Charities (Protection and Social Investment) Bill [ Lords ] (First sitting)

Peter Kyle Excerpts

Tuesday 15th December 2015 Public Bill Committees

[Peter Kyle (Hove) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Main.

The relationship between the regulator and charities is a sophisticated one, and it is important that the Charity Commission plays a supportive role as well as a challenging one. Does my hon. Friend agree that the ability to send a warning notice without notice is a sign of failure in the relationship between the regulator and the charity, rather than one of support or challenge?

[Anna Turley]

My hon. Friend makes a really important point. The relationship is long standing, sophisticated and complex. It is right that there is an opportunity to give notice of a warning in the Bill. Our issue is that there is no significant timeframe and no notice of the timeframe. I will explain why that is such a critical issue, but my hon. Friend is absolutely right; it is important that there is a nuanced and balanced relationship and opportunities for both sides to state their case in any dispute.

I will now focus on the amendment. The Bill helpfully ensures that before issuing a warning, the commission must give notice of its intention to do so. However, there is no indication in the legislation of timescales for a warning. The briefing from the commission states that

“the Commission has confirmed it will ensure that a reasonable time for representations is given”.

It continues:

“The timing is likely to vary for warnings in different cases, depending on how much engagement and warning the charity has had during engagement with them, and there may be times when the timescales might have to be relatively short (if, for example, it relates to a time critical incident)”.

It states that operational guidance for its staff will be published. However, this seems very vague and gives total discretion in this situation to the commission. What is a reasonable time? Could that mean a matter of hours or a phone call before a press release is sent out? We know the potential damaging implications for a charity of publicity around the warning.

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[Anna Turley]

I completely agree with my hon. Friend. A later amendment sets out the right of appeal to the charity tribunal, which we think is an important safeguard. Even without that appeal, giving no notice whatsoever could entail significant risks, particularly with regard to reputational damage, as the Human Rights Act sets out.

[Peter Kyle]

My hon. Friend is being generous with her time. Trustees of boards of charities are volunteers, and they give up their time very generously. Quite often, boards are cautious in their approach. Does my hon. Friend think that seeing warning notices handed out to other charities might well be a deterrent to people giving up their time and lead to uncertainties over governance arrangements?

[Anna Turley]

My hon. Friend makes another excellent point. We know how difficult and challenging it can be around the country to get good trustees and to get people to stick with it. Trustees are under a lot of pressure because of regulations and time commitments. There is the risk that the measure will disadvantage trustees and deter them from putting themselves forward. If a warning has been published, the reputational damage could be huge.

The Lord Chief Justice referred to “ludicrous time limits”. He also said that he could understand why it was felt that the Charity Commission had behaved in an extremely high-handed manner and that there was a real danger that the Commission, if allowed the scope to use this new power in a disproportionate way, may well do so, however well meaning its intentions.

We are not seeking to remove the power to publish a warning, because we think that it is important. The ability to publish a warning should be there, because of the opportunity it gives to create greater weight behind a warning. However, we think that before that step is taken there should be significant opportunity for a charity to challenge it. That is what our proposed 14 days’ notice seeks to do.

The power to publish a warning, the potential impact of which cannot be overstated, means that the public, media and funders will become aware of it. They will not be able to distinguish between a low-level issue that is giving rise to the warning and something that is much more severe. In the court of public opinion, such issues often become conflated. This year we have already seen a huge media furore relating to the charitable sector. Although relevant to only a small number of charities, it has had a substantial and damaging effect on trust in the sector. The publicity could lead to a choking off of donations and the loss of grant funding and corporate sponsorships, leading to closure of services and redundancies.

To give advance notice of 14 days of a warning, as our amendment proposes, would allow a charity to ensure that steps can be taken immediately to remedy a situation, where it is a small administrative error, to explain any extenuating circumstances and to challenge that with the Charity Commission. It would allow the conversations mentioned by the Lord Chief Justice in the High Court case to take place in a supportive and trusting environment.

We believe that there is no reason why there should not be a 14-day notice period ahead of a warning. We hope that the Government will support our amendment.

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[Mr Alan Mak (Havant) (Con)]

It is a pleasure, Mrs Main, to serve under your chairmanship. I welcome the Bill and will refer to clause 1, as well as to other provisions.

Charities play a vital role in civil society and local communities across Britain. They care for the sick, feed the hungry, raise money for veterans and protect the natural and built environment. They rely on generous public support and confidence in order to continue their vital work. Deliberate abuse of charities is relatively small, given the size of sector. However, it needs to be tackled robustly to protect public trust and confidence.

The Bill, particularly clause 1, would equip the independent regulator, the Charity Commission, with the tools that it needs to tackle more effectively the types of abuse it faces. That in turn should protect charitable donations and reassure the giving public that charities are well regulated. Clause 1 inserts into the Charities Act 2011 new section 75A, which provides the Commission with a power to issue an official warning to a charity or a charity trustee. That warning may be given where there is a breach of trust or duty by a charity or trustee, or other misconduct or mismanagement in the charity. Breach of duty can also include non-compliance with a commission order or direction. That warning system is similar to powers vested in other regulators, but it is a more reasonable and proportionate way to deal with breaches of the 2011 Act and fiduciary duties or other mismanagement episodes, particularly where the risks and impacts on charitable assets and services are relatively low.

Before I had the privilege of entering this House, I was fortunate to be a trustee of a small but successful children’s charity working across the UK. My experience of working with donors, funders and beneficiaries suggests that the new powers in clause 1 will be welcomed by all those in believe in the proper governance and oversight of charities by bolstering public confidence in charities.

The new power is a more proportionate use of the Charity Commission’s powers, and a better alternative to a number of other remedial powers such as suspension or removal of trustees, or restitution action against trustees. An example of where the power might be used is where a charity makes unauthorised payments, for example, to a connected company or for the benefit of a particular trustee. In such a case, the size of the sums involved may mean that it is disproportionate to take stronger action but the Commission could issue an official warning on future conduct, as stipulated under clause 1.

Another case might be where the charity’s governing documents have been breached. For example, there has been a failure to call elections or annual general meetings, which would compromise the proper functioning of the charity and public faith in the charitable sector. The powers in clause 1 would be a proportionate and effective means of ameliorating that situation.

[Peter Kyle]

It is a privilege to speak under your chairmanship, Mrs Main. Like the hon. Member for Havant, I have served on charity boards. In fact, I was involved in founding two charities and have seen them grow and thrive. My role included the challenge of recruiting trustees to two charity boards.

I have seen the charitable sector from many different perspectives, including working for almost six years for an umbrella organisation in the sector. I can see from different perspectives the challenges but also the opportunities that the voluntary sector provides to society. It is embedded fully in civil society, and increasingly delivers public services, which are often integrated in the welfare state. That is a fantastic and growing part of our voluntary sector, and we should be proud of it.

The delivery of public services is an aspect of the voluntary sector that does indeed need greater regulation and scrutiny. The public needs to know, since the sector is funded by taxpayers’ money, that it is scrutinised accordingly. I therefore welcome many aspects of the Bill.

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[The Minister for Civil Society (Mr Rob Wilson)]

indicated dissent.

[Peter Kyle]

The Minister is shaking his head. I look forward to his speech and to hearing his views, because he has kindly listened to mine. Trustees are cautious people: they are volunteers and they are not often law experts. They want to make sure that the organisation for which they voluntarily give up their time does not make headlines for the wrong reasons, which means they often become cautious. I cannot see exclusions in the legislation on the application of warning notices.

For example, I hope the Minister will say that tweets and public statements that criticise Government policies will be excluded from the issuing of warning notices. He might not be able to give an example, but if the practice is allowed to continue unhindered, it may well give the impression to boards of trustees that the Government criticise bold and forthright statements that are made by trustees when their client groups are challenged, or public policy is not rolled out in their best interests. We need a very clear and unequivocal statement from the Minister, on the record, that that is not the case and that warning notices will not be used to challenge the advocacy role of charities.

Charitable organisations reach right the way through our society. For example, many academy schools are charitable trusts registered with the Charity Commission. Schools, therefore, might well be issued with warning notices. There are many areas of public service that come under the remit and regulation of the Charity Commission. I am chair of governors of a school which is registered with the Department for Education as an academy school and with the Charity Commission as a charitable trust. Has the Minister looked at these complex registration challenges and regulatory circumstances and made sure that the right exclusions are put in place to reassure trustees that the Government will always protect their interests and their independence?

[Several hon. Members rose—]

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[Maggie Throup]

I completely agree with my hon. Friend. That is probably why the measure is in the Bill. It mimics what is happening across the board with other regulators.

[Peter Kyle]

I am extremely grateful to the hon. Lady for giving way. If a charity has reached the point where its trustees are destroying evidence, does she not agree that it has probably reached the point where a warning notice is not sufficient in the first place?

[Maggie Throup]

The problem is that if the evidence has been destroyed, no one knows whether it was there. That is the case I want to make. We want to make sure that correct action can be taken in a timely fashion.

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[Wes Streeting]

I am grateful to the hon. Gentleman for making those points. It is absolutely right that charities benefit, particularly from gift aid. As an avid, although somewhat despondent, viewer of “The X Factor”, I notice that the Chancellor has generously waived VAT on the winner’s single, which I am sure we will all be rushing to buy.

[Peter Kyle]

Will my hon. Friend give way?

[Wes Streeting]

Is my hon. Friend going to rush to buy it?

[The Chair]

Order. Before the hon. Gentleman intervenes, we are way off the point of the clause. We widened the debate to include clause 1 because many Members wanted to speak, but “The X Factor” and VAT are far beyond the scope of the debate. If the hon. Member for Hove was going to intervene along those lines, I caution that he might wish to reconsider.

[Peter Kyle]

My intervention was going to be on regulation in general and its burden on the charitable sector, but I will happily withdraw if the Chair so wishes.

[The Chair]

Thank you.

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[Mr Wilson]

It is a great pleasure to serve under your chairmanship, Mrs Main. This is a Bill on which there is a great deal of consensus across the House. I think we all accept that the regulatory powers of the Charity Commission needed to be brought up to date, to support the regulator in tackling cases of abuse in charities.

The Bill has already been through significant scrutiny. The previous Government first published their proposals for public consultation just over two years ago, in December 2013. Those followed criticism of the Charity Commission’s powers by the National Audit Office and were based on proposals put forward by the commission itself. There was broad support for the measures from charities, particularly small ones, although some measures received mixed reactions from charities and their representative bodies.

The proposals were refined as a result of consultation and a draft Bill was published in October 2014. The draft Bill was subjected to extensive pre-legislative scrutiny by the Joint Committee on the Draft Protection of Charities Bill, ably chaired by Lord Hope of Craighead, a former deputy president of the Supreme Court. I pay tribute to its detailed scrutiny, which led to a number of improvements and refinements being made. We should also note that the Bill has already been considered in detail in the other place, in a largely collaborative and consensual way. That, too, led to sensible refinements to the Bill. I very much hope that we can continue working together in that spirit of cross-party consensus on most aspects of the Bill for the benefit of the Charity Commission and the public.

Before moving to clause 1 and the amendments on official warnings, I want to make three more general points. First, I repeat what I said on Second Reading: the vast majority of charities are run well by decent, honest people who selflessly want to do good for the benefit of others. When considering these powers, it is important to remind ourselves that they will help to protect public trust and confidence in charities generally and will target only the minority involved in abuse.

Secondly, I want to place on record my thanks to the staff and the leadership at the Charity Commission, who are transforming the commission into a modern, proactive, risk-based regulator and who will use the new powers in a targeted and proportionate way. I was pleased to see that, when the National Audit Office returned to the commission just a few months after publishing its report, it found that it had made “good, early progress” against all its recommendations. That progress is down to the effective leadership and hard work of everyone at the commission.

The third point is an overarching one relating to the Charity Commission’s duty to act in line with the principles of better regulation, human rights and equalities duties, some of which have already been raised. These all require the commission to carefully consider a number of factors when exercising its powers. The duty is set out in section 16(4) of the Charities Act 2011:

“In performing its functions the Commission must, so far as relevant, have regard to the principles of best regulatory practice (including the principles under which regulatory activities should be proportionate, accountable, consistent, transparent and targeted only at cases in which action is needed).”

The Charity Commission also has a published risk framework that explains this regulatory approach to protecting the public’s interest in charity and how it assesses risks and manages its resources. The commission’s risk framework sets out the criteria it uses to determine whether it should open a statutory inquiry and where it is likely to use its temporary and/or permanent powers. In assessing regulatory issues that come to its attention by whatever means, the commission needs to be as sure as it can that the facts are correct and that it does not act on a false or unproven premise. It relies on information as evidence in its case work when making decisions.

The commission also has to act fairly and needs to be able to explain its actions to trustees and those directly affected by its decisions when it exercises legal powers. The commission may be called to justify its actions by the first-tier tribunal for charities or by the court. In doing so, the commission needs to show that its action has been taken on the basis that relevant issues have been properly considered. In assessing information and deciding to use it, it is important that the commission acts fairly and consistently in line with the principles set out in its guidance. The commission also considers its decision-making, as it is bound to, in accordance with the relevant statutory duties, namely those relating to the best regulatory practice, proportionality, human rights, the Equality Act 2010 and wider public law considerations.

I will now turn to clause 1 before responding to amendment 2. I will also try to respond to all the issues that hon. Members have raised during the wider debate on clause 1. The clause gives the Charity Commission an important new power to issue an official warning. This is one of the most important new powers in the Bill and is considered to be a normal power in the toolbox of modern regulators. It is already a staple tool of other regulators, such as the Care Quality Commission, the Financial Conduct Authority, the Pensions Regulator and the Solicitors Regulation Authority, to name a few.

An official warning could be issued to a charity trustee or to the charity itself where the Charity Commission considers there to have been a breach of trust or duty or other misconduct or mismanagement. The power would enable the Charity Commission to publish a warning, which it has said it would do in most cases. The commission has also said that it would not publish all warnings. The decision to publish would be in line with its current policy on publishing the announcement of statutory inquiries, which depends on whether publication is in the public interest. The Charity Commission would not publish an official warning if it considered that it would not be in the public interest to do so.

The Charity Commission does not expect to use the power too often. It is hard to put a precise number on it, but the commission estimates that it would be in the dozens of warnings each year, rather than the hundreds. Let me give two examples of when the Charity Commission might consider issuing an official warning—let us remember that these are low-level activities. One example is when a charity is consistently a little late in submitting its accounts. An official warning would remind the trustees of the seriousness of their non-compliance. We recognise that this is already a criminal offence, but it is rarely investigated or prosecuted as such. An official warning would be a much more proportionate response to encourage trustees to rectify the position.

The second example is when a charity makes unauthorised payments to a connected company or payments that benefit a trustee. If the size of the sums involved meant that it would be disproportionate for the Charity Commission to take firmer action, it could issue an official warning on future conduct. As one would expect, the power is subject to a number of important safeguards.

[Peter Kyle]

On its website, the Charity Commission already highlights in red those charities that submit their accounts late. The commission has said that this has had a significant impact on behaviour in the sector. Is the Minister saying that this is not enough? Can he give the precise number of charities where this is not working and where there will be an impact?

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[Mr Wilson]

The Charity Commission is always prepared to listen to representations and to consider further guidance, but as I will come on to explain, I do believe there should be further guidance as part of what we are discussing.

[Peter Kyle]

We are all very grateful to the Minister, who has been generous with his time, for allowing us to probe for more detail. The Joint Committee also recommended a minimum notice period to make representations on a draft warning before it was issued. My hon. Friend the shadow Minister suggested a 14-day period, which seems extremely reasonable. Does the Minister agree?

[Mr Wilson]

I would like the hon. Gentleman to be a little patient. I know I am going on a bit—these are issues that need a detailed explanation—but I promise I will come to his point and answer all the questions that have been put.

On process, we have set out in proposed new section 75A(5) of the 2011 Act the matters that must, as a minimum, be included in a notice of an official warning. These include the grounds for issuing the warning and action that the Charity Commission considers should be taken to rectify the warning. The Charity Commission must give notice of a warning, set out a period for representations to be made and take account of any representations before issuing or publishing a warning. We consider these changes to significantly improve the official warning power and we were grateful for the Joint Committee’s recommendations.

Let me turn now to amendment 2, which seeks to require the commission to give at least 14 days’ notice of an official warning in every case. I can see why the hon. Member for Redcar is attracted to that, as it would ensure that trustees had sufficient time in all cases to consider the notice of intention to issue a warning and co-ordinate any representations they might wish to make.

The commission will set out in guidance how it will operate the official warning power. The Charity Commission has said it would give publicity about this and is keen to work with sector representatives on the implementation of the power. That would be done before the statutory warning power is commenced. The guidance will set out the commission’s normal approach. The commission has confirmed that it will ensure that a reasonable time for representations is given, as is the case currently when trustees comment on the content of inquiry or operational compliance case reports before publication.

The time period between giving notice and issuing warnings will vary in different cases, depending on the level and extent of previous engagement with the charity, and the subsequent level of compliance. As a starting point, I would expect that to be 14 days, but there may well be cases in which a shorter notice may need to be given.

Let me give some examples of where a shorter period may be appropriate. A charity may have been strongly advised on several occasions, both under compliance visits and in writing, about taking small but repeated amounts of cash overseas to buy supplies for a medical centre, with no audit trail and no evidence of expenditure, when an equally legitimate banking arrangement was in existence, and the centre was a registered facility. A disaster happens in the same area and as a result the demand for the charity’s services and funds rises sharply. The commission becomes aware on a Wednesday that a payment is due to be taken in cash overseas by that Friday.

In that context, the Commission would want to issue a warning to the charity regarding its financial practices to minimise the ongoing risk to charity funds. Its warning would set out what the issue was—unacceptable lack of financial controls—and how that could be remedied, such as by using the banking arrangements already in place, considering a branch transfer and also ensuring that receipts are obtained for supplies purchased to satisfy the trustees’ duty to account.

A second example is where the commission might become aware of a charity that is conducting fundraising activities—raising money from the public—in an aggressive manner or with poor financial controls. It thereby poses a risk to charity property and public trust and confidence, for example by not collecting in sealed buckets or by depositing money into personal accounts. The commission is then informed that the charity is due to participate in a fundraising event in the next seven days. Currently, in that situation, in order to protect the charity the commission would have to open an inquiry and issue directions, which would take up significant time and resources. An official warning could address the issue at an earlier stage. The commission would need to issue its notice and publish the warning within a seven-day turnaround period.

As a final example, the commission might receive a whistleblowing report providing evidence of a low-level property or asset transfer that the trustees propose to enter into. The information provided by the whistleblower and a meeting with the trustees includes evidence that the proposed property disposition or asset transfer is not being conducted in accordance with the requirements of the Charities Act and their duties as charity trustees. If the transaction proceeds, a breach of trust and loss to the charity will occur. The proposed deadline for entering into the transaction is five working days from the last meeting, and the commission would want to issue a warning about following charity law requirements when engaging in property acquisitions.

In those examples, the issues identified in the charity are limited and specific. Opening an inquiry would be time consuming and in a sense misleading, as it may suggest that there are wider or more serious issues in the charity that need addressing when this is actually not the case. It would be wrong to prevent the commission from issuing an official warning in those circumstances, where an official warning may be the most appropriate and proportionate response to the misconduct or mismanagement in question. It would not be practical for the commission to be limited to a particular timeframe. The commission would always intend to give trustees fair notice, but this period may differ depending on the nature of the case. The commission’s guidance will deal with other matters, including its policy on when official warnings will be archived or removed. Its current policy on inquiry reports is that they are archived after two years.

I hope that I have been able to explain to the Committee how the official warning power will be used by the commission and that hon. Members will agree that it represents an important new tool for the commission in tackling lower-level misconduct and mismanagement. We do not want to create a power that results in more bureaucracy and red tape where it is not needed.

I now want to return to some of the issues raised in the debate, many of which were raised by the hon. Member for Redcar. Let me begin with misconduct and mismanagement and whether there will be guidance on this. The commission’s statutory responsibilities allow it to investigate issues that pose a significant risk to charities and to check abuse. Abuse is misconduct or mismanagement in the administration of a charity. The words “misconduct” and “mismanagement” should be interpreted as they are commonly understood. The premise is supported by case law. Misconduct includes any act or failure to act in the administration of the charity which the person committing knew or ought to have known was criminal, unlawful or improper. Mismanagement includes any act or failure to act in the administration of the charity which may result in charitable resources being misused or the people who benefit from the charity being put at risk.

Concerns of abuse are always taken seriously, but the level of the commission’s response will be proportionate and determined by the risk factors attached to the specific circumstances of the case as required by the commission’s risk framework, which I mentioned in my original comments. The commission’s updated CC3 guidance already sets out what types of action could constitute misconduct or mismanagement—I am sure hon. Members will be going away quickly to read that.

Let me turn to operational compliance cases, which are likely to be regarded very differently from official warnings. The Charity Commission already publishes details of some of its operational compliance cases when they give rise to wider lessons for charities. It is difficult to see how publishing an official warning would be any different, or why it would carry more stigma for the charity or trustee concerned. Charities exist for public benefit, so there should be transparency and accountability to the public, who are their ultimate beneficiaries.

The issue was raised of the real danger of the commission being allowed to extend the scope of its powers in a disproportionate way, with reference to the recent high-profile case of the Joseph Rowntree Charitable Trust and Cage. The reference to the JRCT-Cage litigation is a bit misleading in this situation. The court made no finding that the commission acted disproportionately—in fact, the court made no finding at all; the case was settled. Proportionality was not even one of the grounds of the challenge in the case. Furthermore, at the conclusion of the hearing, the Lord Chief Justice expressly stated that, of course, nothing at all that we have done comments in any way whatsoever on the underlying issues. Using the case is therefore a little unfair, if I may say so. It is one out of more than 500 regulatory compliance cases over the first six months of this year, so it is not representative.

The hon. Lady mentioned the compatibility of an official warning with the European convention on human rights. We accept that publication of an official warning could have an adverse impact on the reputation of the person named, but as the Government’s human rights memorandum made clear, any interference with ECHR article 8 rights is justified because it is proportionate, prescribed by law and for a legitimate aim, namely the protection of charity assets held for third-party beneficiaries.

[Peter Kyle]

I am grateful to the Minister for giving way, and I hope that it gives him a chance to catch his breath, because he has been rattling through the issues.

The Minister said that he was addressing serious concerns within the organisation. However, the point about the warnings being issued is that they are low to medium-risk warnings. Does he accept that the public sometimes do not know the difference in the types of warning and see only that a warning has been issued against a charity, and that there might well be big brand repercussions for what is a minor warning.

[Mr Wilson]

It is important that we do not have a situation in which charities can do no wrong. If charities cross the line, even in a low-level way, it is right that the Charity Commission should proportionately and sensibly be able to issue an official warning. That is why I fully support the principle of such warnings.

Campaigning was mentioned briefly by the hon. Gentleman early on his comments. To be clear, charities may not engage in party political campaigning. Where they undertake any types of campaigning to support their charitable purposes, they must avoid adverse perceptions of their independence and political neutrality. In addition, charities may not embark on campaigning to such an extent that it compromises their legal status as a charity. Charity Commission guidance CC9—I can see Members scrambling for CC9—is clear about what is and is not permitted. It makes it clear that charity law recognises that non-party political campaigning may be a legitimate activity and it sets out the general principles.

As long as charity trustees act within the legal framework, they are permitted to undertake activities that may include statements, lawfully and properly. That is relevant across all media platforms.

[Peter Kyle]

Those of us who run campaigning charities are very familiar with the regulations to which the Minister refers—

[Wes Streeting]

indicated assent.

[Peter Kyle]

I see my hon. Friend nodding, recalling his days in charities.

The point is that for those in government, it is policy and it is not always party political, but those of us who are familiar with the regulations know that sometimes charities need to speak out absolutely. The Minister’s predecessor once said publicly that charities ought to “stick to their knitting”. Charities find that kind of statement offensive, and trustees interpret it as an indication that they should not get involved in public campaigns that might impact on Government policy. Will he say that charities should do everything beyond knitting, including challenging the Government? It does not have to mean that they are involved in party politics—

[The Chair]

Order. The hon. Gentleman is making a speech. The Minister may decide not to indulge in discussion of knitting, if it so pleases him.

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[Mr Wilson]

Clause 5 would insert into the Charities Act 2011 a new section 79A to enable the commission to remove a disqualified charity trustee if they continue to remain in their position once disqualified.

The clause aims to close a loophole in the current legislation. The Charity Commission does deal with cases where a trustee knows that he is disqualified, but that he does not commit a criminal offence unless he “acts” as a trustee and so remains on the charity’s books as a trustee, but maintains that he does not “act” as one.

Under the law as it stands, in those circumstances the commission sometimes has to put pressure on disqualified individuals to step down from their trustee position. An example of where that may be necessary is where a trustee is disqualified by virtue of bankruptcy pursuant to section 178 of the Charities Act 2011. However, disqualification does not automatically remove the person from the position of trustee. Similarly, the charity’s governing document does not remove the individual either. In those circumstances, the commission or trustee body has to try to secure the resignation of the individual.

[Peter Kyle]

Will the hon. Gentleman give way?

[Mr Wilson]

I will finish this paragraph and then give way.

The individual might refuse to co-operate and not resign, which means that the trustees may not be able to operate quorately or appoint new trustees. If the disqualified individual continues to maintain their position, that will open them up to potential criminal and civil liability, but that does not help the charity to move forward. This new power would enable the commission to remove the disqualified trustee in order to allow the charity to continue to function.

[Peter Kyle]

I apologise for interrupting the Minister mid-flow; I thought he had reached the end of the paragraph. Perhaps those drafting his speeches are putting too much into one sentence.

I agree wholeheartedly with the intentions behind the clause. Will the Minister inform the Committee how frequently it is expected the powers will be used? It strikes me as being a rare occurrence that somebody would be declared bankrupt and yet not voluntarily stand down from a charity. I do not know of any such case.

[Mr Wilson]

I know that my officials like to pack a lot into my speeches, so they have longer paragraphs. Obviously it is important that we have proportionality. This is the sort of issue that arises dozens of times a year, so it is a regular occurrence and we need to take action to try to control and eradicate it.

Another example might be where a charity trustee is disqualified by virtue of having been convicted of theft. The person refused to resign his position, which was problematic for the charity because it affected their quorum for business and decision-making purposes and there was no power to remove a trustee within the charity’s constitution. The trustee board is already at its maximum size and is unable to act further. This new power would allow the commission to remove the trustee so that the charity can continue to operate quickly and safely.

The commission has estimated that the power would be used dozens of times each year to remove people who were refusing to stand down even when they had been told they were disqualified. This indicates that there is an issue to deal with. It is important to equip the commission with powers to take steps to remove a disqualified trustee from their role quickly and effectively. The new power was welcomed by the Joint Committee on the draft Bill and I commend it to the Committee.