Charities (Protection and Social Investment) Bill [Lords]

Robert Jenrick Excerpts

Thursday 3rd December 2015 Commons Chamber

[Robert Jenrick (Newark) (Con)]

I welcome the Bill, which is a much needed and sensible Government reform. I am delighted that they have introduced it.

Before entering this place, I practised as a solicitor for several years. I practised corporate governance, among other areas, and over the course of the past year, I think we have all come to realise that the governance of charities is in crisis and it is affecting all charities. The large charities are infecting the small charities, which is why it is so important for this House to act.

As has been said by many Members on both sides of the House, we all support the charities in our constituencies, including those we give to and those of which we are trustees. We want them to thrive and we want public confidence in them to increase, because, undoubtedly, public confidence in charities has been knocked this year. As the head of a charity based in my constituency recently told me, charities are different from many other parts of our society. When large businesses get knocked by scandals, the public turn towards the little guys and confidence in them rises. If there is a horsemeat scandal at Tesco, we all go to our local butchers and sales there start to rise. Charities seem to have the inverse situation. If the big charities get hit by scandals, the little guys suffer as well.

It is essential that we protect the thousands of excellent small charities that we, as Members of Parliament, get to know more than most members of society. It is for them that we must ensure that the larger charities, in particular, have the highest quality of governance. That comes down to trustees. It has been a torrid year in many respects for how the large charities have behaved, whether the scandals have been about the high salaries of chief executives and the management teams of big charities, about the question of politicisation or, above all, about the question of the inappropriate use of fundraising on our high streets. Of course, there has been the tragic case of Olive Cooke.

[Kevin Foster]

My hon. Friend is making a very strong speech. Does he agree that part of it is about the public having confidence about how much of the pound that they donate ends up going to the good work of the good cause, particularly as with some of the larger charities there have been issues about how much ends up going on overheads and administration?

[Robert Jenrick]

My hon. Friend makes a strong point. I want to come on to how we can ensure proper financial management of our charities. That cuts in both directions: how they govern themselves and what percentage of their organisation and resources is deployed on central management.

Kids Company has seen the last and perhaps most prominent scandal, which has raised all manner of questions about the governance of our most high-profile and largest charities, particularly their capacity to handle their finances appropriately. I do not want to dwell on Kids Company, which is an outlier, but it has done huge damage to other charities. That is why those who have been at the heart of it and those parts of Government that have worked with Kids Company have to take it seriously. It is damaging all our charities throughout the country. The powers in the Bill to bar ineffective and inappropriate trustees from acting as trustees will be tested if there are Kids Company-type scandals in future.

[Nigel Huddleston (Mid Worcestershire) (Con)]

Is that not at the heart of the matter? The vast majority of people who work with, volunteer for or have leadership positions in charities across the UK generally do the right thing in their day-to-day activities. Through this Bill and other initiatives, we need to try to get the right balance between governance and allowing them to get on with doing the things that they really want to do.

[Robert Jenrick]

My hon. Friend makes the point perfectly. It is important to remember that the core activities of our charities are rarely questioned. They are usually performed incredibly well and incredibly sensitively and appropriately. The scandals and disappointments tend to come from the way the operation of our charities occurs. That is why it is incredibly important that trustees play their full role in managing, scrutinising and supporting those organisations, as do directors and non-executive directors of our companies.

The role of a trustee has to be at the heart of it all. The new Bill is important in that regard as the power to bar individuals who are not appropriate to be trustees and who bring charities into disrepute is incredibly important. I would be interested to know from the Minister how many trustees he believes that that would apply to in an average year. Will the difference be marginal, or will it be more significant? As for the question of preventing trustees from moving on, after damaging an organisation, to continue in many others, we all know that many people—many good people—are trustees of several charities and so, inevitably, the bad apples are also involved in many charities. We want to ensure that that involvement cannot continue.

The power to issue warnings to charities is important if the Charity Commission considers their actions to amount to misconduct or mismanagement. Of course, that must be done proportionately and the Charity Commission has not always acted proportionately on a range of other issues, including, as we heard from my hon. Friend the Member for Congleton (Fiona Bruce), the issue of the Plymouth Brethren. Had I been in the House at the time, I would certainly have supported that important campaign.

Many involved in the third sector have expressed concern that the Bill gives the commission the benefit of the doubt, but bearing in mind the importance of raising public trust in our charities, particularly the big ones, it is essential that we have a strong regulator with the tools to act. The Bill provides that.

I have some questions and thoughts for the Minister on the role of trustees. First, it is absolutely essential, as Kids Company showed—this seems a simple and obvious point—that a board of trustees contains the right range of expertise. That is stipulated within the guidance of the Charity Commission but, clearly, it does not always happen. In particular, that must include the right range of financial expertise. When charities reach a certain size, like our larger companies, they qualify to be in the FTSE 250. They are huge organisations and require individuals with genuine financial expertise and knowledge of financial controls so that they can scrutinise the organisation and hold it to account.

[Fiona Bruce]

I hear what my hon. Friend is saying, but my concern is, as the hon. Member for Clwyd South (Susan Elan Jones) mentioned, possible regulations for larger charities. My concern is how that is defined and that one might bring in the smaller charities. Does my hon. Friend not share my concern about the difficulty in attracting officers of charitable organisations, particularly to the role of treasurer, as my experience shows?

[Robert Jenrick]

I share that concern. We all know through the other organisations in which we are involved how difficult it can be to find good people, particularly younger people, as has been said, to act as trustees. Incidentally, the charitable sector is a lot more diverse than our corporate sector. About 40% of charitable trustees are women, and that figure is not the same in the corporate sector. It is important that we do not put people off from getting involved. It might be that the time has come when “one size fits all” does not work and that our largest charities, which uphold public trust and confidence in charitable giving more generally and which are very large—we are encouraging charities to merge and get larger—should be subject to far greater scrutiny and a different regime from the small ones that we all know in our constituencies and want to thrive.

[Fiona Bruce]

My hon. Friend is being very generous in giving way. Perhaps for the very small charities there needs to be some sort of Charity Commission kitemarked course that a would-be trustee can go on to ensure that they have the necessary understanding of the role required.

[Robert Jenrick]

My hon. Friend comes on to a point that I wanted to make. By the Charity Commission’s own reckoning, knowledge of governance rules and best practice is quite limited among our trustees. I do not blame them—they are busy people who are doing this voluntarily and we want to encourage that—but knowledge is quite limited. The awareness and knowledge of some of the guidance—for instance, CC3, which is “The essential trustee” guide—are quite modest. Surveys that the Charity Commission has put out to trustees of larger and small charities suggest that basic functions of being a trustee are not widely known by our trustees.

Anything that the Charity Commission can do to boost awareness without putting off our trustees is essential. I know that the Charity Commission takes that seriously, because I have spoken to it, but it needs to do something to boost that awareness and support trustees in a way that strikes the right balance between not deterring people and ensuring that they know what they are supposed to do. Some of the reports and surveys are quite scary when it comes to how few trustees understand their responsibilities, particularly as regards finance.

[Kevin Foster]

My hon. Friend is being extremely generous with his time. Does he agree that it is also important that we ensure that anyone who wants to do the best for their community or to support a good cause does not feel excluded from being a charity trustee merely because they do not have formal qualifications? It is important that the Charity Commission helps to build the skills they need, as I would not want to see trusteeship become a graduates-only zone.

[Robert Jenrick]

That is very important, but I do return to the theme of some of our biggest charities. They are major organisations dealing with hundreds of millions of pounds of not only the public’s money, through charitable donations, but the taxpayer’s money. I am nervous to dwell on the case of Kids Company, but its trustees had very little relevant expertise. One was a celebrity hairdresser—there is nothing wrong with that, but I do not expect that person necessarily to have expertise in running a major multinational business, as Kids Company had become. It is therefore essential that those organisations step up and have appropriate trustees. I would like this Bill and the Government to push our biggest charities to have those individuals.

I know that charities are now required in their annual return to confirm whether or not they have reviewed their financial controls. Clearly, that important lesson has come out of recent scandals, and such a provision is essential. Anything we can do to beef it up, without deterring the little guys, is essential.

Another issue is that, unlike as happens in companies, most trustees do not meet in mixed board meetings with their management, and so the interplay between the two is often limited. Those trustees who take their role most seriously and work hardest at it no doubt get to know the senior management of their organisation, but others do not and often rely, crucially, on the chief executive, who may be, as we have seen in other scandals, an overbearing founder. Such a person may be incredibly charismatic, powerful and knowledgeable about the organisation, but it is difficult to scrutinise them, stretch them and hold them to account. That is important, and our larger charities have started to have mixed board meetings involving executive and non-executive directors— I use the corporate setting there.

I would like the Government to think about the role of overbearing founders, because it is an incredibly important issue. Anyone involved in the charitable sector sees examples where someone who may be a brilliant individual founds a charity and then it gets out of control, as they become extremely difficult to scrutinise and perhaps the time comes when they should step aside or hand over to somebody else. Perhaps it would be appropriate for these individuals to have term limits, as we might have for a chairman of a public company, where they have to go through a rigorous procedure at the end of a certain term in order to be reappointed.

A number of our charities, even the largest ones, are riddled with conflicts of interest. We see trustees having friends and relatives employed in the organisation, and trustees sometimes getting benefits that are not appropriate. I do not think the Bill particularly deals with that issue, but it does a lot of damage and undermines confidence in the charitable sector.

Lastly, I wonder whether the Minister really believes that the Charity Commission has the capacity to regulate the vast number of charities. We have thousands of charities in this country, some of which are extremely complex organisations, as we have seen. Does the Charity Commission have the resources to do that work? I suspect it does not, a view shared by many in the sector. Some of our most experienced chief executives believe the time has come for some form of beefing up of the Charity Commission through self-funding, whereby the big charities, which are the holders of public trust and confidence, might contribute some money towards ensuring that trust in the wider sector is maintained through a Charity Commission that has the funding required to see that happen.

I know that the Minister wants to speak, so in conclusion, trustees are absolutely essential and those of our biggest charities are letting down the entire sector. Scandals such as what happened at Kids Company matter, because they are harming the small charities, which are the lifeblood of charitable giving. As a Member of Parliament, I have taken huge pleasure in getting to know and working with these charities in my constituency, and I know other Members feel the same. Those who hold those positions in the big organisations need to step up and behave as if they are non-executive directors of large and important organisations, which they are.