Charities (Protection and Social Investment) Bill [HL]

Baroness Pitkeathley Excerpts

Wednesday 1st July 2015 Grand Committee

[Baroness Hayter of Kentish Town (Lab)]

My Lords, the amendment stands in the names of my noble friends Lord Watson of Invergowrie and Lord Lea as well as my own. It essentially restates the current legal position, as it is well established in charity law that campaigning and political activity can be legitimate, indeed valuable, for charities, provided that they are undertaken to achieve their charitable aims.

The Charity Commission’s guidelines on campaigning and political activities, known to us in the field as CC9—technically called “speaking out”—recognise that there may be situations where carrying out political activity is the best way for trustees to support the charity’s purposes. Indeed, charities have used the opportunity of elections to promote their charitable objectives for more than 100 years to raise concerns and gain attention for their charitable aims. It is clear that, although a charity cannot exist for political purposes, it can campaign for a change in the law or a change in policy, or on decisions where such a change would assist the charity’s objectives. Charities can also campaign to ensure that existing laws are observed.

However, following the transparency of lobbying Act—I am delighted to see here the noble Lord, Lord Wallace of Saltaire, whom we would say was the guilty party on that Act—we know that there is a very difficult interplay between charity law and electoral law, particularly over non-party campaigning rules. There is insufficient clarity now on whether and when awareness-raising on policy and legitimate non-partisan campaigning by charities would be regulated by the Electoral Commission, even where activities were not intended to have any electoral effect.

The NCVO is therefore concerned that charities could be deterred from engaging in public policy and speaking out on behalf of beneficiaries during election periods. With local, European, devolved and general elections, we seem almost always to be in an election period.

The NCVO wants charities to have maximum clarity as to what comes within the scope of the non-party campaigning rules, so that legitimate campaigning is not inhibited. We share that aim. The problem is that the recent Act broadened the definition of what counted as political expression while reducing the threshold at which organisations caught by the new definition had to register with the Electoral Commission. They thus have to comply with more red tape than most businesses seem to have to do in a year.

Indeed, the Act represents a radical change to the regulatory environment for charities, and it has constrained, if only by a chill factor, charities’ legitimate activities. When the then Bill was in the House, the noble Earl, Lord Clancarty, feared that it would,

“put Westminster further into a bubble”,—[Official Report, 22/10/13; col. 923.]

by cutting out a much-needed source of intelligence to SW1. We think that this has happened.

More than that, the Act increases the imbalance between the controls on commercial lobbying and similar activities by charities on behalf of those with the least access to decision-makers. Not only can well-heeled drinks or defence companies have free rein to lobby, to campaign and to further their interests, so can groups, such as the TaxPayers’ Alliance, which has a clear campaigning rule. However, because they are not charities, they face no regulatory or transparency rules.

We wholly concur that a charity’s sole purpose should not be to campaign, must never be party political, nor involved in the electoral process, and that they should campaign only to achieve their charitable aims. The charities believe that they have been unfairly treated by the new Act and are genuinely bemused by such treatment, given that every political party, including that of the Minister, purports to support the work of charities. Indeed, many parliamentarians from across the political spectrum are actively involved in at least one charity.

The NCVO reports that confusion over the law is now widespread, leading to charities unduly self-censoring. For example, the charitable arms of two well-respected churches, which both provide an extensive network of social care and have advocated for policy change for over 150 years on behalf of the people they support, have come to different conclusions about what advocacy they can now undertake, how they do it and how to account for it. They are confused about what counts as controlled expenditure and are fearful that the new legislation means that almost anything that a charity or coalition does to advocate policies in the year before an election might be judged to impact on the success or failure of a particular party or candidate.

Indeed, trustees of some charities appear so scared of infringing the rules, as well as being bemused by the difficulties of calculating staff costs, particularly geographically, that they have stopped the charity from campaigning. Others have reached a different conclusion and have decided to risk running outspoken campaigns on the grounds that, as they make the same points to whoever is in government, they are not seeking to influence any one party.

What is most worrying for democracy is those other charities which feel that they cannot risk advocating on behalf of their charitable aims or their charitable beneficiaries. It is surely wrong and, due to the uncertainties created by the lobbying Act, some charities believe that they cannot speak up on behalf of their users or campaign to achieve their charitable objectives. Decision-makers lose that input and the voiceless lose their advocates, and this is in a democracy like ours, which is such a strong and vibrant civil society.

The intention of the amendment is clear; that is, to give confidence to trustees that the existing legal position remains untouched by the lobbying Act. They can undertake campaigning or political activity in furtherance of their charitable purposes. They can campaign to build support for, or oppose, a change in the law, the policy or the decisions of central government, local authorities or other public bodies. I beg to move.

[Baroness Pitkeathley (Lab)]

My Lords, I support this amendment and speak as the former chief executive of Carers UK, a very successful campaigning organisation, which, arguably, could be credited with making caring and carers, once an entirely private matter, the public issue that we all recognise today. I submit that that came about almost entirely through the campaigning of the carers’ organisations. I very much agree with my noble friend that there is now confusion, since the lobbying Act, about what is legitimate and what is not so far as charities are concerned at election periods.

At present, we do not have the maximum clarity which my noble friend has called for. I draw the attention of your Lordships to the lack of profile which charities had in the recent general election. In the past, it was commonplace for charities or groups of charities to hold hustings at which all parties could set out their wares. We heard very little of that in the last general election.

I hope that the Minister will confirm that he supports the rights of charities to campaign for policy changes which will benefit their client group. Of course, that could be called political—changing policy is political—but it is very much small-“p” politics, not party politics, and charities are very much aware of that.

[Lord Judd (Lab)]

My Lords, I am very glad that this amendment is before us but I noticed that in introducing it my noble friend emphasised very heavily that it was not endorsing in any way the concept of charities becoming involved in party-political activity. I was glad that my noble friend Lady Pitkeathley also made that point.

I want to speak very honestly as a former director of Oxfam in the 1980s, when we were campaigning very hard to get a change in charity law. We had quite a skirmish with the Charity Commission at the time. It was done in a gentlemanly way but very firmly by the commission, which was quite right, and in the end the laws on campaigning were rewritten and we could have almost dictated word for word what the new regulations said because they were exactly what we were after.

What was happening in Oxfam, as I saw it, was that the charity was maturing and growing up. It was saying, “We can’t go on simply alleviating poverty or whatever because in doing that we may be condoning the causes of what we are dealing with. We are repeatedly putting fingers in the dyke without seeing that it is the dyke itself that is crumbling or which is the problem”. There was a very strong feeling developing among staff and trustees—and the trustees held very firm on this, which I found very encouraging—that we were being dishonest: that in our work we were coming up against the real causes of the issues we were encountering and, in order to not just alleviate the consequences but deal with the causes, we had to spell out what we had come to see as the causes.

I think I have shared this personal anecdote with the Committee before so I hope I can be forgiven for mentioning it again. Once when I was on a visit to Latin America at a very difficult time to visit our programme there, I had a very long and interesting conversation with the Bishop of San Cristobal, who was bravely standing up for the Indians in Chiapas who were under terrible pressure. He was being denounced by the Government of the time and so on. It was quite ugly, with people disrupting his church services and standing outside his little house shouting all night, but he was just getting on with the job. He spoke fluent English; he was a really strong man. I asked him, “Have you got a message that you would like me to take back to the UK, to my staff colleagues and my trustees but also more widely in Britain?”. He said, “Yes, I have”. He made several points but the point I shall always remember is that he said, “In situations of this kind, you cannot be neutral. I believe that solidarity is the real meaning of charity”. If you are getting into a position of solidarity with the people you are trying to help, you must recognise that they are talked about a great deal, they are talked to a great deal, but in the major debates that are taking place that affect policy who talks for them? Of course, that is one step short of talking for themselves in those debates.

I was very privileged to have held that post in Oxfam. I came away from my time in it absolutely convinced intellectually and emotionally that if a charity was to be true to its purposes and was dealing with really severe social problems, one of its most important tasks and one thing it should never equivocate about was advocacy—to speak out about the issues that it had discovered in its work were the real issues. Of course, that is not always comfortable but it is absolutely essential to integrity. We received terrific support. We relied in those days on a widespread constituency support, and regular giving from the wider public increased while we were making this stand. Clearly many people in the country agreed with our position. It is a tremendous achievement and of great credit to the Charity Commission of the time that it took the point and amended the laws on campaigning. We must stand firmly by that because it could become easily eroded.

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Moved by

[Baroness Pitkeathley]

15B: After Clause 12, insert the following new Clause—
“Review of Charity Commission’s funding arrangements
The Secretary of State must order a review of the Charity Commission’s funding arrangements and look into different options for funding.”

[Baroness Pitkeathley]

My Lords, I again declare my interests as vice-president and patron of several charities, co-chair of the All-Party Group on Civil Society and Volunteering, a member of the advisory body of the NCVO and, especially in relation to this amendment, chair of the Professional Standards Authority, the overseeing authority for the nine health regulators, such as the GMC, the NMC and the GDC.

Throughout our deliberations on the Bill, concern has been expressed about giving more responsibility and powers to the Charity Commission while not providing any additional resource. Indeed, the commission has seen a considerable cut in its resources over the years. So this amendment, and I stress that it is very much a probing one, calls for a review of its funding. I am certain that we all—beneficiaries, government and charities themselves—want from the Charity Commission the assurance that it can do its job and, further, to be assured of its competence to do that job and its independence in the way that it carries out its functions.

In view of the cut in its funding and of the criticism, sometimes harsh, that it has faced about its competence, the Charity Commission has concentrated, perhaps understandably, on its core function: its regulatory or policing function. In my view, this is a pity since what is most valued by the charitable sector, particularly small charities—we have heard many times that most charities are indeed very small—is the commission’s advice and guidance as well as its regulation. The role of regulation, after all, is not just about policing but about maintaining professional standards in the interests of public protection. This is very familiar to me in my role as chair of the Professional Standards Authority.

This probing amendment seeks to encourage the Government to look at other ways of funding the Charity Commission in order to ensure that its role includes advice, information, support and other services that those regulated should be able to expect from a regulator. I start from the assumption that no further money will be forthcoming from the Government, which seems a safe enough one in this climate, though if the Minister would like to disabuse me of that idea I would be delighted; I would be very glad to be corrected if more money were coming from the Government.

The review that I am suggesting would take the widest possible look at all the funding options, but I am going to concentrate here on one particular option. One other way to be considered could be for the regulated to contribute to the funding of their own regulator, which is how most other regulators get their income. My own organisation, the Professional Standards Authority, which provides not actual regulation but oversight of the nine health regulators, is shortly to be funded by a levy on the organisations that we oversee, based on a per-capita calculation of the number of registrants. I am aware that it is one thing to charge a nurse, doctor or dentist a fee for a registration that allows them to practise but quite another to take things from money raised from charitable donations. However, not all charitable income comes from charitable sources, and even the lowest-paid nurse knows that it is a condition of his or her practice to be registered, and that for that registration you have to pay a fee.

Let me be clear: I am not suggesting that paying fees to the Charity Commission should be a condition of regulation for all charities. The review that I am suggesting would of course have to look at exemptions from contribution, and I suggest that a very high threshold would have to be set. I think that the commission itself has suggested a £100,000 a year income, but in my view that is not nearly high enough and the threshold would have to be much higher—say, income of £1 million before any fees were charged, and then there would have to be a sliding scale.

Moreover, no Government could bring in such a scheme without significant quids pro quo being established if this suggestion were to be at all acceptable to the charitable sector. One of these would certainly be the guarantee of the independence of the commission, as all the regulators with which I am familiar have—they are guaranteed independence. We call the Charity Commission independent at present, but does it pass all the tests for an independent body? It is answerable to the Government of the day, not to Parliament; it is dependent for virtually all its funding on government; and the way in which it appoints and reappoints its trustees has been called into question, with the Government’s influence over that possibly being too strong. In my experience it is unusual, to say the least, for an independent body to have staff in the Box advising the Minister on a Bill of which it itself is the subject. So we would need more assurance about the independence of the Charity Commission if we were even to think about going down this road.

Another change which could and should be suggested about the governance of the Charity Commission in return for a change in the way it is funded is more connection with the beneficiaries of charities—the consumers of their services. The focus of all the other regulators with which I am connected in my role at the PSA has been radically altered in recent years and their governance has been changed to reflect this. The change has been to ensure that their primary role is protection of the public, not defence of their registrants. There is surely a case for making it similarly clear that the regulation of charities is a means to an end, not an end in itself. The end must be the protection of the beneficiaries—the receivers of the services of charities. Accordingly, along with contributing to the resources of the Charity Commission, the charities themselves should be assured that their beneficiaries would in some way be represented in the governance of the Charity Commission; if not on the board, then for example through an advisory or reference group.

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[Lord Bridges of Headley]

My Lords, I welcome this debate, prompted by the amendment of the noble Baroness, Lady Pitkeathley, who, as the noble Baroness, Lady Hayter, has just said, has extensive experience of this sector. I also welcome, as did my noble friend Lord Hodgson, the chance to climb on my horse and canter around this terrain once again. It is important that we debate these issues and I can see that there are a number of them here. On the one hand there is the independence of the commission but on the other, much more fundamentally, there is the question of its funding.

Before I turn to the future, I shall talk first about the present and where we are today. It is important that we put the debate on funding in the context of recent history. As the Committee knows all too well, in its critical 2013 report on the Charity Commission the National Audit Office found that the commission had,

“no coherent strategy for delivering clearly defined priorities within its broad remit”,

and:

“The Commission does not know how much its activities cost and has not focused its resources on its priorities”.

Those are pretty damning words, as I am sure the Committee will agree. Under the leadership of William Shawcross and Paula Sussex, the Charity Commission is making good progress in addressing these weaknesses. I pay tribute to their leadership and that of the commission’s board. Equally important, I also recognise the commitment and hard work of the staff at the Charity Commission who strive, day in and day out, to ensure that charities are properly regulated and get the service they require.

The National Audit Office undertook a follow-up report on the Charity Commission which came out in January 2015. The report found that the commission has made good early progress in addressing all of the recommendations made by the NAO and the Public Accounts Committee and has put in place a credible programme for change. That said, it also pointed out that there is still some way to go.

The Charity Commission’s 2014-15 annual report, which was laid before your Lordships’ House yesterday, demonstrates some of the progress it has made in its compliance work, for example, and in a number of other areas. It reports that in 2014-15 the commission opened 103 new investigations and used its enforcement powers 1,060 times—up from 64 and 790 respectively in 2013-14. Equally as important, the commission also continues its enabling work through permissions casework, providing online services to charities, and through guidance and engagement to support trustees in fulfilling their legal duties when managing their charities. In the commission’s first contact alone, it dealt with over 57,000 calls, 55,000 emails and granted over 2,500 permissions last year. It continues to refine this work with an aim to provide an “efficient, fuss-free service to charities”. So we are seeing good and positive progress from the commission in becoming a more effective and efficient regulator.

However, as has been discussed, the question of funding is a valid one and I share the noble Baroness’s wish to ensure that the regulator is properly and sustainably funded. I am sorry to disappoint the noble Baroness but I am not able to shake a money tree and magic up a large cheque for the Charity Commission. This is because the Government remain committed to dealing with the record deficit and all parts of government need to contribute to efficiency, including the Charity Commission.

That said, the Government recognise the need for targeted additional resources for the Charity Commission. In October last year, my right honourable friend the Prime Minister announced an £8 million capital investment for the Charity Commission through to March 2017. On top of that, it also received an extra £1 million in funding for 2015-16. This £8 million capital investment will help the commission to refocus its regulatory activity on monitoring and enforcement in the highest risk areas—for example, the abuse of charities for terrorist and other criminal purposes such as tax avoidance and fraud. The commission has said that this significant investment will be spent on technology and frontline operations, allowing it to streamline lower risk work and deploy its resources more effectively to priority work.

So that is where we are. Looking to the future, the Charity Commission’s strategic plan for 2015-18, which was also published yesterday, sets out its four strategic priorities. These are, first, protecting charities from abuse or mismanagement; secondly, enabling trustees to run their charities effectively; thirdly, encouraging transparency and accountability; and, fourthly—this is the matter that concerns the Committee—operating as an efficient and expert regulator with sustainable funding. Under the heading of that fourth strategic priority, the commission has committed to consulting on proposals for alternative funding options, including an annual charge for registered charities.

The strategic plan also makes it clear that the Charity Commission cannot devote the same level of resource to each of its statutory objectives as it previously could. It accepts that means changing the way it operates, allocating resources by relative priority and risk, and working with partners. The commission is looking at various options. However, I should stress that there are no plans in place yet. The commission’s chairman, William Shawcross, has been meeting the chief executives of a number of charities to raise the idea with them and listen to their thoughts. Of course there are those who have concerns. The commission is listening to them and will consult more widely as its plans develop.

As the noble Baroness, Lady Hayter, has illustrated, there is a wide range of views on this subject already. The Populus research that she cited found that the majority of the public—69%, as noble Baroness said—believe that charity regulation should be partly or fully funded by charities themselves. A significant minority of charities—23%—agree with this, while the majority of charities believe that charity regulation should be funded entirely through general taxation. Clearly, therefore, discussions must continue with the sector to see where there is shared ground. Of course, Parliament would want and needs to be involved in any debate, and I know that some of your Lordships have already fed in your thoughts and have expressed them today. Section 19 of the Charities Act 2011 would enable charging to be brought in through secondary legislation, but importantly and crucially, it provides for parliamentary scrutiny of any charging proposals and requires the affirmative resolution procedure.

The issue of independence was raised and whether, if charities are to pay for their regulation, we can ensure that the Charity Commission is independent of government. This again raises questions about the commission’s independence. Its chairman, Mr Shawcross, explored the issue of sustainable funding for the regulator in a speech on 10 June, saying:

“There are indeed very real questions to answer—including how the Commission’s independence, which is so vital, would be protected under such an arrangement”.

We must ensure that the Charity Commission remains independent of government and the sector it regulates, however it is funded in the future.

The funding of the commission is just one strand of ensuring that it is able to be the modern, effective regulator that the public and we all expect. The powers in this Bill are another strand of that. I hope that my response begins to reassure the noble Baroness that we and the commission are committed to ensuring that the regulator has a sustainable funding solution to enable it to regulate charities effectively and efficiently, and that work is already under way to consider the options. With that, I hope that she will feel able to withdraw her amendment.

[Baroness Pitkeathley]

I thank the Minister for his thoughtful response and other noble Lords for their similarly valuable contributions to this short debate. I said that my amendment was controversial; it has also been illustrated that there are many complex issues within it. The debate about how the Charity Commission is funded did not start here and certainly will not finish here. It will be the subject of ongoing relationships. It seems to me that the relationship between the Charity Commission and the sector that it regulates is vital.

I have raised the issue—and the Minister has addressed it—of independence. My noble friend referred to consumer involvement and protection. Those issues will not go away as we look to the future of funding for the Charity Commission, but, for the moment, I am happy to withdraw the amendment.

Amendment 15B withdrawn.