Charity Test (Specified Bodies) and the Protection of Charities Assets (Exemption) (Scotland) Amendment Order 2015 [Draft]
Good morning and welcome to the Education and Culture Committee’s fifth meeting in 2015. As usual, I remind everyone to switch off all electronic devices in case they interfere with the sound system.
Agenda item 1 is an evidence-taking session on a piece of subordinate legislation. I welcome to the meeting Fiona Hyslop, the Cabinet Secretary for Culture, Europe and External Affairs, and her supporting Scottish Government officials. After we have taken evidence on the amendment order, we will debate the motion in the cabinet secretary’s name, and I point out that officials are not permitted to contribute to that formal debate.
I invite the cabinet secretary to make opening remarks.
Good morning, committee members. Public bodies such as historic environment Scotland that are responsible for looking after our treasured national cultural resources have charitable purposes at the heart of their existence. There are many examples of public bodies with charitable status looking after the historic environment, including the Royal Commission on the Ancient and Historical Monuments of Scotland and the Historic Royal Palaces in England.
The committee will recall that last year we discussed the implications of charitable status for historic environment Scotland and examined in some depth a wide range of issues—especially the potential impacts on other charities in the sector and the risk of conflicts of interest. We also discussed the potential financial benefits and other less tangible benefits of the special role that charities contribute to public life.
In the end, it will be for the newly appointed board of historic environment Scotland to assess the benefits of charitable status for the body but, before it can decide whether to apply for charitable status, ministers must amend two existing orders to exempt historic environment Scotland from certain provisions of the Charities and Trustee Investment (Scotland) Act 2005. The amendment order that is under consideration makes those amendments.
First, section 7(4) of the 2005 act prevents bodies that are subject to ministerial direction from becoming charities, which means that, in general, public bodies cannot be charities. However, the act also includes powers to exempt certain bodies from that provision, which allows them to become charities while being subject to ministerial direction, to reflect the nature of some public bodies, whose activities clearly serve charitable purposes. As the exemption is already in place for other holders of national collections, including RCAHMS, it is logical to extend the approach to historic environment Scotland, which will hold a national collection relating to the historic environment. The amendment order achieves that by adding historic environment Scotland to the Charity Test (Specified Bodies) (Scotland) Order 2006, which lists exempted bodies.
Secondly, section 19 of the 2005 act protects the charitable assets of bodies when they cease to be charities by requiring them to continue to operate those assets in accordance with their charitable purposes and allowing the Office of the Scottish Charity Regulator to transfer the assets to another charity. The act includes powers to exempt specified bodies from those provisions, which in this case would ensure that assets funded by the public purse remained under ministerial control in the event that the body lost or surrendered charitable status. Such an exemption is already in place for the other national collections, and I propose to extend the approach to historic environment Scotland.
The amendment order delivers on the Government’s commitment to treat HES as we treat our other national cultural collections and as we already treat RCAHMS. I believe that the approach has the support of all key stakeholders, and I would welcome the committee’s support for it, too. I am happy to take questions.
Thank you, cabinet secretary. Do members have any questions?
This is probably more of a comment than a question, convener. In considering various statutory instruments, we have discussed the detail of the consultation section in the policy note. That section in the policy note for the amendment order appropriately points to the discussions that we had about the Historic Environment Scotland Bill, which the cabinet secretary referred to.
My concern stems from the sections in the policy note about impact assessments and financial effects, which gloss over the fact that during the passage of the bill there was quite a robust debate about the equalities impact and the perhaps more likely financial impact on other bodies. The National Trust for Scotland was vocal about the matter. The Government and the Parliament have taken bodies’ views but, for the purposes of transparency, it might be better for the policy note to better reflect that discussion and the points that were made on both sides of the argument.
You have raised quite a lot of issues. On consultation, I deliberately ensured during the passage of the bill that the committee was made aware of the impact—or not—of having charitable status, and we made it clear that the new body’s viability did not depend on that. In its very full consultation on the bill, which happened only last year, the Government put in quite a lot of proactive provisions about the implications.
Similarly, as you rightly pointed out, there was quite a lot of discussion about the potential impact on other bodies. That discussion was had and the determination was made during the passage of the bill, and the committee made a number of comments about the matter not only in its stage 1 report but in the debates in the chamber.
Another point that gave comfort to other organisations, including the National Trust for Scotland, was that HES must operate under the historic environment strategy. That strategy has brought everyone together, and we now have for the first time a historic environment forum, which has brought together all the agencies.
That brings us back to the point about the importance of the amendment order, which allows for ministerial direction—which, I should add, I have never used in seven years for any of the bodies for which I have responsibility—to deal with circumstances in which, for whatever reason, HES might be working counter to the interests of the wider historic environment or doing something detrimental to another body. Charities and other bodies are therefore protected by the strategy, which HES has to support; if that does not happen, that is an issue. Mary Scanlon rightly tested that issue during the passage of the bill. We have therefore discussed such areas quite a lot, and the committee discussed them fairly recently.
The final issue that I will address in answering your important question is what charitable status provides. It would, for example, allow HES to help the whole sector to grow the cake of what might be provided. People expressed concern that everyone would be competing for limited resources, which could only be detrimental, but the discussions in the historic environment forum have been leading us in the direction of expanding what we are doing and growing the cake and the available resources.
If HES chooses to have charitable status—we are not saying that it has to; it is up to the body to make that decision—it will have access to gift aid, rates relief and so on. Moreover, it might be able to approach the European Commission for funding in a way that Government bodies cannot, but the sensible way of doing that is to work with other bodies, such as the National Trust for Scotland.
Securing charitable status is an enabling move, but today’s debate is not about whether HES should become a charity. That is a debate and a decision for the board. Today’s debate is about whether it is sensible for HES, if it chooses to become a charity, to be treated the same as other holders of national collections and in a way that not only allows for ministerial direction—I have gone over the issue a lot with the committee and I make it clear again that that would be a last resort, that it has never happened to date and that any issues would be resolved well before such an approach was taken—but ensures that, if at some point HES decided not to be a charity any more or if it had charitable status taken away from it, public money that had been invested in public assets would come back to ministers. Ministers, not OSCR, would be in control of that.
That was a long answer, but there was a lot to address in answering your important question.
That was a fair response and a fair characterisation of the debate that we had on the case for and potentially against a move to charitable status. It is up to the board to decide whether to make an application and up to OSCR to decide whether the body complies.
We are all familiar with that discussion, because we were protagonists in it. However, the financial effects section of the policy note says:
“The impact of charitable status was considered during”
the business and regulatory impact assessment
“carried out for the 2014 Act which found that there would be no financial impact.”
That rather glosses over what was a lively debate, albeit that, ultimately, we came down on the side of saying that the bill should proceed, given the reassurances that had been provided and the fact that it would be for the board to decide whether to apply for charitable status. I think that, as a committee, we will want to return to the matter if the National Trust or others come back to us and say that, in practice, the arrangements are not working in the way that those bodies were assured that they would.
10:15
That relates to the wider policy context. The convener or the clerks can correct me if I am wrong, but I think that, when the financial impact of an order is being considered, it is necessary to look specifically at the impact on the relevant body—in this case, that is historic environment Scotland—and on the Government. You are talking about the financial impact on organisations that are not subject to the order that we are considering. I suspect that that is a bit of a legal anorak’s answer.
What you have said is correct.
I understand that Liam McArthur is interested in the wider policy context. Perhaps the committee can discuss whether, when it considers subordinate legislation, it should focus only on the order in front of it or whether and to what extent it wants the wider context to be taken into account. In this case, because the wider context was examined very thoroughly by the committee and debated in the chamber, we assumed that that was a reasonable position to take.
Technically, the point about there being no financial impact means that there will be no financial impact on the Scottish Government or on the new body, HES, to which the order applies.
I remind members that we agreed to come back to the Historic Environment Scotland Act 2014 later this year. That is already in the work programme.
Good morning. You said that the order will have no financial impact, but you mentioned that it might allow HES to apply for European funding and so on. What is driving the proposed change?
If we go right back to the beginning of the process, when evidence was taken on different bodies—I do not think that Chic Brodie was a member of the committee at that time—one issue that came up was the commitment that I gave the RCAHMS commissioners that we would protect the underlying tenets of what RCAHMS provided, which would not be compromised. We were keen for it to be possible for the element of its education service that was charitable to be accommodated in the new body. In addition, we reckoned that there was an opportunity for between £1.4 million and £2.1 million to be gained—whether through gift aid or rates relief—as a result of HES having charitable status.
So there will be a financial impact.
There will be a financial impact on the body if it chooses to apply for charitable status. The order does not decide whether the body should become a charity; all that it does is enable HES, should it so choose, to become a charity. For protection, ministers would be allowed to offer ministerial direction.
The committee is not considering whether the organisation should become a charity. If it decided to become a charity, ministers would still have powers of direction, as we have in relation to National Museums Scotland, National Galleries of Scotland and so on. That would be in the interests of the public because it would mean that, if charitable status was at some point taken away from the organisation or if it chose not to be a charity, the assets would be determined not by OSCR but by ministers.
As I said in my answer to Liam McArthur, we are addressing what the order will do in relation to the 2005 act; we are not considering a decision about whether HES should acquire charitable status, which was thoroughly discussed during consideration of the Historic Environment Scotland Bill. I return to the point that, when we talk about the financial impact, we are talking about the financial impact of the order, which is about the powers of ministers, not the powers of HES.
Has the acquisition of charitable status by governmental bodies been contested by other charities in terms of the protection of the assets by the Government?
The 2005 act is the relevant act. I remember taking part in consideration of the Charities and Trustee Investment (Scotland) Bill. It was the Parliament’s strong cross-party view that our national collections should have the power to be charities but that there should be checks and balances such that they should not be completely exempt from ministerial direction. There might be cases in which it was necessary to provide ministerial direction—that would probably be in the area of corporate governance. In my eight years as a minister, I have never used a power of ministerial direction on a body. The power is like a safety net.
I understand that and subscribe to it somewhat, but it was not really what my question was about. My question was about whether charitable status can be contested by non-governmental charities that wish to protect their assets.
You might want to explain what you mean. The relationship is between the Government and the national collections, not other charitable bodies. I do not understand the premise of your question and why you think that an external body would challenge whether there was ministerial direction or how assets were treated.
No, I am saying that there is one rule for the Government under charitable status, and I understand why we want to protect the assets, but there is another rule for other charities that might wish to have an asset distribution model or activity.
The National Trust for Scotland, for example, would not take kindly to the committee, the Parliament or the Government telling it that, if at some point it wanted to change its charitable status, the state would take control of all its assets. Are you suggesting that it might want to have the same treatment—
No, I am talking about other charities versus the Government and the rules that apply to the assets that the Government can control. I take your point about the assets and I could be wrong, but should charitable status be removed, the assets would be the Government’s anyway. What is the comparison between non-governmental bodies and governmental bodies?
If a charity ceases to be a charity, the normal rule is that OSCR, the charities regulator, will ensure that the charity’s assets are disposed of to another body that can continue to use them for the charitable purposes for which they were originally being used. The assets of a charity that had not received substantial Government funding as a core of its being would have been accumulated from contributions from members and money that the charity earned, so they would belong to that charity. Somebody would have to act as a go-between to get them to a new charity if they were to carry on being used for charitable purposes.
The Government has been the main contributor to the accumulation of the assets of the national collections and quite a number of other public bodies. The Government has spent public money on the body to help it to accumulate and develop the assets for the charitable purposes that they serve, so it is taking the responsibility of ensuring that they are passed on to another body. In an extreme case, that might mean that the Government had to create another body to take on that role, and OSCR could not do that.
The arrangement is a means of ensuring that the Government takes responsibility for bodies that it has been supporting and funding and ensures that assets are carried forward. It is a special arrangement for Government bodies, because the assets will contain money that the Government has given those bodies over many years to accumulate the assets that support the charitable purpose.
That is why I said in my previous answers that it is the public money that has been invested over many years that is of interest. The committee, the Parliament, the Government and the public in Scotland have concerns that, after many generations of investment in national collections, they might be distributed to bodies other than the Government to decide what to do with them.
I was on the committee that set up OSCR in 2005 and I think that I am right in saying that the national museums and others were already charities at the time. If HES applied, it would face a fairly robust test from OSCR, and the order that we are looking at opens a door for HES.
I have two points, which are not exactly new. I remember how important the independence test was for a charity to achieve its outcomes in accordance with its principles. I would like some clarity from the cabinet secretary about how the independence of a charity sits alongside ministerial direction. I heard everything that you said about how you have not used such powers in eight years as a minister.
We received quite a lot of evidence from charities that asked whether, given that the Government allocates and disburses huge amounts of money, it will automatically choose those over which it has ministerial direction, irrespective of how important the collections are to the country. I do not remember who raised that in evidence, but there are genuine concerns. I seek a bit of clarity on those two issues.
An important point for not just HES but the other collections is that the Government does not interfere in curatorial decision making or what curators do with the collections. The committee has made its views on that clear, particularly in its scrutiny of the National Library of Scotland Bill. In relation to that bill and the legislation that governs historic environment Scotland, we have made it absolutely clear that we will not have curatorial direction. We had that debate at stage 1, as Mary Scanlon rightly remembers.
The committee should remember that it will be up to HES to decide whether it wants to apply to be a charity and, if it does, it will be up to OSCR to determine whether it passes the independence test that Mary Scanlon rightly identified. Members will recall that, during the passage of the Historic Environment Scotland Bill, OSCR stated to the committee and to us:
“OSCR has had sight of the Functions of Historic Environment Scotland in section 2 of the Bill ... and our view is that in principle these can be clearly linked to one or more of the charitable purposes set out in the 2005 Act”.
Mary Scanlon is right. The final decision will be for OSCR to make in relation to independence, but we certainly drafted the bill in such a way that, should HES want to become a charity, the independence that is set out in the provisions should enable it to do so, if OSCR agrees.
My second point was about concerns from other organisations. Given that the Government has control over so much funding, will HES be given preferential treatment, irrespective of how important buildings or collections are to the nation?
We have made it clear that HES will not provide grants to itself. I have managed to protect grants so far, which has been a challenge in the financial circumstances. Given that HES will have public funding, people wanted the assurance that it will not be able to decide to give grants to its own works. There needs to be provision for on-going care, maintenance and development, but that is an important part of the separation of interests.
One purpose of the historic environment strategy is to enable all the bodies to share consideration of the priorities. Is the priority castle buildings or the streetscapes of our conservation areas? The aim is for the bodies to work collectively to make the most of what we have in challenging times. The historic environment strategy and the forum that I have put together will help Scotland, collectively, to decide what the priorities are, as opposed to a sole body saying that it will determine everything that happens in the area.
I am sorry—my question was really more about the Government having ministerial direction and also the ability to disburse funds. The concern was that there might be preferential treatment. I just asked the question for clarity. I do not have an issue with the position, but it is worth while to raise the concern, because it was mentioned in evidence.
The more resources I as a Government minister can allocate—with the committee’s support—to historic environment Scotland, the better it will be for everybody, because not only HES but other bodies will get the benefit of that. That is the route for disbursement. If we bear it in mind that HES will not be able to give grants to itself, that gives the protection. A lot of organisations came to us to discuss that point, and they were satisfied with our response.
We move on to agenda item 2, which is the formal debate on the amendment order. I invite the cabinet secretary to move motion S4M-12362.
Motion moved,
That the Education and Culture Committee recommends that the Charity Test (Specified Bodies) and the Protection of Charities Assets (Exemption) (Scotland) Amendment Order 2015 [draft] be approved.—[Fiona Hyslop.]
Motion agreed to.
I suspend the meeting to allow the witnesses to change over.
10:29 Meeting suspended.Previous
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