a charity’s operations where it belongs. In that respect, I also warmly welcome the Charity Commission’s new guidance for trustees on their responsibilities to do with fundraising. The new guidance, which is being consulted on, should be a must-read for all trustees of charities that fundraise from the public.

To update the Committee on our progress in strengthening the self-regulation of fundraising, which sits alongside the provisions in the Bill and is arguably more important, not only did we amend the Bill in the other place, but I asked Sir Stuart Etherington to undertake a review of fundraising self-regulation over the summer. He was supported by a cross-party panel of peers. His report, published in September, recommended the establishment of a new, tougher, single self-regulator to oversee charity fundraising with universal coverage, high standards of best practice, stronger sanctions and close links to existing statutory regulators.

The review also recommended the setting up of a fundraising preference service so that people who felt inundated with charity fundraising requests would be able to reset their consent to be contacted. That has proved a popular concept with the public. Taken together, the proposals will provide a strong and comprehensive framework for the self-regulation of fundraising.

We are making good progress on implementation. I appointed Michael Grade, Lord Grade of Yarmouth, to be the interim chair of the new fundraising self-regulator. In December he appointed his interim chief executive, Stephen Dunmore. He also appointed a working party to develop plans to implement the fundraising preference service, led by George Kidd, who has vast experience in direct marketing regulation. In December the largest fundraising charities were invited to a summit, which was streamed live and at which Lord Grade set out his vision for the new self-regulator. The meeting was a success and I left with the impression that the largest charities accepted that things needed to change and were willing to throw their weight behind the new regulator.

Over the next few months Lord Grade’s vision will be turned into reality and we expect to see the new regulator up and running from spring 2016, with the fundraising preference service following shortly afterwards. Most of the largest charities have committed to fund the new self-regulator’s set-up costs and I am sure that the others will soon follow. This is an opportunity for the charity sector to demonstrate its leadership and maturity and to show that it can put its own house in order.

I have every confidence that, with charity support, the new self-regulatory system will succeed and, most importantly, consign poor fundraising practices to history. If the new self-regulatory system were to fail, however, we need a back-up plan, which is where new clause 7 on the Government’s reserve powers to regulate fundraising through statute comes in. I will explain those powers to the Committee in more detail at our next sitting.

[Anna Turley]

The Opposition welcome clause 14 and have tabled no amendments to it. However, it is important and deserves discussion, so I will take some time, with the leave of the Chair, to make a few points.

Due to the clause’s importance and, in particular, because of some of the public exposure that led to it, it is essential to explore some of the issues behind it. It amends section 59 of the Charities Act 1992 and prohibits commercial fundraisers from raising funds for a charitable institution unless the fundraising agreement between the commercial fundraiser and the charitable institution includes certain terms on fundraising standards that the commercial fundraiser undertakes to follow. That is extremely important, because many within and outside the sector have felt that what could be described as the outsourcing of a charity’s fundraising function can perhaps play a part in distancing that process from the charity’s original aims and objectives. People have also felt that the accountability of a charity itself could be somewhat loosened by the outsourcing of fundraising provisions. We therefore think the clause is an important amendment to ensure that a proper agreement is in place setting out a certain number of standards that must be followed.

Clause 14 also amends the Charities Act 2011 by inserting new section 162A, which requires charities whose accounts have to be audited in accordance with section 144(2) of the Act—currently, those with a gross annual income of more than £1 million, or those with a gross annual income of more than £250,000 and assets with an aggregate value exceeding £3.26 million—to set out in annual reports their approach to fundraising, including in particular whether they use commercial fundraisers and how they protect vulnerable people from undue pressure in their fundraising.

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We do not seek to claim that the power of social investment will solve all the problems faced by charities, but it will make a positive contribution by giving them certainty that they can explore the model as a tool that can help them to increase their impact. It fits with the wider Government aim of supporting the flow of investment into charities and social enterprises. Those organisations have huge expertise in their areas, along with an unwavering commitment to helping some of the least fortunate in our society. Supporting them in their numerous missions has been a consistent aim of the Government, as it was of the previous Government. I am pleased that the new power will take a small but meaningful step in that direction, and I commend it to the Committee.

[Anna Turley]

I thank the Minister for setting out the views and values behind the clause, which we welcome. Social investment is an important part of the fabric of our community and voluntary sector. We have tabled no amendments to the clause, and we recognise that it will make an important contribution.

As the Minister set out, the Bill is the first attempt to define in statute social investment, which is

“the use of repayable finance to achieve a social as well as a financial return.”

Community and voluntary sector organisations are playing an increasingly large role in society. As such, demands on the sector will be higher than ever. However, the third sector faces a chronic lack of investment. Many organisations are constantly in a state of fragility and vulnerability, and many are urgently seeking the next source of funding rather than investing to create a sustainable and robust social business. The climate of cuts, particularly in local government, as well as increased pressures and demands on many of the services that community and voluntary sector organisations provide, mean that they are facing a difficult climate. Any opportunity to look at new and innovative ways of raising finance are therefore to be welcomed.

Often, when funding comes it is unsuitably packaged for the purpose. It might be aimed at short-term projects or something specific, with many strings attached. It could come with unrealistic expectations and may not always be support the core aims and objectives of the charity. Social investment is growing in response to those needs and challenges. Done well, it could not only create more capital for the sector but help to build long-term capacity and develop a movement towards early intervention and prevention, which the Opposition welcome as part of our approach to public services. That could result in a stronger third sector that is better able to play its important role in society.

The Bill’s helpful explanatory notes give examples of acts that might constitute social investments, and the definition is welcome. Such examples include a charity for the support of homeless people letting out housing at a low rent; an overseas development charity investing in fair trade tea production; a charity for the advancement of medicine making a high-risk investment in a medical research company; a diabetes charity investing in a company that is developing foods intended to reduce the impact of diabetes on sufferers; or a charity for the reduction of reoffending investing in a social impact bond to fund a project that supports individuals leaving prison. Those are all worthy and important aims and objectives, and we support efforts to put a social investment framework into statute.

Nevertheless, it is important that we continue to see the funding of the community and voluntary sector as diverse and variable. We do not want a one-size-fits-all solution to the funding crisis in the charity sector, as not all charities will be able to make social investments. Some charities need to be able to take risks and fail, which is in the nature of any charity or community organisation. Because of the kinds of people that they support and deal with, or because of their aims and objectives, some community and voluntary sector organisations will have to spend money just to manage or prevent decline or difficult scenarios. We must ensure that charities that support such social investment, which may never have a financial return, are not starved of the finance and support that they would traditionally get through a grant-based model.

The clause sets out an important framework for social enterprise, which we support and welcome as an important new means for charities to gain income and to be longer-term and more strategic in their approaches. It gives charities the reassurance that they need to feel empowered to undertake investment. Definitions will continue to change and evolve, but in the meantime, this is an important regulatory framework to encourage and support social enterprise.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.

Clause 16

Reviews of the operation of this Act

Question proposed, That the clause stand part of the Bill.

[Mr Wilson]

This is a review clause. We took on board the concerns raised in the other place that five years would be too long before the first review, and we have debated some of those concerns today. We amended the Bill so that the first review will have to start within three years of enactment and conclude within a year. Subsequent reviews will have to take place every five years. All the reviews will be reported to Parliament.

We must remember that the Charity Commission estimates that some of the new powers might only be exercised once or twice a year, so allowing time for the development and publication of guidance and, in some cases, public consultation before the provision can be commenced means that for some of the powers there may be a limited evidence base for the first review after three years. Nevertheless, this is a sensible provision that will enable us to determine whether the Bill has achieved its aims, and I commend it to the Committee.

[Anna Turley]

The Opposition support this clause because it is a simple and practical way of providing for the Minister to review the operation of the Bill. As he mentioned, we have had quite a lot of discussion and debate today about the timeframe for monitoring the Bill. We have had a lot of debate about the onus that much of the Bill puts on the Charity Commission, about many of the new powers and about many of the new expectations that will be placed on charity and community groups. It is right that we review those things.

The Minister has used the word “proportionate” many times when talking about the decision making and judgments that the Charity Commission will have to exercise in taking steps to raise standards within the charity sector. Continuing to review that will be important. We will also continue to assess the financial impact, particularly on the Charity Commission but also on the charity sector, of many of the new demands and powers.

As the Minister said, it is important that new guidance, new policy papers and new explanations, definitions and criteria for the Charity Commission will be set out, consulted on, established and reviewed consistently within three years of the enactment of the Bill. Three years, moving to five years thereafter, is a perfect timeframe to establish that, so we support the clause.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clause 17

Short title, extent and commencement

[Mr Wilson]

I beg to move amendment 9, in clause 17, page 20, line 34, leave out subsection (6).

A technical amendment to remove the Privilege amendment that was inserted in the House of Lords.

This is a technical and procedural amendment to remove the privilege amendment that was made on Third Reading in the other place. The privilege amendment recognises that provisions in the Bill may infringe the privilege of the House of Commons with regard to the control of public money. Amendment 9 will leave out subsection (6), thus ensuring that the imposition of any charge resulting from the Bill is properly approved. In practice, the new powers that the Bill confers on the Charity Commission are expected not to result in additional costs for the commission. The commission itself has said that the new powers will help it to regulate charities more efficiently by ensuring that more proportionate and effective action can be taken at an early stage and by limiting the opportunity for delaying tactics, which can waste the commission’s resources.

The remainder of clause 17 addresses the Bill’s territorial extent, which is England and Wales. The Bill team has submitted a memorandum to the Committee’s Chairs for the purposes of Standing Order No. 83L covering the Government amendments that have been made today. It reflects the Department’s continuing view that the Bill, as amended, extends and applies to England and Wales only. We liaise with the devolved Administrations on cross-border charity law and regulation, and the Charity Commission similarly liaises with its counterparts in Scotland and Northern Ireland on matters of mutual interest.

The final provisions relate to the commencement of provisions in the Bill. We will work with the Charity Commission to publish an implementation plan for the Bill once it is passed. As I have mentioned, there are a number of provisions of which we will need to give charities, and those working in them, sufficient notice before we commence them. The extension of automatic disqualification is an important one. Other provisions will need guidance to be published before they can be commenced. I hope that my explanation suffices.

[Anna Turley]

We support the amendment. We agree with the Minister that it is a technical, procedural amendment to ensure the passage of the Bill, and we have no comments to make at this stage.

Amendment 9 agreed to.

Clause 17, as amended, ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.— (Sarah Newton.)

Charities (Protection and Social Investment) Bill [ Lords ] (Second sitting)

Anna Turley Excerpts

Tuesday 15th December 2015 Public Bill Committees

[Anna Turley (Redcar) (Lab/Co-op)]

I beg to move amendment 4, in clause 6, page 5, line 2, at end insert—

‘(4) An order under this section will automatically be discharged on the closure of the inquiry under section 46 which is referred to in subsection (1).’

To restrict the power to ensure that if a tribunal appeal is successful, a direction by the Commission as a result of the warning is no longer relevant.

I welcome the clause, which inserts a new provision into the Charities Act 2011 to enable the Charity Commission, after it has instituted an inquiry, to make an order directing a charity not to take or to continue certain actions that the commission considers constitute misconduct or mismanagement in the administration of the charity. The order has to specify the action that must not be made or continued, and has to set out the commission’s reason for making it. The commission will have to review any order at intervals of not more than six months and there will be a right of appeal against the order.

When the Joint Committee on the Draft Protection of Charities Bill suggested that it would be helpful if the Government chose to revisit proposal 13, it set out that the provision must be tightly drawn to clarify the circumstances in which the power can be used and the safeguards that apply, in particular the right of appeal. The previous Government accepted the Joint Committee’s recommendation and said that they would revisit proposal 13 for inclusion in the Bill—that is now clause 6. I look forward to the Minister setting out some examples of the circumstances in which the power may be used and any safeguards. I am pleased to see the right of appeal.

The new power in the clause is broadly similar to a power that the Office of the Scottish Charity Regulator has to direct that specific action is not taken. However, the OSCR’s power may take effect for a maximum of six months. There is no such limit under clause 6, although the Charities Commission must review the order at intervals of not more than six months.

The crucial issue, to which my amendment speaks, is that it is not clear whether the order may remain in place once a section 46 inquiry has been closed, so it could extend beyond the period of the inquiry. The amendment seeks to prevent that. The Charity Commission states:

“The purpose of an inquiry is to examine the issues in greater detail and investigate and establish the facts of the case so that the commission can ascertain the extent of any misconduct or mismanagement, establish the extent of the risk to the charity, its work, property, or beneficiaries, and decide what action is needed to resolve the concerns. If the allegations are not substantiated, the inquiry will say so. The ultimate aim is to stop abuse, ensure compliance and put a charity back on a secure footing. Where this is possible it may include restoring its reputation, protecting beneficiaries or assets and protecting and enhancing the reputation and public confidence in the charitable sector generally.”

That is all right and proper, and we agree with the Charity Commission’s view on the purpose of an inquiry. Once the inquiry has concluded, an order made under clause 6 should no longer be relevant and the findings of the inquiry, whether allegations are substantiated or not, should take precedence. Directions that have been given during the process of an inquiry, but which are not in keeping with the outcomes, should not be pursued.

The commission has recently clarified the fact that it has no power to require trustees to fetter the future exercise of their fiduciary powers under its general power to give advice and guidance, which appears in section 15 of the Charities Act 2011. That clarification followed judicial review proceedings in the High Court, where it was alleged that the commission had attempted to do exactly that. This is one of the concerns that we expressed earlier in the debate, and it could apply in particular to the commission’s powers to specify action that should be taken to rectify misconduct or mismanagement under clause 2.

There are situations in which the commission may direct trustees to act or not to act—clauses 6 and 7 introduce more such situations—but they are always carefully circumscribed. It is therefore extremely important that we are satisfied that the definition of such powers is carefully discussed, that their gravity is understood and that they do not continue beyond an exhaustive inquiry. That is why I moved the amendment.

[The Minister for Civil Society (Mr Rob Wilson)]

The clause is a sensible extension of the existing powers of the Charity Commission that are available to it when it is conducting a statutory inquiry under section 46 of the Charities Act 2011. At the moment, when a statutory inquiry is under way and the commission is satisfied that there has been either misconduct or mismanagement, or that there is risk to charity property, it may direct a charity to undertake certain actions under section 84 of the Act. The purpose of the existing section 84 power is to allow the commission to direct any action to be taken that it

“considers to be expedient in the interests of the charity.”

Legal precedent confirms that “expedient” in that context means advantageous or beneficial, so the action that the commission proposes will be of advantage or benefit to the charity’s interests, which in effect means the charity’s beneficiaries. However, the advantage or benefit must be viewed only in the context of the issues raised through the inquiry and not in the belief that it would be good for the charity in general terms. Specific examples of where the commission already uses that power include ordering a charity to undertake a governance review in a defined period; review a legal agreement; provide specified documentation by a certain date; ensure that a named individual is monitored on charity premises at all times; draw up a risk management procedure in a certain timeframe and implement that procedure; and take legal advice in connection with a matter concerning the charity and its funds.

Published figures in “Tackling abuse and mis- management: 2013-14” show that the commission used that power to direct charities on 38 occasions. As we have discussed, the commission has been exercising its power more often and more effectively, so we may well see that figure increase in the report for 2014-15, which will be published in the coming weeks.

The power to direct a charity to do something is long held and the commission has well-established procedures and policies in its armoury. The commission also has the power under section 76(3)(f) of the Charities Act 2011 to restrict a charity from undertaking certain financial transactions. That existing power can be exercised in a number of ways, including freezing a charity’s bank account; requiring the charity’s trustees to seek commission approval before entering certain transactions; and preventing specific transactions. That was used on 15 occasions in 2013-14.

The commission does not have the power to prevent a charity from undertaking actions or activities that would amount to misconduct or mismanagement during the course of a statutory inquiry. That is a loophole and the clause is a common-sense addition that will give it that power.

Some people have expressed concern that the commission could use that power to undermine freedom of association or freedom of speech, in particular for charities with religious purposes, but it is important to point out that it would be available to the commission only to prevent activities that would constitute misconduct or mismanagement were they to go ahead or continue. Therefore, if a charity engaged in unlawful political activity such as supporting a political party and holding partisan events, the Charity Commission could act to prevent further such activity from taking place.

It is worth pointing out, as the hon. Member for Redcar did, that the commission’s equivalent in Scotland, the Office of the Scottish Charity Regulator, has a similar power. Section 28 of the Charities and Trustee Investment (Scotland) Act 2005 enables the OSCR to

“direct any charity, body or person with regard to which it is making inquiries…not to undertake”

specific activities for a period of six months. The OSCR may seek a court order for longer restrictions.

The Joint Committee supported the inclusion of such a power, provided that it was tightly drawn to clarify the circumstances in which it could be used, along with the safeguards that applied, particularly the right of appeal. The new power in the clause will enable the Charity Commission to intervene to prevent misconduct or mismanagement from taking place rather than having to watch powerlessly, then take remedial action once the damage has been done.

The bar for exercising the power will be high and there will be six specific protections. First, the power can be used only in the context of a statutory inquiry. Secondly, the commission will have to be satisfied of the need to prevent misconduct, mismanagement or risk to charity property. Thirdly, the commission must set out a statement of reasons for exercising the power and review any order regularly—at least every six months. Fourthly, the making and every review of the order will be subject to a right of appeal to the Charity Tribunal and, like all its other protective and remedial powers, this power is subject to the Commission’s duty to act proportionately under section 16 of the Charities Act 2011.

Let me give the Committee two examples of cases in which the powers might be used. In recent years, there have been several cases of charities involved in the abuse of charitable business rates relief. In such cases, the so-called charity enters into multiple tenancy agreements with commercial property owners at reduced rents without any real evidence that the tenancies are in the best interests of the charity or are used meaningfully for charitable purposes. Once occupied by the charity, the property benefits from a reduction of at least 80% in business rates relief, which can be a substantial sum. The saving is often shared between the charity and the property owner. Local councils and honest taxpayers end up losing out. The commission has taken action in such cases, but it can do so only after the event. The new power would enable the commission to direct the charity not to enter into, renew or continue any further tenancies, in effect preventing the misconduct from continuing.

Another example in which the power could be used would arise if a charity had made significant loans to companies connected to the trustees. The trustees would seek to become insolvent and to wind up the charity, writing off the loans and resulting in significant financial benefit to the companies connected to the trustees. In that case, the commission would be able to use the new power to direct the trustees not to wind up the charity, buying time to sort things out by, for example, removing the trustees, or appointing new trustees or even an interim manager to act in the charity’s best interests, which could involve calling in the loans.

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[Anna Turley]

I thank the Minister for his helpful response. It was extremely important to hear his clarifications, particularly about the six protections that will be in place before the power is used, and the clear and helpful examples he gave of instances in which the power will be used.

The amendment relates not to the warnings and the tribunal dealt with in clause 1 but to whether the power will continue if it is used in the course of a formal inquiry, subject to the inquiry’s final outcome. I was reassured to hear that the inquiry’s outcome and the report’s findings will take precedence in the action going forward. It is extremely important that if allegations made in the course of the inquiry are unfounded, they are quashed and no further action is taken. We also wanted to know whether, if the inquiry report showed structural issues and there was a remedy that affected those issues, that would overrule the temporary protective amendments. The Minister clarified that issue, for which I am grateful. I am reassured by his response, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6 ordered to stand part of the Bill.

Clause 7

Power to direct winding up

Question proposed, That the clause stand part of the Bill.

[Mr Wilson]

We are progressing through the Bill at a rate of knots, so I will try not to delay the Committee too long. The Charity Commission’s usual practice, as many of us will know, is to try to restore a charity to health following a statutory inquiry and to ensure that funds dedicated for specific charitable purposes are used for those purposes. The commission’s current powers are based on that premise; that is as it should and, indeed, will continue to be. In practice, that may mean replacing some of the trustees, directing the charity to take certain actions or reforming its governance arrangements, but the principle is one of ensuring the continuation of the charity to deliver its charitable purposes.

There are, however, rare inquiry cases where it is more appropriate for the commission to take a different approach. In those cases, it is clear that attempting to restore the charity to health is unlikely to succeed and would not be the right strategy. A good example would be sham charities set up ostensibly for charitable purposes but really operating for private gain or some other non-charitable purpose. Such a body may never have had a genuine charitable aim in the first place and the commission is unlikely to be able to restore it to health.

In such cases, the Charity Commission can and already does act to transfer any remaining funds or assets to another legitimate charity with the same charitable purposes. It can do this under its existing inquiry powers. The commission can remove the trustees, ensuring their disqualification, provided that they do not resign before the commission can do so. What the commission cannot do under its current powers is tackle the empty shell that is left, so there is a risk that the empty shell could be reactivated at a later date to be used for further misconduct.

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[The Chair]

The Minister has concluded.

[Anna Turley]

I am happy to take any interventions. We are indeed rattling through these clauses and are the beneficiaries of some excellent analysis of the Bill during its long progress through the other place and in pre-legislative scrutiny. A lot of action has been taken to clarify and improve the Bill. Indeed, it is clear from its drafting that this clause has benefited from much scrutiny.

Clause 7 will provide a new power for the Charity Commission to direct the trustees, or other people in the charity, to take the necessary steps to wind up the charity and transfer its resources elsewhere. The explanatory notes suggest that the power will be used in “rare cases” and state:

“The Commission’s usual practice is to attempt to restore a charity to health following a statutory inquiry”.

We all support the positive and supportive role that the Charity Commission would play. As the Minister said, the commission itself cannot wind up the charity, as that would be acting in the charity’s administration; it can only direct the trustees to do so themselves. That is absolutely right and within the boundaries of the commission’s power. The power would be available after the commission had instituted an inquiry and was satisfied either that there was misconduct or mismanagement, or a need to protect charity property. The commission would need to be satisfied on other matters specified in the clause, including that the exercise of the power was

“expedient in the public interest.”

Again, I fear that a burden of decision making and judgment is being placed on the Charity Commission. Just as the decision on whether to publicise a warning under clause 1 will be taken by the commission, so again we find the commission having to be the arbiters of public interest. I do not doubt that it will perform that duty admirably, but we must be conscious that we are asking it to make another judgment call. That risk should be looked at in the context of an environment in which the commission is under pressure to take action on charities that are threatening public trust and confidence, and to be seen to do so. The recent High Court judicial review case mentioned earlier provides an example of how easy it is for the commission to take precipitate and potentially disproportionate action. I sincerely hope that the commission will use its customary wisdom and good judgment in making these decisions. I was reassured to hear that it is expected to use the power only one or two times a year.

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[Mr Wilson]

My hon. Friend makes a very good point. The clause is partly about restoring trust. It is also about making the Charity Commission work better and more efficiently and focus its funds on the areas where it can really make a difference—day in, day out. She is absolutely right.

Other barriers may make a person unable to comply with a commission direction of this type, such as restrictions in the charity’s governing document, which may prevent otherwise willing trustees or members from complying with this type of commission order because they are legally unable to do so. The Joint Committee recommended that we consider the inclusion of some form of statutory protection for a financial institution in cases where compliance with the direction from the commission in those circumstances might constitute a breach of its contract with a charity. The clause seeks to remove any obstacles by allowing the commission’s direction to overcome a contractual obligation owed to a charity.

Importantly, clause 8 continues to provide the specific, statutory protection for a financial institution—or, for that matter, any person holding the charitable property—in cases where compliance with the commission’s direction in those circumstances might constitute a breach of its contract with the charity. It is always important to consider the practical application of legislation and the clause will help the Charity Commission make use of the existing power more effectively.

[Anna Turley]

I echo the Minister’s concluding comments. As well as supporting the Charity Commission, the clause will support many charities that often struggle with individual trustees who may have been unable to take necessary action. This will enable the commission to step in and essentially fill a void where no one has had the power to tackle the issue.

Again, we welcome clause 8. It will amend the power in section 85 of the 2011 Act, which enables the commission to direct the application of charity property, where it is satisfied that a person is unwilling to apply it properly for the purposes of the charity and it is necessary or desirable to make an order to secure the proper application of that property.

The clause will amend section 85 in two ways. First, the commission will now have the power to direct the application of the property, if satisfied that the person is unable to apply it properly, as opposed to being unwilling. I appreciate the Minister’s examples of where that will be applicable. It is helpful to understand the case studies that will ensue.

Section 85 will be amended to ensure that compliance with the order will not result in a breach of contractual obligations to the charity. The explanatory notes and the Minister have provided an example of banks that act on client instruction. That is the most common example of the problem, where financial institutions hold a charity’s property but are unable to comply with the commission direction to transfer that property because doing so would result in a breach of their contract with the charity. That closes an important loophole and enables the Charity Commission and charities themselves to progress with securing the property.

As the Minister showed with his examples, clause 8 will continue to provide the specific statutory protection for a financial institution, in cases where compliance with a Charity Commission direction in these circumstances might constitute a breach of its contract with a charity. We support the clause and welcome it as a useful addition to the Bill.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Sarah Newton.)

Charities (Protection and Social Investment) Bill [ Lords ] (First sitting)

Anna Turley Excerpts

Tuesday 15th December 2015 Public Bill Committees

[The Chair]

Copies of written evidence that the Committee receives will be made available in the Committee Room. We will now begin line-by-line consideration of the Bill. The selection list for today’s sitting is available in the room. It shows how the selected amendments have been grouped together for debate. Amendments grouped together are generally on the same or a similar issue. A Member who has put their name to the lead amendment in a group is called first; other Members are then free to catch my eye to speak on any or all of the amendments within the group. A Member may speak more than once in a single debate.

Please note that decisions on amendments take place not in the order in which they are debated, but in the order in which they appear on the amendment paper. In other words, debate occurs according to the selection and grouping lists, and decisions are taken when we come to the clause that the amendment affects. I hope that explanation is helpful. I will use my discretion to decide whether to allow a separate stand part debate on individual clauses and schedules following the debates on the relevant amendments.

Clause 1

Official warnings by the Commission

[Anna Turley (Redcar) (Lab/Co-op)]

I beg to move amendment 2, in clause 1, page 1, line 16, after “give” insert “at least 14 days”.

To require a minimum period of 14 days’ notice of a warning.

It is a pleasure to serve under your chairmanship, Mrs Main. Thank you very much for this opportunity. As we stated on Second Reading, we wholeheartedly welcome the Bill and the intention to clarify and support charity law, particularly by introducing greater transparency, greater effectiveness in governance and greater efficiency. The Bill will also give charities a new power to make social investments.

The intention behind clause 1 is to introduce a new official warning for the Charity Commission where it considers that there has been a breach of trust or duty, or other misconduct or mismanagement. Our amendment, which we believe is important, would require a minimum period of 14 days’ notice if a warning is issued.

We welcome the clause in principle. We understand that the purpose behind it is to fill a gap for low-level breaches of the statutory provisions of the Charities Act 2011 or of the fiduciary duty where there are low risks for assets and services. The National Audit Office welcomed it and said it will give the Commission

“a stepped approach so that, rather than just having, on the one hand, advice and guidance and then the nuclear option of a statutory inquiry, it gives the Commission something in between”.

We welcome the principle of the warning process.

However, we have some concerns about the clause, particularly on the lack of safeguards, which we believe could threaten the independence of charities and fundamentally change the relationship between the Charity Commission and its volunteer trustees. The commission already has a number of powers to deal with regulatory concerns—even low-level concerns. In particular, it can do so by way of operational compliance cases, which it routinely carries out.

Statistics from the Charity Commission show that between 1 April and 30 September 2015 it opened 575 operational compliance cases into registered charities. If the matter is urgent, the commission can already open a statutory inquiry without notice and suspend the trustees, pending the use of additional protective powers. The decision to open a statutory inquiry and the subsequent exercise of protective powers can be appealed to the charity tribunal, known as the first-tier tribunal. There are no plans to change that.

Operational compliance cases are likely to be regarded very differently from the new official warnings, which could have a significant impact on a charity. First, it is likely that the public issuing of an official warning, which is allowed in this version of the Bill, will carry far more stigma than an operational compliance case and could risk damage to a charity’s reputation, with a resulting drying up of funding and support.

Secondly, failure to comply with a warning automatically gives rise to a right for the commission to take further, significant protective action in relation to a charity, after opening a statutory inquiry. That is not the case with an operational compliance case, so this is a fundamental shift in the relationship between charities and the commission.

[Peter Kyle (Hove) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Main.

The relationship between the regulator and charities is a sophisticated one, and it is important that the Charity Commission plays a supportive role as well as a challenging one. Does my hon. Friend agree that the ability to send a warning notice without notice is a sign of failure in the relationship between the regulator and the charity, rather than one of support or challenge?

[Anna Turley]

My hon. Friend makes a really important point. The relationship is long standing, sophisticated and complex. It is right that there is an opportunity to give notice of a warning in the Bill. Our issue is that there is no significant timeframe and no notice of the timeframe. I will explain why that is such a critical issue, but my hon. Friend is absolutely right; it is important that there is a nuanced and balanced relationship and opportunities for both sides to state their case in any dispute.

I will now focus on the amendment. The Bill helpfully ensures that before issuing a warning, the commission must give notice of its intention to do so. However, there is no indication in the legislation of timescales for a warning. The briefing from the commission states that

“the Commission has confirmed it will ensure that a reasonable time for representations is given”.

It continues:

“The timing is likely to vary for warnings in different cases, depending on how much engagement and warning the charity has had during engagement with them, and there may be times when the timescales might have to be relatively short (if, for example, it relates to a time critical incident)”.

It states that operational guidance for its staff will be published. However, this seems very vague and gives total discretion in this situation to the commission. What is a reasonable time? Could that mean a matter of hours or a phone call before a press release is sent out? We know the potential damaging implications for a charity of publicity around the warning.

[Jo Stevens (Cardiff Central) (Lab)]

The problem with the term “reasonable” is that it is subject to interpretation. We can tell from case law and statute that what is reasonable in one circumstance is not reasonable in another. This will create a lack of clarity around the implementation of the Bill. Does my hon. Friend agree that it would be much better to have clarity and specific time limits so that both the Charity Commission and the charities are clear about what the expectation is?

[Anna Turley]

I totally agree. That is the purpose of the amendment. There is a lack of clarity around “reasonable time”. Not only is that pretty indefinite, but it puts the onus back on staff at the Charity Commission, which could place an undue burden on them and leave open to interpretation what the definition of a reasonable time could be. That is why it is important to have a timeframe in the Bill.

Without a timeframe, there might be no opportunity for a charity to prepare a defence or to correct an unconscious mistake, which could be the cause of the warning, or to let trustees know. We might end up in a ridiculous situation in which they could read about a warning for their charity in a newspaper or a sector magazine because, as the Bill is drafted, the Charity Commission can publish the warning. Such a warning, especially if published, could have a substantial impact on a charity’s ability to raise funds and might have significant reputational damage.

It may be felt that a prescribed period of notice is not necessary because the Charity Commission will act reasonably and proportionately. I do not doubt that will always be its intention; I know that the Charity Commission does an extremely good job in difficult circumstances, often with many resource pressures. However, recent experience shows that is not always the case. In a recent High Court case involving the commission and the Joseph Rowntree Charitable Trust, the Lord Chief Justice referred to “ludicrous time limits” imposed by the commission. He also said that he could understand why it was felt that the Charity Commission had behaved in an extremely high-handed manner in that case, and suggested that there should have been

“an awful lot more time spent at the beginning talking, as people normally do, and not issuing ultimatums”.

There is therefore a real danger that the commission, if allowed scope to use this new power in a disproportionate way, may well do so, however well meaning its intentions.

If the power is intended to be used only for low-level matters, a minimum notice period of 14 days is entirely appropriate. It is not clear why there should be any objection to that. For more serious matters where the Commission is able to take more extensive regulatory action, it will be able to use its other powers without notice. That is the existing situation. The Joint Committee on the Draft Protection of Charities Bill recommended that a reasonable minimum notice period to make representations over a draft warning should be clear in the Bill. That safeguard has not been included and the amendment seeks to rectify that.

Moreover, it was clear, even from the Government’s response to the Joint Committee’s report, that a recipient should have an opportunity to make representations on a proposed warning and for these to be considered by the commission before the warning is published. There is no minimum notice period, and it is possible that a recipient will not have a meaningful opportunity to make representations. We know that there have been many situations in which advice and support given by the commission can be challenged and are open to interpretation by the charity.

[Jo Stevens]

A warning could have human rights implications. It might harm a trustee’s reputation, for example, or be in breach of his or her rights under article 8, particularly in the absence of a fair trial, as preserved by article 13. Is my hon. Friend concerned that the Bill has implications for human rights?

[Anna Turley]

I completely agree with my hon. Friend. A later amendment sets out the right of appeal to the charity tribunal, which we think is an important safeguard. Even without that appeal, giving no notice whatsoever could entail significant risks, particularly with regard to reputational damage, as the Human Rights Act sets out.

[Peter Kyle]

My hon. Friend is being generous with her time. Trustees of boards of charities are volunteers, and they give up their time very generously. Quite often, boards are cautious in their approach. Does my hon. Friend think that seeing warning notices handed out to other charities might well be a deterrent to people giving up their time and lead to uncertainties over governance arrangements?

[Anna Turley]

My hon. Friend makes another excellent point. We know how difficult and challenging it can be around the country to get good trustees and to get people to stick with it. Trustees are under a lot of pressure because of regulations and time commitments. There is the risk that the measure will disadvantage trustees and deter them from putting themselves forward. If a warning has been published, the reputational damage could be huge.

The Lord Chief Justice referred to “ludicrous time limits”. He also said that he could understand why it was felt that the Charity Commission had behaved in an extremely high-handed manner and that there was a real danger that the Commission, if allowed the scope to use this new power in a disproportionate way, may well do so, however well meaning its intentions.

We are not seeking to remove the power to publish a warning, because we think that it is important. The ability to publish a warning should be there, because of the opportunity it gives to create greater weight behind a warning. However, we think that before that step is taken there should be significant opportunity for a charity to challenge it. That is what our proposed 14 days’ notice seeks to do.

The power to publish a warning, the potential impact of which cannot be overstated, means that the public, media and funders will become aware of it. They will not be able to distinguish between a low-level issue that is giving rise to the warning and something that is much more severe. In the court of public opinion, such issues often become conflated. This year we have already seen a huge media furore relating to the charitable sector. Although relevant to only a small number of charities, it has had a substantial and damaging effect on trust in the sector. The publicity could lead to a choking off of donations and the loss of grant funding and corporate sponsorships, leading to closure of services and redundancies.

To give advance notice of 14 days of a warning, as our amendment proposes, would allow a charity to ensure that steps can be taken immediately to remedy a situation, where it is a small administrative error, to explain any extenuating circumstances and to challenge that with the Charity Commission. It would allow the conversations mentioned by the Lord Chief Justice in the High Court case to take place in a supportive and trusting environment.

We believe that there is no reason why there should not be a 14-day notice period ahead of a warning. We hope that the Government will support our amendment.

--- Later in debate ---

[Maggie Throup]

The problem is that if the evidence has been destroyed, no one knows whether it was there. That is the case I want to make. We want to make sure that correct action can be taken in a timely fashion.

[Anna Turley]

The hon. Lady said that the measure could make the powers of the Charity Commission similar to those of other regulators. However, while many other regulators have the power to issue warning notices, they are often exercisable only in the case of a breach of a statutory requirement. This proposed power goes much further than that. A warning can be given on the strength of

“a breach of trust or duty or other misconduct or mismanagement”.

The hon. Lady will agree that that gives the Bill a fairly broad scope. The adverse publicity and possibility of more severe regulatory action that could flow from that would not match what had actually been breached at that stage.

[Maggie Throup]

I have to disagree with the hon. Lady. Regulatory abuse in charities is of course rare, but it is vital that measures are in place to ensure that the public and, indeed, the many charity volunteers do not lose confidence when it happens.

Clause 1 provides a suitable means of protecting our many charities, small and large, from unscrupulous behaviour. It will maintain the confidence of the public, the many donors and the amazing volunteers, as well as those employed by charities. I am delighted to have been able to speak in support of the clause, which I commend to the Committee.

--- Later in debate ---

[Mr Wilson]

Clearly it is not enough, because the Charity Commission has asked for the additional powers. I am sure the Charity Commission would be only too happy to answer the detailed question about the number of affected charities.

I want to return to the safeguards, because there are a number of important safeguards on which we should focus our attention. First, the Charity Commission must give notice of its intention to issue a warning to a charity and its trustees. The notice must specify a number of matters, including the grounds for issuing the warning and any action the Charity Commission considers should be taken by the charity to rectify the breach that has given rise to the warning in the first place.

The notice must specify a period for representations to be made about the proposed warning, and the Charity Commission must take account of any representations before it issues any warning. An official warning could also highlight the likely consequences of any further non-compliance, which would be likely to require a more significant intervention by the regulator, such as the opening of a statutory inquiry and subsequent use of its temporary protective powers or its permanent remedial powers.

[Anna Turley]

I appreciate the Minister setting out those important safeguards. However, there is little evidence about the timeframe in the Bill, which means that charities have no control over their ability to present their arguments and let their trustees know. We will continue to press on this issue unless the Minister has some analysis of what is a reasonable time.

--- Later in debate ---

[Mr Wilson]

The criteria for issuing an official warning are now clearly stated in the Bill—breach of trust or duty, or other misconduct or mismanagement. These are not as narrow as the criteria recommended by the Joint Committee, but we decided that limiting the warning power to a failure to comply with a limited range of statutory provisions, or order or direction of the Commission, would result in a power that was only half effective at best. Charity law is a mix of statute and case law, and the scope of the warning power needs to reflect that. It would be wrong to limit the warning power to just breaches of statutory provisions or commission orders or directions, as this would limit the regulator to issuing warnings on less than half the legal framework.

I recognise that a breach of duty might not always be completely clearcut, but it is right that the regulator of charities should be able to reach a view on whether a charity’s trustees have breached their duties, and should be warned about their conduct. It would be wrong to expect the Charity Commission to have to open a statutory inquiry and consider exercising its more serious compliance powers in cases where charity trustees have breached their duties but not a specific statutory provision.

[Anna Turley]

The Minister is being extremely generous with his time. Does he agree that there are things that lie between breaking a statutory definition and what we are talking about here, which is quite a low level of concern: a breach of trust or duty, or other misconduct or mismanagement? That is quite broad in scope. Should there not be further definition—not necessarily in statute, but perhaps from the Charity Commission—to identify the criteria for that?

[Mr Wilson]

The Charity Commission is always prepared to listen to representations and to consider further guidance, but as I will come on to explain, I do believe there should be further guidance as part of what we are discussing.

--- Later in debate ---

[Mr Wilson]

My daughter has just taken up knitting. She is only eight and is doing a fantastic job.

It is clear that party political activity is outside the bounds of what charities should be doing. I think everyone accepts that. Sometimes there is a grey area, and if something is reported to the Charity Commission, it would rule one way or the other. I have stated on many occasions on public platforms that it is right that charities should be able to speak up for their beneficiaries, whether the Government like it or not, and I stick to that principle.

Another issue raised was the risk that adverse publicity could result from the publication of a warning. As I have said, it is important that charities are accountable to donors, beneficiaries and the general public. Since the 2006 Act, one of the commission’s statutory objectives has been to enhance that accountability. The argument against the clause is effectively that charities should not have to be accountable for things that they have done wrong. That is not fair to donors, beneficiaries and the general public, and reduces the incentives for charities to make future improvements.

A point was made about whether the commission should be allowed to publish warnings at all. Charities exist for public benefit and depend on public support, so there should be transparency. Official warnings should be published if the regulator considers it necessary to intervene, unless there is good reason not to publish the details of an official warning. Publishing those details also encourages compliance, thereby increasing the efficacy of the power.

Any published details of warnings would have to be removed by the commission after a certain period—as I said earlier, the commission currently archives after two years. There would be an opportunity to make representations about the factual accuracy of a statutory warning before it is published. A process for representations is included in the clause, following the recommendations that came during pre-legislative scrutiny. The commission has said that it will consult on and publish guidance on how it will use the official warning power before the power commences.

The hon. Member for Hove asked about the balance between the Charity Commission as friend versus the Charity Commission as regulator. I think we all agree that the commission needed to improve its regulatory performance on compliance and enforcement—the National Audit Office made that point—but that is not to belittle its other important regulatory functions, such as registration, guidance and permissions. We agree with Stuart Etherington of the National Council for Voluntary Organisations that in the past the commission sometimes blurred the distinction between being the regulator and being a friend of the sector. Getting the balance right is not particularly easy, but I am confident that the commission’s current leadership will try. The lack of guidance would create risk for the sector, but the commission’s guidance is well regarded and much has been done to simplify it.

The hon. Member for Ilford North briefly mentioned the commission’s need for extra resources to do its job. It has said that the powers would help it to undertake its compliance and enforcement work more efficiently, which is one of the reasons why we are introducing them. Gaps and weaknesses in the commission’s existing legal powers have occasionally frustrated its efforts to tackle abuse, resulting in delays and wasted costs that the Bill will help to minimise. We are helping the commission to become more efficient and to use its resources better than in the past.

A wider point was made about the amount of money that the Charity Commission receives. Obviously, all parts of Government need to contribute toward efficiency, and that includes the Charity Commission just as much as everyone else. Nevertheless, we recognise the need for targeted additional resources. In October we announced an extra £1 million of funding for 2015-16 and a further £8 million in capital investment between now and March 2017. That will be spent on technology and front-line operations, which will allow the commission to deploy its resources more effectively to prioritise its work.

I am sorry, but I do not support amendment 2. I hope the hon. Member for Redcar will understand that in practice, in the vast majority of cases, the commission will give sufficient notice, which I would expect to be 14 days. That will be set out in guidance that will enable some flexibility for particularly urgent cases. On that basis, I hope that she will not push the amendment to a vote.

[Anna Turley]

I thank the Minister and everyone who participated in the debate. There is a wealth of experience in this room from within the sector and on the frontline, which does credit to this place and has informed the debate. I echo colleagues’ sentiments about charities’ fantastic work in local communities, in particular their work with the most deprived in some our most challenged communities. We appreciate the work that trustees do and the value that they provide while giving up so much precious time. In the spirit of working with the Government on the Bill, we hope that it will, through better support and guidance, allow trustees and charities to develop their role and create a better regulatory environment.

I am reassured by everything the Minister has said, but we will continue to want to iron out some issues throughout the Bill’s proceedings. While the vast majority of charities abide by the regulations and work incredibly hard to fulfil the criteria, I agree that our attitude cannot be that charities can do no wrong. Equally, our attitude cannot be that charities can do no right. Charities may have felt somewhat beleaguered over the past few months as a result of some media campaigns, so it is important that we send a message that we want to support them in doing the right thing. Some concerns remains, however. The Minister said “proportionate” a lot, and we are putting a lot of trust in the Charity Commission to decide what is proportionate. While I welcome his notification that the commission will set out in guidance the timeframe for issuing warnings, I look forward to seeing the detail.

[Wes Streeting]

The Opposition’s amendment specifies a 14-day window before a warning notice could be issued. Is my hon. Friend aware that several voices in the voluntary sector say that that does not go far enough, but that what she has proposed is a sensible compromise that gives flexibility and fair notice?

[Anna Turley]

My hon. Friend is absolutely right. We received many representations from the charity sector suggesting that 28 days was the preferred option. We thought that 14 days was sufficient to give people the chance to notify trustees and to take immediate action to challenge concerns. The amendment is fair and I hope that the commission will consider our 14-day proposal as a good timeframe when setting out its guidance, so we look forward to seeing the detail.

I also look forward to exploring some of the Minister’s examples of when action must be swift and what steps the commission will take in such circumstances. I am also glad that the sector will be able to contribute during the consultation period. In the light of the safeguard of this being proposed by the commission and the constructive discussion with the Minister, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Anna Turley]

I beg to move amendment 1, in clause 1, page 2, line 15, at end insert—

‘(2) In Schedule 6 to the Charities Act 2011 (appeals and applications to Tribunal) insert in the appropriate place—

--- Later in debate ---

[Jo Stevens]

The Government have been reducing access to judicial review proceedings, which is another reason why this is of particular concern.

[Anna Turley]

My hon. Friend makes an excellent point. We know that judicial review is pretty much inaccessible without legal assistance, and that cuts to legal aid have had a hugely detrimental impact on people who are trying to access justice.

[Robert Jenrick]

The hon. Lady is making a good point. Doe she agree that perhaps the best way to tackle that problem is through guidance from the Charity Commission? If the Care Quality Commission issues a warning, there is no formal way to appeal against it, but in the guidelines there is a 10-day period in which representations can be made to the CQC, which happens all the time. Then the CQC, having read the representations and at its discretion, can withdraw its warning.

[Anna Turley]

The hon. Gentleman makes an excellent comparison, but what happens if, at the end of that representation, the Charity Commission does not agree? Where is the right of redress or recourse after that? Judicial review is too large, bureaucratic and expensive. It is a complex, time and resource-intensive activity that is largely inaccessible without legal assistance. It is widely known as the remedy of last resort for public body decisions when all other avenues of appeal have been exhausted.

There may be a perception among the public that charities should not use their funds to pursue judicial review applications, in particular in the light of some of what we have seen in the media in the last few days about how charities spend their money, which goes against the grain of what we are trying to encourage. It has been said that if it were possible to appeal against a warning, the commission might be reluctant to issue warnings full stop, as there would be a risk that appeal after appeal would gum up the system. This implies an awareness that judicial review is not really a remedy, as it so much more costly, complex and inaccessible than an appeal to the tribunal. In any event, research suggests that of the 103 inquiries opened by the commission between April 2014 and April 2015, no more than 5% were appealed to the tribunal, which is not a significant proportion. If the warning power is meant to be only for low-level issues but could precipitate adverse publicity—we have already discussed that at some length this morning—and the exercising of the commission’s protective powers, it is illogical that it should be more difficult to challenge than the exercising of the commission’s more extensive regulatory powers, such as the power to remove trustees, which can be challenged in the tribunal.

It is also worth noting that there seems to be confusion over whether the warning power can be used for low-level or medium-level concerns. When the power was first suggested, the Cabinet Office said that it would be for medium-range abuses, for which the commission’s protective powers could be used but it is not likely to be proportionate to do so. Yet the explanatory notes to the Bill say that it will be used where the risks are relatively low. There is still a huge lack of clarity about the difference between a medium-range and a low-level concern. The possible implications of a warning, as we know, are harsh for low-level matters, so it is important that charities have a right of redress and recourse to a tribunal. Without it, they might be unable to disprove what could potentially be false allegations. We also want to ensure that the Charity Commission considers warnings extremely seriously before issuing them.

[Mr Wilson]

I am grateful to the hon. Lady for her explanation of this amendment. I have already explained our thinking behind the official warning power at some length, and I do not intend to repeat it now, the Committee will be relieved to hear. I will try to be brief, but I do want to explain our thinking on why we propose relying on a representations process and judicial review as the means to challenge an official warning, rather than a right of appeal to the tribunal.

To use a footballing analogy, I consider official warnings to be like a yellow card, whereas statutory inquiry and the corrective and remedial powers that follow are more of a red card. It is absolutely right that the commission’s protective and remedial powers are subject to rights of appeal to the charity tribunal, but I do not accept that the warning power is in the same category.

Clause 1 provides for the commission to give notice of its intention to issue an official warning and for a period for representations to be made, which the Charity Commission will be obliged to consider before deciding whether to proceed with issuing the official warning. There is then the option of judicial review of the commission’s decision. We consider that that is proportionate in the sort of low-level yellow-card cases in which an official warning would be issued. It is exactly the same as the current position when the commission publishes details of its operational compliance case reports into non-inquiry cases that have attracted public interest and highlight important lessons for charity trustees.

The problem the commission currently has is that in between 20% and 30% of those non-inquiry cases, its advice and guidance is simply ignored, or the issues are not rectified in full. We believe that a right to appeal an official warning to the charity tribunal would be disproportionate and could render the power impractical for its intended purpose, which is to enable the commission to respond proportionately to the low-level non-compliance, misconduct or mismanagement that sometimes take place. The commission has told me that the resources required to defend tribunal proceedings would be disproportionate to the issues at stake in official warning cases, rendering the official warning power unusable from the commission’s perspective. The last thing I want to do, as I have said, is to give the Charity Commission powers that it cannot use because they are too bureaucratic, and that it could be criticised for failing to exercise several years down the line.

The Joint Committee on the draft Bill looked at the issue in some detail and agreed with us, stating:

“Although we note the arguments by some that the issue of a warning should be subject to appeal to the Tribunal, we see the practical difficulty this would present to the Commission as disproportionate to the benefits of doing so. On the assumption that the Government agrees to our recommendation that the necessary details be added to the face of the Bill, we are satisfied that the issuance of a warning does not need the further safeguard of an appeal beyond the ability to seek judicial review.”

It is important to point out that if the Charity Commission sought to escalate matters when an official warning had been ignored, by opening a statutory inquiry, the opening of the statutory inquiry would itself be subject to a right of appeal to the charity tribunal. Similarly, if the commission were to exercise one of its protective or remedial powers, that would also be subject to a right of appeal to the charity tribunal, so there are already two layers of appeal rights when a statutory inquiry is involved. It would seem wrong to add another layer of appeal to the tribunal in the case of an official warning, which could be used to frustrate commission regulatory action.

The Charity Commission has a high success rate on appeal—there were no successful appeals to the tribunal against the commission’s decisions to open a statutory inquiry in 2014-15. That shows that the concerns that some have expressed about the commission’s decision making are not based on reality. The issue for the commission is the amount of work and time that each tribunal case takes, even when it does not have merit. In 2012-13 appeals were made to the tribunal in five cases, and in 2014-15 appeals were made in 32 cases. The judicial review system is much better set up for setting right genuine wrongs, while discouraging or disposing of cases that are unmeritorious or that have been brought with the calculation that delay through litigation is the best tactic for avoiding robust regulation.

The requirement in clause 16, which I urge members of the Committee to look at if they have time, for a review of the legislation to begin within three years of enactment, will provide a timely opportunity to review the commission’s exercise of the official warning power and any judicial reviews of its exercise of that power.

The hon. Member for Redcar made a couple of brief points, one of which was about judicial review being costly and inaccessible. The administrative court judicial review system is much better set up for dealing with the concerns that are expressed—for putting right genuine wrongs, as I have mentioned—because there is a filter system. The tribunal, unlike judicial review, does not have a filter system in which the court’s permission to go ahead is sought. Cage is a recent example. The High Court refused permission on two of the three grounds, avoiding the spending of significant amounts of time on complex human rights arguments that were not arguable.

As for costs, a system such as that of the High Court, where costs are usually paid by the loser to the winner, can act as a sensible deterrent, encouraging parties on both sides to act reasonably and in accordance with the overriding objective.

Another question from the hon. Lady was whether the provision amounts to a direction power. The answer is no, it does not. An official warning is not the same as a direction power. The Government agreed with the Joint Committee’s recommendation to set out more detail in the Bill about the content of an official warning, including that the commission should specify how a charity should rectify any breach.

In some cases, such as a failure to file accounts, it will be obvious how a breach can be rectified. In others it will be less clear, and it is important for the commission to be able to set out guidance on the actions it considers necessary to remedy a breach. Ultimately, however, it will be for the charity’s trustees to decide how they will remedy a breach and then to demonstrate that they have done so effectively. A warning cannot force charities to take a particular course of action.

I think I dealt earlier with why there is no appeal in relation to warnings, so I shall not do that now. I hope that the hon. Lady will be persuaded to withdraw the amendment on the basis of my response.

[Anna Turley]

I thank the Minister for his thorough and helpful response. Again, we will not press the matter to a vote, but we still have significant concerns. As a football fan I liked the Minister’s metaphor about yellow cards, but with a yellow card there is no immediate repercussion other than having to be a bit more careful about the next tackle. For a charity, there are potentially quite damaging repercussions of a warning, particularly given the public notification. There could be an impact on a charity’s ability to fundraise, its reputation and its ability to find trustees. Those are wide-ranging implications, and something of such seriousness needs to be able to be challenged.

We still have not come to a conclusion on that point. I take the Minister’s point about the lack of error making so far in the Charity Commission’s decisions, and I commend it for that, but that is not to say that it will always be perfect. The point about warnings is that they are more low-level, so the likelihood of error is going to be substantially lower. As yet, there is no means of redress, other than judicial review, if a warning has been incorrectly given or if it is subsequently found that the Charity Commission did not abide by due process. Judicial review seems hugely disproportionate, particularly in the case of smaller charities, for what seems like the small issue of a warning. There ought to be proper discussion about different means of redress and a way of allowing a charity to challenge the Charity Commission formally.

We will not press the amendment to a vote, and I appreciate the Minister’s point that the Commission will be setting out further information in its guidance. I also welcome the Minister’s acknowledgement that the Charity Commission cannot force charities to take a particular course of action on the back of a warning. That is a welcome message to the sector. Of course, people will want to rectify any errors or issues that have led to a warning being given. I am sure many will want to guard their ability to decide the future of their charity and not be directed on how to run it by the Charity Commission. I look forward to seeing more from the Charity Commission on how it intends to ensure that.

We look forward to working through further clarification away from the statute book, but on the basis of the Minister’s comments I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[The Chair]

As I said earlier, we will not be having a debate on clause 1 stand part.

Clause 1 ordered to stand part of the Bill.

Clause 2

Investigations and power to suspend

Question proposed, That the clause stand part of the Bill.

[Anna Turley]

Clause 2 sets out the powers for the Charity Commission to take action where a charity fails to remedy a breach as specified under a warning. Our amendment 3 sought to ensure that where a warning had been challenged through the charity tribunal the charity was not automatically able to take action under clause 2. Given that we withdrew our previous amendment, I decided not to move amendment 3, because it was pursuant on a charity tribunal.

--- Later in debate ---

[Mr Wilson]

My apologies, Mrs Main. I missed that—it was all too quick for me. I am a bear with a slow brain.

Clause 3 enables the Charity Commission to take account of a person’s other relevant conduct outside of the charity under inquiry. The provision will enable the commission to consider whether there is evidence of misconduct or mismanagement in other charities or conduct outside charities that could undermine public trust and confidence in charities and therefore ought to be taken into consideration before the commission determines how to act.

On the face of it, that appears to be a very broad power, but it is not. There are significant safeguards, which I will set out. First, there must be a statutory inquiry open into charity A of which the person is a trustee or employee and the Charity Commission must be satisfied that there is misconduct or mismanagement linked to that individual in charity A before it can consider any of their conduct 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 all the evidence it relied on in making the decision. This would include any evidence from outside the charity, which must, of course, be relevant evidence. Finally, there is 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 Charity Commission could only take account of conduct that would be relevant to the management or administration of a charity and would have to set out in its statement of reasons, under section 86 of the Charities Act 2011 or under the new official warning power in clause 1, the conduct that it was taking into account in decisions to exercise any compliance powers. The Charity Commission would not be able to take into account any conduct that was not relevant to the management or administration of a charity.

Let me give an example of when the commission would expect to rely on this power in practice. Allegations are made against an individual who is a trustee of charity A about abuse of vulnerable beneficiaries in a charitable care home. The Charity Commission opens a statutory inquiry and determines that there has been misconduct by the trustee. During the course of the commission’s inquiry, other regulators provide the commission with evidence of past misconduct that resulted in the individual’s employment in a care home being terminated. The commission would be able to take this other evidence into account before making a decision on what action would be proportionate in the circumstances.

As things stand, the commission would be able to give no weight to this other evidence of unacceptable conduct. Another example could involve an individual who is a trustee of two charities, charity X and charity Y. He may have been involved in misconduct in charity X and the commission may have already taken action in relation to charity X. The regulator may then have concerns about similar misconduct taking place in charity Y but, as the law stands, the commission cannot take into account the individual’s track record from charity X. This provision would enable the commission to do so.

We made amendments to the Bill in the other place to modernise the language of this provision and others in the Charities Act 2011. These changes were suggested by Lord Hope of Craighead, who chaired the Joint Committee and is a former deputy President of the Supreme Court. He argued, rightly, that there is no place in the 21st century for the term “privy to”. It was used in the Bill and the 2011 Charities Act to identify trustees who knew about misconduct or mismanagement but turned a blind eye. We have now replaced the term “privy to” with,

“knew of the conduct and failed to take any reasonable step to prevent it”.

That is much better for the understanding of the lay reader of the legislation, which is something we must bear in mind when we consider that trustees are almost all volunteers. This clause makes sensible changes that will help the commission with its compliance casework, and I commend it the Committee.

[Anna Turley]

I thank the Minister for that thorough and detailed explanation. He will be aware that we have tabled no amendments to this clause because we fully support it. It has been through a great deal of pre-legislative scrutiny and scrutiny in the other place, so we support that the clause stand part of the Bill.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4

Power to remove trustees etc following an inquiry

Question proposed, That the clause stand part of the Bill.

[Mr Wilson]

Clause 4 basically does two things. First, it amends the existing power in section 79 of the Charities Act 2011 to allow the Charity Commission, in the course of an inquiry, to establish a scheme in relation to a charity. A scheme is a legal document made by the commission which can amend, replace or extend the trusts of a charity. It can set out new objects and purposes for a charity or amend or remove a prohibition or restriction.

Under the current law, the Charity Commission can make a scheme only where there is evidence of misconduct or mismanagement and a need to protect charity property or secure its proper application. Clause 4 would change that so that the Charity Commission can make a scheme where there is either evidence of misconduct or mismanagement or a need to protect charity property or secure its proper application. The commission considers this change to be necessary to enable it to take action in some cases where only one of the limbs can be demonstrated, but where commission action is necessary. Let me give two examples.

--- Later in debate ---

The clause was widely supported by the witnesses and the Joint Committee during pre-legislative scrutiny. I hope that the Committee will agree that this is a common-sense provision that closes a significant loophole in the law.

[Anna Turley]

As with the previous clause, we support this measure. We believe it will give the Charity Commission an important power to safeguard the integrity of a charity, particularly its public profile. Misconduct and mismanagement are extremely serious and should be taken extremely seriously. As the Minister identified, the ability to address this loophole has long been missing from the Charity Commission’s powers. Representatives of the sector have not raised concerns with us about this proposal. They understand it is an important opportunity for them to protect themselves against misuse and abuse. On that basis, we are happy to support the clause.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5

Power to remove disqualified trustee

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Mr Wilson]

I know that my officials like to pack a lot into my speeches, so they have longer paragraphs. Obviously it is important that we have proportionality. This is the sort of issue that arises dozens of times a year, so it is a regular occurrence and we need to take action to try to control and eradicate it.

Another example might be where a charity trustee is disqualified by virtue of having been convicted of theft. The person refused to resign his position, which was problematic for the charity because it affected their quorum for business and decision-making purposes and there was no power to remove a trustee within the charity’s constitution. The trustee board is already at its maximum size and is unable to act further. This new power would allow the commission to remove the trustee so that the charity can continue to operate quickly and safely.

The commission has estimated that the power would be used dozens of times each year to remove people who were refusing to stand down even when they had been told they were disqualified. This indicates that there is an issue to deal with. It is important to equip the commission with powers to take steps to remove a disqualified trustee from their role quickly and effectively. The new power was welcomed by the Joint Committee on the draft Bill and I commend it to the Committee.

[Anna Turley]

I thank the Minister for that full and thorough explanation. As trustees of charities—which many members of the Committee are—many of us feel it is important to fulfil our duties fully and with confidence, should a fellow trustee board member not fulfil their duties and be disqualified as a result. The Charity Commission’s standards for disqualification are high—it has set the bar at a good level. We wholeheartedly support the clause because we think it is in the best interests of trustees around the country. They want the integrity of their boards protected, and it is important that those who have been disqualified can be removed, because trustees often do not have the ability to do so themselves. The clause gives more powers to the Charity Commission, but we wholeheartedly support them and we know it will use them wisely.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Sarah Newton.)

Charities (Protection and Social Investment) Bill [Lords]

Anna Turley Excerpts

Thursday 3rd December 2015 Commons Chamber

[Anna Turley (Redcar) (Lab/Co-op)]

It is a privilege to respond to the Bill on Second Reading as shadow Civil Society Minister. I thank the Minister and his colleagues for bringing the Bill before us, and for the open and co-operative way in which they have sought to engage with us. It is much appreciated. I thank all the civil servants involved in drafting the Bill, and all the charities and organisations that have contributed to its development and to our understanding. I also thank noble Lords, who used their customary wisdom and experience to refine and improve the Bill in its passage through the other place.

This is a good and important Bill, and we on the Labour Benches welcome it. There is, of course, some room for improvement, and I will come on to that in my speech, but its objectives are to be welcomed. We all know the vital role that charities play in building a strong and flourishing civic society. Thousands of people around the country give up their time every day to work as trustees and volunteers. Thousands more depend on the vital services they provide. As the Minister said, charities change and save lives. They support the poorest and the most vulnerable. They pick up the pieces of social and economic failures. They heal, they tend the sick, they bring dignity in old age and they give children the best start in life. We owe it to all of them to provide a secure and robust regulatory environment that inspires confidence and allows the sector to flourish.

The sector has had a difficult year. The regulation of the sector has come under increasing scrutiny and we have seen high-profile cases that have been deeply concerning. We have seen poor governance, financial mismanagement and, as the Minister set out, concerning fundraising methods. These cases are extremely rare, but they are deeply disappointing to the rest of the charitable sector. It is important that we support and encourage confidence in the wider sector by clamping down on any abuse. That is why we welcome the Bill.

It has been good to see the sector itself step up to the plate to tackle so many of these concerns. It is vital that we play our part in supporting the sector in that process by giving it the legislative and regulatory environment it needs. It is also vital that we get the right balance: a strong and sound regulatory environment that ensures trust but allows charities the freedom to be innovative, enterprising and, crucially, effective in delivering their social aims and objectives.

We welcome the core aims of the Bill. We support providing stronger protection for charities in England and Wales from individuals who are unfit to be charity trustees. That is vital to ensure good governance and prevent abuse. We support the measures to equip the Charity Commission with new and strengthened powers to tackle abuse more effectively and efficiently. To ensure confidence in the sector, it needs to be able to respond quickly and decisively to any concerns raised. Further clarifications are required, however, and we will work with the Minister to resolve them in Committee.

I want to put on record at this point my pleasure in hearing the Minister say the Government will use the Committee stage to look again at fundraising: at whether self-regulation is sufficient and what steps we can take if it fails. We look forward to working with him on that.

We welcome the aim to give charities a new power to make social investments; some are already doing that, but it is important we give charities the reassurance to enable them to do so. We know that one in three British consumers will pay more for products with a positive social or environmental outcome. It is important that we enable the charitable sector to encourage that.

There are some areas, however, where we believe the Bill can be improved. We will look to work with the Government during the progress of the Bill in Committee to do so. We will be seeking to discuss the following points.

First, on the freedom to speak and engage in political discourse, we continue to oppose the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014. We intend to use the passage of the Bill to highlight and defend the right of charities by law to campaign and speak out on issues in line with their objectives. So often, it is charities that end up picking up the pieces of our policy failures. It is vital that we give them the right to campaign on their issues, and to challenge and hold us to account. That is a key part of a strong, healthy democratic and civic society.

Secondly, on clause 9 and the disposal of assets, the clause sets out that

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

We will continue to defend clause 9, so as to give housing associations the statutory backing to ensure they can make their decisions in the best interests of their tenants, and not be bullied by a Government determined to sell off and run down affordable housing. We think it is absolutely right that charities have the freedom to dispose of their assets in the way that they see fit.

Thirdly, on the protection of children and vulnerable adults, the Bill provides an opportunity to better protect children and vulnerable people. We are grateful that the Government accepted proposals in the other place to include people on the sex offenders register as among those who will be debarred from being trustees, but we believe there are other measures we can look at to strengthen that area. We will bring them forward in Committee.

Finally, on clarifying some of the powers of the Charity Commission, the Bill seeks to strengthen the powers of the Charity Commission. We believe there should be a strong, well supported regulator of charities that acts fairly and has the appropriate powers. Ultimately, the regulator must preserve public trust and confidence in charities. However, some provisions in the Bill could threaten charities’ independence. For example, there are no objections in principle to giving the Charity Commission the power to give warnings to a charity, but the current drafting raises some concerns within the sector.

For example, the commission can issue a warning if it thinks there has been a breach of duty or trust or other misconduct or mismanagement. It is possible that the commission could issue a warning about an issue of relatively low concern. Also, a disagreement between the trustees and the commission could arise about whether the warning was justified. It is therefore important to attach safeguards to the issuing of a warning, and failure to comply with it should not in itself have significant consequences that could be disastrous for charities. I hope that we can continue to discuss the matter further in Committee. In addition, the commission should give adequate notice of its intention to issue a statutory warning.

These are issues that should be discussed in Committee because clearer guidelines should exist on the number of days and other protective remedial powers. Given the implications a warning would have for the charity in question, we should also consider a right of appeal to the charity tribunal. I look forward to working with Ministers on those issues as we go through Committee.

In summary, we believe all these areas can be discussed and looked at in more detail as we take the Bill forward in Committee. This is an important Bill. It has some room for improvement, but offers a great deal to build trust and confidence in the charitable sector, which is why the Opposition will support it. I look forward to working with Ministers in Committee.

Community and Voluntary Sector Funding

Anna Turley Excerpts

Tuesday 24th November 2015 Westminster Hall

[Michelle Donelan]

I agree. I am very much involved with the carers’ organisation in my constituency and I completely understand that point.

We need to go further to encourage and enable more people in long-term unemployment to go into volunteering schemes. We already do that, but we need to work more closely with volunteer centres to ensure that it happens more. There is a lot of concern about the loss of benefits to volunteers, so there is much work to do there.

We need to invest to encourage more young people to volunteer as well. Some fantastic work has already been done, such as that of the National Citizen Service. It is important today to focus not only on the negatives, but on the positives. Seventy-five thousand young people have changed their lives and got involved in their communities through the NCS. We should take note of the things that are working as well.

[Anna Turley (Redcar) (Lab/Co-op)]

I share the hon. Lady’s positive view of the NCS and its good work with young people. At the same time we are seeing huge cuts to youth services across local authorities and the NCS works with a fairly small number of young people compared with the great majority who can access mainstream services. Does she not think that the cuts to local authorities also impact on young people’s preventive services?

[Michelle Donelan]

The cuts to youth services are for a totally different debate, because they are not purely about volunteering. There is a vast variety of youth services depending on the different areas and models involved. There is also the question of replacement: in many areas, including mine, the council has worked closely with the community to offer a replacement service that is the most cost-effective and efficient for the people using it.

In addition, the Government are providing funding for campaigns such as the national Step Up To Serve #iwill campaign, which aims to make social action part of the lives of as many 10 to 20-year-olds as possible. More remains to be done, however, and I am quite shocked that there is still no formal encouragement in respect of the value of getting volunteering into schools, through things such as voluntary placements. We have always had a system of work placements, but there has never been a system of voluntary placements as a formal mechanism in the UK. I have approached my local volunteer centre about the issue, and we are trying to do something with willing schools in my constituency.

We need to change the ethos and encourage more businesses to allow voluntary days, which would build on the Government’s initiative on that. There have been other great investments, which we should not fail to mention, such as Big Society Capital, tax relief for social investment, social impact bonds and £70 million for social investment in the investment and contract readiness fund.

--- Later in debate ---

[Anna Turley (Redcar) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mrs Moon, and my privilege to respond as shadow Minister for Civil Society. It is also a great pleasure to follow the hon. Member for West Dunbartonshire (Martin John Docherty) who set out clearly and powerfully the role of the community and voluntary sector in Scottish civil society and its impact on the Scottish economy. He also talked about the Big Lottery Fund, which I will discuss in some detail. I share his deeply held concerns.

I thank my hon. Friend the Member for Bradford West (Naz Shah) for calling this extremely important and timely debate. She set out eloquently and passionately the challenges faced by the community and voluntary sector. She also gave a heartfelt example of how crucial services such as the Blenheim Project in her constituency are to people in need, in particular at times of crisis.

Tomorrow, the Chancellor will set out his departmental spending priorities. It is his chance to set out his vision for the kind of society and economy he wants to build. The question for us today is whether that vision will be one that recognises and values the role that the community and voluntary sector can play in building a safe, healthy, decent and prosperous society. Many Members have set out fantastic examples of great work done by civil society organisations in their local areas, as well as the challenges such organisations face.

The hon. Member for Chippenham (Michelle Donelan) mentioned Mind. Many of us would want to pay tribute to the great work that Mind does, not least in my own constituency, where it has been dealing with some of the repercussions of the huge job losses we have faced. She made a really important point about the preventive role it plays in reducing pressure on our public services. That also made me think of the importance of investment to prevent costs further down the line in public services. She also mentioned gift aid. There is an important message for the Government on that: they should look again at whether they might loosen the eligibility criteria for the small donations scheme, which so far has generated only £21 million, not the £105 million expected. That might be something that they could explore further.

My hon. Friend the Member for Clwyd South (Susan Elan Jones), who is chair of the all-party group on civil society and volunteering, spoke eloquently about the importance of core funding. Any of us who have had experience of working with the voluntary and community sector will know how important that funding is to enable voluntary organisations to keep the lights on and keep functioning, when often grant money for specific projects is more readily available. She also talked about the importance of new technology. There are some really interesting issues there that we can look to take forward.

The hon. Member for Central Suffolk and North Ipswich (Dr Poulter) made some important points about businesses giving up time for people to volunteer. It is important always to look at the contribution that everyone can make, not just the professionals within the community and voluntary sector. We recognise the importance of diversity of funding and of capacity within the sector; to my mind, however, we must not lessen the importance of the role of partnership with public services and the support of local authorities and central Government, as they are often absolutely critical to funding projects that would not necessarily get private sector support.

My hon. Friend the Member for Merthyr Tydfil and Rhymney (Gerald Jones) talked eloquently about the impact of cuts on the devolved Administrations and on local government, and the effect that had on local communities in his area. My hon. Friend the Member for Swansea East (Carolyn Harris) paid tribute to Hands Up For Down’s, which sounds like a really excellent organisation doing great work. She also mentioned the impact of cuts to the Big Lottery Fund.

My hon. Friend the Member for Cardiff Central (Jo Stevens) talked eloquently about Open Public Services, which ranks alongside the big society as a flawed philosophy, set out by the Government five years ago. It has seen many contracts gobbled up by the private sector and larger charities, to the detriment of smaller charities, as my hon. Friend the Member for Hampstead and Kilburn (Tulip Siddiq) also pointed out. I thank all my colleagues for their important contributions to the debate.

The worry for many of our hard-working community and voluntary sector volunteers and professionals, as well as those who rely on their vital services, is whether the Chancellor will tomorrow hasten his assault on the sector, which has already seen the big society agenda disappear like a mirage, wiped out by a wave of cuts over the past five years. Figures I have received from the NCVO show the sector is already receiving £1.7 billion less of its income from Government than it was in 2010-11, and the number of grants to the sector from Government has halved since 2002. The charity sector faces a shortfall of £4.6 billion by 2018-19 on current spending trajectories. Charities and community groups have been hit by a triple whammy of cuts to their grants and income; a reduction in local government support, with partnering public services facing their own drastic cuts, leading many of them to cut preventive services; and having to deal with a large rise in demand.

As my hon. Friend the Member for Bradford West mentioned, according to the Charity Finance Group, 70% of charities expect demand for their services to continue to rise in the next 12 months. In 2009, the figure was half that, with only 36% of charities thinking demand would rise. Charities know they are picking up the consequences of this Government’s economic and social policy failures. They are often catching the people who have fallen through the gaps and are too often failed by the state. Charity and community groups are fearful of tomorrow’s statement. They are asking whether tomorrow will see a spending review that puts the final nail in the big society coffin and shows that, like the Tories of the past, this is a Government who believe in neither the state nor society.

Nowhere is that threat more clearly exposed than in the expected cuts to the Big Lottery Fund, as many of my colleagues have rightly set out. The Big Lottery Fund has been a vital ingredient in helping many community organisations to deliver vital services in the local community and transform lives, particularly in our most deprived areas. The rigour that the Big Lottery Fund applies to its funding process ensures that charities can prove they work to change people’s lives—a rigour that has been sadly lacking from the Government’s own direct distribution of money to charities, as highlighted by the Kids Company saga.

If it is true that the Chancellor intends to take around £320 million from the Big Lottery Fund and redirect it to the Department for Culture, Media and Sport to spend on arts and sports, it is a shameful act of misappropriation. The Chancellor should not be raiding the people’s lottery to plug gaps in his departmental spending, to try to compensate for the total failure of his long-term economic plan. The British people donate these funds when they buy lottery tickets in good faith that the money will go to good causes—village halls, youth clubs, playgrounds, domestic violence support, care for older people and those with disabilities, and the many groups we have heard about this afternoon. Ninety per cent. of Big Lottery Fund grants are less than £10,000, and they are a lifeline to small local groups, as my hon. Friend the Member for Bradford West set out, so this act will hit the smallest charities doing the most important work in the most deprived areas.

As the former Conservative Prime Minister John Major recently said, lottery money was to be from the people, for the people. The guiding principle has always been that lottery money adds to, rather than replaces, public funding. Is the Minister going to allow that principle to be shredded to compensate for his Government’s failure to protect and support our public services? Is he aware that some 3,800 charities are still waiting for the repayment of £425 million that was taken from the Big Lottery Fund to help pay for the 2012 Olympics? Depriving vulnerable people and communities of support during this difficult time is outrageous and is contrary to the very nature of what players of the lottery expect will happen with their contributions. I urge the Minister to ask his right hon. Friend the Chancellor to think again.

In conclusion, I hope the Minister will give some reassurance to the community and voluntary sector ahead of tomorrow that the Government still value the contributions it makes to our society. In 2009, the Prime Minister, then Leader of the Opposition said he wanted to

“set free the voluntary sector and social enterprises to deal with the…problems that blight so many of our communities”.

Far from setting them free, this Government are starving them of funds and forcing many of them, as we have heard today, out of operation. I urge the Minister to fight for the future of a sector that is vital to the strength, health and dignity of our society.

--- Later in debate ---

[Robert Halfon]

As I said, I suggest the hon. Lady holds her horses and waits to see what happens in 24 hours. I will talk about what we have already done to fund civil society and big society in a moment.

The Government recognise that individuals are looking beyond the state and want to help friends, family, their community and their local services. People are becoming far more community-minded and are asking not what their community can do for them, but what they can do for their community. Millions give their time, energy and expertise to help others, and they put service above self. I am wearing a Heart 4 Harlow badge, which is from a social action project created by faith communities in my constituency. They work together to do social action and to help our town. This social action—this people power—is the foundation of the bigger and stronger society that we all desire.

It is no surprise that the Charities Aid Foundation found that the UK is the most generous nation in Europe. That means that the public are giving twice, which it is important to note, both in their taxes and personal donations. With all the talk of funding, it is also worth noting that taxpayers are giving about £13 billion a year to charities up and down our country—remember, that is not Government money, but taxpayers’ money.

We should also note that five years ago, our country was broken. We had experienced the deepest recession in living memory and the deficit between public spending and the Government’s revenue was unsustainable. Unemployment had risen to record levels and household debt was higher than many of us would agree is sensible. The societal issues that stemmed from those circumstances meant that public services and civil society both faced an incredible challenge—one of increasing demand, but without the ability easily to invest increased resources to meet it.

[Anna Turley]

If the Minister is setting out the challenges and saying that there is a consequence for public services and the big society, we are now five years on and the crisis is even greater for the community and voluntary sector. Is that not a consequence of the last five years of economic policy as well?

[Robert Halfon]

As I said, the taxpayer is spending £13 billion a year, which is a sizeable chunk of money, on charities.

I turn to the Government’s achievement over the last years in pursuit of this vision. There is, for example, the community organisers programme, which is training more than 6,500 organisers to work in hundreds of cities, towns and villages. Community organisers are not about replacing existing jobs or services; they are about people power, giving social entrepreneurs, charity workers and volunteers the real tools to help themselves. One example is the work of community organiser, Tania Swanson, in Clacton in Essex. She works with the Rural Community Council of Essex to assist with projects on affordable housing, energy efficiency and community farming, as well as on many other community initiatives.

The big society has meant the establishment of the Centre for Social Action, too, which has seen an investment of around £70 million of real money from the Cabinet Office, commissioners, local authorities, philanthropists and other partners into 215 social action projects in England, working alongside and helping public services. Just as the Government have liberated business entrepreneurs from red tape and regulation, so the big society has worked to free charities, voluntary groups and social entrepreneurs from red tape. There has been £200 million of investment to help charities transform themselves to be more effective. We have seen the creation of the world’s first social investment bank, Big Society Capital. A prime example of that, and one I know about, is the £825,000 invested into the Essex social impact bond to help vulnerable young people avoid care or custody and stay at home with their families.

To me, perhaps one of the most exciting and forward-looking of the big society projects is the National Citizen Service, which was highlighted by my hon. Friend the Member for Chippenham. It gives young people a real chance in life and a real experience of community ethos, social action and important skills that they will have for life. Over 5 million hours of volunteering has been given by NCS participants to their local communities; that is a whole generation for whom social action has become the norm, not the exception. Ensuring that future generations are more socially minded is key to the work of the National Citizen Service. A lot of work has been done to help young people. In my constituency of Harlow, we have the Young Concern Trust, which does an enormous amount to support disadvantaged young people.

I said earlier that the big society was about social capital, social entrepreneurship and people power, and that that is the continued mission of the Government over the next five years.

Oral Answers to Questions

Anna Turley Excerpts

Wednesday 21st October 2015 Commons Chamber

[Anna Turley (Redcar) (Lab/Co-op)]

Q11. On 16 September, the Prime Minister told this House that he would do everything he could to keep steelmaking on Teesside. He failed. Now we learn that the £30 million support package that the Government promised for retraining and economic regeneration is not only going towards the statutory redundancies of those who lost their jobs: I have an email from the Minister with responsibility for the northern powerhouse to a constituent in Stockton South that says it will also be used to pay for the final salaries of those who have lost their jobs in the past month. This is an insult. How much more injustice does the Prime Minister think the people of Teesside can endure?

[The Prime Minister]

We will do everything we can to help, including the financial package that the hon. Lady set out—making sure we help people with retraining and new opportunities, and with bringing new industries to the area—but let me tell her what we cannot do. We cannot in this House set the world price of steel and we cannot overcome the fact that the SSI plant had lost £600 million in this Parliament. Those are the facts which, frankly, Opposition Members have to engage with.