Liz Barker, Party Spokesperson for the Voluntary Sector and Social Enterprise, laid out the main concerns for Lib Dems in the Charities Bill:
Reform of charity legislation usually happens at a pace which is somewhere between slow and glacial, so it was a great privilege to be a member of the committee that scrutinised the draft Protection of Charities Bill. The committee was chaired by the noble and learned Lord, Lord Hope of Craighead. Such was his skill, and the diligence of our advisers, that, starting in the first week of November 2014, we held 13 evidence sessions, heard from more than 35 witnesses and concluded our report by 28 February 2015. As a result, I see the noble and learned Lord as the Usain Bolt of charity legislation, and I shall continue to think of him as such in the days ahead.
The Charity Commission was established in its present form under the Charitable Trusts Act 1853, and I suspect that the first debate on the subject of its effectiveness probably took place in around 1854. Every regulator is subject from time to time to criticism from the bodies that it regulates. The CQC and the FSA have their critics, but none draws fire like the Charity Commission.
There are those who find the commission immensely helpful and who value its reports and guidance. There are also those who find the commission so defensive, distant and legalistic that dealing with it is a bit like having your family solicitors tied up in Jarndyce v Jarndyce. Then there are people like me, frequent users of the Charity Commission’s services, who are at times very much supported by what it does but at other times frustrated by its slowness to change.
The leadership of the commission changes periodically, and relationships between the commission and the sector change as a consequence. However, the underlying lack of a clear consensus about what sort of regulator the commission should be means that the relationship between the commission and the sector is never as good as it should be. There is now general agreement with the recommendation of the noble Lord, Lord Hodgson, that, if the commission had to prioritise one area of work, it should be that of its unique role as regulator. However, the commission’s reluctance to signpost charities to other sources of advice or to develop relationships with other sector bodies which could give advice that would not have the same statutory standing as its own but would help poor trustees who are seeking help to get it much more quickly, still generates great frustration. I make these remarks in order to explain why some voluntary organisations have reacted as they have to the Bill, in its present form and its draft form.
The Minister eloquently set out for us the antecedents of the Bill: the review of the 2006 Act by the noble Lord, Lord Hodgson; the National Audit Office report into the handling of the Cup Trust; and the Public Accounts Committee report on the same subject. We also know from the available data that there are approximately 350,000 charities in this country, including excepted and exempt charities, and about 800 small charitable industrial and provident societies. They have an annual income of £64 billion. Yet there is very little evidence of abuse in the charitable sector. Over the period 2007 to 2014 there were only 526 investigations into charities.
As we look at the provisions of the Bill, we have to answer two questions. First, are the provisions of the Bill necessary to retain and improve public trust and confidence in charities? Secondly, does the Bill pass what I call “the Lord Hodgson test”—because it was set out in his report—that:
“Regulation needs to be proportionate, transparent and comprehensible”
On the whole, I think it does. A number of provisions are welcome. Giving the Charity Commission a new power to issue warnings as a lighter-touch form of regulation of charities is a good thing. Giving the commission the power to remove trustees following an inquiry and to do so within a time period that means that trustees will no longer be able to avoid being subject to the commission’s powers by resigning will strengthen trustees’ responsibilities in this regard. It is important to be able to close that loophole.
It is also important that, as in Clause 6, once the commission has opened a statutory inquiry, it should have the power to direct a charity not to take a particular course of action. It is a bit odd that it has an existing power to direct that something be done but does not have a power to direct that something not be done, when we could be talking about charitable assets.
All those powers are welcome. In particular, the power in Clause 13 to enable charities to make investments in social enterprises that are consistent with their charitable objectives is fine. Much more needs to be done in order to build the social investment market in this country. It is still extremely difficult to find venture capital, for want of a better term, for activities that have a social element as well as a profit element. But it is really important that we give charities this power to put their money where their mouth is.
However, as the noble Baroness, Lady Hayter, has already suggested, there are three key areas in which the Bill needs to be strengthened. The first is the power under Clause 3 that the commission will have to consider any other evidence of a person’s conduct—not just their conduct within a charity—when it has opened a statutory inquiry. In addition, the power is not limited in time, so it could mean that a charity trustee is hauled over the coals for something that they did when they were a very young person. That clause is drawn too widely.
I can see the sense behind the new power that the commission will have under Clause 7 to direct the winding-up of a charity. At the moment the commission cannot do that. It seems to be a sensible step but the basis on which the commission would exercise that power—the criteria it would use—should be open to considerable discussion before the power becomes finalised.
Finally, on Clause 9, “Automatic disqualification from being a trustee”, the noble Baroness, Lady Hayter, is right. It is in some ways desirable that the reasons for automatic disqualification should not be, as they largely are now, financial. It is possible that somebody could be guilty of conduct which was undesirable and harmful to a particular charity, or to charities in general, but which was not of a financial nature. However, as the power is drawn at the moment, and given the references to the counterterrorism legislation and the potential chilling effect that it may have on people who work within Islamic charities and are perfectly upright individuals, we need to exercise real caution and give that great consideration. One of the most impressive witnesses to come before the committee was Christopher Stacey, the director of Unlock, a charity that works with people who have criminal convictions. He gave compelling evidence to the committee that stopping people who have criminal convictions from having anything to do with a charity could be wholly counterproductive. We need to take great care before we make any such blanket disqualification.
On the whole, the Bill is reasonable. Given the historic and ongoing tensions in the relationship between the commission and the sector, it would be right and wise for us to have a thorough and full discussion of those three or four points which need further attention.