I welcome members to the Communities Committee's 22nd meeting in 2004. We have received apologies from Sandra White and we welcome Tricia Marwick for this agenda item.
Thank you for inviting us to discuss the draft Charities and Trustee Investment (Scotland) Bill, which was published for consultation last Wednesday. We will be happy to answer any questions that the committee has, but first I will introduce the bill team. I am the bill team leader and Quentin Fisher is the deputy. Sian Ledger deals mostly with fundraising issues and Philippa Bonella, who is on secondment from the Scottish Council for Voluntary Organisations, has been arranging our consultation meetings and events. Catriona Hardman, who is from the office of the solicitor to the Scottish Executive, provides our legal advice.
Thank you.
Before we get into the meat of the draft bill, I wonder whether we can go back to anchor it in the consultation process to which Richard Arnott alluded in his introductory remarks. Who was involved in the 40 meetings over the past few months and what main themes arose?
As members know, I was seconded from the Scottish Council for Voluntary Organisations to set out the consultation process while we were drafting the bill. The first thing that I did was to think about how the consultation should take place at that stage in the policy debate. There had been a fair amount of consultation on the big policy issues and we felt that it was important to start taking that forward towards action. Everyone was well aware that there was a need to involve the charity sector if regulation was to be effective.
What discussions have taken place with the UK Government, the Inland Revenue and the Charity Commission for England and Wales about the proposed framework for south of the border?
We have had regular discussions with Home Office officials who have been developing the draft Charities Bill for England and Wales, which was published the week before our bill was published. It is important to bear in mind the fact that England and Wales are starting from a different position with regard to charity legislation. There is a well-established statutory regulator there and the bill will make amendments to the existing situation, some of which will be major amendments to the definition of charity. However, the overall system will, in effect, continue as it is.
I want to move on to consider the relationship between the draft bill and the McFadden commission. Obviously, the McFadden commission undertook a large consultation before making its recommendations. To what extent does the draft bill reflect the original recommendations? In which key areas is there a departure from them?
It is important to acknowledge the work of the McFadden commission. I suspect that it was the McFadden proposals for having a separate public benefit test that influenced the English strategy report on having such a test. It is because of that that we have been able to develop our proposals in conjunction and in parallel with the Home Office proposals for that definition.
We will explore why the definition of the public benefit test is to be left to OSCR. The McFadden report includes a definition of the public benefit test, which says:
We have covered all the bases of the definition that was proposed by McFadden, but we have covered them in different parts of the bill. The idea of the net public benefit is inherent in the definition in the draft bill. McFadden included a suggestion of independence in its definition and, as Richard Arnott explained earlier, we have covered that elsewhere in the bill.
What I am trying to get at is that it is very clear what McFadden would expect from a public benefit test. From your perspective, would that definition prevent organisations that are, in effect, of private interest from bolting on a bit of public benefit to the edge of their enterprise and redefining themselves as existing for the public benefit? Would the bolting on of good works to private enterprises enable organisations to pass a public benefit test?
The other part of the test—that the body has to have only charitable purposes—assists us in that regard. If an organisation were to have a purpose such as the distribution of profit among shareholders, that is clearly not a charitable purpose. The organisation would fall at that hurdle and would not get through to the public benefit part of the test.
It was suggested that charity stewards exist to promote the benefit of the charity. I feel slightly uneasy about that, because it would put stewards in the same relationship to the charity as a company director is in to a company—a fiduciary duty would exist. Would it not be more proper, in the charitable domain, that the charity steward's prime responsibility should be to the charitable purposes that are being served by the charity? If that were the case, one of the things that the charity steward or stewards might do would be to say, "We can best serve the charitable purposes of this charity by closing the charity down."
I confess that, in setting out the duties for charity stewards, we have largely tended to consider the equivalent in trust law; that is to say, the trustees of trusts. In many ways, the relationship that charity stewards have to the essence of the charity mimics the relationship that trustees have to the essence of the trust. There is the sense of duty owed in that respect, and we have tried to mimic that duty.
But you are saying that the primary duty is to the organisation, not to the purposes of the organisation.
It is not quite as strong as that. We are saying that charity stewards must act in the best interests of the charity to ensure that it follows its charitable purposes. We are not aiming to move away from the charitable purposes—the best interest of the charity is to fulfil those purposes.
I do not want to make a meal of it—we are just trying to pick out your thinking in supporting the Executive. What I am really getting at is whether, in respect of the public benefit from charities, what the charity does is much more important than the charity. That is quite different from the company position. Could the situation be expressed in an alternative way that would articulate it more clearly? Have you thought about and dismissed any such alternatives?
No. There are no other reasons, and we have not chosen the wording with the intention of avoiding charitable purposes. I would welcome hearing suggestions for better ways of setting it out.
The SCVO has argued that the independence of charities should be part of the bill, and you have explained that you have not taken that approach. The SCVO stated:
I do not think that it has developed in the past few days, since we read that. We have attempted to set out a framework that will apply to all charities. Much of the current case law on public benefit—most of which is English case law, although there have been Scottish cases—covers the fact that the trustees of a charity must act for the interests of the charity and, as Mr Stevenson pointed out, its purposes. It is important that we recognise that charity stewards should be free to act for the charity and that is what we mean by independence—freedom to act for the charity and its purposes.
So there was no thought in your mind to go along with the McFadden idea of limiting the number of trustees or stewards who could be appointed by a public body, for example, to charities that had been set up by the state?
We have chosen to rely on the principle rather than on a rigid formula for testing. For one matter, the principle is more flexible and it allows development over time. The principle that underpins the need for charities to be independent of Government is a suggestion that ministers have already accepted, so we do not have a difficulty with that.
I return to the point about public benefit. You say on page 11 of the consultation document:
I will deal with those questions in reverse order. We expect OSCR to prepare guidance on how it will interpret public benefit tests and other parts of the legislation and to consult on that guidance before finalising it. In considering how it should interpret the legislation, OSCR will need to consider previous case law and to set out and justify its proposals. We feel that OSCR will be expected, and required, at least to justify that it is following previous case law or even why it is not.
If you were to bring to the attention of the committee and others what that existing case law was, that would be very useful, given your argument that we do not need a definition in the bill because case law already exists.
It chimes very much with existing case law.
I would like to make one final point on public benefit. There are two arms to the proposed legislation—one concerns the charitable purpose for which you have set out 13 different criteria and the second concerns public benefit. Can you explain in words of one syllable why the charitable purpose is so important that it is included in the bill, but the public benefit test will be left to the regulator?
I do not think that the matter is as clear cut as that, in that the 13 charitable purposes are merely examples of currently accepted charitable purposes. They are set out in that way partly to ensure that existing charities are already accepted as having charitable purposes and that that can continue. The 13th head—the 13th charitable purpose—which refers to other purposes for public benefit, is in effect a catch-all to allow other charitable purposes to be added. Therefore, the list of purposes is perhaps not as closed as it seems. There is scope for additional purposes to be accepted in the future, but bodies with those purposes will be able to become charities only if those purposes also have public benefit.
I would like clarification. Am I right that you are not saying that organisations that are currently regarded as charities will—because they are already regarded as charitable—be regarded for all time as charitable?
Such organisations will probably be regarded as charitable, but the question whether they provide public benefit would be asked. They need to do both those things to continue to be a charity.
On the point that Patrick Harvie raised about independence, page 18 of the consultation document mentions that Jim Wallace pointed out that there is a divergence between charity law requirements on independence and existing Executive policy on ministerial direction of public bodies. Given that you said that the stewards will always have to act in the interests of the charity, what have you done to ensure that charities are independent of ministerial direction? How can charities be independent when they are pursuing Government policy, for example on social inclusion? Is not there scope for their independence to be questioned?
There is scope for that. That is one of the reasons why an undertaking was given in Jim Wallace's announcement in December 2002 that non-departmental public bodies—which we can, of course, speak for—would consider the issue in their then quinquennial reviews, although the way those are conducted has changed slightly. To our knowledge, that was done.
That continues as part of the review of NDPBs.
I should add that there being a parallel between Executive policy and the charitable purpose of a body that has been set up by Government would not in itself be fatal in relation to the question of whether charity stewards are acting in the interests of the charity or its charitable purposes. It is imaginable that a charity steward could be focused entirely on the charity and its purposes despite there being a parallel with Government policy. Such a parallel is not problematic.
Many charities are funded from the public purse to carry out duties and to provide public benefit. If a charity is being paid by the Executive and is carrying out ministerial directions—which can change over time depending on the Government—it could be argued that it is not independent.
That is exactly why the Executive has undertaken to review the status of NDPBs that are charities. It wants to consider whether it is appropriate for them to continue to be NDPBs and charities.
The point is important. How will OSCR decide whether a charity is independent or whether it is pursuing a ministerial directive, which may call its independence into question?
Our hope is that, before OSCR has to make such a decision, the Executive and the NDPB will consider as part of the review of the NDPB whether the trustees are free to act for the charitable purposes for which the body was set up. If they are not, the body will have to consider its status.
Has that been a concern for you in drafting the bill?
It has not caused us concern. We accept that the Executive has agreed that charities should be independent and we have set out the rules for charity stewards so that those rules are concurrent with that aim. All charities should come under the same framework, whether or not they were set up by the Executive.
I have questions on the role of charities, although I suspect that we have already explored the issue fairly fully. Given that the Executive states that the reform of charity law forms a core part of a wide-ranging programme on charities and the wider voluntary sector, what other proposals might be produced in due course as part of the Executive's reforms?
We deal mostly with the draft bill, but obviously that fits in with other parts of the voluntary issues unit's work. It is important to bear it in mind that the Executive supports voluntary work, not just by charities but by other organisations. Every year, £360 million goes to the voluntary sector from Executive departments, agencies and NDPBs. In the past few months, the Executive has relaunched, in conjunction with the sector, the Scottish compact, which revisits and reaffirms the way of working with the voluntary sector.
Is the implication of what you say that there are no further issues to be dealt with?
The answer is probably no. I am sure that there is scope for further improvement and discussion with the sector, and that the Executive will continue to work with the sector to improve things.
Can you say whether any specific proposals are being worked up, even if you cannot say what they are?
Other proposals are being discussed, but I am afraid that I am not qualified to go into the detail of them.
Charities in the 21st century are obviously different animals from those in the 19th and 20th centuries. How has the role of charities changed and how will it change in the future? Bearing in mind that you said in your opening remarks that you are not focusing on charities' individual characteristics, how have they changed in general? I presume that they have changed, given that we have to change the regime.
Philippa Bonella is probably the expert among us on the history of charities, but I will begin.
I would add to that only that the sector has changed in two ways. First, it now often delivers services in partnership with the state and, secondly, it campaigns more and is more willing to advocate on behalf of users of its services. We have tried in the bill to acknowledge both those changes. We want to allow charities to continue to work in partnership with Government when they choose independently to do so, and we want to ensure that charities are free to put across to Government their points on policy.
My activities as an MSP are entirely funded from the public purse, yet I feel able to be a trenchant critic of the Executive from time to time. I take it that you are perfectly content that the devil's bargain between charities and the public purse need not impugn charities' independence in any way.
The compact sets that out very clearly.
I will be charitable about that question.
I want to ask about public benefit. You felt on reflection that to set out detailed criteria of public benefit in the consultation document might be too constricting. You therefore set no criteria; everything is left to OSCR. Is not that rather an extreme position?
We ask that question in our consultation. Two different points of view have been put to us. One is the suggestion that Mr Gorrie has just made—that we could provide greater clarity to OSCR in order to allow it to make its determinations. However, it has also been put to us that, if we attempt to codify what are extremely complex concepts that are debated in court, we might end up divorcing ourselves from the existing body of case law and we might emphasise certain aspects at the expense of others, with a resultant loss of flexibility. However, we are putting the question to consultees.
The courts would, however, be starting from scratch in deciding public benefit. I would have thought that it is our job to set out principles for courts and quangos—whatever OSCR is—to follow. The idea is, "Let's have public benefit but you guys go away and decide what it is on the basis of what some judge in England said 100 years ago." I am not a lawyer, but I understood that Scots went in for principles and the English went in for case law. What about setting out a few principles?
That is a valid suggestion, but I add that the Scottish courts would not be operating in a case-law vacuum. Catriona Hardman may wish to add to that.
Thus far, case law has been English case law. There is a tie-in with the Inland Revenue, because it will consider definitions of charities, of what is charitable and of what constitutes public benefit as far as English law is concerned. We have considered either leaving public benefit completely undefined or putting guidelines in. I am not sure that there is much that I can add to what has been said. I hope that there will be more dialogue as part of the consultation on the bill. The issue can be approached either way. The English bill at present does not offer a definition of public benefit, either. It relies on an understanding of public benefit as it has been developed in English case law. There is a danger that to move too far away from that might cause difficulties for the Inland Revenue in its interpretation of what is charitable in both jurisdictions.
Is it satisfactory for Scottish law on charities to be determined by the Inland Revenue in London, which is in effect what will happen?
I am sorry if what I said sounded like that. I do not think that it will be determined by the Inland Revenue. At the moment, there is no legal interpretation of public benefit in Scotland. That will come to the fore now that we have a Scottish definition of charities. In considering matters, the courts will look at the legislation, and may still look at some of the English case law in the background. The definitions of public benefit in Scotland and England will inevitably change because there will, with the coming into force of the English provision, be no presumption of public benefit in cases of advancement of education or religion and relief of poverty. English case law and ours will develop and they will, I hope, do so roughly in tandem. It is not a particularly easy matter, given that they already have a definition of sorts and we do not.
We are advancing, but I would like us to do so in the right direction.
My point is fairly similar to that which Donald Gorrie raised. Given the references that have been made to English case law, it sounds as though the Executive is content for English courts to continue to make decisions that significantly affect Scottish charities. Unless you have anything else to add on that matter, I am happy to pass the questioning to another member.
It is not true to say that the Executive is content for English courts to decide on Scottish cases. During the consultation, charities felt strongly that they would find it difficult if the definitions of a charity in Scotland and a charity that would receive tax benefits were completely different. To avoid that situation, we have very much borne in mind their comments in developing the Scottish definition, and we have tried to ensure that there is no great difference between the definitions.
Definitions always plague any legislation or proposal. The draft bill sets out the terms of the charity test. Section 7(2) lists 13—or more properly 12—items, the last of which is
The idea is that we will avoid misleading people. We intend to make things clear in order to allow a body to see whether it can decide for itself whether it will be successful in becoming a charity. If the bill contained only the catch-all, we would have no guidance in that respect. To state that "the advancement of education" is assumed to be a charitable purpose gives confidence to education providers that they have such a purpose.
Your use of the word "guidance" encapsulates my point exactly. We are putting a list in the bill when it might be more sensible, flexible and appropriate to leave such matters to OSCR. After all, when I read the list, I felt that there were significant omissions, such as the reference to education but not to training.
We were aiming to clarify as much as possible to people that the list was in the bill and would not change. With regard to your example, people would know that the legislation itself made it clear that "the advancement of education" was a charitable purpose.
I suspect that this discussion will continue elsewhere.
I wonder whether I could turn to fundraising and fundraisers and in particular—
I am sorry, Trish; I am trying to deal with this particular set of questions first. I will bring you in when we reach that part of our questioning.
I want to be absolutely clear about the link between OSCR's role and the Inland Revenue. In your opening statement, did you say that the Inland Revenue would be expected to accept OSCR's recommendations of what constitutes public benefit and, therefore, a charity?
That is what I said. I emphasise that the decision is for the Inland Revenue, which is responsible for tax matters. However, from discussions with the Inland Revenue we are confident that, as long as the definitions do not differ greatly, it will see no reason to repeat the exercise.
In other words, OSCR is the driver and must acknowledge that an organisation is a bona fide charity before it can receive tax relief from the Inland Revenue. Is that correct?
Yes, but there is a proviso in that we will not, until the end of the two legislative processes, know how similar the definitions will be. The Inland Revenue could end up deciding that the definition that will be used in Scotland is too different from that which will be used in the rest of the UK and will therefore not be appropriate for tax purposes. We aim to avoid that situation.
It will be possible that an organisation could be registered as a charity by OSCR but not be recognised by the Inland Revenue. Conversely, could a charity be recognised by the Inland Revenue but not by OSCR? I will give you an example once you have answered that question.
In theory, an organisation could be recognised as a charity by OSCR, but the Inland Revenue could decide that it did not constitute a charity for tax purposes. We hope to avoid that situation. If a body were accepted by the Inland Revenue as having charitable status for tax purposes but was not recognised by OSCR, that body would not be able to call itself a charity in Scotland.
I return to the issue of public schools, which will be part of the debate. It would be fairly easy for a school such as the High School of Dundee to prove public benefit, as it is in the centre of Dundee and its playing fields are open to the whole population of Dundee and the surrounding area. Gordonstoun, in Morayshire, is surrounded by farms and it may be more difficult for the school to prove public benefit. Do you envisage a situation in which some private schools pass the OSCR test and get tax relief, whereas others do not but still get tax relief?
I am not sure that we are in a position to answer that question.
It is hypothetical.
I presume that the situation that the member has described could arise.
Executive officials are in the business of answering questions that they can answer. If witnesses are unable to answer a question, to say that that is the case is sufficient. We will pursue the matter with the minister, who can deal with hypothetical questions.
I am asking whether all private schools will be eligible for tax relief, irrespective of whether they are registered by OSCR.
I am not able to answer that question.
That is an interesting argument that the committee can pursue later.
The draft bill proposes that OSCR should become an independent statutory body, which will be answerable to ministers and will have to submit an annual report to Parliament. What relationships between the Parliament and OSCR will the bill introduce?
Confusion arises because the form of the non-ministerial department has not been commonly used in Scotland. It is more commonly used at Westminster, which has set up a number of such bodies. The only non-ministerial department in Scotland is the General Register Office for Scotland. That form of public body is designed in such a way that ministers do not have direct responsibility and control over it, so such bodies are more independent than, for example, a non-departmental public body, for which ministers are responsible and over which they therefore consider that they should have control.
You said that OSCR will be less accountable to ministers and more independent, but it appears from part 1 of and schedule 1 to the draft bill that ministers will still have quite a bit of responsibility in the appointment of members and of the chair. Will you explain in more detail the difference between OSCR and an organisation such as Communities Scotland? How will its relationships be different?
Communities Scotland is an executive agency; it is part of the Scottish Executive and it carries out functions on behalf of ministers. Its statutory powers are held by Scottish ministers so, not unreasonably, they expect to be able to control its actions in certain ways and to ensure that its powers are exercised correctly.
So OSCR will be required to lay its annual reports before the Parliament and parliamentary committees can expect to be able to scrutinise those reports.
Yes.
What influence could the Parliament have on the organisation?
OSCR has to follow what is in the legislation. If the Parliament thinks that the legislation does not tell it to do the right things, Parliament should change the legislation, because that is what sets out OSCR's duties.
What relationship do you envisage between the Parliament and OSCR in relation to recruitment processes?
That is one of the questions that we ask in the consultation paper. In non-ministerial departments, as in most public bodies, it is normal practice for Scottish ministers to appoint board members. That process is governed by the normal public appointments process. In the consultation paper, we ask whether that system is appropriate for OSCR or whether there should be another form of appointment process. We suggest that there could be a role for the Parliament; it would be interesting to hear views on whether a parliamentary committee should appoint members to OSCR or whether the Parliament should set up an appointments panel. It is true to say that the Scottish Parliamentary Corporate Body was not immediately enamoured of the idea because, I think, of the resources that would be required. One can imagine that a week might have to be set aside to interview candidates for the board of OSCR. The Parliament needs to consider whether it wishes to be involved in that, and that is why we ask the question in the consultation.
It will be interesting to see the responses. I am sure that committee members have experience of making appointments to outside organisations.
It seems to me that the Parliament would take on a huge responsibility if it were to scrutinise the work of an organisation such as OSCR, which will have such a central role in many issues. That would be a complex and difficult task. You said that such arrangements are not unusual elsewhere. Are there examples of the Westminster Parliament taking on responsibility for something so big and complex? My anxiety is that something that becomes the responsibility of everybody could end up being the responsibility of nobody. We might then lack the consistency and clarity that people seek from charity law reform.
To be honest, there is no example of Westminster taking on such responsibility for appointments. The normal, accepted practice is that ministers follow a transparent process of public appointments that is overseen by a commissioner who is appointed by Parliament.
The issue concerns not just the public appointments process but the scrutiny arrangements. As we go through our consideration of the draft bill, I suspect that we will hear a lot of discussion about the definition of public benefit. It would be a hugely significant task for the Parliament to scrutinise the regulatory body, given that our role is to scrutinise the work of the Executive. Are there any examples of Parliaments taking on such responsibility? It might be easy enough to deal with the public appointments issue because all sorts of structures are involved, but the rest of the task seems very complicated.
I am not aware of any such examples. Many would say that the Executive should do the donkey work for the Parliament.
I will resist the temptation to comment on that.
Who would answer parliamentary questions about the activities of OSCR?
The normal process would be for a Scottish minister to answer questions on behalf of OSCR.
So questions would not be answered by a member of the Scottish Parliamentary Corporate Body. SPCB members already answer certain categories of question.
I may be wrong, but I suspect that SPCB members answer questions about the parliamentary bodies—the commissioners—for which Parliament is responsible.
So, notwithstanding the fact that Scottish ministers will have no political responsibility of any kind for OSCR, a minister would answer such parliamentary questions.
That is how the model works in Westminster.
Which minister would answer? Sorry, that is perhaps an unfair question to put to an official, so I shall not pursue it.
Let us move on to the proposed self-regulation of fundraising, which we have already started to consider. The Executive proposes a self-regulation scheme for the fundraising activities of charities and voluntary organisations. Given recent public disquiet over charities such as Breast Cancer Research (Scotland), why does the Executive propose self-regulation rather than a statutory regulatory system? To which criteria will the scheme be required to adhere?
Let me start by saying that we will not rely merely on self-regulation of fundraising. The draft bill proposes immediate regulation of professional fundraisers, who will be required to have a contract that sets out the work that they do for the charity in question. No such requirement exists in Scotland at the moment, but we feel that it must be emphasised to charities that they need to control the agents and fundraisers who work for them. That proposal may help charities to ensure that they have adequate contracts with professional fundraisers and is designed partly to try to avoid cases such as those that have arisen in the past year or so.
I have several fairly specific questions on the issue of fundraising concerning circumstances that I cannot find covered anywhere in the draft bill. Perhaps you can direct me to where they are covered or, if they are not, give me your thoughts about why they have been omitted.
I may be wrong, but I suspect that the selling of scratch cards would be governed by existing gambling legislation. We will check that, but I think that it would be.
What about people selling small household goods—little brushes, for example—for the homeless or the disabled? Where is that covered in the bill?
Selling brushes amounts to trading and is covered by existing legislation.
Okay. So you do not think that there is a problem with people collecting allegedly for the homeless, the disabled or the dog society. You think that such collections are adequately covered in trading legislation and that they should not be addressed in the bill.
There is no requirement to do so in charity legislation. However, there is an overriding provision in the bill that, if OSCR suspects that people hold themselves out to be a charity, whether or not they call themselves a charity, it can investigate that and take action to protect any funds that are raised.
Let us turn to the issue of professional fundraisers, whom you say will be self-regulated. The consultation document states:
There are two parts to your question. First, what information should the public receive at the point of donation? We propose to require professional fundraisers to provide a statement, although the draft bill does not contain exact details about that. The matter would be best dealt with in regulations because the statement might be very detailed and there are various different ways in which charity fundraising would be described as providing a revenue over different periods of time.
I have some technical questions about sections 65 and 66 of the draft bill. Section 65(2) defines a public benevolent collection as one that is undertaken in a public place or
Perhaps it would be best if I explained the policy intent, as we would welcome views on whether the draft bill would fulfil it.
Thank you for clarifying that. Supermarkets did not seem to be exempted—I looked for such a provision.
I am afraid that I cannot answer that.
The provision would apply to public roads, as opposed to private roads.
It would not apply to unadopted roads.
I think that that is right, but we can check that for the committee.
A bowling club in my constituency, for example, might want to have a collection on a private road.
That is the nub of the argument.
So children could no longer have a collection on the pavement outside their home; it would have to be done within their own grounds.
I think that, according to the law, they would have to do that within their own gate.
Okay. Thank you.
Unfortunately, children who live in tenements do not have a gate.
My question is on the balance between statutory regulation and self-regulation for professional fundraisers. In an article in Third Force News, I note that
I should perhaps point out that our intention is for the regulation of fundraising using the reserved power to be brought in across the board. It would not be used for a particular charity that might have failed; it would be used if self-regulation in Scotland had failed.
I understand that.
We have not decided on the exact criteria that will be used to determine failure. I suppose that that is something on which all of us need to decide.
I am sure that all of us are aware of high-profile cases such as Breast Cancer Research (Scotland) and the Moonbeams Children's Cancer Charity. The percentage of the money collected for those charities that was given over for good causes was considered inadequate. As part of self-regulation, would it be acceptable for 90 per cent of the money that was collected for a charity to be used to pay wages and so forth and for that money not to go to the charity? Is there to be a recommended level for what constitutes an acceptable percentage?
At the moment, we do not have proposals for a set formula. I agree, however, that 90 per cent does not sound acceptable.
If self-regulation fails, is it possible that that course of action might be recommended in future?
It could be.
Thank you.
OSCR will be able to monitor and investigate charities and third parties will be able to contact it with their concerns. However, it seems that there is no requirement for a public body—for example, a local authority—to alert OSCR about a problem with a charity, an example of which might be that it is no longer operating as a charity. Is it a failure of the bill that it does not place a statutory duty on public bodies or public authorities to pass on their concerns to OSCR? Those public bodies might have more contact with charities and therefore be more aware of problems at a much earlier stage. That suggestion would have covered the situation of the Third Age Group in Glenrothes, which continued to be funded although it no longer operated as a charity.
The proposal for a statutory duty on public bodies to pass on such information to OSCR is not something that we have considered. Obviously, there is nothing to stop those bodies from doing that. Indeed, one would hope that they would report such occurrences to OSCR. It is a matter of debate whether a duty should be placed on them to do that.
I have two questions, but one answer should cover both of them. First, could you explain briefly what sort of animal a Scottish charitable incorporated organisation is? Secondly, there is a lot of interest in the issue of enabling charities to set up arm's-length, non-profit-distributing companies. I am thinking of the community body that operates as a pukka charity—it gets grants, raises money and so on—which sets up a company that provides a particular service on a commercial basis in the locality and makes a profit but does not distribute it. Could what I have just described be a Scottish charitable incorporated organisation, or would we need something new for that?
Only charities can take the form of Scottish charitable incorporated organisation. An organisation has to be a charity to become an SCIO. An arm's-length body of a charity that is not part of that charity could not be an SCIO.
Do bodies have to be charities already in order to apply to be SCIOs, or could they start from scratch?
They could start from scratch and apply at the same time to be an SCIO and a charity.
Is there anything in the bill that would cover the business that I described of setting up an arm's-length, non-profit-distributing company that is an offshoot of a charity?
There is nothing in the bill to stop a charity setting up an arm's-length company or something else in another legal form.
The consultation document says that the majority of charities are small, with either a local focus or a very low income, and you mentioned that yourself. Has the Executive carried out any assessment of how the regulatory framework will affect smaller charities in particular?
We are in the process of doing that. We hope that we will gain some more information from the consultation on that. The consultation paper contains an annex with a draft regulatory impact assessment. We hope that people will help us to complete that and will provide more information on how they think the proposals will affect them as smaller charities.
I have some technical points to raise about the register. I cannot see any power to remove a charity from the register at all.
There is one somewhere.
Secondly, the only way in which it appears that a charity can be removed is on its own application. It gets removed within 28 days. Is it the intention for charities to be removed, or is it merely that they be deregistered? I would have thought that, even after a charity ceased to be registered, information should continue to be available beyond the period of 28 days that is set out. Is that a policy intention that you think is appropriate? Have I missed something on how charities can be removed from the register?
My colleagues are looking through the bill to find the provision on removal.
There is no right of appeal against OSCR removing a charity from the register and there is only one way in which a charity can be removed.
You are right that if a charity is removed from the register, it is in effect deregistered and is no longer a charity. We would certainly expect OSCR to keep the information on a body that used to be a charity, because it is likely that there would be residual assets, which OSCR would want to ensure were still given to the cause.
All I am getting at is that it strikes me that, for a reasonable period of time, it should remain easy for the general public to have access to information about a body that has ceased to be a charity. In my humble opinion, the reasonable period of time should be five years, but that is a relatively arbitrary number. I wondered about your considerations in drawing up the bill. Is it the policy intention for a charity just to disappear from the register 28 days after OSCR has received an application for its removal, which is what the bill appears to suggest?
That is not the policy intention. The register is the list of bodies that are charities, but that does not mean to say that there cannot be a separate list of bodies that used to be charities.
Okay. That is fine. We have clarified the policy intention, which is all that I was after.
Section 26 sets out OSCR's powers where a charity no longer meets the charity test. Section 26(1)(c) sets out its powers to remove the charity from the register.
But there is no corresponding right of appeal against that. However, let us not prolong the agony.
We will consider your point.
My convener is looking at me anxiously, or rather imperiously.
You mistake anxiety for something else. We have had a useful session this morning. I thank the witnesses very much for their attendance. I know that we overran a bit, but I was keen for us to explore all the issues that people were concerned about. We are aware that we are at the beginning of the process, rather than the end. If you wish to clarify points or come back to us on specifics, that is fine. We will be happy to hear further points from you.
Thank you.
Meeting suspended.
On resuming—