Charities (Protection and Social Investment) Bill [HL]
Lord Wallace of Saltaire Excerpts(8 years, 11 months ago)
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“Independent schools’ facilities: public benefit
In section 4 of the Charities Act 2011 (the public benefit requirement), after subsection (4) insert—“(5) Independent schools which are charities must engage actively with local communities and state schools with a view to sharing resources and facilities.
(6) The Charity Commission must publish guidance setting out the minimum that independent schools which are charities must do to comply with the duty in subsection (5).””
Lord Wallace of Saltaire (LD)
My Lords, we return to a simplified version of amendments which the noble Lord, Lord Moynihan, and I moved in Committee. Between the two stages there have been a number of discussions with the Minister, for which I thank him, and with the Independent Schools Council along with others. I must apologise to some of those with whom I was attempting to negotiate for much of Thursday and Friday morning, in that I happened to choose one of the few places in Oxfordshire where you cannot get mobile phone reception.
The context is clear: the rise in quality in resources and facilities at most—though of course not all—independent schools, which arises from their ability to raise fees and fundraise, along with endowments that many of them have, is in contrast with the decline in the resources and facilities of state schools, including their playing fields, music and drama facilities and specialised coaching and teaching of specialised subjects, which is unlikely to be reversed under this Government, since they are committed to shrinking government spending further, including on education. The second part of the context is the charitable purposes of independent schools, which are often rooted in their founding purposes in education for local communities. I am well aware that the Charity Tribunal in 2011 said that purposes can change, and indeed have changed—although they have not entirely been discarded. We discussed this earlier, with the question of housing associations. A housing association that changes itself into something entirely different would have its charitable status questioned. I remind noble Lords that the ruling of the Charity Commission says that schools can choose how they demonstrate public benefit, not that they can disregard public benefit.
The third part of the context is the increased awareness within the educational world of the importance of resilience and self-confidence as wider elements in education, although, unfortunately—and the Independent Schools Council made this point to me—Ofsted no longer pays any attention in assessing state schools to the wider elements of education that encourage resilience and self-confidence. There is a consensus on how important these things are to individual development. Best practice in the independent schools sector recognises this, and there are a number of excellent examples of partnership between independent schools and the local communities—and their schools—in which they are embedded. There are some examples of less good practice, however, which is why the amendment talks about engaging “actively”. One of the weakest points, in the statement agreed between the Independent Schools Council and the Charity Commission, is to say that there will be a new website through which state schools will have a facility to request involvement in partnership activities. We want independent schools to go out to find, explore, pursue and develop partnerships with their local communities and state schools.
The strongest point of the ISC and Charity Commission is the commitment to a research report, 12 months from the introduction of these changes, which will review data from the annual reports of charitable schools as well as the aggregated data that the ISC collects through its census. At present, the details of how that research project is developed will be agreed between the Charity Commission and the ISC.
We are all conscious of the problems of defining public benefit. The NCVO advice on this amendment repeats that too strict a definition of public benefit gets one into enormous problems—and I am looking at the noble Lord, Lord Hodgson, who has said this to me, and many others, many times. But the Charity Commission must monitor that public benefit of some sort is provided. If the Minister is to say that the Charity Commission is not capable of doing that at present, many of us would say that the Charity Commission have been severely constrained in recent years. Faced with a Government who are cutting public expenditure, this very important third sector may need more effective regulation as we have to depend on it more and more.
We hope that we can avoid going down the road to a further statutory definition of public benefit. What the noble Lord, Lord Moynihan, and I wanted to achieve through this process was a strong nudge to the independent schools sector to move in the right direction. It will help us not to divide in this House if the Minister can give us a number of strong reassurances—first, to make it clear to independent schools that they are expected to pursue and develop partnerships, not just to wait and see whether anyone applies. They should see this as part of the social responsibility that all charities should shoulder. Secondly, we should engage with the ISC and the Charity Commission on the terms of the research project to be conducted over the next 12 months and not leave the definition entirely to them. Thirdly, it is important to report to Parliament on the outcome of this research and arrange for it to be debated either through an Oral Statement or otherwise in government time.
I hope that that gives the Minister sufficient space to take us forward, not necessarily to any form of mandatory obligation but certainly to say that we have moved independent schools towards the active partnership with their local communities and schools that we all want.
Lord Moynihan (Con)
My Lords, I shall speak to the amendment on the important question of the relationship between independent schools’ charitable status and public benefit and the need for all schools, particularly those with charitable status, to work together with state schools and neighbourhood communities in their vicinity. I intend to concentrate my remarks on the dual use of sports facilities and coaching expertise, although the principles behind my support for progress towards closer educational partnerships extend to all the charitable objectives set out by Parliament in the Charities Act.
In moving a probing amendment in Committee, my intention was to consider the merits and disadvantages in moving from the flexibility of the current system to a more prescriptive approach, reflected in the amendment that we are considering today, which requires all independent schools to engage with local communities, particularly regarding the dual use of sports and arts facilities. A considerable benefit of Committee for me was the opportunity that it provided to delve deeper into proposed legislation and learn significant lessons from the in-depth experience found in this House and outside.
Following Committee, like the noble Lord, Lord Wallace, I have taken the opportunity to meet the Charity Commission, the Independent Schools Council and the Minister to consider how we can make further progress to promote engagement with all independent schools in receipt of charitable status that have the facilities and coaching expertise to engage with local communities and state schools to mutual advantage. I am particularly grateful to my noble friend the Minister, who has upheld his open-door policy to any Member of your Lordships’ House on this Bill.
I spoke in Committee about good practice and cited Tonbridge School as a leading case study of good practice in this country. Under the leadership of Tim Haynes, the head, the school has engaged with 27 primary schools in its vicinity. The reaction from children, parents and the local community can best be described as fulsome praise. His initiative has gone further than engagement through sport, with the subjects of music, drama, dance, chess, art, design, IT, creative writing, science, history, maths, modern languages and classical studies all featuring as part of that engagement. Above all, all independent schools, such as Tonbridge School, in showcasing their facilities, should look to work also with governing bodies of sport, local clubs and those responsible in the primary schools for the school sport premium. That comes with £8,000 for schools with 17 or more pupils, plus an additional £5 per pupil, which could be very useful to fund insurance, transport and related costs incurred as a result of these initiatives.
To be successful, this must be a two-way process. Over the past few days, the Charity Commission has confirmed that it will relaunch and publicise the examples for schools of how to provide benefit for people who cannot afford their fees in its existing guidance, Public Benefit: Running a Charity, by sharing sports facilities. In a significant step forward, it will give new examples relating to sharing sports facilities, arts and music in the guidance Public Benefit: Reporting and in the example trustees’ annual report for “Anytown School”. A significant improvement in good practice should be achieved.
The problem I have with mandatory requirements is the one-size-fits-all approach. For example, many prep schools have to work to capacity to survive financially, even with charitable status. Some do not own their own sports facilities, others share and some are in need of significant upgrading. What is needed is for each school not only to follow best practice but, as the noble Lord, Lord Wallace, stated, for the Charity Commission to publicise it through its channels so that each school can tailor its public benefit accordingly and the House can debate the outcome.
The Charity Commission responded positively to the suggestion of a research report, in which I have more faith than the noble Lord, Lord Wallace. According to its guidelines, that report has to be published 12 months from the introduction of these changes. That research should provide us with a comprehensive picture of the extent of partnerships and enable this House to consider whether legislative steps are necessary, for example, when the next education Bill comes before us during this Parliament.
While there are challenges for independent schools with charitable status, the broader question we should also be debating applies not only to all independent schools but to the state sector, whether well-endowed with sports facilities or not. One of the greatest challenges we face in designing a long overdue and effective sports policy is the oft-quoted statistic about the percentage of our Olympic medallists from the independent sector. That reflects the need to do all we can, far more than at the moment, to identify talented youngsters in all our schools and provide ladders of opportunity for them to climb from primary school to podium.
In response to pressure from all sides of the House on this Bill, the Independent Schools Council has agreed to act by building a new website, Schools Together. The site is currently under development and should be ready to receive information from schools in the autumn term. It was not even on the agenda before Committee. I hope the site will be launched as soon as possible in the autumn. It must be two-way. The site absolutely needs to summarise what is on offer at all independent schools with charitable status and to include a facility for state schools to get involved in partnership activities. From the conversations I have had, I believe that independent schools will reach out to their community in this way by providing information and contact details of their partnership co-ordinators. State schools will be asked to request involvement in partnership activities. Since this is clearly the intent of all who have contributed to this debate at various stages, there should be no reason why all schools do not engage constructively. Once again, if the combined new commitments of the Charity Commission and the Independent Schools Council do not bear fruit in the way the House and the Minister have indicated, we should be able to produce legislative change through a wider education Bill.
I believe that these initiatives represent more than a nudge in the right direction. They are very significant steps forward and would not have happened had there not been the level of interest expressed in your Lordships’ House from all parties. They are tailor-made for the differences between schools and they avoid the cost and administration that a one-size-fits-all legislative approach would deliver. I believe that what I have sought to address constitutes a very strong example of how cross-party support for the interests of sport and recreation, including the arts and curricular subjects, for all children coupled with the promulgation of best practice can be and has been achieved. That is a rare outcome of negotiation between Committee and Report. I fully appreciate the strength of opinion expressed and I share it, but I believe that the changes we have been offered are far reaching and deserve support. I also believe they are for real. There is genuine consensus on this issue among all interested parties. I believe the approach offered will prove to all concerned that the proposed package will achieve even more with the good will of all involved than a one-size-fits-all amendment would deliver. For these reasons, I hope the amendment will not be pressed to a vote and that we can build on these important initiatives and regularly hold all those involved to account when it comes to the outcome of the research project and the website in a year’s time.
Lord Wallace of Saltaire
My Lords, this has been an important debate and a number of noble Lords, as well as the Minister, have said important things about what we need. I recognise that a number of noble Lords on the Conservative Benches have close links with the independent schools community. I trust that everything that has been said will be taken back and pursued further. I particularly welcome the point made by the noble Lord, Lord Moynihan, that we expect a positive response to all that has been said. If necessary when the research report comes out, if good progress and significant movement has not been achieved, we will clearly have to move further again.
We all recognise that charitable status is a privilege and that public benefit has to be part of the response to that privilege. We all also recognise that public benefit is very difficult to define and that there are many other areas, including religious groups, where public benefit can sometimes be extremely contentious. That is an issue to which we may well return during the course of this Parliament.
The research project is key, and I welcome the Minister’s response that we will be able to debate that report when it returns and see how thorough it has been and what it shows. On that basis, I am willing to withdraw my amendment. I am a liberal, not a socialist: I prefer co-operation and partnership to compulsion and the imposition of penalties. I would not vote for Jeremy Corbyn as my party leader. I want to see a strong and diverse charitable sector, including many schools founded as charities serving different purposes. However, it is also clear that schools that have been founded as charities have to pursue charitable purposes and demonstrate public benefit. That is what we have been calling for. On that basis, and on the basis that this discussion will continue with many of us on all sides of the House actively engaged, I am willing to withdraw the amendment.
Security: State Procession
Lord Wallace of Saltaire Excerpts(8 years, 11 months ago)
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Lord Wallace of Saltaire
To ask Her Majesty’s Government what assessment they have made of the potential security risks posed by converting former government buildings into privately owned hotels along the State Procession route between Buckingham Palace and the Palace of Westminster, including along Whitehall.
The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)
My Lords, the former government buildings to be converted into hotels along the state procession route are Admiralty Arch and the Old War Office. The freeholds remain under government ownership in perpetuity and continued oversight and security measures will be implemented as part of the commercial arrangements with the private sector. Long-term protocols and operating procedures are agreed and built into both schemes. The security and intelligence services and the Metropolitan Police are closely involved in this process.
Lord Wallace of Saltaire (LD)
My Lords, does the noble Lord recall that when President Bush made a state visit to London, the entire Whitehall area was cordoned off, including to Members of Parliament? Does he also recall that the IRA, from within the area of Whitehall, managed to mortar No. 10? Further, he will remember that the bombing of the Brighton hotel, which affected Mrs Thatcher and others, was placed in the hotel some time in advance of the incident? Do the security services intend to vet positively all the staff of these hotels; has that been agreed? Will the hotels be closed to all visitors during state visits or will the visitors be vetted as well?
Lord Bridges of Headley
The noble Lord has raised interesting questions based on his own experience. I have looked into the clauses of the leases for both the Old War Office and Admiralty Arch and I am satisfied that they allow for appropriate access for both security and ceremonial purposes. The hotels will employ their own staff, and while the Government have not insisted on security clearances for each member of staff, it is obviously in the hoteliers’ interests to take their security checks on their staff into consideration. Furthermore, I should point out that both the Metropolitan Police and the security services are very involved, as always, in ceremonial processions and major events, and will continue to be so to make sure that security is upheld.
Voting: UK Overseas Citizens
Lord Wallace of Saltaire Excerpts(8 years, 11 months ago)
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Lord Bridges of Headley
My Lords, I believe that this is a matter that your Lordships and many others have discussed many times and will continue to do so, but, as I have said, we have set out our view on the European referendum. It will be based on the parliamentary franchise. However, I am sure that we will continue to have the debate that my noble friend wishes to have.
Lord Wallace of Saltaire (LD)
My Lords, do we have any idea how many British citizens there are overseas and how many of them are dual citizens of the United Kingdom and other countries? When I was in government I tried to find out figures on this and got estimates that varied between about 4.5 million and 6 million. Could the Government possibly aid us all by trying to get some accurate estimates, including of where they live and how many of them are dual citizens?
Lord Bridges of Headley
My Lords, I hardly dare say that my efforts will be greater than those of the noble Lord. What I will say, reading from my brief, which I am sure the noble Lord remembers, is that there are 5.2 million British-born migrants living overseas. I do not have a breakdown but I will certainly ask. I would stress that more than 105,000 British citizens resident overseas were registered to vote in the election—more than three times the previous highest number.
Charities (Protection and Social Investment) Bill [HL]
Lord Wallace of Saltaire Excerpts(8 years, 11 months ago)
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Lord Wallace of Saltaire (LD)
My Lords, I will follow the line of argument raised by the noble Lord, Lord Moynihan, which is that although we see islands of good practice within the charitable public schools community, we want consistency. Many public schools, as we all know, have origins as charitable institutions set up to provide facilities and education to their local communities. To some extent in recent years, links with their local communities have weakened; their facilities, however, have been transformed.
I fell out of state education by going to a choir school when my father’s employers very generously provided me with a scholarship to go to a school in north Oxford set up to educate the sons of the clergy. I remember practising my violin in what was then the school’s music wing, which was a bunch of wooden huts set up during the Second World War for some other purpose. St Edward’s School in Oxford now has a magnificent music wing, and a drama wing, funded by rising fees and contributions from grateful alumni over the years; so have, as we all know, a great many other private—or public, as we call them—schools across Britain. The facilities are there. However, facilities in many state schools have weakened. Specialised coaches and music and drama teachers are very often no longer on the staff. Sometimes the playing fields are not there; the specialised music and drama institutions are certainly not.
I declare an interest as the trustee of two musical education charities and the chair of Voces Cantabiles Music and the Gresham Centre. We have developed over the last 11 years partly through partnerships with a number of public schools: first, with Bedford School and the five schools of the Grey Coat foundation and, secondly, with Bradford College, Ardingly College and Rugby School. In all instances it has been a matter of providing access to the excellent facilities that these public schools have to primary schools and some secondary schools in the region—to bring people together, give them a different quality of experience and so expand their horizons and build their self-confidence. I place on the record our gratitude as a charity to the partnerships we have had with these public schools. However, as the noble Lord said, this is an island of good practice when what we want to see is consistency.
There are other areas of public benefit that some public schools provide very well but which others neglect. My son went to a state school and was a good enough mathematician to be entered in the maths olympiad. When he got into the last 20 of the British Mathematical Olympiad, he was one of only three state school pupils, because the quality of the teaching you get in public schools is so much better than in state schools. When they got down to the final six to go on to the International Mathematical Olympiad, all the pupils were from public schools rather than the state sector. That tells you something. He was then offered a place to study maths at the University of Cambridge, conditional on taking a further set of advanced papers that his state school was incapable of providing him with the coaching for. Happily, Westminster School provided a teacher from its excellent maths department who provided him with weekly tuition in the evenings for a full term, which got him through. That is anecdotal evidence of a partnership of this sort. Public schools that have a better-paid and better-staffed maths department should be thinking about key areas where they could be providing additional coaching for people from state schools at crucial periods in their careers. We are well aware that some public schools now sponsor academies: Wellington College has gone in that direction.
All that the amendment says is that public benefit is important and needs to be demonstrated. Where there are these excellent facilities, which have improved so enormously in recent years, they should be provided for these purposes wherever possible. We would like to see much more consistent advice given, and much more consistent expectation, that the privilege of charitable status should be reflected in the public benefit provided.
Lord Wallace of Saltaire
My Lords, I must remind the noble Lord that on the previous day that this Committee sat he made a very powerful speech about the need to define rather more clearly some of the elements in the Bill. He now seems to be arguing in entirely the opposite direction.
I recognise that the public benefit test has to be left relatively broad, and indeed both these amendments say so. I also recognise, with regard to the use of the word “fully”, that there are ways in which this amendment might need to be reconsidered.
All that we are attempting to do here is to make it clear that there is an expectation of public benefit, as we have both said. Different schools demonstrate that in different ways, and we all expect them to do so. I have to say that many of us are a little worried about a small minority of schools that now seem to have a large proportion of overseas students, for example, and have raised their fees to such an extent that they are a very long way from the original charitable purposes for which they were founded. If we are nudging them—nudging is, after all, one of the things that this Government are extremely keen on—in the right direction, it is this sort of wording that seems to be pushing them in that direction, and that is what we wish to do. I do not think that we are going down the route of politicisation; we are, however, reminding them—and providing them with some examples—that charitable status is a privilege and public benefit is an expectation.
Lord Hodgson of Astley Abbotts
I entirely agree that charitable status is a privilege. The question is whether that status is better enhanced by statute or by guidance. I am saying that the test should be made clear but it should be a Charity Commission guidance test rather than be put in statute, with all the inflexibilities and ancillary problems that may flow from that.
“Independent schools’ music and arts facilities: public benefit
In section 4 of the Charities Act 2011 (the public benefit requirement), after subsection (4) insert—“(5) Independent schools which are charities must engage fully with local communities and state schools with a view to sharing facilities for music, drama and arts.
(6) The Charity Commission must publish guidance setting out the minimum that independent schools which are charities must do to comply with the duty in subsection (5).””
Lord Wallace of Saltaire
I will, if I may, very briefly second what the noble Lord, Lord Moynihan, has said. We will take this away and consider whether we should provide a different form of words. I have to say I was puzzled by the quotation from Ofsted—
The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
Forgive me, but if the noble Lord is speaking, he must move his amendment at the end of his speech.
Lord Wallace of Saltaire
My apologies. I had not understood that that was the way Committee stages went. In that case, we will talk off the Floor. I will ask for the exact quote from Ofsted and we will return to this.
Charities (Protection and Social Investment) Bill [HL]
Lord Wallace of Saltaire Excerpts(8 years, 11 months ago)
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Lord Wallace of Saltaire (LD)
My Lords, my name has been mentioned in this debate and perhaps I should intervene. I spent a good two months of my life much preoccupied with this issue and I came away from it content with the law as it stands. It is quite clear that there is a line between advocacy—which is an entirely appropriate and proper part of what charities should do—and moving too close to party-political campaigning. This is not purely a matter of, as it were, good-works charities on what one might describe as the left, but also about think tanks on the left and on the right. I can think of one or two think tanks which have got quite close to the line of moving from research to a highly partisan presentation of the research they provide. Having worked for 12 years in a think tank, I am conscious of the lines that one has to draw.
In speaking to 50 representatives of different charities, I certainly came across the advocacy point. Some first- class charities raised public awareness of mental or physical conditions, the problem of women unnecessarily in prison and so on—all of which are entirely within charity law. I also came across a small number of organisations which appeared to want to get a little too close to party campaigning, including on one splendid occasion meeting a group of rather large charities, one of which said, “We do not want to have to register for this because the little old ladies who give us money would not want to know that we were doing it”. That seemed to be a recognition that they were indeed moving towards a line that they should not be too close to.
I am happy with a restatement of the position as it stands. I think we all accept that advocacy is a part of what charities do in furtherance of their charitable purposes, but that they should not move too far into the party-political area. Anyone who has been involved in the think-tank world knows how conscious they have to be that that is a line they should not cross.
Lord Judd
Does the noble Lord agree that this is not altogether simple? He and I clearly agree on this important matter, but it is not simple because if a charity finds itself strongly advocating a position and a political party is doing the same, that is open to misinterpretation. We have to be absolutely clear that the way in which the law is administered is also transparent. There have been arguments that campaigning should be curbed in the last year before an election. It is absolute nonsense for a charity, which feels strongly, passionately and morally obliged to put forward a case because it wants policy change, to have to lay off in the year of a general election. That would be condoning something they believe is wrong and that is not what any of us would want to imagine happening in Britain. It is very important that the Charity Commission is held to account; that the whims of a particular commissioner are not prevailing and that, from an objective, analytical position, very strict rules are fairly observed.
Lord Leigh of Hurley (Con)
My Lords, I declare my interest as a trustee of a number of charities, national and local, a former trustee of a care charity and, of course, as a senior treasurer of the Conservative Party. I broadly agree with the remarks made by the noble Lord, Lord Wallace of Saltaire. I remember the arguments on the then transparency of lobbying Bill; I was fairly new to Parliament, and I found myself for the first and only time being lobbied—on a lobbying Bill, as it transpired—by charities. However, I take issue with his remark, unless I misunderstood it, about the charities doing good works being broadly on the left. In the charities that I see, the donors’ register broadly replicates that of the Conservative Party, and there are many good-works charities on the right that are helping people to help themselves. I may have misunderstood.
Lord Wallace of Saltaire
As the chair of trustees of a musical charity, I would welcome the further conversation that we might have on that.
Lord Leigh of Hurley
I thank the noble Lord. I also think that I may have misunderstood the noble Baroness, Lady Hayter, when she talked about some charities not solely campaigning. My experience is that some charities are solely campaigning ones; in fact, I had personal experience of that only two weeks ago when a raven bird got stuck in my basement. In a moment of panic, and prompted by my young children, I was too frightened to address the issue myself so I rang the RSPB, thinking that that was a logical solution. The RSPB informed me that under no circumstances does it actually go out to assist birds in distress or in danger of damage; no, it is a lobbying charity. I was to either ring another charity or do it myself. In the event, I passed the buck to my wife.
My point is that there are charities that have evolved—some quite rightly, but some perhaps worryingly—into pure campaigning. The charities with which I am involved found the transparency of lobbying Bill helpful, in that it was clear that during the election we had to keep on the straight and narrow. On the boards of the charities with which I am involved sat a broad-array spectrum of political opinions, and it helped to ensure that we all abided by the Act and did not engage in political advocacy during the election.
I am particularly heartened by the comments from my noble friend Lord Hodgson of Astley Abbotts that he is taking further evidence on this issue. I rather hope that this can still be discussed at a later stage with that evidence, and I ask for the Minister’s comments on that.
Lord Hodgson of Astley Abbotts
My Lords, I have three amendments in the group, Amendments 18A, 18B and 20A, which follow the noble Baroness down the rabbit hole of definition. However, I have to say that the advice I am getting—I am not going to pretend that I drafted these amendments—is that the Bill as drafted does not do what it says on the tin. I should like to take a minute to explain why that is the case and why the Government should be considering amendments along the lines of these three. I am supported in this by members of the Charity Law Association.
Perhaps I may back up for a moment. We spent quite a lot of time in my review on social investment, which obviously presents tremendous opportunities if we can set it up right and make it work effectively. As I said at Second Reading, that is not just in terms of this country. We in the UK have done so much heavy lifting that we are in a world-leading position in this new area. We heard from my noble friend on the Front Bench at Second Reading that the Law Commission carried out a consultation on these and various other proposals to remove unnecessary impediments to the growth of social investment. That consultation ended in July 2014 and the commission’s final report underpins much of what lies in Clause 13. I do not doubt for a moment the Government’s good intentions regarding social investment, but there is a view held by specialists in this area that the current drafting of the clause—specifically, proposed new Section 292A—does not capture the results of the Law Commission’s consultation, which the Government have accepted and which I think this Bill was supposed to implement. It is worth quoting from the summary of its conclusions at paragraphs 6 to 8 of the report:
“6. We recommend that a new statutory power should be created, conferring on charity trustees the power to make social investments, so as to put the law beyond doubt.
“7. A social investment is any use of funds from which charity trustees seek both:
(1) to further one or more of their charity’s objects; and
(2) a financial return, which might include (i) income, (ii) capital growth, (iii) full or partial repayment, or (iv) avoiding incurring financial liability at a future date.
“8. We recommend that the new power should apply unless it has been expressly excluded or modified by the charity’s governing document”.
The consultation paper produced by the Law Commission contains a splendidly clear diagram of how this works and sheds light on what is a pretty technical area. At one end are the grants where the money is given and at the other end is investment where there is a financial return. But in between, close to a grant, there are what is known in the trade as programme-related investments, which support the charitable objectives of the charity but do not expect a financial return. As you inch towards financial investments by moving across the spectrum, you reach something known as mixed-motive investment, a title that I find quite appalling because a mixed motive sounds like an ulterior motive. I wanted to change it to “mixed-purpose investment”, but that was altogether a bridge too far and we are still stuck with the terrible title of mixed-motive investment. Never mind; we can leave that for another day.
There is concern among charity lawyers that the Bill permits programme-related investments but does not give an adequate statutory power to mixed-motive investment, which I like to call mixed-purpose investment. That is because of the general drafting, particularly the use of the word “directly”, of subsection (2)(a) of Section 292A to be inserted in the Charities Act 2011 under Clause 13. Charities may not always act directly to further their charitable purposes. They may do so through a third party, which may not be exclusively charitable.
I have received examples of how this might work. First, a diabetes charity seeks to invest in a company developing foods calculated to reduce the impact of diabetes on sufferers but which are available to the general public. The investment will achieve some mission benefit for the diabetes charity but the fact that the foods will be available more widely means that not all the activities of the investee will advance the objects of the charity because there is a commercial element. The object therefore will be advanced only in part, which is why we need to get the words “in part” in the rephrasing.
Secondly, a charity that has purposes to relieve unemployment wants to invest in a social firm in the construction industry that employs ex-offenders at risk of unemployment. Once employed, the individuals employed by the social firm are not charitable beneficiaries because they are employed. The investment by the charity and the social firm may in part relieve unemployment but it also, in part, advances other purposes and benefits individuals who are employed by the social firm.
The worry is that almost any situation in which a charity is investing in a non-charitable social enterprise—picking up the point made by the noble Baroness—such as co-operatives, community benefit societies or community interest companies, will likely involve mixed-motive investment and will likely advance the objects of the charity in part and not exclusively. Without adequate clarification of the power, the Government risk introducing a statutory power which fails to achieve the clarity and confirmation that they seek.
Quite simply, Amendment 16A deletes the phrase,
“directly furthering the charity’s purposes”,
and replaces it with,
“furthering one or more of the charity’s purposes in whole or in part”.
The examples that I have just given underline that. Amendment 18B would insert a new subsection at the end of what will become subsection (7). It would state:
“A relevant act of a charity may be carried out with a view to furthering one or more of the charity’s purposes in whole or in part for the purposes of this section even where the relevant act may not exclusively further one or more of the charity’s purposes”.
Finally, Amendment 20A would make an amendment to new Section 292C, to which we will come later, headed “Charity trustees’ duties in relation to social investments”. At the end of subsection (2) it would insert,
“having had regard to the degree to which the relevant act is expected to further one or more of the charity’s purposes in whole or in part, and the expected financial return”.
That is all quite complicated, technical and difficult but it has important consequences. However, the charity law sector is concerned that we need to bottom this out. I am sure that the Government accept that, and I certainly believe that we want to put the ability of trustees to make mixed-purpose, mixed-motive investments beyond statutory doubt. I am sure that my noble friend will not be able answer all this today but I hope that he can take on board the concern about the technical details. I think that they have been raised elsewhere with the Treasury and so on, and it may be that we will need to have a discussion about it. I hope he can see what the sector is driving at. The sector is merely wishing to ensure that what the Government want to achieve can properly be achieved by the Bill. Currently, it does not think that the drafting achieves that.
Lord Wallace of Saltaire
My Lords, I agree with much of what the noble Lord has said. Perhaps I may remind him that when I first went to a tutorial with him on charity law history, he said that part of the glory of charity law was that so many definitions were left loose.
Lord Lea of Crondall
My Lords, I tabled this amendment to help clarify what Clause 13 is not, as much as what it is. I would like to ask the Minister how widely this clause can be interpreted. I do not want to wake up one morning and find that it means something quite different from what I thought it meant. I would like to clarify that it is not an opportunity to open up a further shift towards helping taxpayers invest, with socioecononomic income distributional consequences, in private education rather than public education. I do not think anyone would deny that that is a consequence of the charity status of public schools in this country. I repeat that my purpose is to ensure that we all put our cards on the table as to what is going on here and what may be open to interpretation. We do not want to wake up one morning in four years’ time and say, “Well, people kicked the ball through that goal and you did nothing about it. Are you stupid or something? You didn’t keep your eye on the ball”.
I do not know how we are going to avoid the spectre that I am talking about but I will put my question to the Minister in two parts. First, will he comment on my anxieties or analysis of what this may lead to? Secondly, if he wants to reassure me—not me, I am sure he does not wake up in the middle of the night and think, “I’d like to reassure the noble Lord, Lord Lea, of something”; but if he wanted to reassure people—that this does not have any wider consequences in the sphere that I am talking about, what is wrong with this amendment? The answer can only be that it is redundant or offensive. I would like to know which it is. Is it redundant or is it offensive and if so, why? I beg to move.
Lord Wallace of Saltaire
My Lords, the noble Lord, Lord Moynihan, and I both have amendments down for Monday’s Committee sitting which relate to the issue of public benefit and public schools, and specifically the provision of their facilities for use by others. We all know that this is a delicate and sometimes politically controversial issue. What I want to say on Monday—although I realise with horror that I am supposed to be speaking in a debate on Gaza at the same time—is that now that private schools in Britain with charitable status have some wonderful sports, music and drama facilities, the question of how far they make them available to their communities is one that we cannot entirely ignore.
It happens that a charity which I chair has benefited from very good partnerships with a small number of public schools which do this precisely because it demonstrates that there is a public benefit, and I am sure that the noble Lord, Lord Moynihan, will be saying much the same thing. We will return to this issue on Monday, but one has to be careful not to go on an all-out attack on schools with charitable status. Nevertheless one would wish to insist that public benefit does mean what it says in this and other areas. As I say, we will return to these matters on Monday.
Baroness Hayter of Kentish Town
My Lords, I want to add little to what my noble friend Lord Lea has said, but it is a question that needs a serious answer. It does not take much imagination to see how such investment could be used by certain facilities to further enhance the advantages they already have, and therefore a serious response is needed. We look forward to hearing it.