Local Audit and Accountability Act 2014 (Special Trustees) Amendment Regulations 2015

Earl Howe Excerpts

Tuesday 10th March 2015 Grand Committee

Moved by

[Earl Howe]

That the Grand Committee do consider the Local Audit and Accountability Act 2014 (Special Trustees) Amendment Regulations 2015.

Relevant document: 22nd Report from the Joint Committee on Statutory Instruments

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)]

My Lords, these regulations are among a number of statutory instruments relating to the audit of the accounts of relevant authorities in the new regime introduced by the Local Audit and Accountability Act 2014. The Act also abolishes the Audit Commission, passing responsibility for auditor appointments to the local public bodies.

I will not take up the Committee’s valuable time by repeating the arguments put forward during the passage of the 2014 Act in this debate. There was broad support across the House during the debates on the Act for creating a more efficient audit system, giving greater responsibility to local bodies while providing greater opportunities for local people to hold those bodies to account.

These regulations introduced today make a minor but important change to the application of the Act, relating to one particular type of local public body—special trustees appointed by the Secretary of State for NHS charities. Special trustees are established by the Secretary of State to administer property or funds held on trust at particular teaching hospitals. There are currently special trustees at only three hospitals— Great Ormond Street Hospital, Moorfields Eye Hospital and Royal National Orthopaedic Hospital. All the special trustees were established to manage charitable funds and they represent some of the largest NHS charities.

The Local Audit and Accountability Act 2014 makes provisions for audit appointment, conduct and regulation for a range of local bodies which are defined as “relevant authorities”. The relevant authorities include local government, parish councils, NHS trusts, clinical commissioning groups and special trustees. The special trustees’ charitable accounts fall outside the account definition in the Local Audit and Accountability Act. These accounts are covered by the Charities Act 2011, which sets the audit and reporting arrangements for all English NHS charities. However, the Local Audit and Accountability Act 2014 applies generally to matters which do not relate to the accounts of trustees. For example, there is a requirement in the Act for relevant authorities, which include special trustees, to have auditor panels. The intention, however, was that the Act should apply to special trustees only if they held non-charitable funds.

These regulations therefore amend the definition of relevant authorities as far as it relates to special trustees so as to restrict its application to instances where the trustees are dealing with non-charitable funds. The amendment would also remove any overlap which exists in relation to matters which are already covered by the Charities Act 2011, and so it will restore the current position, making special trustee arrangements consistent with those for other NHS charities. This amendment will also make the application of the Local Audit and Accountability Act to special trustees clearer. The fact that the Act does not apply to special trustees’ charitable accounts is currently not directly stated. To establish this, readers have to follow two cross-references to other Acts. In preparing these regulations, we discussed the implications with the Charity Commission and the Association of NHS Charities, which agreed that the overlap between the Acts should be removed.

In conclusion, these regulations will amend the Act so that it does not apply to the charitable trust funds of special trustees and applies only where the trustees are dealing with non-charitable funds. I commend these regulations to the Committee.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I am sure that we all are grateful to the noble Earl. As he will understand, I laboured long and hard over these regulations. Rather like the previous RIA, they are quite remarkable in that there has been no consultation, guidance or impact assessment, no charities are affected apart from the charitable trustees—I do not think that the special trustees count as charities in that sense—and they do not impact on small and medium-sized enterprises. No doubt if there had been an RIA, it would have been another “Nul points” return.

I think the noble Earl said that as of today the regulations will have no impact because the three special trustees who still exist do not engage in non- charitable activities. I have a genuine question for the noble Earl with regard to the Government having adopted a deregulatory or better regulatory approach. I wonder whether this SI was really necessary and whether a letter from his department to the three special trustees telling them not to engage in non-charitable activities might not have been a better option. I was going to ask him which three special trustees still existed, but he very kindly gave their names. I wonder why they are still special trustees. He may not know why, but it struck me that, with the options that are now available for these trustee arrangements, other NHS trusts and foundation trusts have decided on different options.

Finally, it is worth noting that in some cases we are talking about quite considerable sums of money that, in one way or another, have been left or that special trustees operate. They can therefore have a major impact on the activities of those hospitals, particularly on research but also on contributions to patient comfort. I do not know whether the noble Earl really thinks that these funds are generally in good hands and whether there are any trends in giving at the moment; clearly the NHS finds them to be extremely useful.

[Earl Howe]

My Lords, I am grateful to the noble Lord for his questions and comments. Essentially, these regulations are about creating legal certainty when the 2014 Act commences. The policy intention has always been that the Act should apply only where special trustees are dealing with non-charitable matters. That policy is already reflected in the Act, albeit in an indirect way, through cross-reference to other legislation in respect of the accounts of special trustees. However, the background legislation to this amendment is complex, and by not limiting the relevant authority reference to special trustees to when they deal with non-charitable matters, a number of provisions apply generally to special trustees. We considered that to be unsatisfactory and it is why the amendment we are making is necessary as a point of clarification. In other words, there is an overlap between the Local Audit and Accountability Act and the Charities Act. The noble Lord knows as well as I do that lawyers find that sort of thing extremely untidy.

Lest the noble Lord think that this is purely an academic matter, I am advised that it is perfectly possible for special trustees to hold non-charitable property. The DH guidance in 2011 says that NHS trustees have the power to accept and hold trust funds other than charitable funds and asks the NHS trustees to consult the department if they are considering accepting donations under terms not regarded as charitable. That could occur where funds are donated for the support of an independent patient, or for such a small and specific group of patients that it does not qualify as a charitable purpose under the Charities Act 2011. In other words, the special trustees would just be custodians of those funds in those circumstances.

As regards the noble Lord’s final question on whether I consider the charitable funds to be safeguarded and in good hands, I have no reason to doubt that that is the case. I do not have any background on the charitable funds themselves, but if I can comment on that matter, I would be happy to write to him.

Motion agreed.