Charities Bill [HL]

Lord Phillips of Sudbury Excerpts

Thursday 5th May 2011 Lords Chamber

[Lord Phillips of Sudbury]

My Lords, I thank my noble friend for the way in which she has introduced this Bill and in so doing thank those responsible for it, particularly the Law Commission, the Charity Commission, the Office for Civil Society and the Consolidation Committee under the chairmanship of the noble and learned Lord, Lord Carswell. Consolidation is an often thankless task and I sympathise with the poor old parliamentary draftsmen who on such occasions get nothing but brickbats. He, she or they have done a sterling job in pulling together the 200 plus pages that constitute the Bill.

As my noble friend said, it is vital that Parliament never loses sight of the nature of the charity and voluntary sector which is, as its name implies, made up of volunteers. Ninety-five per cent of all charities in this country have no paid staff and the overwhelming majority of trustees are volunteers—there is just a tiny handful of exceptions. I suspect that every Member of this House is trustee of at least one, and in many cases, many charities. The charity sector is the jewel in our national crown. It is that which keeps us going in hard times; that which keeps us from getting cynical; that which gets us out and about contacting fellow citizens whom we would normally come nowhere near.

The Minister said why the Bill does not consolidate the fundraising provisions in Part 2 of the Charities Act 1992 and in the Charities Act 2006. I will read in Hansard what my noble friend said but at first hearing it sounded a convincing explanation of why the consolidation has not occurred. It has disappointed very many people. I am sure that my noble friend Lord Hodgson of Astley Abbots will have something to say about that when he speaks. Certainly, the Charity Law Association is very disappointed about that important aspect of charity law not being within this Bill. I do not instantly see why it could not have been consolidated and if it proves the case that on review large parts of it are abandoned or changed, you can as well change this consolidation Bill as you can change the 2006 Act.

I know that the Minister is keen to address any issues that are raised in this House, particularly those which will clarify even further the consolidation Bill. Make no mistake, it will make a huge difference. Many solicitors I know who try to help local charities but know very little about charity law will be extremely grateful for this legislation. As the Minister said, the basis on which consolidation measures are brought forward is that they do not change substantive law. I will, therefore, refer in detail to the opening clauses of the Bill in that regard. To enable the Minister, her very helpful Bill team, the parliamentary draftsmen and this House to get to grips with my rather gritty points. I am afraid that I need to set out my observations in unremitting detail. I have hitherto raised these issues with the noble and learned Lord, Lord Carswell and the Bill team.

In short, the key definitions in the Bill are not as clear as they could and should be. They affect the whole interpretation of the Bill. Key to this are the unnecessary distinctions made in the first three clauses between “charitable purpose” and “charitable purposes”. Clause 1(1)(a) refers to “charitable purposes” in defining what is meant by “charity”. Clause 2 is headed, “Meaning of ‘charitable purpose’”. Clause 2(2)(a) refers to “charitable purposes”. The heading to Clause 4 begins, “Charitable purpose”, and the heading to Clause 11 is “Charitable purposes”. Clause 3 takes the biscuit and has it both ways. The heading is, “Charitable purpose: purposes which can be charitable purposes”. Clause 11 purports to define “charitable purposes”,

“In the rest of this Act”.

That implies that there are different definitions of “charitable purposes” in Clauses 1 to 10 from those in Clauses 11 to 358, plus the 11 schedules. Schedule 11, which contains an index of defined expressions, hedges its bets and refers to “charitable purpose or purposes”, directing the reader to Clauses 2(1) and 11.

For those in the Chamber who are still listening and think that I am splitting hairs, I say that we lawyers thrive on hairs. Furthermore, the courts will aver that we parliamentarians do nothing in vain; we may do it vainly, but not in vain. The difference between singular and plural must be taken as having significance—and I believe that it does.

I return to Clause 3, which is crucial and contains the 13 main purposes of a charity. Noble Lords will recollect that the clause heading is, “Charitable purpose: purposes which can be charitable purposes”. I can find no reference in the 2006 Act, or in any other pieces of legislation consolidated in the Bill, to the quizzical qualification, “can”. What can one make of something that “can” be a charitable purpose? The headings to Clauses 2 and 3 seem mutually inconsistent, the former being the same as Clause 2 of the 2006 Act and the latter containing that brooding word, “can”.

I turn now to another issue. I wonder whether the Bill is clear enough in mentioning only in Clause 1(1)(a) the need for a charity to have exclusively charitable purposes. Although it may be arguable, if one follows through the interlocking of the first three clauses of the Bill—with a towel around one’s head, I may say—that the need for a charity to be established for charitable purposes only works through the remainder of the clauses, I prefer the approach of the Charities Act 1993. There, the general interpretation section at the end—Section 97—defines “charitable purposes” as,

“purposes which are exclusively [charitable purposes as defined by section 2(1) of the Charities Act 2006]”.

That last phrase was inserted by the 2006 Act.

I draw the attention of the Minister and the House to an obscurity that exists in relation to what law is being applied in the Bill. Clause 2 makes it clear in two places that it is, unsurprisingly, the current law of England and Wales. In Clause 3(1)(m)(i), one finds a reference to “the old law”. I think I know what the draftsman means, but I am not sure how many other people will, and I would like to be sure that what I think it means is what it means. Finally, I cannot resist pointing out that Clauses 4(1) and 4(5) are superfluous, particularly in the light of Clause 2(1)(b).

I apologise profusely for the turgid nature of my contribution to this debate, but at least there are 10 colleagues in the Chamber who have had to suffer my meanderings. I am grateful for the opportunity.

--- Later in debate ---

[Lord Phillips of Sudbury]

The noble Lord cited my name on Re: Resch., and he is quite right that it is a leading Privy Council case, but it is wonderfully obscure. He may remember that, during the debates on the 2006 Act, I moved an amendment to try to give the Charity Commission a little help in giving guidance and making judgments on public benefit. In many ways, it is a pity that we left it nude and relying on a paucity of very unsatisfactory cases.

[Lord Hodgson of Astley Abbotts]

The noble Lord, Lord Phillips, is one of the prime charity solicitors, and if he says Re: Resch. is obscure, who am I to disagree? I bow to his expert opinion. As he said, the Charity Commission was left with the task, and we now have a reference by the Attorney-General to the charity tribunal for a determination on the public benefit test. The hearing is later this month, so we are holding this Second Reading debate on the cusp of potentially significant changes for the charity sector. Some noble Lords may say that is all about private hospitals and private schools—that they deserve what is coming to them—but I think a word of caution is required because, as has been pointed out, the decisions made in those proceedings will affect not just fee-paying independent schools but potentially all fee-charging charities. That will include playgroups, nurseries, care homes, healthcare charities, museums, theatres, amateur sports clubs, advice centres, veterinary care charities, heritage and visitor attractions, housing associations and alms-houses. It has a very substantial possibility of changing the sector. When coming in to the House, noble Lords may have seen the huge queues outside Westminster Abbey of people wanting to go in to see the abbey today. It will be affected by the tribunal’s determination. While I absolutely support the Bill, I think we are holding this debate at an unusual point in the development of charity law.

As my noble friend pointed out, this Bill is a consolidation measure containing no new legislative proposals. I will not repeat what the noble Lord, Lord Phillips, said on the points that he made. The guts of the Bill are in Clauses 3 and 4 and are to do with the public benefit test and the test for charitable purposes. I entirely support what my noble friend said about the charitable purposes clause. I was surprised that Section 2 in the 2006 Act, which is headed “Meaning of ‘charitable purpose’” and seems absolutely clear, is replaced by a clause headed “Charitable purpose: purposes which can be charitable purposes”. That does not clarify anything; it seems to obscure things. That issue needs to be chased down.

Secondly, the words “under the old law” which, as my noble friend pointed out, now appear at the end of Clause 3(1)(m)(i), are a further confusion. Perhaps the Minister will explain why Section 2(8) in the 2006 Act, which contained the definitions of charity law and existing charity law, seems to have dropped out of the Bill. Maybe they appear somewhere else or have proved otiose or redundant, in which case, I am perfectly happy, but it would be helpful to have some words on that in due course.

One of the glories of consolidation Bills is that they provide a brief opportunity for reflection on where we got it wrong in the past and the direction of travel for the future. The Minister and my noble friend Lord Phillips referred to fundraising, which has proved a tricky subject and is clearly still in need of further treatment.

There are three brief issues that I would like to signpost this afternoon. The first is the role of the charity tribunal. The idea of the charity tribunal was to provide a quick, user-friendly, cheaper alternative to High Court proceedings so that small charities were not burdened by the risk that they would have to undertake if they appealed against Charity Commission hearings. I am afraid that it has not worked. There have been very few cases. Those that there have been have been highly legalistic in their approach and we are back with Silks, lawyers and everything else. The idea that we had for a simple remedy has not been fulfilled. One problem was the terms of the old Schedule 4, which is very prescriptive. We tried to persuade the then Labour Government that it would be a good idea to remove the schedule, but we were not able to do so. It is now reproduced wholesale in Schedule 6. If we are to make the tribunal as effective as we had hoped that it would be, a whole fresh eye is needed.

The second problem concerns dealing with the emergence of social investment. Recent years have seen the emergence of people who wish to make investments for social as well as financial purposes. They have an interest in making an investment and want to see a financial return but they also have a social purpose. The present proposals for charitable investments to be able to get improved results if they are successful—for example, as regards prisoner reoffending, getting people into work and ending school exclusions—would mean that the charities would get a better return.

There are implications for this whole area, including individuals. We have the counterintuitive idea that you may give the money to a charity to do something but you may not invest in it. That cannot be sensible. People who invest in charities or one of these schemes would get back their money or perhaps a modest return. That surely would be a sensible way of increasing the volume of money available for the sector. For charitable trusts, this would mean tackling the issue of permanent endowment, which cannot be spent. Therefore, many charities find it impossible to support schemes which are entirely in line with their objectives because of the issue whereby they cannot invest in schemes where there is a social return characteristic. That is a new area which has come to the fore in recent years. As we move forward we need to take time to think about it.

The last and greatest issue is of course the future regulatory structure. This afternoon, we have talked about charitable trusts. But there is now a welter of different corporate forms. You might be a charitable trust, a company limited by shares, a company limited by guarantee or a community interest company—a CIC. You could be an unincorporated association or an industrial and provident society, and you are shortly going to be able to become a charitable incorporated organisation—a CIO. Each of those forms of company or structure has different regulatory requirements as regards governance and fundraising. I am not sure that we have begun to think about how we get some coherence into the whole sector. I think that we can look at those issues in the future.

In conclusion, I entirely support this Bill. The UK charitable sector is glorious in its diversity. Therefore, this Bill has my strong support. But it is not the end of the road. Important decisions lie ahead if we are to find the right way to engage our fellow citizens in this critical area.