Lord Higgins
Main Page: Lord Higgins (Conservative - Life peer)Department Debates - View all Lord Higgins's debates with the Home Office
(12 years, 4 months ago)
Grand CommitteeMy Lords, I am in no sense an expert in this area, but over the past two or three years I have been involved in negotiations with the Charity Commission. I certainly join with those who have expressed appreciation to the Law Commission for its work on this. I think I have only on one previous occasion had a debate in this Chamber on one of its reports. Am I right in thinking that this does not go to the Commons at all and is dealt with exclusively in your Lordships’ House? I was not clear about that.
I also pay tribute to the way the Charity Commission has handled the particular negotiations in which I have been concerned. I understand it is being quite severely affected by the cutbacks but it managed to get through these particular negotiations before that had too serious an effect.
I will raise only some very simple points. The explanation given by the noble Lord, Lord McNally, points out that the four burdensome 19th century rules requiring apportionment between capital and income, which are described so adequately in the Explanatory Memorandum, will be renewed for new trusts. My very simple question is: will it apply only to new trusts, or can existing trusts make arrangements to take advantage of the changes as well?
The Explanatory Memorandum draws rather a charming analogy with trees and the fruit of trees. In the trust about which I am concerned, we had considerable problems over whether to regard a particular asset as income or capital. In addition to the original trust being set up, it was then given the royalties from a particular operation and was therefore continually topped up in this way. This gave us considerable problems in deciding whether that should be regarded as capital or income. However, it will be very helpful overall if time and costs can be saved by the Charity Commission making regulations, rather than people having to apply on a case-by-case basis, as is the present position.
The Minister’s letter has a final line which states that the Bill is expected to be beneficial to small firms and micro-businesses. I am rather puzzled as to how that will be the case but no doubt the Minister can explain.
Obviously, we are always more than happy for there to be consultation before, during and whenever to deal with these matters. They ought to be looked at and that is how we get the right result in the end on all Bills. It is something that we would more than encourage. I am sure the noble Lord will be in touch with the officials, and that he has already spoken to them, the Charity Commission and the Law Commission at some stage.
I move on to my noble friend Lord Hodgson’s concerns about whether the regulations in Clause 4, particularly the total return investment regulations in new Section 104B, will be too restrictive. Again, this is a matter that we will need to look at in some detail. However, it is a matter that the Charity Commission should be able to get right following consultation. I am certainly confident that it will strive to ensure that the regulations achieve just the right level of trusting the trustees to get things right and protecting charity funds. It is a matter that I hope the House will look at in detail.
I understand my noble friend’s concerns about English cathedrals and that he raised the matter at the Peers’ briefing in March. As a result of ongoing discussions at official level between the Ministry of Justice, the Law Commission, the Charity Commission and the Church Commissioners, they are all looking at the issue. In essence, the Association of English Cathedrals, which represents all the corporate bodies of our 42 cathedrals, has asked that Clause 4 be extended to include the cathedrals in its scope. The association considers that this would benefit the 20 or so cathedrals that have permanent endowment. That would put those English cathedrals on the same footing as the Welsh cathedrals. However, unlike cathedrals in Wales, cathedrals in England are not subject to the general regulation of the Charity Commission. The Government will consider the request from the Association of English Cathedrals carefully, but at present no final decision has been taken.
I cannot remember whether it was on this issue or another that my noble friend speculated as to whether the word “Resist” appeared in my briefing. I can assure him that it does not, although it might appear later as we discuss these matters further. However, this is not really a matter for the Government to resist; it is a matter for all of us to make sure that we get right. Again, I stress that this is not a government Bill; it is a Law Commission Bill, which we are ensuring gets on to the statute book.
My noble friend also asked about social impact and mixed-motive investment. The Government acknowledge that social or mixed-purpose investment is a highly important issue and are grateful to the noble Lord for drawing attention to it, both today and as part of the work of his ongoing review of charity law. The Government’s ambition is that social investment should become a major source of finance for the social sector. To this end, the Cabinet Office’s social investment team is working with other government departments to make this vision a reality. Social or mixed-purpose investment did not, however, form any part of the Law Commission’s work on capital and income in trusts and therefore has not been included in the Bill, by the Law Commission in its report or by the Ministry of Justice in its consultation. Therefore, at this stage we would not want to see anything further added.
I have already dealt with the question from my noble friend Lord Higgins as to whether the Bill will go to the Commons. I can give that assurance. My noble friend also asked whether it will apply only to new trusts, which I think was a question also raised by the noble Lord, Lord Beecham. I can give an assurance that the reform is prospective only. We believe that retrospective interference with existing trusts could frustrate the intention of the person who created the trust, contrary to the general principles of trust law. However, as the noble Lord, Lord Beecham, reminded us, in any drafting of trusts that he has been doing over the last however many years, he has been excluding the rules in Howe v Earl of Dartmouth and others, just as, I imagine, most practitioners have been doing.
My noble friend Lord Higgins also asked about the letter and whether there was going to be any effect on small and medium-sized businesses. We believe that it is unlikely to have a major effect on small and medium-sized enterprises. However, the impact assessment published by the Ministry of Justice states:
“While a reduction in the complexity of the current legal rules may lead to a very marginal reduction in trust related business for small legal firms and trust service suppliers, this is expected to be more than offset by reduced costs for trusts. Small legal firms and trust service suppliers may also benefit from additional business if there is an increase in the number of charities operating total return investment … We do not consider that the Bill is likely to have a disproportionate impact on the operations and performance of small businesses compared to others”.
I am still slightly puzzled about this. It says that the Bill is expected to be beneficial to small firms and micro-businesses. Does it mean small legal firms? The idea of a small legal micro-business strikes me as a little unlikely, so I do not understand how it affects small businesses and micro-businesses.