Charities Bill [HL]

The Government have included a power in the Bill under Clause 11(12)(b) allowing my right honourable friend the Home Secretary to make an order giving exempt status to charities which are not currently exempt. The Government’s current policy is that no new classes of charities—the charitable service non-public funds would count as a new class—should be converted from registered or accepted charities into exempt charities. That policy is in the interests of accountability and transparency. The power I mentioned is needed because there is at least one class of charities—the higher education institutions—within which the majority are already exempt but a minority are not. The power will be used to put the minority on the same exempt footing as the majority—a matter of common sense. The power could, however, be used to exempt an entire new class of charity should the Government’s policy change in future. However, I should make it clear that there is no immediate prospect of a change in policy. Charitable service non-public funds are excepted charities at present. Excepted charities do not have to register or submit accounts but are otherwise within the Charity Commission’s regulatory jurisdiction. Clause 9 will require excepted charities with income over £100,000 to register with the commission. Of the 15,000 or so SNPFs in existence, that would, in rough terms, catch the largest 1,500, leaving the remaining 13,500 to continue as they are at present. The £100,000 threshold can be lowered by statutory instrument, but there is now a provision—subsection (8) of new Section 3A—to prevent it being lowered before a five-year review of the operation of the Act has been reported to Parliament. So 90 per cent of SNPFs are protected from any prospect of being required to register within at least the next five years. Even for the 10 per cent that are required to register, the process of registration and the year-to-year requirements consequent on registration will be genuinely minimal in the extra work that might fall on those who administer SNPFs. The main challenge for SNPFs is to bring their accounting procedures into line with the Statement of Recommended Practice. That is something which the three services accept must happen and which they have been working on for some time with the Charity Commission. I can report that excellent progress is being made. Changing the status of SNPFs from excepted to exempt will not alter their position under SORP. SORP applies to all charities, whether registered excepted or exempt. Making SNPFs exempt will not help them at all in that regard. Perhaps the main question to be answered if SNPFs were to have exempt status is who would regulate them. Exempting them would take them out of the Charity Commission’s remit. Under the Bill’s arrangements for   exempt charities in Clause 13, a new ““principal regulator”” would have to be prescribed for them by the Home Secretary. The principal regulator would also have to be given, by regulations, the objective of promoting compliance by SNPFs with charity law. It seems perverse to take SNPFs out of the hands of the Charity Commission—a regulator which is fully equipped for regulating charities—and place them under the oversight of an as yet unidentified alternative regulator—the MoD being the most obvious candidate—which almost certainly has no experience of regulating for charity law compliance. That seems like an administrative nightmare for the new principal regulator. And it is not offset by anything like comparable reductions in bureaucracy for the SNPFs themselves. To sum up, I can see no material advantage for anyone in making SNPFs exempt charities. Again, the Armed Forces have been consulted, and I should say that the Ministry of Defence is content with the Bill as drafted. I am grateful to the noble and gallant Lord for   bringing his amendment before your Lordships’ House. It has provided me with the opportunity of explaining in some detail and depth our approach to these matters and why we have what might be described as a principled opposition to the position advocated by the noble and gallant Lord.