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At its meeting on 4 September, the committee agreed that it should plan to conduct an inquiry into charity law at an appropriate point in the committee's work programme. The Scottish Council for Voluntary Organisations has agreed to give evidence to start the inquiry.
Thank you for your invitation to talk to you about charity law. I hope that you will have received some background material that was prepared by the SCVO and a copy of our submission to the Scottish Charity Law Review Commission, which is meeting under the convenership of Jean McFadden with a view to reform.
Thank you very much, Lucy, for the information that you have provided us with. What consultation did you undertake, in compiling the SCVO submission, to reach your conclusions?
The SCVO has been campaigning on charity law for some eight years. On numerous occasions, we have consulted our membership broadly—most extensively over the role of the Commission on the Future of the Voluntary Sector in Scotland, which was chaired by Arnold Kemp. That developed an in-principle position of our view on charity law. To update that and confirm that that position was still recognised in the voluntary sector—given the many changes that there have been in Scotland since that commission met—this summer, in parallel with Jean McFadden's commission's consultation, we conducted a consultation exercise of our own, which involved seminars and a consultation document that was sent to our members.
What were the strongest points of agreement that came out of that consultation?
Fundamentally, that something radical must be done and that the situation cannot continue as it is.
Where are the areas of potential disagreement and dispute within organisations that are campaigning for reform?
Possibly in determining what structure should supervise the system. In a sense, that involves a secondary set of issues. When we know exactly what the system is supposed to do, the institutions can be designed around it. People are familiar with the existing institutions and want to know what is going to happen to them in future. They have different views on what might be the better system in the long run.
Does SCVO have a view on the time scale for implementation? What is your view on the way in which Jean McFadden's commission has been operating? Is it proceeding satisfactorily?
We were assured by Jackie Baillie and Jim Wallace, in their initial announcement, that the commission hoped to complete its work by next spring, with a view to its recommendations being drafted into legislation before the end of the Parliament's first session. We are still hopeful and would like that timetable to be adhered to. Jean McFadden spoke at the conference that I mentioned. She was confident that the commission will meet its deadline and report in April.
Let us move on to the Scottish Criminal Record Office checks. There is speculation that an announcement may be made that the situation may be alleviated. What is your understanding of the current situation and what do you expect to happen?
In the same speech to which I referred, Jackie Baillie told us that a decision would be made by Christmas on the prospect of criminal record checks. The review group that has been examining the issue—which contains representatives of the voluntary sector—met last week and had a further discussion on the issues surrounding charging for criminal record checks. That group also was told that a decision would be made by Christmas. We would like there to be no charges for criminal record checks for voluntary organisations, as that would be a barrier to increasing the level of volunteering in the sector.
That report is to be produced in time for the commission to acknowledge its recommendations, if it chooses to do so. I take it that we must wait and see what the report recommends.
Absolutely. We hope that we do not have to wait much longer.
On the specific point about criminal record checks, I pressed for the review group. Furthermore, we had Jackie Baillie's statement earlier in the year. You said that a decision will be reached by Christmas. I understood that the group might reach a common position. Is your organisation represented on the group?
Yes.
Is there a question of what will happen following the committee's agreed position, as any legislation has to be co-ordinated with Westminster?
The review group is not in a position to decide on that matter; it can only make recommendations to the Executive. We are sure that the Executive will decide on its proposed way forward by Christmas.
Are you aware of the Executive's concern on this matter? Am I wrong in saying that legislation has to be co-ordinated with Westminster? The Minister for Justice is worried that if the Scottish Parliament goes ahead unilaterally, an influx of people could try to register up here.
We are aware that the time scale is a problem. The implementation in Scotland has already been put back for several reasons and if it is to go ahead to the current time scale, voluntary organisations should be registering for access to checks in April with a view to implementation in the summer. That means that, from our perspective as well as any Government perspective, the time scale is getting very short.
The review group has already been set up to consider the matter and suggest proposals to the Executive. Is there any real need for the commission to consider the matter independently? Obviously, it will need to take into consideration the review group's recommendations and the Executive's decision on those recommendations.
Do you mean the Scottish Charity Law Review Commission?
Yes.
The commission does not need to consider the matter specifically, but when it examines the broader charity law framework, it needs such contextual information on the obligations that voluntary organisations are under.
A key point that you raise and that we want to pursue is the definition of charitable status.
A hierarchy of difficult complications surrounds this matter. For example, there are differences between English and Scottish systems. You have proposed a three-tier system in which some organisations qualify for such status under UK legislation, some qualify for Scottish tax reliefs and others qualify for both or neither. What might be the difficulties if the English and Scottish definitions were different?
We would prefer the definition of a Scottish charity to carry all the same benefits as the definition of an English charity, involving the UK Inland Revenue and Treasury as well as the institutions over which the Scottish Parliament has control. In our submission to the Charity Law Review Commission, we included a proposal for a three-tier arrangement as a fall-back position, in which a Scottish public benefit organisation, a Scottish charity overlapping with English charity law and an English charity would be clearly defined.
You are suggesting a concept of public benefit within a framework that limits personal benefit or advantage, but the fact that housing associations are tenant controlled has raised problems of compliance with existing charity definitions. Am I right in identifying that as an issue?
That is right. At the moment, mutual organisations are excluded from the definition of a charity because it is perceived that the individuals who are members receive benefit. Our argument is that that can be overcome if there is a public benefit definition. It should be quite clear that a broader public benefit is accruing to the activity of the organisation than simply the benefit that goes to its members. For example, one could not argue that an exclusive golf club that operates on a mutual basis has wider public benefit, but a credit union with a mutual status that is relieving poverty clearly does.
What about a fee-paying educational establishment? It would be very difficult to distinguish that in principle from a housing association because a benefit is extended to a defined public group of one sort or another in both cases.
The issue would be exclusivity. The fees involved in public schools mean that they are exclusive and cannot provide benefit to anyone who would want to access them. That is why fee-paying schools would breach the public benefit definition, as we understand it.
Would the public benefit definition that you propose mean that all housing associations could be defined as charitable?
Yes.
Would that apply only to community-based housing associations? The big English-style housing associations that have 40,000 houses under their control would not qualify.
The principles that we are proposing for the definition of charitable status and public benefit involve very clear criteria about community ownership and accountability to the users in the community.
The cut-off point is rather important and has many implications. You say that a private school would not qualify because it is exclusive and charges fees, but housing association tenants pay rent. Where is the cut off? I appreciate what you are getting at, but I cannot see a difference in principle and I am concerned about how one would define that in practice.
The principle is that of public benefit. Can one argue that providing an exclusive form of education has wider public benefit? No. Can one argue that providing people with accommodation at acceptable rent levels has wider public benefit? Yes.
On another technical point, the proposed housing bill is likely to contain provisions that would allow the right to buy. How would that fit in with your definition? Presumably you assume that everyone can get access to the public benefit of low-cost housing, but not everyone will have access to buy that accommodation. The right-to-buy legislation might cause problems.
That might be taking the principle and the argument a step too far. At the moment we are putting principles to the Scottish Charity Law Review Commission and asking it to review them. Those are the principles that we would like to apply to non-profit-making independent organisations with wider public benefit.
Anyone who had a housing association house who had the right to buy it would gain personal benefit to a significant extent.
That implication would have to be considered.
The point that I was trying to get at is that the concept of public benefit is a bit like motherhood and apple pie—it is extremely difficult to pin down.
You are absolutely right—it is a delicate line. My view is that, in principle, if political parties are seen to be a crucial part of democracy, there is a wider public benefit. The position that we have submitted to the commission is drawn from our consultation exercise. It was felt by the people whom we consulted that extending the principles of public benefit and the advantages of charitable status to political parties was a step too far. Some attention will have to be given to the distinctions that were mentioned but, at the moment, we are a long way from having to make those distinctions. The vast majority of organisations that have charitable status are extremely reluctant to campaign in any way, because they fear for their charitable status. However, there is no reason why they should not campaign. In the new democracy in our modern Scotland, we would actively encourage organisations that involve communities to advocate on behalf of those communities.
Your view is that we should define public benefit as widely as we can to try to incorporate as many areas as we can into the organisations that achieve the benefits of charitable status.
The word has a number of connotations, some positive and some negative. The negative connotations come from the impression of old-style philanthropy that the word conjures up. That is especially the case south of the border, where charity has a heritage that is different to that in Scotland. We know that organisations that are called charities south of the border have a different make-up and style to those that are found in Scotland, whose origins are in the community and in a self-help ethos. They are mutual in the loose sense, rather than having the top-down, Lady Bountiful style that is found elsewhere. I hope that we can leave behind that negative connotation of the word.
I think that that goes to the heart the matter. I must challenge you on your statement. A lot of organisations that operate in Scotland and that deal with major public issues—such as the Cancer Research Campaign and the Royal Society for the Protection of Birds—must fall within the context of charities. They do not, however, have the community-based ethos that you mention. Is there a difference between voluntary-sector organisations and the organisations that are not principally funded by the state, but which are charities in the more traditional sense?
The voluntary sector is a broad church. Our research has helped us understand better the various parts of it. We know—in a fairly crude fashion—that there is a small handful of large organisations that have staff and wealth; that there is a medium-sized raft of middle-sized organisations, many of which are Scotland-wide but have few staff; and that there is a plethora of small organisations that have one or two people working for them. Added to that are organisations that are the Scottish end of UK-wide organisations, such as the two examples that Robert Brown just gave. They are run differently from the other organisations that I have mentioned, but they would still be included in our consideration of voluntary-sector activity in Scotland. However, the Scottish-based voluntary organisations have the dominant culture.
Do you have any research paperwork on that that would give us an inkling into the context of the voluntary sector in Scotland? I must say that, despite what you say, the operations of the large charities in Scotland must be regulated—any charity legislation should be comprehensive enough to cover them.
Robert Brown is right that, in theory at least, Scottish operations of UK charities are supposed to be recognised separately in Scotland under the current system. Our understanding is that that does not happen. There is a clear overlap between the situation in Scotland and that in the rest of the UK. How those organisations would relate to a new or revised set of Scottish regulations would need to be examined.
Good morning.
The register that the Charities Commission for England and Wales runs is a major operation. It has a turnover of more than £2 million a year. We are not suggesting anything like even the Scottish proportion of that figure for an operation in Scotland. The bare minimum that is required to make a new system of charity law run effectively is shared information, so that all the institutions in the sector and the public know who or what is a charity. They would also know whether it was a legal entity and whether those who were involved were bona fide people who should be involved in such organisations.
You have said that a register would not be particularly expensive, but you have not elaborated on how you would set the register up. Would it involve voluntary registration by each charity into a main website, or would it be a register for tax purposes?
It would have to be a statutory register, if it were to carry authority. It would have to be a requirement of the law that annual reports and accounts were submitted in the form of an annual return, as is expected in England in Wales and as is expected of companies. In this age of information technology there are many ways in which we can do that with simplicity and transparency to make it accountable and accessible to the public.
The Scottish Charity Law Review Commission says that the existing structure of registration, with two or three different roles, is the best structure. You suggest that the roles should be under the remit of one organisation. Will you expand on that?
The system is patchy. The Scottish charities office is part of the Crown Office, which has—theoretically—the job of supervising organisations. However, without a register it cannot supervise organisations other than those about which it receives complaints. The Scottish Executive also has a role, especially in respect of accounting regulations. There is no source of clear advice and guidance beyond the financial intermediaries and claims office of the Inland Revenue, which has the indexing role and advises charities on tax matters.
I understand that. You are saying that a one-stop shop would be easier than different contact points.
There is one caveat, which is the issue of being both friend and policeman of the charitable sector. The Charities Commission for England and Wales has a supportive advice and guidance role as well as being the supervisor and the accountable body for registration of charitable status. We do not think that that is the best way in which to develop support for the charitable sector in Scotland. We would prefer the bulk of advising and giving guidance to remain within the sector, because that would be more appropriate and accessible. However, we would like the stopgap of being able to refer people on matters—
Yes—when somebody phones one organisation, they are told to phone another.
I am conscious of the time, Sandra, so do you have any more questions?
My last question is about people who are disqualified from involvement in the management of charities and public benefits. Are there problems in setting up and maintaining a register of those people? Should that be the responsibility of somebody else?
The registrar would have to have that responsibility—it is quite a sensitive area. The Scottish charities office has the authority to provide waivers to people who, in law, are exempt from managing or controlling charities. The process is completely non-transparent. We do not know the circumstances in which waivers are given and we are not able to give advice to people who, following the letter of the law, might be exempt but who in every other way would be perfectly able and who would be good members of management committees. We cannot advise them simply because we do not know the circumstances in which waivers are granted. We are looking for a better and more transparent system.
I have a couple of questions to follow up answers that you gave earlier.
The existing charity law in Scotland is part I of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990—that says it all: it was snuck through as part of a catch-all bag of legislation in 1989-90. That provision is a pale imitation of the charity legislation that existed even then in England and Wales. Since then, there has been further charity legislation in England and Wales, but the definition still hinges on the four heads of charity, which dates back to 1601. In Scotland, we would like to leave all that behind and to leapfrog—if you like—England and Wales and to devise a modern definition of charity that would be fit for the 21st century. There is a lot of quiet interest from policy makers in the voluntary sector south of the border, because what we do in Scotland might reflect back to what happens in England and Wales.
So, the devolved Scottish Parliament would be leading the way for the rest of the United Kingdom.
Absolutely.
I was sympathetic to your idea of giving charitable status to mutually organised housing associations. The problem is with the right to buy, which Brian Adam referred to. Charitable housing associations are exempt already from the right to buy, and under the new proposals, they will continue to be exempt. Would you be concerned if the Executive resisted the extension of charitable status to mutually organised housing associations on the ground that that would interfere with the Executive's intention to extend the right to buy to those organisations?
I hope that that will not happen.
So do I.
Looking at the situation from a housing perspective, it is anomalous that charitable housing associations are—rightly—exempt from the right to buy. I do not understand why that exemption should not be extended further to co-operative housing associations which, to all intents and purposes, perform the same public benefit role within their communities and sit beside other forms of voluntary activity.
I am supposed to be asking you about the eligibility for benefits of organisations that have registered status. You said that you hoped that funders would amend their eligibility criteria in order to reflect the new public benefit regime that would come into being following the enactment of a dedicated charities act for Scotland. Many of those funders are Westminster-based organisations, for example the National Lottery Charities Board; HM Customs and Excise, which grants VAT exemption; and the Inland Revenue, which deals with national insurance contributions. Has anybody contacted those organisations to find out their attitude to a change in the law in Scotland?
The relevant passage in our submission refers to grant-making trusts, which are charities that have in their constitutions conditions to the effect that they will fund only charities. We want to be clear that they should be able to extend that to the Scottish definition of charities. However, the point that Mr McAllion made about the statutory funders is important. The NLCB is not the only funder; the new opportunities fund, the Arts Council, the Sports Council and so on are key funders of the voluntary sector. The NLCB can fund only charitable, benevolent and philanthropic organisations. We hope that the committee of the board in Scotland will recognise the Scottish definition of charitable rather than the English one—the Scottish definition would need to be tested with that committee.
Would you argue that it is not for Jean McFadden's commission to take up the issue with the UK Government, but the Parliament or the Executive?
That would be the best way forward. I hope that Jean McFadden's commission will consider those issues and that she gives some steer on them. However, it is not her responsibility to approach—
There are a number of joint ministerial committees between the Scottish Executive and the Westminster Government. Is there one on charity law?
There is not, to my knowledge.
Should there be such a link?
Yes.
We are talking about ensuring that eligibility for current benefits would be available to all the new organisations under the new definition of a charity. What additional benefits does the SCVO think should be available to charities, beyond what is currently available?
An area that needs to be properly defined is the benefits that can be accrued by charitable organisations from local authorities. As members are probably aware, one benefit that is under debate at the moment is water rates relief. That used to accrue to charities but, now that responsibility for it has passed from the local authorities to the water authorities, it does not. The Transport and the Environment Committee will consider the matter next week. Our position is that that relief should continue to be given to charities. Equally, we hope that non-domestic rates relief will continue to be given to charities in the extended definition. It might be worth considering other benefits at a local level.
I want to ask about the information, advice and guidance services that the SCVO provides—we touched on that earlier. You advocate that much of the legal advice and guidance should be sought from a registrar, perhaps working on the same basis as the body that exists in England and Wales, which has the role of supportive advice and guidance. What role do you see for the SCVO in relation to legal guidance in particular?
You may have misunderstood me—our proposition is that shared good practice and general advice and guidance on understood positions are best delivered by and kept within the voluntary sector. We see a continued role for the SCVO—and, indeed, for our colleagues in the councils for voluntary service network—in providing that direct support to new and existing voluntary organisations. We would like to see the registrar having the authority to come up with definitive advice and guidance on particular issues as they arise, so that we can carry that forward and disseminate it to the sector.
Would that guidance come from the registrar to the SCVO?
It would be on matters relating to the new circumstances in the law.
Would you still expect people who work in the voluntary and charitable fields to come to the SCVO for guidance and information?
Yes—for information on the day-to-day business of voluntary organisations, which we are in a position to disseminate.
The SCVO and people who are involved in the voluntary sector are often involved in community learning and training. Should a minimum level of training be required for those people?
It is required for people who are involved in the management committees of housing associations and credit unions—partly because they manage extensive assets. We strongly recommend basic training and support for people who join management committees in a wide range of other voluntary organisations. It is good practice to provide such training, but I do not think that it is a legal requirement. However, we should support it and provide the resources to ensure that it happens.
I would like to ask about fundraising and accounting. You talk about the licensing practice for public fundraising and you recommend advisory guidance to achieve a gradual standardisation of practice and licensing across local authorities. You also recommend advisory guidance—such as a code of conduct—for street collectors, which at the moment does not form part of the regulatory system of supervision. How well would such guidance work in practice? Should there be monitoring?
Yes, there certainly should be monitoring. At the moment, rules for fundraising are patchy. There are different rules for different aspects—indeed, there are no rules at all for some of the more modern forms of fundraising, such as telephone solicitation, big broadcast solicitation, or the solicitation of direct debits by people in tabards on the streets of Glasgow and Edinburgh in particular. None of that activity is regulated in Scotland and we would like a framework for all those forms of fundraising. A light touch should be used, which would encourage people to develop innovative ways of reaching the public. Accountability should be built in, so that people have a means of recourse if they feel that matters are beyond their control or that they are being inappropriately approached.
How should monitoring be done?
Do you mean for street collections?
You have highlighted a number of areas that have no regulation, supervision or monitoring. How can that change?
Local authorities clearly have a role in regulating fundraising in the street—such as can rattling and non-financial transactions, for example. Voluntary organisations also have a role in setting up good practice and internal monitoring for telephone solicitation. Ultimately, there has to be a legal framework for the authority and the registrar, to whom I presume complaints could be made.
Are you suggesting an extension of the role of local authorities to allow that? What financial implications might that have? You have also talked about the removal of some of the exemptions for the licences that are required for street collections. What effect would that have?
Local authorities already monitor street collections, but they do not operate in a legislative context that is flexible enough to let them pick up on all the different methods of collection. For example, there is uncertainty over non-financial transactions and the definition of a public place. It is possible to conduct fundraising in a shopping mall, which is a public place to you and me, but which is not a public place according to the law. The law should be made more flexible for local authorities so that their role is easier and their relationship with the police, where an issue of law arises—for example, where someone causes a public nuisance—becomes easier to control.
It is important to have uniformity among local authorities, so that local authorities do not apply the law differently. Different application of the law leads to confusion and great difficulty, particularly for nationally based charities, which must deal with many local authorities. I do not want to become bogged down in the subject of street collection, which is the traditional form of fundraising. Much more important in recent years has been raising money from the industrial and commercial sector. More multinationals and smaller companies are becoming involved in the community through contributions to voluntary organisations. Is not there a need for more guidance on that?
Guidance—yes; law—no. The position is different for corporate donations. It is quite rare these days for companies to hand over cash to voluntary organisations. We are glad that support from the private sector is increasing again, after it almost disappeared in the 1980s. However, that support is now being given in different forms, such as secondment and sponsorship. Such arrangements are controlled by agreements—an exchange of letters at the very least—and quite often conditions will be attached so that the arrangements are less vulnerable to abuse. A person who rattles a can in the street is asking for cash from people who simply have to take them at face value.
We are all excited by the prospect of a new system that will take the voluntary sector into the 21st century and, obviously, we will expect best practice in that system. If people do not comply with requirements on aspects such as accounting scrutiny, what sanctions—if any—should be applied to maintain the system?
There must be a sensible framework and a light-touch approach to working within the framework. At the moment, if somebody finds out about a breach of charity law and knows enough about the system to make a complaint to the Scottish charities office, there is a secretive process until the case arrives in the court. That is heavy-handed. The vast majority of breaches of good practice or the law are inadvertent—perhaps because of lack of training or understanding. Such cases should be addressed supportively and with a light touch, by putting the relevant people in organisations in touch with infrastructure bodies in the voluntary sector that can nurse them through the process. We assume that there is a handful of people who wish to abuse charity; they should be dealt with by the courts.
We expect to have information on Scottish Criminal Record Office checks by Christmas and we expect the review of charity law to be completed by spring. What role should the committee play in the process? What do you and the organisations that you represent expect from us in relation to the work of the McFadden commission?
We would like the committee to have an eye to the bigger picture. As we have found in the past few minutes, it is very easy to become bogged down in the detail of the current charity law system and the potential new system. The committee should oversee the whole process to ensure that we arrive at a modern system for the 21st century—a system that is concerned with the realities of organisations operating in our communities, rather than something that we have inherited from several hundred years of English case law. It is beyond the scope of the committee to get into the nitty-gritty—that is what the independent commission is for. I recommend that the committee should consider the relationship between Scotland and Westminster, the ambition of the Executive to implement a modern system and its relationships with voluntary organisations and, through them, communities.
Thank you for that clear indication of what you expect from the committee. I hope that we can provide that. No doubt we will be in contact with the SCVO on this issue in future.