Charities Bill [HL]

Special Public Bill Committee

Clauses 1 and 2 agreed.

Clause 3: Powers of unincorporated charities

Amendment 1

1: Clause 3, page 3, line 9, at end insert— “(2A) For the purposes of this section “amendment” includes the entire replacement of the trusts of the charity.”Member’s explanatory statement This amendment provides that the power of amendment in proposed section 280A can be used to replace the entire governing document of an unincorporated charity with a new governing document.

My Lords, since I am not a Member of the Committee, I hope noble Lords will forgive me if I say a few words about why I have taken a particular interest in this sector and this piece of legislation. This comes about because, as long ago as 2005, I was the Conservative Party’s Front-Bench spokesman on what became the Charities Act 2006, which is now the Charities Act 2011. My party was then in opposition, so I was the shadow spokesman and the government Minister on the Bill was the noble Lord, Lord Bassam of Brighton, well known to all of us and a familiar Member of this House.

The 2006 Act represented the biggest shake-up of charity law since 1601. It was a very substantial change and, while it was generally agreed across the House that the sector needed a shake-up, there was a concern about the unintended consequences that might flow from such a big change. We therefore wrote into the Bill, again by consent and with the agreement of the then Labour Government, the need for a five-year review, which I was asked to undertake in 2011. That is really the basis of my interest. This Bill in large measure flows from the work that was done in 2011, which was reported on, looked at and then enhanced and improved by the Law Commission and forms the basis of what we are discussing and approving today.

I want to place on record my thanks for the help I received from what was then the team in the Cabinet Office, now DCMS, led by Ben Harrison who is here today. It was a terrific effort and they were exceptionally helpful. I want to make that very clear.

It is a humbling experience to spend a year looking at the charity sector, because you see what relatively small groups of men and women, with relatively few assets—money, plant, equipment or buildings—do at the local level to improve their communities and make the lives of their fellow citizens better. I therefore felt that there were three things we ought to try to achieve. First, we wanted to have lines of authority and responsibility that were as clear as possible, from the commission and within the 170,000 registered charities. Secondly, because many of those charities are pretty small, we wanted to be deregulatory, as far as possible. It was important, in my view, that people should spend their time on public benefit and not on filling in forms. That is the origin of the phrase that I have heard being used in evidence sessions in Committee of “getting the barnacles off the boat”. Thirdly, overarching this was the need to maintain public trust and confidence in the sector, without which all is lost.

My Lords, it has been a real privilege to be part of the Committee for this Bill and, in particular, to have been part of the special evidence sessions that we had, because this is a Law Commission Bill. As the noble Lord, Lord Hodgson, has just demonstrated, this is fiercely technical, arcane law governing very rare situations.

In the original proposals that were put forward, the Law Commission explained that in its recommendations it was trying to take several hundred years of charities’ existence in different forms and formats and try to bring some of the law that applies to charities of different formats—particularly unincorporated charities, as differentiated from incorporated charities; charities can be incorporated in a number of different forms—to try to bring the process of amending governing documents much more into line, so that a trustee in any charity would have a clearer idea of how they could go about amending their charity’s governing document. The Law Commission had to go back through all sorts of different statutes that have led us to the point where we are now in charity law. It readily admitted that, if you were going to invent a way of doing this in future, you would not start from where it had to start.

The Law Commission put in place what it saw as a new way of enabling charities to amend their governing documents. Part of our job today is to try to explain that to people who are not steeped in all the detail of it. What we are talking about, by and large, is charities not changing the purpose for which they exist but changing the ways in which they achieve that purpose. In the case that the noble Lord, Lord Hodgson, set out, he is right that, when a major change concerns the disposal of property, that is a very significant change. Our evidence from the Law Commission said that there is a particular problem in cases such as the one cited by the noble Lord where there may not be a dissolution clause in a very old constitution. Therefore, in order to achieve some kind of disposal of property, it is not possible for the charity simply to dispose of that property and merge with another charity. However, the Law Commission says that it is, and that what it has come up with is a simplified way of doing this. Some charity lawyers disagree with the way in which the Charity Commission has gone about seeking to do that; this is the issue that the noble Lord, Lord Hodgson, has alighted upon.

As Members of the Committee, I have to say that we talked to lawyers—charity law experts—who take a very different view from the Law Commission. Members of the Committee came down on either side. This appears to be about whether, if a charity does not have a clause in its constitution that allows it to dissolve, it then has to go through a process of setting up another charity in which it vests property—a costly process that takes a lengthy period with the commission.

I think the noble Lord, Lord Hodgson, has hit on an issue that we should discuss further in the Committee. At the moment, I think the Law Commission, perhaps on balance, has it right, but the problem that the noble Lord has highlighted is a very real issue for a very few organisations.

My Lords, I shall talk very briefly to this amendment. I agree with the noble Baroness, Lady Barker, that it is a privilege to be part of this technical Bill. It is one where I suspect that I, among other lay Members of this Committee, have learned a lot. I also thank the noble Lord, Lord Hodgson of Astley Abbotts, for introducing this amendment. He has explained a particular problem that is a big problem for a small number of charities. I understood that to be the problem that he outlined. The potential solution is not agreed between the Law Commission and certain specialist lawyers. Whether there is a way out of the problem through either dissolution or merger of the charity is something on which there is no overwhelming consensus.

I do not know what plans the noble Lord, Lord Hodgson, has for his amendment at either this or later stages of the Bill. I shall listen to the Minister’s response to the issues raised by the noble Lord and then take a view, depending on what he does at a later stage.

My Lords, before responding to this group of amendments, I first extend my best wishes to the noble and learned Lord, Lord Etherton, who has so ably chaired this Special Public Bill Committee so far. I hope he gets well soon and is back with us swiftly.

I thank my noble friend Lord Hodgson of Astley Abbotts for tabling Amendments 1 and 2 to Clause 3 and for the way he set out not just the amendments but, helpfully, the background to the Bill’s importance to charities and the people it will affect. Of course, he has long-standing interest and experience in this important area.

On my noble friend’s Amendment 1, which would insert a new subsection (2A) at line 9 on page 3 of the Bill, we consider that new Section 280A can be used to replace all the stated governing document in its entirety, with Charity Commission consent in respect of the particular provisions that fall within Section 280A(8). We do not think that a legislative solution is necessary and, as has been noted, this view is supported by the Law Commission and the Charity Commission—we have discussed the issue with both of them. I am grateful to my noble friend for raising this point, as it has prompted us to consider ways in which we can make the position clearer, but I hope that, on that basis, he will feel able to withdraw his Amendment 1.

On Amendment 2, which would insert subsection (9A) at line 14 on page 4 of the Bill, although my noble friend again makes an important point, we can in fact already achieve what the amendment sets out to do under the clause as it stands. Under the Bill, the Charity Commission’s consent is required for an amendment that would alter any unincorporated charity’s purposes. That is equivalent to one category of regulated alterations for charitable incorporated organisations, which requires the consent of the Charity Commission. By way of comparison, the Charity Commission currently treats amendments to the purposes of charitable incorporated organisations of the same type referred to in the amendment as not being a regulated alteration and therefore not requiring Charity Commission consent. Given the similarity between the statutory provision concerning charitable incorporated organisations and the new Section 280A(8)(a), the same approach would be taken in relation to changes to unincorporated charities’ purposes. Therefore, Section 280A(8) as it stands already looks at substance over form, and an amendment to a governing document would require Charity Commission consent only if it makes a substantive change, not if it is a pure drafting change. I hope that provides reassurance to noble Lords. As with the previous amendment, this is a view supported by the Charity Commission and the Law Commission.

I am grateful to the noble Baroness, Lady Barker, and the noble Lord, Lord Ponsonby, for their contributions. My noble friend the Minister has, of course, elegantly found a third way: it was not that the Charity Commission was wrong; it was not that we need to produce some new change to the Bill; there are powers within the Bill as it stands to find a way around the problem through Section 280A and ancillary provisions. I talked about getting barnacles off the boat, and this was certainly a barnacle. I will reflect on this, talk to the people from Spilsby, who are obviously at the front line of this to see if they have any comments. In the meantime, I beg to withdraw the amendment.

Amendment 1 withdrawn.

Amendment 2 not moved.

Clause 3 agreed.

Clauses 4 to 11 agreed.