Charities (Protection and Social Investment) Bill [Lords]

Matt Hancock Excerpts

Thursday 3rd December 2015 Commons Chamber

[The Minister for the Cabinet Office and Paymaster General (Matthew Hancock)]

I beg to move, That the Bill be now read a Second time.

Every hon. Member will know of a charity or charities doing extraordinary work in their constituency, as will you, Mr Speaker. Many have served or will serve as patrons or trustees. They may even have subjected themselves to ritual humiliation to raise money and awareness. I have dressed up as a sumo wrestler, carried a pedometer for a week and even lost two stone to race a charger around the Newmarket July course. Charities channel the best of our instincts against the worst that life can inflict, whether that is sickness of mind and body, entrenched poverty or natural disaster.

So often, charities lead the way for us in Government to follow. Long before there was an Education Act, an NHS or a welfare state, charities that knew people could not wait had set up hospitals, schools and almshouses. Today, their compassion and kindness are matched by ideas and innovation. When Paula and Robert Maguire posted their first ice bucket challenge video, they expected to raise about £500 for the Motor Neurone Disease Association, but the campaign went viral, many of us joined in and they ended up raising £7 million. Let us look at Bristol Together, a social enterprise that buys and refurbishes properties and employs ex-offenders to carry out the work: that social investment is transforming lives.

The Government are committed to a flourishing civil society. We have protected the budget of the Office for Civil Society, we are expanding the brilliant National Citizen Service and we are rolling out more locally designed social impact bonds. Along with those opportunities, there are challenges. Perhaps more than any other kind of enterprise, charities trade on their reputation. Scandals of poor governance or unscrupulous fundraising undermine public trust, tarnishing the vast majority of charities that are well run and seek only to do good.

[Sir Edward Garnier (Harborough) (Con)]

I could not agree more with the opening remarks of my right hon. Friend in describing, to use an awful expression, the charitable landscape. I am a patron of Unlock and a trustee of the Prison Reform Trust. Both organisations have concerns, which I hope he can allay, that this much needed legislation might make it more difficult for them—bearing in mind that the subjects that interest them are prisons, prison reform and the condition of prisoners—to have among their trustees people with criminal convictions. The point is obvious, but I am sure that he can deal with it.

[Matthew Hancock]

I can give some assurance to my hon. Friend—

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

And learned.

[Matthew Hancock]

Sorry, my hon. and learned Friend.

[Sir Edward Garnier]

Right honourable.

[Matthew Hancock]

My right hon. and learned Friend. If he would like to raise it any further, I could continue. I commend the two charities of which he is a trustee for their work. While protecting charities through the Bill, we will of course seek to support the good work that excellent charities do. The Bill proposes extra restrictions for those with unspent convictions. However, the Charity Commission will be able to waive those restrictions and, as with almost all the extra powers of the Charity Commission, it will be possible to appeal to the charity tribunal. I hope that he is reassured by the safeguards that are in the Bill, and that we can work with him to ensure that they are applied properly to charities that work in the important area he mentions.

[Sir Edward Garnier]

My right hon. Friend has been extremely clear and helpful. May I make him an offer? I know of his success at Newmarket racecourse. There is a very good racecourse, Leicester racecourse, in my constituency. If he would ever like to run there, he should let me know.

[Matthew Hancock]

I very am grateful for that unexpected invitation. I am dearly tempted. I hope that Unlock and the Prison Reform Trust will work with us to ensure that the Bill passes in a form that supports the important work that they do.

On the broader question of supporting the reputation of charities, by one measure trust in the sector is at a seven-year low. It is in all our interests that we have a strong, confident and thriving charitable sector.

The purpose of the Bill is twofold: first to tackle the challenges and then to unlock new opportunities. The main provisions of the Bill fall into three main areas: first, strengthening the Charity Commission’s powers, including over trustee disqualification; secondly, the regulation of charity fundraising; and, thirdly, the new social investment power for charities.

Let me turn to the Charity Commission’s powers. The purpose of the Charity Commission is to ensure that each of the 164,000 charities in England and Wales pursues its charitable objectives. Set up in 1853, it has done a century and a half of good work, but two years ago the National Audit Office and the Public Accounts Committee found that it was failing in its core duty. In particular, they found that it was not doing enough to tackle the abuse of charitable status. The NAO made a series of recommendations to improve the commission’s effectiveness.

The coalition Government published proposals for new powers based on those recommendations. Following a public consultation, the draft Protection of Charities Bill was published. Pre-legislative scrutiny and the Bill’s passage through the House of Lords have resulted in further refinement. I thank all the Members, peers and others who have improved the Bill that is before the House today. These measures are just one part of a wider programme of reform, aimed at turning the Charity Commission into a tough, clear and proactive regulator.

[Mr Jenkin]

It pains me to point out that my right hon. Friend has left out the significant post-legislative scrutiny of the Charities Act 2006 that was conducted by my Committee, the Public Administration Committee, in the last Parliament, which was the prime precursor of this Bill. I also sat on the Joint Committee that performed the pre-legislative scrutiny of the Bill.

Will he say something about recent controversies, for example those around charitable fundraising? The Select Committee is very frustrated that we are conducting significant inquiries that the regulator, the Charity Commission, should be conducting, but it does not necessarily have the power to hold its hearings in public in a way that would demonstrate its regulatory role.

[Matthew Hancock]

I was going to come on to the work of my hon. Friend and his Select Committee in making sure that the Bill is in the best possible shape. I am very grateful for the work that he did at the end of the last Parliament, after the National Audit Office report, to make sure that when we had a Bill, it gave the commission the necessary powers.

We believe that the Charity Commission has the power to convene meetings in public. However, I recognise that there is a question over whether it does so. During the passage of the Bill, we will look at that point in more detail. We are prepared to accept amendments, if they are necessary to bring clarity on the point that my hon. Friend raises.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

I agree with my right hon. Friend that pre-legislative and legislative scrutiny are extraordinarily important in this place. Will he observe, for the record, how much legislative scrutiny is being performed by Her Majesty’s official Opposition, since there are precisely no Opposition Back-Bench Members in the House?

[Matthew Hancock]

I hope that this Bill can unite both sides of the House. I welcome the hon. Member for Redcar (Anna Turley) to her place. My hon. Friend has made his point very clearly and it will appear on the record, but I do not want to get into an unnecessary dispute with the Opposition, given that I hope we will have all-party support for this important Bill which will strengthen the role of the Charity Commission and, ultimately, be in the best interests of charities throughout the land.

As I said, we want to provide a tough, clear and proactive regulator. Under the strong and capable leadership of William Shawcross and Paula Sussex, there has been a direct focus on tackling abuse and mismanagement. However, an effective regulator needs to have teeth. As the NAO reported, the commission needs our help to address the “gaps and deficiencies” in its legal powers. The Bill will close those gaps in the commission’s capabilities, as well as tackling a number of damaging loopholes in charity law.

Let me briefly outline the five new powers that the Bill confers. These powers will help to protect the public, the staff and the people our charities serve from those who would seek to exploit them. First, the Bill will extend the automatic disqualification criteria. Currently, the focus of the law is on barring people who have misappropriated charitable assets, but the criteria are far too narrow. We will extend them, as my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) said, to include people with unspent convictions for money laundering, bribery, perjury or misconduct in public office, those on the sex offenders register, and those convicted for terrorism offences, including individuals subject to an asset-freezing designation.

Secondly, the Charity Commission will be given new powers to disqualify in instances where an individual has behaved in a way that makes them unfit to be a charity trustee, acting on a case-by-case basis and using its judgment and discretion. That new power is essential to empower the Charity Commission to tackle those who would bring charities into disrepute, and I hope that it will be used with care and decisiveness.

Thirdly, the Bill gives the Charity Commission a new official warning power in response to low-level misconduct. That will allow a more proportionate approach for less serious cases. Fourthly, the Bill grants a new power that allows the Charity Commission to direct the winding up of a charity following a statutory inquiry. That would apply if the commission proves that a charity is not operating, or that its purposes could be promoted more effectively by ceasing to operate, and that to do so would be in the public interest. We expect that power to be used in limited circumstances, and it is subject to several safeguards.

Fifthly, the Bill closes a loophole that allows offending trustees to resign before they are removed by the commission, and then act as a trustee for a different charity without fear of repercussion. That will ensure that trustees are no longer able to escape accountability if they abuse their position of trust. As with all the commission’s existing powers, all five of those proposals would be subject to the general duty to have regard to best practice. With the exception of the official warnings power, all the commission’s new powers are subject to a right of appeal to the charity tribunal.

All five measures that I have outlined are essential to protecting the interests and reputation of the vast majority of charities that are run by people of great integrity. The Charity Commission was closely involved in developing the powers, and it fully supports them. In addition, independent research for the Charity Commission found that 92% of charities supported new, tougher powers for the regulator.

We also intend to remove clause 9, which was added on Report in the Lords. We have serious concerns about the unintended consequences of that clause, as it attempts to encompass complex case law into a single statutory provision. It would also impose a major new regulatory responsibility on the commission. Clause 9 was not proposed because of concerns about charities in general, but in a narrow attempt by the other place to undermine the Government’s manifesto commitment to extend the right to buy. It is regrettable that a Bill with widespread support was used in that way, and we cannot allow that to stand. I urge the House to reject that anomalous clause and consider the matter elsewhere.

The challenge of regulating charity fundraising has already been mentioned. We can be incredibly proud that we are one of the most generous countries in the world when it comes to charitable giving, but although people are happy to give, they do not want to be bullied or harassed into doing so. A voluntary donation must be voluntary. Earlier this year we heard about the tragic case of Olive Cooke, Britain’s longest-serving poppy seller. For years, she was targeted with hundreds of cold calls and requests for money. More than 70 charities bought her details or swapped them with other charities, and in one month alone she apparently received 267 charity letters. Sadly, since then more cases of unscrupulous fundraising practices have come to light, and we must act.

We began by asking Sir Stuart Etherington to review the regulation of fundraising over the summer, backed by a cross-party panel of peers, and I thank them for their work. Sir Stuart recommended a new, tougher framework of self-regulation, and we are working with charities to deliver that. Lord Grade of Yarmouth will chair the new independent body at the heart of that framework. It will be paid for by large fundraising charities, and it will be able to adjudicate against any organisation that is undertaking charity fundraising. The body will be accompanied by a fundraising preference service—similar to the telephone preference service—which will give the public greater control over their consent to receive charity fundraising requests.

Next, we will prohibit contractors from raising funds for a charity unless the fundraising agreement between them explains how the contractor will protect people from undue pressure, and sets out how compliance will be monitored by the charity. It will require large charities to include a section in their trustees’ annual report on the fundraising undertaken by them or on their behalf. That will include an explanation of how they protect the public in general, and vulnerable people in particular, from undue pressures and other poor practices.

[Mr Jenkin]

The Public Administration and Constitutional Affairs Committee—or PACAC, as we call ourselves—is concluding an inquiry into charitable fundraising, alongside our other inquiry into Kids Company. I will not pre-empt the outcome of those two inquiries, but we are concentrating our inquiries on the conduct of trustees in these matters, and their responsibility to oversee and support charitable organisations so that they reflect their values in their operations as much as in their objectives. We are making recommendations on that because it might be insufficient to rely on processes and structures to ensure that things are ethically and properly run.

[Matthew Hancock]

I welcome that review, and I hope that during the passage of the Bill we can consider—and where appropriate take on board—any recommendations to improve it. I am glad that the work of that Committee is taking place concurrently, and I hope that recommendations will come forward in time for them to be considered for the Bill.

[Dr Murrison]

How can we make more explicit the amount of money spent on management overheads, and in particular the £80 to £120 per direct debit set up that goes to chugging agencies? That must be made crystal clear to people. That is, on average, the amount for the first year of any direct debit set up in favour of a charity. At the moment, people are not clear how much of their generosity is being expended on management overall and on that practice in particular.

[Matthew Hancock]

I am a great fan of transparency and a supporter of transparency across Government. We should consider carefully whether further transparency should be applied to charities, and how that is best delivered. I have no doubt that transparency begins at home for charities, and best practice is for them to be widely transparent about their operations. There is a question about whether we should do more in law, and balanced arguments in both directions. I hope we can consider that during the passage of the Bill.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

Do any of the new powers that the Bill gives the Charity Commission deal with charities that depart from their original charitable ambitions and disproportionately become political funding and campaigning organisations?

[Matthew Hancock]

We took action towards the end of the previous Parliament to ensure that the legal framework for charities and other organisations means that they do not cross over into direct partisan political work. A review is under way into how the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014 has worked. There are questions about whether that needs to go further, but the best place to deal with such issues is in the review and during scrutiny of the Bill. I understand my hon. Friend’s concerns, and it is important that our review fully considers the impact of the 2014 Act.

We regard the Etherington package, including the fundraising preference service and a move to opt-in for further contact, as the minimum necessary to rebuild public trust. We propose that regulation of fundraising happens on a self-regulatory basis, but that self-regulation must implement the review’s recommendations in full. Some people have rightly asked what will happen if self-regulation fails. We want it to work, but we are also clear that practices must change. In Committee, we intend to bring forward amendments that will strengthen the Government’s reserve powers to intervene if the self-regulation recommended by Sir Stuart fails. Predatory fundraising targeted at vulnerable people is wrong. It has shaken public confidence in charities and we are determined to stamp it out.

Alongside tackling those challenges, the Bill aims to open up new opportunities.

[Mr Jenkin]

I am terribly sorry for intervening again, and most grateful to the Minister for being so generous in giving way. I regret that I cannot stay to take part in the debate. The House will need to know that my Committee will produce its reports in January, in good time for the conclusion of the passage of the Bill. Before he leaves the matter of fundraising, will he bear in mind the concern of many people about some charities that raise a substantial part of their income from foreign sources? Security services are concerned that organisations posing as charities might be receiving funds from abroad for nefarious purposes. Will he consider introducing measures to the Bill at a later stage to deal with that matter? I know that that is something that also concerns the Charity Commission.

[Matthew Hancock]

The Chairman of the Select Committee need not apologise. He can intervene on me as many times as he likes and I will always seek to take his interventions. I know that that must happen, otherwise he will seek to get me in front of him in some other way. On my hon. Friend’s substantive point, that concern has been raised with us. We want to consider the matter in more detail as the Bill passes through the House.

The Bill seeks to open up opportunities for charities to do more to fulfil their mission by providing a new power of social investment. Social investment seeks a positive social impact and a financial return, trying to make money go further. It is a huge and growing chance for UK charities to make more of their assets in a field where the UK is already the world leader. In 2014, the Law Commission conducted a review of charities’ social investment powers. It found a lack of clarity around charities’ social investment powers and duties, and concluded that that could be deterring some charities from getting involved in this exciting new field.

UK charities currently hold assets of over £80 billion, but they have made social investments of about only £100 million. We think that with the right support that market could double in the next few years. The Bill will ensure that more charities have a chance to take full advantage of social investment should they so wish. It removes the existing uncertainty by providing a specific new power to make social investments. It also sets out trustees’ duties to ensure that all social investments are made in the best interests of the charity. That will allow charities to make investments with the dual aim of fulfilling their mission and achieving a financial return. It is the way of the future and it is happening here in Britain. We want to support it to go further.

The work charities do transcends politics and unites hon. Members on both sides of the House. We want all charities to enjoy the very highest levels of public trust and esteem, and the generosity that brings. By delivering a more effective regulator, by tackling unscrupulous fundraising and by unleashing the power of social investment, the Bill will strengthen that trust and allow charities to do more with that generosity. I commend the Bill to the House.