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

Peter Kyle Excerpts

Thursday 7th January 2016 Public Bill Committees

[Mr Wilson]

I thank my hon. Friend for raising that really important question. Charities—particularly education charities—rely on the special relationship they have with their membership. The data protection legislation that has just been passed in Europe means that all sectors will need to move to an opt-in system in the next 18 to 24 months. That means that any organisation will require unambiguous and affirmative consent before being able to process any individual’s data. Workarounds such as assumed consent or pre-ticked boxes will simply no longer be good enough. A change is therefore coming, and it will affect all sectors, not simply the one we are discussing.

[Peter Kyle (Hove) (Lab)]

The Minister has repeatedly asserted in his opening speech that charities need to heal the wounds resulting from the challenges they faced last year and from the public dismay that greeted some of what happened. However, would it not be more honest to acknowledge that the Government also played a role in undermining public confidence in charities last year? Will he take this opportunity to reaffirm that the Cabinet Office will no longer put millions of pounds in funds into charities that are trading insolvently—something that greatly undermined public confidence in not only one charity, but the Government themselves?

[Mr Wilson]

That really is a very strange point to make. What we saw over last summer was a number of large charities clearly targeting vulnerable and elderly people in the most immoral way and on a scale we had not seen before. The Government had no role in making that happen or even allowing it to happen. Since we discovered the scale of what was going on, we have acted extraordinarily swiftly. We have set up a new single regulatory body in a very short time, given it the powers to be successful and made sure it is funded sufficiently. We have got the sector’s backing, and a whole series of other things are now happening to make sure that that body is up and working so that the sector does not make the terrible mistakes it has made in the past.

It is also important to recognise that it is a small number of large charities that have let the whole sector down and that, by and large, small charities have had nothing to do with this. We are therefore having to focus on a fairly narrow section of the sector, but that work is important, because we have seen the figures for those who trust charities go down to below half the population—it was previously much higher—and that has had an impact on how people feel about donating to charities. A lot of the work that the Government have done over the past five or six years has been about building the idea that people should give of their time and money to volunteering and charities, and that has been a big success for the Government.

[Peter Kyle]

I am grateful to the Minister for giving way again. He spoke with great passion about solving the problems that a small number of charities faced, and indeed created, with some of their fundraising practices last year. However, he also quoted figures for the damage done to the voluntary sector’s reputation, and I invited him to face up to the fact that the Government also played a role in damaging the sector’s reputation last year by overriding officials’ recommendations not to put more money into Kids Company. In doing so, the Government put millions of pounds into a charity that was trading insolvently, creating a national scandal that was reported throughout the media, which damaged the sector itself. Yes, the voluntary sector needs to own up to its challenges, but will the Government take a lead? Will the Minister say that the Government will no longer fund charities that are trading insolvently?

[Mr Wilson]

Look, there are at least three separate investigations into what happened at Kids Company, two of which are due to report by the end of this month, I think. It is important that we all wait to see what those reports say. If lessons can be learned, the Government will certainly learn them and do what we can to ensure that such things do not happen again, but to pre-empt that in this Committee would be wrong.

I was talking about the change in the nature of fundraising regulation if we had to invoke this power. It would no longer be governed by a self-regulatory system; instead, the Government would be able to invoke statutory regulation by mandating the Charity Commission with that task. Were that function to be passed to the commission, clearly it would require additional funding or would charge fees under section 19 of the Charities Act 2011.

I hope that I will never feel compelled to use this power, as it would mean that the self-regulatory system had failed. More importantly, it would mean that large charities had failed to put their house in order. However, the seriousness of the abuse in the past year or so and the impact it has had on public trust in charities has made it clear that a robust backstop is needed to ensure that the public feel that they can give with confidence and to prevent the same sorts of scandals being repeated.

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[Anna Turley]

That logic refutes the need for any special advisers, who are of course paid by the public purse to implement a political manifesto.

[Peter Kyle]

Does my hon. Friend agree that there is ample charitable law stating that charities exist to serve their beneficiaries? They do not exist to serve special advisers or any other part of society; they exist to support their beneficiaries. That is the beginning, the middle and the end of the story as far as charities are concerned.

[Anna Turley]

My hon. Friend is absolutely right. That is their full purpose, and they should feel entirely able to stand up and challenge the Government of the day, whoever they may be, and any political party if they feel that their policy does not support their charitable objectives.

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[Anna Turley]

I think that is perfectly acceptable, if people want to go to any party political event and offer their views. They may go to it and disagree with the party and challenge it. As far as I am concerned, we are in danger of separating politics from the realities of campaigning and policy making. Politics has to be open and accessible and must not exist in a vacuum. Many people are deeply involved in politics, from councillors and MPs to activists; there is not a small box for people to sit in because they are in one category but not another.

[Peter Kyle]

Does my hon. Friend agree that there are many ways to achieve social change? One is to go into communities and work with individuals on the frontline, and another is to change public policy. An individual using the front-line method can change hundreds of people’s lives, but changing public policy can change millions of lives for the better. Is not it right that charities should seek to bring about front-line change and involve themselves in public policy simultaneously?

[Anna Turley]

I agree that that is part of their core objectives and part of what they have done for centuries. I am happy to support that.

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[Anna Turley]

I do not understand the point that the hon. Gentleman is making, because gift aid is made automatically to charities that people may or may not support. A taxpayer may be paying gift aid to a charity whose aims and objectives they may not support. That is the logic.

[Peter Kyle]

May I invite my hon. Friend just to clarify one point? We are talking—are we not?—about charities having the ability to support individual policies. They are not being invited or allowed to support political parties.

[Anna Turley]

My hon. Friend makes a really important point. This measure is not about party political campaigning; it is about lobbying and putting pressure on the Government, and on all political parties—[Interruption.]

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[Anna Turley]

I disagreed with everything until the hon. Lady’s last point. Charities totally value their independence. Previous legislation has sought to stifle their independence and to prevent proper challenge and scrutiny of Government in the build-up to an election, but the new clause seeks to protect that.

[Peter Kyle]

Does my hon. Friend agree that what would damage the trust of people who give so much to charities and of beneficiaries is to see Government discussing and making policies for an area that concerns them directly while the charity stays mute because it is not allowed by law to intervene or even talk publicly about that area?

[Anna Turley]

My hon. Friend makes an important point. When people support a charity—whatever the issue, whether it is cancer treatment or supporting the elderly to have a dignified older age—they want to see it making a difference, and that is in everything, from campaigning and having a loud voice nationally to seeking to secure changes to our society.

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[Mr Wilson]

The New Schools Network is not a party political organisation. I think that that is best left there.

[Peter Kyle]

The Minister talks about the importance of independence and the fact that beneficiaries need to see charities being independent-minded. They absolutely do, but does he not accept that to be independent, charities need to be able to choose the terms on which they engage with public policy? It is interesting that the hon. Member for Worthing West (Sir Peter Bottomley), who sits on the Government Benches, has invited Donald Trump to his constituency because he thinks it will be an important statement of free speech in our country. Is it not strange that we live in a world where Donald Trump and billionaires are invited here to demonstrate the principle of freedom of speech, while we are discussing charities’ freedom of speech being inhibited in the run-up to a general election, when the voices of the disempowered are needed the most?

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[Mr Wilson]

My hon. Friend makes the points powerfully. He has returned a number of times to a point that is relevant and of huge public interest: charities should not use Government funding for political activity. That should be clear from the terms and conditions attached to any Government funding of a particular charity. For political activity, charities can use other funding, such as voluntary donations or earned income from trading. I understand what he says, and I have set out clearly the Government’s view .

[Peter Kyle]

The hon. Member for Tonbridge and Malling makes an important point. Empowered individuals absolutely have the right to speak for themselves, as does any citizen of this country. The problem we have is that some citizens in this country do not have the ability to be heard or to voice their concerns—the disempowered people, who are often hidden away from general discussion and from public policy. That is why civil society organisations need the power to speak vocally on behalf of the people who do not represent themselves equally in a democracy. Does the Minister not agree?

[Mr Wilson]

Once again, I am surprised at the hon. Gentleman’s question. At the outset, I said clearly that charities should be able to speak truth to power. That is absolutely fine—

[Peter Kyle]

Not during an election.

[Mr Wilson]

Whatever time of year it is. The hon. Gentleman singles out elections. We have Lord Hodgson looking at this. The Charity Commission has looked at the incidents that took place during elections. So far, I have seen no evidence of any chilling effect, and I await Lord Hodgson’s report to support the hon. Gentleman’s case.

Attempting to put into statute a provision of case law risks changing the boundaries of what is permitted. It just is not feasible to encapsulate all the nuances of case law in a simple single statutory provision. We have already explored those risks in the context of clause 9 and the protection of charity assets, and it would be no different here.

It is not clear whether new clause 2 would permit charities to support political parties, for example, by allowing charities to undertake political campaigning without defining exactly what that means. Given our earlier conversation about the Badger Trust, I think even the hon. Member for Redcar is not clear about what constitutes political campaigning and what does not. The new clause is just one example of where a well meaning attempt to codify case law in a statutory provision can go badly wrong, resulting in potentially significant unintended consequences.

There is also a risk that the new clause would permit charities to overstep the current mark in another way: under the law as it stands, charities cannot engage in campaigning to such an extent that it calls into question their charitable status. If the only thing the organisation does is non-party political campaigning, one would question whether it is an organisation with political rather than charitable purposes. That is already encompassed in case law, but it is not clear to me whether new clause 2 would encompass that restriction, potentially opening up charitable status to political organisations. That would clearly damage public trust in charities, which I am sure the hon. Lady does not intend.

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[Anna Turley]

Okay.

[Peter Kyle]

To clarify, the new clauses are about trying to get better value for the public from private and selective education. To use a previous argument of the hon. Member for Tonbridge and Malling, where taxpayers’ money is—

[Tom Tugendhat]

Taken by force.

[Peter Kyle]

—taken by force and given to selective education, we need to ensure that the public who pay for it get full value for it.

[Anna Turley]

I totally agree, and I will come on to that point shortly. I want to make it clear that my view of pulling up the ladder is selective education, but I will move on, because we can have a whole conversation outside the Committee on that. I agree with the good work that many independent schools are doing; it is just not enough, in my view.

A recent report by the Social Market Foundation showed that UK children who are privately educated are likely to earn almost £200,000 more between the ages of 26 and 42 than those in state schools. Independent schools seem to be stretching further away from even middle-class families, who have been priced out of private education because of an “endless queue” of wealthy people from outside Britain pushing up fees. Andrew Halls, the head teacher of King’s College School in Wimbledon, south-west London, recently said that local lawyers, accountants and military officers had stopped sending their children to the school because of the costs. He said that in many cases, such schools have become

“finishing schools for the children of oligarchs”.

It is simply not appropriate that while the social and financial advantages to independent school pupils persists, they are subsidised by the British taxpayer through the charitable status. My hon. Friend the Member for Hove made the point that I was going to make about the view of the hon. Member for Tonbridge and Malling on value for money. Charitable status is now an outdated and inappropriate financial privilege that is impossible to justify without substantial action from independent schools, which is what the new clauses seek to achieve.

Charitable status currently means that trustees of school charities have a responsibility to ensure they are running the school for the public benefit. Public benefit is part of what it means to be a charity, to operate as a charity and to report on a charity’s work. The Charity Commission produces guidance for charity trustees on each of those aspects of public benefit and the particular issues that relate to the different charitable purposes that the law recognises. All charity trustees have a duty to have regard to the Commission’s public benefit guidance and must report each year on how they have carried out their charity’s purposes for the public benefit. The Commission publishes those reports on the online public register of charities and checks a random sample of them. Trustees must therefore take action to ensure that the school does not solely benefit those who pay fees, yet the critical point is that it is up to the trustees to determine how that is achieved, and that is what we seek to challenge.

During the Bill’s passage through the other place, these new clauses were voted down on the understanding that the Charity Commission would pursue non-legislative routes. The Charity Commission updated its guidance in October last year, but the only change was to “encourage” schools to show in their annual reports how, for example, they have shared sports facilities; there is no compulsion to do so. It can only be concluded from that limited reaction that there is no desire for any progress on this issue. Indeed, it goes against the very principle of why people send their children to independent schools. Why would someone pay to send their children to schools for the facilities if other local children who do not pay get to use them? There is no inherent incentive for independent schools to share their facilities.

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[Jo Churchill]

I could not agree more—it is not always necessary to tell people how to behave well.

The school has forged great community links and the council and people in my constituency got another sports ground for very little investment. It helps social cohesion and health outcomes, among other things, as the hon. Member for Redcar alluded to.

My underlying belief is that people should be allowed to choose what is right for themselves and their family. The clauses would legislate choice and good behaviour out of the system to a degree, and that is regressive. Indeed, if my memory serves me correctly, the hon. Member for Hackney North and Stoke Newington (Ms Abbott) chose to send her son to a private school. As a mother, I can understand her need to make that choice about what is best for her child. Should we deprive others of that choice? I do not think so, but the new clauses could begin to do that.

The worry is that the clauses will not allow small schools that offer specialisms in areas that the hon. Member for Redcar discussed to continue to do so across the board, particularly for gifted music scholars, those who are talented at sports and budding linguists. All have benefited from education in the independent sector. Many of these schools offer bursaries and 100% scholarships to youngsters whose parents would not normally be able to afford the fees. Similarly, and of the utmost importance, some of the best education for our children with dyslexia or autism occurs in the independent sector, easing the burden on state schools to provide special needs support.

[Peter Kyle]

As an acute dyslexic, I understand the benefits that can be bestowed on students who are lucky enough to have parents who are able to send them to such schools. Does the hon. Lady accept that she is citing best practice in the private schools sector, and that the new clauses seek to extend best practice throughout the whole sector?

[Jo Churchill]

No, I am not. I am standing here and saying we must be allowed to choose. I am the mother of four children, two of whom are acutely dyslexic. They have both been educated fully in the state system at a school that is excellent. What I am saying is that independent schools must be allowed to function as they see fit and to pay back in a way that is appropriate; the Charity Commission will be the regulatory body, as will Ofsted and the ISI. An organisation cannot be compelled to devolve out, because all that will do is create yet more unfairness.

Independent schools are often a vital resource, depended on by local authorities. That has to be considered, because we cannot account for all the specialisms. Many local authorities use such provision to help disadvantaged children to get on. More than 66,000 pupils in the independent sector have special educational needs. For that reason, we should be very cautious of doing anything that ties the hands of schools.

I believe that we should empower school leaders—and I mean all school leaders. Leaders in this sector often assert that the clear vision, ethos and purpose on which they are founded and the freedom to deliver allows them to excel. That should be there for all schools to allow them to bring rounded people into society who have the same fair chance at everything.

All schools with charity status currently have to demonstrate a charitable purpose. A strong Charity Commission will hold them to account. It should not be for us in this place to over-regulate. There are excellent examples of this Government promoting schemes that help, such as the National Citizen Service. My children attended the scheme with children from the independent sector and children who had been in dire straits with different authorities. All went on the scheme together, which allowed them to learn, experience and become well rounded.

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[Jo Churchill]

There is no point. First, smaller schools, which make up more than half the number of independent schools, could not afford to put on a programme on such a vast scale. Secondly, a scheme exists to get social mobility between different areas and have children learn from each other. I am worried by the over-prescription of this measure and the need to regulate something that does not need to be.

I feel able to comment as somebody who believes in choice. The choice I made for my four children was to educate them entirely in the state system. The point at which they had any degree of paid provision was when they were in nursery. As they were all born during the previous Labour Government, I could not access any provision I did not pay for.

[Peter Kyle]

There is less now.

[Jo Churchill]

That is not actually the case. With the extension of provision to two-year-olds and three and four-year-olds, there will be considerably more than I was granted.

After many years as a school governor at a high-achieving secondary school in the state system and a primary school for those with special educational needs, I believe that independent schools have to abide by the obligations placed on them, and the Charity Commission is there to do a job. To prescribe their behaviour further is not only unnecessary but may well force small specialist schools out of existence due to the red tape and cost of administration. It is nothing to do with what they deliver.

These proposed new clauses are ill considered and should be rejected. They will not give any of us what we all desire, which is an excellent education for all our children, so they become well rounded individuals who can contribute to society and have an equal chance of doing what they wish.

[Mr Wilson]

I start by congratulating my hon. Friend on her excellent speech, which was clearly based on an enormous amount of personal knowledge. I also thank all Members of the Committee for their contributions over the past four or five sittings. We have had an excellent Committee stage, where we have given the Bill a rigorous check on what it should and should not do. I look forward to Third Reading and Report.

I agree that we should do more to promote stronger partnerships between independent and state schools. Where I differ from Opposition Members is in how we go about that. We should recognise that many strong partnerships already exist, as my hon. Friend and other hon. Members have said, and they are growing in number and impact.

Before I go into detail, I want to clear up a point the hon. Member for Redcar made about Lord Moynihan’s views. Lord Moynihan actually agreed with us that encouraging charities to do more to share facilities was a better approach than legislating to force them to do so. That ought to be on record so as to make clear Lord Moynihan’s views.

[Peter Kyle]

When I was an adviser at the Cabinet Office I had the benefit of working on the 2006 Charities Bill, later the Charities Act 2006, which brought in the public benefit test. We discussed public schools then and considered drafting and implementing an amendment not dissimilar to the new clauses at that stage of legislation. At that point, we had representations from independent schools, which strongly said that they would improve community relations and that self-regulation and actions from within the sector would deliver demonstrable change. Can the Minister tell the Committee the degree by which the sector has improved in the intervening years and whether that will extend further without the need for legislation?

[Mr Wilson]

I thank the hon. Gentleman for that point. I will come to it later in my speech, rather than deal with it up front.

There are both principled and practical reasons why legislating to force charitable independent schools to do more is wrong and could be counterproductive. Let me start with the principled argument against these new clauses. Public benefit is a requirement at the centre of the definition of a charity. All charities, regardless of their size or charitable purpose, must exist for public benefit. Public benefit itself is not defined in statute, but has a meaning given by a body of case law that has been built up over several hundred years, which sets out clear principles but gives the definition the flexibility needed to deal with a wide range of types of charities. The way in which a charity demonstrates its public benefit and the extent to which it does so is for its trustees to decide, taking into account the circumstances of the charity and other relevant factors. It is not for the Charity Commission to interfere unless charities fail to meet the requirement.

An Upper Tribunal ruling in 2011 set the parameters for charitable independent schools. Public benefit must be real and not tokenistic, but beyond that it is not for the Charity Commission to dictate to schools the type or amount of public benefit they provide. That should be a matter for the trustees of the charity, who must take into account the charity’s circumstances.

There is a wide range of ways in which charitable independent schools can and do provide benefits, including academic partnerships with state schools, sharing sporting or other facilities and expertise, and providing bursaries and other financial assistance to those who cannot afford the fees. There is also the important indirect benefit of relieving the taxpayer of the cost of educating 7% of the nation’s children. It is for the trustees to determine the way in which their charity provides a public benefit. The law places the decision on which approach or combination of approaches the charity takes in the hands of the charity’s trustees.

It would be wrong to single out one type of charity in legislation and stipulate one particular type and the extent of public benefit that it must provide. No other type of charity is treated in that way, and it would set a very dangerous precedent. What would be next? Religious charities, overseas aid charities or campaigning charities? Once the precedent has been set, the risk is that the temptation to interfere would be too great for some to resist, and specific legislative requirements could creep in over the years for different types of charities. If unchecked, there is a real danger that over time charities would be opened up to significantly increased state interference—whether or not politically motivated—which could seriously undermine the charity sector’s independence. In this Committee, all parties have sought to protect the independence of charities and trustees.