Charities Bill [HL]

Report

Clause 12: Power to borrow from permanent endowment

Amendment 1

1: Clause 12, page 13, line 37, at end insert— “(4) In section 348 (regulations subject to affirmative procedure etc)—(a) in subsection (1), after paragraph (c) insert—“(d) regulations under section 285(3) (power to amend period or multiplier specified);”;(b) in subsection (2), for “or (c)” substitute “, (c), (d)”.”Member’s explanatory statement This amendment provides for the power to make regulations added by Clause 12 to be subject to affirmative resolution procedure.

My Lords, I rise to speak to Amendment 1 in my name. As this was a Law Commission Bill, scrutinised through the Special Public Bill process, I thank the noble Lords who sat on the Special Public Bill Committee which examined it, chaired ably by the noble and learned Lord, Lord Etherton. It consisted of my noble friends Lord Cruddas, Lord Bellingham, Baroness Fullbrook and Lord Sharpe of Epsom, the noble Lord, Lord Ponsonby of Shulbrede, and the noble Baronesses, Lady Goudie and Lady Barker, and was ably assisted by our clerk, Alasdair Love. I thank them and all those who gave evidence to the committee.

Amendment 1 responds to an amendment tabled by the noble and learned Lord, Lord Etherton, in Committee. I am grateful to him for his suggested amendment, and for the time that I have had to consider the policy behind it. The Government accept that the two thresholds in Clause 12—to vary the proportion of permanent endowment which may be borrowed, and the period over which such borrowing must be repaid—are of a different nature from the other financial thresholds contained in the Bill. Those other financial thresholds are concerned with monetary sums. They set the level at which it is appropriate for trustees to make their decision independently, or for the Charity Commission to oversee that decision. We maintain that in relation to the powers to vary those financial thresholds, and thus change where that balance is to be struck, the negative resolution procedure provides a proportionate level of parliamentary scrutiny.

However, Clause 12 does not indicate where regulatory intervention is required in the same way. It does not set out monetary sums. Instead, it places a percentage limit on how much a charity can borrow from its permanent endowment and specifies the period over which such borrowing must be repaid. Therefore, any variation of these thresholds has a slightly different implication. The financial thresholds elsewhere in the Bill can be adjusted to reflect changes in the value of money. By contrast, any amendment of the Clause 12 thresholds would not be about changes in the value of money.

My Lords, we support these government amendments. The Minister has explained them very clearly. I have nothing to add. He is just following up on recommendations in the fifth report of the Delegated Powers and Regulatory Reform Committee.

Amendment 1 agreed.

Amendment 2

2: After Clause 36, insert the following new Clause— “References to the Tribunal (1) In section 325 of the Charities Act 2011, in subsection (2), for “with the consent of the Attorney General” substitute “where the Commission has given the Attorney General 28 days’ notice of its intention to make such a reference”.(2) In section 326 of the Charities Act 2011, in subsection (1), at the end insert “provided the Attorney General has given the Commission 28 days’ notice of his or her intention to make such a reference”.”Member’s explanatory statement This amendment implements the Law Commission’s recommendations that the Charity Commission should not be required to obtain the consent of the Attorney General before making a reference to the Tribunal and vice versa.

My Lords, the hour is late—later than any of us would wish it to be. In the famous phrase of Mr Jeremy Clarkson, it is time to put the pedal to the metal. Before I do, I thank the noble Lord, Lord Stevenson of Balmacara, and the noble Baroness, Lady Barker, for their putting their names to this amendment. The noble Baroness has tested positive for Covid and cannot be here tonight. I am sure that I speak for the whole House in wishing her a very speedy recovery.

The only other preliminary remark I wish to make is addressed to the Minister, who has struggled mightily to find a way through this particular problem. However, I am afraid that he has been impaled—as I have—on what I can only describe as the obduracy and inflexibility of the Attorney-General’s Office. With that—to horse!

When I undertook the review of the Charities Act for the Government 10 years ago, it was brought home to me that there was a fundamental flaw at the top of the regulatory structure. This comes about because under Section 325 of that Act, the Charity Commission, the sector’s regulator, cannot—and I mean cannot—approach the charity tribunal for a ruling on a point of law unless it has first obtained the permission of the Attorney-General. This has a number of serious consequences, which were brought out to me in evidence I gathered for my review.

First, there is not a clear chain of responsibility and command: an important issue in regulating a sector as diverse as the charity sector. Secondly, this divergence of control can undermine the authority of the commission and prevent it obtaining clarity in the development of charity law. Thirdly, and most unattractively, there is a possibility that rich, powerful and well-connected charities will think it possible to take on the commission in the hope that the Attorney-General will provide cover for them later. Those were the points made in favour of sorting this out.

However, there was a contrary point, which was that the commission should not be permitted to go running off to the tribunal too frequently. Therefore, when I made my recommendation, I said that while the veto of the Attorney-General should go, the Charity Commission had to inform the Attorney-General and join the Attorney-General in any case it wished to take to the tribunal. Therefore the veto went, but in no way could the Attorney-General be blindsided.

Although my report was well received by the Government and by the sector, this recommendation was rejected. However, the Government passed the report to the Law Commission and asked it to consult on whether it could form the basis of a Bill. The Law Commission did so and produced a report, and the Bill tonight is largely the result of that consultation. The Law Commission also produced a report, and in recommendation 43 of that report it supported the conclusion that I had reached. It produced—very much more elegantly—wording to cover this particular point, and it is that wording which forms the basis of Amendment 2 tonight. It is not my wording—it is the Law Commission’s wording.

However, the Government again rejected the Law Commission’s recommendation. What were the reasons for the Government not to accept its recommendation? First, they said that the Attorney-General’s consent was