Small Business, Enterprise and Employment Bill

Lord Hodgson of Astley Abbotts Excerpts

Monday 19th January 2015 Grand Committee

Moved by

[Lord Hodgson of Astley Abbotts]

56A: After Clause 89, insert the following new Clause—
“Annual returns
(1) This section applies where the company is a charitable company.
(2) The Registrar must agree with the Charity Commission a common form of annual return for both organisations.”

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[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I am sorry that I am on the wrong side of the Moses Room this afternoon, but all the chairs were full when I arrived earlier, but never mind.

The amendment inserts a new clause after Clause 89 and is born of long frustration at the Government’s failure to force through a simple deregulatory change. If someone sets up a charity, it will normally be the case that it will be set up as a charitable trust; trustees will be appointed who will operate in a normal way under the supervision of the Charity Commission. The drawback of this is that the trustees have unlimited liability, which is not always particularly attractive. Therefore, to avoid that you can change from being a charitable trust to being a charitable company, which gives you the advantage of limited liability. However, that has a drawback because you then come under two regulators: the Charity Commission for your charitable activities and Companies House for your limited company activities. Both regulators require annual returns to be made to them and require largely overlapping information. If one was to draw a Venn diagram, one would find that there was relatively little space not covered by both regulators’ requirements.

In 2012, a report that I did for the Government recommended that the two forms could and should easily be merged. The Government accepted that recommendation, but I have to say that since that date progress has been glacial. In fact, that would be altogether too rapid a description of the progress that is being made. There has been lots of stuff about overlapping jurisdictions and incompatible IT systems, all of which to my mind smells of the long grass, if the long grass does smell. So I tabled this amendment to suggest that the Minister should be required to ensure that a common form is agreed between the two regulators, the Charity Commission and Companies House. I do not suppose for a moment that the Minister will accept it, but it is an attempt to draw attention to very slow progress in one part of her department.

How many companies the measure would cover is not exactly known, but the estimate is between 20,000 and 30,000 companies, which means about the same number of forms, if we could make this change. Deregulation requires a scalpel, not a meat axe, and this is a scalpel which I am offering to my noble friend on the Front Bench, as it would make a significant difference to 20,000 to 30,000 charitable companies, a difference to which the Government have been committed for some little time but which so far seems to be entirely stillborn as an idea. I beg to move.

[Lord Cope of Berkeley]

My Lords, I support this amendment but must declare an interest. I happen to be a trustee and director of just such a charitable company and charity as my noble friend suggests. I cannot pretend that it is a huge burden to fill in both separate forms but this is exactly the sort of deregulation that we should be looking for—and so do the Government, or at least I thought they did. How are we getting on with the glacial process, as my noble friend described it, of trying to harmonise these two forms?

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I am pleased to say that work is in progress on this matter. I hope that the noble Lord has found my explanation reassuring and, on that basis, will withdraw his amendment.

[Lord Hodgson of Astley Abbotts]

I am extremely grateful to my noble friend and I congratulate his officials on drafting a speaking note of brilliant obfuscation, which manages to avoid most of the issues. The one point that he did make, which was about the public benefit, obviously occurs only in charities’ accounts; it does not occur in an ordinary company’s accounts. That is the one difference, and that surely can be accommodated in a common form and does not represent an insuperable difficulty.

The second red herring concerned the charitable incorporated organisation—the CIO—which has now been in existence for just over 12 months. There is, of course, a problem for companies. At present the Charity Commission will not accept conversion because of the volume of work; it simply cannot take on more than a certain number of CIO applications at a time. Indeed, there is no reason why we should force people who have set up charitable companies to become CIOs. It is looking at the problem through the wrong end of the telescope to say that they have to change their arrangements when, quite simply, a regulatory action by my noble friend would solve the problem.

Finally, my noble friend said that he was going to invite the two regulators to write to me setting out how they would take this forward. However, it is now 18 months since the Government accepted the recommendation that I made a year before that. Do we not yet have a plan from Companies House, after 18 months? Surely, we could find a way of acting with a little more urgency. I urge my noble friend to act as the Dyno-Rod man on this matter to ensure that we move the whole issue forward; otherwise, in two or three years’ time, we will still be discussing how difficult it is, and we will be talking about all the problems that he has been informed about by his officials.

I would like my noble friend to take a personal interest rather than merely ask the organisations to write to me, which means that the issue will certainly be put in the long grass. However, I am grateful for his reply and I beg leave to withdraw the amendment.

Amendment 56A withdrawn.