Charities Act 2006 (Changes in Exempt Charities) Order 2010

My Lords, I think we would all agree that this has been a very interesting debate. We have had the benefit of the very great experience of the noble Viscount, Lord Eccles, in the charities sector. His CV is a bit like a Who’s Who of the charities sector, and the debate has been fascinating in that sense. I thank noble Lords around the House, particularly my noble friend Lady Pitkeathley, for the support that has been given in principle to the order and the regulations, with certain caveats; I was quite rightly asked certain questions to which I have been asked to respond. I may be able to give the noble Viscount, Lord Eccles, some comfort on the Friends of the British Library, which he mentioned. I would like to provide further assurances to the noble Viscount. I know that he has concerns about the impact of the instruments on charities which are connected to exempt charities. With the exemption of charities connected to the British Library, these statutory instruments will not change the exempt or registered status of any charities connected to or associated with other exempt charities. For example, the Foundation and Friends of the Royal Botanic Gardens, Kew, a registered charity, will be unaffected by these instruments and will remain a registered charity under the Charity Commission’s regulatory supervision. Charities which are exempt because they are connected to an exempt charity will remain exempt. Like their parent exempt charities, they will come under the relevant principal regulator. Regulation 2 of the principal regulator regulations in no way extends the scope of the definition of a connected charity. That definition is in paragraph (w) of Schedule 2 of the Charities Act 1993 and remains unchanged. Whether a charity falls within that definition is entirely a matter of charity law and company law is not relevant in this context. For connected charities that are currently exempt by virtue of paragraph (w) of Schedule 2, Regulation 2 of the principal regulations simply ensures that they come under the same principal regulator as their parent exempt charities. I know that the noble Lord is concerned about the status of the Friends of the British Library, which is a registered charity. The view of the Charity Commission is that if it is governed independently from the British Library Board and therefore able to make its own decisions about what projects and activities it will fund or support, it will not become exempt and will still be required to be registered separately with the commission. It is not clear which of any of the British Library Board’s associated charities would be caught by the connected charity definition. The Charity Commission has said that it would be prepared to work with the British Library Board and its associated charities, including the friends, if asked to, to identify whether any of the associated charities would become exempt by virtue of their connection to the British Library Board and identify options for the relevant charities going forward. If a charity associated with the board would become exempt by virtue of the order in front of us and the charity’s trustees felt that this should not be the case, the commission could consider the circumstances further and advise the trustees and, if appropriate, the board about what steps they might take to clarify the independence of the charity concerned. Tonight, I want to go further and say that in order to allow more time for this consideration to take place, we would put commencement of these provisions back from 1 April—the planned commencement date—to 1 June 2010, so that further consideration can take place. I hope that that has given some comfort to the noble Viscount, Lord Eccles. I turn to some of the points raised by the noble Viscount and other noble Lords. The noble Viscount asked about advice and comment from the Charity Commission on these orders and about infringing the commission’s independence. The commission and the Government have worked together to develop the Charities Act and subsequent secondary legislation. The commission has shaped and informed this legislation and fully supports the draft SIs being considered, as it has indicated to several noble Lords present with its briefing. The noble Viscount and the noble Lord, Lord Bates, referred to what they consider to be insufficient consultation. They asked why there has been no public consultation on who the principal regulators will be. The strategy unit first proposed the principal regulatory regime, or main regulator, as it was put then, in its 2002 report, Private Action, Public Benefit following public consultation. The Government accepted the recommendation and set about discussions with the various groups of charities likely to be affected. The aim of the discussions was to identify whether a suitable principal regulator existed for those relevant exempt charities. The outcome of these discussions was published in May 2004 in the regulatory impact assessment that accompanied the draft Charities Bill. The Bill itself had pre-legislative scrutiny and it was then subject to parliamentary scrutiny during its passage through Parliament. During that time there were discussions about the exempt charities provision. Most of the concerns raised in the debate about the exempt charities provisions were seeking to minimise the burden of regulation of exempt charities. Discussions still continue right through from before the passage of the Act in 2006 until now, with the proposed principal regulators and representative bodies of the exempt charities. I take the point made by the noble Viscount that some of this has been private discussion, not necessarily in the public domain, but I am trying to give a linear example of the public discussion in 2002 right through to continuing discussion with those charities that may be affected by these orders. There is no statutory requirement for requirement for consultation. We have, as I said, consulted the relevant charities directly and the proposed principal regulators. The bodies representing these charities and the principal regulators have said that they are content with the proposals. The noble Viscount asked why there was no impact assessment specifically on the orders before the House today. An impact assessment was published alongside the draft Charities Bill in May 2004 and updated as necessary when the Bill was introduced into Parliament. That impact assessment considered the costs and benefits of appointing principal regulators and listed the proposed principal regulators for each group of exempt charities where one had been identified, including for example, the Secretary of State for Culture, Media and Sport for that department’s sponsored exempt charities. We accept that the original impact assessment could not provide the detailed costs of all aspects of the proposals, and therefore included in the Explanatory Memorandum to these statutory instruments is more information about the likely costs that will apply. We did not consider that there will be any significant costs for charities that remain exempt subject to a principal regulator. There will be additional costs for those charities that cease to be exempt and, where possible, we have set out those costs and the costs that we expect. The noble Viscount also asked whether the commission has experience of regulating colleges as in Oxford and Cambridge. I take his point about the intricate, detailed and complex systems that can be set up in colleges of great history, as those are. The commission regulates 180,000 registered charities that are hugely diverse in terms of size, legal framework and purpose. We have more than 40 years’ experience of this and we are in dialogue with these colleges to enable a smooth transition to being registered, providing advice and support when needed. The noble Viscount and the noble Lord, Lord Bates—with special reference in the case of the noble Lord to St Cuthbert—talked about the inherent conflict of interest between the role of the department and the Secretary of State as a funder, and that of principal regulator, and asked whether there be a circumstance when the duty of promoting charitable law compliance could tip over if the Secretary of State was passionate enough. We considered this carefully with the proposed principal regulators and concluded that the principal regulator role can coexist with the funding role. We do not believe that there is an inherent conflict of interest between the role of funder and that of promoting compliance with charity law. If a conflict were to arise, we consider that it could be identified and managed within the department, and a fallback position would be to call upon the Charity Commission for its input. The noble Viscount, Lord Eccles, talked about the independence of the Charity Commission. It was an independent non-ministerial department before the Charities Act 2006, which reinforced its independence. It has been involved in the development of both the Charities Act and its secondary legislation and fully supports them. My noble friend Lady Pitkeathley, whom I thank for her contribution, asked some important questions about "right touch" legislation and gave us the benefit of her experience. I agree strongly with her conclusions. I thank the noble Lord, Lord Shutt, for his support for these statutory instruments. He spoke of how important it is to simplify the procedures for charities as much as possible so that they do not have to complete two sets of accounts and write two annual reports. He asked whether Ministers who act as principal regulators would be able to interfere with the running of their exempt charities. I reassure him that these instruments do not confer any powers on principal regulators that would enable them to interfere with the administration of the exempt charities for which they are responsible. The only duty imposed on a principal regulator is to promote its exempt charity’s compliance with charity law. I thank the noble Lord, Lord Bates, who rightly spoke of the wonderful and extraordinary generosity of the British public and the tremendous work of the charity sector. He made the point quite movingly that, in a time of deep recession and when people’s backs are against the wall, there has still been an enormous outpouring of charitable giving. The noble Viscount, Lord Eccles, and the noble Lord, Lord Bates, talked about conflict of interest. I hope that I have covered that. With those remarks, perhaps I may say in conclusion that it has been over six years since the Government accepted the Strategy Unit’s recommendations relating to exempt charities. We now need to make progress with the implementation of these provisions of the Charities Act 2006 on which there has been much debate over several years. The Charity Commission is ready, the principal regulators are ready and the exempt charities that will be affected by these instruments are ready. We have committed to further work with the British Library Board and the charities connected with it before these instruments come into force. I hope that this gives the noble Viscount the assurances that he is looking for. I am confident that these changes will improve the regulation of exempt charities as charities in a way that meets the criteria of best regulatory practice and avoids excessive regulation. Motion agreed.