Unrevised

Oral Evidence

Taken before the Joint Committee

on Tuesday 13 January 2015

Members present:

Lord Hope of Craighead (Chairman)

Baroness Barker

Baroness Warwick of Undercliffe

Lord Watson of Invergowrie

Viscount Younger of Leckie

Mr Bernard Jenkin

Mrs Emma Lewell-Buck

Mark Menzies

Chris Williamson

________________

Examination of Witnesses

Witnesses: Rob Wilson MP, Minister for Civil Society, and Ben Harrison MBE, Policy Manager, Office for Civil Society, Cabinet Office, examined.

Q486 Chairman: Good afternoon to you both, and thank you very much for coming to give evidence to us. There are two formalities that I should mention. The first is that the session is being webcast, and you should be aware of that. The second is that a transcription is being taken. The transcript, when it is ready, will be circulated, and I would encourage you both to study it when it comes out to be sure that it is an accurate account of your evidence.

What I propose, if it is acceptable to you both, is to address my questions to you, Minister; and Ben Harrison, you can chip in if there are points that you can add. I am sure that the Minister will invite them if he feels that he needs your support. We shall address our questions to you, Minister, and see how we get on.

First, I have a fairly general question. What is your view on the current operation of the Charity Commission? We have heard evidence to the effect that there has been a bit of a cultural change, and we have seen a graph that tends to demonstrate that. The question for us is whether they have responded effectively to the various criticisms of which I am sure you are aware, from the NAO, the PAC and the PASC, and also Lord Hodgson’s review. In a nutshell, would you describe to us where you think you are, as to the current position of the Commission?

Rob Wilson: First, Chairman, thank you very much indeed for inviting me to attend the Committee today. I have been watching your progress closely, and I am very grateful for the work that the Committee is doing.

Yes, the Charity Commission is doing a good job. It has responded well to the criticisms that were made by the NAO and others. It has had strong leadership provided by William Shawcross and, most recently, by Paula Sussex, as the new chief executive officer; also, the board is engaged and diligent. In fact, I have agreed today, with the Commission chair, that the board members should be able to continue their existing level of engagement to lead the next phase of the Commission’s change programme, because they are only one year into a three-year change programme. I am looking forward to seeing the detail of what the NAO’s follow-up report will be in a few weeks’ time.

Q487 Chairman: One of the points that has been made, which I am sure we are all aware of, is the need to strike the appropriate balance between the regulatory work, which is what the Bill is concerned with, and the support and advice function, which is part of the functions of the Commission under statute. Do you think that the balance has been struck in the right place? If not, what kind of adjustment do you think is needed?

Rob Wilson: First, abuse in the sector is small in the context of the size of the sector, but it is still significant so we need to take account of that. Yes, the Commission needs to improve its regulatory performance on compliance—that is what the NAO report told us—and the enforcement thereof, but that is not to belittle the other work that it has undertaken in its other regulatory functions. I agree to some extent with what Sir Stuart Etherington said about the Commission, which is that in the past it had sometimes blurred the role between regulator and friend of the sector. Getting the balance right between those two things is not that easy, but I am very confident that under its new chairman, William Shawcross, it is doing that, and doing it very well.

The Commission receives a huge number of inquiries and requests for assistance, and it would be impossible for it to deliver the sort of service that we have perhaps seen in the past, and certainly not a one-to-one service. Just to give you some idea of the scale—I do not know whether the Committee has had this reported to them before—the Commission received questions in 48,274 e-mails, 88,822 phone calls and 9,681 letters last year. You can understand the scale of what they have to deal with.

Q488 Chairman: We have not had those figures, but we have asked, and we have had an answer, about the time scale for replies to e-mail and correspondence, and it is quite extended. We have a feel for the problems they have in producing quick responses; it does not seem to be practicable to respond by return. In fact, they don’t attempt to do that.

Rob Wilson: When you see the numbers, it would be a daunting challenge for any organisation to respond to that scale of inquiry.

Q489 Chairman: Can I change the questioning a little bit to focus on the Bill itself, which obviously you are promoting? The question is whether all the powers in the draft Bill are really needed, and whether a longer period of consultation and reflection would be appropriate before it is taken up. The Charity Commission have made it clear that they would like to have the Bill, but there are a lot of criticisms, which we have to assess, and there may be a question as to whether we recommend that part go ahead or that a longer period be given. What position would you adopt?

Rob Wilson: You need to see this in a wider, broader context. Stronger powers under the draft Bill are just one element of what we regard as a multi-strand approach. It is therefore very important that the powers are delivered. It is a must-have part of that multi-strand approach.

We are giving new funding, as the Prime Minister announced. The culture of the Charity Commission is changing. There is a whole series of changes, of which the draft Bill is part. The new funding that we are giving, and the new approach that is being taken, make the new powers that the Bill gives more urgent, not less urgent. There is no point in the NAO asking, or telling, the Commission to be more proactive and then finding that it cannot act when it finds abuse in the system. It is really important that the Commission has these powers.

Q490 Chairman: Can I go back to the question of extending the period? You talked about a three-year period and said that the position of the present members of the board is being extended for a year. Is that right?

Rob Wilson: For a year.

Q491 Chairman: What about the remainder of the period? There is a three-year period. What exactly is it designed to achieve?

Rob Wilson: The three-year period, as you know, is a period of transformation. My predecessor but one gave the board some additional management time, a one-year period, and said that we would review it. I have now reviewed it and extended it for another year, but I am open to its being extended for a further year after that.

Q492 Baroness Warwick: When you talk about the period, do you mean a change in ethos? Is that what you really have in mind, or is it a change to a greater emphasis on the regulatory role? I was not clear on what that meant.

Rob Wilson: The NAO criticism was heavily focused on compliance. Much of the criticism therefore was that the Commission was not doing its job as a robust regulator, and rooting out the problems in the sector that it should have been. That is where it is focusing a lot of its attention; it is not necessarily diverting away from its other functions, but it must focus on those because they are so important to the standing of the sector over the long term.

Ben Harrison: May I add to that? This is a difficult time for the Commission because, as the Minister said, they are one year into a three-year change programme or transformation programme. It is going to take time for all of this. They are bringing in new processes, and they will be bringing in new IT to support those processes. The aim is that moving more of their services online and making better use of IT will free up some of their resources, and start to deal with some of the longer times that it is taking to respond to correspondence and the like, and to make registrations.

Q493 Mr Jenkin: I turn to the governance question. With the appointment in 2012 of the new chairman, William Shawcross, his paid time was reduced from three days a week to two, although he probably does about five days a week. In retrospect, apart from being parsimonious, it was not reasonable to expect the job to be done in two days a week, was it?

Rob Wilson: I can only reflect the conversations I have had with William Shawcross, and he is happy with the amount of time that he has been given.

Q494 Mr Jenkin: On continuity in the change programme, his term is only three years, and this is for after the general election, but if the Government wanted continuity in the change programme they would presumably give consideration to the question of whether the chairman’s term should be extended. Three years is quite a short time—mind you, he says that he thinks he may have had enough by then. If we want continuity, what thought has been given to the continuity of the chairmanship?

Rob Wilson: You are right—that is a strong argument that some people would make, and it is certainly one that would need consideration in due course.

Q495 Mr Jenkin: Thank you for that wonderful non-answer. Moving on to working relationships between the Charity Commission and other parts of Government, such as the other enforcement agencies, particularly HMRC, the experience with the Cup Trust was a brutal one. The opinion formed by the Public Administration Select Committee was that the Charity Commission was being expected to take far too much responsibility for what was essentially a tax question and that there should be greater co-ordination between the Commission and HMRC so that they could share information, and the vast resources of HMRC compared with those of the Charity Commission could be used to police the tax system, as they should be, rather than blaming the Commission for a tax avoidance problem. How are these two agencies now working together?

Rob Wilson: My understanding from the Charity Commission is that they have no significant problems working with HMRC, and that building good relationships between the two organisations is the key factor. There are obviously still some issues to be ironed out about data sharing and things of that nature, but that will be done on the basis of the relationship rather than any legal requirements or difficulties.

Q496 Mr Jenkin: What is the problem of data sharing, and how will a mere relationship resolve it?

Ben Harrison: The Charity Commission does not accept that there is a legal barrier when it comes to data sharing. It is about building strong relationships and relationships of trust between the Commission and other regulators. Where they have been able to do that, and where they are continuing to develop those relationships, it leads to more information sharing and better joint working.

Q497 Mr Jenkin: So we think that the data-sharing problem was the subject of too much cautious legal advice.

Ben Harrison: I think HMRC said that they had taken specific advice on their ability to share information with the Commission, and changed their view on that at one point in the past.

Mr Jenkin: Very good.

Ben Harrison: The other point is that the Commission and HMRC are working on a joint application portal, so that when someone wants to register a charity with the Charity Commission and register it for the purposes of gift aid, they will be able to make one application, which will go through to both the Commission and HMRC.

Mr Jenkin: Excellent.

Q498 Viscount Younger: You alluded earlier to the extra funding. We understand that the extra resource that was recently announced for the Charity Commission has been earmarked for greater digitisation of its services for charities and the public. The Commission itself and the sector umbrella bodies emphasised the importance of its web presentation, but a number of witnesses highlighted the difficulty of accessing Charity Commission information and materials on the gov.uk website. William Shawcross told us in his evidence that the Commission did not want to move to the Government website, and that it prevents them from presenting their material in a structure specifically designed for charities. I wondered whether this was your view.

Rob Wilson: I agree with William Shawcross on many things, but I disagree with him about this. The idea of bringing hundreds of different websites to gov.uk is a good thing for the end user. It is simpler, it is clearer, and it is faster to use. That is not to decry the Charity Commission, because, as with any new website, they have gone through some teething problems, and they are working with the Government Digital Service to iron out some of the things that have caused them concern; but they have also had the benefit of increased traffic to their website, which has to be a good thing.

Q499 Viscount Younger: I want to follow up on something that you said earlier about statistics on the number of questions presented, and the huge challenge that there is. I must admit that I remain to be convinced that, even with the new digitisation, such traffic, if I may put it that way, is going to be adequately dealt with and that, crucially, the resources for casework are going to be there—in other words, that there will be freeing up for the casework. Could you both comment on that?

Rob Wilson: Many of the Government agencies that have switched to the gov.uk website, and the public, have had a pleasant experience. For instance, I don’t think there are now many people who do not go online to renew their car tax disc, because it is simple and easy. There are many benefits to be had from the gov.uk website, and over time the Charity Commission will find that there is a big benefit, in terms of there being one place easily to access all the information that you need. That does not mean to say that there are not problems of structure, and problems in getting easily to the parts of the website that you want, but that can be worked on and worked out through conversations between the Charity Commission and the Government Digital Service. I am quite hopeful that, in a fairly short period of time, it can be solved.

Ben Harrison: The Commission’s casework represents a fair proportion of the work they do at the moment—things like giving charities certain permissions to do things—but that work can be streamlined. It is obviously for the Commission to decide how they do that, and not for us to say, but I know that the Commission are thinking about how they can use technology to filter some of that work—into low risk, where it will not necessarily even be looked at by somebody; into medium risk, where they may need to make a quick check; and into high risk. It is a way of filtering the work that is coming to the Commission, to ensure that the Commission is able to deploy its resources as best as possible in order to address different issues. That can be done with the Commission’s work; even on registrations there are ways of flagging high risk. That is one of the benefits that improving their IT systems will bring, but it will take a bit of time.

Q500 Viscount Younger: The proof of the pudding will be to show results, in terms of the Charity Commission being more proactive in going into charities when it might otherwise not do so, to ascertain whether there are issues to address. As I see it, it remains very reactive at the moment, perhaps because of the lack of digitisation, but also because of the lack of resources.

My final question is this. I have a concern about the one size fits all. I know, Mr Harrison, that you have attempted to address that, but I think a lot more needs to be done to reassure people that one size fits all is an appropriate model.

Rob Wilson: In answer to the first part of your question—I am sure that Mr Harrison will have the figures—there has been a big increase over the past 12 to 18 months in the proactive work that the Commission is undertaking. It is not simply a reactive organisation any more, and part of what we are trying to do, with this and the other measures that we are taking, is to make it even more proactive than the stage that we have reached today. Do you have any figures?

Ben Harrison: I have them, but not immediately to hand. I think they have opened three times more statutory inquiries over the last year than in the previous year.

Q501 Mrs Lewell-Buck: Good afternoon. Regarding giving the Commission the statutory power to issue a warning to a charity, what value do you both think could be added as a result of this, and do you have any practical examples where this power would have been more effective than an informal warning or the opening of an inquiry?

Rob Wilson: First, this is one of the most important powers in the draft Bill. It deals with abuse that is not serious enough for the opening of a statutory inquiry. It enables the Commission to make a more proportionate reaction in a particular set of circumstances. At the moment, we have a situation where 20% to 30% of non-statutory warnings are currently either completely ignored or only partially addressed. We believe that the statutory nature of the warning will increase the level of compliance; in a sense, if you get this level of warning, things will essentially fix themselves. We think that is a good thing to be happening. Common examples of the sort of thing we are talking about for this type of warning would be late filing of accounts, poor financial management or perhaps other governance issues. That is the sort of thing that we are talking about.

Ben Harrison: There are two types of area where the Commission may need to issue a warning. One is the simple failure to meet one of the requirements in the Charities Acts, and failure to file accounts is a good example, but there are other areas that are not necessarily black and white and set out in legislation, which could include financial control. On the failure to have in place sufficient financial controls, there is no single statutory requirement that one could easily point to; it would be a matter of the duties of the trustees, and it would be the Commission’s judgment that those trustees had failed to put in place the proper financial controls necessary to run the charity.

Those are the different types of area where the Commission would consider issuing a warning, and it would be a proportionate resolution. Before it gets to the point at which the Commission considers that it needs to open a statutory inquiry, because there is serious risk to charity property or serious risk of misconduct or mismanagement, the Commission will say, “Well, we are engaging with the charity,” and it may have written to the charity informally. At the conclusion of that engagement, it may say that it is not proportionate to open a statutory inquiry with some of the pretty invasive and serious powers like suspension, the removal of trustees or directing the charity, but instead to issue a statutory warning.

Rob Wilson: In answer directly to your question, I think the Charity Commission provided some examples in its consultation document, so you should have some real-life examples of what we are talking about.

Q502 Mrs Lewell-Buck: On the back of that, some witnesses said that the operation of a statutory warning system should be set out on the face of the Bill. Do you both agree with that? If not, why not?

Rob Wilson: We need to give that proper consideration, and accept that there are some elements of the operation of a statutory warning power that may need to be made clear on the face of the Bill—things such as the content of the warning, perhaps a period of representation, and things of that nature. Yes, I have some sympathy for that. It is something we need to look at further.

Q503 Chairman: As presently drafted, the clause does seem remarkably wide. All it says is that the Commission “may issue a warning”, it “may publish a warning it has issued” and it “may issue or publish a warning in any way it considers appropriate”. There are no checks at all set out in the statute, and I think that is what Emma’s question is really about. Some thought needs to be given to responding to all this, and there will certainly be questions when the Bill comes forward.

Rob Wilson: What I am saying, Chairman, is that we accept that we probably need to look further at that, and come up with something that people would generally accept was fair.

Chairman: The public would be much reassured if you could do that. Thank you very much indeed. Baroness Warwick, there is another aspect to this.

Q504 Baroness Warwick: Exactly—another similar aspect. One of the concerns expressed by a lot of witnesses is that in the current drafting of the Bill the warning power does not allow for an appeals process. Given the broad range of issues that might be subject to a warning, and given the reputational damage that might occur were it to become obvious that a warning had been given, is there not an argument for having an appeals process?

Rob Wilson: No, I do not think so. I would disagree with that. If you set up an appeals system for this type of yellow card warning—effectively, that is what it is—it could make the power completely unusable. That is not really what we want. Instead, we plan to have a period for representations to be made, and the Commission would be obliged to consider them. That would be much more proportionate than having an appeals system. Of course, there is always the option of a judicial review. What we do not want is a system whereby you issue this yellow card, and there is constantly appeal after appeal, gumming up the system, making it overly bureaucratic and taking up time for relatively lower-level stuff, compared with the statutorily opened inquiries. No, it would not be a good use of the Commission’s time.

Q505 Baroness Warwick: Is that not an even stronger argument for being a lot more specific about the areas where warnings might be issued, so that it was clear why a warning was being issued, and what the reasons for it were?

Rob Wilson: As I have said, and at the risk of repeating myself, I am certainly open to that. It is something we are going to have a look at.

Q506 Baroness Warwick: The final point on that is that, for many regulators, the way in which they handle this sort of process is by issuing a report with the warning contained in it, but the representations about which you are talking can be made before any publicity is given to that warning. Is that something you are considering? It seems to me to be a sensible practice.

Rob Wilson: As I say, we are looking at something where there is a period for representations, and corrections as necessary. People would have the opportunity to make those representations, and if anything was evidenced as something that needed to be corrected, obviously the Charity Commission would correct it.

Ben Harrison: Currently, when the Commission engages with charities it is at a level below statutory inquiry. It operates what are called operational compliance cases, and it often publishes the outcome of operational compliance cases. We have had several in the last few weeks, and several just before Christmas. In those cases, there is no right of appeal against publication. There is no power; it is done on a non-statutory footing. Essentially, in our view the Commission would be using the warning power in a similar way to the way it currently publishes these operational compliance case reports.

Q507 Viscount Younger: To follow on from Lady Warwick, I wonder whether, as part of the consideration that you mentioned, there could be a verbal warning that was internal, which would then be written internally, before the public warning was given, if you see what I mean. I know that I am getting into some detail, but it might be something to consider. It happens in industry.

Rob Wilson: We will certainly look at any suggestions that the Committee would like to present to us.

Q508 Chairman: I am not sure that I entirely follow your point about an appeal process gumming up the system, bearing in mind your acknowledgment that, if there is not an appeals process, a warning would be open to judicial review. People have views about judicial review and whether it is an appropriate remedy. It is probably more expensive than the tribunal system.

Rob Wilson: For somebody to go to judicial review would be a very big decision, whereas going to an appeal would not be, so you would be more likely to have a lot of appeals and very few judicial reviews.

Q509 Chairman: Is that simply because judicial review costs more, and people would be discouraged by the cost?

Rob Wilson: You can draw your own conclusions on that.

Q510 Baroness Barker: I have a similar line of questioning. While we try to gauge exactly what the range of weaponry for this particular battle should be and how it should be deployed, I guess that perhaps you would agree with some of the witnesses that we have heard—that some appeals against the opening of statutory tribunals are vexatious. Given the safeguards that are attached to the powers that the Commission has, is there a case for ceasing to allow appeals simply against the opening of an inquiry?

Rob Wilson: Again, I am open-minded on this. It is a case of “on one hand, and on the other”. Opening a statutory inquiry makes significant powers available to the Commission, and as such it seems appropriate that there is an appeal to something that significant. On the other hand, removing the right of appeal against a statutory inquiry would reduce the number of deliberate attempts to frustrate the Charity Commission’s progress. I will be interested to see what the Committee’s view is on that.

Q511 Baroness Barker: Presumably, you would deploy the same argument about people having recourse to judicial review, and the possible impact of that.

Rob Wilson: I think judicial review is slightly different from an appeals process. The comments that I made to the Chairman a few moments ago would be my response to that particular question.

Ben Harrison: I would agree. It comes down to proportionality. If the Commission is issuing warnings more regularly than it is opening statutory inquiries, it may be more proportionate just to have a process of representations in relation to the yellow card. When you are opening a statutory inquiry, as the Minister says, it is the gateway to some pretty significant powers for the Commission. The charity sector has generally supported there being a right of appeal, and has argued and made the case, even in evidence to the Committee, that certain powers should be reserved for a statutory inquiry, so it seems appropriate for there to be some right of appeal for the opening of an inquiry. Quite what that should be is for the Committee to say.

Q512 Baroness Barker: It is worth nothing that the Commission told us that the opening of a statutory inquiry is a significant undertaking. We could not quite get from them details of why that should be so, but it made us question the extent to which they were likely to be enthusiastic or otherwise about opening an inquiry, given the potential impact that it would have not only on the charities but on their work. Would you care to comment on that?

Ben Harrison: I cannot speak for the Commission, but in opening an inquiry they have to make sure that they run through in their mind almost a checklist, so that if they are challenged they are able to present a strong case before the tribunal. That is no bad thing necessarily, although others have argued that opening a statutory inquiry can be a very straightforward and simple process.

Q513 Baroness Barker: Given that the Commission have to do that, in the course of doing the work necessary to open a statutory inquiry it must become clear what is wrong with the charity. If, in those circumstances, the charity makes an effort to address that, should they be able to stop a tribunal going ahead if it has rectified the problem?

Ben Harrison: That could be appropriate for the Commission. You are saying that the Commission is gathering evidence, and the opening of an inquiry is an information-gathering power. It is about them gathering the evidence in order to come to a conclusion and decide what to do, if anything. If, during the course of that, the charity puts right what has been wrong, I imagine that there would be dialogue between the parties as to whether a case before the tribunal was withdrawn and whether a statutory inquiry was closed by the Commission.

Q514 Lord Watson: Minister, may I ask you a question relating to the ability to charge the Commission with being able to disqualify individuals from being trustees on the basis of cautions rather than convictions? In favour of this proposal, we have heard it argued that cautions are spent immediately they are accepted, but they remain on the records of the Disclosure and Barring Service for six years. Do you feel it appropriate that in such situations a caution is, effectively, being equated with a conviction?

Rob Wilson: In these circumstances, yes, I do. There may be situations where, for whatever reason, the police may choose to offer a caution rather than take something to a full case. Public trust in charities is so important, and that trust could be damaged if the Charity Commission were not shown to have taken action. The Commission considers these things on a case-by-case basis. It would also have to demonstrate that the person’s conduct made them unfit to be a charity trustee. There is quite a high bar.

Q515 Lord Watson: It is interesting that you mention the case-by-case basis, because that is the answer that William Shawcross gave when I asked him a similar question, and I understand—

Rob Wilson: Great minds think alike.

Lord Watson: And I understand why you said that, but there are situations where cautions are accepted, perhaps because the individual feels that he or she does not have the ability, possibly for financial or other reasons, to contest a case in court. That would not necessarily be proof of anybody having done anything wrong—maybe they had no option.

Rob Wilson: If the individual disagrees with the Charity Commission’s view, they have the right to appeal to the tribunal. That is obviously an independent way of settling the issue.

Q516 Lord Watson: It is not clear from the Bill—I wonder whether you can offer some clarification—whether or not cautions should carry weight in terms of disqualification only if they are accepted by a person who is already a trustee, as opposed to something that may have happened retrospectively. What is your view on that?

Ben Harrison: The Commission would argue that the risks were the same, whether or not they were currently serving as a trustee, if the conduct was such that it made someone unfit. Remember that accepting a caution is the trigger, and the Commission then goes on to consider whether that conduct makes them unfit to be a trustee. If the Commission’s view was that they were unfit to be a trustee, whether they were serving as a trustee or looking to become a trustee would not be much of a distinction.

Q517 Lord Watson: There is nothing implicit in the Bill on that.

Ben Harrison: No. They may not be a serving trustee, but the disqualification power in the draft Bill is not limited to serving trustees. They could be people who are not currently serving trustees but who have in the past been trustees, or they may be employees of a charity or they may be looking to set up a charity. It is about protecting public trust and confidence in charities from people who are unsuitable to be running charities.

Q518 Lord Watson: On a slightly different angle, I would like to turn to the potential effect of convictions by courts in overseas jurisdictions. We heard evidence from Bond, the umbrella organisation for overseas aid charities, who were concerned that the power was too broad. They said that it could lead to individuals facing censure even with a standard of evidence and justice that would not be accepted in a UK court, which raises broad civil liberty and sovereignty issues. Do you have a view on that particular aspect of convictions?

Rob Wilson: An overseas conviction, in my understanding, would need a trigger—a consideration by the Commission. The Commission would still need to consider the individual’s case and the individual’s fitness. Its decision on that would reflect all the circumstances, and take into account what had happened overseas. Again, if the individual does not agree with the outcome of the Charity Commission’s decision, they can appeal that decision to the tribunal.

Ben Harrison: Specifically on the point about fairness in overseas trials, that is clearly something the Commission would have to take into consideration in these sorts of cases.

Q519 Chairman: You already have a perfectly appropriate qualification, particularly at head B in the list of conditions. The second part of it requires that the offence for which the conviction has been returned is something that would be an offence in the United Kingdom, which is perfectly fair and proper—that’s in; but there are these points on human rights grounds, such as that the individual had received a fair trial and so on, and one might feel happier if they were written into the Bill. I wonder whether you would be prepared to look at that, too. Lord Watson’s point relates to cases where somebody has been convicted on evidence that we would not accept, although the offence itself is one that we would. Do you see the point?

Rob Wilson: Yes. I think we would happy to look at that.

Chairman: Thank you very much.

Q520 Baroness Warwick: Minister, could I move on to the list of offences that would automatically disqualify a person from being a trustee in future? The Delegated Powers and Regulatory Reform Select Committee, as well as several of our witnesses, raised concerns about clause 8 and the power to add additional offences without primary legislation. The first question is whether this power is appropriate, and then how you would consult with the charity sector and the public prior to making such an order.

Rob Wilson: Yes, I think it is appropriate, if accompanied by the appropriate safeguards—for example, an affirmative resolution in Parliament. On consultation, we would consult publicly on any substantive change that we were proposing, such as proposals to add a new category of offences to the list. As usual, this will involve publishing the proposals and proactively seeking views, in the normal way that you undertake consultation.

Q521 Baroness Warwick: Perhaps I could ask an additional question. The Delegated Powers Select Committee raised the quite interesting question that adding new automatically disqualifying offences would have immediate effect, and that would not give trustees with the relevant convictions time to step down to avoid prosecution for acting as trustees while disqualified. Is that something that has been raised with you, and is it of concern?

Rob Wilson: That is a fair point to raise. We would plan to build it into the implementation of the Bill so that trustees with relevant convictions would be able to familiarise themselves with what is being asked of them, and the changes being made, and step down where appropriate or seek a waiver.

Q522 Baroness Warwick: So there would be time.

Rob Wilson: There would be time.

Q523 Baroness Warwick: I have one question on the same area. It is about the power in clause 9 that amends the list of conditions, at least one of which must be satisfied when exercising the power to disqualify from being a trustee. The anxiety is around the breadth of that clause. Should the power have a requirement, as we were saying in relation to the previous case, that any additional condition must be relevant to the fitness of an individual to be a trustee?

Rob Wilson: That sounds like a very good idea, and it is something we should look at.

Q524 Chris Williamson: Minister, we now move on to disqualified trustees holding positions of power in a charity. We have heard evidence supporting, in principle at least, the consultation proposal for the Charity Commission to prevent disqualified trustees from acting in another position of power in a charity, but there is some concern about the lack of clarity on what that means in practice. What do you see as the positions of power that disqualified trustees should be prevented from occupying? Could you also tell us your thoughts about how easy or otherwise it might be to define that clearly and effectively in statute?

Rob Wilson: As you are probably aware, Mr Williamson, this is not something that is currently in the Bill but something that the Commission wants added to the Bill, to avoid people exploiting what could be considered a loophole. We are supportive of that view. This is not particularly new territory for the Commission. Its current powers, where there is misconduct in a charity, enable it to suspend or remove paid employees when they have been guilty of misconduct or mismanagement. In terms of how we might define it in statute, we should like to explore that in more detail.

Q525 Chris Williamson: To summarise, you are saying that you are supportive, as indeed other witnesses have been, of the consultation proposal.

Rob Wilson: Yes.

Q526 Chris Williamson: I am not sure, though, that you have been clear about whether you think it is easy to define it in a way that is meaningful in statute. Do you think that is possible?

Rob Wilson: Yes, I do think it is possible. We could clearly and effectively define it, and there are some precedents for doing that—for example, in the Company Directors Disqualification Act and, of course, HMRC’s fit and proper person test. There is some basis for us thinking that we can do that.

Chris Williamson: Thanks.

Q527 Chairman: I wish to make another point on clause 9, where our attention has been drawn to a possible lack of legal certainty. It relates to the phrase “the person is unfit to be a charity trustee”, which is what the Commission has to be satisfied about before it exercises the power in new clause 9. There is another phrase, “fit and proper person”, which we will ask you about in a moment, but what about the word “unfit” itself? We are aware, I think, that, in the Company Directors Disqualification Act, a fairly elaborate system is set out in support of section 9, with a list of about 10 conditions, 10 criteria by which, for that purpose, unfitness can be determined. There is one chapter where the company has been declared insolvent, and the other is a general chapter where the offences are in themselves sufficiently disturbing to justify the action being taken. We do not have anything like that in this case, and the suggestion is that, as it stands, the word itself is so open-ended that it creates some concern that the Commission’s powers are wider than they need to be.

Rob Wilson: I shall ask Ben to come in on this, but I would say that the Commission would have to consider all relevant factors in deciding whether individuals were unfit to be trustees, and these might differ from one case to another. I do not want unduly to fetter the Charity Commission with inflexible criteria. That is my starting point. Ben, do you want to add anything about the tests?

Ben Harrison: It is a two-limb test, of course, so there will already have had to be a trigger for the Commission to determine whether or not someone’s conduct makes them unfit. There are precedents, as you said, and we could look at some of them, but we need to give it some more thought, perhaps in terms of a non-exhaustive list of criteria. We would want to do it in a way that did not fetter the Commission in making those decisions.

The idea of having it drafted as it is currently is that, over time, people would appeal decisions to the tribunal, and one would get a sense of the approach that it would take, and we would expect to see the Commission publish some guidance on this. Over time, one would see decisions being made, with a body of cases giving us a clearer indication of the matters that the Commission would take into account on the question of fitness.

Q528 Chairman: That is a perfectly fair point. The structure here is different from the Company Directors Disqualification Act, where there is a different kind of trigger. In this case, you are right to say that there is a two-stage test. The mere view that somebody is unfit does not take the Commission where it needs to go to exercise the power of disqualification, so we take that point. Baroness Barker, you have a related point on another provision in the same section, don’t you?

Q529 Baroness Barker: HMRC’s fit and proper person test is not uncontroversial in the commercial world, and the prospect of introducing it in the charitable world is something that people are questioning. How have the Government looked at the efficacy of this test? It has been put to us by a number of witnesses that a test which requires people to say whether they have ever been involved in the design or implementation of tax avoidance might rule out pretty well most accountants and a large swathe of lawyers in this country, because they frequently advise their clients on how to minimise their tax payments. It could be quite difficult. It could pose a lot of difficulties. Have you thought about that?

Rob Wilson: The test they apply is a pretty good test. It is certainly a good way of ensuring that charity tax reliefs are not misused by those unfit to manage them. It is particularly telling that, despite a simple appeals process, there have been no appeals against decisions made on that basis. Those disqualified by the test know that they are not suitable to be trustees, so I think it is a pretty good system.

Q530 Baroness Barker: That is the exercise of the test by HMRC, not by the Charity Commission.

Rob Wilson: What I am trying to suggest is that, in principle, it is a good test and one that possibly the Charity Commission could use.

Ben Harrison: The Charity Commission would not be exercising or conducting the fit and proper person test itself. It would be relying on the decision made by HMRC that a person was not fit and proper as a trigger to consider whether that person was fit to be a trustee of a charity. That person would have been ruled out by HMRC as not being a fit and proper person for charity tax purposes, and the Commission would then be able to use that as a trigger for it to consider whether or not that person was suitable and fit to be a charity trustee.

Q531 Baroness Barker: If the Charity Commission arrived at a different conclusion—

Ben Harrison: It may arrive at a different conclusion, in which case the person could be a trustee, but they would not be able to get access to the charity tax reliefs through HMRC.

Q532 Chairman: Forgive me if I am wrong, but were you suggesting that decisions of the First-Tier Tribunal on this kind of issue would be of assistance?

Ben Harrison: They would give us a pointer, but obviously they are not legal precedent in the way that a case to the High Court would be.

Q533 Chairman: That is the problem. They are one-by-one cases, which does not take you any further in the case itself.

Ben Harrison: Some general principles on the way the tribunal looked at a case could be quite helpful for the Commission in formulating its guidance. If it were to see that the tribunal took a particular view on the way in which the Commission was exercising the test of fitness, one would hope that the Commission would take that into consideration.

Chairman: We are now going to change subject matter a little.

Q534 Mr Jenkin: Turning to terrorism-related issues, and the large number of charities, particularly smaller charities, that seem to be at risk of association with extremist elements, it is easy to feel that the Charity Commission may be targeting disproportionately certain groups. What would you say about that?

Rob Wilson: First, it is important to keep the issue in proportion. It is something that is very rare, but it would be very foolish to ignore the role that some charities could play in fund-raising for terrorist activities. It is not a new phenomenon. It is not something that we have not seen before; for example, 10 years ago the Charity Commission was looking at charities involved with Sri Lanka. It is not a new phenomenon, but in the light of events it is something we need to take very seriously, to make sure that the reputation of charities and public trust in charities remains high, as they are at the moment.

As I say, it is very rare, but we want to make the Charity Commission much more proactive across the piece, not just with the subject that we are talking about here. If it does become more proactive, and the Commission itself recognises this, it will find that the more stones you look under, the more things you find. I am not just speaking about terrorists; I am talking about all aspects of the charity sector. In light of this, the powers in clause 8 about extending the criteria for automatic disqualification for trustees—the list—are important.

Q535 Mr Jenkin: The Home Office counter-terrorism domestic effort is very much directed at persuading Muslim communities that it is engaged with them in order to protect them from terrorist activity and infiltration. What lessons can be learned by the Charity Commission, from that effort, for the way they operate in those communities?

Ben Harrison: I think there is a parallel. The Charity Commission needs to engage, and is engaging, with charities from those communities, to help them better protect themselves against the risk of abuse. The Commission has produced guidance, and it has met with the likes of the Muslim Charities Forum. That is an important part of the Commission’s work. It is about the Commission helping those charities to protect themselves from the risk of being abused. That is fundamentally it.

Q536 Chairman: You mentioned clause 8 in your answer to Bernard Jenkin. We have to bear in mind, don’t we, that clause 8 sets out a list of disqualifying offences? When we come to clause 9, a mere caution for disqualifying offences is enough for the discretionary power to be exercised. We have to bear in mind the reach of the terrorism aspect of the Bill. It is not just the conviction aspect; it is to do with cautions too. People are nervous about both those aspects of the terrorism legislation.

Rob Wilson: It is unspent convictions.

Ben Harrison: Yes, it is unspent convictions. In relation to cautions, the sorts of offences that we are looking at here are fairly serious—money laundering and so on. Charges that relate—

Q537 Chairman: Money laundering comes under a separate head, of course. That is under head 3, but 1 and 2 are “An offence to which Part 4 of the Counter-Terrorism Act 2008 applies”, and then “An offence under section 13 or 19 of the Terrorism Act 2000”, which is the wearing of uniform, and the failure to disclose information. Failing to disclose information could trap somebody in all sorts of ways. Somebody trying to take money to a humanitarian individual or organisation could be asked to disclose things that might compromise the humanitarian effort. It is that kind of problem. Emma, would you like to put your question?

Q538 Mrs Lewell-Buck: Yes, my question follows on from that point. Some of the witnesses have told the Committee that the anti-terrorism offences referred to in the draft Bill are broadly defined, and serious concerns have been raised as to the effect that the counter-terrorism legislation has on the delivery of humanitarian aid in areas where proscribed groups operate. Are these concerns that you share?

Rob Wilson: You raise an interesting and relevant point. Obviously, I have no ministerial responsibility for counter-terrorism legislation. However, I think that you are referring to the fact that some charities, for example, sometimes pay organisations that might be considered terrorist organisations for access to distribute their aid. I think that is the type of thing you are referring to. I think you have to make a distinction between what we are doing in the draft Bill and wider counter-terrorist legislation. They are separate issues.

Charities need due diligence processes in order to ensure that donations are not misused or diverted to fund terrorist or extremist activities. The Commission has issued guidelines on that, and they are widely regarded as good guidelines on how to deal with it. There has not been a single case of aid workers being prosecuted under counter-terrorism legislation for the type of activities that we are discussing.

Q539 Mrs Lewell-Buck: Are you saying that you do not necessarily share the concerns of those witnesses?

Rob Wilson: I can see why you raise the question, but in terms of what we are proposing in this legislation, I do not think that it is going to be a problem.

Ben Harrison: May I add a little to that? These are very difficult parts of the world in which to operate. Charities are doing an amazing job in getting vital aid through to some of these really difficult parts of the world, but if they are difficult there are extra costs involved. There are risks—risks to the staff of the charities and their local partners, and also the risk that money is misappropriated. That has an impact on public trust and confidence back home. Charities incur extra costs in working in these parts of the world, and it is important that the Charity Commission works with the sector and others, such as banks and so on, to make sure that charities are equipped with the best possible guidance on what they need to do in order to be able to work effectively and get the aid to where it is most needed in those parts of the world.

Q540 Mrs Lewell-Buck: Have you considered the fact that in countries such as Australia and New Zealand there are provisions in law that provide legal cover for charities providing humanitarian aid? Why would the Government not consider that?

Rob Wilson: I think that would not fall within my remit or the Cabinet Office remit. That is essentially a question for the Home Office.

Q541 Mrs Lewell-Buck: But presumably you have had those discussions with your counterpart in the Home Office.

Rob Wilson: We have had discussions with the Home Office about the provisions in our Bill.

Q542 Mrs Lewell-Buck: Has there been consideration of doing something similar to what Australia and New Zealand have done?

Ben Harrison: Not up to this point in time, but as the Minister said—this is an important point—we are not aware of any humanitarian aid worker, charity employee or trustee having been prosecuted under UK terrorism legislation.

Rob Wilson: We might be chasing a problem that does not exist, if no one has been prosecuted.

Mrs Lewell-Buck: It is probably worth having those conversations and looking at it though, because there are people out there who are genuinely concerned. The people who gave evidence to the Committee are genuinely concerned.

Chairman: The problem we are faced with is witnesses who talk about the chilling effect. You may be right. We do not have the information to say whether or not there have been prosecutions, but the presence of the provision in the Bill is said to alarm simply because of the prospect of being prosecuted. Mark Menzies, do you want to take up that point?

Q543 Mark Menzies: I have a supplementary question on that point. Should the Crown Prosecution Service publish guidance on prosecutions and the application of the public interest test in this area, to provide greater clarity and certainty to charities operating under these circumstances?

Rob Wilson: Similarly to my answer just now, I would say that it would be a matter for the Crown Prosecution Service. I have not looked into the matter personally, but it sounds like a sensible idea.

Q544 Chairman: If the Bill goes through Parliament, questions are going to be asked about this. That is the reason why we are putting these questions to you. Somebody is going to raise it, and you are going to be in a position, frankly, where you are going to have to give answers that will satisfy people that there isn’t cause for alarm.

Rob Wilson: I await the Committee’s report with eager anticipation on these matters.

Chairman: We shall do the best we can to guide you on these two points.

Q545 Lord Watson: Clause 6 of the Bill would allow the Charity Commission to direct the trustees of a charity to wind it up in certain circumstances. This is an issue that I raised earlier with the Charity Commission’s director of legal services—indeed on a day when Mr Harrison himself was present—and he said that the power would be used only in exceptional circumstances. Nobody would doubt that, but the witnesses that we have heard from have been divided on the need for such a clause, at least as it stands. Perhaps importantly, the Charity Law Association was in favour of it but the NCVO was not convinced that it would be appropriate without safeguards. Having seen the evidence that we have had, have you had any thoughts as to whether or not this provision should remain as it is in the Bill?

Rob Wilson: I am aware of the Charity Law Association’s suggestion of a requirement for the Charity Commission to publish notice of a proposal to direct the winding up of a charity under this power. This strikes me as quite a sensible suggestion, and one that we should certainly give consideration to. As things stand, the Charity Commission could do so as a matter of policy, and indeed would do so, I think; but as an added safeguard we could look at including this as a requirement on the face of the Bill. We could certainly do something on this front.

Q546 Lord Watson: There must surely be time for those involved, particularly in the charity concerned, to contest or challenge the decision. Do you have any idea what sort of time scale might be involved? What do you think might be reasonable, to enable people to take on board the information that the Charity Commission has confronted them with and to respond?

Ben Harrison: I should have thought at least 28 days.

Rob Wilson: I would say possibly more—

Ben Harrison: Maybe up to 90 days.

Rob Wilson: Yes. We are talking, as you say, about a very rare set of circumstances. Based on previous evidence from the Charity Commission, we will have possibly one or maybe two of these per year. They are very rare indeed, and I would have thought that 60 to 90 days would be a reasonable amount of time to give an organisation; 28 days might be a bit too short.

Ben Harrison: Indeed, but I would be surprised if you had any responses to the publicity, because in most cases I expect that all that would be left was an empty shell, with no one wanting anything to do with it and with the Charity Commission wanting to ensure that it was wound up. We are not in the league of charities with members or a membership body with a lot of public support; we are talking about rare cases where there is just a shell left and only one or two people involved.

Q547 Lord Watson: The period of 60 to 90 days that you suggest is helpful. May I clarify whether you would understand this to be as regards the general public, if you like, and not just the charity itself?

Rob Wilson: We would publish a notice that anyone could see.

Q548 Viscount Younger: I want to move on to exempt and excepted charities. As you both know, a good few—more than a good few—fit into those two categories. Issues have been raised on a few occasions with the Committee during this process. In your view, is there a need to change the registration arrangements and the thresholds?

Rob Wilson: No, I don’t think there is any need to change them. Exempted charities pose a very small risk to public trust. Exempt charities are exempt because they are regulated by other bodies. We are talking about three categories—small unincorporated charities with an income of less than £5,000, organisations such as Churches and the Scout Association, and universities. I really don’t think it is a big issue.

Q549 Mark Menzies: Picking up on that point, Minister, how much engagement should the Commission seek to have with charities that fall within this bracket, and are therefore not registered with it, and how can this best be achieved?

Rob Wilson: The Charity Commission has regular engagement with the principal regulators of exempt charities, including routine meetings, and it works closely with the bodies that represent groups of excepted charities. It already has a close working relationship with those groups.

Q550 Chris Williamson: Can I move on to the Charity Tribunal? It has been suggested by some witnesses that schedule 6 of the 2011 Act should be removed, and the jurisdiction of the tribunal reformulated to provide a right of appeal against any legal decisions of the Commission, and a right of review in respect of any other decisions. Would you give us your reflections on what the advantages and disadvantages of that approach might be?

Rob Wilson: The Government’s position on this subject has already been set out in response to Lord Hodgson’s review. I do not know whether the Committee has had a chance to look at that. I am not opposed in principle to rationalising appeal rights, but I would not want to expose the Charity Commission to challenges when it decides not to intervene in a charity, or to create significant new appeal rights that would add to the Commission’s and the tribunal’s case load. We do not want to add more unnecessary bureaucracy that would risk grinding the Commission’s activities to a halt. Although, in principle, it is an interesting idea, in practical terms it would be the wrong thing to do at this moment in the Charity Commission’s development.

Q551 Chris Williamson: Is that because you think that it would slow down the Commission’s ability to take action, particularly in this fast-moving situation?

Rob Wilson: Where you have appeals processes, as one member of the Committee has already mentioned, there are people who sometimes use them in a vexatious way. While the Charity Commission is going through the change programme, I do not want to find that we have set in motion a whole series of things to do with appeals that mean they are incumbent on it in carrying out the duties we want it to carry out, which are to be more robust in regulating the sector and getting to the root of some of the difficulties and problems that the charity sector has.

Q552 Chris Williamson: I am curious. You say that in principle you are not against it but you think that it is not practicable. I wonder why you say that in principle you think it is a good idea but that in practice it would not work.

Rob Wilson: In principle, appeals are always appealing, in the sense that they are attractive and seen to be generally a fair way of a decent democratic society carrying out things, but you have to weigh that against the real danger that the Charity Commission could end up being bogged down in a morass of appeals, frustrating and delaying its legitimate regulatory action in other areas. That is my big concern, particularly when we are one year into a three-year period of big change. Now would be exactly the wrong time to do something like that.

Q553 Chris Williamson: What if more resources were made available to the Charity Commission to cope with that, if you think it is a good idea in practice—I mean in principle?

Rob Wilson: More resources have been made available to the Charity Commission: £1 million for the period 2014 to 2015, and £8 million to invest in capital—IT systems and the like. There are more resources, but earlier in my comments I think I gave you the scale of what it is already dealing with. We need to help the Charity Commission as much as possible through this big period of change, without encumbering it with unnecessary appeals processes or bureaucracy.

Q554 Chris Williamson: In conclusion, how much more resource do you think the Commission would require to enable it to fulfil what you think is a good idea in principle but that is not practicable? The rationale for that seems to be that it would take up too much resource and that the Commission would get bogged down. It needs more resources, and it has had more resources, but do you have an idea of what additional resources would be required to enable it to deliver in practice what you think is a good idea in principle?

Rob Wilson: It will be difficult for any Government to deliver even more additional resources to the Charity Commission than we have already—

Q555 Chris Williamson: I am not asking you to give more but whether you have any idea of how much more would be required.

Rob Wilson: We have not done a study of how much more—that is the direct answer—but the Government expect the Charity Commission to carry out its functions and duties with the extra resources that it has been given. I would not expect the Charity Commission to come back and ask for more resources.

Q556 Mr Jenkin: We are, of course, preparing ourselves for another comprehensive spending review. May I suggest that now would be a good time to do the analysis so that, whether you or some other Minister is sitting there after the general election, there is some analysis of the risks and uncertainties surrounding changes in the budgeting for the Charity Commission? Just top-slicing everything is not a way of evaluating the quality of outcomes.

Rob Wilson: We have not top-sliced, in that we have given the Charity Commission extra resources of £8 million in capital and £1 million in 2014-15. We have not top-sliced in that respect.

Q557 Mr Jenkin: But with respect, that did not reflect the 2010 review, which envisaged a progressive contraction of the Charity Commission budget. That approach turned out to be wrong, which is why the extra money has had to be provided.

Rob Wilson: Based on the reports that we have had, we are asking the Charity Commission to do more in the area of compliance than they were doing. That is why we have given them extra resources. They need to redirect some of the activities they were doing before in order to be able to do that, and they need funding to get through their change programme. This is not an ongoing process; £8 million—

Q558 Mr Jenkin: What would be the harm of doing some analysis now, so that the discussion with the Treasury about the Charity Commission is informed, when it occurs after the election?

Rob Wilson: As you know, Mr Jenkin, we are always looking at things.

Mr Jenkin: Thank you.

Q559 Mark Menzies: Returning to the registration of charities more generally, is there a risk that more joint working between the Charity Commission and HMRC would have the effect of slowing the registration process?

Ben Harrison: I do not know the answer to that off the top of my head. I imagine that there must be a risk, but equally it must be a risk that the Commission and HMRC colleagues will have jointly considered. The benefits would outweigh the risks, in my view, as you would have the ability to share information more easily and to have the same facts in front of you as are in front of someone in HMRC making a similar decision. Registration is the gateway to the respectable world of charities, and people seeking to abuse a charity have to go through that gateway. It is therefore an important point in the process at which you can protect the charity. It is more important to have the ability for both the Commission and HMRC to look at something and to share information about a registration case than whether there could be delays. The fact that it is going to be an online process could help.

Q560 Mark Menzies: Bearing in mind that you think there could be a risk, what steps could be put in place to mitigate that? You touched on the fact that it is online, but what other steps could there be?

Ben Harrison: You would have to ask the Commission and HMRC, because they are the people who are developing that joint application portal.

Q561 Mark Menzies: Again, picking up on Lord Hope’s earlier point, if we are looking to put this into legislation to go through the House, that may be the sort of thing that is probed.

Ben Harrison: Absolutely, but that is something that is an operational decision for the Commission and HMRC. We can certainly go away and find out what risk analysis they have undertaken on that programme. We can do you a note on that if it would be helpful.

Mark Menzies: Very helpful. Thank you very much.

Q562 Chairman: Can I go back to Chris Williamson’s question about the tribunal’s position? One of the problems of not having a general right of appeal to the tribunal is that you have to set out, as is done in schedule 6 in a quite remarkable table, the various situations in which an appeal could be taken; you list the person who can take the appeal and then I think there is a third column that sets out the powers of the tribunal. That is all very neat and tidy, but there is a slight downside; you have to be absolutely sure that you have covered every possibility in the Bill. You have done it in clause 6, for example, with the power to direct winding up. Are you satisfied that you have covered all the situations where you would need an amendment to schedule 6, or is that something still to be looked at?

Rob Wilson: We think that we have done a pretty good job, but if the Committee thinks that we have missed anything we would be interested to see what it is.

Q563 Chairman: It would be nice not to have to come back with another amending statute if it can all be done in one.

Rob Wilson: Obviously, yes.

Chairman: Thank you both very much indeed. That completes our questions for this afternoon. We express our warm thanks to you, Minister, for giving us your time and for assisting us very much by your answers. We would like to pay particular tribute to Mr Harrison, who has been with us throughout this inquiry, from the very beginning. You gave us the introduction at the start; you have been sitting at the back of the Committee Room every day we have met and have heard all the evidence. I know, from what I have heard from the secretariat around me, that you have been immensely helpful in providing them with support and responding to their questions. That has been of great assistance to us, and we are extremely grateful to you for that assistance. Thank you both.