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1701 Public Administration Committee 6 JUNE 2013 Public Administration Committee 1702 Report (Charity Commission) Report (Charity Commission) Madam Deputy Speaker (Dawn Primarolo): Order. I am sure that that is not the intention, Mr Flynn. Under this procedure, Mr Jenkin can take up to 20 minutes to present his report but he will take interventions as he is going along. Paul Flynn: He has just refused one. Madam Deputy Speaker: I think we should interpret his remarks, as I did, to mean that he wanted to finish the point he was making before he took an intervention. I am sure that that was what you meant, Mr Jenkin, was it not? Mr Jenkin: I will give way to the hon. Member for Newport West (Paul Flynn) and I can assure the House that I have never been able to gag him, try as I might. I can assure him that my speech will by no means fill the 20 minutes available; I hope it will fill no more than half that. Madam Deputy Speaker: Order. I want to make sure that we are both clear on the procedure. If you make your remarks and sit down, that is the end, so we need you to take interventions during your speech. Mr Jenkin: I quite understand. We received firm advice from the Attorney-General that we should treat the Preston Down case as sub judice to avoid prejudging any future tribunal decisions. In any case, it is not for PASC to determine the charitable status of individual cases. The impact of the 2006 Act on the issue of public benefit and charitable status was at the centre of the inquiry. It has always been the case that charities must be established for charitable purposes only and that a charitable purpose must be “for the public benefit”, but the 2006 Act is said to have removed the presumption of public benefit from the list of headings that has historically existed, although case law prompts the question whether there ever was in fact such a presumption. However, the Act also placed a duty on the commission to publish guidance on public benefit, even though Parliament failed to define “public benefit” in the Act. That aspect of the Act has been an administrative and financial disaster for the Charity Commission and for the charities involved, absorbing vast amounts of energy and commitment. Lord Hodgson describes the public benefit aspect of the Act as “a hospital pass”, inviting the commission to become involved in matters such as the charitable status of independent schools, which have long been a matter of political controversy. We criticise the Charity Commission’s interpretation of the Act in some cases, but ultimately find that “the Charities Act 2006 is critically flawed on the question of public benefit and should be revisited by Parliament”. Mr Peter Bone (Wellingborough) (Con): Will my hon. Friend give way on that point? Mr Jenkin: I will give way to my hon. Friend when I am close to the end of my remarks. We recommend that the presumption of public benefit in the 2006 Act should be repealed along with the Charity Commission’s statutory public benefit objective. The situation must be rectified with a new Act to allow the commission to focus on its proper job. Parliament, not the Charity Commission, should determine the criteria for charitable status and should not delegate them to an executive body. We concluded that the other objectives for the Charity Commission set by the 2006 Act are also far too vague and aspirational in character—an all-too-frequent shortcoming of modern legislative drafting—to determine what the Charity Commission should do, given the limitations on its resources, to fulfil its statutory objectives. Mr David Nuttall (Bury North) (Con): Will my hon. Friend give way? Mr Jenkin: The Cabinet Office must consider how to prioritise what is expected of the Charity Commission, so that it can function with its reduced budget. That must enable it to renew its focus on regulation as its core task. The commission is not resourced, for example, “to promote the effective use of charitable resources” or, for that matter, to oversee a reappraisal of what is meant by “public benefit”; nor is it ever likely to be. PASC’s report also makes recommendations on the issue of chugging—that is, the face-to-face fundraising whereby many feel pressured by chuggers. Paul Flynn: Will the hon. Gentleman give way on that point? Mr Jenkin: I will give way to the hon. Gentleman in a moment. The chair of the Charity Commission, William Shawcross, described chugging as “a blight on the charitable sector”. Self-regulation has failed so far to address that. The case for statutory regulation of fundraising is compelling, but what about the cost, whether to the taxpayer or to charities themselves? Self-regulation has made some progress, but we recommend that it is placed on notice and reviewed in five years’ time. Lord Hodgson proposed a rise in the threshold for compulsory registration with the Charity Commission to £25,000 a year to reduce red tape for smaller charities. We rejected that on the basis of the overwhelming majority of the evidence we received. We also recommended against any relaxation of the rules on political campaigning by charities. Moreover, charities should publish their spending on campaigning and political activity to boost transparency. That is relevant to the question of lobbying, which Parliament is shortly to consider. As for the question whether public funds should be used by charities involved with political campaigns, again transparency is the answer. Ministers should inform Parliament whenever a decision is made to provide Government support by direct grant to a charity that is involved in political campaigning. Earlier this week, the Public Accounts Committee reported on the case of the Cup Trust and the specific issue of sham charities and tax avoidance. We welcome its report and the Charity Commission should learn from that scandal. We question whether the commission’s legal advice was too cautious and whether they should have acted more boldly. If the commission feels that it
1703 Public Administration Committee 6 JUNE 2013 Public Administration Committee 1704 Report (Charity Commission) Report (Charity Commission) lacks necessary powers, it should tell us. Generally, however, the abuse of charitable status to obtain tax relief is intolerable and should be uncovered by Her Majesty’s Revenue and Customs and the Charity Commission working more closely together. Mr Barry Sheerman (Huddersfield) (Lab/Co-op): Will the hon. Gentleman give way? Mr Jenkin: I want first to give way to my fellow member of the Committee, the hon. Member for Newport West. Paul Flynn: The report does nothing to add to the reputation of this House. It is an atrocious report and it is a bad reflection on our systems that the Chairman of the Committee can take up the entire time devoted to its consideration. Let me take the hon. Gentleman back to the point about the situation with independent public schools. It was hoped that the 2006 Act would change the unfairness whereby Eton and Harrow get a handout from taxpayers whereas ordinary schools in poor areas do not. The Act tried to change that, but a perverse decision taken by the law stated that the status of a charity depends on what it was established for, not on what it does. Two charities—one in Wales that exists to give petticoats to fallen women and another that exists to give education to the orphans of the Napoleonic wars—are more important than the fact that ordinary schools are deprived of charity status whereas public schools for the rich and privileged continue to enjoy that status and the related handouts. Mr Jenkin: I am grateful to the hon. Gentleman for his intervention, because he demonstrates the diversity of view on the question of the charitable status of independent schools. That shows why that matter should be decided by this House and Parliament, rather than simply being passed to the Charity Commission to determine. It is too controversial and we should not be delegating legislative functions to an executive body. Mr Sheerman: I am obviously not a member of the hon. Gentleman’s Committee, but I am a trustee and chair of a number of charities. Can he comment at all on the well-known whistleblower who worked for the Charity Commission but said that the weakness of the commission is that it has absolutely no power to investigate what is known to be widespread fraud in the charitable world? The commission is ineffective at doing that and does not have the necessary staff. Even the staff it does have are not directed to that large-scale fraud, which the whistleblower who came to see me told me is going on and must be stopped. Mr Jenkin: I am mindful of the hon. Gentleman’s point. We did not major on that during this inquiry, but it might be something to which we return. We recommend in our report that the Charity Commission and HMRC should work much more closely together. In fact, HMRC has the resource to investigate, penetrate and demand information about charities and their tax affairs and donors. In my personal opinion, it is as much a failure of HMRC as of the Charity Commission, but we recommend they work together more closely. What we have to be absolutely clear about is that the Charity Commission cannot start to conduct extensive investigations into the tax affairs of charities and their donors; it simply is not resourced to do so. Mr Bone: I congratulate my hon. Friend and the Committee on producing such an excellent report— Paul Flynn: You haven’t read it. Mr Bone: There it is, Paul. I’ve read it—okay? Mr Sheerman: We’ll test you on it. Mr Bone: Madam Deputy Speaker, the suggestions being made from a sedentary position that I have not read the report are outrageous. Madam Deputy Speaker (Dawn Primarolo): Mr Bone, I quite agree. Mr Sheerman, Mr Flynn, you have made your contributions, and shouting across the Chamber is not helpful. Mr Sheerman: He spends his life shouting across the Chamber. Madam Deputy Speaker: Well, the next time he shouts across the Chamber when I am in the Chair, I can assure you I will pick him up, as I do everyone. Mr Bone, you may continue. Mr Bone: May I refer to a different aspect of the report, on charitable status for religious institutions? Many such institutions feel that there has been creep by the Charity Commission in defining public benefit or, worse still, going to the tribunal to define it. From what the Chair of the Committee is saying, I gather that he thinks this is something that Parliament should revisit. Mr Jenkin: That is exactly right. The legal advice we received on this question is quite clear: in the 1949 case of Gilmour v. Coats, the House of Lords made it clear that a cloistered religious order is not charitable, as any benefit is restricted to its members, who are a private class and not a sufficient section of the public. It has never been the case that every religious organisation is automatically charitable. However, the judgments in two other cases—Neville Estates v. Madden in 1962 and Re Banfield in 1968—were that a private religious group that is not wholly shut off from the world at large may be charitable. The 2006 Act was not intended to introduce anything new, and it may have introduced some instability by requiring the commission to think up guidance on public benefit. That is what we feel was the real mistake—the apparent removal of the presumption and the requirement to produce guidance. If Parliament wants public benefit to be defined, it should define public benefit or it should leave the matter to the courts. Making the Charity Commission use its intervening judgment is what Lord Hodgson of Astley Abbotts described as the hospital pass. Mr Nuttall: Will my hon. Friend give way? Paul Flynn: Will the hon. Gentleman give way?
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