Unrevised

Oral Evidence

Taken before the Joint Committee

on Tuesday 9 December 2014

Members present:

Lord Hope of Craighead (Chairman)

Baroness Barker

Lord Hodgson of Astley Abbotts

Baroness Warwick of Undercliffe

Lord Watson of Invergowrie

Viscount Younger of Leckie

Mr Nick Hurd

Mark Menzies

Sarah Teather

Chris Williamson

________________

Examination of Witnesses

Witnesses: Sir Stephen Bubb, Chief Executive, Association of Chief Executives of Voluntary Organisations, Richard Corden, Director, Southampton Hospital Charity, and Lindsey Williams, Director of External Services, Wales Council for Voluntary Action, examined.

Q228 Chairman: Good afternoon to all three of you. This is an enormous room and I hope you will keep your voices up so that we can hear all that you have to say. I hope you can all hear me speaking. Before we start asking you questions there are two things I should mention. The first is that there is a webcast system in operation here, so these proceedings are being webcast. The second is that a transcript will be taken of your evidence. It will be circulated in due course, and I encourage you all to study the transcript and draw attention to any errors that may have crept in. Thank you all very much indeed.

I will put a question to all three of you, but perhaps take you in order, with Sir Stephen first in his answer. It is a general question about the scale of the perceived problems the Bill is seeking to address, bearing in mind the very large number of charities there are in England and Wales. It is just to get a grasp of the scale of the problem in comparison with that main quantity and also what you think are the main regulatory issues that we should be addressing. Sir Stephen, I wonder whether you would like to begin.

Sir Stephen Bubb: Yes. Thank you, Chairman. One of the core tasks of the Charity Commission is around maintaining trust and confidence in charities. That is of course extremely important for charity leaders. You maintain trust and confidence in charities in two ways. You tackle misdemeanours, so you have a compliance regime, but you also provide support and advice to charities in terms of good governance. Both roles are important. I do not think the distinction that is sometimes drawn between the police role and the friend role is helpful. In fact, I think it is a rather silly distinction, because you need to do both. As you said, there are 160,000 charities, and many more trustees, so providing support and advice for good governance is as important as the compliance role. There are questions about whether the balance is now tipping too much towards compliance and away from support and advice. I think many charity leaders have concerns about the efficacy of the Commission in dealing with the standard inquiries, complaints and issues that they get.

You are looking at a draft Bill that is mainly concerned with the compliance issues. I will obviously talk more about that, but there are broader issues about the regulation of a 21st-century charity world. That is one of the reasons why ACEVO established the Low Commission; Lord Low of Dalston and the various commissioners that he has appointed are looking at the issue of better regulation in a broader sense for charities.

Richard Corden: Before we start, Lord Chairman, I should say that I am a director of one charity and trustee of two others, and my partner in private life, Alison McKenna, is principal judge of the Charity Tribunal. The views I will express today are mine alone and do not belong to any of those people or organisations.

The regulatory issues that the Bill is trying to tackle are on a spectrum. There is mismanagement, misuse and ineffective use of charitable funds, which arise largely through ignorance or honest incompetence. Those things result from some of the things that Stephen was talking about a moment ago—lack of good governance and lack of access to good quality advice about the duties of trusteeship and how to run charities. Those sorts of problems are fairly widespread.

Then you have issues to do with theft, fraud and deliberate misuse of charitable funds. That is relatively rare, although I was interested to see that the annual fraud indicator produced last year by the National Fraud Authority estimated that fraud cost charities about £147 million a year. They did a survey by e-mail of about 30,000 largish charities, and about 9.2% of respondents said that they had in the recent past identified fraud within their own charities. From that 9% or so, the NFA went on to extrapolate to the £147 million that it reckoned was lost to registered charities—including Scotland, incidentally—in that year.

Finally, right at the end of the scale, there is the currently topical issue of the use of charities for terrorist-related purposes. Probably only a handful of people could claim to be able to estimate with any degree of accuracy how many charities might be at risk of being hijacked for terrorist purposes. I am certainly not in a position to be able to do that, but I note that last month William Shawcross, the chairman of the Charity Commission, said that the Commission was looking at the moment at about 86 charities that could be at risk of extremism. What I suspect he meant by that was that those 86 charities were ones that might be engaged in, or be at risk of being taken over for the purposes of, funding terrorism, or acting as vehicles for the radicalisation of people, or the incitement of terrorist acts. As I see it, those three things are the regulatory issues at the moment: mismanagement through honest incompetence; theft, fraud and deliberate misuse; and terrorism.

Q229 Chairman: The figure you gave for terrorism is at second hand, isn’t it? Was it provided to you by Mr Shawcross?

Richard Corden: The 86 charities that he said were at risk of extremism and that the Commission is looking into were mentioned in an interview that he did with The Daily Telegraph last month.

Lindsey Williams: I would concur with much of what has already been said. I do not wish to repeat it ad nauseam but, to give a little bit of context, in Wales we have about 9,000 registered charities and about 33,000 voluntary and community organisations in the third sector. There have been a few fairly high profile cases of fraud and general bad behaviour by trustees or employees of charities, and that has had a significant effect or impact on the public because it has been widely reported by the media. It has also had an impact on funders in Wales, who get very nervous about governance issues in the sector. Although our sector is generally dominated by small charities, the incidence of one or two high profile cases can have a very detrimental impact.

Our view is that the provisions in the Bill, in so far as they may help to tackle such cases, are welcome. In terms of the workings of the Commission and relations with the sector in Wales, they are generally good; the Commission has an office in Wales and it translates all its very excellent materials into Welsh. The officials in my organisation—an umbrella organisation—and more locally in what are called in Wales county voluntary councils, all work very closely with the Commission, and we feel we have a good working relationship with the Commission. Currently, for instance, our concern is about registration of charities. It seems that it is taking longer than it used to for the registration process to be achieved. That is an issue we have taken up with the Commission. We are pleased with the response. They have made some suggestions about how they are going to improve matters. I give that as an example of what I consider to be a good working relationship.

Q230 Chairman: Thank you. I will come back with some supplementaries before I move on to other members. Sir Stephen, we are of course dealing with the Bill and with things that require statutory intervention, so taking on board the point you made about the emphasis that still needs to be given to support and advice, is there anything that should be put into a Bill about this, or is it a matter just of general encouragement through such reports as we may issue at the end of our inquiry?

Sir Stephen Bubb: That is the point. This is a Bill that is dealing with the compliance regulation. The points I am making are about the direction, efficiency and competence of the Commission in the way it operates as a public body with a budget of £20 million and some 300 staff. In terms of how it operates, yes, it is not a matter for legislation; it is a matter for leadership in the Charity Commission itself.

Q231 Chairman: If I can pursue this for one moment, I think I am right in saying that you have set up a review through your body. What prompted that? Was there some particular reason why you decided to launch a commission to review the regulation of the sector?

Sir Stephen Bubb: There are a number of things. It was partly the point that I was making earlier about whether the balance between the compliance and the support role has shifted in an unhelpful way. This also arises from a lot of conversations with my charity chief executive colleagues, who have raised concerns about the direction of travel.

Many of my members feel that they are over-regulated. Charities, particularly those involved in delivering public services, are regulated not just by the Charity Commission but by a wide range of bodies. The bureaucracy and red tape involved in that is a cause of concern. The focus is partly on the Charity Commission, but there is a broader focus; it is on better regulation for the charity sector in the 21st century. Lord Low is taking quite a broad look at issues.

Q232 Lord Hodgson of Astley Abbotts: The question about over-regulation comes up a lot. If they give more advice and guidance, how do you prevent it from essentially becoming regulation? Advice and guidance from the Charity Commission morphs into regulation. All you are really going to do is extend the amount of regulation there is by providing that advice and guidance.

Sir Stephen Bubb: That is a fair point. It requires good trustees who understand the difference between compliance and guidance. The Charity Commission guidance they are looking at at the moment, for example—CC3 on support for trustees—is an important and helpful document. I would like to see that sort of advice being backed up by work with the key umbrella bodies in supporting good governance; we may come on to this later. Part of our role as a chief executives body is supporting particularly the relationship between a chair and a chief executive of a charity. There are many ways in which you encourage good governance, but the Charity Commission does need to play that supporting role, possibly more with us in partnership.

Q233 Lord Watson of Invergowrie: This is a question to Sir Stephen. The relationship between charities and the Charity Commission in regulating is quite important in terms of this Bill. I noticed in the notes with which we have been provided that at ACEVO’s annual conference the chair, Lesley-Anne Alexander, said of the Charity Commission that it “says wild and wacky things and shoots from the hip.” Do you feel that is a widely held view within ACEVO?

Sir Stephen Bubb: I think my chair was particularly referring to a very unhelpful remark from one of the Charity Commissioners in an interview that “charities should stick to their knitting.” That caused huge offence in the charity sector. It was a silly remark. It tries to make the distinction between charities’ role in delivering services and their role as leaders of civil society, and their campaigning role; and in a sense saying that the latter role in campaigning is not a proper role whereas delivering services is. That caused offence. That was what particularly irritated my chair. It irritated me.

Q234 Baroness Warwick of Undercliffe: This is a continuation, in a way, of what you have been saying. You very helpfully categorised the different types of offence. The Charity Commission told us that the vast majority of the cases with which they deal relate to honest mistakes rather than to deliberate misdeeds. Do you think that the Commission needs new powers to deal with those sorts of offences, or simply better advice and guidance, and perhaps guidance on how to give better advice and guidance and how to communicate it better?

Sir Stephen Bubb: Yes. It probably follows from some of the evidence that I have been giving. I agree with you on that, but I would not underplay the compliance role of the Commission. Clearly there need to be powers, and you are looking at some extension of those, which we do not object to, to deal with fraud and mismanagement. That is absolutely right, but in terms of our vast charity sector of 160,000 charities, the real role in terms of promoting good governance is in advice and support. I do not think directions and so on are a very helpful addition to what is being proposed.

Q235 Baroness Warwick of Undercliffe: Does anybody else want to add anything?

Richard Corden: My view is that the Charity Commission’s existing powers are more than adequate to deal with honest mistakes. That applies whether or not the trustees who have made those mistakes are willing to co-operate in putting things right. In cases where trustees put their hands up and say, “We made a mistake and can we co-operate with you to put it right?” the Charity Commission may very well not even need to exercise any powers. If it does, there may well be enabling or facilitating powers to help put things back on an even keel. Even where trustees do not co-operate, the Commission’s existing powers are, in my view, quite adequate. The Commission, when faced with unco-operative trustees, can simply open an inquiry, thus acquiring access to a much greater range of protective and remedial powers.

Lindsey Williams: I agree. The Commission already has very important powers that it can use. Perhaps the only issue is that there is sometimes a perception that it is slow to use them, but that is changing. The provisions in the Bill are presumably intended to apply on those rare occasions when there are serious problems with charities. Those are welcome provisions, because it is important that the public sees that as a regulator it has some teeth.

Q236 Baroness Warwick of Undercliffe: That touches on the supplementary I was going to ask. How effective do you think the Charity Commission is in exercising its current remit, in terms of responding to charities coming to it for advice or identifying issues that need to be dealt with?

Lindsey Williams: As I said, in the past there has been a perception that it has been rather slow to act. Nevertheless, the guidance has always been very good when it has been given but, if the public perception is not quite right, that needs some action and I think that the new chief executive is leading the organisation in the right direction.

Q237 Baroness Barker: Clauses 8 and 9 of the draft Bill set out a list of conditions under which trustees can be disqualified. Do you think that that list of offences is appropriate?

Richard Corden: When the disqualification provisions were first enacted, which was in 1992, they were aimed almost exclusively at protecting the assets of charities. The grounds for disqualification were by and large to do with financial incompetence or criminally dishonest or deceitful behaviour. People who behave in that way are, under those provisions, disqualified from trusteeship of any and every charity, to protect its assets.

There are two purposes for which one might consider extending the provisions. The first is to protect a particular charity from somebody who might be completely unsuitable to be a trustee of that charity but not necessarily of others. One example might be that, if a person has unspent offences for animal cruelty, you do not allow them to become trustee of an animal welfare charity. But should they be prevented from becoming trustee of a charity to preserve an old church? That is an open question. Clause 9 of the Bill as drafted would allow the Charity Commission to disqualify a person by order in those circumstances, and I think that is right.

The second way in which one might consider extending the provisions is to consider whether there are any offences which, in the words of your earlier witness Stuart Etherington, are “so repugnant to society” that a person who has an unspent conviction for one of those offences should not, while the offence remains unspent, be allowed to be in charge of any charity. That would be a matter of public confidence. Parliament is well placed to consider that question; it is not for the Charity Commission.

Q238 Baroness Barker: Thank you; that is very helpful. Sir Stephen, in your response to the consultation you pointed to the need to ensure that rehabilitation opportunities exist for people within the charity world. In view of that statement, what do you think of the draft provisions in clauses 8 and 9?

Sir Stephen Bubb: Richard has put the position very well. The concern that we would have is if these provisions prevented some charities from appointing people who are eminently qualified to be a trustee because they have been in prison or have worked with gangs, for example. There are a range of my members where that would be seen as a really strong qualification—if the convictions are spent. For example, the Prince’s Trust and Blue Sky—a social enterprise that Nick Hurd often talks about—make a point of employing people who have been in prison. In that case you would want as your trustees people in that position because they know about the culture of gangs and are therefore eminently suitable. I do not want anything in the Bill to stop those charities being able to do that. They could be employment charities, rehabilitation charities or youth charities, but it could be much wider.

You may be coming on to this, but it is very important if you are extending the offences under consideration that you have a Charity Commission that is able to issue waivers and can tackle waivers properly. There is evidence that they are not very good at tackling that at the moment. You could make a much stronger argument for the redemptive power of trusteeship. We want to encourage people to take up trusteeship positions. We should not be unfairly categorising a particular section unless, as Richard says, it is absolutely a matter of trust and confidence in that charity in terms of its trustee board.

Q239 Baroness Barker: Could you send us the evidence about the Charity Commission and its existing use of waivers?

Sir Stephen Bubb: I think some of the responses to the consultation made that point.

Q240 Chairman: In connection with your answer, Sir Stephen, is clause 9 sufficiently sensitive to the point you made, particularly in relation to spent convictions, because it allows the order to be limited to such charities or classes of charities as may be specified? One could think that gang members, for example, would be disqualified for some but very well qualified for others. It may be that this is sensitive to your point.

Sir Stephen Bubb: Yes, I think that might be right.

Q241 Chairman: Ms Williams, do you have anything to say in relation to Lady Barker’s question?

Lindsey Williams: Yes. I support the points that Sir Stephen raised. In relation to people who have accepted cautions, we think that there needs to be some discretion about them being allowed to be trustees. Some people accept cautions not realising the consequences of doing so.

Q242 Lord Hodgson of Astley Abbotts: My question concerns something which is not in the Bill, namely, the question about the power for the Charity Commission to prevent disqualified trustees from acting in another position of influence in the charity. Do you think that should be included? If you were to say yes to that, would you want to see some ways whereby the Charity Commission’s power was curtailed?

Lindsey Williams: Our organisation would like to see that included, but we would need to see some safeguards in there so that there was somehow a right of appeal.

Q243 Lord Hodgson of Astley Abbotts: To whom?

Lindsey Williams: The courts or the Charity Tribunal, I would think.

Sir Stephen Bubb: I think the answer is no, and, if it was yes, I would absolutely want to see safeguards.

Richard Corden: My answer, Lord Hodgson, would be yes. A charity trustee is defined in the Charities Act as a person who has general control and management of the administration of a charity. If you are disqualified from that position but you can easily slip the following day into another position in which you are in a position to exercise substantial influence over the control and management of the charity, it would seem to defeat the purpose of the disqualification. If the Commission were allowed to, as it were, extend disqualification to an ex-trustee who wants to come into a position of substantial influence over the affairs of the charity, I think they should be allowed to, with an appeal to the tribunal.

Q244 Lord Hodgson of Astley Abbotts: On the question of appeal—you are very experienced in this field—how long do you think it would take to go through the appeal process? Speed is sometimes of the essence in these circumstances.

Richard Corden: It would take more or less as long as the parties wanted.

Q245 Lord Hodgson of Astley Abbotts: That is quite delphic.

Richard Corden: The tribunal is quite capable of acting very swiftly. It has a target of dealing with its cases within 30 weeks. With only one exception, which was an extremely complicated one where the proceedings were delayed by the parties, the tribunal has met its target in every case. Where there are delays it is usually down to one or other of the parties.

Q246 Lord Hodgson of Astley Abbotts: If I could just press all three of you slightly further on that one, here is this bad man or woman who has been disqualified as a trustee and is now operating in another position, and it is going to take 13 weeks for us to decide he can be disqualified—

Richard Corden: The target is 30 weeks, Lord Hodgson.

Q247 Lord Hodgson of Astley Abbotts: A bad hat can do a lot of damage in 30 weeks as opposed to 13 weeks. Is it really an option to have that length of appeal in terms of good governance and trust and confidence?

Richard Corden: Yes. I believe that, if both parties to the appeal want the thing dealt with in a matter of days, it can and will be dealt with.

Chairman: Thank you very much. I think we should move on.

Q248 Chris Williamson: I want to return to the Commission’s view that it is mainly dealing with honest mistakes rather than deliberate misdeeds. Do you think more work is required to make clear the minimum requirements for being a trustee? If you think that more work needs to be done, is that a role for the Commission or for sector reps like yourselves? How do you think it would be best achieved?

Lindsey Williams: It is a long-term task. My organisation and similar bodies in Wales are acutely aware of the importance of doing this and to keep on doing it. There are about 250,000 trustee positions in Wales. You cannot hope to speak to all of them all of the time. The problem, of course, is that we tend to engage either through training or online learning or conferences and so on with trustees who are probably quite well aware of their roles and responsibilities. You do not necessarily reach the ones who are less well aware and who might do something damaging as a trustee. The task for us is how you reach the people that you are not generally engaging with.

Q249 Chris Williamson: How do you think you will reach them?

Lindsey Williams: I said earlier that the Commission produces some very good guidance documentation. We also commission some material and we try to produce it in a very friendly way. We have a very popular guide called “Faith and Hope Don’t Run Charities (Trustees Do)”, which we have on a little memory stick and give out anywhere we go. It is those kinds of things, where you try to reach as many people as you can.

Q250 Chris Williamson: Would you think it is a role for the sector reps like yourself rather than the Commission?

Lindsey Williams: It is a key role for us. The Charity Commission guidance performs a useful role, and I would not like to see that disappear.

Richard Corden: The Charity Commission has a range of publications, many of which are very good indeed. They cover the duties and requirements of trusteeship pretty comprehensively, both the legal duties and the requirements that the Commission thinks should be followed by way of good practice. It has just produced a draft new version of its basic guidance, “The Essential Trustee: What you need to know and what you need to do.” That is out for consultation at the moment.

In relation to that, and in relation to something Lord Hodgson said a few moments ago, I just observe that for the first time in my experience the Charity Commission is saying in print, “If you do not follow what we regard as basic good practice, we might treat that as misconduct or mismanagement.” This is not the Commission saying, “If you don’t follow the law”; it is the Commission saying, “If you don’t follow good practice, we might treat that as misconduct.” This seems a possible example of Lord Hodgson’s creeping regulation, where somehow good practice becomes mandatory.

Q251 Chris Williamson: In terms of the point about minimum requirements, do you think more work needs to be done to illustrate that very clearly? Who should be doing it? Is there a role for the Commission or for sector reps, to come back to that point, or for both?

Richard Corden: For both, definitely. There are some truly excellent guidance publications about what as a basic minimum you need to do and know as a trustee from sector organisations like Lindsey’s and Stephen’s and many others.

Speaking now as a trustee, the bottom line for me would be that if I needed to know whether, as a trustee, I was allowed to do X or had to do Y as a minimum requirement, I would want the regulator to tell me the answer. I would want to know, if inadvertently I got my decision wrong, what regulatory action would be taken against me. Only the regulator can say that.

Q252 Chris Williamson: It is both, but perhaps erring more on the side of the Commission.

Richard Corden: Yes, I would think so.

Sir Stephen Bubb: It is core to the Charity Commission’s role that they provide support and guidance on good governance—core to their role. I am certainly not about to be put in a position where they offload that role on to me. They have a budget of £20 million and 300 staff. I have significantly less.

Q253 Chris Williamson: You are erring very firmly towards the Commission. We have gone from erring more on the side of the Commission to saying that it is really the Commission’s role.

Sir Stephen Bubb: But to add to that, it is also my role as leader of a charity leaders network to provide support to my chief executives on good governance. That is absolutely what we do. We provide an extremely good guide on the chair/chief executive relationship. For example, tomorrow we are publishing a report called “Good with Money”, which is about ethical investment decisions by charities. That is a matter both for trustees and for charity executives. It is absolutely our role. If the Charity Commission were to reinvigorate their support and guidance role, they could work with us. I am not opposed to the idea that we work in partnership. It is certainly something that, frankly, they should be supporting us in doing.

In terms of the minimum requirement issue, I do not personally think that that is the right approach. It is more about how we encourage charities to have induction, training and support for trustees. Some charities are extraordinarily good at that and some are pretty poor. In a sense, we want to encourage trusteeship. Some charities at a small local level find it difficult to find trustees and are really grateful when they turn up. Once they’ve got them, supporting them in that role is obviously for the charity itself and its chair and leadership, but it is also a matter of how we give guidance from the Charity Commission on what they should do. They need to do more of that.

Q254 Chris Williamson: Do you think it is a good idea for there to be some form of basic qualification for a trustee or not?

Sir Stephen Bubb: No. I do not see how that could operate in a sector where you have 160,000 charities ranging from the local cricket club in my village to the NSPCC.

Richard Corden: I do not think a qualification would work.

Lindsey Williams: Neither do I.

Q255 Sarah Teather: My question was touched on in one of the earlier answers, but this will give you an opportunity if you have anything else to say. I did not hear specifically from Lindsey on this issue. We were keen to know your answer to this question. The Charity Commission appears to be keen to revisit the consultation suggestion of having a power to issue directions to charities without having first opened a statutory inquiry. Sir Stephen, you touched on this earlier and said you were not in favour of them having that power. Is there anything more you want to say about that?

Sir Stephen Bubb: The point has already been made by Richard. They have powers at the moment and they should use them. I thought what was quite interesting was the response from the Charity Commission when they referred to 20% or 30% of people not taking up action plans that they had been given by the Commission. The question I would have asked is, “Why not?” Why have they not investigated why it hasn’t happened? If they find that it is through deliberate intention not to implement the action plan, they should launch a statutory inquiry. It is bizarre that they make that statement without then saying what they have done about it. They do not need directions to do that or, indeed, warnings.

Richard Corden: I think that the power should be exercised, but only after the opening of an inquiry, since it is of a piece with other protective and remedial powers. The Commission has suggested previously that somehow the opening of an inquiry involves it in a lot of unwelcome and needless bureaucracy. I suspect that, if that is so, it is bureaucracy of the Commission’s own creation, because the statutory power, which the Commission has had since 1960, is: “The Commission may from time to time institute inquiries with regard to charities or a particular charity or a class of charities, either generally or for particular purposes.” That’s it. The Commission does not have to meet any other criteria. There are no statutory hoops that it has to go through.

It is 20 years since I worked in the Charity Commission on investigations, but my recollection was that we had rather a lot of investigations on the go at any one time. I had a quick look on the Commission’s website for older annual reports, and I found an annual report from 1991. In the section on investigations it says, “During the year we opened 556 statutory inquiries.”

Q256 Sarah Teather: That is quite helpful context for your earlier answer, when you said that there were 86 under investigation on terrorism issues.

Richard Corden: There are 86 under review because they might be at risk of extremism.

Q257 Sarah Teather: So actually the Charity Commission does an awful lot of inquiries, some of which result in nothing. We have to be a little bit careful about how we use that data to suggest that there is a big problem with terrorism.

Richard Corden: It is because the Charity Commission has changed the way it uses its inquiry power. This may be connected with the creation of the tribunal, which gives an appeal against the opening of an inquiry. The Charity Commission possibly wants to be appealed as infrequently as possible. From 556 inquiries in the early ’90s, in 2012-13 there were 15 inquiries opened, in the year before that 12, and three in the year before that. During the early 2000s, the Commission made a policy decision to start saying that it would reserve the opening of a statutory inquiry only for the most serious cases. That was a policy decision, but it said it so often that it has sunk into all the trustees and staff of charities, so now if the Charity Commission opens an inquiry into your charity, you think, “This must be heavyweight stuff,” but in my view it need not be so.

Q258 Sarah Teather: Your argument is that they should use that more often.

Richard Corden: Yes.

Q259 Sarah Teather: Lindsey, we moved on a bit, although Stephen touched on this earlier. I did not hear from you during that question.

Lindsey Williams: I would agree with what Richard said. The use of a statutory inquiry may be perceived to be bureaucratic, in which case make it less so. I understand that it can be relatively easily opened and closed, so I do not see that there is a need for further directions. Use the inquiry.

Q260 Sarah Teather: Earlier, you indicated that you thought the Charity Commission needed to act more swiftly. Is part of the answer that you simply make the inquiry process less bureaucratic, or are there other things that you think they could do to speed up their processes?

Lindsey Williams: They are no doubt influenced by the resource constraints that they have. They tell us that they are anyway, but that is a slightly different issue. Maybe opening statutory inquiries and closing them rather quicker than they do at present might help.

Q261 Lord Watson of Invergowrie: I would like to ask a question particularly of Sir Stephen and Ms Williams about clause 6 of the Bill, which was consultation proposal 17, relating to the power of the Charity Commission to wind up a charity in certain circumstances. I noted in the responses from both your organisations that there was no mention of that particular proposal. My first question is, do you not feel strongly either way about it, or do you have some views you would like to express to the Committee?

Sir Stephen Bubb: I can see why the Charity Commission wants to have powers to wind up a charity. In certain cases I can see that being very helpful. If a charity was set up just for tax avoidance, you would want to be able to act very quickly. As the Bill is drafted, I do not like clause (b) which says, in terms of winding-up, “that its purposes can be promoted more effectively if it ceases to operate.” I think that is far too wide a category and not something I would support. It gives far too much discretion to the Commission in what it would wind up.

Q262 Lord Watson of Invergowrie: That is quite a strong view. I wonder why you did not feel that it was necessary to comment on that at the time of the consultation. Has something happened in the interim to firm up your views?

Sir Stephen Bubb: It is probably something we were considering when we were about to give evidence to you.

Chairman: Thank you very much. We only have about 10 minutes left so we will have to move fairly quickly. Do you have a supplementary question?

Lord Watson of Invergowrie: It is not a supplementary. I asked the question of both Sir Stephen and Ms Williams.

Q263 Chairman: We are slightly under pressure of time. I do not want to cut you off, but if either of you have something to add, please do.

Lindsey Williams: We welcome the clarification that this new power will be limited to certain circumstances, and if there is guidance on which circumstances, that would be helpful.

Q264 Viscount Younger of Leckie: I would like to move on to warnings and deterrents. In your view, does the Charity Commission need a formal power to issue warnings? If the power is retained in the Bill, what would be necessary for this regime to operate effectively?

Richard Corden: As a director and trustee of charities, if I received a letter from the Charity Commission under the present regime and it had “Official Warning” written at the top, I would give that just as much weight as I would give something that arrived after the law had been changed saying “Statutory warning under section 15”. Of course, the amount of weight I would give it would be a great deal. If I was law-abiding, which I am, I would act on either type of warning with equal celerity. If I was not law-abiding, I suspect I would ignore each type of warning with equal disdain, because the statutory warning power does not allow the Commission to do anything that it could not do without having issued the warning. I do not think the Commission needs the power as an extra regulatory tool. In other words, I think that tool is already available to it. Neither do I think that it needs the power as a matter of law, since section 20 of the Charities Act says that the Commission can do anything “which is calculated to facilitate, or is conducive or incidental to, the performance of any of its functions”. That surely includes writing letters with “Official Warning” at the top and then the content of the letter says, “You have been doing X, Y and Z, or failing to do A, B and C, and we warn you that unless you get your act together there will be the following regulatory consequences.” I think they can do that perfectly well at the moment. If Parliament decided to enact a warning power for its symbolic value, as it were, I personally would not oppose that at all.

Q265 Viscount Younger of Leckie: Perhaps I could have some brief comments from Lindsey and Sir Stephen.

Sir Stephen Bubb: I agree with Richard.

Lindsey Williams: And so do I.

Q266 Mr Hurd: We have mixed messages from you about the degree to which you support this Bill. Could I press you to clarify whether you think the Bill is a nice to have or a must have, or which elements within it you would consider a must have?

Lindsey Williams: We welcome the Bill. We think that the new powers extend the Commission’s ability to take action that it may need to take, but they will probably be on fairly limited occasions. Possibly more important would be to use what powers it already has a bit quicker, and perhaps to have a better communications strategy about its role, functions and activities.

Richard Corden: I think it is a nice to have. The National Audit Office in its report this time last year and the PAC both suggested that, for the Commission to regain full effectiveness as a regulator, the single most important thing overwhelmingly was a change in culture—how the Commission operates and is run. If that happens, this Bill alongside it will be a useful, if modest, addition to its range of powers. The Commission says it will use many of the powers in the Bill two or three times a year. If that allows the Commission to deal with a handful or a dozen of the particularly serious or intractable cases with much greater dispatch than it now can, it is a useful Bill.

Sir Stephen Bubb: It is a pertinent question, Nick. It absolutely is not a must have; it is a nice to have. In the evidence we gave we said that we support some of these provisions, but you have already gathered from what I have been saying to the Committee that I think there are much broader issues that need tackling.

Q267 Mr Hurd: Could I press you on an underlying concern about the fraudulent use of the voluntary sector to support extremism and extremist groups, about which the Government and the public are concerned? Stephen, you used some strong language in The Times about the need to avoid “zero tolerance machismo” in relation to concerns over extremism. Would you share with us any concerns that you have about the Commission’s current approach in relation to these issues?

Sir Stephen Bubb: That letter in The Times was in direct response to a sensationalist report on the front page of The Times which suggested that Muslim charities were a particular target, including surveillance. It was a fairly appalling story that I think needed to be responded to. I did not like the way the Charity Commission responded by using that zero tolerance language. No one suggests that we should not have a firm line on terrorism or extremism, but that is largely the responsibility of bodies other than the Charity Commission. I think the Charity Commission has two roles here. It goes back to what I said at the beginning of this hearing: there are the regulatory compliance issues, but there is also the support and guidance that you give.

This has arisen, for me, from a meeting I had with representatives of Muslim charities such as Islamic Relief, Muslim Aid and the Muslim Charities Forum, which you are going to hear from. I was very concerned about what they were telling me about the problems that have occurred for them through some of the statutory inquiries that have been opened by the Charity Commission, and the perception that has been created by that. If you want to tackle extremism, you have to do it in two ways. Obviously you need to root out misdemeanours, but you also have to work with the leadership of Muslim charities in tackling issues in their own communities. That is what Muslim charities do. Strengthening social cohesion means we must work with Muslim communities and Muslim charities. That is what I would like to see the Charity Commission and others doing alongside their compliance work.

To give you an example of the problem that was created by the Charity Commission, Muslim Aid found two problems in their international development work in Sudan and the Gambia in terms of fraud. They reported those problems to the Charity Commission. As a result of that, a statutory inquiry was launched and it was publicly announced. Immediately that raises issues for the charity in terms of perception. They have had significant problems. That was done during the main Muslim charity-giving period, which is during Ramadan.

Let us remember that the Muslim community, of all faith communities, give the most, so if we damage their fund-raising efforts we damage their ability to support people in Sudan and the Gambia. That is quite serious, but if, more broadly, it has a knock-on effect for Muslim charities generally, that is very bad. I have encouraged the Charity Commission that, as well as the actions they have taken, they think about how they support Muslim charities and the good governance of Muslim charities in the work that they do. This is a really serious issue. You tackle extremism by working with people in their communities. The point was made to me by the Dean of Westminster, who said that the thing you notice about people who have been involved in terrorism is that they have a poor understanding of Islam and they have often been excluded from their communities and from their mosques. You want to work with community and charity leaders so that that does not happen. That is where we need to put as much emphasis as we do on rooting out actual terrorists.

Q268 Chairman: That is a very important issue. Is there anything that you would like to say by way of criticism of the Bill as it stands? Ms Williams mentioned the caution problem, where one of the things that opens the door to disqualification is a caution.

Lindsey Williams: On the list of possible disqualifying matters, I think that should be handled very sensitively. As I said, a lot of people accept cautions without realising the repercussions of doing so. I would not like to see that being a widely used reason for disqualification.

Q269 Chairman: The problem is drafting. It may be that one cannot do more than leave it there and make it plain to the Commission in other ways, taking both your points. Mr Corden, do you have anything to say on this issue?

Richard Corden: Specifically on terrorism or on the Bill more generally?

Q270 Chairman: On the drafting of the Bill in relation to this particular problem of extremism, shall we say?

Richard Corden: I do not personally think that much in the Bill will allow the Charity Commission to do much, if anything, that it cannot do at the moment in relation to terrorism. The Charity Commission is a civil regulator. To my mind, its role in relation to tackling terrorism and extremism should be twofold. First of all, it should be involved in reporting any criminality, possible criminality or preparations for criminality to the appropriate authorities, because it is a civil regulator and it has no power to investigate or prosecute any crimes. It is a sort of information gateway, and from time to time it is quite likely to find out from its work with charities things that would be of interest to the police and security services, so it should pass that on. The other aspect of its role as a civil regulator is that it has powers which are apt to secure the property and assets of charities and to prevent their misuse for terrorist purposes. It should be ready to deploy those property and asset-related powers alongside any operations of the criminal investigation authorities.

Q271 Mark Menzies: Are you content with the workings of the Charity Commission’s appeal processes and the Charity Tribunal? Would any of the powers in the draft Bill require changes to these processes?

Richard Corden: The Charity Commission’s appeal processes, as distinct from those of the tribunal, consist, as I understand it, of a decision review. As a charity or trustee, if you are on the receiving end of a decision you do not like, you can ask the Charity Commission to have a look again at their decision, either to confirm that they made the right decision in the first place or to say, “No, we might have got it wrong and we hereby overturn it.” That is an administrative process that anyone can ask the Charity Commission to go through. If I remember rightly, Mr Dibble of the Charity Commission said that the Charity Commission does change its mind in about two thirds of cases. But you do not have to go through the decision review process before you appeal to the tribunal.

If I was on the receiving end of a decision I did not like, I think that probably I would appeal straight to the tribunal. The Charity Commission has to decide whether to defend the appeal and I would have thought that its decision whether to defend the appeal would require it in practice to do a decision review. To my mind there would be no point in asking the Commission to do a decision review, wait for the outcome of that and then decide whether to appeal to the tribunal.

Lindsey Williams: Giving the Commission more powers that are going to be used more often will need more resource. That is an important factor to bear in mind. My understanding is that there are two levels of review in the Commission. If people do not want to do that, as Richard said, they can go to the tribunal, which is viewed as being a very cost-effective and easy way; it welcomes litigants in person so I think that is working quite well.

Sir Stephen Bubb: I agree with my colleagues.

Chairman: Thank you all very much indeed. This has been an extremely helpful session, if I may say so. We are very grateful indeed, and I bid you good afternoon.

Examination of Witnesses

Witnesses: Christopher Stacey, Director (Services), Unlock, Dr Hany El-Banna OBE, Chairman and Founder, Muslim Charities Forum, and Ben Jackson, Chief Executive, Bond, examined.

Q272 Chairman: Good afternoon. Before we start asking you questions I should point out, first of all, that these proceedings are being webcast. Secondly, a transcript is being prepared of your evidence and will be circulated in due course. I encourage you all to study the transcript to see that what has been recorded is in accordance with your recollection of your evidence.

First of all, I want to put a general question to all three of you. It is about the scale of the problem the Bill is intended to address. What do each of you in turn think are the main regulatory issues within the charity sector that require attention? How widespread are they?

Christopher Stacey: I come at this with a very clear, specific perspective, which is around people who have criminal convictions. To be absolutely honest with you, I think there is a lack of evidence as to what the problem is specifically in relation to people with convictions and their role as trustees. Nearly 10 million people in the UK have a criminal record. It is not particularly clear how many of those have unspent convictions for dishonesty or deception, which is what the current legislation covers, but we estimate that that would affect around 4,000 of the current trustees who perform that role in the UK, yet the numbers of people that the Charity Commission deal with in relation to convictions is very small indeed. You can count the number of cases literally on one hand.

The perception is that there is a big problem of people with unspent convictions for either dishonesty or deception, or the broader issues that this Bill seeks to address. In reality, I am not so sure that the Charity Commission are dealing with those cases. As you will hear from me as we go on, no doubt, there is a big problem about perception and about the way the process comes across, and how that puts a lot of otherwise suitable people off becoming a trustee.

Ben Jackson: On a broader basis I would tend to agree with that. It is not entirely clear what nut they are trying to crack with the proposals in this Bill. Of course, my members are as keen as anyone—in fact keener—to make sure that where there is misconduct or mismanagement it is dealt with swiftly and well. We are very unambiguous about that. We support the general approach of a proactive regulator dealing with that quickly and efficiently. We definitely support many of the measures that the Commission has been putting into place to improve its performance in that area. But that is not quite the same as saying they need new powers.

Our general position on this is that we would not see that as an essential part of that package, as was said earlier. There are many more important things than new powers that need to be done by the Commission, and I am glad to say that a number of those are now being dealt with. That is not to say that we don’t accept the general points being made by the Commission in relation to a number of them—that there is a problem that needs to be fixed or a hole that needs to be plugged. We can hear those arguments and, as you will see, hopefully, in our response to the consultation, we tried to take a nuanced approach.

Finally, however, we do have concerns about some of the powers that are being proposed in terms of their broad sweep, such as the measures for appeal and so on, but we will come to those. That will give you a general sense. It is not one of complacency at all. We are not saying there can never be problems. We know that there are issues that need to be dealt with and we want them dealt with. It is a question of whether new powers are at the top of the list of things that need doing.

Q273 Chairman: There could be more than one nut or more than one hole, as you were saying, but the comment you make still applies on the assumption that there is more than one, does it?

Ben Jackson: Yes, I think so. You asked in terms of the general problem. My members remain very concerned about any examples of mismanagement or misconduct. They need to be dealt with, but the question is whether some legal powers could contribute to solving that problem. It is just not top of the list. That would be my answer.

Q274 Chairman: Dr El-Banna, how do you see it from your point of view?

Dr El-Banna: There are three points. First, is the Charity Commission able to define between policing or better administration? An important line has to be drawn between regulation and good practice. The second point is that one of the main regulatory issues is the overlap of Government legislation and the private financial sector, particularly the banking industry when they prevent people from opening bank accounts or they stop bank accounts and stop transferring money to different payers. The last point is that for many years we, as the Muslim Charities Forum for Muslim organisations, have highlighted that the problem is overestimated. The counter-terrorism climate, the counter-terrorism feeling and the knee-jerk effect, which is affecting all politicians and the Charity Commission, is really very serious. I can talk about this on three points.

First, we work in a very difficult area. I came from a medical background, but I have been in the charity sector for the last 32 years. Most of my work is international; I travel to more than 70 countries globally. I go to difficult areas like Afghanistan, South Sudan and Chechnya. Recently, two weeks ago, I was in Iraq, in Baghdad. I have been in Somalia, in Mogadishu and other countries. I think counter-terrorism legislation is preventing us from having access to the neediest people. There are proscribed groups in those areas, and we know them. They are the gatekeepers. How can we go through the gatekeepers to reach the neediest people in Syria, Somalia or different parts of the world? This is very important. The banking industry themselves become the Charity Commission. They do not respect our Charity Commission, because they give authority to stop transfer to a registered organisation in a country—a credible organisation, a new one or an old one. They close bank accounts without considering the role of the Charity Commission. The banking industry is now playing a very difficult role.

I can give an example in Somalia, where there is a famine every two or three years. In the Somali famine in 2011, we heard from the Somali organisation there when we met in South Africa that they lost 260,000 people. This was because of the bank restrictions. It didn’t happen in the famine before that. The banking industry has to be sorted out. We need the Charity Commission to have the upper hand and to be respected by the banking industry. We need the Government to create a system to empower the Charity Commission, especially on this point.

Chairman: I am sure we will come on to deal with that in further questions. Thank you very much for highlighting that very difficult issue.

Q275 Baroness Warwick of Undercliffe: The Charity Commission told us that the vast majority of the cases that they deal with relate to honest mistakes rather than to serious misdeeds. I think you yourselves have affirmed that, as indeed have other witnesses. Does it actually need new powers to be able to deal with those, or should the Charity Commission be focusing more on its guidance and communications so that it can get that guidance through better?

Ben Jackson: From my side, the point about engagement with the sector, guidance and clarity about what is expected and all those things are absolutely crucial. There is no doubt about it. Prevention is always better than cure and, for exactly the reasons that you say, very often it is because people do not understand the situation and so on. To me, that is non-negotiable. To be fair to the Charity Commission, they are trying to do that better and we would support that.

It is very important to distinguish, because sometimes that work is seen as “soft” and therefore not dealing with the problem. All the work of communications and advice those instruments are tangible instruments to deal with the central problem of mismanagement and misconduct. There might be another debate about some of the wider pieces. Sometimes those sorts of measures are projected as softer and slightly woolly things over here, but the real things are the powers. The issue is how you deal with the problem of mismanagement and misconduct. We would agree that those are absolutely vital instruments in addressing those issues and they need to be part of a full strategy that is proactively and well managed.

Dr El-Banna: The Charity Commission needs to exercise its existing power. One of the problems that stops them exercising it is lack of funding. The Government made cuts about three or four years ago which crippled the Charity Commission. We were trying to get some guidance or rules for a new organisation to work in a conflict zone, but there was nothing ready in August 2012. The Bill came in 2013. We need the Charity Commission to be empowered by having the right funds to regulate and to engage, and to build the capacity of charity organisations.

Christopher Stacey: I would certainly agree that better use of existing powers would be a better use of the Charity Commission’s resources. Taking a step back, when I look at this whole piece of work, it is surprising that there are further powers wanted by the Charity Commission and a need for more resources, given the current climate of the Commission. Having just looked at the original Government consultation on this issue, we engaged with the criminal justice sector and came across one example of a charity that for many years had a trustee who had an unspent conviction that disqualified them technically from the role. They engaged with the Charity Commission in February of this year. That matter is still ongoing without an outcome because, as far as I am aware, they have not had the resources to look into the issue. If you are looking at encouraging better management and better regulation, I would have thought that the Charity Commission’s resources could be better placed in enabling and supporting the sector to do that for themselves, with the regulator providing support in the form of advice and guidance.

Q276 Baroness Warwick of Undercliffe: I have a supplementary question which follows on from the point that Dr El-Banna made. How useful is the current guidance for charities working in challenging circumstances overseas? Perhaps both of you could answer. Is there a need for greater clarity about what dealings with proscribed organisations are tolerable and what are not?

Ben Jackson: I definitely think this is something where we can improve things. We would very much welcome it. We have said to the Commission—we say it again here on the record—that we are very happy to collaborate in a working party with them, with DFID and others, to clarify how this works in practice, with a set of principles that meet difficult objectives, about the need to ensure there are real measures to prevent any support to terrorist organisations, while allowing NGOs to carry out their work operating in the realities of those conflict zones. It is absolutely essential that that is the case.

A lot of the conversation from the Charity Commission around the issue of anti-terrorism, where they have been quite vocal, seems to have been oriented more towards communities here, which is obviously part of it, but, as was pointed out, it is also absolutely critical that we address the realities on the ground in conflict affected countries. If you are working in Gaza and you are taking anything in through the crossings, you have to take account of Israeli authorities and the authorities in Gaza. The authorities in Gaza are Hamas; that is just a fact of life. We need to understand the consequences of that and go in with our eyes open, but we should not underestimate some of the unintended consequences of measures that put so much pressure on NGOs, including among my members,not just Muslim organisations, but big household names across the board. It is already a huge logistical, legal and financial nightmare dealing with those measures. It is not just the EU regulations, the British regulations and the US regulations and so on. I know those are there for a good reason, but I think we can do better in working out what they mean in practice. It is a vital thing, and we absolutely stand ready to engage constructively on some workable guidelines to make that possible, and to try and synergise those between the different actors so that people can get on with the job.

There will be a point where it will get too difficult and the risks will be too high because they are being transferred on to the NGOs. We all, in the international community, have a responsibility in that area. Are we saying that in Gaza we want to make it so difficult that it is not possible for international aid to be delivered there. That would suit the militants and the extremists extremely well. It would fit the narrative that says, “No one out there cares about you. We are the only people, with the guns and the rockets, who do care about you.” We need to be very careful about that. I know that is not necessarily an intended consequence, but we need to think about it and we stand ready to work through what that would look like in practice.

Chairman: We are looking at a Bill. I am not suggesting that you answer this question now, but if there is anything you have to offer by way of hints as to how we might draft this to make the point you are both making, we would be extremely grateful. We all appreciate the importance of all this, but because time is fairly short, I am going to move on, if I may.

Q277 Viscount Younger of Leckie: I want to move on to the operation of the Charity Commission. I know you touched on this earlier, Mr Jackson. The Charity Commission has begun to respond to criticism of its regulatory work by making greater use of its existing powers. To what extent do you support that more proactive approach, and to what extent is it happening? What impact have you seen from it so far?

Christopher Stacey: In relation to criminal convictions we have seen very little proactive approach, quite honestly. I would be concerned if there was a proactive approach—not that I would be opposed to it—about what they would find and what their response would be. The case I highlighted earlier would suggest that there are many people serving quite suitably as trustees of charities, but where an unspent conviction has not been disclosed for whatever reason. That might hinder their future chances. As I see from the impact assessment of the Bill, one of the impacts would be that 30 to 50 currently serving trustees would be disqualified. It would be interesting to see how the Charity Commission would deal with that.

Having met them recently, I am encouraged by their willingness to work proactively with stakeholders like ourselves, to try to ensure that there is clear guidance available out there to people who might want to become a trustee. At the moment that guidance is very poor and very confusing. I would like to have a better understanding of the numbers of people we are talking about. If there was a proactive approach, as I said, I would be quite concerned about how many people might be brought within the net.

Ben Jackson: We support a more proactive approach by the Charity Comission. We also see all the issues around systems and so on. There are good signs that those issues are being dealt with. The critical further point is that we need to be satisfied that the framework both for the current powers and for any future powers is applied consistently and even-handedly. I do not know what the instrument is for this, to be honest, but there is some need, perhaps through its accountability—in its annual report to Parliament or whatever—to understand what the framework is. Which charities are chosen to be investigated and on what basis? Unless you do that, perceptions will build up. Certainly many of my members feel, “Fair enough, we need to be accountable like everyone else,” but there seems to be a disproportionate amount coming out of the Charity Commission around international development organisations and terrorism and so on. That is not to say those are not issues, but that would be my proviso. Yes, we support a more proactive approach, but it needs to be clear that it is within a framework that is even-handed and consistent, and deals with the issues across the board, including some of those more mundane issues that are less politically high profile than anti-terrorism—just people mismanaging the accounts or whatever. I know that is not immediately high profile, but that is the issue that concerns us about the consistent and proactive approach.

Dr El-Banna: There is a perception that we feel that Muslim charities have been targeted. That is the first point. Secondly, as Sir Stephen Bubb mentioned earlier, they published the names of organisations under investigation before they were proven guilty or innocent. This definitely affected their funds and their reputation. It had a knee-jerk effect not only on their Muslim donors but on other donors.

Q278 Mr Hurd: I have a question about warnings and deterrents. Does the Charity Commission need a formal power to issue warnings? What safeguards or statutory guidance on the power would be required?

Ben Jackson: We can see the sense of that in principle. The problem is the nature of how you define it, and in what circumstances it needs to differ from the mechanism of investigations. We need to come up with something that would place a clear definition on why the warnings were being issued, what the basis was and some form of appeal. This is a very important point. The impact assessment that was produced with the Bill underestimates the potential impact on a charity, because people out there do not understand the fine detail—they are likely only to see something out there in lights saying it is under official warning. We understand the principle, but we are concerned about the way that it would be applied and how we could have a warning system that took account of issues of appeal and so on.

Christopher Stacey: I have nothing to add other than to say that I would agree with that.

Q279 Sarah Teather: Before considering the offences that would lead to disqualification in the draft Bill as it stands, are the current rules on disqualification working adequately?

Christopher Stacey: I can comment specifically on the list of offences. First, there is very poor understanding of what the concept of dishonesty and deception actually means in practice. It might seem fairly obvious, until you begin to look at it in detail; in an earlier session you heard from the Charity Commission itself, where they explained that the offence of money laundering is not automatically defined by that, and that is what this Bill seeks to add.

There is certainly the risk that the current rules are quite misleading. I took a quote off the gov.uk site: “If you have an unspent criminal conviction involving dishonesty or deception you cannot become a charity trustee.” That is clearly not the case; it is misleading information, but that is what happens in these situations and that is what feeds into the idea that people cannot engage with the Charity Commission process that allows for waivers and other forms of not applying those disqualifications. That is also borne out in the very few cases that the Commission actually deals with through their waiver process. It is not clear to us how many of those relate to criminal convictions, because they do not have the data available, but I believe that in the last year they dealt with less than 10 waiver applications. From speaking both to charities that want to recruit trustees that have convictions and to people who have convictions, the whole process puts a lot of people off, because they are automatically assumed to be disqualified and they have to prove that they are not somehow a risk. The balance seems to be very one-sided in that respect. As a charity that recruits trustees who have convictions, we found that a very difficult process to engage with, as I think we have shown in our response to the Government consultation. It is very difficult to see how the current rules are working adequately at the moment.

Dr El-Banna: I agree, but I do not have an example. If I am convicted in North Korea as a human rights activist of being a terrorist, will the Charity Commission put me on the list, as one of the people on terrorist lists? You have to look at this differently and rationally, and locally and internationally as well. Certain Governments abroad can classify you and your organisation, and because of our relationship with such a Government they can turn a blind eye or turn their head. I have a very reputable charitable organisation that is very well funded by DFID, the European Union and UN agencies, but some foreign Governments are classifying them without giving any reason. What is our Government going to do to protect them? What will the Charity Commission do to protect them, since they know all of them?

Q280 Sarah Teather: In that circumstance, you are raising the question of somebody who is a political refugee and who might have been convicted of something abroad.

Dr El-Banna: This is one of the questions.

Sarah Teather: There might be people who would be particularly attracted to working in such areas. I think I understand.

Ben Jackson: Just to underline that, the findings in foreign courts definitely need to be looked at. It would potentially affect my members quite seriously and in quite perverse ways, whether it is on human rights or one Government’s definition of who is a terrorist and who is not. That definitely needs to be looked at.

Q281 Sarah Teather: Christopher, where do you think the balance needs to lie around public confidence and rehabilitation? Do you have any specific views on that?

Christopher Stacey: To say that it would be a balance would suggest that one trades off against the other, and I am not so sure that would be the case.

Q282 Sarah Teather: Say a bit more about that.

Christopher Stacey: The way that the regulator looks at rehabilitation of offenders at the moment as a concept is by using a very strict legal matrix, that being the Rehabilitation of Offenders Act, which is very important when it comes to disclosing to employers and others. What that does not do is account for the fact that many people have convictions that will never become spent for various reasons.

Q283 Sarah Teather: Give us some examples.

Christopher Stacey: For example, somebody who receives a very short IPP prison sentence, which were given out a lot in recent years, and were certainly set up under the Labour Government. More recently there are quite long sentences—for example, somebody who receives just over four years in prison. If that was 40 years ago, today they still remain legally un-rehabilitated and would be disqualified by the Charity Commission’s current rules. There is a question about what rehabilitated actually means and having a process that allows a conversation take place, rather than to automatically assume that somebody would be disqualified, which is where we are at the moment. That boils down to looking at the role the charities themselves can play in having those conversations with people.

When we recruit volunteers, staff and trustees, we ask them whether they have any unspent convictions and we have a conversation with them. When we have done that in the past with regards to trustees, we have had that conversation, we have gone through a risk assessment process and our trustees have decided to appoint someone; yet when it gets to the regulator level it has been stopped. There is a role for allowing better self-regulation among charities, particularly those within the criminal justice system and working with offenders, where there is this idea of user involvement and actually being involved with an organisation, and, at trustee level, being on the board of directors and responsible in some way for the direction of the organisation. It is a really important thing. People who have volunteered for charities for many years have been invited on to the board, but there have been these clouds around whether they would be allowed. That is a really hard conversation for charities to have, and it begins to undermine some of the principles that they themselves stand for. I would like to see the Charity Commission pay more attention and give more weight to that particular voice.

Q284 Sarah Teather: I want to go back slightly; we touched on these issues, but there was something in Dr El-Banna’s evidence that I was interested in and I would like to hear him say a bit more about it. He was talking in his written evidence about the need for the Charity Commission to rehabilitate actively if they have done an investigation and found no fault. Could you say something about how that process might work, or should work, in your view? It touches on the point that Ben Jackson was speaking about, but you did not get a chance to speak at that point.

Dr El-Banna: Yes. That was the case my colleague was talking about. Let me give you a practical example. I was in Mandera, in the north of Kenya, which has mostly Somali refugees. I was in a school, and they asked a nine-year-old child, “What do you want to be when you grow up?” He said, “I want to become a fighter, to go and fight the Americans in Iraq.” As you can imagine, this young boy was being kept in a very remote area. How did he get that perception of who is the enemy and who is the friend? That is why I support my colleague in what he said. We have to look objectively at how we can work with those people and rehabilitate them, and how we can rehabilitate those organisations.

In two years the United Nations is organising the first world humanitarian summit in its history. Nowadays we are promoting the engagement of local organisations with national and international organisations and Governments to join with one voice to try to fight extremism and terrorism.

Q285 Sarah Teather: You are answering a slightly different question from the question I asked. You are answering a question about the wider role of charities in social cohesion and tackling issues of extremism. I was asking quite a specific question around process. Suppose the Charity Commission does an investigation of a charity and the investigation finds no fault. The point I understood from your evidence, and the point that Ben was making earlier in the session, is that it has a significantly damaging impact on the charity. In your evidence, you were saying that the Charity Commission should at that point actively try to rehabilitate the reputation of the charity. What do you mean by that? How would it work?

Dr El-Banna: Before they found that any organisation was guilty of doing something wrong, the list was publicised in the newspapers. Sir Stephen Bubb mentioned this earlier on. We contacted the Charity Commission to ask them not to publicise any investigation before people were proved guilty or innocent. That was our role. When we find that the media are actually talking about a list of organisations, whether Muslim or non-Muslim organisations, we have to defend our civil liberty in this country and try to ask the Charity Commission not to publicise the list or their investigation before they find evidence against them.

Sarah Teather: Do you mind, Chairman, if I ask whether or not—

Chairman: We are very much up against time, I’m afraid.

Sarah Teather: My question was how can you then repair the damage? Perhaps you could give the evidence later.

Chairman: We are likely to have a Division fairly soon, so I am quite anxious to get as far on as we can. Please keep the answer fairly short.

Sarah Teather: I was going to suggest he could give written evidence, to answer it in writing.

Chairman: I am going to encourage them both to do that.

Q286 Mark Menzies: I want to return to the issue of past convictions. What are your views on the provisions in the draft Bill for disqualifying trustees on the basis of past convictions? Is the list of offences appropriate? Is it appropriate to disqualify individuals on the basis of cautions? I am particularly keen to hear from Christopher.

Christopher Stacey: As I said earlier, the Commission themselves highlighted the difficulties with the current list of dishonesty and deception. All this Bill seems to do is build on the principle and the way that it works. I have already said a bit about how I think that could be changed. On the additional offences, my colleagues can speak with more authority about the complexities of terrorism offences and particularly some of the unintended consequences.

I was particularly concerned to hear the Commission talk in their evidence a couple of weeks ago about the role disqualifying orders may play in testing extra offences not specifically listed in the Bill but that may become of interest to them. That may widen the net quite considerably. Rather than looking at additional offences, I would like the existing list looked at and a more sophisticated way of establishing what is pertinent to the role of a trustee.

I would be very concerned about the role that a caution can play. First, the legal basis of taking a caution into account is unclear to me at the moment. Under the Rehabilitation of Offenders Act, a simple caution given by the police becomes spent immediately and those who accept a police caution are told that. I cannot envisage a police officer telling them about the ramifications of becoming a trustee, but there would be an important context for individuals that applies to. There are much broader issues as to who accepts cautions, so I would be very concerned with that. I would also want to clarify—this is not as strong as I would like to see it in the Bill, but perhaps it could be done afterwards in guidance—the role of disqualification orders, and if they were to take into account certain convictions that are unspent, that they would be time limited specifically until that conviction becomes spent, or certainly no longer than when it becomes spent. I think that would be particularly important.

Q287 Mark Menzies: Very briefly to Mr Jackson and Dr El-Banna, both your organisations have touched on the issue of terrorism already and in fact have gone into it at some length. Can you give me some examples of terrorist offences included in the list on the basis that they are very broadly defined?

Ben Jackson: I am not sure about the alignment of the list. The kind of issues that we would be concerned about would be those in the field, where people are engaged in operations—for example, the payment of licences to de facto authorities in a lot of those kinds of areas. In a way that sounds obscure—would it actually lead to that?—but those are issues that get raised with my members, as in the police raising those issues, so it is not an academic issue.

As I was saying earlier, it is complicated on the ground. When people say convictions for terrorism, people think the obvious thing, but the legislation is very wide. It is to do with financial flows and so on. Those are the areas we would be concerned about. We are very happy to wrap that into a submission that would cover off some of that area. We could co-ordinate to make it easier for the Committee.

Dr El-Banna: The problem in this area is that you cannot get in unless you are allowed by those groups. That is the first thing. Secondly, if you are working there, practically, quite often, they design the land for you. In certain areas they tell you to distribute to everyone or not to distribute, and sometimes they get involved in the distribution mechanism, no matter what you do. This is the problem. Once they get involved in the distribution process, you can get classified by one of the security or intelligence services in the area saying, “Organisation X is doing so-and-so,” but you cannot access the area unless you use those people. That is where you need the solution. How can you have access through those people without being listed? You need to give us guidance, because we are on the ground and it is difficult to see people dying every day when we can’t have access because this individual or this group are preventing us. We do not have any regulation or any guidance to deal with them.

Q288 Baroness Barker: In Unlock’s evidence you talk about the Charity Commission providing practical guidance to individuals and organisations about ways in which they might exercise due diligence themselves. Is that a preferable way of dealing with the matter, rather than having a list of offences in law?

Christopher Stacey: I certainly think that in a lot of the work we do, whether it be with employers or insurers, the common thread is not to look at specific technical offences and assume what you might from that. When you apply that to terrorism offences or any category, they are quite blunt instruments. It is certainly the role of charities to be able to self-regulate in this respect—those that wish to make the right decisions for them as charities. Stuart Etherington gave an example of the RSPCA recruiting somebody with a conviction for animal cruelty. I imagine that the RSPCA would not want to recruit a trustee who had a conviction for animal cruelty, regardless of what the Charity Commission’s list of offences said. There is a role for charities to be able to apply some common sense, and to apply their principles to these things. I have no doubt that charities like Unlock are perhaps more forward-thinking, or more open-minded about the role of people with convictions on boards of trustees, but at the moment in reality we do not have the ability to make those decisions. This is perhaps more of a problem with perception than reality. It feels like the Charity Commission are in a very policing role at the moment. I am encouraged by the Charity Commission in what they have said about being able to build proper guidance and to give clarity, but that clearly is not fundamentally changing the role that a list of offences plays at a parliamentary level. That needs some questioning, because I have yet to see any evidence that as part of the aim of this work, which is to strengthen the ability to prevent abuse within charities, there are any more than simply anecdotal cases of that abuse coming specifically from people with unspent convictions. It is automatically a jump that people make—that it means that people with unspent convictions should be stopped being trustees.

Q289 Baroness Barker: You would like to see greater weight given to guidance about process for trustees—the processes through which they should go in arriving at a conclusion.

Christopher Stacey: I certainly think so. I will be sharing with the Committee the evidence that we gave to the Government consultation, where we ourselves had a very real example of somebody we felt would be absolutely fantastic as a trustee. When that got to the Charity Commission, they had a telephone conversation that seemed to suggest there might be quite an intrusive level of investigation in them as a person. I do not believe that that was particularly suitable. As a charity we had gone through a very rigorous risk-assessment process, because we have a reputation to uphold as a charity. We felt that was appropriate, and our chair of trustees felt that it was appropriate. I would like to see that kind of activity being cultured, supported and encouraged, because it allows charities like ours, and any other charity, to make a decision first and foremost on what they believe is right as a charity.

Q290 Lord Hodgson of Astley Abbotts: My first question to Mr Stacey has largely been covered in the discussions about unspent convictions and the waiver process. I would like to talk about the powers to prevent disqualified trustees from acting in another position of power in a charity. It is not in the Bill, but quite a lot of people thought it should be. I would like to get your views on that and also, if it is to be in the Bill, what safeguards are necessary?

Christopher Stacey: I will be very brief. I would personally be against that. Up until March of this year, if that power was to exist, I would have seriously had to question my job as a director of this charity, because I would not be aware whether it would stop me doing my job. It would have a very wide-ranging impact, particularly on criminal justice system organisations where there is a known culture in many of employing people who have unspent convictions at very senior levels of the organisation. I do not believe that it would add much weight to what the Commission would be trying to do, and would prevent organisations from tackling abuse within their charities.

Q291 Lord Hodgson of Astley Abbotts: It is a power to prevent, not a requirement to prevent.

Christopher Stacey: I understand that, but personally I think it would give a lot of uncertainty to the charitable sector as to where that power would extend into certain roles. I believe the role of the Charity Commission in regulating a trustee board is very clear. On a very personal level, where that begins to extend into regulating the management of charities for which the trustees are responsible, that causes me some mental concerns.

Ben Jackson: I will not repeat all the general points about the provisos—what sorts of offences and all that kind of stuff. Once you have done that and you have got to the position, on rare occasions, when you are disqualifying someone, it seems logical to us that they should then be prevented from holding other positions in charities. So from our point of view we would see the logic of what is being proposed.

Chairman: Nick Hurd, I think you have question 11.

Mr Hurd: It has been asked.

Q292 Chairman: I have a final question about the Charity Tribunal. I do not know how familiar any of you are with the workings of the tribunal process. Have you any comments to make? Are you content with the way the tribunal works? Would any of the powers in the Bill require to be changed, in your view?

Christopher Stacey: I would like to see more evidence of where the Charity Tribunal is being used in relation to criminal convictions. I think the problems are further downstream in relation to the waiver process and how that could be bolstered, and how more active considerations of people who might otherwise be disqualified could happen. That would begin to filter down into cases that might end up at the Charity Tribunal stage. I have certainly seen no examples of the Charity Tribunal making decisions based on people who have been disqualified because of unspent convictions. I simply do not think they get to that stage. That might beg some bigger questions about the process earlier on.

Ben Jackson: We made the point earlier about the proposed new warning. Logically, one of the issues there is the piece around appeals. Leaving that issue aside, in terms of the original consultation, I will be honest, perhaps we just missed something. It was a bit buried away so we have not consulted our members properly on the issue, which we will do. Obviously, we support checks and balances. Generally speaking, we think the instrument of the tribunal is useful. As was said earlier, obviously we can understand that the Charity Commission does not want to be in a situation where an appeal is happening every day of the week, but, in general, if we are going to have a more proactive approach with more investigations, the Commission needs to adjust the sense that having an appeal process like that is in itself a bad thing. It is not a bad thing. None of us wants it to happen every day of the week, but there is probably a lesson for charities in that they need to get to know these provisions a bit better because they have been so rarely used. I will talk to my members more about this specific issue, but in general we support the need for a robust appeal process of the kind in the tribunal.

Dr El-Banna: I agree. I am trying to save you time.

Chairman: Sarah Teather, I rather cut you short in the discussion you were having earlier. There is a little more time.

Q293 Sarah Teather: It is probably better dealt with in writing. The point I made was quite specific, and I just wanted a bit more information.

Ben Jackson: The piece on reputation and rehabilitation.

Sarah Teather: Exactly. How do you rehabilitate reputation? It is better dealt with in writing, and then you can be precise.

Chairman: I endorse that entirely. I come back to the point I made earlier on about the drafting of the Bill. You have all raised very important points, if I may say so. The question for us may be whether we can do anything about them in the wording of the Bill. Dr El-Banna, if I may say so, the point you make is very powerful, but quite how we deal with it through legislation is a very big question. It may have to be done by guidance, but the more you can do by way of written guidance to us as to how we respond to your points, the better. We encourage you to do that, although it would be nice if you could do it within the next two weeks so that we can build it into our report. Let us leave it there for the time being, and we will look forward to any further contributions you can make to these issues. We thank all three of you very much indeed for a very interesting session.